SafeWork NSW v Candal Investments Pty Ltd

SafeWork NSW v Candal Investments Pty Ltd - [2021] NSWDC 139 - NSWDC 2021 case summary — Zoe

[4]

Background

The parties presented an Agreed Statement of Facts and this material is summarised below.
Candal conducted a business or undertaking which involved the processing and packaging of meat at its factory ("the Premises") in Bomaderry NSW.
Mr Lachlan Graham was the Managing Director of Candal.
Messrs John Gary Honan, Peter Edwin Stretton, Bryce Graham, Lee Kai Yeung and Richard Gillman were also directors of Candal.
Ms Leighanne Bradshaw was first employed by Candal as a meat packer in May 2014. Ms Bradshaw's duties included all aspects of the meat packing process which included weighing and labelling meat, packaging and running the meat through various machines. Ms Bradshaw performed her duties under the direction and supervision of Mr Bignall. Ms Bradshaw was considered to be a conscientious and capable worker.
Mr Stuart Harkin was employed by Candal as a Maintenance and Engineering Manager around the end of 2015. Mr Harkin was responsible for maintaining, repairing and installing machinery and equipment at the Premises. Mr Harkin reported to Mr Green. Mr Harkin resigned a few days after the incident.
Mr Graham employed Mr Harkin upon the basis that he had a good reputation in the meat processing industry and had an in-depth knowledge of meat processing machinery. Mr Harkin held formal qualifications and had 15 years experience in maintenance and engineering management roles at meat packing facilities. These matters were confirmed in Mr Harkin's CV (DX 1, Exhibit LJG-1, pp 11-12).
Ms Brandy McConnell was first employed by Candal as a meat packer and process worker in May 2017. Her duties included running meat trays through machinery, labelling and processing orders. Ms McConnell was supervised by Ms Bradshaw. She witnessed the incident first-hand.
Mr Luke Augustus was employed by Candal as the Innovations, Research and Development Manager. His duties included developing new products by coming up with product ideas, conducting trials and implementing their production. Mr Augustus commenced employment with Candal in May 2016. He left Candal on 1 December 2017.
Ms Qunying Li was employed by Candal as the Research and Development Manager on 4 December 2017. Ms Li's duties involved the research and development of new products, from trial to commercialisation.
Coral Sea Fishing Pty Ltd ("Coral Sea") conducted a business or undertaking which involved the importation and sale of seafood as well as the sale of flavourless filtered smoke which is designed to extend the shelf life of fresh food.

[5]

Plant and Equipment

There were two items of plant involved in the incident: 1. the Reepack Reflex 250 Machine ("the Reepack Machine"); 2. the Superfresh Gas System ("the Superfresh System").
The Reepack Machine was an automated machine used to package meal-sized consumable meat into individual vacuum-sealed tray packaging. When a tray containing fresh meat was run through the Reepack Machine, air was flushed out of the packaging chamber and replaced with a different gas or mixture of gases before the product was vacuum-sealed so that only the modified atmosphere surrounded the product and not any other unwanted gas.
The Reepack Machine included a pressure vessel containing modified atmosphere packaging ("MAP") gas, which was used when vacuum-sealing the packaging. MAP gas is used to keep food products fresher for longer.
The pressure vessel within the Reepack Machine was usually connected to a factory MAP gas supply via permanent supply lines.
A safety relief valve was connected to the pressure vessel incorporated within the Reepack Machine. This ensured that the pressure vessel was not over-pressurised by the factory MAP gas supply which eliminated the risk of any system components exploding under high pressure.
As part of a trial, the Superfresh System was connected to the Reepack Machine via a temporary connection. At the time of the incident, the Superfresh System consisted of the following: 1. A Fresh-Tec gas cylinder ("Fresh-Tec Cylinder") which was a size G gas cylinder containing MAP gas compressed to 70 bar supply pressure when full. A bar is a metric measure of pressure. One bar is equivalent to approximately 14.5 pounds per square inch of pressure. The Fresh-Tec Cylinder MAP gas was a mixture of mainly nitrogen and carbon dioxide with a low percentage of oxygen and other gases. 2. A FM51 pressure regulator attached to the Fresh-Tec Cylinder ("FM51 Regulator"). The FM51 Regulator was rated for a maximum cylinder supply pressure of 300 bar and was factory configured to provide a maximum outlet pressure of 200 bar. The pressure outlet could be adjusted via a handwheel. The FM51 Regulator was fitted with two pressure gauges, one to indicate the inlet pressure from the Fresh-Tec Cylinder and one to indicate the outlet pressure of the FM51 Regulator. There was no pressure relief device incorporated into the outlet side of the FM51 Regulator. 3. A pressure hose connecting the FM51 Regulator to an Aquapro AQF 10" cartridge filter ("Aquapro Filter"). 4. The Aquapro Filter was connected to the pressure hose and was made from polypropylene. It had a maximum working pressure of 7 bar, and a burst pressure of 31 bar. 5. A clear braided pressure hose on the output side of the Aquapro Filter to allow temporary connection of the Superfresh System to the Reepack Machine.

[6]

Events Prior to the Date of the Incident

In 2016, Candal commenced making inquiries as to a system of vacuum-sealing meat for international export. A different gas system was required to keep the packaged meat fresher for a longer period of time.
In April 2017, Mr Augustus made inquiries with Coral Sea in relation to a gas system that Coral Sea used in packaging food products for international export, which was referred to as the Superfresh System.
In or around May 2017, Coral Sea provided the Superfresh System to Candal being a gas cylinder, hose, pressure regulator, filter and hand applicator so that trials could commence on meat products. At this stage, the Superfresh System was being used through a manual process and was not being used in conjunction with the Reepack Machine. Mr Harkin set up the Superfresh System in Candal's Premises in order to conduct the trials.
In October 2017, the pressure regulator that was originally supplied by Coral Sea with the Superfresh System ("Gascon Regulator") was found to be faulty and returned by Candal to Coral Sea. Candal also returned the gas cylinders and replaced them with new cylinders. Coral Sea took the matter up with the supplier of the Gascon Regulator and was advised that it probably failed because of the system being over-pressurised by the user Candal. This information was relayed to Candal via an email sent to Mr Augustus on 20 October 2017 and copied to Mr Harkin.
Candal, via email to Coral Sea, requested the details of the Gascon Regulator that had been returned to Coral Sea as Candal wanted to obtain a new one that was similar. On 20 October 2017, Mr Rainer Bride, Operations Manager for Coral Sea, sent an email to Mr Augustus and Mr Harkin stating that the model was "HD5S-A-500-GGP-T20-4F (mixed gas regulator; dual stage)" and attached four photos of the Gascon Regulator.
On 24 October 2017, Mr Harkin emailed Mr Javier Arellano from Coregas Pty Ltd ("Coregas"), asking Coregas to urgently supply an appropriate gas regulator. In his email, he listed the gases that would be used and attached a Gascon Systems Single State Regulators information sheet ("Gascon Information Sheet").
Coregas recommended a Spectron Speciality Lab Cylinder Regulator FM51 Regulator (the FM51 Regulator referred to above). Candal purchased the FM51 Regulator from Coregas.
In January 2018, Mr Graham, Mr Green and Ms Li visited the Coral Sea facility in Queensland to further observe the operation of the Superfresh System, including how the gas was generated and captured.
In February or March 2018, Ms Li and Mr Bryce Graham travelled to Indonesia to observe a factory using the Superfresh System for fish.
Ms Li undertook trials and testing. Mr Harkin assembled the Superfresh System on each occasion and oversaw the testing. There were no near misses or any other adverse safety events during the trials and testing of the Superfresh System.
Before the incident, Ms Bradshaw expressed concern over the safety of the Superfresh System to Mr Bignall. She was uncomfortable that the gas canister was not encased because she sat on the factory floor entirely exposed to it whilst it was in use.
As the Superfresh System was on a trial run, Candal took the view that the cost of securing it in a case or cage, and positioning it outside of the factory, was disproportionate in circumstances where it was unknown whether the system would be used in the long term.

[7]

The Incident

On Monday 28 May 2018, Ms Bradshaw arrived for work at approximately 4.30am. The Premises were very busy as there were often several large orders to fill on Mondays. The first task of the day required Ms Bradshaw and Ms McConnell to operate the Reepack Machine to prepare a domestic order for a major supermarket. Once this was completed, Ms Bradshaw and Ms McConnell took a short break before commencing work on an export order. As the export order was destined for Hong Kong, the Superfresh System was required.
At the time of the incident, the Superfresh System had been used in conjunction with the Reepack Machine for approximately 5-6 weeks and was still in its trial phase. Since its introduction, the Superfresh System had been set up by Mr Harkin approximately one time per week to allow Ms Li to conduct the testing and also to allow for the preparation of some export orders.
Mr Harkin was solely responsible for setting up the Superfresh System as and when required. This involved wheeling in the gas cylinder and associated parts on a trolley, stationing it next to the Reepack Machine, disconnecting the hard-plumbed existing MAP gas supply and connecting the Superfresh System via temporary supply lines. Mr Harkin generally remained with the Superfresh System when workers, including Ms Bradshaw, operated it.
At the conclusion of the testing and the completion of the export order/s Mr Harkin would disconnect the Superfresh System from the Reepack Machine, and then reattach the Reepack Machine to its original MAP gas source.
On the day of the incident, the Superfresh System had been used earlier in the day on the Reepack Machine for a trial on a different product by Ms Li. Mr Harkin had set up the Superfresh System in the morning. Ms Li used the Superfresh System without any adverse event. Mr Harkin was aware that it was to be used in the afternoon by Ms Bradshaw and therefore decided to leave it in situ until then.
Ms Bradshaw noted that the Superfresh System was already in place and asked Mr Harkin whether it was ready to be used. Mr Harkin confirmed that it was ready to be used and directed Ms Bradshaw that all she had to do was to turn the gas on. Ms Bradshaw denies ever being asked to turn the gas on previously. Mr Harkin and Ms McConnell said that Ms Bradshaw regularly turned the gas on and was taught to do so by Mr Harkin.
At approximately 2.00pm on the day of the incident, Ms Bradshaw walked over to the Fresh-Tec Cylinder and turned the nozzle to the "on" position. She then took two steps away and heard a hissing sound. Ms Bradshaw stepped back towards the Fresh-Tec Cylinder and attempted to turn the gas off. There was an explosion.
The Aquapro Filter which sat downstream from the Fresh-Tec Cylinder and FM51 Regulator, and upstream from the Reepack Machine, had reached its bursting limit which caused the plastic housing to explode. A fragment of the filter housing speared into Ms Bradshaw's right forearm. Fragments were found up to 20 metres away. One fragment exploded with such force that it lodged itself into a metal factory wall, narrowly missing Ms McConnell, and causing considerable damage to the wall. The force of the explosion could be felt by workers in the adjacent room.
The Premises were evacuated. Workers rushed to the immediate aid of Ms Bradshaw. An ambulance was called and transported Ms Bradshaw to hospital.

[12]

Safety Relief Devices

The Reepack Machine was configured to ensure the supply pressure to the MAP pressure vessel would not exceed 8 bar. A safety relief valve was incorporated within the Reepack Machine to control the risk of over-pressurisation of the MAP pressure vessel above 8 bar.
The FM51 Regulator was capable of supplying an outlet pressure of 200 bar. When connected to the Fresh-Tec Cylinder, the maximum outlet pressure was limited by the maximum outlet pressure of the Fresh-Tec Cylinder, being 70 bar.
The maximum outlet pressure from the FM51 Regulator was not limited by a pressure relief device.
The maximum outlet pressure from the FM51 Regulator when connected to the Fresh-Tec Cylinder (70 bar) far exceeded the maximum working pressure (7 bar) and burst pressure (31 bar) of the Aquapro Filter, as well as the maximum working pressure (20 bar) and burst pressure (64 bar) of the Superfresh System pressure hose.
Thus the Superfresh System was likely to fail when the FM51 Regulator was adjusted to provide an outlet pressure greater than 31 bar, which ultimately resulted in the bursting of the Aquapro Filter.
The Gascon Regulator that was originally supplied by Coral Sea (which was returned by Candal prior to installing the FM51 Regulator) had a maximum outlet pressure of 5 bar which fell well below the burst pressure of the Aquapro Filter. Therefore the Gascon Regulator would not have created a risk of the Aquapro Filter exploding.
By contrast, the FM51 Regulator sourced by Mr Harkin had a maximum outlet pressure of 70 bar when connected to the Reepack Machine. Candal ought to have installed a Regulator that had a maximum outlet pressure that did not exceed the burst pressure of the other downstream components of the Superfresh System.
The information regarding the working pressure of the Superfresh System and all of its parts were available to Candal prior to the incident. A competent person would have established that an appropriate safety relief valve was required to be fitted.
Mr Harkin stated in his interview with SafeWork NSW that he did not consider the purchase of, or using, pressure relief devices and that he was not aware of the bursting pressure of the system components.

[20]

Background to Candal

In 2007, Ms Graham and his wife, Ms Andrina Graham opened a small butcher and meat sale business in Harden, NSW, which traded as "Argyle Prestige Meats". Subsequently, they expanded into distribution of meat to a small number of retail stores in and around Harden.
In 2009, Argyle Prestige Meats leased a neglected abattoir situated in Harden which it converted into a meat processing facility ("Harden Facility"). Over a period of 12 months, the Harden Facility grew from being run by only Mr Graham and his wife to employing approximately 38 employees. At that time, Argyle Prestige Meats was the largest employer in Harden.
On 9 December 2010, due to the growth of Argyle Prestige Meats, Mr Graham and his wife decided to incorporate Candal. Candal trades under the business name "Argyle Prestige Meats".
In around 2013, Manildra Enterprises Pty Limited bought a 50% equity stake in Candal.
In around 2013, Candal leased the Premises at Bomaderry. At that time, Candal invested $8 million to develop and fit out the Premises as a meat processing and distribution facility.
While the Premises were being built and fitted out, Candal continued to perform its meat processing operations at the Harden Facility, together with Mr Graham's separate farming business. On around 30 June 2014, the meat processing facilities of the Harden Facility and the majority of the staff were relocated to Bomaderry. The farming operations continued in Harden.
In August 2017, the Hong Kong-based global food company Dah Chong Hong Holdings Limited invested into Candal as a debt provider. In around 2019, Dah Chong Hong Holdings Limited became equity holders in Candal.
At the time of the incident on 28 May 2018, the Board of Directors for Candal comprised Mr Lachlan Graham, Mr Bryce Graham, Mr John Honan, Mr Peter Stretton, Mr Lee Kai Yeung and Mr Richard Gillman.
At the time of the incident, Candal's operations included the purchase of cattle, the processing and packaging of meat and the marketing, sale and distribution of the meat.
The Premises processed and packaged meat from Candal's suppliers into a form which was ready for purchase by consumers. At the time of the incident, Candal had 110 employees, the majority of whom worked at the Premises. Immediately following the incident on 28 May 2018, Candal ceased operation of all meat packaging.

[33]

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 The Queen (No. 2) [1988] HCA 14; (1988) 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] NSWCCA 242; (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 [1988] HCA 67; (1988) 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].
In Muldrock v The Queen [2011] HCA 39; (2011) 244 CLR 120 at [27] the High Court said: "The objective seriousness of an offence is to be assessed without reference to matters personal to a particular offender or class of offenders. It is to be determined wholly by reference to the nature of the offending."
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] NSWIRComm 71; (2000) 49 NSWLR 610 at [82]. The question of foreseeability of the risk is to be determined objectively.
The court must identify all the factors that are relevant to the sentence, discuss their significance and then make a value judgment as to what is the appropriate sentence given all the factors of the case: Muldrock. This approach to sentencing, known as the "instinctive synthesis" approach, involves the making of a global judgment without any attempt to state precisely how any given factor has influenced the judgment.
The Court of Criminal Appeal has examined the sentencing process with regard to the Act 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. Justice Basten at [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 [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 [event] 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, costs."
At [53] his Honour dealt with the proper approach to considering the objective seriousness of offences under the Act, saying: "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 materialize. The objective seriousness of the conduct will also be affected by the ease with which mitigating steps could have been taken."
My findings about the defendant's level of culpability are based upon the following: 1. The risk of injury or death of a worker caused by the gas system being over-pressurised and then exploding was obvious and foreseeable. 2. Failing to install a regulator that had a maximum outlet pressure that did not exceed the burst pressure of other system components and failing to ensure that a properly size pressure relief device was installed led to obvious risks. Relevant guidance materials identified such risks. 3. The potential consequences of the risk were serious injury or death. Ms Bradshaw sustained serious injuries requiring hospitalisation and an operation. 4. There were several reasonably practicable steps which could have been implemented to eliminate or minimise the risk at the time of the incident, including: 1. carrying out a proper risk assessment on the components of the Superfresh System to identify the potential hazards that may arise from the addition of new process equipment, in particular the FM51 Regulator; 2. installing a regulator that had a maximum outlet pressure that did not exceed the burst pressure of the other downstream components of the Superfresh System; 3. installing a properly sized pressure relief device into the Superfresh System; 4. developing and implementing a safe system of work that specified that: 1. the Superfresh System must be inspected by a competent person before use; 2. the Superfresh System must not be used without a suitable safety release device installed; 3. the Superfresh System must only be operated by workers who had received training in the safe system of work. 1. The burden or inconvenience of the steps mentioned above would not have been particularly complex, costly or burdensome. 2. Ms Bradshaw suffered a deep laceration to her right forearm caused by a component of the Superfresh System exploding. She has been left with scarring. 3. Candal was a company with a focus upon safety. As demonstrated in the fine detail of the affidavit of Mr Graham, Candal had a comprehensive safety system in place for the standard operations which took place at the Premises. The trial run of the new system was not covered by the standard procedures, and insufficient thought and attention was directed by Mr Harkin to the new processes introduced. 4. The maximum penalty for the offence is a fine of $1,500,000, which reflects the legislature's view of the seriousness of the offence.
I find that the level of culpability of Candal is in the lower half of the mid range.

[36]

Capacity to Pay a Fine

I am required to have regard to s 6 of the Fines Act 1996 (NSW) 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: Mahdi Jahandideh v The Queen [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.
In Unity Pty Limited v SafeWork NSW [2018] NSWCCA 266 at [79] the Court of Criminal Appeal said: "First, and more generally, questions of specific deterrence should take into account the size and scope of the operations of the defendant; a fine which may be crippling to a small business may have virtually no impact on the financial operations of a large corporation. The maximum penalty for the offence is undoubtedly set having regard to such a factor. Secondly, the Court is required to have regard to 'the means' of the defendant, pursuant to s 6 of the Fines Act 1996."
According to Mr Graham's affidavit, Candal has experienced financial difficulties since the time of the incident and during 2019.
Since the closure of the Premises in around early 2020, Candal has been unable to sell the majority of the equipment. The strain faced by the Australian cattle market has meant that meat producers are operating within low margins of profit or at a loss. As a result, Candal has found that operators within the livestock industry are unwilling to make large capital investments such as processing and packaging equipment.
In around 2019, Candal identified a growth opportunity available in the People's Republic of China. This opportunity enabled Candal to export frozen Wagyu meat product to China ("Wagyu Contract"). In addition, Candal was exploring opportunities to export processed meat to China.
In around January and February 2020, Candal's export operations became impacted by COVID-19 which had arisen in China. Anticipating the international ramifications of COVID-19, Candal did not renew the Wagyu Contract. However, Candal had a large quantity of frozen Wagyu meat that it could not move from a shipping port in China due to the COVID-19 pandemic, thus incurring storage costs. Candal was unable to sell this product for several months, until it was sold for approximately 60-70% of its value, further impacting Candal's cash flow position.
In around April 2020, Candal's overseas operations in China suffered additional detriment due to the strained Australia-China diplomatic relations, which resulted in China imposing trade sanctions on goods exported from Australia. The trade sanctions extended to include red meat. As a result of these trade sanctions, the licence to deal with processed meat in China was suspended, causing Candal to lose access to the Chinese market.
Due to the COVID-19 pandemic and the Australia-China trade dispute, Candal received only approximately half of the revenue it had forecast for the year ending 30 June 2020. As a result Candal has further reduced its workforce from 12 employees to 7 employees.
In the year ending 30 June 2019, Candal experienced a net loss of $3,685,434 and had a net equity of minus $10,988,581. In the year ending 30 June 2020, Candal experienced a net profit of $189,921 and had a net equity of minus $10,798,660.
According to Mr Graham's affidavit, Candal's financial position remains tenuous. Candal has an overdraft facility of $400,000 with the ANZ Bank, which it has virtually exhausted. As at 15 March 2021, Candal had drawn on $371,337.99 of the overdraft facility.
For the year ending 30 June 2020 and the six months up to 31 December 2020, Candal received certain sources of one-off income, including JobKeeper payments under the Commonwealth government scheme and revenue from the sale of some historical assets. As at 31 December 2020, Candal had a net profit of $56,583 and a net equity of minus $10,436,707.
Counsel for the prosecutor accepted that Candal had a reduced capacity to meet a fine. Senior Counsel for Candal made it plain that there was no submission that Candal did not have the capacity to pay a fine, but rather it had a reduced capacity to pay. Its financial difficulties had been caused by the drought followed by the COVID-19 pandemic and the closure of the Chinese market. I will moderate the fine which I would have otherwise imposed.

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