Inspector Anthony John Farrell v Forgacs Shipyard Pty Ltd

PROSECUTOR: Ms A.F. Backman of counsel Solicitors: Ms K Parsons WorkCover Authority of NSW LEGAL REPRESENTATIVES: DEFENDANT: Mr R.S. Warren of counsel Solicitors: Mr N. Dan Bilbie Dan

JUDGMENT: - 12 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: KAVANAGH J Date : 12 October 2001

IRC3294 of 2000 INSPECTOR ANTHONY JOHN FARRELL v FORGACS SHIPYARD PTY LIMITED Prosecution under s15(1) of the Occupational Health and Safety Act 1983

1 This is a prosecution under the provisions of s 15(1) of the Occupational Health and Safety Act 1983 in that the defendant corporation on 18 July 1998: Did fail to ensure the health, safety and welfare at work of all its employees and in particular, Stephen Baker in failing: 1. to provide and maintain systems of work for the testing of sealed vessels for leaks, to wit, dredging pontoons. 2. to provide employees with such information and training as may be necessary to safely conduct testing of sealed vessels for leaks, to wit, dredging pontoons; and 3. to provide such supervision as may be necessary for the testing of sealed vessels for leaks, to wit, dredging pontoons. 2 The prosecutor proceeds by way of Amended Summons filed in court on 1 March 2001. An original summons was filed on 6 November 2000. The defendant corporation entered a plea of guilty to the amended charge. An Agreed Statement of Facts was filed in court on 1 March 2001 which relevantly reads as follows:

2. At all relevant times the defendant, FORGACS SHIPYARD PTY LTD [ACN 080 451 583] (hereafter "the defendant") was a company duly incorporated with its registered office at 304 Pacific Highway, Hexham, in the State of New South Wales and was an employer at Old Punt Road, Tomago in the State of New South Wales. The principal business of the defendant is the fabrication of ship structure components. 3. At approximately 12 noon on 18 July 1998 Stephen Baker, aged 26 years, an employee of the defendant, while conducting a leak test of a dredging pontoon suffered bruised ribs, a torn and badly bruised groin and concussion requiring three days in hospital when the pontoon exploded. 4. Mr. Baker had been employed by the defendant as a boilermaker for eight months prior to the accident. 5. On the day of the accident Mr. Baker had been told by Norman Field, Production Manager, to assist Denis Hadley, Maintenance Supervisor, with a job of carrying out a leak test on a dredging pontoon, which Baker had never done before. Neither Norman Field, Stephen Baker nor Denis Hadley knew of a system of work or procedures for carrying out a leak test on a dredging pontoon. There were no documented work procedures at the time. 6. Mr. Baker and Mr. Hadley used a crane to lift the pontoon, which had been sinking, and unbolt a pipe and bring it to dry ground. They could not find the leak so decided to use compressed air. The pontoon was brought into the workshop on a forklift. Here they made up a fitting to use an air hose, then released the air into the pontoon for approximately two minutes. Mick Coyle, Production Supervisor, was present and allowed them to continue with the work. Robin Morris, a rigger, had walked into the workshop to see Mick Coyle about a job and was standing alongside Baker. 7. One end of the pontoon then blew out, propelling the pontoon in the opposite direction, hitting Mr. Coyle, Mr. Hadley, Mr. Morris, and Mr. Baker, who took most of the force and suffered injuries. The end of the pontoon, or pontoon lid, which was constructed of mild steel and weighed 35 - 40kg, was hurled through the air a distance of approximately 28 metres. It struck an office building causing damage, before coming to rest on the ground. 8. WorkCover was verbally advised of the accident on 18 July 1998 by the Police. Inspector Farrell attended the scene that day in the company of Allan Kemp, Regional Manager, WorkCover Newcastle, Craig Hall from Raymond Terrace Police Station, Norman Field and later by Constable Peter Muscio from Maitland Crime Scene Unit, Mick Coyle, Denis Hadley and Fin Cairney, the defendant's OHS Officer. The following observations were made: a. A large factory complex surrounded by a steel posted weldmesh fence approximately 1.8 metres high. b. Approximately 200 metres from the main entrance was a large corrugated iron building identified as the curved panel shop or No.2 Shop. c. Approximately 17 metres from the front of the building was a yellow forklift truck with the following identification numbers: (i) Chassis No. FG 351470 (ii) Engine No. F 337857 d. Approximately 2.5 metres to the left of the forklift truck was a Dredging Pontoon. The pontoon was constructed of mild steel and measured 2.39 metres by 1.0 metre in diameter. d. Inspector Farrell was advised by Norman Field that the dredging pontoon had been taken out of a dredge line approximately 500 metres away and transported on the forklift in 5 to be tested for leaks. e. Attached to the end of the pontoon was a one half inch air hose which was attached to a compressed air pipe approximately 11 metres away f. At the time of the inspection there was no regulator attached to the compressed air fitting. g. The compressed air pipes were connected to two Sullair Compressors housed in a corrugated iron building known as the compressor shed. h. The two sullair compressors were identified by labels stating: · Compressor No. 1 Model 20 - 150H Serial No 46077 · Compressor No. 2 Model 20 - 150H Serial No 46076 i. Approximately 28 metres from the pontoon could be seen an office building of aluminium construction. j. The building had suffered damage with damage to the aluminium exterior of the building and the partition of the door was shattered. k. Inspector Farrell was advised by Mr. Field that the damage to the office building had been caused by the airborne mild steel section of the dredging pontoon after the explosion. l. Approximately 28 metres from the pontoon and approximately 4 and a half metres from the office building was a mild steel section one metre in diameter. Inspector Farrell was advised by Mr. Hadley that it was the lid off the pontoon and had been blown off after compressed air was allowed into the pontoon. m. The mild steel section had a Zinc anode on the outside of the section, a buckle in the top and an approximate weight of 35-40 kilograms. 9. Inspector Farrell's investigation found that there was almost 7 tonnes of pressure in the pontoon requiring a minimum thickness of 52.22mm to withstand the pressure, yet the actual thickness was only 6mm. There was no pressure valve on the line which was feeding the tank, and no pressure relief valve installed on the pontoon itself. Clause 27 of the Boiler and Pressure Vessel Regulations states that no testing of pressure vessels or boilers shall be carried out by any means other than water pressure. Section 17 of the Regulations states that every pressure vessel subjected to pressure by air shall be protected by suitable safety or relief valves, and pressure gauges. 10. Mr. Hadley states that there were no procedures in place, no training provided and it was the first tank he had every tried to repair in this manner. Mr. Hadley stated that he used compressed air because "Well at that time it was the fastest way to find the leaks, and I had not been provided with any other system to test for leaks." Mick Coyle, Production Supervisor, wasn't aware of whether there was a safe system of work for carrying out leak tests on dredging pontoons. He was aware that compressed air was being used, but didn't know of any hazards. He said "I just thought it was normal practice." 11. According to Fin Cairney, Safety Officer, there was no documented safe operating procedures for leak testing of dredging pontoons. There was no risk assessment, as that was left to the person in charge of the individual job. Prior to the accident Mr. Hadley and Mr. Coyle received no training to carry out their jobs as supervisors in relation to Occupational Health and Safety. 12. Prohibition Notice No. 108476 issued by Inspector Gary Sandall upon the defendant on 20 July 1998 for an unsafe system of work involving the use of compressed air to test a sealed vessel for leaks. The Notice required a hazard and risk assessment by a competent person of all work involving the use of compressed air to test sealed vessels. 13. A document titled Safety Procedure for Pneumatic Testing of Tanks and Compartments was issued on 23 July 1998 by the defendant. It sets out a safe procedure for testing with compressed air, and at Item 5.1 states that only personnel who have been instructed on the safety and correct procedure for tank and compartment testing and who demonstrate the appropriate knowledge required shall be used to undertake this task. 14. All the employees interviewed stated independently that they had never been shown any instruction nor received any training by the defendant in regard to the checking for leaks, or the use of compressed air. 3 Ms A.F. Backman appeared for the prosecutor and Mr R.S. Warren for the defendant corporation. The maximum penalty for the offence is $550,000.

4 In consideration of penalty the court must first assess the nature and quality of the offence, that is, the objective seriousness of the offence. As was held in Lawrence Diecasting Pty Limited v WorkCover Authority of New South Wales (Insp James Swee Ch'ng) (1999) 90 IR 464 (at 474): . . . in our view, it is important to reiterate that the primary factor to be considered when a judicial officer is determining the appropriate sentence to impose is the objective seriousness of the offence charged. In case of prosecutions under the OH&S Act, this proposition has often been expressed by saying that the "true measure of penalty lies in the nature and quality of the offence". The Full Bench said (at 474): It has been observed on a number of occasions that subjective factors which mitigate the seriousness of the offence or exculpate the accused must be secondary to consideration of the nature and quality of the offence.

The Full Bench cited (at 474) with approval a passage of the judgment of Fisher CJ in Haynes v James Glass and Aluminium Pty Limited (unreported, CT91/772-775, 20 May 1994) where his Honour said: . . . While previous good industrial citizenship and the absence of prior convictions are proper considerations, their importance lies well behind the two primary aspects of the matter, namely the nature and quality of the offence and the clear policy of the Act in relation to the establishment of safe standards and the protection of the workforce.

The Full Bench further commented (at 476): . . . the proper approach is to first consider the gravity of the offence viewed objectively. 5 The facts reveal a dredging pontoon, measuring approximately 2.4 m long by 1m in diameter and constructed of mild steel, was seen to be leaking while floating in a dock. The dredging pontoon was brought from the water and into the Yard's workshop. Relevantly, this occurred on a Saturday morning. Mr Baker, an employee, attached a half-inch air hose to the end of the pontoon in order to test for the site of the leak. The pontoon, from photographic evidence, was very rusted. On the release of the air into the pontoon, one end of the pontoon blew out. The explosion caused significant damage to the workshop and to an office area inside the workshop. The force of the explosion propelled the pontoon in the opposite direction, hitting four of the workers on site including Mr Baker.

6 Notwithstanding admissions in the agreed statement of facts, the defendant company took issue as to whether there was, in place, a system of work for the testing for leaks in the dredging pontoons. Mr Peter Burgess, Managing Director of the defendant corporation suggests there was in place a work method for the recognition and repair of leaks in pontoons. He said he had spoken to a Mr Whalings, his manager, about the system to be used, who, he expected, would have communicated this to Mr Cox, the production manager on site and to Mr Coyle, the qualified boilermaker. Mr Burgess reveals 15 or more similar pontoons had been safely repaired from March 1998. Such work, he submitted, had been performed in a safe manner in accordance with safe procedures and under the appropriate direction and supervision.

7 However evidence from Mr Stephen Donnan, a maintenance fitter on site on the day of the accident, was not challenged in cross-examination. He revealed on the day of the accident there had been much discussion between himself, and two other employees, Mr Hadley, the Maintenance Supervision, and Mr Baker as to the work method to be adopted. These discussions were directed to how to identify the site of the leak. They were conducted during the period the water was draining out of the pontoon which had been lifted from the water into the workshop. Mr Hadley, Mr Donnan recalls said: We want to get the dredge going again quickly.

Pumping into the pontoon a mixture of compressed air and soapy water was suggested and Mr Donnan noted if air was to be used a regulator would be necessary. Mr Hadley, conceded he used the compressed air because: Well, at that time it was the fastest way to find the leaks, and I had not been provided with any other system to test for leaks.

Mr Coyle, the production supervisor, also gave evidence. He was not aware of any other system of work in place nor that the use of compressed air, in the circumstances, was hazardous.

8 Neither Mr Hadley nor Mr Coyle acknowledged any training in a devised safe work method for this task. All of the employees interviewed stated, independently, they had never been given any instruction or received any training by the defendant company in regard to the checking for leaks, or the use of compressed air.

9 From the evidence, if it is necessary given the content of the agreed statement of facts, I find there was not in place in the operation of this defendant corporation a safe work method directed to the task being performed nor the associated proper training and supervision of the employees.

10 The gravity of the potential risk to safety flowing from the breach of the Occupational Health and Safety Act 1983 is relevant as a measure of the gravity of the breach and the culpability of a defendant (see Tyler v Sydney Electricity (1993) 47 IR 1 at 5; Fletcher Construction Australia Limited v WorkCover Authority of New South Wales (Inspector Fisher) (1999) 91 IR 66 at 79-80. It was the great good fortune of this defendant corporation that, because it was around midday Saturday, no worker was in the office space area which was showered with pieces of metal and broken glass.

11 The court further finds there was an element of foreseeability to the offence. Aside from not providing a safe system of work nor the appropriate training, instruction or supervision, once the procedure for the task was chosen, no regulator or safety valve was attached to the air hose so there was no way of ascertaining how much pressure was being pumped into the pontoon. The system of work adopted provided a foreseeable and obvious risk to safety to a reasonable observer bearing in mind the condition of the pontoon, its construction, and weight (see WorkCover Authority of New South Wales (Ins Ankucic) v McDonald's Australia Limited & Anor (2000) 95 IR 383 at 450.) The explosion of a steel vessel of considerable weight had the potential to result in the most serious of consequences. The individuals struck by the pontoon suffered various injuries. As was held in Capral Aluminium Limited v WorkCover Authority of New South Wales (2000) 99 IR 29 at [62]: The existence of a reasonably foreseeable risk of injury will necessarily result in the offence being more serious in nature.

12 In an assessment of the nature and quality of this offence, that is the objective seriousness of the offence, I find the following matters relevant: there was a failure to provide a safe system of work by this defendant corporation; there was a failure to properly supervise and train the employees concerned; there were readily available steps to remedy the defect in the system adopted; there was a potential for a serious consequence to this explosion. There was an obvious and foreseeable risk of injury. This was a serious breach of the Occupational Health and Safety Act, 1983.

13 Some subjective features to this offence have been offered in consideration of penalty to the plea of guilty to the charge and are taken into account in the Court's consideration. The defendant entered a plea to the amended summons on the day the amended summons was filed. The first summons was filed some three months before and the matter was stood over while the prosecutor's brief was provided to the defendant corporation for consideration as to plea. R v Thompson; R v Houlton (1999-2000) 49 NSWLR 383; (2000) 115 A Crim R 104 makes clear a court should give consideration, in the form of a discount as to penalty, for the utilitarian benefit of a plea of guilty. The effect of the guidelines promulgated by the Chief Justice, with whom all other members of the court agreed, has been further considered in R v Carter [2001] NSWCCA 245 where Barr and Howie JJ held [at 14]: . . . two circumstances . . . will generally affect the appropriate level of the discount in a particular case. They are, firstly, the time when the plea is entered, so that the earlier the plea the larger the discount and, secondly, the complexity of the evidence to be gathered and adduced to prove the charge, so . . . the greater the difficulty in collecting evidence or the greater the length and complexity of the trial, the greater the utilitarian value of the plea and, therefore, the greater the discount. Their Honours [at 16] further stated it was erroneous for a court, when determining the utilitarian value of the plea, to consider the fact that the case against the defendant was very strong. In the circumstances I find the defendant should have the benefit of a discount as to penalty for the utilitarian value of its early plea of guilty.

14 The corporate character and reputation of the holding company which has been placed before the court can be given consideration in mitigation as to penalty because of evidence of the incorporation of the defendant company into the community activities of the holding company (see full discussion of the nature of character and reputation evidence in Melbourne v The Queen 198 CLR 1; WorkCover Authority of NSW (Insp Dubois) v Transfield Pty Limited (unreported, IRC6985 of 1999, 8 November 2000, WorkCover Authority of New South Wales (Inspector Ankucic) v McDonalds Australia Limited & Anor (2000) 95 IR 383; WorkCover Authority of New South Wales (Inspector Mauger) v Ridge Consolidated Pty Ltd [2000 ]NSWIRComm15 (published 8 March 2001); see also discussion referred to in WorkCover Authority of NSW (Insp Hopkins) v Profab Industries Pty Ltd (No. 2) (2000) 101 IR 92).

15 Mr Burgess acknowledged the defendant company was one of three significant companies operating under a holding company entitled Forgacs Engineering Pty Limited. This defendant corporation was brought into existence in 1997. It was incorporated specifically to participate in the construction of modules for the ANZAC frigate project. However, the holding company has operated on the Newcastle, Gladstone and Brisbane dockyards over many years and had employed up to 800 persons around the eastern seaboard. On average the defendant company provided employment for up to 120 persons. 16 Forgacs Engineering, the holding company was a founding member of the Hunter Medical Research Foundation and contributes significantly to the organisation. Through its corporate structure, including the defendant company, it has for many years contributed significantly to the Channel 10 Children's Christmas Appeal. Mr Forgacs, when he first came to this country, was assisted by the Salvation Army and, since then, his companies have been a major contributor to the Salvation Army Appeal. They contribute to the Oncology Unit at the Newcastle Mater Hospital. They are the largest employer of apprentices in the Hunter Region (some 86 apprentices are employed today). The holding company, in part through the defendant company, continues a commitment to training apprentices. With the closure of BHP, the Submarine Corporation's closure and the Glen Innes closure the holding company, through the defendant company, has absorbed much of the displaced labour in the Newcastle area. 17 The holding company has an ongoing relationship with the University of Newcastle providing, through its company structure (including the defendant company), work experience opportunities for engineering students both from the mechanical engineering and environmental engineering faculties. Many graduates of environmental engineering from the University of Newcastle are employed long term within the corporation and some are employed with the defendant company. The corporation is also a significant contributor to junior sports in the Hunter area. Each company sponsors and assists young sportspersons, particularly through financial support to the Hunter Academy of Sport. 18 Mr Burgess chose to rely upon documentation of the holding company to indicate there was a safety awareness culture within the defendant company. He identified a number of documents prepared by the holding company. One such document was provided to the defendant's workers as a Safety Induction Handbook prior to the accident. Particular safety guidelines were designed by the holding company for various tasks. The inference cast was all these safety procedures were adopted by the new defendant corporation for various identified tasks. However, as an example, the relevant document relied upon entitled "Pneumatic Testing of Tanks and Compartments" only came into existence on 23 July 1998: that is, after the accident. A document related to the use of compressed air is unfortunately not dated. I accept it was in existence prior to the accident.

19 The defendant company charged with the breach was formed for a specific task. The first appointment made by the defendant company after its establishment was that of a Safety Officer. The Safety Officer compiled a Site Safety Handsheet for each new employee. It was prepared from the pre-existing holding company's documents. The holding company has worked in heavy industry for many years. I find there was a site safety awareness in the defendant company from its establishment but the detailed procedures for risk assessment of specific tasks, the design of task specific safe work methods and the proper instruction and training of employees were not in place. They may well have been in place for the holding company but the existing site safety procedures and safe work methods had not been inculcated into the defendant company's operations. It may have been intended to be so but it was not so.

20 The defendant company has, however, tendered a document, prepared since this accident, headed "Safety Procedures". Attached to the document is a register recording training sessions and identifying which supervisors carry the responsibilities for such training. The documentation is comprehensive and regularly updated. It is a "living" document. I am persuaded there is now in place a proper procedure for the risk assessment of tasks and for the identification of task specific safe work methods as well as in place the appropriate supervision and training of employees.

21 It is submitted the defendant corporation had no prior convictions. However, in relying upon pre-existing safety awareness/procedures/manuals of the holding company, the industrial history of the holding company was placed before the court. There are four recorded convictions against the holding company. One breach, which post-dates this accident, would appear to have been a serious accident. I do not believe the circumstances and separate corporate identity of the defendant company attract the provisions of s51A to increase the maximum penalty to $850,000. However, the industrial record of the holding company becomes relevant when considering its reputation and character. That the activities of the defendant company are incorporated into the community activities of the holding company is not challenged so reference to the holding company's corporate reputation is allowed. The holding company's industrial record is also however given weight in an assessment of its corporate reputation.

22 The defendant company's separate industrial record of no recorded convictions is given consideration in mitigation as to penalty.

23 I have weighed all the evidence of corporate reputation placed before me and find it has some probative force sufficient in my consideration to allow a measure of mitigation of penalty.

24 There were no submissions relied upon as to the defendant's capacity to pay a fine (see s6 of the Fines Act 1996; Ferguson v Nelmac Pty Ltd (1999) 92 IR 188 at 209; Rahme (1989) 43 A Crim R 81 at 86-87).

25 The court takes into account the objective seriousness of this offence and the subjective matters as outlined above in its consideration as to penalty. The court applies a discount of 20% for the early plea of guilty.

27 The defendant is fined in the sum of $70,000 with a moiety to the WorkCover Authority.

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