Anna Elizabeth Osborne and Sonya Lynne Rockhouse v Worksafe New Zealand

This Supreme Court case is about a simple but important rule. A public prosecution cannot lawfully be dropped on condition that money is paid.

The case came out of the Pike River disaster, but the principle is wider than mining and wider than one statute. If a regulator is prosecuting a business owner, director or officer, money for victims cannot be used as the trade-off for ending the case.

The Court allowed the appeal and declared that WorkSafe’s decision to offer no evidence against Peter Whittall was unlawful.

The background was the Pike River mine explosions on 19 November 2010. Twenty-nine men died and two others were injured. WorkSafe investigated possible breaches of the Health and Safety in Employment Act 1992, while police investigated possible criminal offending under the Crimes Act.

Twelve health and safety charges were laid against Peter Whittall, who was a director and chief executive officer of Pike River Coal. The charges included allegations that, as a director and officer, he had participated in or acquiesced in the company’s safety failures. He also faced charges in his own capacity as an employee.

Pike River Coal was separately charged and later convicted. On 5 July 2013 the District Court fined the company and ordered $3.41 million in reparations for the survivors and the families of the 29 men who died. But the company was already in receivership, so payment was uncertain.

Mr Whittall pleaded not guilty and trial preparation continued. The Supreme Court noted that preparation included substantial disclosure and expert evidence. In July 2013 police announced they would not bring Crimes Act charges.

After that, discussions took place about resolving the WorkSafe prosecution. WorkSafe had initially explored a pleaded outcome. The proposal that mattered in the appeal was different. It was that $3.41 million would be paid into court for the families and survivors, but only if WorkSafe did not proceed with the charges against Mr Whittall.

WorkSafe later decided to offer no evidence on all charges. The charges were dismissed in December 2013, and the money was paid out in satisfaction of the earlier reparation order against Pike River Coal.

Two family members, Anna Osborne and Sonya Rockhouse, challenged WorkSafe’s decision by judicial review. They said the prosecution had effectively been traded away for money. They lost in the High Court and Court of Appeal, but succeeded in the Supreme Court.

The key issue was not whether compensation for victims is desirable. The Court accepted the importance of reparation and victim support. The real question was whether WorkSafe had acted on an unlawful arrangement that the prosecution would not be maintained on condition that money was paid.

That basic principle was not disputed. WorkSafe accepted that an agreement not to prosecute in return for payment would be contrary to public policy and inconsistent with the Solicitor-General’s Prosecution Guidelines. The fight was about characterisation.

WorkSafe argued there was no unlawful bargain. It said the payment proposal was voluntary and was only one factor in its public interest assessment about whether to continue the prosecution. The lower courts accepted that view.

The Supreme Court had to decide whether, looking at the whole course of dealings, the arrangement was in substance an agreement to stop the prosecution in exchange for payment. The Court also considered the prosecution framework under the Health and Safety in Employment Act and the role of the Solicitor-General’s Prosecution Guidelines.

The Court was not deciding whether every payment connected with a prosecution is unlawful. It was deciding whether this particular arrangement crossed the line because the payment and the withdrawal of charges were tied together.

The Supreme Court allowed the appeal and made a declaration that WorkSafe’s decision to offer no evidence in the prosecution of Mr Whittall was unlawful.

The Court stated the governing rule at the start of the judgment: it is contrary to the public interest and unlawful for an arrangement to be made that a prosecution will not be brought or maintained on the condition that a sum of money is paid.

The Court focused on substance over form. It said bargains of this kind are not always set out neatly in a single written agreement, so the court must infer what happened from the whole circumstances. Here, the payment of $3.41 million was understood throughout to be conditional on WorkSafe offering no evidence.

The Court rejected the idea that the arrangement could be saved by calling the payment voluntary. It also rejected the idea that the arrangement was acceptable because the final decision-maker was an independent public servant acting without bad faith. Independence and good faith did not answer the public interest problem created by making prosecution a matter of private bargain.

The Court also disagreed with the Court of Appeal’s reliance on the fact that WorkSafe’s counsel did not have authority to settle the final outcome. The Supreme Court said the decision-maker who did have authority acted on the basis of the negotiations undertaken on WorkSafe’s behalf.

Another important point was that WorkSafe had other reasons of its own for wanting to resolve the charges without trial. The judgment refers to matters WorkSafe had considered, including cost, complexity, witness availability, competing expert evidence, the doubtful prospect of substantial fines, and the existence of the Royal Commission report. Those factors did not change the effect of the arrangement that was actually reached.

The Court did not need to decide whether WorkSafe’s decision would otherwise have been lawful on ordinary judicial review grounds. The unlawful conditional payment arrangement was enough to decide the case.

Most businesses will never face a case on this scale. But the operating lesson is very practical. After a serious incident, there is often pressure to do several things at once: support affected people, deal with insurers, manage the regulator, protect directors and keep the business functioning. This case says those streams cannot be collapsed into one deal.

If your business wants to fund counselling, make compensation payments, help families, apologise, or provide practical support, those steps may still be important. What this case forbids is making that support conditional on the regulator dropping charges.

The same caution applies where directors or officers face personal allegations. A director cannot buy certainty by arranging for money to be paid only if the prosecution ends. The Court was clear that public responsibility for alleged offending must be dealt with through lawful public processes, not private compromise.

Insurance does not change the rule. In this case, the source of the proposed payment was director insurance. The Court still treated the arrangement as unlawful because of the condition attached to the payment.

The judgment also shows how much documents matter. Courts may later reconstruct the arrangement from letters, emails, memoranda and the way the proposal was presented internally. If the substance is payment in exchange for withdrawal, the arrangement is exposed.

For SMEs, the practical message is to separate remediation from prosecution strategy. You can support people affected by an incident. You cannot make that support the bargaining chip for ending a public case.

The judgment is a reminder that risk often sits in the wording and structure of negotiations. The Court did not just look at the final outcome. It looked at how the proposal was framed and understood throughout.

For businesses and advisers, the danger signs are practical and familiar. They usually appear in correspondence, draft terms, internal memoranda and verbal instructions that later get recorded.

If a serious workplace incident happens, your first decisions can shape both the human response and the legal risk. This case supports a careful, documented process. The aim is not to avoid helping people. It is to make sure help is not turned into an unlawful exchange for prosecutorial leniency.

Use a structured response plan. Keep legal, insurance and operational teams aligned, but make sure everyone understands that compensation and prosecution outcomes are not bargaining chips.

The Supreme Court heard the appeal on 5 October 2017 and delivered judgment on 23 November 2017. The appeal was allowed, and the Court declared that WorkSafe’s decision to offer no evidence in the prosecution of Peter Whittall was unlawful.

The case concerned prosecutions under the former Health and Safety in Employment Act 1992. That Act has since been replaced by the Health and Safety at Work Act 2015. Even so, the public-law principle confirmed by the Supreme Court remains important for modern regulatory prosecutions.