Nash v Silver City Drilling

Court of Criminal Appeal (NSW)|2017-03-24|Before: Basten JA, Hoeben CJ, Walton J, Mr J, Ms J

Jennifer Ann Nash (NSW Department of Industry, Skills and Regional Development) (Appellant) Silver City Drilling (NSW) Pty Ltd (Respondent)

Attorney General of NSW (Appellant) Silver City Drilling (NSW) Pty Ltd (Respondent) Representation: Counsel: Mr J A Agius SC/Mr C Magee/Ms J McDonald (Appellants) Mr A R Harris QC/Mr N J Floreani (Respondent)

Solicitors: Lea Armstrong, Crown Solicitor (Appellants) Lee Legal Group (Respondent) File Number(s): 2016/338282; 2016/338276 Decision under appeal Court or tribunal: District Court Jurisdiction: Criminal Date of Decision: 12 August 2016 Before: Curtis DCJ File Number(s): 2014/242201

Judgment

BASTEN JA: On 12 August 2012 the respondent, Silver City Drilling (NSW) Pty Ltd, was operating a drilling rig at the Ashton Coal Mine, near Singleton. There was an incident which caused an employee, Benjamin Kuypers, to suffer life threatening injuries, resulting in quadriplegia. The incident led the appellant, Jennifer Ann Nash, an inspector with the New South Wales Department of Industry, Skills and Regional Development, to lay a charge against the respondent under s 32 of the Work Health and Safety Act 2011 (NSW) (Work Safety Act) for a breach of the duty imposed by s 19(1) of that Act.
The respondent having entered a plea of guilty to the charge was sentenced in the District Court on 12 August 2016 to a fine of $112,000. The sentencing judge, Curtis DCJ, awarded the prosecutor a moiety of the fine but declined an application for an order that the respondent pay the prosecutor's costs.
The present proceedings involve an appeal against the inadequacy of the fine and a separate appeal against the failure to award costs. The appeal with respect to the sentence is brought by the Attorney General under s 5D of the Criminal Appeal Act 1912 (NSW). There was no challenge to the jurisdiction of this Court under that provision. There was, however, a challenge by the respondent to the jurisdiction of the Court to hear an appeal against the refusal to award costs. That challenge led the prosecutor to commence proceedings in the supervisory jurisdiction of the Supreme Court, seeking to set aside the judge's decision with respect to costs. That challenge should be rejected, for the reasons given in the contemporaneous judgment delivered in the Court of Appeal.
For the reasons given below, the appeal against sentence should be upheld and this Court should resentence the respondent. The appeal against the refusal to award costs should also be upheld and an order made that the respondent pay the prosecutor's costs in the District Court.

Statutory regime

Part 2, Div 5 of the Work Safety Act specifies three categories of offences which may be committed by a person who has breached a health and safety duty. Category 1, being the most serious offence, requires that the offender engage in conduct which, without reasonable excuse, exposes a person to a risk of death or serious injury or illness, as to which risk, the offender is reckless. [1] The respondent was not charged under this provision. Rather, it was charged with a category 2 offence which was defined as follows: 32 Failure to comply with health and safety duty - Category 2 A person commits a Category 2 offence if: (a) the person has a health and safety duty, and (b) the person fails to comply with that duty, and (c) the failure exposes an individual to a risk of death or serious injury or illness. Maximum penalty: (a) in the case of an offence committed by an individual (other than as a person conducting a business or undertaking or as an officer of a person conducting a business or undertaking) - $150,000, or (b) in the case of an offence committed by an individual as a person conducting a business or undertaking or as an officer of a person conducting a business or undertaking - $300,000, or (c) in the case of an offence committed by a body corporate - $1,500,000.
The term "health and safety duty" is defined to mean a duty imposed under Div 2, 3 or 4 of Pt 2. [2] Relevantly for present purposes, the charge alleged a breach of the primary duty of care imposed by s 19(1) of the Work Safety Act, which provides: 19 Primary duty of care (1) A person conducting a business or undertaking must ensure, so far as is reasonably practicable, the health and safety of: (a) workers engaged, or caused to be engaged by the person, and (b) workers whose activities in carrying out work are influenced or directed by the person, while the workers are at work in the business or undertaking.
The duty imposed by s 19(1) is qualified by reference to what is "reasonably practicable", a phrase which is defined in s 18 in the following terms: 18 What is "reasonably practicable" in ensuring health and safety In this Act, reasonably practicable, in relation to a duty to ensure health and safety, means that which is, or was at a particular time, reasonably able to be done in relation to ensuring health and safety, taking into account and weighing up all relevant matters including: (a) the likelihood of the hazard or the risk concerned occurring, and (b) the degree of harm that might result from the hazard or the risk, and (c) what the person concerned knows, or ought reasonably to know, about: (i) the hazard or the risk, and (ii) ways of eliminating or minimising the risk, and (d) the availability and suitability of ways to eliminate or minimise the risk, and (e) after assessing the extent of the risk and the available ways of eliminating or minimising the risk, the cost associated with available ways of eliminating or minimising the risk, including whether the cost is grossly disproportionate to the risk.
To complete the structure of offences under the Work Safety Act, it is appropriate to note that a category 3 offence involves a failure to comply with a health and safety duty, but without the additional requirement found in s 32(c) of exposing a person to a risk of death or serious injury or illness. The maximum penalty for corporations in respect of reckless conduct (category 1 offences) is $3 million; in respect of category 2 offences, $1.5 million and in respect of category 3 offences, $500,000. The respondent was therefore exposed to a potential maximum penalty of $1.5 million.
The sentencing exercise was governed by Pt 3 of the Crimes (Sentencing Procedure) Act 1999 (NSW) (Sentencing Procedure Act). [3] The purposes of sentencing, identified in s 3A, are as follows: 3A Purposes of sentencing The purposes for which a court may impose a sentence on an offender are as follows: (a) to ensure that the offender is adequately punished for the offence, (b) to prevent crime by deterring the offender and other persons from committing similar offences, (c) to protect the community from the offender, (d) to promote the rehabilitation of the offender, (e) to make the offender accountable for his or her actions, (f) to denounce the conduct of the offender, (g) to recognise the harm done to the victim of the crime and the community.
The sentencing judge was required to take into account the plea of guilty and was entitled to impose a lesser penalty than would otherwise have been imposed, pursuant to s 22(1) of the Sentencing Procedure Act. Being satisfied that the plea was entered at the earliest possible opportunity, the judge stated in one passage that he allowed a discount of 25% on account of the plea, [4] although he later described the discount as being "in recognition of its plea of guilty and cooperation with the authorities." [5] The discount was challenged by the prosecutor as inappropriate in the circumstances.

Background circumstances

The respondent had been contracted by Ashton Coal Operations Pty Ltd to drill two large diameter boreholes from the surface to the coal seam to allow the escape of water from the underground longwall mining operations at the Ashton Coal Mine. When in operation, the drill rig was positioned over the intended borehole to which was attached, at the surface, a diverter box and an outlet or discharge pipe referred to as a "blooie line". The operator of the drill rig stood on a hinged platform on the side of the rig, from which he could control its operation. The blooie line ran beneath the platform of the drill rig and evacuated its discharge into a large pit, known as the sump.
The discharge (also known as slurry) included foam pumped into the bore- hole, together with water, mud and rock which were the product of the drilling process. The discharge was an environmental contaminant, capable of polluting nearby waterways if it escaped. Once the drilling operation reached a water table, large quantities of contaminated water were expelled. By the time the borehole had reached 80-85 metres, as it had on the day of the incident, Mr Kuypers reported that it was producing between 15,000 and 20,000 litres/hr and about 15,000 litres for every 4-5 m drilled. [6]
To ensure that the discharge was not expelled into the surrounding bushland, the respondent had fixed a 90 degree elbow at the end of the blooie line, so that the discharge was directed downwards into the sump. Unless the blooie line was properly secured in place there was a tendency for any sudden increase in pressure to drive the end of the blooie line upwards. If such an event occurred and the blooie line passed under the platform on the drill rig on which the operator stood, there was a risk of injury to the operator. It was this risk which materialised at the time of the incident, which caused Mr Kuypers to suffer serious injuries to his neck and spinal cord, resulting in quadriplegia, constant pain and ongoing psychological trauma.
The incident occurred as a result of the use of the 90 degree elbow in circumstances where the blooie line was not secured to prevent upward movement and was positioned so as to pass under the drilling platform on which Mr Kuypers stood.

Sentencing judgment

The sentencing judge made a number of findings of fact in relation to the manner in which the incident occurred: "[7] In the course of drilling borehole number 3 several sudden increases in pressure known as 'blow-outs' caused the spoil horizontally exiting the Blooie Line to overshoot the sump and pollute the surrounding environment. In order to re-direct the flow of the slurry into the sump Mr McKinnon the defendant's Manager of Operations, directed the drilling workers to fix a 90º elbow at the end of the Blooie Line diverting the flow from horizontal to vertically downwards. … [8] When drilling commenced at borehole 4 the elbow was again fixed to the end of the Blooie Line to ensure that the slurry was confined to the Sump. [9] On the day in question a sudden accumulation of pressure drove the elbow a considerable distance upwards. This elevation caused the Blooie Line to pivot at the Diverter Box, forcing the hinged platform on which Mr Kuypers stood upwards, crushing him against the Drill Rig control console. [10] The Pressure Event occurred when, after a 40 minute delay, a resumption of drilling operations forced an accumulation of groundwater, gas, mud and rock into the elbow, exiting at an estimated downward velocity of 281.6 m/s. [11] The precise cause of the pressure event is not known."
The judge identified the risks against which the defendant had failed to guard, as set out in the summons containing the charge. The risks have been outlined above and will be considered further below.
The reasons then turned to an assessment of the objective seriousness of the offence, particularly by reference to "foreseeability". The judge referred to the following agreed fact: [7] "The risk of pressure events is known in the drilling industry. Catastrophic releases of energy from a drill hole of the type which occurred in this incident are rare."
The judge found this statement unhelpful. [8] The reasoning diverted to a consideration of the reasonable practicability of steps to ameliorate a risk, apparently on the basis that s 18 includes, as a factor in assessing what is reasonably practicable, "the likelihood of the hazard or the risk concerned occurring". In that context, the judge quoted a statement from the reasons of Callinan J in Slivak v Lurgi (Australia) Pty Ltd [9] to the following effect: "Reasonable practicability does not contemplate or require infallibility."
This statement, taken out of context, was inapt. Callinan J was dealing with a question which arose in a negligence claim, as to whether the designer of panels used in construction work ought to have increased the strength of the panels, beyond that which was necessary, in order to overcome any careless or cost-cutting behaviour of a contractor, omitting some of the ingredients in the design.
In circumstances where the respondent conceded that available options were reasonably practicable and appropriate (they were thereafter taken by the respondent), the discussion in Slivak did not assist in determining the degree of foreseeability, to the extent that that was relevant in assessing the objective seriousness of the conduct.
The judge considered the complaint that there had been a failure to undertake a proper risk assessment with respect to the factors identified in the charge. The judge noted that, although both the respondent and Ashton Coal undertook risk assessments, neither considered the possibility of the use of the elbow attached to the end of the blooie line. [10] The judge then stated that neither the respondent's drilling supervisor (Mr Griffiths), nor its manager of operations (Mr McKinnon), nor the project manager of Ashton Coal (Mr Jones), perceived a risk in attaching the elbow to the blooie line. The judge then said: [11] "Some hours before the accident the Blooie Line at borehole number 4 was observed by Mr Griffiths to be moving a bit in an upward direction off its stands due to the pressure of material being released from it. Mr Griffiths directed that star pickets be installed on each side of the Blooie Line around which wire was wrapped to hold down the Line."
This could have been seen as a warning of the risk that was to materialise, thereby increasing the culpability of the respondent. Instead, it seems to have been treated as a source of reassurance that nothing worse would happen. The judge identified the elements of the risk involved in the following terms: [12] "The risk pleaded resulted from the possibility that three distinct factors would combine. First the sudden extreme elevation of the Blooie Line, second, the positioning of the Blooie Line under the platform on which Mr Kuypers stood, and third that the platform was not welded into position but rather hinged at one end." The judge also noted that the risk that the blooie line might move appreciably upwards might not have been foreseen given that the line was secured to the diverter box by 10 large steel bolts. The judge said that there was no expert evidence that "the placement of the blooie line or the application of the elbow was inconsistent with reasonably prudent industry practice." [13]
Finally, the judge referred to the fact that Ashton Coal had employed a person (Mr David Thomson) holding a class 4 drilling licence, which was a requirement of the licence it held to drill the boreholes, but noted that the licence holder "exercised no practical supervision or control over the drilling operations". [14] The judge held that fact to be "causally irrelevant in the absence of evidence that Mr Thompson would have done things differently". [15] The judge concluded: [16] "Consistently with the agreed facts I find that the risk against which the defendant failed to guard was a risk at the very threshold of being sufficiently foreseeable to engage a duty to guard against it."
Having reached that conclusion, the judge then accepted that "the potential consequences of this breach included the possibility of death or the gravest of injury" and that "obviation of the risk by removal of the elbow and re-siting the sump would not have been burdensome." [17] The judge made no reference at that point to the desirability or ease of assessing the risk of using the elbow. The reference to re-siting the sump was in order to allow the blooie line to traverse the rig otherwise than under the drilling platform.
Under the heading "Subjective Factors", the judge noted that the respondent had been operated and owned by a Mr Nathan Wilson (and part owned by members of his family) at the time of the incident. Six months after the accident, the company was sold to Mr Vivian Oldfield who had previously provided loan funds but had had no equity or control. The judge noted Mr Oldfield's excellent record for safety demonstrated by his operation of another drilling company and stated that under Mr Oldfield's "guidance" the respondent had achieved an excellent safety record, since the incident.
The judge accepted Mr Oldfield's expression of "regret" as to the incident, although it had occurred at a time when he had money "invested" in the company but was not in control. The judge also accepted, as an indication of remorse, the fact that the company had made payments to Mr Kuypers over and above the statutory rate paid by its workers compensation insurer. [18] Finally, the judge found that the company had "cooperated" with investigators and had entered a plea of guilty. In that regard he held: [19] "In the light of my observations on foreseeability I do not regard this as a matter in which a conviction was certain. The extent of foreseeability was a matter in respect of which reasonable minds may differ. I accept that the defendant pleaded guilty at the first available opportunity once the factual basis relied upon by the prosecutor had been sufficiently refined to reflect guilt."
The Court, in imposing a fine, was required by s 6 of the Fines Act 1996 (NSW) to consider "such information regarding the means of the accused as is reasonably and practicably available to the court for consideration", which the judge identified as follows: "[55] The balance sheet of Silver City Drilling as at 30 June 2015 records total assets of $15,564,244 and liabilities of $20,242,017, a net shortfall of $4,677,773. Nevertheless the company continues to trade and in the year ended 30 June 2015 paid wages in the total sum of $10,944,541. [56] Although accepting Mr Oldfield's evidence that the company is only continuing to operate through personal financial contributions and support from himself, I am unpersuaded by the defendant's submission that a fine appropriate to all other considerations should be reduced by reason of the limited means of the defendant."
In determining the amount of the fine, the judge referred to s 3A of the Sentencing Procedure Act and concluded with the following passage: "[58] In the present circumstances I do not think it necessary that the sentence reflect other than minimally the purposes of individual deterrence, community protection, rehabilitation, or accountability. [59] The English Court of Appeal said recently in Regina v Thames Water Utilities Ltd [2015] 1 WLR 4411, that in relation to the criminal liability of corporations; The object of the sentence is to bring home the appropriate message to the directors and shareholders of the company. [60] I do not believe that any punishment is necessary to bring home to Mr Oldfield the necessity of scrupulous attention to matters of Occupational Health and Safety. The evidence establishes that he is highly diligent in this regard. [61] In R v Wattle Gully Gold Mines NL [1980] VR 622 the Supreme Court of Victoria (Young CJ, Kaye and Murphy JJ), recognising the need for general deterrence, nevertheless imposed a nominal fine ($500 in 1980) upon a corporation on the basis that the detriment flowing from imposition of the fine would otherwise fall not upon those who were really responsible, but upon innocent persons. [62] However, unfortunately for Mr Oldfield, it is sometimes necessary, for the encouragement of others, to inflict a penalty upon innocent parties for the purposes of general deterrence and in recognition of the harm done to the victim and to the community. The Conclusion [63] The maximum penalty is $1,500,000. An appropriate undiscounted penalty is $150,000. The defendant is entitled to 25 per cent discount in recognition of its plea of guilty and cooperation with the authorities. [64] I fine the defendant $112,000. [65] I award the prosecutor a moiety of the fine."

Grounds of appeal

The grounds of appeal relied upon by the prosecutor were set out discursively and need not be repeated verbatim. They may be addressed under the following headings.

(a) objective seriousness of offence

The appellant accepted the statement of principle articulated by Spigelman CJ in Mulato v R, [20] affirmed in R v KB, JL and RJB: [21] "Characterisation of the degree of objective seriousness of an offence is classically within the role of the sentencing judge in performing the task of finding facts and drawing inferences from those facts. This Court is very slow to determine such matters for itself or to set aside the judgment made by a first instance judge exercising a broadly based discretion. The question must be whether or not the particular characterisation which her Honour gave to the circumstances of the offence was open to her Honour." However, the appellant contended that the sentencing judge had mistaken an important aspect of the agreed facts, ignored parts of the agreed facts, and had misunderstood the necessary assessment of the foreseeability of risk.

(i) mistaken facts

In the passage set out at [15] above, the sentencing judge had used the term "blow-out" to describe the circumstances where the slurry from the drilling operation had been ejected into surrounding bushland, rather than the sump, with the potential to contaminate the creek at the bottom of the slope. [22] That event, which had occurred at borehole 3A (borehole 3 having been abandoned as a result of a broken drill bit which could not be removed from the borehole), had led to a manager from Ashton Coal requiring that the respondent ensure that no more contamination occurred. The respondent's employees had sought to solve the problem "by using a shovel taped to the Blooie Line to divert the cuttings in a downwards direction." [23] On 24 July, Mr David Jones, the manager of electrical engineering with Ashton Coal, arranged to meet the operations manager for the respondent, Mr McKinnon, at the drill site on the following day. He told Mr McKinnon that Ashton Coal "would not tolerate another discharge event." [24] Mr McKinnon decided to attach an elbow at the end of the blooie line. [25] The agreed facts stated: "95. At the Borehole 3A Drill Site there was an area where the Defendant stored various pieces of equipment. Stored in that area was a 90 degree elbow joint that had previously been attached to the collar end of a blow-out protection unit of the Drill Rig when it was used at another site - United Colliery near Singleton …. 96. The 90 Degree Elbow came to the [Ashton Coal] site with Drill Rig. It had simply remained on the site during the drilling of Borehole 3. The 90 Degree Elbow was not part of the Blooie Line equipment."
It is clear that the judge sought to defuse the opportunistic nature of this attempt to rectify the problem of contamination by suggesting previous history which had "proved effective". That was a misreading of the agreed facts. There was no suggestion that the contamination at borehole 3A involved a "blow-out". Importantly, the elbow used to deal with the blow-out was inserted at the collar end (that is at the borehole end) of the blooie line; its use to control the discharge of slurry was at the opposite end, where the slurry discharged into the sump. The fact that this was an improvisation using a pipe which happened to be on site, but was not part of the equipment in use, exacerbated the failure of the respondent to undertake any risk assessment of the course it adopted. Contrary to the judge's assumption, there was no prior experience to rely upon.
Secondly, while it was true that the precise cause of the pressure event which lifted the blooie line was not known, the agreed facts included the following propositions: "187. An analysis of the Diverter Box following the incident showed that the bolts connecting the flanges of the Diverter Box and Blooie Line, save for the two top bolts, had fractured due to tensile overload. The force required to cause the tensile overload fracture of the bolts was approximately one tonne …. 188. Force of this magnitude could be produced by water escaping the end of the Blooie Line through the 90 Degree Elbow at downward velocity of 20.4m/s … or by air or other gas escaping the end of the Blooie Line through the 90 Degree Elbow at downward velocity of 281.6m/s …, causing vertical lift at the 90 Degree Elbow end of the Blooie Line. … 190. Assuming that the duration of the incident was 2 seconds, it would have required approximately 1345 kg (1,345 ltr) of water or approximately 85kg (65,743.68 ltr) of air to achieve such flow rates. … 192. During the break from drilling that occurred around midday on 12 August 2012, it is likely that Borehole 4 refilled with water. On resumption of the rotary air drilling when there is known to be a head of water in the hole it is necessary for the driller to bring on the air pressure slowly to bring about a lifting of that head of water in a gradual way. Once the head of water is moving then additional pressure is added to bring the water to the surface quicker. 193. At no time prior to the pressure event was the drill hole blocked, however the rotation of the drill pipe was being impeded. … 196. The Defendant failed to ensure the health and safety of workers and exposed workers, in particular Benjamin Kuypers, to the Risks by using [the] Blooie Line with a sharp 90 Degree Elbow at the end to direct the discharge from the Blooie Line into the Sump instead of ensuring, in circumstances where it may have been necessary that discharge from the Blooie Line not be expelled into the surrounding environment, and as was reasonably practicable in the circumstances, that the Sump was constructed at a sufficient distance from the drill rig, to enable an elbow with a long radius with a bend not exceeding 70 degrees to be used to direct the discharge into the Sump. 197. As noted above from 80-85 metres onwards the Borehole 4 was producing approximately 15,000 to 20,000 litres of water every hour and/or 15,000 litres of water was being produced every 4 to 5 metres drilled. … 212. The Defendant failed to take any, or any adequate steps to assess the risks associated with the Work, in particular: a. the risks associated with the use of the 90 Degree Elbow at the end of the Blooie Line; b. the risks associated with having the Blooie Line traversing beneath the Drilling Platform; c. the risks associated with an unsecured Blooie Line; d. the risks associated with an inadequately positioned Sump." The immediate cause could be reconstructed. These agreed factors, which led into the assessment of risk, were not fully acknowledged.

(ii) assessment of risk

The sentencing judge commenced his consideration with the proposition that "[g]reater culpability attaches to the failure to guard against an event the occurrence of which is probable rather than an event the occurrence of which is extremely unlikely." [26] However, the truth of that proposition depends upon other considerations, including (a) the potential consequences of the risk, which may be mild or catastrophic, (b) the availability of steps to lessen, minimise or remove the risk and (c) whether such steps are complex and burdensome or only mildly inconvenient. Relative culpability depends upon an assessment of all those factors.
Furthermore, there was an elision in the reasoning set out above from considering the foreseeability of a pressure event or a catastrophic release of energy from a drill hole, to the risk of injury to a worker. The latter was said to require three distinct factors in combination. But that was not right; rather there were three steps which could have been taken to reduce or remove the consequences of the foreseeable pressure event.
Further, the judge was wrong to rely upon a lack of expert evidence that the use of the elbow was inconsistent with reasonably prudent industry practice in circumstances where the elbow was not part of the equipment used with the blooie line and where there was no evidence that the use of the elbow was more than a pragmatic improvisation to deal with a problem which had not been anticipated or, if it had, had been disregarded (namely, contamination of the bushland and waterways). There was no occasion for the prosecutor to call expert evidence to address an event which did not form part of industry practice. The failure of the respondent to undertake an appropriate risk assessment of the use of the 90 degree elbow was an agreed particular of the offence.
Finally, the judge appears to have misunderstood the significance of the prosecutor's complaint that the person holding the class 4 drilling licence, Mr Thomson, exercised no supervision or control over the drilling operations.
Ashton Coal had not employed the respondent on previous occasions. It obtained a licence under Pt 5 of the Water Act 1912 (NSW) for the purposes of the borehole drilling. Mr Jones asked Mr Wilson, the Managing Director of the respondent, if he had someone with a class 4 drilling licence. Mr Wilson responded by providing a copy of a class 2 licence held by an employee of the respondent. Ashton Coal, which correctly took this as a "no", then arranged for Mr Thomson to be identified as the licence holder and the driller. Although the class 4 licence holder was responsible for ensuring that minimum construction requirements were complied with, the agreed facts asserted, in some detail, the entirely formal role played by Mr Thomson. [27] The agreed facts continued: "37. Mr Thomson did not exercise real and practical supervision and control over the drilling operations at Borehole 3 and Borehole 4 and this fact was known to the Defendant throughout the drilling operations at Borehole 3 and Borehole 4. 38. None of the employees of the Defendant who worked at Borehole 3 and/or Borehole 4, considered that Mr Thomson was supervising their work and made no enquiries of him during the drilling operations. Mr Wilson was aware that Mr Thomson was only engaged to assist [Ashton Coal] in complying with the conditions set out in paragraph 35 above. Neither [Ashton Coal] nor Mr Thomson made it clear to the employees of the Defendant what Mr Thomson's role in fact was."
The importance of these considerations did not depend on what advice or directions Mr Thomson may have given had he been on site when the 90 degree elbow was fitted. Rather, the facts demonstrated knowledge on the part of the respondent that a class 4 drilling licence was required by the person in charge of the drilling and its blithe disregard for that requirement. This attitude exacerbated the culpability, and indicated a degree of irresponsibility, in attaching the 90 degree elbow without any apparent consideration (let alone a formal risk assessment) as to its effect on the drilling system. (The fact that the respondent had attempted to direct the flow from the blooie line by taping a shovel to the end of the pipe [28] also indicated an element of irresponsibility.)
It may be seen from the errors identified above that the sentencing judge did not err simply in evaluating the seriousness of the identified circumstances of the offending; rather, he mistook material facts and engaged in a process of reasoning which was erroneous. In these circumstances, his characterisation of the objective seriousness of the offending as minor, because the "risk" was "barely foreseeable", cannot be accepted.

(iii) reassessing objective seriousness

The assessment of the objective seriousness of the offence was to be carried out in accordance with Pt 3 of the Sentencing Procedure Act and, in particular, having regard to the aggravating and mitigating circumstances set out in s 21A. Many of those factors have salience in relation to deliberate or reckless criminal conduct. Broadly speaking, the degree of culpability of the respondent may properly be assessed by reference to the risk against which steps falling within the definition of what is "reasonably practicable" are to be taken. [29] The risks in this case were identified in the statement of agreed facts as the risk of injury as a result of the blooie line striking the drilling platform with force when thrust upwards as a result of a pressure event, which was foreseeable.
The culpability of the respondent is not necessarily to be determined by the remoteness of the risk occurring, nor by a step-by-step assessment of the various elements. Culpability will turn upon an overall evaluation of various factors, which may pull in different directions. Culpability in this case is reasonably high because, even if the pressure event of the force which occurred might not be expected to occur often, the seriousness of the foreseeable resultant harm is extreme and the steps to be taken to avoid it, which were not even assessed, were straightforward and involved only minor inconvenience and little, if any, cost. That assessment will involve both objective considerations and a consideration of what the respondent's responsible officers knew or ought to have known.
Of the relevant aggravating factors, one is an offence which involves "a grave risk of death to another person or persons". [30] This factor is satisfied in the present case. However, as exposing an individual to a risk of death or serious injury is an element of the offence, there are limited circumstances in which this aggravating factor can operate with respect to an offence under s 32 of the Work Safety Act. It is also an aggravating factor if "the injury … caused by the offence was substantial". [31] In this case, the injury caused to Mr Kuypers was very substantial. Although the injury was the materialisation of the risk, it was the risk which was an essential element of the offence, and not its materialisation. Accordingly, it is appropriate to take the nature and extent of the injury into account as an important aggravating factor.
It was an agreed fact that pressure events were well known in the industry. It should have been obvious that the use of the 90 degree elbow would, in the event of a discharge under pressure, cause an upward thrust on the end of the blooie line. It was known that the blooie line passed under the platform used by the drill operator and that the platform was hinged and not secured, except by its own weight combined with the weight of the operator. Any significant upward force might well dislodge the operator and cause serious injury. A failure to have regard to these factors and carry out a risk assessment involved a serious dereliction from the health and safety duty imposed on the respondent as an employer.
Further, the question of objective seriousness must be assessed within the gradation of category 1, category 2 and category 3 offences. The respondent was not charged with a category 3 offence, no doubt because it was accepted that the conduct did not amount to reckless disregard for the safety of its worker. On the other hand, the respondent demonstrated a level of disregard for proper procedures which exacerbated its culpability. If, for some reason, it had considered, but rejected the carrying out of a risk assessment (an element of deliberation which was not shown to exist on the facts) then it could have taken the simple steps of redirecting the pipe, or using a different technique of directing the discharge, so as not to place the operator's life at risk. It could also have taken steps to secure the blooie pipe so it did not have a tendency to rise up in response to a pressure event, putting strain on the bolts at the diverter box. Reassessing the objective seriousness, the conduct of the respondent fell in the middle of the range for a category 2 offence.

(a) deterrence

The evidence as to compliance with safety requirements was largely that provided by Mr Oldfield in relation to his own operations prior to the incident and in relation to the respondent's operations after he took control. That evidence supports the conclusion that limited emphasis needed to be given to personal deterrence with respect to the respondent.
On the other hand, the prosecutor was right to emphasise the importance of general deterrence as a means of promoting compliance with health and safety requirements at work. The only penalties available for breaches of the Work Safety Act are fines, whether the offence is committed by an individual or a corporation. To the extent that the sentencing judge appears to have treated the penalty as one inflicted upon Mr Oldfield, an innocent party, the penalty may have been reduced below that which might otherwise have been imposed. As will be discussed below, the judge may also have failed to give proper weight to the maximum penalty.
Mr Oldfield took over the ownership and operation of the respondent some six months after the incident in which Mr Kuypers was injured. There was no suggestion that he was not aware of the circumstances which gave rise to the charges at the time he took over control of the company. The trial judge did not accept that the financial circumstances of the company should lead to the appropriate fine being reduced, and there is no reason to revisit that conclusion.

(b) discount for plea

There is no doubt, as the appellant submitted, that the full discount of 25% for the plea of guilty was not sustainable. The plea was entered on the first day of what had been fixed for a three week trial. The utilitarian value of the plea must have been severely reduced in those circumstances. As was said in R v Thomson; R v Houlton: [32] "The top of the range would be expected to be restricted to pleas at the earliest possible opportunity and should not be given, save in an exceptional case, after a matter has been set down for trial. A discount towards the bottom of the range is appropriate for late pleas, for example, on the date fixed for trial, unless there are particular benefits arising from the prospective length and complexity of the trial."
It is far from clear that there were any exceptional circumstances in the present case. Certainly the sentencing judge did not identify any, beyond the fact that the plea was entered to an amended charge contained in a further amended summons. However, the only significant recent amendments to the summons were the removal of certain particulars of acts or omissions which the prosecutor said were reasonably practicable in order to eliminate or otherwise minimise the risks. Of eight particulars, four were unchanged, one was removed (alleging failure to cease drilling when the borehole began producing excessive water) and two had sub-particulars removed. As the prosecutor correctly submitted, it would have been open to the respondent to plead at an early stage, without admitting all the particulars.
If the reference to "cooperation with the authorities" [33] were intended to engage s 23 of the Sentencing Procedure Act, that was not warranted as there was no basis for an additional discount under that provision. An appropriate discount in the circumstances was 15%.

Resentencing - the residual discretion

There remains a question as to whether, in the exercise of the Court's residual discretion, it is appropriate to intervene in this case regardless of the fact that errors have been established. While the establishment of error is a necessary condition of interference, [34] it is also necessary for the prosecutor to demonstrate affirmatively why the court should intervene. The purpose of the intervention will generally include giving guidance to sentencing courts. [35] It may be inferred that it is the limited scope of that purpose which requires the court to be affirmatively satisfied of the appropriateness of intervention, rather than any particular sensitivity with regard to putting the respondent to the appeal at jeopardy of an increased sentence. [36]
The legitimate purposes of intervention in the present case are twofold. The first purpose is to identify the proper approach to considering the objective seriousness of offences under the Work Safety Act. It is important to note that the risk to be assessed is not the risk of the consequence, to the extent that a worker is in fact injured, but is the risk arising from the failure to take reasonably practicable steps to avoid the injury occurring. To discount the seriousness of the risk by reference to the unlikelihood of injury resulting is apt to lead to error. The conduct in question is the failure to respond to a risk of injury, conduct which will be more serious, the more serious the potential injuries, whether or not they are likely to materialise. The objective seriousness of the conduct will also be affected by the ease with which mitigating steps could have been taken.
Secondly, it is important to emphasise that the proportionality of the sentence should depend upon an assessment of the particular offence in the context of the penalties imposed by the Act. As noted above, the Act provides a gradation rising from category 3 through to category 1, in order of seriousness. In addressing a category 2 offence, attention must be paid to the nature of the conduct which could have led to the employer being charged with a category 1 offence (namely reckless disregard as to the risk to the individual of death or serious injury), combined with a lack of reasonable excuse for engaging in such conduct. Serious derelictions of duty, which do not reach that standard, will constitute the high end of objective seriousness for category 2 offences. That factor is to be considered in the context of a category 2 offence which must, to qualify as such, involve conduct which exposes the individual to a risk of death or at least serious injury or illness.
By contrast, a category 3 offence may involve a dereliction of duty, varying from the casual to the deliberate, but in circumstances where no individual is exposed to a risk of serious injury or illness.
Once the nature of the gradation is borne in mind, the relevance of the maximum penalties may be appreciated. As will be noted shortly, the trial judge erred in failing to give proper consideration to the maximum penalty imposed for the offence in the present case.
For these reasons, error having been established, it is appropriate for this Court to intervene, so that the resentencing may give guidance as to sentencing for offences under Pt 2 of the Work Safety Act.

Resentencing

For the reasons explained above, a proper assessment of the conduct of the respondent warrants the conclusion that it was in the mid-range for severity with respect to a category 2 offence. Accordingly, it required a significantly larger fine than that imposed by the sentencing judge. In that regard, the maximum penalty (a fine of $1.5 million) is an important, though not determinative guidepost, as is the maximum penalty for a category 3 offence ($500,000).
Two factors would indicate that, objectively speaking, the fine should not be at or above the half-way point of the range available. The factors are related. First, the fine will apply to corporate employers of wide-ranging size and ability to absorb a fine. That which would hardly be noticed in the balance sheet of a large corporation may push a smaller corporation to the verge of insolvency, or over. Secondly, it is possible to be satisfied in the case of a small corporation that changes in management practice may diminish significantly the need for individual deterrence. That may not be so powerful a factor with a large corporation which will rely upon general systems and the quality and diligence of its supervisory officers.
The size of the operation of the respondent may perhaps be best indicated, on the evidence available in this Court, by the size of the respondent's wages bill in the year to June 2015, which was in excess of $10 million. The evidence also revealed that the company operated in a number of different regions within Australia.
Finally, in mitigation of penalty, it is appropriate to accept the findings of the trial judge that, under new management, the company has a different safety culture and has, since the accident in which Mr Kuypers was injured, established an excellent safety record. It is also significant that the company has sought to provide a level of continuing support to Mr Kuypers, although the actual value of the support is not revealed.
In these circumstances, an appropriate fine prior to discount, would have been $250,000. Applying a discount of 15% for the late plea, gives a figure of $212,500.

Costs - Prosecutor's appeal

The prosecutor sought an order for costs pursuant to s 257B of the Criminal Procedure Act 1986 (NSW). That section provides: 257B When costs may be awarded to prosecutor A court may, in and by a conviction or order, order an accused person to pay to the registrar of the court, for payment to the prosecutor, such costs as the court specifies or, if the conviction or order directs, as may be determined under section 257G, if: (a) the court convicts the accused person of an offence, or (b) the court makes an order under section 10 of the Crimes (Sentencing Procedure) Act 1999 in respect of an offence.
The respondent did not dispute that the Court had power to make such an order (although it did dispute the jurisdiction of this Court to hear an appeal against a refusal to make such an order), but rather submitted that, being a discretionary power, the appellant had failed to demonstrate any relevant error on the part of the sentencing judge in refusing the order sought.
The trial judge dealt with the application cursorily. Having delivered his reasons on 12 August 2016, he stated: "I will hear the parties on costs. It seems to me this is not an appropriate matter in which Mr Oldfield should have to bear the costs as well as the fine. What do you say Madam Prosecutor? MCDONALD: The prosecutor would seek costs to be agreed or assessed. HIS HONOUR: You seek an order for costs. The prosecutor asks an order pursuant to s 257B of the Criminal Procedure Act 1986 that the defendant pay the prosecutor's costs. The prosecutor is in the public interest funded by the State. Her office is to receive a moiety of the fine. To my mind, the public interest in this prosecution is exhausted by the fine imposed. It would not be fair, just or reasonable to impose a further impost upon the innocent natural person who will bear the costs of that fine. I decline to order that the defendant pay the prosecutor's costs."
Although the prosecutor complained that the judge dismissed the application peremptorily, without hearing submissions from the prosecutor, the circumstances do not support that complaint. The application was made in lengthy written submissions on sentence, which sought both a moiety of the fine to be payable to the prosecutor and an order for costs in favour of the prosecutor. Where a party has had and embraced an opportunity to put its submissions in writing, it will not usually be procedurally unfair for the judge not to hear the parties further as to costs. At least that is so where the application will not be affected by the outcome of the substantive dispute. The reason why the judge raised the matter in this case was probably to allow the prosecutor to put any further submissions in circumstances where the judge had expressed a view that no order should be made, contrary, possibly, to the expectation that costs would follow the event. In any case, it is not clear that the prosecutor did not have the opportunity to say more than she did when advised of that view.
The appellant also challenged the result on the basis that the judge: 1. treated the payment of costs as an element of the penalty; 2. treated both the costs and the penalty as being imposed on Mr Oldfield, rather than the company; 3. treated the moiety as a substitute for costs, and 4. failed to identify any disqualifying conduct on the part of the prosecutor which would have warranted a refusal to order costs.
In Latoudis v Casey [37] the High Court considered the effect of a statutory provision (by then common across Australian jurisdictions) empowering a court, in dismissing a summary prosecution, to order the informant to pay the defendant's costs. The magistrate had dismissed the defendant's application for costs on the basis that the informant had had reasonable grounds for pursuing the prosecution. The High Court held that that involved an error in the exercise of the discretionary power. Prior to that case, courts in various Australian states had been reluctant to award costs in favour of a defendant who had escaped conviction, where the charge was reasonably laid. The majority [38] applied, broadly, principles relevant to civil proceedings, in accordance with the statutory regime. Thus McHugh J, with whom Mason CJ expressed agreement, although giving his own reasons, stated: [39] "An order for costs indemnifies the successful party in litigious proceedings in respect of liability for professional fees and out-of-pocket expenses reasonably incurred in connexion with the litigation …. The rationale of the order is that it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred. The order is not made to punish the unsuccessful party. Its function is compensatory. … Once it is perceived that costs operate as an indemnity …, no ground exists for distinguishing between informants in summary proceedings who are public officials and those who are private persons. True it is that public officials should launch prosecutions only when the public interest requires it. This is the chief, but not the only, rationale for the rule that historically the Crown neither paid nor received costs. … Once a legislature abolishes the rule that the Crown and those who institute summary proceedings in the public interest neither pay nor receive costs, the various rationales of that rule cannot be used to justify the exercise of the discretion to refuse to order the payment of costs of a successful defendant in summary proceedings. … Paradoxically, the rationales of the historic rule are not used to defeat the exercise of the discretion in favour of the Crown or police informant when the informant seeks an order for costs. The result is unequal justice."
Noting that a similar non-discriminatory principle had been adopted in Hamdorf v Riddle, [40] which was approved in Latoudis, McHugh J then continued: [41] "In civil proceedings, the relevant statute or rule often provides that costs follow the event unless the court thinks that some other order should be made. But even when the discretion is uncontrolled, civil courts act on the basis that a successful party has a reasonable expectation of obtaining an order for costs and that the discretion to refuse to award costs should not be exercised against the successful party except for a reason connected with the case. … It is true that the discretion to award costs in summary proceedings has to be exercised in circumstances which are not identical to those which exist in civil cases. … But, despite the differences between civil and criminal proceedings, once the real issues in the summary proceedings are identified, there is no difficulty in applying in such proceedings principles akin to those applicable to the making or refusing of orders for costs in civil cases."
These principles have been applied to criminal prosecutions (other than jury trials) since that time, in accordance with a range of statutory provisions. The principles were recently applied by this Court in relation to a prosecution under the predecessor to the Work Safety Act, in Bulga Underground Operations Pty Ltd v Nash. [42] There may be cases, such as Bulga, where it is appropriate to order costs by reference to success or failure on discrete issues, but this was not such a case.
The brief reasons given by the sentencing judge for not awarding costs revealed that a number of factors (noted above) had been taken into account which, with one possible exception, were not material to the exercise of the discretion to order costs. The possible exception was the reference to the award of a moiety (that is payment of half of the fine) to the prosecutor.
The right to a moiety, now located in s 122(2) of the Fines Act 1996, was discussed in Downey v Acting District Court Judge Boulton (No 5). [43] The issue raised in Downey was far removed from that which arises in the present case. Mrs Downey alleged that proceedings brought against her by an inspector on behalf of the RSPCA for mistreatment of cattle were invalid because the inspector, who was entitled to a moiety should a fine be levied, was said to have an interest in the proceedings which conflicted with his obligation to act in the public interest. That argument was dismissed, but in the course of the reasoning, I referred to the fact that a moiety could not be awarded if the prosecutor were a police officer. [44] I then suggested that '[t]he precise scope of s 122 is by no means clear: there are many circumstances in which a government officer will be a prosecutor, a circumstance in which, given the history of the provision, it is unlikely that it was intended to apply". [45] That was discussed further in the following passages: "[66] As explained by the Solicitor-General, a provision in the form of s 122 of the Fines Act, permitting a 'common informer' to recover a statutory penalty for his or her own benefit has a long history in this country and in the United Kingdom. In the particular context of this case, he noted that the Cruelty to Animals Act 1850 (14 Vic c 40) provided in s 13: 'And be it enacted, That all fines forfeitures and penalties imposed by this Act shall be paid one moiety to Her Majesty, Her Heirs, and Successors, for the public uses of the said Colony, and in support of the Government thereof … and the other moiety to the use of the informer or party prosecuting.' [67] Although there is a longstanding principle that the Crown or State, as prosecutor, neither receives nor pays costs of a criminal trial, the rule has long been otherwise in respect of summary proceedings. Indeed, the question of costs incurred by prosecutors predated the establishment of a statutory police force. Thus, in England in 1752, legislation empowered a court before whom a person had been tried and convicted of a felony to order the treasurer of the county to pay the prosecutor a reasonable sum not exceeding the expenses of the prosecution and a reasonable allowance for time and trouble: (1752) 25 Geo II, c 36 and (1818) 58 Geo III, c 70."
In short, it appears that the purpose of payment of a moiety to a common informer was, historically, to provide an incentive to encourage law enforcement by private proceedings, the payment being either from public funds or from the penalty. However, it is by no means clear that the historical purpose is to be found in the current provision.
There is no statutory requirement that the payment of the moiety be applied to the costs of the proceedings brought, as opposed to the costs of running the regulatory agency responsible for bringing the proceedings. Further, it would be anomalous if the prosecutor were to be paid his or her costs in circumstances where no moiety was payable, but not in circumstances where one was. Indeed, the very idea of a moiety payable to a public officer is something of an anomaly in circumstances where the fine will be paid to the same body politic as that responsible for maintaining the law enforcement agency in question, namely, in this case, the State of New South Wales. How the moneys are accounted for within the government should be of no concern to the offender or the court.
In those circumstances, and in the absence of reasons justifying the refusal to award any costs to the prosecutor, the decision should be set aside.
Although the submissions as to what should happen in that event were limited, there is an issue as to whether some deduction should be made from any award of costs against the respondent in respect of particulars which were introduced by amendment of the charges, but later withdrawn and not relied upon. There are two difficulties in this Court assessing how that matter should be dealt with. First, the detail of the chronology is by no means clear; secondly, it is not clear whether any additional costs were incurred in preparation for a trial in which those particulars would be relied upon.
Rather than speculate as to these matters, the appropriate course is to order that the respondent pay the appellant's costs of the proceedings in the District Court, not including any costs incurred in preparation for a trial in which the particulars withdrawn in the further amended summons were to be relied upon, such costs to be agreed or assessed.

Orders

The Court should make orders setting aside the sentence imposed on the respondent and resentencing it in accordance with the conclusions reached above. It is not entirely clear that the sentencing judge in fact convicted the respondent on the basis of its plea and an order to that effect should be included. The District Court awarded a moiety to be paid to the prosecutor and that order should stand. No order was sought as to the costs of the appeal.
Accordingly, the Court should make the following orders: 1. In respect of the appeal against sentence: 1. allow the appeal and set aside the orders made by Curtis DCJ on 12 August 2016; 2. in lieu thereof make the following orders - 1. convict the respondent, Silver City Drilling (NSW) Pty Ltd of an offence under s 32 of the Work Health and Safety Act 2011 (NSW) for contravening s 19(1) of the Act with respect to its workers at Ashton Coal Mine on 12 August 2012; 2. order that the respondent pay a fine in the amount of $212,500 of which a moiety should be payable to the prosecutor. 1. In respect of the appeal against the refusal of the costs application: 1. allow the appeal and set aside the order made by Curtis DCJ on 12 August 2016 refusing the application; 2. in lieu thereof order that the respondent pay the prosecutor's costs of the proceedings in the District Court, not including any costs incurred in preparation for a trial in which the particulars withdrawn in the further amended summons were to be relied upon, such costs to be agreed or assessed.
HOEBEN CJ at CL: I agree with Basten JA and the orders which he proposes.
WALTON J: I agree with the orders proposed by Basten JA for the reasons given by his Honour.

Endnotes

Work Safety Act, s 31.
Work Safety Act, s 30.
Sentencing Procedure Act, s 4(3).
Judgment at [52].
Judgment at [63].
Agreed statement of facts, pars 146 and 154.
Judgment at [15].
Judgment at [16]-[17].
(2001) 205 CLR 304; [2001] HCA 6 at [91].
Judgment at [21]-[25].
Judgment at [28].
Judgment at [30].
Judgment at [33].
Judgment at [34]-[35].
Judgment at [36].
Judgment at [37].
Judgment at [38].
Judgment at [45]-[48].
Judgment at [51].
[2006] NSWCCA 282 at [37].
[2011] NSWCCA 190 at [51] (Bathurst CJ; Buddin and Harrison JJ agreeing).
Agreed statement of facts, par 85.
Agreed statement of facts, par 87.
Agreed statement of facts, par 90.
Agreed statement of facts, par 98.
Judgment at [14].
Agreed statement of facts, pars 29-36.
Agreed statement of facts, par 87.
Work Safety Act, s 18; at [7] above.
Sentencing Procedure Act, s 21A(2)(ib).
Sentencing Procedure Act, s 21A(2)(g).
(2000) 49 NSWLR 383; [2000] NSWCCA 309 at [155].
Judgment at [63].
CMB v Attorney General (NSW) (2015) 256 CLR 346; [2015] HCA 9 at [33] (French CJ and Gageler J); [54] (Kiefel, Bell and Keane JJ).
CMB at [55].
See Crimes (Appeal and Review) Act 2001 (NSW), s 68A; CMB at [62] and [65].
(1990) 170 CLR 534.
Mason CJ, Toohey and McHugh JJ; Brennan and Dawson JJ dissenting.
Latoudis at 566-568.
[1971] SASR 398 at 402 (Bray CJ, Hogarth J and Sangster AJ).
Latoudis at 568.
[2016] NSWCCA 37 (Bathurst CJ, Hidden and Davies JJ) at [219]-[221].
(2010) 78 NSWLR 499; [2010] NSWCA 240 at [64]-[69].
Fines Act, s 122(1).
Downey at [64]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 May 2017

See Crimes (Appeal and Review) Act 2001(NSW)

Fines Act 1996(NSW)s 122(2)

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