(District Court Hamilton, Judge Smith, CRI 2007-019-3364, CRI 2006-073-450, CRI 2006-073-447, 12 October 2007)

This is a recent sentencing case that illustrates that in appropriate circumstances the fines the Court is prepared to impose can be substantial.

The Facts

A guilty plea to nine charges under the Resource Management Act 1991 (RMA) was entered by Hydro Energy (Waipa) Limited (HEWL). Three charges related to excavation and soil disturbance in and around the Waipa River and Waiharakia Stream and the remaining six to breaches of abatement notices.

Mr Neal pleaded guilty to three charges, excavation of the Waipa River bed, diverting the Waiharakia Stream and soil disturbance in the Waipa River Gorge.

The facts in the matter were complex and the Judge took the somewhat unusual course in a prosecution where a guilty plea is entered of  undertaking a site visit  Importantly at the time of the site visit some of the works that had been undertaken were significantly greater than at the time the charges were laid. The Court therefore relied on photographic evidence in relation to these works. 

A summary of facts (some 27 pages) was largely agreed. However there was a hearing on disputed facts that the Court ruled on separately to sentencing.

HEWL was seeking to build a run-of-the-river hydro-electric power scheme in the upper Waipa River valley near Te Kuiti.  Mr Neal was the earthworks contractor for HEWL. The power scheme held a series of consents from the Regional Council and Waipa District Council. The Judge had this to say about the nature of the consents:

Perusal of these consents shows that they are particularly generic in their terms and essentially provide for a consent on the basis that construction will not commence until a CMP [construction management plan] covering all the critical matters of regional concern is provided.  That CMP must be approved by the Regional Council, based upon technical certification ...

The actual mechanism for such technical certification and/or approval, however, is not set out in the consent.  Nor are the particulars of the content of the CMP or the various requirements to be achieved. Not unnaturally, given the size and complexity of this project, this led almost immediately to ongoing problems between HEWL and the Regional Council.

In relation to works affecting the Waipa River it was not alleged that there would have been any significant effect upon the Waipa River as a result of these works. The Judge also found that the Stream was already compromised. This is to be contrasted to the effects of constructing a track down the Waipa Gorge which the Judge accepted the Regional Council estimate that around 32,000m2 of land was either cleared or subject to the side cast work (ie 8,100m2 for the Rock Spill).

The abatement notices generally applied to both the gorge track and the Waiharakia Stream and are essentially related to sediment and erosion control mechanisms not being installed at various periods. While there was debate about the nature and extent of the abatement notices between HEWL and the Regional Council, it was accepted that that notices were not complied with and the non-compliance was for a longstanding period.

The Court discussed whether or not it ought to make enforcement orders as part of the suite of matters it can consider in such cases. The input from the parties, particularly the Regional Council, was influential in the Court's decision on making orders. The Court concluded that orders in relation to remedial works related to the Rock Spill ought to be made.

Sentencing Principles

Having traversed the facts and related issues the Court then went onto consider the relevant sentencing principles.  The sentencing principles considered by the Court are those laid down in the seminal case on RMA sentencing - Machinery Movers Limited v Auckland Regional Council [1994] 1 NZLR 492, and the provisions of the Sentencing Act 2002.  Of particular note the Court paid due attention to the following Court of Appeal statement in Machinery Movers:

In combination these changes [to the RMA] constitute a clear legislative direction for the Courts to ensure that higher penalties are imposed which would have a significant deterrent quality. If fines are too low they will be regarded as a minor licence fee for offending.

In terms of the enforcement orders for remedial works that the Judge had already flagged, these were considered to constitute "reparation" in accordance with the Sentencing Act principles. This was important in this case because  the defendant argued any costs incurred for remediation works  should be deducted from the amount of the fine that the Court would otherwise impose.

The Court concluded that the remedial work it was to order would not overcome the environmental damage caused.  Rather its impact would be to reduce the potential impact in the future of the Rock Spill. 

Setting The Fines

The Court accepted the agreement of the parties that a fine was the appropriate course of action to take in sentencing. The Court then considered the various matters set out in the Machinery Movers case and the Sentencing Act including:

  • Nature of the environment affected (in this case  the Rock Spill).
  • Extent of the damage inflicted (again the Rock Spill was the worst affected).
  • The deliberateness of the offending. (A distinction between the company and its contractor was drawn. The former knew there was no approval for the works. The latter ought to have known or found out but clearly did not know from first hand knowledge. However, in the scheme of things the deliberateness of offending was the highest end of the scale particularly for the company.)
  • The attitude of the defendants. (Again a distinction between the two defendants was made. Mr Neal was helpful with investigations and showed genuine remorse for his actions. The Court did not form the same view about HEWL however held that this issue was a minor aggravating factor linked closely to the issue of deliberateness.)

The Court then weighed up these factors and formed a view as to the starting point (ie a base level of fine) for each of the charges it was considering. At the lower end of the scale for some of the soil disturbance matters the starting point was $5,000. This rose to $70,000 for the Rock Spill. The abatement notice offences sat somewhere in the middle at $30,000.

After reflecting on the legal and other costs being sought by the Regional Council the Court went on to consider the matters in totality. In total the fines and costs the Court had reflected on would amount to some $220,000 ($48,800 in costs and some $100,000 in remedial costs). The project value was in the order of $15 million. Therefore the total financial penalty would be in the region of 2.5% of the cost of the project. The Court did not consider that this percentage was out of keeping with the type of offences that had occurred. In fact the Court said something in the region of $500,000 would be more in keeping.

The Court then went on to apportion the penalty to the two defendants and concluded that the maximum that Mr Neal ought to pay, taking into account all the factors including his ability to pay, was $30,000. The total penalty against HEWL was in the order of $130,000 plus remediation costs which were at the estimated to be around $100,000. 

Of note is that the remediation costs could in fact be substantially higher but the Court concluded that even if they were as high as $300,000 this would not affect the outcome on fine and costs.

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