Court of Appeal reduces 'manifestly excessive' fines for health and safety offences

In the first case, the Court of Appeal reduced a fine on the grounds that the Crown Court had taken into account the financial position of the parent company of the offending organisation at an earlier step in the sentencing process than it should have done. In the second, the Court of Appeal reduced a fine where it found that there had been an incorrect assessment of the likelihood of harm at first instance.

In July 2017, Southwark Crown Court fined NPS London Ltd £370,000 for a breach of section 3 of the Health and Safety at Work Act (HSWA) for failures relating to an asbestos survey, identification and removal. The judge at first instance assessed culpability with reference to the guideline as 'high', and assessed that the risk of harm created was harm category 2.

Accounts showed that NPS London had an annual turnover of £5-6 million, making it a 'small' company for the purposes of the guideline. This would normally give rise to a starting point of £100,000, and a category range of £50,000 to £450,000.

NPS London is a joint-venture company owned 80% by NPS Property Consultants Ltd ('NPS Parent'), and 20% by the London Borough of Waltham Forest.  At the time of the sentencing, NPS Parent had a turnover of £125m. As a result, the judge deemed that the applicable table was the one for 'large' organisations as, "exceptionally, it may be demonstrated to the court that the resources of a linked organisation are available and can properly be taken into account". This gave rise to a starting point of £1.1m and a range of £550,000 to £2.9m.

The Crown Court heard that NPS London had a good health and safety record, no previous convictions and it had shown co-operation. In addition, it was a low profit organisation which operated for the benefit of local authorities. This was sufficient to adjust the fine towards the bottom of the bracket which, with full credit, resulted in a fine of £370,000.

NPS London appealed, arguing that the judge had erred in law by applying the 'large organisation' table rather than the 'small organisation' table on the basis of its wider linked resources. The Court of Appeal agreed. It ruled that, for the purposes of the tariff-based approach in the guideline, the relevant turnover was that of the 'offending organisation'. As NPS London was a small organisation, the starting point was therefore £100,000 and the final fine £75,000 once the mitigating features were taken into account.

Importantly however, the Court of Appeal did find that it was perfectly proper to examine the wider finances of a linked organisation at step 3 of the sentencing guidelines, following the reasoning in the Tata Steel case. In the NPS appeal, this meant that the low profitability of NPS London was not of itself a reason to reduce the fine further, as it was proper to have regard to NPS Parent as a linked organisation. After full credit was given for NPS London's guilty plea, the fine was ultimately reduced to £50,000.

Health and safety law expert Simon Tingle of Pinsent Masons, the law firm behind Out-Law.com, said that the first of these cases "would offer comfort and concern for companies part of larger group structures."

"Whilst a linked company's resource will not be relevant to establishing turnover for the purposes of the guideline, for organisations which are part of/owned by a larger group company, this may have at least a bearing on any ultimate assessment of a proportionate financial penalty for health and safety breaches," he said.

In a parallel appeal to that of NPS London its subcontractor, Squibb Group Ltd, was unsuccessful in overturning its conviction for breach of duty towards its employees under section 2 HSWA, but ultimately successful in reducing its "manifestly excessive" fine from £400,000 to £190,000.

The jury in the original trial had found Squibb guilty of the section 2 offence, in respect of its duty to employees, but acquitted it of a section 3 HSWA offence in respect of its duty to non-employees (third parties). Squibb argued on appeal that there was no rational basis for differentiating between the two counts, as the evidence showed that both employees and non-employees were exposed to risk and this was a feature of both the prosecution and defence case.

The Court of Appeal found, however, that the jury was entitled to consider that, as the degree of risk of harm to Squibb's employees was substantially greater than to third parties, the measures which Squibb was required to take to avert the risk to its employees was correspondingly more onerous (in achieving the balance necessitated by "reasonable practicability"). As a result, there was a rational basis for the jury to return different verdicts for each offence.

The Court of Appeal did reduce sentence on appeal however, agreeing with the judge's assessment of 'high' culpability, but disagreeing with his assessment in relation to harm. In the Crown Court, the judge had departed from the assessment of likelihood put forward by an expert witness without giving reasons for his alternative conclusion, and so the only reasonable conclusion on the available evidence was that the likelihood of harm arising from the offence was low, the view advanced by the expert.

"The failure of the appeal on Squibb indicates that it is entirely possible (in certain circumstances) for a jury to return different verdicts on section 2 and 3 HSWA breaches in the same way that it might be possible where an indictment features alleged breaches of HSWA and subordinate regulations." said health and safety law expert Simon Tingle.

"The Court of Appeal's judgment on sentence underlines the importance of the court's proper assessment and evaluation of the likelihood of harm in relation to risk created by a relevant health and safety breach and how expert evidence can be helpful. It is also however a cursory reminder that where specialist contractors carry out routine work, it can be challenging to assert that the relevant failures did not fall far below the relevant standards, which can equate to a finding of 'high' culpability," he said.