Five companies sentenced over Whakaari/White Island eruption
In our Summer 2024 edition published in early February, we wrote on the Whakaari/ White Island prosecutions brought by WorkSafe; in this Winter issue we report on the court’s late February sentencing.
Almost five years after the Whakaari/ White Island eruption that left 22 people dead and 25 others severely injured, the District Court delivered its sentence for safety failings under the Health and Safety at Work Act 2015.1
Five companies were collectively fined $2 million for failing to assess and mitigate risk, and three of the five have been ordered to pay a collective total of $10.21 million in reparations to victims and their families. GNS Science was also fined $54,000 for failing to adequately communicate risk to contractors.2
Whakaari Management Limited (WML), one of the five companies sentenced and responsible for managing access to the land, was held liable for a significant portion of the penalties. WML has claimed it is unable to pay the penalties as it has no assets or bank account, even though evidence at trial indicated WML received about $1 million annually from island tours. The judge acknowledged he cannot make orders against WML’s shareholders, but appealed to their ‘inescapable’ moral duty to advance the necessary funds – even if this means reaching into their own pockets.
These penalties are a strong reminder for businesses to take seriously their health and safety obligations or risk hefty penalties.
Navigating financial distress
What should you do if your business is in rough financial waters? If you feel financial strain creeping into your business, it is important to take action early to address the situation rather than hoping it improves on its own. Below we suggest some options to help you navigate financial distress.
- Engage with lenders: Communicate transparently with your lenders early on. This will maximise available options and strengthen your relationship. Most lenders are willing to agree to an approach where borrowers are transparent and can demonstrate a plan
- Reach out to suppliers and customers: Have open conversations, where appropriate. Clarity around payment timeframes, late payment fees and other expectations will provide certainty for all parties involved
- Review business contracts: Understand the terms of your business contracts, what obligations are owed and the implications if you default
- Keep directors’ duties in mind: Ensure you are complying with your director duties, including avoiding trading recklessly or incurring obligations the company is not able to perform. You can be found personally liable if you breach your director duties. Maybe you have to make the difficult decision of winding up your business to avoid breaching your duties, and
- Seek professional advice: Speak to your accountant or financial advisor to assess the financial position and solvency of your business. We can also advise on your options at any stage.
Commerce Commission win over Viagogo
In a recent judgment, the High Court provided useful guidance on misleading and deceptive conduct, and unfair contract terms under the Fair Trading Act 1986 (FTA). The decision followed a six-year legal battle between Viagogo and the Commerce Commission.3
The Commission commenced proceedings against Viagogo in 2018 after receiving thousands of complaints by consumers who had purchased event tickets from Viagogo, only to be refused entry at the events because their tickets were not authentic.
The High Court found that Viagogo had misled consumers in breach of the FTA by:
- Failing to adequately disclose its status as a resale platform
- Guaranteeing customers’ tickets to events, when in practice it often refunded invalid tickets after a customer had already missed the event
- Creating a false sense of urgency for prospective purchasers seeking tickets
- Disclosing additional ticket fees at a late stage of the purchase process, and
- Stating it was an official or authorised source of tickets when it was not.
A clause in Viagogo’s terms and conditions requiring customer disputes to be resolved in Switzerland was also found to be unfair and unenforceable.
Viagogo was ordered to correct the misleading information on its website and update its terms and conditions.
This judgment emphasises the importance of using honest and fair trading practices, and ensuring your terms and conditions comply with the FTA.
Viagogo has appealed the judgment.
CCCFA update
The government recently announced changes to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) as part of a larger, two-phase financial reforms package to address concerns about the accessibility of credit and burdensome obligations on lenders.
Phase 1: Already underway, this phase includes the removal of overly prescriptive requirements around loan affordability assessments, and exemptions for local authorities and providers of non-financial goods and services (such as certain car dealers).
Phase 2: As this phase is rolled out, it is expected the CCCFA will be updated to further streamline the lending process and continue to support more accessible lending practices.
The Ministry of Business, Innovation and Employment will publicly consult on revisions to the Responsible Lending Code and possible amendments to the CCCFA as they become available.
1WorkSafe New Zealand v Whakaari Management Limited, White Island Tours Limited, Volcanic Air Safaris Limited, Aerius Limited, Kahu (NZ) Limited [2024] NZDC 4119.
2WorkSafe New Zealand v Institution of Geological Nuclear Sciences Limited [2024] NZDC 4149.
3Commerce Commission v Viagogo AG [2024] NZHC 713.