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Pike River Compensation must be paid

Written By: - Date published: 12:36 pm, July 7th, 2013 - 32 comments
Categories: disaster, Mining, uncategorized, workers' rights - Tags: , ,

pike river families

So Pike River has been punished for the deaths of 29 workers.  Judge Jane Farish has fined the company $760,000 and ordered it to pay $110,000 compensation for each worker that died and for the two survivors.

Judge Farish found the company had a high level of culpability for its methane management and ventilation management and said that there were significant deficiencies in the company’s ventilation management plan.  She is quoted as saying “[t]here were many indicators that the mine was in a potential explosive position but the warning signs were not noted or heeded.”

She also remarked on the obvious despair felt by the families and described the hearing where they spoke of their loss as very tough,  “[t]he victim impact statements were harrowing. They all feel deep sorrow.”

She previously said that it was morally unjust the way that Pike River Coal Ltd had been able to fold soon after the disaster and thereby avoid paying further money to the families.

The SST this morning contrasted Pike River with that of the Upper Big Branch Mine in West Virginia, where a compensation package of $46.5m was paid after an explosion that also claimed the lives of 29 men.

That sum was part of a US$209.3m package that mine owners agreed to pay to end a criminal investigation and civil proceedings. Mine manager Gary May was also jailed for 21 months after pleading guilty to conspiracy to impede America’s Mine Safety and Health Administration’s enforcement efforts at the mine.

Like Pike River, the Upper Big Branch mine was blighted with health and safety failings and poor ventilation; the latter which contributed to the subsequent deadly methane explosions.

The chances of the Pike River families being paid out do not appear to be good.  The Company has said that it only has $500,000 in cash which is available for secured creditors and $156,000 in insurance monies left to meet liabilities.

The shareholder, New Zealand Oil and Gas appears to be reluctant to contribute any further funds.  It has noted that it provided Pike River with $25m to keep keep it afloat immediately after the tragedy and put insurance proceeds to the contractors of Pike River to partially compensate for money owed to them and made a contribution to the victims’ family trust.  But its “largesse” appears to be running out.

NZOG chief executive Andrew Knight has told the SST “[w]e quite clearly don’t have a legal responsibility … we quite clearly were not in control. And there is evidence to that effect. I have my own shareholders to manage. And my shareholders are saying, ‘Well you’ve already spent $25m – you need to learn where to stop.”

I suspect that the legal advisers for the families will be having a good look at a possible claim against the directors of Pike River.  Under section 135 of the Companies Act 1993 a director must not “allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors”.  With the benefit of hindsight the way the mine was run clearly created a substantial risk of serious loss to all involved in the mine.  There is some wriggle room in what meaning ought to be given to “creditors” and if this includes the workers but this may be able to sustain a claim.

Judge Farish may have been hinting at this when she noted that the Directors had significant insurance and criticised them for not volunteering funds.  One of the directors, Stuart Nattrass, has been quoted as saying that he is thinking of making a contribution.

One thing is clear.  The Pike River families deserve every cent of compensation that has been ordered.  For NZOG and others to use legal niceties to avoid paying compensation would be totally unjust.

32 comments on “Pike River Compensation must be paid”

  1. Dv 1

    Why cant the shareholders be levied.

    The number of shares on issue are 405,513,900

    A levy of 1 cent per share would raise about $4mill
    5 cents would raise about $20m
    10 cent would raise $40m

    How about it shareholders

    • Lanthanide 1.1

      Sounds like a pretty fair way to do it, really. Probably 2c would be a good amount.

      Although as there’s probably no actual mechanism for this to happen, the costs involved could eat up quite a bit of the money gained back.

    • Tim 1.2

      ….and failing all that – what about the “We will do whatever it takes” assurance (pardon me for the lack of reference – in advance).
      The ‘risk society’ (led by agencies of State), prevented those amongst the ‘coalition of the willing’ (fellow miners, family members, any and all on standby at the time) from initiating recovery at a time that was the most appropriate moment.
      If ONLY because they did that, they are at least, morally accountable.
      … it’s all a bit like: NO – you can’t attempt to rescue your kith and kin, because you might hurt yourselves. You might even die in the process – AND WE KNOW BEST!
      Turns out – they didn’t (know best)

      • Tim 1.2.1

        To be clear:
        “If ONLY because they did that, they are at least, morally accountable”

        By they – I mean those agencies of State.
        Gary Knowles – bless his heart, out of his depth, and trying to do his best – did what he thought best (maybe).
        Probably though – he should have deferred to those who were actually familiar with the conditions, rather than listening to those more concerned with ‘risk management’

      • David H 1.2.2

        “We will do whatever it takes”

        More John Key Bullshit. It just means he will sit there and cover his ears, and shout naya naya naya, cant hear you.
        Or he’s already forgotten what he was going to do.

    • Tamati 1.3

      Why should the shareholders be held liable?

      They didn’t make the decisions on how company was run. The responsibility should lie with the directors personally.

      Does anyone know if they are going to be sued by the receivers under s135 ?

      • Dv 1.3.1

        Tamiti the directors should be have some responsiblilty.

        Legally you are probably right about the shareholders, BUT there is a moral responsibility and a duty of care by NZer for the victims

  2. RedBaronCV 2

    It’s over to the NZOG shareholders – passing a motion at the AGM I suspect. Anybody with a conflict of interest can’t vote which should leave some big share blocks out of the action.
    And I know a long term shareholder who is investigating this right now. May require pressure on significant shareholders ACC was one at the end of 2012. You’d think ACC would have a real vested stake in good work practices to save payouts from the fund. Be interesting to see if they factor that sort of risk into their sharebuying practices.

    And to the directors – unethical business practices tend to create these sorts of losses , think exxon valdez, union Bhopal, Nike

  3. RedBaronCV 3

    Of course NZOG can afford it. I don’t believe the director saying there won’t be a payout has confirmed that stance with shareholders and I believe that NZOG has about 0.50 cents per share held in actual cash plus $20m profit per annum. Also a diverse share registry.

  4. Lefty 4

    Limited liability for companies was a good idea at the beginning of the industrial revolution when it was necessary to kick start capitalism and the process of accumulation that built modern society.

    We now need to move beyond capitalism and concentrate on redistribution and sustainability rather than accumulation.

    Many of the laws that were once appropriate now simply operate to enable kleptomania and the abuse of power by businesses that have grown far to powerful.

    Ditching limited liability would be a good start to reforming commercial structures and laws that favour the already too powerful and prop up an arrogant elite who have nothing but contempt for the people who make them rich.

    • Tamati 4.1

      So you would be happy paying up out of your own pocket if a company your Kiwisaver invested went bankrupt?

      Limited liabillity is a pretty fundamental concept, removing would harm small start up companies not large corporations. People do business with limited liabillity corporations at their own risk.

      What we need is greater liabillity for directors (including corporate manslaughter) and higher labour standards in mining.

      • Lefty 4.1.1

        I am not happy that I have to make savings through Kiwisaver that may be used for immoral purposes.

        Pension funds cause a great deal of damage to both our local and the international economies as they are in a never ending quest for better returns at any price.

        I would far sooner the same amount of money was taken from me in tax and used to build a fair and sustainable economy that was able to provide an adequate pension for me when I retire.

        Making money out of other peoples efforts is never right, but at least removing limited liability would stop the ‘great entrepreneur and risk taker’ bullshit we have to put up with from both corportate crooks and dodgy small businesspeople.

      • Draco T Bastard 4.1.2

        removing would harm small start up companies not large corporations.

        I doubt it. If a small start up fucks up they go out of business and declare bankruptcy. If a large corporation fucks up they get protected by the law and don’t have to pay out the full damages that they caused and they keep going causing similar damages because of that protection. This latter is a massive injustice that needs to be corrected. Removal of limited liability would seem to be the way to achieve it.

        • Tamati 4.1.2.1

          Bankruptcy is essentially limiting liabillity.

          • Draco T Bastard 4.1.2.1.1

            Yes I realise that but large corporations generally don’t go bankrupt. In other words, bankruptcy acts as a reasonable limited liability for small firms without the protection offered to large corporations that don’t need it that limited liability involves.

            • Tamati 4.1.2.1.1.1

              By definition companies can’t go bankrupt, they often go into receivership and sometimes then into liquidation.

              Bankruptcy is a tough process, would be pretty unfair to make every person who started a cafe which didn’t work out sell their house and car!

              • KJT

                Usually what happens to any small business start up if it fails.

                Losing your house is what normally happens, as a mortgage is the only source of reasonably priced businesses finance in NZ.

                Unless the owner is already a millionaire, in which case they will have their wealth well hidden in trusts and offshore.

      • KJT 4.1.3

        Removing limited liability would not make any difference at all to small start ups.

        If you had ever, actually, started a small business yourself you would know that suppliers and banks require a small business startup to give personal guarantees, i.e. waive limited liability, before you can get supplies and or loan finance.

        It may in fact make starting a business easier as you could then compete on more equal terms with the big outfits, that can, and do, limit liability.

        AND. The small business may, ACTUALLY, get paid, when the big one they are subbing to, decides to go belly up to avoid taxes and contractors accounts, while the owner shareholders decamp with millions, leaving the small business owners, suppliers and employees holding the baby.

        AND, Why the hell, should shareholders, who expect to benefit from the lax safety standards and stealing from employees that goes on, be exempt from responsibility. They should pick better directors and hold their feet to the fire.
        The owner manager of a small to medium business is not exempt.

        Limited liability in effect works only to allow those owning and in charge of large corporations to avoid any responsibility. The responsibility they claim they take on, to justify their ridiculous pay rates and profit.

        If they were not able to limit liability, imagine the effectiveness of the push, from shareholders, to get competent and knowledgeable directors and managers, who do more than paper their arses with safety policies which are more honoured in the breach, instead of the present self perpetuating old boys club.

  5. RedLogix 5

    I was talking with an electrical engineer from the Australian coal industry last week. One of the first things he brought up was how incomprehensible the whole Pike River disaster was to him and his colleagues.

    We’ve had a Royal Commission that has established beyond all shadow of a doubt, and stated in the strongest possible terms that this mine was run in the most grossly negligent manner possible. I took the time to read the whole of the Commission’s report. Virtually every paragraph was another eye watering, head shaking revelation of folly.

    What is seems utterly missing here is any real accountability. A monetary penalty/compensation is surely only the entry point. If our H&S regime is to mean anything at all, then the key management and directors must all serve long prison terms. Their failure was feckless and complete; if this fiasco does not attract a substantial, meaningful and maximum penalty for the guilty … then nothing will.

    • mickysavage 5.1

      I agree RL.

      Pike River, Whittall and VLI Drilling Pty Limited were charged with offences under the Health and Safety in Employment Act. The directors were not.

      I must admit struggling with the decision because under section 56 of HSEA if a company fails to comply with a provision of this Act its directors who “authorised, assented to, acquiesced in, or participated in, the failure” is also guilty.

      Unfortunately the limitation period on prosecuting the directors ended some time ago …

      But yep we need a charge of corporate manslaughter on the books.

    • UglyTruth 5.2

      Accountability lies to some degree with those who enabled the company to operate with limited liability. The actual liability for the deaths doesn’t just disappear.

      • Tamati 5.2.1

        Limited liability has been with us a while. Blame some 19th Century English judges.

        • UglyTruth 5.2.1.1

          Scapegoating. Try again.

        • Populuxe1 5.2.1.2

          By the 15th century, English law had awarded limited liability to monastic communities and trade guilds with commonly held property. In the 17th century, joint stock charters were awarded by the crown to monopolies such as the East India Company. The world’s first modern limited liability law was enacted by the state of New York in 1811. In England it became more straightforward to incorporate a joint stock company following the Joint Stock Companies Act 1844, although investors in such companies carried unlimited liability until the Limited Liability Act 1855.

    • Draco T Bastard 5.3

      What you’ll find is that National and Labour are tough on crime – as long as the criminals aren’t business people.

      • KJT 5.3.1

        Yep. The party of individual responsibility have never taken individual responsibility, for anything!

        Watch them scapegoating like mad now, after they put the pressure on Christchurch city council to rush through the consenting processes, without spending the money on giving them the resources to do so, they pretend it was all the councils fault that it has been too rushed.

    • bad12 5.4

      Obviously without evidence the Pike River Royal Commission could not address ‘deliberation’ in it’s inquiry into the cause of the 1st explosion at the Pike river mine,

      There are 2 strands to ‘deliberation’, one being the compromised state of the ventilation system from the time of the shafts collapse and the building of a ‘dog-leg’ into the system, included in this is the number of times Miners were left to work underground whilst Methane levels were within the levels required in the mine’s atmosphere where an explosion could have occurred at any time,

      The 2nd strand of ‘deliberation’, much more sinister in nature is based upon the evidence of the ‘Mine Manager’ on the day of the 1st explosion and the South African electrician sent into the mine after that 1st explosion,

      The Mine Manager in evidence to the Royal Commission said that He, from the office car-park, smelt on that day after having already sent the South African electrician up to the mine to investigate, a strong smell of burnt diesel,

      The South African electrician, a man with 27 years experience in South African mining, stated in His evidence to the royal Commission that He smelt, in the mine, a strong smell of burnt diesel and went on to say that this smell was the same smell He had experienced in South African mines after the use of AMFRO explosives,

      As far as i have been able to ascertain, Methane when combusted is odorless and the evidence of ‘a heavy smell of burnt diesel’ given to the Royal Commission leaves me with the sneaking suspicion that the 1st Pike River Mine was not one of Methane gas at all…

  6. vto 6

    Bill Birch, who I understand introduced the self-regulatory healt & safety regime for mining, is similarly culpable for negligently putting in place a system with findamental and fatal flaws.

    If Bill Birch’s system had not been put in place it is likely that an independent system would have picked up the problems that Pike River willfully turned a blind eye to.

    This entire episode is one of the ugliest in New Zealand’s history imo. And it should be hammering another nail into the neolib philosophy and approach to things, in people’s minds. It has involved;

    1. failure of deregulation.
    2. failure of self-regulation.
    3. failure of accountability.
    4. failure of “greed is good”.
    5. failure of individualism and each acting in their own interest equating to the wider longer common good.
    6. failure of incentives (in fact incentives made it worse).
    7. failure of limited liability (well, it has succeeded from the directors and shareholders perspective, but not from society’s perspective).

    Failures which killed 29 men dead.

  7. vto 7

    Regarding limited liability, it is of course a cornerstone of capitalism and any broad-reaching changes to that will have significant consequences imo.

    But that is only with regard to financial and business matters………..

    When it comes to the lives of workers and other people then the limited liability feature of commercial enterprise has far less importance. As it should. A dollar can be printed again, a life cannot.

    So, when it comes to other life-matters in the course of commercial enterprise as a limited liability company shareholder and director then that limited liability must itself be limited. Personal liability must be able to be raised in circumstances such as Pike River.

  8. Rosetinted 8

    Now that returns from sales of government property are to be turned to paying off debts to banks and citizens for Solid Energy, looking after the Pike River families with compensation would be in order, actually demanding to be attended to.

    And as in making good the losses of out-of-pocket investors in South Canterbury Finance, the losses of payments to Pike River contractors (workers on contract) should also be met. I don’t know how much this amounts to but I understand that they came far down the priority list even though they were the actual wealth creators!!

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