Legal spotlight - April 2019

Many column inches have been used up warning of the consequences for organisations, and individuals, of falling short of their safety and health obligations. It is no exaggeration to say that since the introduction of the Definitive Guideline for sentencing in health and safety etc offences ("the Sentencing Guideline") just over three years ago, in February 2016, fines in the hundreds of thousands of pounds sterling have become commonplace, and for large and very large organisations that may well move into the realms of £millions. Since the introduction of the Sentencing Guideline, there have been around 57 fines over £1million.

The seismic change in sentencing brought about by the Sentencing Guideline is aptly demonstrated in the prosecution last year of the Atomic Weapons Establishment (AWE) by the Office for Nuclear Regulation. The incident involved a burn injury (described in reports as "minor") sustained by an engineer whilst carrying out routine testing at one of AWE's sites. There was nothing unusual about the equipment involved and nor was there any nuclear risk. Despite this, a fine of £1million was felt appropriate by the sentencing judge.

Significantly, although AWE had some systems and risk assessments in place, it appears that they were found to be deficient; there were no instructions on routine elements of the testing process and risk assessments were generic and did not cover specific equipment risks. As a result the sentencing court decided that AWE had medium culpability and the matter had an overall harm category of 2 (harm risked was level A with a medium likelihood of harm). For a large organisation this would give a starting point of £600,000 and a range of £300,000 - £1.5million. The Sentencing Guideline permits courts to move outside this range where the organisation being sentenced is deemed a “very large organisation", "to achieve a proportionate sentence". "A very large organisation" is one whose "turnover very greatly exceeds" the large organisations threshold of £50 million. With a turnover of £862million and pre-tax profits of £14.1million, AWE could well have been deemed very large but the court appear to have decided it was not necessary to move outside of the table applicable for large companies, instead moving up the range placing the fine at the highest level for the type of harm for large organisations, £1.5million. Reports suggest that AWE cooperated throughout, admitted guilt at a very early stage and so received the maximum deduction for that, taking the fine to £1million.

There is of course no requirement to move a very large organisation beyond the large organisation range. In the 2015 Thames Water case, the Court of Appeal made it clear that there "must not be a mechanistic extrapolation from the levels of fine suggested …for large companies". What is important is that the fine is "sufficiently substantial to have a real economic impact which will bring home to both management and shareholders the need to comply with health and safety legislation". The fine here was unquestionably substantial and at around 7% of pre-tax profit should make the board and shareholders sit up and take note. It is worth remembering too that although actual harm is generally not relevant when assessing sentence, it is accepted that where there is a fatality, that will move a matter into a higher sentencing range. In the Whirlpool case, for example, of particular significance was the fact although the breach was deemed low culpability, category 3 harm, the fact that it involved a fatality was enough of itself to justify a move not only into the next category but to the top of the next category range. The court then increased this further to take account of the organisation's status as very large.

It would be foolhardy for very large organisations to believe their fines will be capped at the level for large organisations - that is certainly not what experience suggests. Where the circumstances require it, sentencing courts will move beyond that range.

So too where the circumstances require it, courts will look at the financial situation of parent organisations when assessing a fine. In the recent R v NSP London Ltd case the Court of Appeal did just that deciding that the finances of a linked organisation could be relevant in determining the overall proportionality of the proposed fine. Where it is demonstrated that the offender will not be dependent on its own financial resources to pay a fine, this may be a consideration when assessing the overall proportionality, especially where "losses" may initially be indicative of the need to reduce a fine. Subsidiaries financially assisted by their parent are unlikely to be able to make use of their apparent financial "ill health" to secure a rounding down of their fine.

A reminder, if one is needed, that organisations which pay lip service only to their safety and health obligations can expect to pay a hefty fine. In the AWE case the relatively innocuous nature of the incident may have led some to believe that a smallish fine would be levied, particularly where, on the face of it, the organisation had written systems and procedures in place. But that is not enough; those systems and procedures must be fit for purpose. 

Kevin Bridges is a partner and head of health and safety at Pinsent Masons. For more information, visit www.pinsentmasons.com