Out-Law Analysis | 21 Feb 2017 | 3:10 pm | 4 min. read
With hefty fines becoming the norm, organisations with a little more to lose may well be more inclined to fight cases or to appeal.
In 2011, the £1 million fine of a major retailer for asbestos exposure was considered exceptional. In 2014, fines for Network Rail and Sellafield of £500,000 and £700,000 respectively were subject to an appeal which, whilst ultimately unsuccessful, reflected the prevailing view at that time that these were large fines, even for significant corporate entities.
Under the new guidelines fines of this level, and indeed many times greater, are becoming the norm for large organisations. Comments by the judiciary suggest that fines of up to 100% of pre-tax profits could be imposed in appropriate cases, even if that results in tens or hundreds of millions of pounds and even if the result is that, in the most serious of cases, the organisation goes out of business.
The guidelines, which apply in England and Wales, came into force on 1 February 2016 and are applicable to both organisations and individuals convicted of relevant offences, although there are separate provisions for each. Fines are now directly linked to the risk of harm as a result of health and safety failings, rather than any actual harm caused as was usually the case previously, signalling a major shift in focus.
In the period from 1 February 2016 to 18 January 2017 we know of sixteen cases sentenced under the guidelines involving fines of £1m or more. Of those, eight involved fines of £2 million or more, with the largest being £5 million. That compares with total fines from all health and safety enforcement in the year 2014/15 of only £19.3m, an average of approximately £18,500 per offence.
Fines once regarded as exceptional and reserved for the most significant disasters involving multiple fatalities, such as train derailments, now look likely to become the norm for the largest organisations, with a similar escalation in fines for smaller companies. Whilst most predicted correctly that increased fines would result from the new guidelines, their commencement also fuelled concerns that they would bring with them uncertainty, increased appeals and, consequently, greater costs. Have these concerns materialised?
To be successful, on appeal against sentence the company must show that the fine imposed was "manifestly excessive". An appeal court will normally defer to the sentencing court's assessment of the evidence heard before it, interfering only where necessary to avoid an injustice. With sentence under the guidelines imposed only after a detailed nine step process - intended to increase consistency and transparency - has been completed, is there really any scope for appeal when the axe falls?
In June 2016, the Court of Appeal rejected an attempt by Kent-based Watling Tyre Services to reduce a £1m fine imposed a decade after the incidents occurred. The company pleaded guilty to two HSWA offences in relation to the death of a young tyre fitter in January 2006, but the company was not sentenced until June 2016 through no fault of its own.
Excessive delay can rightfully be used as a mitigating factor under the guidelines. However, the Court of Appeal ruled that the delay had already been fairly taken into account by the original sentencing judge. A £1m fine for a medium-sized company was therefore legitimate on the facts, even though it had taken 10 years for the case to come to court.
In October 2016, the Court of Appeal reduced a "manifestly excessive" £1.8m fine imposed on a ports operator to £500,000. The company was sentenced on 21 January 2016, before the guidelines took effect but during a period in which the courts imposed numerous fines of over £1m.
On the face of it, this was a good result for the company - but £500,000 was still a very large fine for what was a serious, but nonetheless non-fatal, accident. C.RO Ports is a medium-sized company, but the original fine of £2.7m before the discount for an early guilty plea had been applied would have been the equivalent of treating this as a very high culpability harm category 1 case had the guidelines been in force at the time.
This seems an unlikely outcome, given the findings of the sentencing judge that culpability was one of falling far below the relevant standard – equivalent to 'high culpability' under the guidelines – and the harm category was likely to be 2, at worst. In these circumstances, the applicable range is between £220,000 and £1.2m with a starting point of £450,000. Although the guidelines were not applied in this case, a £750,000 fine reduced to £500,000 for the plea sits squarely within this range. Less good news for the company was that had five years to pay the original fine, at a rate of £360,000 per year; and only 28 days to pay the substituted fine of £500,000.
In December 2016 MJ Allen Holdings Limited successfully appealed against a sentence of £160,000. In that case the appeal court merely confirmed the correct application of the guideline; the sentencing judge had failed to take into account any of the mitigating factors it had identified in reaching a fine.
Of the sixteen fines of over £1 million mentioned above we know of only three which were subject to appeal and, of those, only one succeeded. There is no doubt that the guidelines have fundamentally changed the courts' approach to sentencing health and safety and food safety offences, as well as the most serious offence of corporate manslaughter. Large fines for small and medium-sized companies and very large fines for large and very large companies are here to stay and the Court of Appeal has signified that it will be slow to interfere where the guideline has been properly followed. If an appeal is considered, specialist advice should be sought to avoid what at the end of the day may amount to no more than additional adverse publicity and increased legal costs.