SafeWork NSW v Auschem

District Court of NSW|2017-11-22

Solicitors: SafeWork NSW (Prosecutor) Longton Legal (Defendant File Number(s): 2016/189551

Judgment

Auschem (NSW) Pty Limited (the offender) has pleaded guilty to an offence that being a person conducting a business or undertaking that had a health and safety duty under s 19(1) of the Work Health and Safety Act 2011 (the Act) it failed to comply with that duty and thereby exposed Mr Ian Raine and Mr Geitu Ciantar to a risk of death or serious injury contrary to s 32 of the Act.
The maximum penalty for the offence is a fine of $1,500,000.

THE INCIDENT

On 3 February 2015 Mr Ian Raine and Mr Geitu Ciantar, both 63 years of age and both employees of the offender, were in the process of decanting Thinners by gravity feed from one 1,000 litre IBC to another. They were doing this because one of the IBCs, which was partially filled with Thinners, was leaking.
Mr Raine and Mr Ciantar placed the receiving IBC in the decanting area, with the metal frame of the receiving IBC directly in contact with the floor of the decanting area. The decanting area was constructed of besser block and steel. The floor of the decanting area was made up of metal grates placed over a bund. The metal grates were permanently fixed to earth.
Mr Raine and Mr Ciantar raised the leaking IBC on the tines of a forklift so that it was resting on the top of the receiving IBC. The forklift was leant forward to allow the liquid to flow out. The top lids of both IBCs were removed. They then attached an earth cable to the receiving IBC. They also attached a bonded hose to the bottom valve of the leaking IBC. The other end of the bonded hose was placed into the bottom of the IBC.
The contents of the leaking IBC were moving around inside the IBC immediately after that IBC was raised on the forklift tines. The contents of the receiving IBC were glowing and the receiving IBC began to expand.
The valve to the leaking IBC was opened and within a second of this an explosion occurred and a fire started.
Mr Ciantar suffered burns to his stomach, shoulder and right arm/hand. His right finger was also fractured. Mr Raine suffered cuts to his head requiring stitches. Both were taken by ambulance to Liverpool Hospital.
The explosion and fire also caused damage to both IBCs, a diesel forklift truck and a brick wall. The flame height was from the floor of the mixing area to the metal roof.
The cause of the explosion and fire was electrostatic ignition due to the flow of Thinners between the two containers.

SYSTEMS OF WORK PRIOR TO THE INCIDENT

There was no documented risk assessment in place for the decanting process.
There was no structured training in place in relation to the decanting of Thinners from one IBC to another IBC. There was an informal on-the-job training process and a broad procedure involving the earthing of the IBCs, during the decanting of Thinners from one IBC to another IBC, to prevent electrostatic discharge from igniting flammable air-vapour mixtures present during the decanting process.
There was no formal system in place at the time of the incident to ensure earth straps were not faulty and that they were ready for use and in good working condition.
There was no procedure in place for ensuring that the earthing of the IBCs was maintained at the same electrical potential during the transfer of Thinners.
There was no procedure established or maintained to ensure that in the course of transferring Thinners from one IBC to another, both containers and the transfer hose connecting them were all at the same electrical potential.
There was no process in place at the time for ensuring both IBCs had an earthed metal plate placed in the solvent flow, at the valve that connected part of the IBC frames to earth. Had this been done it would have ensured that any electrostatic build-up during the transfer of Thinners was discharged to earth.
At the time of the Thinners being decanted by gravity feed in the manner set out above, the linear flow rate of the Thinners from the valve attached to the IBC containing the Thinners was faster (i.e. 3.1 metres per second) than the recommended linear velocity of one metre per second. This faster rate would have increased the electrostatic build-up.
The offender and its staff believed that grounding/earthing and bonding were sufficient measures to control any risk associated with decanting Thinners from one IBC to another. However, there was no formal auditing process in place at the site for checking or inspecting earth straps to ensure they were able to adequately earth or ground IBCs to which they were attached.
There was no procedure for controlling or minimising the risk that during the decanting process the Thinners will accumulate an electrostatic charge, which can ignite air-vapour mixtures, despite there being measures in place for the proper grounding or earthing of the relevant containers. Such a procedure should make provision for: 1. the dissipation, by settling, of the electrostatic build-up in the Thinners; 2. controlling the linear velocity of Thinners, during transfer, to reduce the risk of electrostatic build-up; and 3. avoiding splash filling of the receiving container.
Workers were not provided with information, instruction, training, or supervision in relation to this hazard associated with Thinners. The hazard may arise even where adequate earthing or bonding of the containers has been achieved.

SYSTEMS OF WORK AFTER THE INCIDENT

After the incident, gravity decanting from one IBC directly into another ceased at the site. The transfer of products now takes place using pumps which suck the material from its source tank into a blending tank from which it is then conveyed into the receiving container. When the blending tank is not available, the material is transferred into an emergency steel IBC, then into the receiving container.
Provision for the dissipation of electrostatic build-up by relaxation is now included in the procedures for decanting of Thinners from one IBC to another IBC.
Regular auditing of earth straps is now done to ensure they are not faulty and to make certain they are ready for use and in good working condition.
The defendant cooperated with SafeWork NSW in the investigation of this matter. The defendant also provided voluntary assistance to SafeWork NSW in its investigation into a separate matter, involving a fire at Mount Druitt in January 2011. That investigation led to Omega International Coatings Pty Ltd being charged under the Occupational Health and Safety Act 2000 and dealt with by this Court on 1 February 2016: Safework NSW v Omega International Coatings Pty Limited & Shetty [2016] NSWDC 11.

THE EVIDENCE FOR THE OFFENDER

The evidence for the offender came from the affidavit of Mr Charles Ciantar sworn 21 November 2017. He was not cross-examined. His evidence in relation to the system of work in place before the incident and improvements to that system since the incident, has been summarised above.
Mr Ciantar said that the offender is a family owned and run business. Mr and Mrs Ciantar are the sole directors and shareholders of the offender. Their sons, Jason Ciantar and Adam Ciantar are the offender's "manager of sales and logistics" and the "acting operations manager" respectively. In addition to this, there are 11 full-time employees of the offender, two of whom, Geitu Ciantar and Ian Raine, were the injured parties in the incident.
The offender had previously employed an Operations and Yard Manager, Mr Dean Mifsud, who had responsibility for overseeing work health and safety at Auschem. Mr Mifsud reported to Mr Ciantar. Mr Mifsud left the offender in or around August 2017, the offender has not yet found a replacement for him.
Mr Ciantar, prior to establishing the offender, was a joint director and shareholder of Solvents and Chemical Sales Pty Ltd (Solvents). Solvents was incorporated in 1986 and sold in 1994.
The offender was incorporated in 1998 and commenced trading in 1999. All the solvents which the offender re-packaged for re-distribution were put into 200 litre metal drums. All of the storage and handling facilities and the offender's handling and operating procedures were centred on the handling and storage of solvents delivered in bulk by tanker, or in 200 litre metal drums. From about 2005, international suppliers began to supply solvents in IBCs. From this time, the offender developed step by step procedures for the handling, storage and filling of IBCs on site.
The business of both Solvents and the offender is the same, being wholesalers and distributors of industrial solvents. As such, Mr Ciantar has worked in the wholesale distribution of industrial solvents for around 27 years. Mr Ciantar believes that Solvents was never involved in any industrial accidents, nor was it convicted of any offence.
The offender operates from a purpose built site in Wetherill Park. Industrial Contract Design Pty Ltd designed and installed the on-site storage and handling systems, which includes the solvent handling systems such as the "drumming out" or filling area. The design and construction were compliant with the requirements of the relevant Australian Standard AS 1940-1993.
The drumming out or filling area included a series of permanent earths designed and constructed into the facility. The flooring of this facility was constructed with metal grid plates that were permanently connected to earth. There was also a permanent earth strap located in the filling station, which was attached to the metal frame of the mixing tank.
Benbow Environmental, a specialist environmental consultancy, prepared risk based studies relating to the planning, design and construction of the bulk handling and storage systems constructed at the site.
In around 2007, the offender expanded the site's storage facilities by adding a purpose-designed and built warehouse. Benbow Environmental was again retained to plan, design and over-see construction of the new warehouse facility. The new facilities were designed and constructed in accordance with the requirements of AS 1940 - 2004, the Dangerous Goods Code and also the relevant Dangerous Goods Regulations.
The drumming out or filling area at the premises was severely damaged as a consequence of the incident, and those areas have been redesigned and reconstructed in accordance with current building and dangerous goods handling codes and requirements.
Mr Ciantar expressed his remorse for the incident that took place on 3 February 2015. He feels the incident was an intensely personal one. All three of his children at one point worked for the offender, and on the day in question, his two sons were present and helped fight the fire until help arrived. His younger brother, Geitu, was one of the men injured in the incident, and Mr Ciantar had difficulty dealing with his emotions at seeing Geitu hospitalised. Mr Ciantar feels a sense of responsibility for all his siblings, and as such, cannot emphasise enough the feelings of remorse he had not only on the day of the incident itself, but also the days subsequent to it.
Mr Ciantar says that he has struggled to come to terms with the fact that he was involved in such a terrible incident, not only because his brother and Mr Raine were injured, but his children and all the other employees working at the site were put at risk. Mr Ciantar states that many of the offender's employees have been with them several years, and he considers them like family. Mr Ciantar visited both Geitu and Mr Raine at Concord Hospital, and remained in regular contact with Mr Raine until his return to work.
Mr Ciantar sincerely apologised on behalf of Auschem for the incident and the breach of the Work Health and Safety Act 2011. He also acknowledged, for the offender, that the risk of injury to the employees should have been addressed by adopting better operating procedures; by the giving of better instructions and training to the offender's employees; by incorporating plant modifications into the offender's systems for handling IBCs; and by adopting additional checks on the suitability of plant. Mr Ciantar also acknowledged on behalf of the offender, that the failure to identify and address the risk of an explosion in the course of transferring material from one IBC to another, resulted in the incident in which two employees sustained serious personal injuries.
The offender presently uses, and will continue to use its best efforts to comply with the Act, its regulations and codes of practice.
Mr Ciantar said that this incident had a huge impact upon the offender's name and reputation within the industry, which had been without incident for the previous 14 years. He said that dealing not only with personal trauma, but also the professional effects of the incident have been very difficult. Mr Ciantar said that for at least 6 months following the incident, Auschem suffered a huge financial blow as it had no alternative other than buy goods at a much higher rate and sell at virtually cost price, or even at a loss. He asserts that the offender did this to maintain the trust and faith which customers had in the offender and to maintain its place in the industry. He further said that the insurance premiums paid by the offender have greatly increased since the incident.
Mr Ciantar said that he is from "the old school" and has been in business a long time, as such he always felt he did the right thing. However, after this incident he has come to the realisation that things should have been done better and that he has changed a great deal. He is committed to ensuring that the offender has a proper working health, safety and environmental control system in place. Toolbox Meetings with workers and updated training sessions are now held. Several external auditors and advisors have been employed to assist, offer guidance, and to ensure compliance and constant improvement.
Mr Ciantar said that he had worked hard since age 15, and at 74, continues to do so. He says that he is a very proud man, but is not ashamed to admit that he has suffered personally from the incident, financially, physically and emotionally. This event has had a greater impact than any other hardships he has encountered as a business owner.
Mr Ciantar states that the offender has always had a very good relationship with SafeWork NSW as well as other government agencies. The offender has always been co-operative and gave many hours of assistance to SafeWork NSW in a previous investigation. The offender has co-operated with SafeWork at all times since the day of the incident in question, providing reports, procedures, paperwork, CCTV footage, workers' time, and whatever was required from them to assist in the investigation and complying with all notifications.
The offender has processed approximately 187 million litres of industrial solvents at the Wetherill Park site between March 1999 and 3 February 2015. In that time, the offender has not suffered a single accident or incident. Mr Ciantar believes that the offender had never received any Improvement Notices or Prohibition Notices prior to the incident.
The offender has always had a practice of displaying relevant written work procedures at each work station, including the "drumming out" or filling area. At the time of the incident, those procedures on display in the filling area were destroyed in the fire. The practice of displaying relevant safe work procedures at each station still continues. At the time of the incident, the offender did not have in place a written step by step work procedure for the transfer of solvents, including Thinners, from one IBC to another IBC. The sale of thinners represents approximately 1% of all the solvents distributed by the offender in IBCs.
The only time a transfer of solvents from one IBC to another took place, is when one is leaking, this was a rare occurrence. This required the immediate transfer of the thinners to another container. Mr Ciantar does not recall an IBC ever leaking thinners prior to the 3 February 2015 incident, nor has this happened since. The offender had an informal practice of emptying a leaking IBC either by pump or directly into another IBC. These informal practices involved the use of the permanent earths at the filling station. These earths were tested on an ad-hoc basis by an employee from time to time. The offender has accepted that these informal practices were inadequate.
Following the incident, the offender has had major reconstruction of the gantry/filling area. It engaged Benbow Environmental to provide advice in the course of the re-design and re-build of the filling area, and to review operating systems and provide recommendations as to safety and procedures, including the safe use, handling and storage of Dangerous Goods in IBCs. The offender has obtained detailed information relating to the design and construction of earthing systems built into IBCs from the leading manufacturer and supplier of IBCs in Australia, Schutz Australia Pty Ltd.
The design and installation of the new filling stations was done by Miller Dispersion Equipment Pty Ltd, an industrial design, manufacturing and construction company specialising in industrial chemical dispersion and dispensing equipment. The stations have a permanent inbuilt earthing system, with a metal grid floor linked permanently to an earth, along with an earth-bar at each station. The electrical systems were designed by Miller Dispersion, but installed by Caslec Industries Pty Ltd, a specialist electrical contractor and electrical engineering company. The electrical and earthing systems have all been inspected and certified by Insight Consulting and Training Pty Ltd. Pumping equipment with a control system was also installed, with a view to reduce the risk of electrostatic build-up. In August 2017, the offender retained Caslec Industries to inspect and maintain the earthing systems at the premises.
Miller Dispersion developed written standard operating procedures and held a safety workshop meeting with the offender's employees. The workshop included training in the operation of the new filling equipment and training in the safe operating instructions. The offender has continued to review and update its standard operating procedures for the transfer of solvents from IBC to IBC. It has also set aside a dedicated metal emergency IBC. The offender does not import any Dangerous Goods in IBCs, only in 200 litre metal drums.
The offender has introduced formal toolbox training meetings and engaged B4Risk who are risk management consultants, on an ongoing basis to undertake site safety audits. The offender proposes to implement each of the recommendations made by B4Risk.
Mr Ciantar said that he found that there were a number of ongoing issues relating to the use and handling of IBCs which require the offender's ongoing investigation and monitoring. The offender is investigating obtaining a static earth monitoring system from the United Kingdom, if reasonably practicable.
The offender donates regularly to charity, including Westmead Children's Hospital, NSW Police Association, Kids with Cancer and Bear Cottage.

CONSIDERATION

I have had regard to the objects of the Crimes (Sentencing Procedure) Act 1999 set out in s 3 and the purposes of sentencing set out in s 3A.

OBJECTIVE SERIOUSNESS OF THE OFFENCE

The proportionality principle requires that a sentence should neither exceed nor be less than the gravity of the crime having regard to the objective circumstances: Veen v R (No. 2) (1998) 164 CLR 465 at 472, 485-6, 490-1 and 496. At common law, the term "objective circumstances" was used to describe the circumstances of the crime. The gravity of the offence was assessed by reference to its objective seriousness: R v McNaughton (2006) 66 NSWLR 566 at [15].
The task requires the court to consider where in the range of conduct covered by the offence the conduct of the offender falls: Baumer v R (1998) 166 CLR 51 at 57. This assessment will generally indicate the appropriate range of sentences available which will reflect the objective seriousness of the offence committed, and set the limits within which a sentence proportional to the criminality of the offender will lie: BW v R [2011] NSWCCA 176 at [70].
The sentencing judge should take into account not only the conduct which actually constitutes the crime, but also such of the surrounding circumstances as are directly related to that crime and are properly regarded as circumstances of aggravation or mitigation: R v Wilkinson (No. 5) [2009] NSWSC 432 at [61].
The existence of a reasonably foreseeable risk to safety that is likely to result in serious injury or death is a factor relative to the gravity of the offence: Capral Aluminium Limited v WorkCover Authority of New South Wales (2000) 49 NSWLR 610 at [89]. The question of foreseeability of the risk is to be determined objectively.
The Court of Criminal Appeal has recently examined the sentencing process with regard to the Work Health and Safety Act 2011 in the matter of Nash v Silver City Drilling (NSW) Pty Limited; Attorney General for NSW v Silver City Drilling (NSW) Pty Limited [2017] NSWCCA 96; 93 NSWLR 338. His Honour Justice Basten at paragraph 34, under the heading 'Assessment of Risk' said: "The sentencing judge commenced his consideration with the proposition that 'greater 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'. 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 on assessment of all those factors."
Further at paragraph 42 his Honour continued: "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, were not even assessed, were straightforward and involved only minor inconvenience and little, if any, costs."
My findings about the offender's level of culpability are based upon the following: 1. Employees of the offender were placed at risk of death or serious injury. The risk of explosion and fire due to ignition from electrostatic discharge in the course of decanting thinners from one IBC to another was obvious, identifiable and foreseeable. Nevertheless the decanting process was a rare event. 2. The existence of the risk was known to the offender and was risk identified in: 1. Australian Standard AS/NZS 1020: 1995 The Control of Undesirable Static Electricity; 2. Auschem's Material Safety Data Sheet for All Purpose Thinners; 3. SafeWork Australia Code of Practice: Managing Risks of Hazardous Chemicals in the Workplace. 1. The offender failed to implement the standards and code of practice referred to above. 2. The systems of work at the site were unsafe as the offender had: 1. no documented risk assessment in place for the decanting process; 2. no structured training in place in relation to the decanting of Thinners from one IBC to another IBC; 3. no formal system in place at the time of the incident to ensure earth straps were not faulty and that they were ready for use and in good working condition; 4. no procedure in place for ensuring that the earthing of the IBCs was maintained at the same electrical potential during the transfer of Thinners; 5. no process in place at the time for ensuring both IBCs had earthed metal projections placed into the solvent flow at the valve that connected part of the IBC frames to earth; 6. no formal auditing process in place at the site for checking or inspecting earth straps to ensure they were able to adequately earth or ground IBCs to which they were attached. 1. Workers were not provided with information, instruction, training, or supervision in relation to this hazard associated with Thinners. 2. The cost to the offender of overcoming the risk would have been insignificant when weighed against the effect of an explosion and a fire when workers were immediately adjacent to the ignition point.
I find that the offender's level of culpability is in the high end of the low range.

DETERRENCE

The penalty imposed in relation to these offences must provide for general deterrence. Employers must take the obligations imposed by the Act very seriously. The community is entitled to expect that both small and large employers will comply with safety requirements. General deterrence is a significant factor when safety obligations are breached: Bulga Underground Operations Pty Limited v Nash (2016) NSWCCA 37 at [180].
The penalty must reflect the need for specific deterrence. The offender is still conducting a business. Its operations involve dealing with huge quantities of dangerous goods. The offender has eleven employees.

AGGRAVATING FACTORS

The injury, emotional harm, loss or damage caused by the offence was substantial: s 21A(2)(g) Crimes (Sentencing Procedure) Act 1999.

MITIGATING FACTORS

The offender does not have any record of previous convictions: s 21A(3)(e) of the Crimes (Sentencing Procedure) Act 1999.
The offender is otherwise of good character: s 21A(3)(f) of the Crimes (Sentencing Procedure) Act 1999. The steps which the offender took after the incident demonstrate this. The managing director of the offender ran a similar business in the past, and it too had a good safety record.
The offender is unlikely to re-offend: s 21A(3(g) of the Crimes (Sentencing Procedure) Act 1999.
The offender has good prospects of rehabilitation: s 21A(3)(h) Crimes (Sentencing Procedure) Act 1999. The offender has taken positive steps to guard against the risk of an incident such as this ever happening again.
The offender has shown remorse for the offence: s 21A(3)(i) Crimes (Sentencing Procedure) Act 1999. The offender proved that it has accepted responsibility for its actions and has acknowledged that the injuries were caused by its actions.
The offender entered a plea of guilty: s 21A(3)(k) Crimes (Sentencing Procedure) Act 1999. The court must take into account the fact that the offender has pleaded guilty, when it pleaded guilty, and the circumstances in which it indicated an intention to plead guilty: s 22(1) Crimes (Sentencing Procedure) Act 1999. In my view the offender entered a plea of guilty at the earliest possible opportunity, a matter conceded by the prosecutor. It is appropriate to apply a discount of 25%.
The offender gave assistance to law enforcement authorities: s 21A(3)(m) Crimes (Sentencing Procedure) Act 1999. The offender co-operated at all times with the prosecutor and provided all documents requested in a prompt fashion.

CAPACITY TO PAY A FINE

I am required to have regard to s 6 of the Fines Act 1996 before imposing a fine. Where an offender seeks to have a fine reduced on the basis of a limited capacity to pay, it bears the evidentiary onus of convincing the court that it should exercise its discretion to limit the amount of the fine. The offender's capacity to pay is relevant but not decisive: Jahandideh v R [2014] NSWCCA 178 at [16]. A substantial fine may still be warranted as a result of the seriousness of the offence and the need for general deterrence.
No submission was made as to the offender's capacity to pay a fine.

COSTS

The parties have agreed to an order that the offender is to pay the prosecutor's costs agreed in the sum of $31,000.

PENALTY

The offender is convicted.
The appropriate fine is $80,000 but that will be reduced by 25% to reflect the plea of guilty.
I impose a fine of $60,000.
I order pursuant to s 122(2) of the Fines Act 1996 that 50% of the fine is to be paid to the prosecutor.
I order the offender to pay the prosecutor's costs agreed in the sum of $31,000.

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: 27 November 2017

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Judgment (16 paragraphs)

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Cases Cited (9)