WorkCover Authority of New South Wales (Inspector Schuman) v Transfield Services

Crimes (Sentencing Procedure) Act 1999 LEGISLATION CITED: Occupational Health and Safety Act 1983 Occupational Health and Safety Act 2000

Capral Aluminium Ltd v WorkCover Authority of New South Wales (2000) 49 NSWLR 610 Lawrenson Diecasting Pty Ltd v WorkCover Authority of New South Wales (Inspector Ch'ng) (1999) 90 IR 464 Lowe v The Queen (1984) 154 CLR 606 Markarian v The Queen [2005] HCA 25: 18 May 2005 CASES CITED: Postiglione v The Queen (1997) 189 CLR 295 R v Gallagher (1991) 23 NSWLR 220 R v Thomson, R v Houlton (2000) 49 NSWLR 383 R v Way [2004] NSWCCA 131 Thorneloe v Filipowski (2001) 52 NSWLR 60

PROSECUTION: Mr R Reitano of counsel SOLICITORS: Crown Solicitor's Office

LEGAL REPRESENTATIVES: Transfield Services (Australia) Pty Ltd Mr P Skinner of counsel SOLICITORS: Carroll & O'Dea

Shell Refining (Australia) Pty Ltd Mr R Warren of counsel SOLICITORS: Blake Dawson Waldron

• 21 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM : Staunton J DATE: 23/11/2005 Matter No IRC 6867 of 2004 WorkCover Authority of New South Wales (Inspector Schuman) v Transfield Services (Australia) Pty Ltd Prosecution arising under s8(1) of the Occupational Health and Safety Act 2000 Matter No IRC 6869 of 2004 WorkCover Authority of New South Wales (Inspector Schuman) v Shell Refining (Australia) Pty Ltd Prosecution arising under s8(2) of the Occupational Health and Safety Act 2000

JUDGMENT [2005] NSWIRComm 431 1 The first defendant, Transfield Services (Australia) Pty Ltd (Transfield), has entered a plea of guilty to an offence arising under s 8(1) of the Occupational Health and Safety Act 2000. The second defendant, Shell Refining (Australia) Pty Ltd (Shell), has also entered a plea of guilty to an offence arising under s 8(2) of the Occupational Health and Safety Act 2000. Both offences arise from the same factual circumstances. 2 In relation to Transfield, it was said that the defendant: Did fail to ensure the health, safety and welfare at work of all its employees, in particular, Victor Plescan and Tihomir Boka, contrary to section 8(1) of the Occupational Health and Safety Act 2000. 3 In relation to Shell, it was said that the defendant: Did fail to ensure that persons not in its employment, in particular Victor Plescan and Tihomir Boka, were not exposed to risks to their health or safety arising from the conduct of its undertaking while they were at its place of work, contrary to section 8(2) of the Occupational Health and Safety Act 2000. 4 The particulars of the charge in relation to Transfield are: (a) The defendant at all material times employed a number of employees, including Victor Plescan and Tihomir Boka, who performed duties in the vicinity of the cryogenic processing unit at the Process West area of the site. (b) The defendant failed to ensure that an adequate risk assessment or job safety analysis was carried out to assess or analyse the hazards associated with the task of turning a spade on a potentially live pressure line. (c) The defendant failed to ensure there was a specific documented procedure for its employees to follow for the task of turning a spade on a potentially live pressure line. (d) The defendant failed to ensure that an adequate risk assessment or job safety analysis was carried out to analyse or assess the hazards associated with the task of turning the spade. In particular such a risk would, had it been adequate, have identified the potential risk or possibility of the presence of hydrogen gas, the risk of its escape from the particular line and the potential for a fire or explosion to result. Had such matters been referred to in an adequate risk assessment, the risk assessment would have required that the following control measures be adopted, which measures were not adopted by the defendant: (i) The provision of flame resistant clothing to employees; and (ii) The provision of an appropriate scaffold with dual access and egress points for employees wearing breathing apparatus; and (iii) The training and instruction of the employees in risk assessment, the use of flame resistant clothing and instruction regarding the risks of fire and explosion and the means of access and egress from the scaffold. (e) The defendant failed to ensure adequate supervision for its employees in assessing the risks involved prior to carrying out the tasks as required. 5 The particulars of the charge in relation to Shell are: (a) The defendant at all material times was an employer who employed a number of personnel, including Mario Cabello and Chun Guo. (b) The defendant at all material times operated the Shell Refining (Australia) Pty Ltd Clyde Refinery and was in control of the places of work contained therein. (c) The defendant at all material times had non-employees on site, including Victor Plescan and Tihomir Boka who worked as fitters, but were employed by Transfield Services (Australia) Pty Ltd. (d) The defendant failed to ensure that an adequate risk assessment was carried out to assess or analyse the hazards associated with the task of turning a spade on a live pressure line including the hazard of a hydrogen leak and the risk of escaping gas igniting. (e) The defendant failed to ensure that there was a specific documented procedure for the task of turning a spade on a live pressure line and controlling the risks associated with hydrogen escape. (f) The defendant failed to ensure that there was a safe system of work in place that included positive isolation of valves, danger tagging, depressurisation of the hydrogen line and a mechanism to prevent persons from manually opening valves. (g) The defendant failed to ensure a safe system of work, which included the reduction of the nitrogen purging gas pressure prior to opening the flanges. (h) The defendant failed to ensure that there was a safe system of work in place including ensuring that gas detection equipment was available to identify the escaping gas. (i) The defendant failed to ensure that an appropriate scaffold with dual access/egress points was used. (j) As a result of the above mentioned failures, Victor Plescan was seriously injured and Tihomir Boka was placed at a risk of injury.

6 The prosecution has tendered an agreed statement of facts in both matters. Both of the charges arise from the same factual matrix and there is overlap between the agreed facts of both defendants. However, because the facts with respect to each matter have been expressed somewhat differently, it is necessary to set out the agreed facts with respect to each matter independently of the other. 7 With respect to the charges brought against Transfield, the following facts are agreed: [1] The defendant was contracted to Shell Refining (Australia) Pty Limited to undertake maintenance work at Shell's Clyde Refinery ("the Site"). [2] The defendant employed a number of employees, including Victor Plescan and Tihomir Boka, who performed duties in the vicinity of the cryogenic processing unit at the Process West area of the Site. [3] On 29 November 2002 at approximately 2.30 pm, Victor Plescan and Tihomir Boka were standing on a small scaffold at the junction of pipe work near the cryogenic processing unit at the Process West area of the site. The major pipe contained hydrogen gas and a small amount of LPG at a pressure of approximately 25-27 barg. The minor pipe contained nitrogen purging gas at a pressure of approximately 8 barg. (1 barg of pressure equals approximately 100 kilo Pascals, or 8 barg equals approximately 116 p.s.i. and 27 barg equals approximately 390 p.s.i.).

[4] At the junction of the pipe work, a ball valve rated at 300 p.s.i. was in the closed position isolating the hydrogen, and alongside this, between the valve flange and the nitrogen filled pipe flange was a spade. A spade, or spectacle blind, is a dual ended steel plate which has a large diameter opening at one end surrounded by a perimeter of steel plate to fit between bolt-on flanges. The open end allows a flow of gas or fluid, and the other end has complete steel plate which denies any flow and forms a positive isolation of gas or fluid. [5] A pipe flange is a steel ring welded to the end of a pipe through which bolts can be fitted for a leak proof seal. The valve used also had a flange face for bolting to the pipe flange. A gasket was also fitted between flanges to enhance the seal properties. [6] On 29 November 2002 at approximately 2.30pm, Victor Plescan and Tihomir Boka were standing on the scaffold and had spanners on the flange bolts for the purpose of turning the spade plate from the closed position to the open flow through position. [7] Shell senior operator Mario Cabello was overseeing the procedure and was standing behind the scaffold, approximately 1.5 metres away. Another Shell operator, Chun Guo was standing beside Mario Cabello, also watching the procedure. [8] During the procedure, the fitters were loosening the bolts and low-pressure gas was released. This was nitrogen gas used to purge the pipeline and to prevent air from entering the pipe. The fitters, as a precaution, were keeping their hands on the spanners in case of an abnormal release of gas in order that they could re-tighten the bolts, as directed by Shell senior operator Mario Cabello. [9] As the low pressure gas reduced in volume there was a sudden gush of another substance. The substance of escaping hydrogen or hydrocarbon gas ignited while the fitters had spanners on flange bolts. The origin of the escaping gas preceding the fire has not been determined. [10] The fire started almost instantly, with a ring of flame several metres in diameter that receded to approximately one metre in diameter. Tihomir Boka was able to escape from the scaffold. Victor Plescan was on the other side of the fire with no escape route from the scaffold. He had to exit through the flames. It is believed that his exit was impeded by an emergency breathing bottle strapped to his leg becoming caught on scaffolding or pipe fittings. Tihomir Boka returned to the scaffold seconds later. He pulled Victor Plescan from the flames. At the time they were both wearing air supplied masks. The fire continued for several minutes while Shell employees attempted to isolate the hydrogen gas and assess other possible sources of fuel. Persons at the scene directed Victor Plescan to a shower in the central control room. [11] There was no specific documented procedure for the task of turning a spade on a potentially live pressure line. There was a job safety analysis undertaken by the defendant in relation to the work being carried out and there was a talk about how the job was to be done including a whiteboard sketch. The Job Safety Analysis did not take account of the presence of hydrogen and there was an inadequate risk assessment in respect of the work being undertaken. [12] The defendant's fitters undertook the procedure of loosening the flange bolts in consultation with Dennis McCone, the Shell Process West plant controller, and Shell operations employees. The fitters were undertaking the work as a part of the recommissioning of a unit that was not modified to treat hydrogen-rich platformer gas (approximately 85% hydrogen and 15% LPG). [13] The Job Safety Analysis Risk assessment conducted prior to the commencement of work failed to identify or analyse the possibility of hydrogen being present in the line. The Analysis and talk which took place dealt with the risk of nitrogen gas escape. The Shell operator provided the Defendant's employees with a permit to work and confirmed that the work could be carried out. The risk assessment failed to require the defendant's employees to check that the permit issued was appropriate for the work. Previous job safety analysis worksheets supplied by the defendant indicated the potential hazard of a release of product under pressure was to be addressed by depressurising lines, and also listed retightening bolts if pressure was detected. [14] There was no appropriate procedure used by either Shell or the defendant that addressed the hazard of hydrogen gas being present prior to the fitters removing bolts from the flange. Shell used an increased hazard permit for air breathing equipment to address the nitrogen gas hazard but neither the defendant nor Shell assessed the risk of a hydrogen leak. [15] The fitters should have been able to stop the job when an adequate risk assessment or job safety analysis was not done. [16] The defendant's employees did not know what pressure was contained in the pipe with the nitrogen, or the rate of reduction of pressure during the release of gas from the flange area over time. [17] There was limited knowledge of the risk of static explosion or fire amongst the defendant's fitters. [18] There was electrical equipment approximately 800mm from the source of the gas leak that should have been assessed as a possible source of ignition. The area was classified as zone 1 due to the risk of hydrocarbons being present at any time. [19] Any gas passing the ball valve should have been contained by the positive isolation of the spade, until the bolts were loosened. [20] The hydrogen rich gas in the pipe should have been purged free of flammable gas before the procedure. The procedure of turning the spade was seen as a minor job. [21] Neither the defendant nor Shell assessed the scaffold for appropriate emergency exits. The use of emergency air bottles dictated the provision of a second escape route according to Australian Standards. One escape route on either side of the valve, and possibly a larger platform, would have assisted Victor Plescan's escape from the fire. [22] There existed a potential for an escalation of the fire in a refinery classed as a major hazard facility. [23] The isolation of the hydrogen after the fire was delayed due to a shut off valve nearby still passing gas although being shut off manually. [24] The defendant's fitters should have been wearing flame resistant clothing. [25] An adequate risk assessment would have demonstrated that the procedure should have been halted temporarily while the Shell operator, Chun Guo, went to get gas detecting equipment after realising that the gas released from the flanges was unidentified. [26] As a result of the incident, Victor Plescan suffered 35% burns on his right arm, hand, the back of his scalp, both ears, back, left hand, the entire left thigh and knee, right calf and left thigh. He has had to have skin grafts on most of the right arm, right calf and left thigh. He also tore the ligaments of his right shoulder. As at 16 January 2003 Mr Plescan had not yet returned to work. Tihomir Boka was placed at risk of injury and received trauma treatment on the day of the incident but otherwise did not suffer injury. [27] Subsequent to the accident, the following measures were implemented: (a) Shell and Transfield participated in a TRIPOD incident investigation. Shell also sought technical assistance from Shell Global Solutions Singapore. (b) A documented job safety analysis was conducted on 30 November 2002 for the renewal of the suspected passing valve. Danger tags, depressurisation, nitrogen gas purging, barriers and safety monitors were in place for the procedure. (c) In January 2003 The defendant submitted a documented procedure to Shell entitled "Breaking flanges, couplings, joints on process lines" indicating that a material safety data sheet be obtained and a thorough risk assessment or job analysis be developed and discussed amongst all personnel undertaking the work. The document also addresses isolation, danger tags, depressurisation, purging of line contents and work permits. The procedure includes a checklist for operators.

8 In relation to Shell, the following relevant facts are agreed: [1] At all material times, the defendant, Shell Refining (Australia) Proprietary Limited (Shell), (ACN 004 303 842) was a company duly incorporated whose registered office is L2 LS Redfern Road, Hawthorn East, in the State of Victoria. [2] At all material times, Shell was an employer and conducted the business of refining oil (including processing gas) at the Clyde Refinery at Durham Street, Rosehill in the State of New South Wales (the Refinery). [3] Shell had entered into a long-term contract with Transfield Services (Australia) Pty Limited (Transfield) under which Transfield was to be the dedicated supplier (Alliance Partner) of maintenance and repair services for the Refinery (Alliance Contract). [4] On 29 November 2002, Mr Victor Plescan and Mr Tihomir Boka were employed by Transfield as mechanical tradespersons.

[5] On 29 November 2002, Shell was in the process of converting part of its Cryogenic Processing Unit (CPU) into a chlorine scrubber (CPU Project). As part of the CPU Project, pipework was being reconfigured to enable the flow of hydrogen gas between the hydrogen treater unit and the CPU. A CPU commissioning procedure was developed, and revised, for this process.

[6] One task in the process was to turn a spade (also known as a spectacle blind) from the closed to open position on a line that was isolated on the upstream side by a closed ball valve. The upstream side contained hydrogen and a small amount of LPG. The downstream side was sealed by a spade and contained nitrogen to ensure the line was free of oxygen. [7] A spade is a dual ended steel plate which has a large diameter opening at one end surrounded by a perimeter of steel plate to fit between bolt-on flanges. The open end allows a flow of gas or liquid. The closed end is a steel plate and provides isolation by stopping the flow of gas and liquid. A flange is a steel ring welded to the end of a pipe through which bolts can be fitted to provide a seal. The closed ball valve referred to in the previous paragraph had a flange face for bolting to the pipe flange. The spade was bolted to the pipe flange with a gasket in place to enhance the seal. [8] Under the Alliance Contract, on 29 November 2002, together with other work relating to the CPU Project, Transfield was to perform the task of turning the spade on the relevant line. Mr Plescan and Mr Boka were allocated by Transfield to perform the task. [9] Prior to the work being undertaken, the surrounding gas lines were isolated and the downstream side was then purged with nitrogen (an inert gas) to ensure the line was free from oxygen. The downstream side was then pressurised with nitrogen to ensure the line remained free of oxygen. This was done to prevent the risk of air ingress and explosion during subsequent plant operation. The pressure of the nitrogen gas used to purge the line was not reduced prior to turning the spade. Whilst these steps were undertaken Shell failed to ensure that all valves were positively isolated by means of danger tagging or a mechanism to prevent opening of the valves, and did not depressurise the upstream side of the line. [10] The site was also checked with gas detection equipment by Shell employees, who were trained as Authorised Gas Testers. However, such gas detection equipment was not next to Mr Plescan or Mr Boka during the performance of the task of turning the spade. [11] Prior to work commencing Mr Plescan and Mr Boka were required by Shell to complete an Increased Hazard Permit. This required them to wear supplied air breathing apparatus. A third Transfield employee was acting as a safety bottle watcher in accordance with the requirements of the Increased Hazard Permit. Discussions were held between Shell employees and Mr Plescan and Mr Boka concerning the work procedure, and a "Take 5" analysis was undertaken to assess some of the risks associated with the task. A clearance was provided by Shell employees for Mr Plescan and Mr Boka to commence the task. Shell employees remained at the site and provided supervision in relation to the task while it was being performed. [12] Despite these steps being undertaken, the risk of the closed ball valve failing, and hydrogen gas leaking and igniting was not adequately assessed. The release of hydrogen gas in these circumstances is known as an uncontrolled flow. Shell had in place a written procedure for dealing with the potential of an uncontrolled flow, known as an uncontrolled flow Safe Working Permit. The uncontrolled flow Safe Working Permit requires additional controls to be implemented to ensure the health, safety and welfare of persons in the workplace, including that work platforms have a dual escape route. However, as a consequence of the failure to assess the risk of an uncontrolled flow of hydrogen gas the uncontrolled flow Safe Working Permit was not completed and sufficient measures were not taken to eliminate or control the risk. [13] Documented procedures produced by Transfield were in place for the task of turning the spade, including a documented job safety analysis, and a documented procedure produced by Shell for the commissioning of the CPU. However the procedures used did not address working on a pressurised line or the potential for hydrogen to escape. [14] Shell's employees were aware the nitrogen contained in the pipe was under a pressure of approximately 5 to 9 barg, but did not know the precise rate of reduction of pressure during the release of gas from the flange area over time. [15] The area was classified as zone 1 due to the risk of hydrocarbons being present at any time, as opposed to an area classified as zone 0 which means that hydrocarbons are continually present. [16] Testing of the ball valve revealed that the ball valve leaked more than design specifications. Any gas passing the ball valve should have been contained by the positive isolation of the spade until the bolts were loosened. [17] The contents of the pipe should have been purged free of flammable gas before the procedure commenced, or the work should have been undertaken by use of an uncontrolled flow Safe Working Permit. [18] Shell relied upon a single isolation point. It had confidence that the relatively new valve would not pass gas. [19] There existed a potential for an escalation of the fire in a refinery classed as a major hazard facility. [20] The isolation of the hydrogen after the fire was delayed due to a shut off valve nearby still passing gas although being shut off manually. [21] Mr Plescan and Mr Boka accessed the relevant line by a scaffold which did not provide for dual access/egress. Shell did not assess the scaffold for appropriate emergency exits. The use of emergency air bottles dictated the provision of a second escape route according to Australian Standards. One escape route on either side of the valve, and possibly a larger platform, would have assisted Mr Plescan's escape from the fire. [22] During the course of loosening the bolts of the flange on the downstream side of the line, there was an unexpected release of hydrogen gas from either the upstream or downstream end of the line. The workers attempted to tighten the bolts to prevent the gas flow, as instructed during the "Take 5". The hydrogen ignited and there was a ring of flame several metres in diameter. [23] Mr Boka was able to move clear of the fire and was not injured. Mr Plescan was not able to move off the scaffold and had to exit through the flames. It is believed that his exit was impeded by an emergency breathing bottle strapped to his leg become caught on scaffolding or pipe fittings. Mr Boka returned to the scaffold seconds later and assisted Mr Plescan from the flames. At the time they were both wearing air supply masks. The fire continued for several minutes while the defendant's employees attempted to isolate the hydrogen gas and assess other possible sources of fuel. [24] Mr Plescan sustained burns to 35 % of his body including his right arm, hand, the back of his scalp, both ears, back, left hand, the entire left thigh and knee and right calf. He has had to have skin grafts on most of the right arm, right calf and left thigh. He also tore the ligaments of his right shoulder. Mr Plescan returned to work with Transfield on restricted duties in March 2003, and has returned to work at the Refinery. Mr Boka was placed at risk of injury and received trauma treatment on the day of the incident but otherwise did not suffer injury.

[25] First aid was provided to Mr Plescan by Shell employees on site. Shell's emergency procedures were initiated so that Shell and external Fire crews and Ambulance personnel attended the scene of the incident. Mr Plescan was treated by Ambulance officers on site and then taken to Concord Hospital. The fire was extinguished by the Shell fire crew prior to the Fire Service arriving. [26] Subsequent to the incident, the following measures were implemented: (i) Other tasks of a similar nature were suspended to enable a review of the existing Job Safety Analysis for such tasks. (ii) A review of the job safety analysis was undertaken between Shell and Transfield employees in relation to the task of turning the relevant spade. As a result of the review, the hydrogen line upstream from the ball valve was depressurised and purged with nitrogen to atmosphere and the hydrogen treater unit was shut down. Diagrams for relevant isolations were developed together with a checklist for relevant isolations. (iii) The ball valve used to isolate the upstream line was replaced. (iv) Procedures for the tasks and future similar work, including working instructions, were modified. This included requiring a Hot Work Safe Permit to be completed which an Authorised Gas Safety Inspector must sign prior to work commencing. (v) Shell and Transfield undertook an investigation of the incident, including a Tripod analysis. A copy of this Tripod analysis was provided by Shell to WorkCover. The Tripod analysis process identifies possible, as opposed to actual, hazards. Shell also sought technical advice from Shell Global Solutions Singapore and Shell's Geelong Refinery. (vi) Shell has reviewed its isolation systems and procedures. The revised procedure requires dual isolation points be used. (vii) Transfield provided to Shell a revised "Breaking flanges, joins on process lines procedure" requiring a risk assessment or job analysis to be developed and discussed with workers for similar tasks prior to work commencing. The revised procedure also addressed isolation, danger tags, depressurisation, purging lines and work permits.

9 In addition to the agreed statement of facts, the prosecution tendered a bundle of documents including a factual report of Inspector Tony Pavert, dated 10 February 2003.

10 Also tendered by the prosecution were a number of photographs which have assisted me in understanding the nature and layout of the premises at which the accident occurred, as well as the precise nature of the machinery involved in the incident and the injuries that subsequently occurred. 11 Both defendants' prior conviction record is also before me. The record of Transfield discloses no prior convictions. In relation to Shell, there is a prior conviction, dated 16 March 1994, under s 16 of the Occupational Health and Safety Act 1983. 12 On behalf of Transfield, the following affidavit material was relied upon: (i) Mr David Bond, Group Health, Safety and Environment Manager for Transfield Services (Australia) Pty Ltd. Mr Bond is employed by the defendant as Group Health, Safety and Environment Manager and has worked in that position since November 2003. The responsibilities of that position include overseeing all aspects of health, safety and environment related to Transfield Services employees and contractors within Australia. Mr Bond's affidavit outlines matters such as the business background and character of Transfield Services, the nature of the company's contract with Shell Clyde Refinery and the specifics of the incident and the injured worker. 13 On behalf of Shell, the following affidavit material was relied upon: (i) Mr Andrew Harvey, Health, Safety and Environment Manager for Shell Refining (Australia) Pty Ltd, at Clyde Refinery and Gore Bay Terminal. Mr Harvey has been employed in this position since May 2003. His responsibilities include managing Health Safety and Environment specialists employed by the second defendant and overseeing occupational health and safety within the Refinery Leadership Team. His role requires him to have a broad knowledge of activities carried out across the refinery and steps to reduce hazards associated with work carried out at the refinery. Mr Harvey's affidavit outlines matters such as the refinery's operations, actions taken by the company after the incident and the company's commitment to safety. 14 Both Mr Bond and Mr Harvey were required for cross-examination.

Relevant principles 15 The overall approach to be followed in relation to the determination of penalty is to be found in the first instance within the statutory provisions of the Crimes (Sentencing Procedure) Act 1999 (CSPA) and in particular in relation to these proceedings, ss 3A Purposes of Sentencing, 21A Aggravating, mitigating and other factors in sentencing, 22 Guilty plea to be taken into account. 16 In R v Way [2004] NSWCCA 131 it was emphasised that the provisions of the CSPA referred to above are not to be construed as representing 'a departure from settled principles of sentencing practice, or an abandonment of the discretion that is essential to any system calling for individualised justice'. As was said at [59]: ....it is clear that the legislative policy.......so far as that can be discerned from the legislation itself, was not to create a straight jacket for judges...but rather were intended to provide 'further guidance and structure to judicial discretion.' 17 It is well settled that the starting point for considerations as to penalty is the objective seriousness of the offence charged: Lawrenson Diecasting Pty Ltd v WorkCover Authority of New South Wales (Inspector Ch'ng) (1999) 90 IR 464 at 474.

18 The principle of foreseeability as a factor in determining the objective seriousness of an offence was considered and affirmed in the Full Bench decision of Capral Aluminium Ltd v WorkCover Authority of New South Wales (2000) 49 NSWLR 610 at 646. 19 On the issue of foreseeability, the Full Bench in Capral also stated: The existence of a reasonably foreseeable risk of injury will necessarily result in the offence being more serious in nature. However, the absence of foreseeability does not necessarily render the offence as being nominal or not serious. In this regard the relevant approach is that set out in the judgment of Wright J, President, in Ferguson v Nelmac Pty Ltd (at 209-210) in these terms:

... reliance on 'hindsight' must be seen in an appropriate perspective in terms of culpability. It is a relevant consideration but the very terms of s 15 impose an obligation on an employer which is not confined to the taking of precautions only when there are warnings or signals of danger or when experience indicates that a risk to safety has arisen and requires remedy. 20 The principles of general and specific deterrence are also relevant in sentencing considerations. The approach to be taken on that issue has also been dealt with in some detail in Capral at 643-645. Without detailing all that the Full Bench had to say on those issues I believe the approach to deterrence in the sentencing process is encapsulated in the following passage from the Full Bench in Capral at 644 as follows: ... both aspects of deterrence are matters which should normally be given weight of some substance in the sentencing process; and although there may be exceptional cases (see, for example, Page v Walco Hoist Rentals Pty Ltd (No 2) [2000] NSWIRComm 39 at [40]-[43] we would expect such cases to be very rare, and where the relevant circumstances were held by the sentencing judge to be established, the judge must indicate with some precision the circumstances which had led to the exceptional course being adopted.

21 In the context of the above well established sentencing principles it will also be necessary to have regard to those general matters going to aggravation, mitigation and other factors identified in s 21A (1) of the CSPA relevant to the defendant. As was said in R v Way at [56]:

... it is not to be overlooked that there is a well established body of principles that have been developed by the courts over a long period of time. By providing guidance in the form of a list of aggravating and mitigating factors in s 21A, the Parliament did not intend to overrule or disturb those principles or restrict their application. In so far as those principles refer to factors, whether objective or subjective, that affect the 'relative seriousness' of the offence, they are expressly preserved by s 21A(1)(c). 22 Ultimately, all of the above factors must be considered as part of 'a complex of inter-related considerations' (See R v Gallagher (1991) 23 NSWLR 220). Having said that, as was said by Spigelman CJ in Thorneloe v Filipowski (2001) 52 NSWLR 60 at 69, it still remains for the sentencing judge to ensure: ... that a sentence should be proportionate to the objective gravity of the offence. This necessarily requires a sentencing judge to consider, at some stage in the reasoning process, the sentence that is appropriate for the particular circumstances of the crime without reference to the subjective case of the particular offender. 23 In Markarian v The Queen [2005] HCA 25: 18 May 2005, the High Court, by majority (Kirby J dissenting) generally disavowed the sequential or two tiered approach to sentencing. In doing so, their Honours did not entirely reject the proposition that, in some circumstances, 'an arithmetical process' would be appropriate. As they said at [39]: Following the decision of this Court in Wong it cannot now be doubted that sentencing courts may not add and subtract item by item from some apparently subliminally derived figure, passages of time in order to fix the time which an offender must serve in prison. That is not to say that in a simple case, ... indulgence in arithmetical deduction by the sentencing judges should be absolutely forbidden. ... The law strongly favours transparency. Accessible reasoning is necessary in the interests of victims, of the parties, appeal courts, and the public. There may be occasions when some indulgence in an arithmetical process will better serve these ends . ... (emphasis added) 24 On that point, McHugh J also acknowledged the need, where appropriate, for the awarding of a nominated discount for 'some factor'. As he said at [74]: ...The distinction between permissible and impermissible quantification of "discounts" on a sentence will usually be found in whether the quantification relates to a sentencing purpose rather than some other purpose. So, the quantification of the discount commonly applied for an early plea of guilty or assistance to authorities is offered as an incentive for specific outcomes in the administration of criminal justice and is not related to sentencing purposes. The non-sentencing purpose of the discount for an early guilty plea or assistance is demonstrated by the fact that offenders are ordinarily entitled to additional mitigation for any remorse or contrition demonstrated with the plea or assistance, aside from the discount for willingness to facilitate the course of justice...

25 Overall, I observe nothing in Markarian that precludes me, properly in my view, from identifying a discount for the entry of an early plea of guilty. Additionally, to the extent that there are subjective and mitigating features relevant to the defendant, they are matters which also should be considered in accordance with the provisions of the Crimes (Sentencing Procedure) Act 1999, in particular s 21A(1) earlier referred to.

26 As the defendant Transfield has no prior convictions, the maximum penalty is $550,000. With one prior conviction, Shell is a previous offender as prescribed in s12 and defined in s4 of the Act, taken together. Accordingly, the maximum penalty is $825,000.

27 As a preliminary issue, it is useful to reiterate that Shell is the operator and an employer of the Clyde Refinery where the accident occurred. Transfield is a contractor who provides labour to Shell at the above mentioned premises. Mr Plescan and Mr Boka were both employees of Transfield. 28 There was a clear obligation on both parties to ensure that a safe system of work was in place for the task of turning a spade on a potentially live pressure line which did not pose a risk to the health and safety of Mr Plescan and Mr Boka.

29 The Full Bench in Capral said at 650 that 'a breach where there was every prospect of serious consequences might be assessed on a different basis to a breach unlikely to have such consequences'. In isolation, the potential for 'serious consequences' is not conclusive of the nature and quality of the offence, but it is clear that such a factor is a relevant consideration when assessing the ultimate culpability of a defendant.

30 As the facts disclose, Shell was involved in the process of converting its Cryogenic Processing Unit (CPU) into a chlorine scrubber. Part of this project involved pipe work being reconfigured to enable the flow of hydrogen gas between the hydrogen treater unit and the CPU. A step in the project was to turn a spade from a closed position to an open position on a line that was isolated on the upstream side by a closed ball valve. Mr Plescan and Mr Boka were required to stand on a scaffold some 2200mm from the ground and turn flange bolts in order to turn the spade open. While the bolts were loosened, nitrogen was purged through the pipeline to prevent air from entering. As the pressure lowered, hydrogen or hydrocarbon gas escaped and ignited, surrounding Mr Plescan and Mr Boka on the work platform. There was only one escape route from the platform. Mr Boka managed to escape quickly but Mr Plescan was unable to escape as rapidly. As a result, Mr Plescan suffered burns to 35% of his body and tore ligaments in his right shoulder. He received, and continues to receive medical treatment for his injuries. 31 As was stated in Capral, the presence of foreseeability 'will necessarily result in the offence being more serious in nature'. As such, the starting point for the determination of the objective seriousness of an offence is whether there was 'an obvious or foreseeable risk to safety against which appropriate measures were not taken'. (Lawrenson Diecasting at 476). 32 That the work being undertaken by Mr Plescan and Mr Boka encompassed risks to safety is undoubted, in my view. The steps taken by the defendant to risk assess the task at hand recognised that much. That risk assessment was, in all the circumstances, inadequate, in that the risk was not comprehensively assessed and acted upon. 33 On behalf of the prosecutor, it was submitted that relatively simple and obvious steps existed prior to the accident to properly address the risks to safety that the potential for a live line represented. Those steps included treating all lines as potentially live lines and to deal with the work to be done on that basis. It was submitted, had that been done at the time that the work was contemplated, the work would not have gone ahead in the way that it did. 34 As I have understood the evidence, if treating the line to be worked on as potentially live had been done, the work would have been assessed as work on a hot line as opposed to the cold line assessment made at the time. If the work had been assessed as hot work, a different Safe Work Permit would have been undertaken and additional steps would have been implemented prior to the work being undertaken. I will detail those further in my judgment.

35 Counsel for Transfield submitted that a leak of gas, due to a failure of an upstream valve, could not have been foreseen as a likely event. However, the job safety analysis and subsequent work permit which was issued on the day contemplated a risk of nitrogen gas leaking. Clearly, there was still a foreseeable risk of a type of gas leaking. 36 Evidence was given by Mr Bond on behalf of Transfield that, while a safety analysis is undertaken prior to the work being done to address risks that are apparent in the work to be done by Transfield employees, reliance is placed upon the expertise of Shell's technical operators to ensure the work can proceed with the correct permit. The permit issued by the relevant Shell employee was an Increased Hazard permit for cold work. Mr Bond acknowledged that the permit issued was inadequate given the work to be undertaken. A hot work permit would have been the correct permit to have been issued in all the circumstances given the potential for a live line.

37 On the part of Transfield, there was a failure to ensure an adequate risk assessment was carried out to assess the hazards associated with turning a spade on a potentially live pressure line. A corollary to that failure was that Transfield failed to have a specific documented procedure for its employees to follow doing such work on a potentially live pressure line. If such a specific procedure had been documented, the risk of hydrogen escaping and igniting would have been recognised. On that basis, Transfield would have had in place measures such as providing flame retardant clothing to its employees, providing a scaffold with dual access and egress for employees wearing breathing apparatus, and educating employees about the risks which are attached to that kind of work. It did not have such specific documented procedures in place.

38 It would seem that, as a base line policy, Transfield did not want its employees to work on pressurised lines. The reality would seem to be, given the nature of Shell's operations at the Clyde Refinery and the work being performed by Transfield employees within those operations, there was always a real possibility that a Transfield employee might be confronted with a live pressurised line in the course of work being undertaken by them. That is a possibility that could not be totally excluded as exemplified by the events involving Mr Plescan and Mr Boka. By all accounts, turning a spade was a regular task for Transfield employees. As such, Transfield should have accommodated that possibility in its documented procedure.

39 Transfield's documented procedure at the time of the accident was a document entitled 'Breaking of Flanges'. It set out requirements to be undertaken prior to the work commencing to ensure the safety of its workers. These included determining the contents of the pipe and confirming that the line was depressurised by operating vents and drains. It did not specifically state that all lines should be treated as if they were live until proven otherwise or that work should not proceed if the line was pressurised. After the accident, Transfield subsequently included a direction that all lines were to be treated as potentially live in its new procedure document titled 'Breaking Flanges, Couplings, Joints on Process Lines'.

40 On the part of Shell, whose safety policies and procedures were integral to the safe performance of the work, it's failures had two primary aspects. Firstly, a failure existed to adequately risk assess hydrogen leaking and igniting when turning a spade. If an adequate risk assessment had been undertaken, the need to guard against the possibility of the presence of hydrocarbon would have been recognised and steps put into place to address that as part of the job analysis. Given the possibility of a live line, the appropriate Safe Work Permit that should have been issued was that for an uncontrolled flow Safe Work Permit. This permit requires additional controls such as work platforms with dual routes and for protective clothing to be provided. Mr Harvey, in his affidavit on behalf of Shell, stated that the requirements were to 'implement as a minimum the standards provided for in Australian Standards (AS 1576 & 1577) and WorkCover guidelines…' In the course of giving evidence, Mr Harvey further described the purpose and intent of the uncontrolled flow Safe Work Permit process as: ... putting into place a number of controls to minimise the escape of gas to ensure that any controls that are required in the case of release of gas are in place prior to the work commencing. Once those conditions have been determined the person undertaking the work applies and discusses the uncontrolled flow permit with authorities say, and that is signed off and issued as part of the task.

41 Also relevant in this context is the failure of the ball valve to prevent the gas leaking. Counsel for Shell submitted the failure of the ball valve was not readily foreseeable as it was relatively new, complied with specifications for use and had been used a few months prior to the accident without incident to isolate hydrogen.

42 While the failure of the ball valve may not have been readily foreseen prior to the accident, the importance of ensuring the integrity of the ball valves was clearly recognised by the fact that Shell did, from time to time, check the ball valves then in place. Prior to the accident, ball valves were checked for reasons such as on suspicion that something was wrong with the ball valve or following shutdown or maintenance. Mr Harvey gave evidence that Shell has, following the incident, increased the frequency of checking ball valves used to retain contents which would present a safety hazard if leaked. 43 The second primary failure on the part of Shell in relation to this matter was a failure to provide an overall safe system of work. Despite the fact that Shell conducted a risk assessment in conjunction with Transfield prior to the work being undertaken, the contingencies put in place on the day contemplated the risk of a nitrogen leak only, and were inadequate to combat the subsequent ignition of hydrogen and injury to Mr Plescan. Even though the Increased Hazard Permit that was issued for the work to be conducted took into account the risk of nitrogen leaking, there was still a risk to safety that went unrecognised. Safeguards that were lacking included ensuring valves were danger tagged and would not open to release gas, as well as Shell employee awareness of pipe gas pressure and rate of reduction of pressure while the gas was being released.

44 The totality of the omissions by both defendants leads to a conclusion that foreseeable risks to safety existed in the work being undertaken by Mr Plescan and Mr Boka. That the defendants acknowledge that is evidenced by the entry of their pleas of guilty.

45 Whilst Mr Boka fortunately escaped with no injuries, the potential risk of serious injury was significant. This was a breach where there was 'every prospect of serious consequences' (Capral), and in my view that is a factor directly relevant to assessing the gravity of the offences. 46 On that point, it should be said that while Mr Harvey, on behalf of Shell, conceded Mr Plescan suffered very serious injuries, he did not concede that the failure of the ball valve facilitating the subsequent release of hydrogen and the resulting fire had the potential to lead to 'catastrophic consequences' as put to him by counsel for the prosecutor. As he said: The refinery is designed for such a fire of the single element, it doesn't lead to catastrophic consequences. 47 It is relevant to the objective seriousness of an offence to consider if there were readily and easily available remediation steps which could have been undertaken by the defendant before the accident to prevent injury occurring. To put it another way, one should have regard to remediation or the extent of remediation that is done post the accident, as an indication of the extent to which foreseeability of injury was readily identifiable. 48 Following the accident, Transfield undertook to: (i) Conduct a Tripod incident investigation in conjunction with Shell, which sought to ascertain the causes of the accident and included recommendations to upgrade protective clothing for employees and expand training regarding the hazards of hydrogen. Both Shell and Transfield cooperated to implement the recommendations. (ii) Conduct a job safety analysis on the renewal of the suspected valve and ensured that danger tags, depressurisation, nitrogen gas purging, barriers and safety monitors were in place for the procedure; (iii) Submit a documented procedure entitled "Breaking Flanges, Couplings, Joints on Process Lines", which required risk assessment to be developed and addressed issues such as isolation, danger tags, depressurisation, purging lines and work permits. 49 A Tripod analysis is a structured investigation process which Shell undertakes in examining accidents which occur at the workplace. It identifies possible causes of an incident. It focuses on five stages of potential failures which could lead to an accident. These five stages were identified by Mr Harvey as follows: (a) fallible decisions (decisions, or lack of, by management); (b) general failure types (latent failures); (c) preconditions (conditions enabling or fostering unsafe acts, such as a person's state of mind); (d) unsafe acts (errors and violations by people); and

(e) breached defences (procedures or control systems that are either breached or inadequate).

Each of these five stages are analysed by employees or contractors at the refinery. Remedies to possible failures in any of the stages are generated by those participants and the results are distributed through out the company to both contractors and employees. 50 As well as receipt of the above mentioned procedure document and participation in the joint incident investigation with Transfield, Shell also undertook remedial steps following the accident, including: (i) Suspending tasks of a similar nature to the incident to allow for a review of the Job Safety Analyses that were in place; (ii) Replacement of the faulty ball valve; (iii) Modification of procedures and work instructions for future similar work; (iv) Revision of isolation systems and procedures, whereby dual, not single, isolation points were to be utilised. 51 Both companies acted upon these identified steps promptly.

52 In all the circumstances I assess the offences as being objectively serious and I propose to consider penalty on that basis. 53 The decision of the Full Bench in Capral clearly indicates that general and specific deterrence are factors that should be given weight in all but exceptional circumstances. The Full Bench said at 643-644 that: We consider that the extract from the judgment of Hungerford J in Fisher v Samaras Industries Pty Limited accurately states the approach that members of this Court should take in relation to the question of deterrence, both general and personal or specific, when sentencing an offender in relation to a serious breach of the legislation. It follows that those aspects of deterrence are matters which should normally be given weight of some substance in the sentencing process. 54 In respect of specific deterrence, the Full Bench held in Capral at 644-645: In sentencing, a court may disregard the element of specific deterrence if satisfied that the risk of re-offending is low or non-existent. The court may form such a view as a result of the rehabilitation of the offender: R v Corner (unreported, Court of Criminal Appeal, 19 December 1997) or because the offender will not have the opportunity to commit a similar offence in the future: R v Macdonell (unreported, Court of Criminal Appeal, 8 December 1995). However, we think it unlikely that the weight to be attached to specific deterrence could be reduced to zero in cases of offences under the Act. 55 Considerations as to both specific and general deterrence are relevant in this context as both defendants operate in an industry in which risks to safety are very real and constant. However, in light of the comprehensive steps that both defendants have undertaken to prevent such an incident occurring in the future, the weight to be given to specific deterrence should be tempered accordingly. 56 Further, prior to the accident, Transfield and Shell were actively engaged in working together to ensure that sound health, safety and environment policies and plans were in place, which covered all employees, including both Transfield and Shell. Actions included: s Transfield had available a site specific Operational Systems Plan, a Health, Safety and Environment Plan which incorporated Shell's safety management specifications; s A permit system which required dialogue between Transfield contractors and Shell supervisors and safety inspectors in regards to work being undertaken on site; s An induction program at the Refinery to raise awareness for all workers as to the risks and dangers present at work; s Regular safety audits.

57 Transfield and Shell are also to be commended for their cooperative efforts and commitment in endeavouring to provide a safe workplace at the Refinery for their respective employees. The alliance agreement under which Transfield performs work at the Refinery requires Transfield to adhere to Shell's health and safety regulations and to consult with Shell on matters of workplace health and safety. Mr Harvey gave evidence that Shell has detailed and comprehensive health and safety policies in place and emphasised that merely '…having a set of manuals on the wall…does not cut it'. He stated that the policies were communicated to its workforce through the occupational health and safety committee, training of employees, posters, regular audits and an on-site safety coach.

58 In relation to Transfield's approach to health and safety management, Mr Bond deposed that the company: ... reviews the client systems and where appropriate incorporates or links to elements of the client's safety management system procedure to ensure clarity in the way that Transfield Services works with the client. This process is considered to be important, particularly in heavy industrial environments where we work very closely with our client's employees. Such a plan was developed for Transfield Services work at the Shell Clyde Refinery. 59 The extensive investigations and remedial actions undertaken by both Transfield and Shell after the incident, as set out in both Mr Bond and Mr Harvey's affidavits and evidence, also demonstrate that both companies are proactively committed to the safety and health of their employees.

60 The principle of parity with regard to the penalty to be accorded to both defendants is also relevant. The principle demands that in sentencing offenders involved in the same criminal activity, equal justice requires that like should be treated alike: see Lowe v R (1984) 154 CLR 606 and Postiglione v R (1997) 189 CLR 295. However, if there are 'relevant differences, due allowance should be made for them': Lowe v R (1984) 154 CLR 606 at 610-11.

61 Counsel for the prosecution submitted that the culpability of the two defendants was equal. No issue was taken to that submission by either defendant. Having considered the facts and circumstances, I would agree with that assessment.

62 In the determination of penalty, the defendants are entitled to have taken into account the plea of guilty entered. In assessing the impact of the plea, the Court is guided by the decision of R v Thomson; R v Houlton (2000) 49 NSWLR 383, the principles of which are well settled and need no elaboration, reinforced as they are by s 22 of the Crimes (Sentencing Procedure) Act 1999.

63 I have assessed that discount at twenty five percent with respect to each offence.

64 Transfield has no recorded prior convictions. The affidavit and evidence given by Mr Bond demonstrate Transfield takes its occupational health and safety commitments seriously. A comprehensive safety management system existed prior to the accident and improvements have been made to the system following Mr Plescan's injuries.

65 Transfield's efforts to assist Mr Plescan in returning to work are also commendable. Due to the nature of his ongoing injuries, Mr Plescan is only able to work in an office environment and has assumed a role as a planner at the Refinery. Transfield has assisted him in this role by arranging for business and technology training as well as modifying procedures in order to enable him to continue working in his new role. 66 Shell has a record of one prior conviction in 1994 to which it pleaded guilty. However, that conviction related to an incident at the Gore Bay terminal and not at the Clyde Refinery. There have been no prior convictions involving the company's operations at the Clyde Refinery over the 80 years that the company has operated at that site. Given the nature of the operations at the Clyde Refinery, such a record is a positive one for the defendant. 67 Both defendants' full cooperation and prompt contact with WorkCover in relation to this matter has also been taken into account. Transfield continues to supply labour to Shell and both companies have made joint efforts to improve upon the processes that were in existence prior to the accident. Both defendants have also expressed remorse for the incident and injuries suffered by Mr Plescan.

68 Considering all those subjective elements that I have identified, a further discount on penalty in favour of both defendants is warranted. 69 Taking into account all the matters I have referred to, I determine penalty as follows:

(1) Matter No IRC 6867 of 2004: WorkCover Authority of New South Wales (Inspector Schuman) v Transfield Services (Australia) Pty Ltd : Prosecution arising under s8(1) of the Occupational Health and Safety Act 2000: (i) I impose a penalty in this matter of $125,000. (ii) I allocate a moiety to the prosecution on the usual terms.

(2) Matter No IRC 6869 of 2004: WorkCover Authority of New South Wales (Inspector Schuman) v Shell Refining (Australia) Pty Ltd : Prosecution arising under s8(2) of the Occupational Health and Safety Act 2000: (i) I impose a penalty in this matter of $185,000. (ii) I allocate a moiety to the prosecution on the usual terms. (3) I order the defendants to pay the costs of the prosecutor as agreed or assessed equally between them. Failing agreement, the matter may be referred to the Registrar for assessment.

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