Fining KiwiRail is a bit like coming home from work and fining yourself for speeding

Maritime NZ secured a $375,000 fine against KiwiRail in the Wellington District Court on Monday for the June 2024 grounding of the Interislander ferry Aratere at Titoki Bay, outside Picton. The Maritime NZ director Kirstie Hewlett said there had been “a clear knowledge gap about how the newly installed steering console worked, including in an emergency”. The bridge crew had not been properly trained on the new layout, could not override the autopilot in time, and the ferry ran aground with 39 crew and eight passengers aboard. No-one was hurt, and the vessel was refloated the next evening. We covered the sentencing here.

It is the textbook outcome a regulator wants in a Health and Safety at Work Act case. KiwiRail pleaded guilty, the court accepted the prosecution’s account of the failures, and the fine was imposed. The system worked the way it is supposed to.

It also illustrates why a lot of New Zealanders read this kind of result and wonder what the point of it was.

KiwiRail is a State-Owned Enterprise. The Crown owns 100 per cent of it through two shareholding ministers. So when Maritime NZ, a government regulator, fines KiwiRail, a government-owned company, the money leaves one Crown ledger and lands in another. As a reader of this site put it to us this morning, it is a bit like coming home from work, realising you did 60 in a 50, and writing yourself a fine. The money never really leaves the building.

There is a sensible defence of the arrangement. The State-Owned Enterprises Act 1986 is built on the principle that government trading companies should be treated as separate legal persons, subject to the same laws as any private operator. Without that separation, the Crown could effectively ignore safety, environmental and consumer law because there would be no enforcement mechanism. KiwiRail’s ferries compete directly with the privately-owned Bluebridge on Cook Strait, and a two-tier safety regime where state operators faced less legal pressure than their private competitors would get ugly fast. The fine does, in the narrow accounting sense, sting the entity. It hits KiwiRail’s accounts, its performance metrics and its public reputation.

The trouble is that the people who made the actual decisions, whoever signed off on modifying a safety-critical steering console without ensuring the bridge crew was trained to use it, face no consequence at all from a corporate fine. The Health and Safety at Work Act does allow for individual prosecutions. Officers, managers and workers can be charged personally, and directors face up to five years in prison and fines of up to $600,000 for the most serious category of offence. Maritime NZ chose not to go that route here. Why is a fair question to ask. Sometimes the failure is genuinely systemic and there is no single person to pin it on. Sometimes the evidentiary bar for individual liability is much higher. And sometimes regulators find it politically easier to fine the organisation than to put a named manager in the dock.

The deeper problem is that a corporate fine paid by the taxpayer makes the underlying cause of these incidents slightly worse rather than better. KiwiRail has been chronically capital-starved for years. The Aratere is a 1998 vessel that was cut in half and lengthened in 2011 because there was no money for a replacement. The iRex programme to replace the entire fleet was cancelled in late 2023 after cost blowouts. If your bridge crew did not receive proper familiarisation training on a modified console, one entirely plausible reason is that training budgets, dry-dock time and crew redundancy have all been squeezed for years. Fining the organisation $400,000 then takes a bit more out of the same pot.

The honest counter is that Maritime NZ does not set KiwiRail’s funding. Cabinet does. The regulator cannot say “we will let this slide because Treasury has underfunded you”, so the prosecution proceeds, the fine lands, and the lever that would actually fix the problem, which is capital-investment decisions made three Budgets ago, sits with people who face no consequence from the court case at all.

A more rational system would probably look like this. Mandatory, published incident reports of the kind the Transport Accident Investigation Commission produces, so the public can see exactly which decisions caused the failure. Individual accountability for the specific decision-makers, when the evidence supports it, rather than letting the corporate fine stand in for naming anyone. And separately, an honest political conversation about whether the SOE is funded to operate safely.

The fine ritual that played out on Monday in the Wellington District Court is mostly theatre. The taxpayer paid. The decision-makers walked away unnamed. And the chronic underfunding that helped cause the grounding is unaffected by any of it.

What would you do differently? Tell us in the comments below.