A quarrel on costs

This is the second of a two-part discussion of the health and safety case, WorkSafe New Zealand v Mount Somers Sand Ltd [2021] NZDC 16270. Part one can be found here.

Defending proceedings brought by a regulatory body is expensive. The decision of WorkSafe New Zealand v Mount Somers Sand Ltd [2021] NZDC 16270 is significant as it demonstrates a willingness from the courts to award costs against regulators like WorkSafe for initiating and continuing a baseless case.

WorkSafe investigation and charge

WorkSafe made a brief and unannounced visit to Mount Somers Sand Limited (MSSL), a small quarrying operator, and recommended it obtain advice from an external expert about the risks from the steep slope it was working on – the concern was that falling sand would engulf the excavator.

MSSL engaged a technical expert to produce this report, but it was not completed before a second WorkSafe visit the following year. MSSL’s external expert informed WorkSafe that further investigations were required for him to say whether MSSL’s work methods were safe or not, but WorkSafe decided to charge MSSL – presumably on its own view of the risk.

MSSL’s expert eventually undertook further investigations and produced a report that concluded MSSL workers were not exposed to the level of risk claimed by WorkSafe. MSSL invited WorkSafe to withdraw the charge on the basis it would not pursue costs. Although WorkSafe accepted the evidence contained in the report, it pushed on and the matter proceeded to trial.

Findings as to costs

Under the Costs in Criminal Cases Act 1967, a court may order the other party to contribute costs considered just and reasonable. Normally, even where a prosecution is not successful, these costs are minimal.

In assessing whether costs should be awarded here, Judge Maze focused on WorkSafe’s knowledge of the case’s clear evidential deficiencies. The Solicitor General’s prosecution guidelines set out a minimum evidential threshold. WorkSafe should have known that the test would not be met after it accepted the expert report obtained by MSSL.  

WorkSafe’s rejection of MSSL’s proposal to withdraw the charge was, in the words of the Judge, “unfortunate and negligent”.

The question then became a matter of quantum. Although regulations fix maximum costs, the Court may exceed these on the basis of special difficulty, the case’s importance, or its complexity. Bad faith or negligence on the part of the prosecution can amount to special difficulty.  An absence of good faith can also be special difficulty:

 “If WorkSafe didn’t initially know it could meet the evidential threshold required by the Solicitor General’s guidelines, it must have known after digesting the expert’s report. Continuing in those circumstances demonstrates a lack of good faith and a high degree of carelessness.”

Accordingly, WorkSafe were ordered to contribute some of the fees incurred by MSSL before it received its report, and all of its fees after it received the report. The total was $158,000.

Key takeaways

This decision serves as an important reminder that regulators must be careful in collecting, assessing, and reviewing evidence in order to lay and continue legal proceedings.

It will also be of interest to insurers, whose statutory liability policies mean they will often meet the bulk of costs associated with defending legal proceedings. WorkSafe v Mount Somers Sand Ltd shows that the costs associated with pursing a costs application may well be worth it where there are questions about the decision-making in a prosecution.

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