A ground-breaking “proceeds of crime” hearing is scheduled for the High Court this year and seeks $11m from a business owner for health and safety breaches. The basis of the case — the claim from police that the money was unlawfully earned profit because of health and safety non-compliance before
Inside the $11m claim by police that health and safety breaches allow profits to be seized as ‘proceeds of crime’
Salters Cartage managing director Ron Salter talks in 2015 about the incident that involved the death of contractor Jamey Lee Bowring, 24, at his business in South Auckland.
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How it began
The health and safety failings were exposed in a 2015 incident that took the life of Jamey Lee Bowring, 24.
On September 15 that year Bowring was at Salters Cartage Limited’s yard in Wiri working on a 96,000 litre silo. His job that day was to do welding on a metal catwalk adjacent to the silo, which was called Tank 20.
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The tank was labelled as containing only diesel, which is a substance classified as being of “low hazard”.
However, the label didn’t actually reflect what was in the tank. Along with diesel, the 2500-3000 litres of fuel inside also contained petrol, kerosene and oil. Where diesel has a relatively high ignition point, the compound of fuels inside Tank 20 had a much lower “flash point” of 17.5C.
The heat from the welding torch is believed to have ignited the fumes inside. It led to an enormous explosion with windows hundreds of metres away shattering from the concussive force. It also lifted the lid of the silo off the tower, depositing debris across properties around the neighbourhood.
Bowring’s body was also thrown by the explosion, landing in a nearby car yard.
Falling foul of the law
The tank on which Bowring was working should have been labelled to show what was inside, according to the Hazardous Substances (Identification) Regulations 2001. It should also have shown the contents posed a “high hazard”.
The tank should also have had a “stationary container system test certificate” of which Salter had been notified in 2011 and 2015. No certificate was obtained — and it could not have been because the tank did not comply with legal requirements for venting, anchorage and earth connections. At the time of the fatal incident, none of the tanks at Salters Cartage had certificates.
The company also didn’t have “location test certificates’' at other places on its Wiri site where hazardous substances were held. That included — at various times in 2015 — storing 4725kg of LPG, 241,000 litres of petrol and 92,000 litres of jet fuel.
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When WorkSafe investigated, the issues that emerged led to a “prohibition notice” banning the company from using its recycled oil plant from September 16, 2015, to March 15, 2016. Despite that, WorkSafe alleged Salters Cartage Ltd operated the plant from February 4 to March 4, 2016. Inspections identified “potential ignition sources” in at-risk areas.
The 2017 conviction
WorkSafe laid charges against Ron Salter and against Salters Cartage Ltd under the health and safety legislation and laws governing the handling of hazardous substances. In total there were six criminal charges laid.
In 2017, Salter and the company pleaded guilty to the charges with an agreed “summary of facts” — the prosecutor’s statement of what it alleged took place to which Salter had agreed.
The company and Salter were ordered to pay reparation of $128,000 which included an emotional harm payment to Bowring’s family of $110,000. There were also fines divided into offending carried out before the explosion ($202,500) and offending afterwards ($56,250).
Salter was also sentenced to home detention of 4½ months for offending before the explosion and a fine of $25,000 for post-explosion offending.
In sentencing, the judge hearing the case said: “It is hard to imagine a more flagrant breach of prohibition notice than has occurred in this case.”
That it happened “in the context of a fatal accident … lifts the assessment of culpability”, said the judge. “It is indeed a case of high culpability.”
How did that turn into a “proceeds of crime” claim?
In 2019, it emerged police had been investigating Salters Cartage Limited and intended restraining property owned on the basis it was the “proceeds of crime”.
Police claimed that Ron and Natalie Salter and their company had “unlawfully benefited” from “significant criminal activity”.
The term “significant criminal activity” is a trigger in the Criminal Proceeds (Recovery) Act 2009. That’s the formal name for the “proceeds of crime” law. The trigger is activated when criminal offending involves a sentence with a maximum term of five years or involving $30,000 or more.
The law allowed police to go to court and argue that “significant criminal activity” had occurred and to ask the court to issue “restraining orders” to keep on hold assets it considered were the product of that behaviour.
Those restraining orders affect four properties — the site in Wiri from where the business operates, the Salters’ family home, their Waiheke holiday home and a property rented to their daughter and son-in-law, who both work for the company.
The restraining orders mean that the properties can’t be sold and also compel the Salters to maintain the value of each.
Police say it has calculated the “value of the unlawful benefit” at $10,927,883.
Is this what the “proceeds of crime” law was for?
When Parliament debated the proceeds of crime law, the talk was all about gang members and not about the sort of business owners who might be seen as role models for hard-working New Zealanders.
It was passed in 2009 with speeches about gangs and organised crime. It allowed the Crown to place the onus on asset-holders to prove they had bought or obtained those things in a lawful way.
Simon Bridges, who had just entered Parliament as a National MP from a job as Crown prosecutor, said the law would cut through the techniques insulating wealth and offending that were “so often the case in gang-related activity”.
Clayton Cosgrove, for Labour from the Opposition benches, also offered support for a law that “strikes at the heart of organised criminal activity”.
“We should follow the money and the assets when we really want to hurt, harass, and deal with the activities of gangs and organised criminals,” he said.
National’s Amy Adams — later Minister of Justice — spoke of existing laws meaning “we are not able to get right to the heart of the gang empire, which is, as has already been said, in gang members’ pockets”.
She said: “It sends a message that this Parliament … will not tolerate gangs, criminal organisations, organised crime, or anyone else who seeks to make money from breaking the law.”
As the case has entered the courts, it has been described by judges as a “novel” application of the law.
In the High Court, Justice Matthew Palmer illustrated how unusual it was by saying the proceeds of crime regime had not previously been applied to an “ordinary commercial business” that had breached hazardous substances or health and safety offences.
At the Court of Appeal, it was again noted that it was unusual but that the definition of “significant criminal activity” and of “tainted property” could be argued as providing grounds for seizing and taking assets. Those were, said the appeal judges, “questions to be resolved”.
What happens if police don’t make a case?
The action by police to place restraining orders on $11m in assets doesn’t come without risk for police — or for taxpayers.
That was a successful argument made at the High Court by the Salters’ lawyer, Ron Mansfield, KC. He said there should be some form of balance to the police case and it should come in the form of an order that police would be liable for damages or losses should its case be unsuccessful.
The High Court found there was “public interest ensuring the proceeds of crime regime operates effectively” but that there was also public interest “in protecting those subject to the regime from potential injustice”.
The Salters had made a number of claims about the impact of a restraining order yet the one that gained traction in the High Court was the potential “negative effect” on the ability of Salters Cartage Ltd to “undertake significant borrowing for the purposes of investment”.
It was also likely, the High Court found, that the restraining orders would impact on the Salters’ ability to get the best price possible should they sell the business, as they had said they were considering.
It was the latter reason that found strong support with the Court of Appeal — “that some discount on a sale price for the business is a likely result of the commercial perception of the restraining orders complicating a sales transaction”.
Police argued that an undertaking would create a “chilling effect” as to taking similar cases but didn’t put up evidence to support the claim. Instead, Salters’ lawyers pointed to police claims over the strength of its case and asked: How could there be a “chilling effect” when police was so confident it would win?
Is the case a strong one?
The passage of the case through the courts has heard contrary arguments as to whether the case is strong.
Police say “yes” and the Salters say “no” and the positions of either side largely reflect the view they have taken of the proceeds of crime legislation.
The Court of Appeal judges went further than previous hearings in weighing up the relative strengths of either argument.
In the police’s favour was that “most of the underlying criminal activity in respect of which the restraining orders were sought was the subject of guilty pleas”.
That means, said the court, “the first hurdle has been cleared”. Police needed to vault two other hurdles, it said.
First, they needed to show that “on the balance of probabilities” that the Salters had - over the time of the offending - “unlawfully benefited from significant criminal activity”.
And second, “on the balance of probabilities”, that the assets targeted by police came from “significant criminal activity”.
While the Court of Appeal agreed it was “significant that some of the underlying criminal activity has been established”, it would not go further because there were “live issues about the application of the (proceeds of crime) Act to the circumstances of this case”.
What happens next and why does it matter?
The next big step in the case is a seven-week hearing at the High Court in October.
The police argument is that there are other areas of “serious criminal offending” to which the law should extend.
The Salters — through their lawyers — have argued that this is “overreach” and that it places businesses across New Zealand at risk.
They described as “insulting” what they see as a police attempt to line up the health and safety offending “in the same way a drug dealer profits from drug dealing”. The law, they say, was intended to stop criminal organisations from profiting from crime.
To the contrary, they argue their business was “a lawful business that made mistakes, accepted them, and was punished accordingly”.
“It is not a criminal enterprise seeking to profit from crime. This distinction should be obvious.”
They argue that it was “an unfortunate reality of commercial life that businesses sometimes commit regulatory offences”.
Many offences that would meet the definition police had applied were “strict liability offences”, meaning that it didn’t matter whether business owners were aware of the offending or not.
Those included offences under health and safety legislation but also the Resource Management Act, Fair Trading Act, Land Transport Act, Customs and Excise Act, Tax Administration Act and Financial Markets Conduct Act, among others.
It has said: “There are many businesses that could be the next [Salters Cartage Limited].”
David Fisher is based in Northland and has worked as a journalist for more than 30 years, winning multiple journalism awards including being twice named Reporter of the Year and being selected as one of a small number of Wolfson Press Fellows to Wolfson College, Cambridge. He joined the Herald in 2004.
