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Neutral Citation Number: [2017] EWCA Crim 2186 |
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Case No: 201701764 A1 |
IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM BRISTOL CROWN COURT
His Honour Judge Patrick
S20170069
|
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Royal Courts of Justice Strand, London, WC2A 2LL |
|
|
20/12/2017 |
B e f o
r
e :
THE LORD CHIEF JUSTICE OF ENGLAND AND WALES
THE
RT
HON THE LORD BURNETT OF MALDON
THE HON MR JUSTICE TEARE
and
THE HON MR JUSTICE KERR
____________________
Between:
____________________
Mr Dominic Adamson (instructed by Plexus Law) for the Appellants
Mr Alan Fuller (instructed by Lester Aldridge LLP) for the
Respondent
Hearing date: 21 November 2017
____________________
HTML
VERSION
OF JUDGMENT
____________________
Crown Copyright ©
Lord Burnett of Maldon CJ:
- On 21 March 2017 at the Crown Court at Bristol the appellant company was sentenced by His Honour Judge Patrick to pay a fine of £700,000 having earlier pleaded guilty to an offence contrary to section 3(1) of the Health and Safety at Work Act 1974 ["the 1974 Act"]. That imposes a duty on an employer to conduct its undertaking in such a way as to ensure, so far as
reasonably
practicable, that persons not in its employment are not thereby exposed to
risks
to their health and safety. This prosecution was brought following the death of Mr. Clive Dalley, a self-employed alarm and telecommunications contractor, who died as a
result
of an accident at the appellant's premises on 21 March 2015.
- This appeal against sentence is brought with leave of the single judge. Mr Adamson, who appears for the appellant before us, as he did below, submits that the judge erred in his application of the Definitive Guideline on Corporate Manslaughter, Health and Safety and Food and Safety Hygiene Offences, effective from February 2016, with the
result
that the sentence imposed was manifestly excessive. Three issues fall for particular consideration in this appeal. First, the impact of a death on the approach to the
ranges
set out in the Guideline. Secondly, how one identifies and then treats a "
very
large organisation" for the purposes of the Guideline. Thirdly, the impact of
relatively
poor profitability in the context of an organisation with a substantial turnover.
The Facts in outline
- Mr Dalley was a self-employed fire alarm and telecoms contractor of 30 years' experience who was frequently employed as a sub-contractor at the appellant's Indesit factory in Yate near Bristol. On 21 March 2015 he was working on the fire and heat detector systems from a mobile elevated working platform which he had manoeuvred into position between hanging baskets on the overhead conveyor system. The overhead conveyor system was set in motion by an employee of the appellant who was part of a maintenance team working elsewhere on the conveyor. One of the baskets knocked the working platform causing it to topple and Mr Dalley to fall. He suffered multiple fractures and died ten days later from complications arising from his injuries.
- Both the appellant and Mr Dalley (who had comparable duties as a self-employed contractor as those imposed on the appellants under the 1974 Act) were aware of the
risks
involved of working at height and also that the maintenance work was to be carried out that morning. Two days before the accident, Mr Dalley had discussed the work with the maintenance co-ordinator at the factory and they walked through it. It was agreed that he would
return
on the Saturday when few people would be in the premises. It was explained that the maintenance team would be working on the conveyor system at the same time and that their work would take priority over his. A permit to work system was operated. Mr Dalley was issued with a permit. There was a
risk
assessment
relating
to working at height. It was agreed that Mr Dalley would tell the other workers when he wanted to do his work to enable them to turn off the conveyor system.
- On the morning in question, Mr Dalley told the maintenance workers that he was going to have a cup of coffee before he started his work from the working platform. They continued with their tasks which
required
the overhead conveyor to be turned on and off intermittently. Unfortunately, they were unaware that Mr Dalley had
returned
and
raised
his working platform to a position
vulnerable
to being struck. It was in those circumstances that this tragedy occurred. It illustrates the importance of systems being devised which
recognise
human frailty and the possibility of a small oversight giving
rise
to serious potential consequences.
- The failures which gave
rise
to the breach of section 3 of the 1974 Act were:
a) The appellants did not
require
Mr Dalley to prepare a job-specific
risk
assessment and method statement for the work he was to carry out on 21 March 2015;
b) The appellant could have prepared a more detailed Permit to Work which specifically identified the potential
risk
posed by a working platform being used in the
vicinity
of the overhead conveyor and the control measures
required.
The Guideline
- The Guideline provides a structure within which to sentence for breaches of health and safety legislation. At Step One, the court is enjoined to determine the offence category. As part of that exercise it must first decide "culpability". There are four levels of culpability:
very
high, high, medium and low. The conduct described in the Guideline to inform the assessment of culpability
ranges
from "deliberate breach of or flagrant disregard for the law", at one end, to "offender did not fall far short of the appropriate standard" at the other.
- Consideration of "harm" follows in the context that the offences under sections 2 and 3 of the 1974 Act are ones of creating a
risk
of harm. The Guideline
requires
the court to determine both the seriousness of the harm
risked
and the likelihood of that harm arising. Each of those factors may be ascribed to one of three categories. The hierarchy of harm is then divided into four categories by the Guideline, as set out in the following table:
- Having identified the appropriate level of harm, the Guideline then
requires
the court to consider whether the offence exposed a number of workers or members of the public to
risk
and whether the offence was a significant cause of actual harm. It continues:
"If one or both of these factors apply the court must consider moving up a harm category or substantially moving up within the category
range
at step two … The court should not move up a harm category if actual harm was caused but to a lesser degree than the harm that was
risked,
as identified in the scale of seriousness…"
- At Step Two a starting point and category
range
are determined by focussing on turnover, with aggravating and mitigating features influencing where in the
range
the starting point lies. The Guideline describes organisations as large (turnover £50 million and over), medium (turnover £10 to £50 million) small (turnover £2 to £10 million) and micro (turnover up to £2 million). In
respect
of each, there is a table bringing together the four possible levels of culpability and four possible harm categories. By way of illustration, and also because it is at the heart of the submissions we have heard, we
reproduce
the table applicable to large organisations:
The Guideline provides for larger organisations in this way:
"
Very
large organisations
Where an offending organisation's turnover or equivalent
very
greatly exceeds the threshold for large organisations, it may be necessary to move outside the suggested
range
to achieve a proportionate sentence."
- The Guideline includes a non-exhaustive list of factors both increasing seriousness and those
reducing
it, or
reflecting
mitigation. It explains that
recent
relevant
previous convictions should
result
in a substantial upward adjustment. The impact of both aggravating and mitigation features may
result
in a move outside the category
range
identified in the Guideline.
- We pause to observe that the features of the Guideline we have so far
referred
to
reflect
its inherent flexibility necessary to meet the broad
range
of circumstances that fall to be considered in breaches of sections 2 and 3 of the 1974 Act. In considering a guideline
replete
with so many figures there is a temptation to approach its application in an arithmetic way. In our opinion that should be
resisted.
In this area, as much as any, the court should not lose sight of the fact that it is engaged in an exercise of judgement appropriately structured by the Guideline but, as has often been observed, not straitjacketed by it.
- Thus far the court will have taken account of culpability, harm (with its two components as set out in the Guideline), the extent of those exposed to the material
risk,
the incidence of actual harm, the turnover of the organisation and aggravating and mitigating factors to determine a starting point. Mr Adamson submits that in addition to turnover, the broader financial health of the organisation could fall into account at Step Two for the purpose of the Guideline. We do not agree. It is clear from its terms that such factors come into play at Step Three.
- Step Three
requires
the court to "check whether the proposed fine based on turnover is proportionate to the overall means of the offender". It identifies three general principles affecting sentencing at this stage. It notes that section 164 of the Criminal Justice Act 2003
requires
a fine to take account of the financial circumstances of the offender; that it must meet in a proportionate way the objectives of punishment, deterrence and
removal
of gain derived from the offending; and that it must be "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." It then enjoins the court to consider the financial circumstances of the offender – the economic
realities
– with the
result
that in finalising the sentence the following factors are
relevant:
- Profitability. Adjust downwards for a small profit margin and upwards for a larger profit margin.
- Any quantifiable benefit derived from the offence.
- Whether the fine will put the offender out of business.
- Step Four, which has no
relevance
to this appeal,
requires
the court to consider matters such as whether the fine will impair the offender's ability to make necessary improvements to its systems, make
restitution
to
victims
or adversely affect the economic interests of others. Step Five, also not in play in this appeal, concerns formal assistance to the prosecuting authorities in connection with other prosecutions. Step Six concerns
reduction
for guilty pleas.
Authority
- This court considered the approach to fines for
very
large organisations in environmental cases, with a Definitive Guideline structured in a similar but not identical way, in
R
v
Thames Water Utilities Limited [2015] EWCA Crim 960. In the judgment of the court delivered by Mitting J the general principles governing the sentencing of
very
large organisations
run
for profit which had been identified in
R
v
Sellafield Limited [2014] EWCA Crim 49 at paragraph 3 were adopted:
"It is important at the outset to
recall
the provisions which Parliament has enacted in the Criminal Justice Act 2003 (CJA 2003) in
relation
to the duty of the courts in sentencing, as these principles are applicable to all offenders, including companies:
i) The courts must have
regard
in dealing with offenders to the purposes of sentencing which Parliament specified as (a) the punishment of offenders (b) the
reduction
of crime (including its
reduction
by deterrence), (c) the
reform
and
rehabilitation
of offenders, (d) the protection of the public, and (e) the making of
reparation
by offenders to persons affected by their offences (s.142 of the CJA 2003).
ii) In considering the seriousness of the offence the court must have
regard
to the culpability of the offender and the harm caused or which might foreseeably be caused (s.143 of the CJA 2003).
iii) If a court decides on a fine it must approach the fixing of fines having
regard
not only to the purposes of sentencing and the seriousness of the offence, but must also take into account the criteria set out in s.164 of the CJA 2003:
(1) Before fixing the amount of any fine to be imposed on an offender who is an individual, a court must inquire into his financial circumstances.
(2) The amount of any fine fixed by a court must be such as, in the opinion of the court,
reflects
the seriousness of the offence.
(3) In fixing the amount of any fine to be imposed on an offender (whether an individual or other person), a court must take into account the circumstances of the case including, among other things, the financial circumstances of the offender so far as they are known, or appear, to the court.
(4) Subsection (3) applies whether taking into account the financial circumstances of the offender has the effect of increasing or
reducing
the amount of the fine."
- The Guideline applicable in the appeal before us
reflects
this settled approach.
- There was no doubt that Thames Water Utilities Limited was a "
very
large organisation". At paragraph 37 of the judgment, Mitting J
records
a submission to the effect that all organisations should be treated as
very
large if turnover exceeds £150 million per year on a three yearly average and observed:
"We do not think there is any advantage to be gained by such a definition. In the case of most organisations, it will be obvious that it either is or is not
very
large. Doubtful cases must be
resolved
as and when they arise."
- An obvious case concerning a
very
large organisation was
R
v
Tata Steel
UK
Limited [2017] EWCA Crim 704. The appellant had a turnover of about £4 billion a year, and although a going concern was not at the time profitable. The appeal concerned two offences under section 2 of the 1974 Act when on separate occasions employees had been seriously injured. At paragraph 45 of the judgment of the court Gross LJ approved the approach of the sentencing judge to
reflect
the size of the appellant. By
reference
to the table we have set out in paragraph 10 above, this was a "high culpability harm category 2" case which gave starting point of a fine of £1.1 million. But he moved up a category and proceeded from a starting point of £2.4 million. The judge then enhanced it further at Step Three to bring the fine home to the management and shareholders because the senior management were inadequately focussed on day to day safety.
The Sentencing
Remarks
- The judge noted that the appellants had in place procedures to minimise
risk
although they had failed. He considered that there should have been a second person with Mr Dalley whilst he worked and that the Permit to Work should have been much more specific about the work to be done and the
risks
that it entailed. The
risk
that the maintenance workers posed to Mr Dalley had not been properly assessed, in particular as there was no line of sight between them and him.
- The judge set out the
review
of policies and procedures undertaken by the appellant after the tragedy which had done everything possible to eliminate further problems. The appellant fully cooperated in the investigation.
- There was a culture of commitment to safe systems and improvements in which all the employees were engaged. The judge summarised the
range
of safety systems and procedures in place, all of which tended to demonstrate that commitment. The company had an exemplary health and safety
record,
with no previous convictions. It profoundly
regretted
what had occurred. None of the aggravating features sometimes found in health and safety cases, for example deliberate cost-cutting or calculated
risk-taking
to enhance profit was present. On the contrary,
"so far as the guideline is concerned … not only are there no aggravating features, every single mitigating feature arises … It has an excellent health and safety
record
… The company had also taken steps to ensure that [Mr Dalley] was aware of his duty to act under a code of practice which highlighted the
risk
of working at height, and the company was aware that he was qualified to undertake the work he was doing. It is accepted that there was no formal process to inform workers of contractors working on site. Mr Dalley had been asked to notify the workforce when he would be working at the site of the accident but did not do so."
- The judge went on to consider the Guideline. He concluded that for the purpose of the Guideline the breach of duty was one of low culpability, because the appellant did not fall far short of the appropriate standard. He said:
"I have
regard
to the fact that there were systems in place; that there were systems for working at height; there was a lockout policy; there were policies for working with contractors, of which Mr Dalley was aware and in which he was conversant, he himself had been trained for working on platforms and had undergone
retraining
in 2015. The platforms themselves have an excellent safety
record
… While the permit to work could have been fuller and could have contained more detail, in fact it contained a significant amount of details to minimise a
risk
… it was only on the day of the incident itself that there was any
risk
…Whilst there was no document confirming the presence of Mr Dalley at the factory on Saturday and no one directly
responsible
at the time, it is clear that people were aware of his presence, and there had been a walk through to discuss
risk
only two days before the incident."
- Turning to the question of harm, the judge said it was "plainly a level A case" because the
risk
of harm included death or serious injury. He
recognised
that he had to assess the
risk
of that harm materialising. That is because the gravamen of the offence under section 3 of the 1974 Act is to avoid the
risk
of harm. He concluded that there was no
risk
of harm to any other person that day because the factory was not in production and there were fewer than a dozen people on site. There was a low likelihood of harm materialising. In the
result
that was a "harm category 3" case for the purposes of the Guideline.
- The judge then considered the appropriate starting point. He said that the appellant's turnover was £500 million (whereas the tables in the Guidelines are based upon a turnover of £50 million). He noted that the company had £500 million of assets and that in the two years covered by the appellant's annual
report
for December 2015, in one year there was a profit and in the other year there was a loss. He then said this:
"I am told that manufacturing costs often amount to some 80% of the turnover and I am asked to contrast this company with those with lower operational costs. I have
regard
to that point but decline to draw a distinction between companies with high costs and those with low. In my judgment that appropriate starting point is £1.2 million. I give credit for plea and also make allowance for good character and
remorse.
Other factors have been arrived at when arriving at low culpability and therefore I impose a fine of £700,000 …"
If we unpack that a little, the
result
is this. The starting figure of £1.2 million was
reduced
by £150,000 for good character and
remorse
and then
reduced
by a third to
reflect
the guilty plea.
The financial position of the appellant
- Before considering the submissions made on this appeal, it is necessary to note in a little more detail the information
revealed
in the appellants' annual
report
for December 2015. Turnover in 2014 was £672,842,000 and in 2015 £710,798,000,
rather
than the £500 million identified by the judge. In 2014 there was a profit before tax of £24,738,000. But in 2015 there was a loss of £165,041,000. The
reason
for the loss was two exceptional items. One
resulted
from corrective action
remedying
certain safety and quality issues which
required
the
recall
of products. The other was an impairment to an investment in a
related
company. The former
resulted
in a provision for £178,577.000. In 2014 the company had assets of £546,518,000 and in 2015 assets of £567,548,000. Directors'
remuneration
was £579,000 in 2014 and £584,000 in 2015. The highest paid director
received
£480,000 in 2104 and £488,000 in 2015.
Discussion
- On this appeal there are two principal criticisms of the judge's approach. First, Mr Adamson submits that the judge's starting point of £1.2 million is far too high, by comparison with the starting points and category
ranges
in the Guideline for large organisations. The second main criticism is that the judge failed to examine the financial circumstances of the company at stage 3 which
requires
the court to consider whether the proposed fine based upon turnover is proportionate to the overall means of the offender. In particular the Guideline states that the profitability of an organisation will be
relevant.
If an organisation has a small profit margin
relative
to its turnover downward adjustment may be needed. In declining to draw a distinction between companies with high costs and those with low costs it is said that the judge erred.
- We agree with the judge's conclusion that for the purposes of the Guideline at Step One the offence should be treated as one of "harm category 3". It is more than justified when one considers the circumstances that surrounded this tragedy and is not in issue before us.
- In discussing the scheme of the Guideline in the context of this appeal we will begin by considering the approach to sentence for a large company with a turnover of £50 million or so. The starting point for such an offence would be £35,000. Culpability has a marked impact on starting points, as the table we have
reproduced
shows. Had the culpability been
very
high the starting point would be £1 million, £540,000 if the culpability were high and £300,000 if medium. The table also demonstrates that the harm category can have as profound an impact on starting points.
- There was no question of exposing other workers or members of the public to harm, but the systemic failings were a significant cause of harm, indeed the most serious harm imaginable, namely death. That would justify an upward movement within the appropriate category
range
or a move into the next harm category. Were the appellant a £50 million organisation the Guideline
recognises
that the fact of death would justify a substantial move away from the £35,000 starting point to the top of the category
range
(£140,000) or beyond.
- A consistent feature of sentencing policy in
recent
years,
reflected
both in statute and judgments of this court, has been to treat the fact of death as something that substantially increases a sentence, as
required
by the second stage of the assessment of harm at Step One. Without more, we consider that the fact of death would justify a move not only into the next category but to the top of the next category
range,
suggesting a starting point of perhaps £250,000.
- What impact on that starting point does the higher turnover of the appellant have? We note that there is a five-fold difference in turnover between the smallest and largest organisations falling within both the "small" and "medium" categories for the purposes of the Guideline. The Guideline does not apply the same arithmetic approach to define the boundary between a large and
very
large organisation. No upper limit is mentioned for a large organisation. Instead, the Guideline suggests that "
very
large organisations" will have a turnover that "
very
greatly exceeds" the threshold for large organisations. In such cases "it may be necessary to move outside the
range
to achieve a proportionate sentence." We
remind
ourselves that in paragraph 40(iv) of the Thames Water Utilities case this Court made clear that there should be no mechanistic extrapolation for levels for large companies.
- Each of the category
ranges
in which the turnover limits are identified is designed to accommodate organisations with turnovers at both ends of the
range.
The language of the Guideline suggests that the category
ranges
identified for large organisations are designed to cater for turnovers which "exceed" £50 million, indeed "greatly exceed" £50 million. These first two examples do not fall within the definition of a
very
large organisation at all. Most organisations with a turnover which "
very
greatly exceeds £50 million" will be treated as
very
large organisations. But even then the Guideline
retains
flexibility to meet the individual circumstances by suggesting that it "may", not will, be necessary to move outside the
range.
The language of the Guideline suggests that a
very
large organisation is likely to have a turnover of multiples of £50 million but we would not wish to create an artificial boundary. The turnover of the appellant was of the order of £700m. Although the judge did not say in terms that the appellant was therefore a
very
large organisation within the language of the Guideline it is clear to us that it must be; and indeed that must have been the
view
of the judge. It was therefore permissible to move outside the appropriate
range
in order to achieve a proportionate sentence.
- Having determined that an organisation is
very
large, the calculation of a fine through the structure of the Guideline does not at this stage dictate an arithmetic approach to turnover. There is no linear approach. That much is clear from the conclusion endorsed by this court in the Tata Steel case where a turnover of £4 billion, as opposed to £50 million, led to a step change of one harm category
rather
than extravagant multiples.
- As we have said, the
range
of
recommended
fines for a large company where there is low culpability and harm category 3 goes up to £140,000. But we have concluded that the fact of death, without taking account of turnover, should take the starting point to the top of the next category or about £250,000. That figure must be increased to
reflect
the large turnover the appellant and its status as a
very
large organisation. The next
range
up in the Guideline extends from £180,000 to £700,000.
- We have
reached
the stage in the Guideline of having to take into account the following factors. First culpability; secondly
risk
of harm; thirdly actual harm – in this case death; and fourthly turnover. The judge's conclusion that there was low culpability and a low likelihood of harm underpins this part of the exercise. Were the culpability or harm category greater, then a substantially higher starting point would be appropriate. In our
view
the last of these four points, namely turnover, should
result
in the starting point moving to £500,000 before aggravating and mitigating factors are taken into account.
- The judge significantly
reduced
his starting point to
reflect
the strong mitigation he identified. In following his approach we arrive at a figure of £450,000.
- The judge did not expressly consider Step Three of the Guideline. That step
requires
the court to consider the financial circumstances of the offender and the judge decided not to do so. There is a significant difference between an organisation trading on wafer-thin margins and another, perhaps a professional services company where the profits shared between partners or shareholders is a substantial percentage of turnover. An organisation with a consistent
recent
history of losses is likely to be treated differently from one with consistent profitability. So too, an organisation where the directors and senior management are
very
handsomely paid when compared to turnover is likely to attract a higher penalty than one where the converse is the case.
- However, when one has
regard
to the overall means of this appellant we do not consider that the figure at which we have arrived
requires
adjustment. The appellant has an underlying profitability. The
recent
loss was the
result
of two exceptional items. Furthermore, the assets of the company both in 2014 and 2015 were about £550m. The fluctuations in the profitability did not affect the directors'
remuneration.
As
required
by the Guideline we have stepped back and
reviewed
the proposed level of fine. Having
regard
to the underlying culpability,
risk
of harm, actual harm and turnover, in our
view
a starting point of £450,000 at Step Three is sufficient to have a
real
economic impact which will bring home to the management and shareholders the need to comply with health and safety legislation but it is also proportionate to the appellant's overall means. As the judge noted, this is an organisation with an impeccable safety
record
which has done everything possible to make good the deficiencies exposed by these events.
- Step Three in the Guideline does not provide an invitation to the court to disregard what has gone before, but to adjust any conclusion to
reflect
the economic
realities.
- The final step is to
reduce
the fine to
reflect
the guilty plea. The Guideline dictates a
reduction
of a third with the
result
that, in our judgment, the appropriate fine in this case should be one of £300,000. It follows that we consider that the sentence imposed by the judge was manifestly excessive. We quash the fine of £700,000 and substitute one of £300,000. The
remaining
orders are unaffected.
- Nothing in this judgment is intended to alter the policy in this Court in
recent
times (consolidated by the Sentencing Guidelines Council) of ensuring that organisations are made to pay fines that are properly proportionate to their means. That of course does not
relieve
the Court of a duty to enquire carefully into the facts of each case so as fairly to
reflect
different levels of harm and culpability. The circumstances of this case are unusual in flowing from an offence of low culpability and low likelihood of harm. Had they involved any increased culpability or likelihood of harm the appropriate fine would have been
very
much larger. No two health and safety cases are the same. The Guideline provides for
very
substantial financial penalties in appropriate cases, particularly when the offender is a large or
very
large organisation. Yet it is subtle enough to
recognise
that culpability, likelihood of harm and harm itself should be properly
reflected
in any fine, as well as turnover. The same degree of actual harm following a breach of section 2 or 3 of the 1974 Act can deliver
very
different fines depending on the circumstances. That is obvious when one considers the table we have
reproduced
in paragraph 10, with its wide
range
of potential fines for the same offence.
- Large commercial entities in many areas of business are
vulnerable
to
very
substantial financial penalties for
regulatory failings. The same is true for breaches of health and safety or environmental law in appropriate cases. A fine of the order imposed by the judge in this case would only have been appropriate if the factors weighing in the balance for the purposes of the Guideline had been different.
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