SafeWork NSW v Grasso Consulting Engineers Pty Ltd; SafeWork NSW v Grasso

The Offenders' Case on Sentence

1. The offenders read the following affidavits: 1. Affidavit of Ignazio Grasso sworn 9 April 2020; 2. Affidavits of Ian Rankin sworn 9 April 2020 and 29 April 2020; 3. Affidavit of Penny Cheung sworn 9 April 2020; 4. Affidavit of Lynette Margaret March sworn 9 April 2020; 5. Affidavit of Thomas Mahon sworn 8 April 2020; and 6. Affidavit of Nicholas Giannikouris sworn 7 April 2020.
2. Mr Grasso and Mr Rankin were called as witnesses at the sentence hearing so that they could be cross-examined.

Evidence of Ignazio Grasso

1. Mr Grasso's evidence can be summarised as follows. He is currently 62 years of age and has been practising as a structural engineer since 1982. He is registered under the Queensland legislation. He was also certified as a Local Government Engineer in 1989.
2. In the past 18 years GCE provided engineering consulting services to 1,846 projects, including luxury homes, apartment complexes, commercial buildings, a cinema complex, industrial buildings as well as the demolition of bridges and large CBD office buildings. Payments received for this work is the sole source of GCE's income.
3. Since at least 2017, GCE has engaged Ian Rankin as an accountant, to prepare its financial statements and tax returns. Mr Grasso instructs Mr Rankin on behalf of GCE.
4. In the past 18 years Mr Grasso has spent all of his time in the operation of GCE and he does not have any equity or interest in any other business or enterprise.
5. GCE has always held professional indemnity insurance against civil claims and associated defence costs in connection with its professional practice. GCE does not hold any reserves that would enable it to practice without a professional indemnity insurance policy in place.
6. Since 2004 GCE has obtained professional indemnity insurance through a broker, Australasia Insurance Brokers Pty Ltd (AIB). In January 2020, Mr Grasso instructed Peggy Cheung, the Managing Director of AIB, to renew the professional indemnity insurance policy held by GCE. At that time, GCE's professional indemnity insurance was underwritten by Liberty Mutual Insurance Company (Liberty). The policy was due to expire on 28 February 2020. GCE disclosed the Court's findings in respect of the incident, pursuant to its duty of disclosure.
7. On 12 February 2020, Ms Cheung informed Mr Grasso that Liberty had declined to renew GCE's professional indemnity insurance policy because of the prosecution, the claims history of the industry and its own underwriting guidelines.
8. Since that time, Ms Cheung has approached 14 insurers seeking professional indemnity insurance cover for GCE, but none of them have been prepared to offer cover.
9. Mr Grasso instructed his bookkeeper, Leona Reed, to approach other insurers to seek professional indemnity insurance cover. Ms Reed has approached a further five insurers without success.
10. Mr Grasso has made enquiries of two other insurance companies, without success.
11. On 29 January 2020, GCE was offered further work on condition that it held professional indemnity insurance. GCE has had to decline that work and all offers of new work because of its inability to obtain insurance cover.
12. In the past, GCE's major clients have been Metropolitan Demolitions, Hassarati, Beasy, Toga, Hutchinsons and Build Corp. Mr Grasso has advised each of those clients that GCE has ceased trading because it is unable to obtain insurance cover. Mr Grasso referred those clients to other engineering firms.
13. Mr Grasso has advised Engineers Australia, Consult Australia and the Queensland Board of Engineers that he has retired from practice and does not intend to renew his memberships or registration.
14. Mr Grasso has instructed Mr Rankin to cancel the GST registration for the company as soon as all outstanding tax invoices are paid. Mr Grasso has instructed Mr Rankin to apply for voluntary deregistration of the company as soon as all debts and liabilities are paid.
15. Mr Grasso is no longer working in any capacity. He has not sought or been offered paid employment.
16. In cross-examination, Mr Grasso gave evidence that he had significantly changed his practices after he and GCE were charged with the offences before the Court. In relation to demolition projects, he provided a lot more detail and sequencing and specified that contractors must follow his sequence and keep him informed of information relevant to the specific project. He has completed computer analysis for every piece of advice given. Mr Grasso estimated that he has spent in excess of $600,000 in relation to legal fees for this matter. On Mr Grasso's understanding of the accounts of GCE, it has sufficient funds to pay the tax liability arising from the business activity statement for the first quarter of 2020 and subsequent legal expenses. He has not made any provision for the payment of a fine or legal costs of the prosecution in respect of this matter.

Evidence of Ian Rankin

1. Mr Rankin is a Chartered Accountant and a Director of an accounting firm retained by GCE.
2. Mr Rankin prepared the financial statements for the company and the tax returns for the company for the years ending 30 June 2017, 30 June 2018 and 30 June 2019.
3. Mr Rankin deposed that the position of GCE as at 27 April 2020 was as follows, it had: 1. retained earnings of $309,761; 2. fixed assets of $5,944; and 3. current assets of $347,423.
4. For the current financial year, Mr Grasso has drawn $295,161.40 for private purposes that have not yet been recorded in the company's records as wages. In the ordinary course of business, that amount would be treated as his wage and expenses before the end of the 2020 tax year, when the company's retained earnings and current assets would be reduced accordingly. When those drawings are entered as Mr Grasso's wages, the company will also accrue a PAYG withholding tax liability of approximately $136,000.
5. GCE currently holds insufficient cash to meet that liability and will have to recover money from Mr Grasso to do so. During the first quarter of 2020, GCE has accrued a GST and PAYG withholding liability of $45,465, which will fall due for payment to the Australian Taxation Office shortly. GCE presently has cash reserves to meet that liability.
6. In cross-examination, Mr Rankin gave evidence that on his review of the records, GCE has incurred a liability for legal costs relating to this incident in the sum of $96,703 from 1 July 2019. He anticipated that there would be further legal expenses in respect of the sentence hearing. He had also received an account of approximately $4,000 recently for legal fees which remains outstanding.
7. Mr Rankin gave evidence that Mr Grasso's wife earns a gross wage from GCE in the sum of $30,000 per annum.

Evidence of Peggy Cheung

1. Ms Cheung is the Managing Director of AIB. GCE has been a client of that company for about 16 years and has placed professional indemnity insurance for GCE every year since 10 March 2004, with Liberty. The most recent policy expired on 28 February 2020.
2. In January 2020, Mr Grasso instructed Ms Cheung to renew GCE's professional indemnity insurance cover. Ms Cheung deposed that Liberty had declined to renew the professional indemnity insurance policy that it has offered since 2004. In addition, Liberty has declined to provide run-off cover. The policy issued by Liberty was a claims-made policy, such that GCE would be covered for any claims made during the period in which it was covered by a policy of insurance.

Evidence of Lynette March

1. Dr March is a Professor of Rheumatology and Musculo-Skeletal Epidemiology Medicine at the University of Sydney. Dr March has known Mr Grasso for in excess of 20 years. Dr March and Mr Grasso were neighbours and have socialised regularly at community functions at their homes and through group cycling activities.
2. Dr March described Mr Grasso as friendly and kind to people in the community. She described him as a proud father and a loyal friend who was generous with hospitality. To Dr March's knowledge, Mr Grasso has accommodated a number of young overseas students for six to nine months at a time, free of charge.
3. Mr Grasso has participated in fund-raising charity bicycle events, raising funds that were donated to the Children's Oncology Centre, a not-for-profit organisation in Rosebery.
4. Mr Grasso has informed Dr March about the charges before the Court and that he has been found guilty of breaching the Act. Mr Grasso has informed Dr March that he is now unable to obtain professional indemnity insurance and that he intends to retire from practice.

Evidence of Thomas Mahon

1. Mr Mahon is a Senior Demolition Project Manager employed by Metropolitan Demolitions Pty Ltd (Metropolitan). He has worked in the construction industry for in excess of 20 years and has significant experience in major structural demolition projects.
2. Mr Mahon has known Mr Grasso as a professional engineer since 2011 and has worked with him since that time. Mr Mahon deposed that he valued Mr Grasso's engineering expertise about structural engineering issues that had arisen in the course of many demolition projects. Mr Mahon said that he has relied on Mr Grasso's engineering advice in major construction projects and always found his judgment to be excellent and that the projects they worked on together proceeded without any safety incidents arising as a result of Mr Grasso's advice.
3. Between February 2013 and September 2014 Mr Grasso was the Consultant Structural Engineer in the demolition of buildings at the Royal North Shore Hospital (RNSH). He provided advice that it was safe to place machines on suspended floors and designed the necessary back-propping, temporary bracing and permanent retention systems necessary to conduct complex elements of the work.
4. Between about April 2014 to June 2015 Mr Grasso was engaged as a Consultant Structural Engineer for the demolition of a 14 storey building at 333 George Street, Sydney, completing similar work to that undertaken at RNSH.
5. From about December 2014 until about 2017 Mr Grasso provided structural engineering advice on the demolition of eight and 10 storey buildings in George Street, Sydney and the partial demolition of buildings in York Street, Sydney, completing similar work to that undertaken at RNSH.
6. In about 2015 and 2016, Mr Grasso was engaged as a Consultant Structural Engineer for the demolition of a 20 storey and 13 storey office buildings at 33 Bligh Street, Sydney. The site adjoined six other buildings including two that were heritage listed. Mr Mahon relied on Mr Grasso's advice to design temporary propping and bracing to support the main tower column, to certify that it was safe to place machines on suspended floors and to design other elements of the demolition work.
7. From about 2016 to 2017 Mr Grasso was involved as the Structural Engineer in the demolition of a 30 floor storey building at 60 Martin Place, Sydney, where Lendlease was the principal contractor. Mr Grasso undertook similar work to that undertaken at RNSH.
8. Mr Mahon deposed that Mr Grasso's understanding of temporary works and his ability to quickly understand structural limitations and solutions were unparalleled. Mr Mahon has always found Mr Grasso to be diligent and careful in the execution of his work, honest and reliable in his commercial dealings and to be quiet and respectful.
9. Mr Grasso has informed Mr Mahon of the circumstances of the incident and that he was found guilty of an offence under the Act. Mr Grasso provided Mr Mahon with a copy of the Court's decision, which he has read.
10. Mr Mahon has spoken to Mr Grasso on a number of occasions since the incident. Mr Mahon described Mr Grasso as incredibly stressed and upset over the matter and that he has noticed a sharp decline in Mr Grasso's mental health.
11. Mr Mahon deposed that trust and reputation are critically important in the demolition industry, because "demolition scares builders". Mr Mahon believed, on the basis of his discussion with others, that the Court's findings have circulated widely throughout the industry, and that Mr Grasso's reputation amongst clients has been significantly adversely affected.
12. Mr Grasso has told Mr Mahon that he is unable to obtain professional indemnity insurance and that he will retire.

Evidence of Nicholas Giannikouris

1. Mr Giannikouris is a Director of Metropolitan. He has known Mr Grasso for close to 20 years through his involvement in the construction industry.
2. Mr Giannikouris deposed that Metropolitan has engaged GCE to provide engineering advice in connection with multiple demolition projects, including large buildings, which I have referred to in dealing with Mr Mahon's evidence and will not repeat.
3. Mr Giannikouris deposed that in his dealings with Mr Grasso he has always found him to be conscientious and careful with his work, honest and reliable in business and having a quiet and polite manner.
4. Mr Grasso has told Mr Giannikouris that he has been charged with and found guilty of an offence under the Act in relation to the unplanned collapse of the roof of the former Sydney Entertainment Centre.
5. Mr Giannikouris deposed that over the last year or more that in the course of his work he has found Mr Grasso to be more closely involved with the detailed planning of the demolition work, insistent on validating his own professional judgment with the computer analysis and that he has gone to extra lengths to stress what elements of a building he wants demolished and what elements he wants kept.
6. Mr Grasso has told Mr Giannikouris that he cannot renew his professional indemnity insurance and that he has no choice but to close his business.

consideration

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

Objective Seriousness

1. The offences involve significant objective gravity.
2. The risk of an unplanned structural collapse was known to both offenders and they were each aware of the content of the DW Code and AS 2061. Each offender had actual knowledge that GCE's advice was being sought to ensure the safety of the Rosenlund workers, so far as that was reasonably practicable.
3. The likelihood of the risk occurring was high if appropriate precautions were not taken to eliminate or minimise it. The demolition work was high risk construction work within the meaning of clause 291(c) of the Regulations.
4. The degree of harm that might eventuate was serious and it included a risk of death to the Rosenlund workers.
5. As a structural engineer, Mr Grasso had the training and experience to devise a method that eliminated or minimised the risk of an unplanned structural collapse. This included creating a computer model to calculate the loads that would be applied to the remaining roof structure during the course of its demolition that could be used to predict a risk of collapse of the remaining roof structure at various points of the proposed demolition sequence. GCE failed to prepare a computer model and Mr Grasso failed to ensure that it did so. Accordingly, GCE's advice could not be tested to determine if it removed or minimised the risk of an unexpected structural collapse of the roof structure in the process of its demolition.
6. GCE's advice was also deficient in that it did not outline a precise demolition sequence to be followed. This led to the position that the demolition workers decided on the demolition sequence for themselves. After the removal of the structural members in Bay 9, a few days before the incident, the remaining structure posed an unacceptable risk of collapse, which actually occurred on 19 March 2016.
7. At trial, the offenders contended that Mr Grasso intended to convey in the GCE advice that the unmarked structural members depicted in the 14 December 2015 sketch and 11 February 2016 sketch were not to be removed and by implication, that they were required to maintain the structural integrity of the roof structure during the course of its demolition. In the verdict judgment, I found that it was reasonably possible that was what the GCE advice was intended by Mr Grasso to convey, but I did not and could not find on the balance of probabilities, that was in fact the subjective intention of Mr Grasso and/or GCE. On sentence, the offenders contended that I should take into account as a mitigating factor, that the prosecution did not lead evidence of what the computer model would have demonstrated if those structural members had been left in each bay. I do not accept this argument because I found beyond reasonable doubt that GCE's advice did not objectively convey that meaning, if that is what GCE's advice was intended to convey.
8. A number of mitigating circumstances that were the subject of factual findings in the verdict judgment should be taken into account. GCE's engagement by Hassarati was on an ad hoc basis. GCE was asked for advice on specific steps in the demolition process and it was not retained to prepare or review the entire demolition methodology. Mr Grasso was largely excluded from the review meeting process and was not provided with a copy of the final version of the QCUA Demolition Methodology. Mr Khoury, of Hassararti, was on notice of a discrepancy between GCE's advice and the Arnold sketch that was incorporated into the final revision of the QCUA Demolition Methodology document, but did not raise it with Lendlease or Mr Grasso. Mr Grasso was unaware of any discrepancy relating to the advice. The Hassararti sketch was consistent with GCE's advice. It was not apparent from Mr Grasso's inspection of the demolition work on 8 March 2016 that GCE's advice was not being complied with. Mr Grasso was not required by the parties with control of the site to inspect the demolition work after 8 March 2016. Mr Grasso did not have the opportunity to inspect the demolition work after 8 March 2016. Mr Grasso was unaware at any time that GCE's advice, as he may have subjectively understood it, was not being complied with. On all of the evidence, Mr Grasso was not given the opportunity to realise that there was a discrepancy between his understanding of his advice, and the understanding of others and to take steps to remedy the situation. Overall, I am satisfied that there were significant failures on the part of others that contributed to the unexpected structural collapse.
9. I have taken into account the maximum penalty for the offences.

Deterrence

1. The penalty imposed in relation to the offences must provide for general deterrence. PCBUs must take the obligations imposed by the Act very seriously. The community is entitled to expect that both small and large businesses will comply with safety requirements. General deterrence is a significant factor when safety obligations are breached: Bulga Underground Operations Pty Ltd v Nash [2016] NSWCCA 37 at [180].
2. There is little, if any, need for the sentence imposed on either offender to reflect specific deterrence for the reasons that follow. First, GCE and Mr Grasso made changes to their practice in improving the specifications provided for demolition work following the incident. Second, Mr Grasso provided his services as a structural engineer through GCE and this was the only business or undertaking of GCE. Mr Grasso has been unable to secure professional indemnity insurance after the offenders were found guilty of the offences before the Court and they have both suffered damage to their professional reputation. Mr Grasso is wisely unwilling to continue in practice without professional indemnity insurance and intends to retire and wind up GCE. I note that the most recent professional indemnity insurance policy expired on 28 February 2020 and I accept the evidence of Mr Grasso that he is no longer in practice.

Aggravating factors

1. There are no relevant aggravating factors.

Mitigating factors

1. The offenders do not have any prior convictions: section 21A(3)(e) Crimes (Sentencing Procedure) Act 1999. It is significant to note that each offender has no prior convictions for a considerable period. GCE was incorporated on 31 July 2002 and Mr Grasso is presently 62 years of age.
2. Mr Grasso was a person of good character: section 21A(3)(f) Crimes (Sentencing Procedure) Act 1999. Mr Grasso has no prior convictions and his character referees speak very highly of him. He has involved himself in charitable works and is a respected member of the community.
3. The offenders are unlikely to re-offend: 21A(3)(g) Crimes (Sentencing Procedure) Act 1999. I accept the evidence of Mr Grasso that his inability to obtain professional indemnity insurance has led to his retirement and that GCE will be wound up on settlement of its financial position.
4. The offenders have good prospects of rehabilitation: section 21A(3)(h) Crimes (Sentencing Procedure) Act 1999. The offenders have demonstrated by their willingness to adopt modified procedures after the incident, that they have good prospects of rehabilitation.
5. The offender co-operated with the Safe Work investigation: section 21A(3)(m) Crimes (Sentencing Procedure) Act 1999.
6. The offender conducted the trial in a manner that reflected a willingness to facilitate the course of justice: R v Thangavelautham [2016] NSWCCA 141 at [58] per Bathurst CJ.
7. I am satisfied on the balance of probabilities that Mr Grasso has lost his ability to practice as a structural engineer directly as a result of these offences, because he is now unable to obtain professional indemnity insurance and because his professional reputation in the industry has been irreparably damaged. This involves the loss of his career that he has applied himself to for the past 38 years and the loss of an ability to earn an income from his practice. This is a loss amounting to extra-curial punishment that can be taken into account in mitigation of the penalty imposed: R v Daetz (2003) 139 A Crim R 216 at [60]; Parente v R (2017) 96 NSWLR at [32]; Kenny v R [2010] NSWCCA 6 at [4] and Oudomvilay v R [2006] NSWCCA 275 at [19]-[20].

Capacity to Pay a Fine

1. The Court is required to have regard to section 6 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.
2. No submission was advanced by Mr Grasso that he had a limited capacity to pay a fine.
3. I am satisfied on the evidence that GCE has no capacity to pay a fine or the prosecutor's costs of the proceedings. GCE was a corporate vehicle for Mr Grasso's practice. It is unsurprising, that it does not hold reserves or significant assets. Its present liabilities are roughly equal to the cash it has at the bank. When Mr Grasso's drawings for the financial year 2020 are allocated as wages, it will incur a withholding tax liability of approximately $136,000 that it does not have the funds to pay.
4. Notwithstanding GCE's incapacity to pay a fine, I am satisfied that a substantial fine is still warranted to reflect the seriousness of the offence and the need for general deterrence.

Costs

1. In Nash v Silver City Drilling (NSW) Pty Ltd [2017] NSWCCA 96 the Court of Criminal Appeal reviewed the principles relevant to awarding costs to a prosecutor pursuant to section 257B Criminal Procedure Act 1986 relating to a prosecution under the Act. At [70] the Court stated that it may be appropriate in the circumstances of a case to award costs by reference to success or failure on discrete issues.
2. The prosecutor failed on half of the particulars of breach of duty that it alleged. The prosecution case repeated a number of factual allegations under the different particulars of breach of duty and sought to prove the offences on numerous alternate bases. In the end, the case was proved on a relatively simple basis by reference to what could be expected of the advice of a structural engineer complying with its section 19(2) duty, in the context of the demolition of the roof structure which was large and complex. The prosecution case, as it was presented, required multiple considerations of the same material in different contexts. I found that some aspects of those matters were established beyond reasonable doubt, but that they did not warrant further consideration or could not be relied on to establish the other particulars pleaded. I am satisfied that a significant amount of preparation and hearing time was spent on these failed issues and the consideration of alternate unsuccessful arguments.
3. The prosecutor failed on its application to rely on an expert report prepared by Inspector Turner of SafeWork NSW. In a separate judgment, I found that there were serious deficiencies in the proposed expert report. The voir dire relating to the admissibility of the proposed expert report occupied a significant amount of the hearing time and I infer additional preparation time.
4. The prosecutor advanced a number of other arguments on the pleaded particulars of breach of duty that were rejected, including that the scope of GCE's duty was broader than it was and that Mr Grasso had made a mistake in formulating GCE's advice. These issues occupied a significant amount of preparation and the hearing time.
5. In contrast, the prosecutor took a sensible approach on an issue that had the potential to abort the trial or lead to a stated case to the Court of Criminal Appeal.
6. Overall I am satisfied that this is an appropriate case to reduce the quantum of the costs order to be awarded to the prosecutor. The appropriate award is 70% of its costs.

Penalty - GCE

1. Grasso Consulting Engineers Pty Ltd is convicted.
2. I impose a fine of $200,000.
3. I order pursuant to section 122(2) Fines Act 1996 that 50% of the fine is to be paid to the prosecutor.
4. GCE is to pay 70% of the prosecutor's costs as agreed or assessed of the proceedings against it.

Penalty - Mr Grasso

1. Ignazio Grasso is convicted.
2. I impose a fine of $30,000.
3. I order pursuant to section 122(2) Fines Act 1996 that 50% of the fine is to be paid to the prosecutor.
4. Mr Grasso is to pay 70% of the prosecutor's costs as agreed or assessed of the proceedings against him.

Endnote

1. Described at [12] below. 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: 12 May 2020