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||Neutral Citation Number:  EWCA Crim 1586
||Case No: 2005/05828 A2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM HIGH COURT (QUEEN'S BENCH DIVISION)
CENTRAL CRIMINAL COURT
MR JUSTICE MACKAY
 EWHC 248 QB
||Royal Courts of Justice
Strand, London, WC2A 2LL
||5th July 2006
B e f o r e :
THE LORD CHIEF JUSTICE OF ENGLAND AND WALES
MR JUSTICE NELSON
MR JUSTICE SILBER
||- and -
||Balfour Beatty Rail Infrastructure Services Ltd
(Transcript of the Handed Down Judgment of
Smith Bernal WordWave Limited
190 Fleet Street, London EC4A 2AG
Tel No: 020 7421 4040 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
R Lissack QC, G Bebb QC & S Climie for the Prosecution
J Caplan QC & G Forlin (who did not appear in the Court below), & F Canby & T Sharpe for the Appellant
HTML VERSION OF JUDGMENT
Crown Copyright ©
Lord Phillips CJ:
- On 18 July 2005 in the Central Criminal Court, on re-arraignment on the 93rd day of the trial, the applicant, 'Balfour Beatty', pleaded guilty to failing to discharge the duty as an employer, under section 3(1) of the Health and Safety at Work Act 1974 ('the 1974 Act'), to persons not in its employment in breach of section 33 of that Act. The breach of duty in question was a cause of the Hatfield rail disaster on 17 October 2000, in which 102 passengers were injured and 4 lost their lives.
- On 7 October 2005 the trial judge, Mackay J, sentenced Balfour Beatty to a fine of £10 million and ordered it to pay £300,000 towards the prosecution costs. The Registrar referred to us Balfour Beatty's application to appeal against the amount of the fine imposed. We grant that application.
The facts in outline
- At about 12:23 on 17 October 2000 a GNER train, bound from London to Leeds, was rounding a bend between Welham Green and Hatfield stations at 115 miles per hour when two sections of the track disintegrated and the train was derailed, causing the casualties that we have already described. The track failed as a result of brittle fractures, initiated by gauge corner cracking ('GCC'). The gauge corner is part of the curved portion of the railhead and GCC results from rolling contact fatigue.
- All the infrastructure of the UK rail network, including the track, was owned by Railtrack PLC ('Railtrack'). Railtrack recognised that it had primary responsibility for the safety of the track. It sought to ensure that the track was safe by contracting with infrastructure maintenance companies ('IMCs') and track renewal companies ('TRCs'). At least three different contractors shared the functions necessary to keep the track safe. Balfour Beatty was responsible for inspecting the track. A second company, 'Serco', was responsible for grinding the rails in order to remove superficial GCC and a third company 'Jarvis' was responsible for replacing rails where this was necessary. Balfour Beatty's fault lay in failing adequately to inspect the track and further failing to appreciate from the results of inspections that were carried out that these called for action. The most relevant action that Balfour Beatty should have taken, but failed to take, was to impose a speed restriction on the stretch of track where the accident occurred.
The course of the trial
- The indictment as originally framed ran to 54 counts. Balfour Beatty and Network Rail Infrastructure Limited, as successors to Railtrack, were the two corporate defendants. We shall follow the example of the judge by referring to the latter defendant as 'Railtrack'. There were 12 individual defendants, being employees of either Railtrack or Balfour Beatty. Each company was charged with corporate manslaughter of the four passengers who died. Four of Railtrack's engineers and two of Balfour Beatty's employees were charged with manslaughter. These charges against employees formed the basis of the charges of corporate manslaughter. A count of breach of section 3 of the 1974 Act was brought against each of the corporate defendants and individual defendants were charged with consenting to or conniving in these breaches.
- On 1 September 2004, before the start of the trial, a number of charges were dismissed, including all charges of corporate manslaughter against Railtrack. At the end of the prosecution case, on 14 July 2005, the judge ruled that there was no case to answer in respect of all the remaining charges of manslaughter. There remained outstanding the counts alleging breaches of the duties imposed by section 3 of the 1974 Act. On 18 July Balfour Beatty pleaded guilty to the count that it faced, on a basis, set out in writing, that we can summarise as follows:
i) The deaths were an aggravating feature of the offence.
ii) Balfour Beatty's faults were only some of an aggregation of causes that led to the derailment.
iii) Balfour Beatty failed to ensure that visual inspections of the track were carried out from the appropriate vantage point.
iv) Balfour Beatty failed to respond appropriately to information in reports of ultrasonic inspections.
- The basis of plea ended with the following statement:
"6. For the avoidance of doubt the plea above is made on the basis that:
i. there was no failure to comply with Railtrack mandated standards; and that no guidance was made available to maintenance contractors as to when rail affected by GCC should be removed or subject to speed restriction by reference to its measurement on visual inspection, albeit such guidance was made available after the derailment; and
ii. there was not in place an adequate grinding regime for the management of GCC; and that if re-railing had taken place as planned there would have been no derailment; that re-railing had been scheduled as a priority; and that parties other than BBRISL were wholly responsible for the carrying out of scheduled re-railing and for the failure to re-rail by the date of the derailment. "
- The basis of plea was not accepted by the prosecution.
- Railtrack and the Railtrack employees continued to contest the counts alleging that they had breached the 1974 Act. The particulars of these breaches alleged little more than that they had failed to ensure that Balfour Beatty performed their duties under the Act.
- On 6 September Railtrack was found guilty by the jury of breach of duty under section 3 of the 1974 Act. The individual defendants were acquitted.
The facts in more detail
- GCC does not, of itself, necessarily make a rail unsafe. Initially it will be superficial. Superficial GCC can present a barrier to ultrasonic testing, so that the reading displays 'loss of rail bottom' or LORB. It can also grow to the extent that it develops into, or initiates, fatigue cracks, which can lead to failure of the rail. Periodic grinding of the rails, which removes a microscopic top layer, can remove GCC, thereby permitting effective ultrasonic testing and removing, or reducing, the risk of fatigue cracks.
- Balfour Beatty entered into a seven year contract with Railtrack for a consideration of £368 million under which it undertook, among other duties, that of inspecting some 330 miles of track between London and Berwick-on-Tweed. In his sentencing remarks the judge found that the manner in which Balfour Beatty carried out its duties accorded neither with proper practice nor with the standards laid down by Railtrack. These findings were, to a degree, inconsistent with Balfour Beatty's basis of plea. After a trial lasting 93 days the judge was well placed to make his own findings in relation to Balfour Beatty's breaches of duty and entitled so to do.
- The judge found that there were failings in each of three levels of the regime that should have been maintained for visual inspection of the track. The first level was a weekly visual inspection that had to be carried out by trackmen to inspect every yard of track against a specified list of defects, which included GCC. The stretch where the derailment occurred was on a curve. Trees bordering the track masked the approach of a train to the extent that there was only 4 seconds warning of this. For this reason, those carrying out the weekly inspections would walk at the stretch in question along the outside of the track, known as 'the cess', rather than within the rails. From the cess it was impossible to see anything of the head of the rail. The judge found that one at least of those who inspected in this way was aware that "what he was doing was useless and possibly dangerous".
- The judge rejected Balfour Beatty's contention that this deficiency in inspection was a local failing, commenting "if senior management did not know they certainly should have done. This indicates a total vacuum of management in this important area and of supervision of the actions of the Hitchin team".
- The next level of visual inspection should have been carried out by a route section manager ('RSM') once every eight weeks. The RSM responsible for this did not carry out any such inspection for the period of five and a half months that preceded the derailment, although after this had occurred he forged a report, falsely recording that he had carried out a track walk on 18 September 2000. His predecessor had done two track walks and reported adversely on the condition of the track on each occasion.
- The third level of inspection was a biennial walk, carried out by a track engineer, on 18 August 2000. He walked mainly in the cess and noticed nothing amiss. The judge did not find this surprising as his principal concern would have been for his own safety in the face of having only 4 seconds warning of approaching trains.
- In a nutshell the visual inspections, which should have discovered the defective state of the track before it disintegrated, were very largely a useless formality, were known by those inspecting to be such and this state of affairs should have come to the attention of senior management.
- We turn to the ultrasonic testing. This involved ultrasonic rail flaw detection operators ('URFDOs') pushing a 'walking stick machine' along the rail and recording the results of the ultrasonic scan of the rail that this performed. We note that it proved possible to carry out these tests despite the problem of the short notice of the approach of trains. The judge described the tests that were carried out and their results as follows:
"In January 1999, November 1999 (on two occasions), April 2000, June 2000 and finally on 6 October 2000, 11 days before the crash, such inspections were made of the crash site. On all these occasions the URFDO noted the presence of GCC, the seriousness of which was progressively deteriorating and that it was causing loss of rail bottom, or LORB, a description for the inability of the ultrasonic machine to obtain any reading due to the deformation of the rail by GCC and its obstruction of the ultrasonic probe. This condition persisted over hundreds of yards.
By the 2 November 1999 visits, the relevant URFDO, Fuller, was so concerned by what he saw that he phoned Alan Wilson, a senior technical officer in the Hitchin office, and sought his advice. The best that Wilson could advise him was to say: what would you do about it? Fuller said he thought the curve needed rerailing. Wilson said: well, then, put that on the form. And Fuller did."
- These tests were significant in two respects. Dealing first with the ultrasound results, the LORB might have been due to superficial GCC or might have been indicative of more substantial defects. What should have happened was that the rail should have been ground, after which a further ultrasonic test would have disclosed whether there was still a problem. It seems that Railtrack had been asked to arrange for rail grinding as early as 1998, but no grinding was carried out until September 2000. After this a further ultrasonic test still recorded LORB. These results spelt danger, but those to whom the reports were made were not competent to deduce this. They had not received appropriate training. Their only response to each result was to require re-testing. This was patently inappropriate and inadequate.
- More to the point, the URFDOs reported on the condition of the rails as seen visually. 'Severe GCC' was recorded in November 1999; 'heavy GCC' and 'severe GCC in April 2000'; 'gross GCC, severe chipping of surface, further deterioration' in June and 'severe GCC, gross chipping of rail surface in places' in October, after the September grinding. As the judge observed, the June reports revealed a 'grossly worsening situation and a worrying deterioration in the position which they described'. He concluded that there was no doubt that any competent RSM, having seen the rail, would have put a low emergency speed restriction on the track and sought the advice of engineers. In the event none of Balfour Beatty's personnel took any notice of the ultrasound reports. They were, as the judge found, "filed without any consideration being applied to the message they contained…the Hitchin office when confronted with the clearest possible evidence that action was needed…did nothing at all."
- The judge endorsed the comments of counsel for one of the individual defendants that Balfour Beatty's Hitchin office was "Fred Carno's Circus"; "a shambles" and "the blind leading the blind".
- At the start of his judgment, the judge set out the following principles, which he derived from the judgment in R v Howe & Co (Engineers) Ltd  2 Cr App R (S) 37:
"(1) Failures to fulfil the general duties imposed by sections such as, for example, section 3 of the 1974 Act are particularly serious, as such sections are the foundations for protecting health and safety of the public.
(2) Historically, fines for such offences, certainly those imposed by magistrates, have been too low.
(3) It is not possible to say that a fine should stand in any specific relationship with a turnover or net profit of the defendant. Each case must be dealt with according to its own circumstances.
(4) It may be helpful to look at how far short the defendant fell of the appropriate standard.
(5) Generally, where death occurs in consequence of the breach, that is an aggravating feature. To that proposition I would add that by analogy with cases of causing death by dangerous driving, multiple deaths must be regarded as more serious than single deaths, though not, of course, standing in anything like an arithmetical relationship with them.
(6) A breach with a view to profit seriously aggravates the offence.
(7) Also relevant is or may be the degree of the risk and the extent of the danger, specifically whether it is an isolated failure or one continued over a period.
(8) The defendant's resources and the effect of a fine on its business are important. Any fine should reflect the means of the offender, and the court should consider the whole sum it is minded to order the defendant to pay including any order for costs.
(9) Mitigation will include (1) a prompt admission of responsibility and a timely plea of guilty; (2) steps taken to remedy deficiencies drawn to a defendant's attention; and (3) a good safety record.
(10) Above all, the objective of the fine imposed should be to achieve a safe environment for the public and bring that message home, not only to those who manage a corporate defendant, but also to those who own it as shareholders. Later decisions have all drawn on and confirmed the usefulness of Howe as an authority and they have added the following further points of possible application to this case.
(11) The stated objective in Howe means that consistency of fines between one case and another and proportionality between the fine and the gravity of the offence may be difficult to achieve. Consistency may not, therefore, be a primary aim of sentencing in this area of law. R v Jarvis  EWCA Crim 1409 paragraph 7.
(12) The court can take a more serious view of the breaches where there is a "significant public element", particularly where the public has to trust a company entrusted with work relating to their safety to carry that work out competently and efficiently. The court can also take into account in such cases the fact, if appropriate, that is was a matter of good fortune that the risks, and presumably their consequences, did not turn out worse than in the event they did. Jarvis, again, paragraph 11.
(13) Where a defendant is a public body, it is not as such immune from criminal penalties because it has no shareholder or well-paid directors. But if a very substantial financial penalty will inhibit the cost of performance by a statutory body of a public function which it is set up to perform, that is not something to be disregarded. R v Milford Haven Port Authority CA 1999/00781/W2, 16 March 2000.
An NHS Trust, convicted under the Act, has presented this problem in a particularly acute form as was acknowledged by His Honour Judge Gordon in the first instance decision in Southwest London and St George's Mental Health NHS Trust, in this court on 5th May of this year."
- We have set these principles out in detail because they are a helpful summary of the guidance afforded by the decided cases, which guidance we would endorse. We shall have a little more to say about the relevant principles in due course.
- The judge reviewed the facts that we have summarised above in some detail. He held that it was not appropriate to make any discount for the fact that Balfour Beatty had pleaded guilty, because the plea had come so late and had been delayed for tactical reasons. By way of conclusions, he identified the relevance of the facts to the principles that he had set out at the start, using the same numbering:
"(1) These were both breaches of general duties owed to the public at large. Over the relevant period for which the breaches were in operation, something over three quarters of a million passengers will have been at risk by passing over this area of line at high speed.
(4) Both companies fell below the appropriate standard of care. In the case of Balfour Beatty, I regard their failure as lying at the top of the scale. I have spent over 30 years of my professional life involved in cases concerning the duty of care, including many of the major transportation and other disasters of the late 1980s and the 1990s.
I remind myself to guard against overreaction to this incident and I believe I have done so. But I have to say that I regard the failures of Balfour Beatty, set out above, as the worst example of sustained, industrial negligence in a high-risk industry I have seen.
Railtrack's failures were lamentable, but of a lower order by a clear margin. Mr Thwaites urged me to say that in terms of relative culpability both defendants stand in broadly the same position, or, if there is to be any disparity between them, it should not be great.
Doing the best I can and following this approach, I assess Balfour Beatty's culpability at somewhere between two and three times that of Railtrack.
(5) Four deaths are an aggravating feature of these breaches. There could easily have been more.
(6) I do not view these breaches, both being sins of omission, as having been done with a view to profit in the sense that that phrase should properly be used,
(7) These were not isolated failures in that they affected a substantial part of a busy, high-speed line for at least 21 months.
(8) Both defendants say in terms that they are in a position to pay whatever fine the court sees fit to impose. For that reason, detailed examination of their financial positions has not been necessary. I treat them both as major players in the national industrial landscape. The fact that BBRIS is entirely independent at law from its parent need not concern me in circumstances where the parent accepts the reality of the position; it is a creature through which the parent runs half of its group business.
On the other hand, I should not inflate any fine I had in mind because the parent shareholder's means are substantial. I intend to fix a fine in each case which is appropriate to be paid by a company able to pay it but one whose impact should be felt by those who own and/or control it.
(9) There is no credit for any plea of guilty, but I accept that both companies acted with exemplary urgency and took effective measures after the accident to prevent any future reoccurrence of this event.
Balfour Beatty is no longer in the business of railway maintenance, Network Rail has taken over from Railtrack and has taken maintenance in-house with a new organisation, increased funding, manpower and other resources. No-one can predict the future, but there is no doubt in my mind that the risks of such a tragedy repeating itself have been reduced by the actions of both defendants, principally those of Network Rail, to the lowest, practicable level.
This is an industry, as this case shows, full of good, devoted, loyal railwaymen. In a proper setting and given proper support they should be able to prevent a future Hatfield.
The elimination of one of the more indefensible features of the 1996 privatisation, namely, the separation of the ownership and control of the track from the execution of maintenance upon it, has now gone. Perhaps that is the one good result to have come out of this disastrous affair.
(11) I have looked at a number of authorities provided to me but, at the end of the day, none helps me in anything more than the most general sense.
(12) Self-evidently there was a "serious public element" in this matter and it is a case where par excellence large numbers of the travelling public put their trust in these two defendants and were let down."
The grounds of appeal
- Balfour Beatty advanced the following grounds of appeal:
"1. The judge erred in concluding that BB's failure lay "at the top of the scale" and was one of "the worst examples of sustained industrial negligence in a high risk industry I have seen". He failed properly to assess the level of BB's failure and/or properly to place such failure in its correct context.
2. The judge erred in assessing BB's "culpability at somewhere between two and three times that of Railtrack" but in fining BB £10 million and Railtrack £3.5 million.
3. The level or amount of the fine imposed against BB was excessive in the circumstances and/or having regard to previous large fines of companies for HSWA offences in England and Wales.
4. The judge erred when he concluded that he was "quite unable to extend any discount to BB for the plea it entered at the stage which it entered it"."
We shall deal with each in turn.
The gravity of Balfour Beatty's fault
- Mr Jonathan Caplan QC for Balfour Beatty submitted that the judge had significantly overestimated Balfour Beatty's culpability. He had held that Balfour Beatty's breach of duty extended over a period of 21 months – that is from January 1999 to the date of the derailment. The start of this period was the date of the first ultrasonic report. This was the occasion of the first ultrasonic test report to record the visible presence of GCC. Mr Caplan submitted that this could not be equated with a situation of risk. Visible GCC did not, of itself, demonstrate that a rail was dangerously defective. In June 2000 spalling – that is the detachment of large flakes of material from the running surface of the rail – was observed. This, coupled with visible GCC, was an indication that the risk of rail break existed. This was only four months before the derailment. The judge should have found that this was the relevant period of breach of duty.
- We were unpersuaded by this argument. Balfour Beatty had contracted, for a very substantial sum, to play a vital part in the task of ensuring that the track was safe for the passage of trains proceeding at a speed of 125 MPH, namely the regular inspection of the track, visually and ultrasonically, against defects that might threaten its safety. Balfour Beatty were going through the motions of inspection, but the visual inspections were being carried out from a vantage point that patently rendered the inspection futile. As for the ultrasonic inspections, these were a charade because the results were not considered by anyone qualified to evaluate the information that they conveyed – indeed they were not considered at all. This situation constituted a systemic failure by Balfour Beatty of a very high order in a context that put large numbers of the travelling public at risk. It was a situation that prevailed from at least January 1999. The fact that the rail progressively deteriorated from January 1999, when it may not have been in a condition that threatened a fracture, to the state in which it ultimately fragmented in October 2000 does not mean that Balfour Beatty were only culpable in the last few months when the rail was visibly at risk of failure.
- We consider that the severe terms in which the judge castigated Balfour Beatty's breach of duty were justified. It is true that the indictment selected December 1999 as the date on which the breach of duty under section 3 of the 1974 Act arose, but this did not preclude the judge from considering the overall context of Balfour Beatty's conduct in order to assess its culpability.
- Other points made on behalf of Balfour Beatty have some limited validity. Balfour Beatty's conduct was not the result of deliberately putting profit before safety, albeit that a safe and effective system of visual inspection would probably have required additional workmen to warn of the approach of a train. Mr Caplan further submitted that there was no failure to heed warnings or industry advice. While the former was true, the judge found that there was a failure to comply with the applicable standards governing ultrasonic inspection, although he accepted that these did not provide a clear and unambiguous code. The judge also expressed the view that what had been a lengthy debate about whether standards had been breached had not been useful. Balfour Beatty's approach to testing had constituted a most serious departure from good practice, whether or not it was contrary to specific standards. Finally the judge accepted that Balfour Beatty, and Railtrack, "acted with exemplary urgency and took effective measures after the accident to prevent any future recurrence of the event". The fact remains, however, that over many months Balfour Beatty's approach to duties upon which the safety of rail travellers depended had been lamentable.
- For these reasons we are not impressed by this ground of appeal.
Balfour Beatty's fine compared to that of Railtrack
- In deciding on the appropriate fines for the two companies, the judge expressly compared Balfour Beatty's culpability to that of Railtrack. He concluded that it was somewhere between two and three times as great. He made a small allowance in Railtrack's favour to reflect the fact that it did not distribute dividends but ploughed back all 'profits' into the railway system, so that the funds needed to pay the fine would be funds that would otherwise be spent on railway safety. The fine that he imposed on Railtrack was £3.5 million.
- Mr Caplan submitted that the judge had erred in his assessment of the relative culpability of the two companies. He argued that Railtrack was at least as culpable as Balfour Beatty. Railtrack had accepted that it had prime responsibility for the safety of the track. It had failed to ensure that there was an effective grinding regime. It had further failed to ensure that the defective stretch of track was re-railed prior to the derailment.
- We shall shortly consider the alleged failure to grind and re-rail. First, however, it is important to identify the basis upon which the judge sentenced Railtrack. This appears from the following passage in his judgment:
"I turn to the basis upon which Railtrack falls to be sentenced. This can be much more simply stated. It is based on Particulars 1 to 6 of Count 1. In those respects it was strictly liable for the underlying failings of its IMC and failed to satisfy the jury that it could not have done more to remedy them. It does not fall to be sentenced for its failure to rerail where it faces now no allegation or to provide grinding or to clarify its standards earlier than it did, or for any other of the criticisms made by Mr Thwaites in his mitigation.
It means I must find that its liability is more serious than an automatic or vicarious liability would have been, since it failed, itself, to do more to uncover the failings of Balfour Beatty at Hitchin. Equally, Mr Sweeney argues with some justification that A's failure to detect B's failure to do what B's duty requires him to do is, in the scale of things, less culpable than B's failure, which should be viewed as the primary and more important default. As a general proposition, I see the force of that argument. "
- It was not satisfactory that the judge was put in the position of feeling constrained to impose sentences on the defendants that did not accurately reflect their relative culpability. It is unfortunate that the prosecution did not focus from the outset on the question of Railtrack's culpability in respect of the failure to implement a regular regime of grinding the rails and for failure to ensure that the defective rail was replaced before it failed. We suspect that this may have been because the prosecution were devoting their primary energies to securing convictions for manslaughter – a goal which proved to be unrealistic. Corporate manslaughter is a notoriously difficult offence to establish. The 1974 Act affords the court the ability to reflect in the size of the fine imposed on a company the culpability involved in causing a fatal accident. In a case such as this the prosecution should reflect carefully before making their task more difficult and risking unbalancing the evaluation of the evidence by putting at the forefront of their case charges of manslaughter, rather than relying simply on the 1974 Act.
- The judge was in no doubt that there had been faults on the part of Railtrack that he could not reflect in its sentence:
"Mr Thwaites correctly argues that rerailing was the only sure way of eliminating this risk. Railtrack has always accepted and, indeed, it did, within days of the crash, that it failed in this respect. Equally, it is agreed that Balfour Beatty knew or ought to have known of this continuing failure and that the responsibility for continuing inspection and maintenance of the track remained with them pending rerailing until the very minute of handing the track over to the rerailing contractor. Balfour Beatty can have been in no doubt about that. Quite plainly, however, this failure by Railtrack was a contributory cause of the crash, although it is not one which is included in this list of particulars against them. "
The judge described this as "incompetence of a serious order" and "a lamentable chapter of negligence involving Jarvis and Railtrack".
- The judge further appears to have accepted the following criticism of Railtrack:
"Grinding was in the hands of Railtrack. They failed to grind the rail at all, when asked to in 1998, until September 2000 and, when they did, it was too late and too severe."
- We sought clarification from Mr Lissack QC, who appeared for the prosecution at the trial and before us, in relation to this area of the case. He told us that the evidence was that, on the initiative of a Mr Deards, who worked for Balfour Beatty, a joint inspection of the relevant section of the track by Balfour Beatty and Railtrack took place on 15 February 2000. It was decided that this section of the rail required replacement. There was then a delay of 9 months, in the course of which new rail was delivered, but left to lie beside the track. The rail was not replaced before the derailment.
- Thus Balfour Beatty drew the attention of Railtrack to the need to replace the rail in question. This does not mean that the rail was dangerous at that stage. The object of replacing rail is to anticipate the stage at which it becomes dangerous. But the judge found that the failure to ensure the replacement of the rail involved serious fault on the part of Railtrack. Balfour Beatty, for its part, was also aware that the rail required replacement. It should, in accordance with its inspection duties, have identified the further deterioration of the rail that occurred and imposed speed restrictions. These would no doubt have led to the immediate replacement of the rail. We shall consider the significance of these maters in due course.
The size of the fine
- Mr Caplan contrasted the fine of £10 million imposed on Balfour Beatty with the fines imposed, albeit after giving credit for guilty pleas, with the fine of £1.5 million imposed in 1999 in respect of the Southall train crash, which resulted in 7 deaths and 150 injuries and the fine of £2 million imposed in 2004 in respect of the Paddington rail crash, in which 31 people were killed and 450 injured. The former involved the lack of an adequate system to deal with the failure of an automatic warning and the latter a failure to provide adequate training. Mr Caplan suggested that these were comparable cases.
In August 2005, about a month before the judge imposed the sentences in the present case, Transco was fined by the Court of Session in Scotland £15 million after contesting liability for breach of the 1974 Act in circumstances where deterioration in the condition of a gas pipeline had led to a fatal explosion. Mr Caplan submitted that the judge must have fastened on this case and decided to impose a similar fine, to be shared between Balfour Beatty and Railtrack. He submitted that Transco was not an appropriate precedent. In that case senior management had had knowledge for over a decade of the state of affairs that led to the fatal explosion.
- We have already endorsed the guidance afforded by the previous decisions in relation to the 1974 Act, as summarised by the judge in his 13 propositions. Only one of these, proposition 10, deals expressly with the objects of the sentence, namely 'to achieve a safe environment for the public and to bring the message home, not only to those who manage a corporate defendant, but to those who own it as shareholders'.
- The objects of sentencing are now spelt out by section 142 of the Criminal Justice Act 2003:
"142 Purposes of sentencing
(1) Any court dealing with an offender in respect of his offence must have regard to the following purposes of sentencing –
(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."
Most of these can be applied in the case of a company, although there are obvious difficulties in applying subsection 1(c).
- Section 3 of the 1974 Act requires positive steps to be taken by all concerned in the operation of the business of a company to ensure that the company's activities involve the minimum risk, both to employees and to third parties. Knowledge that breach of this duty can result in a fine of sufficient size to impact on shareholders will provide a powerful incentive for management to comply with this duty. This is not to say that the fine must always be large enough to affect dividends or share price. But the fine must reflect both the degree of fault and the consequences so as to raise appropriate concern on the part of shareholders at what has occurred. Such an approach will satisfy the requirement that the sentence should act as a deterrent. It will also satisfy the requirement, which will rightly be reflected by public opinion, that a company should be punished for culpable failure to pay due regard for safety, and for the consequences of that failure.
- A breach of the duty imposed by section 3 of the 1974 Act may result from a systemic failure, which is attributable to the fault of management. It may, however, be the result of negligence or inadvertence on the part of an individual, which reflects no fault on the part of the management or the system that they have put in place or the training that they have provided. In such circumstances a deterrent sentence on the company is neither appropriate nor possible. Where the consequences of an individual's shortcoming have been serious, the fine should reflect this, but it should be smaller by an order of magnitude than the fine for a breach of duty that consists of a systemic failure.
- In this case there was a serious systemic failure on the part of a company whose contractual duties were directed at securing the safety of rail travellers. The consequence was 4 deaths and over 100 injured passengers. If one has regard to the fact that Balfour Beatty is a very substantial company and that its overall remuneration under its 7 year contract was £368 million, it is hard to say that the fine of £10 million was wrong in principle, albeit that it was severe. We did not find that exercise of comparing this fine with those imposed in other cases helpful. We do not consider that the fines imposed in the other two rail cases provide an appropriate benchmark for a case such as this. Nor is there any reason to believe that the judge was setting out to impose a fine similar to that imposed in the Transco case.
- We are, however, concerned by the disparity between the fine imposed on Balfour Beatty and that imposed on Railtrack. The judge concluded that he was precluded from having regard to Railtrack's true culpability because the particulars of the charge against Railtrack did not embrace the failure to ensure that the defective rail was replaced or that a satisfactory grinding regime was in place. Railtrack had defended the charge made against it on the ground that it had done all that it could to ensure that Balfour Beatty had performed its duties. The jury was not persuaded of this. The judge commented:
"They must have felt, in relation to counts 1, 2, 4 and 6 particularly that there was more that Railtrack could have done by way of intrusive audit, end-product checking on the ground and by way of direct action."
- When a jury returns a verdict of guilty the judge, when sentencing, can properly have regard to his own appraisal of the evidence that has led to that verdict. When considering Railtrack's culpability the judge considered himself circumscribed by the particulars that had been added to the indictment at the conclusion of the prosecution case. Even so, we cannot see why the judge could not properly have had regard, when considering Railtrack's culpability, to that fact that the seriousness of Railtrack's failure to ensure that Balfour Beatty performed its duties was the greater because Railtrack had agreed in February 2000, at the instigation of Balfour Beatty, that this section of the track needed replacing and knew, or should have known, that the replacement had not been effected.
- What effect if any should the size of the fine imposed on Railtrack have on Balfour Beatty's appeal? Disparity between the sentences of two defendants is not an automatic reason for reducing a sentence. In 1983 Lawton LJ, giving the judgment of this court in R v Fawcett 5 Cr App R (S) 158 at 161 approved the following test:
"would right-thinking members of the public, with knowledge of the relevant facts and circumstances, learning of this sentence consider that something had gone wrong with the administration of justice. "
That test has been applied to this day – see Archbold 2006 edition paragraph 5-101. The disparity in the two fines is so great in this case that we consider that the test is satisfied.
- To restore appropriate proportionality between the two fines would require Balfour Beatty's fine to be reduced to a level at which it failed to give proper effect to the principles that we have discussed above. We do not consider that this would be right. Those principles do, however, provide more assistance in identifying the lower limit of an appropriate range of fine than the upper limit. They leave the sentencing judge a wide discretion as to the level at which to pitch the fine. The fine of £10 million on Balfour Beatty was severe. We consider that there is scope for a reduction in the interest of proportionality which will still do justice to the applicable principles and, in particular, to the victims of the Hatfield disaster. We have decided that Balfour Beatty's fine should be reduced to £7.5 million, thereby reducing the disparity between its sentence and that of Railtrack.
The effect of the guilty plea
- The Sentencing Guidelines Council has given guidance in relation to reducing a sentence in order to reflect a plea of guilty by the defendant. It recommends that a discount of one third should be made where a defendant pleads guilty at the first opportunity and that a reduction of 10% is appropriate where the guilty plea is only entered at the door of the trial. As to that situation, the guidelines advise in paragraph 4.3(v) that "if a not guilty plea is entered and maintained for tactical reasons, a late plea of guilty should attract very little, if any, discount". The judge considered that this advice applied to Balfour Beatty's plea made, not at the door of the trial, but 93 days into the trial. He declined to make any reduction for Balfour Beatty's guilty plea.
- Mr Caplan repeated before us submissions that had failed to find favour before the trial judge. He submitted that Balfour Beatty could not reasonably be expected to plead guilty to breach of section 3 of the 1974 Act when charges of manslaughter against itself and its employees were still being pursued. As soon as the manslaughter charges were dismissed, the company pleaded guilty to the charge of breach of section 3. Thus it pleaded guilty at the first reasonable opportunity and should have been granted the full discount of one third. Alternatively, some discount should have been given for the plea of guilty, although it came at a very late stage.
- The judge commented:
"Balfour Beatty's 94-page defence case statement and Mr Thwaites' opening address to the jury contained no single hint of any fault or failing on behalf of Balfour Beatty's part, far from it. I have no doubt it was perceived as a matter of forensic tactics, to be of benefit, principally, to the company itself and possibly its employees, to take this line to avoid contaminating the jury's minds with any acceptance by Balfour Beatty of any criminal responsibility."
He concluded that these forensic tactics carried the consequence that no credit could be claimed for the late plea of guilty.
- We consider that the judge was correct to reject the submission that Balfour Beatty had pleaded guilty at the first reasonable opportunity. We do not accept that the outstanding charges of manslaughter precluded the company from pleading guilty to the section 3 offence at the outset. The company did not even take the course, which was open to it, of offering a plea to the section 3 offence on condition that the manslaughter charges were not pursued. We have been in some doubt as to whether some small discount should have been given for the very late guilty plea, but have had in mind that the judge was ideally placed to decide whether Balfour Beatty deserved any credit in respect of its belated plea of guilty. The judge's reaction to this issue was one that was properly open to him and it would not be right to interfere with his decision.
- For the reasons that we have given, this appeal is allowed to the extent that the fine of £10 million will be quashed and replaced with a fine of £7.5 million.
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