This article takes a look at the Merlin Attractions judgment and considers what practical steps lawyers can take to help their clients and predictions for the future. Skip to this section »
Since the introduction of the new sentencing guidelines for health and safety offences in February 2016 we have seen some significant fines being handed out by the courts. The sentencing guidelines are truly starting to bite big corporates and the upward trend in penalties for health and safety breaches cannot be ignored. In September 2016 alone we have seen six fines being handed down in respect of health and safety offences that were in excess of £1m. That works out at more £1m fines per month than the previous rate of £1m fines per year—prior to the implementation of the new sentencing guidelines. For reference, that now gives a total of 16 £1m plus fines which have taken account of the new sentencing guidelines (including three cases from the week prior to the implementation of the new sentencing guidelines).
There has been a clear increase in the number of £1m fines since February 2016. These cases show us that there has been a shift in the landscape in health and safety sentencing and the courts are now more than willing to give sentences in the £1m plus range, even where a death has not occurred. Non-fatal incidents are attracting these high fines which is something that we have rarely previously seen.
Judges are increasingly looking at wider system failures, not just one-off risks presented at the time of any incident. The reason for this is that courts are able to move up the category ranges when deciding on fines if they believe there to have been long periods where risks are present. Courts are also now encouraged to look for certain features in a case that might increase fine levels. Because the fine levels are categorised in terms of company turnover, courts are placing a particularly heavy emphasis on interpretation and scrutiny of company financial information and accounts, including director’s pay and group company finances.
While we have seen successful prosecutions of ‘very large companies’ (ie those companies being outside the guidelines which go up to ‘large’), we have yet to see a court step outside the guidelines and sentence for a ‘very large company’. Under the guidelines and there is no definitive figure that a company has to reach to be considered ‘very large’, this would be down to judicial interpretation. Merlin Attractions has a turnover of £400m and the judge sentenced the case in the bracket for a ‘large company’ (over £50m) for the purposes of sentencing. However, in sentencing the judge stated that it was ‘certainly arguable that this company’s turnover, at around £400 million, is one that would justify moving outside of the justified offence range…’. It is implicit, although not stated, that this departure would be on the basis of it being a very large company.
When you look back at page 30 of the original consultation document to the guidelines there is a suggestion that:
- a company with turnover in the region of £350m would be large
- a company with turnover in the region of £900m would be very large
Although no guidance as to where between these values the threshold would lie, it could not be that they intended for this to be at £400m or they surely would have picked better examples. Therefore, the recent Merlin Attractions case highlights that the courts are willing to subjectively interpret the guidelines where there is a lack of rigidity. This is very concerning for companies, particularly those that benefit from high turnovers.
The obvious message to take from these cases is that huge health and safety fines are becoming the new norm—the recent £5m fine for Merlin and the £4m fine for Network Rail make that clear. The new sentencing guidelines are truly starting to bite big corporates—and there is no hiding place for directors and shareholders either, with sentencing remarks in the Alton Towers case looking at generous share options and directors’ take home pay. Judges involved in the sentencing of these cases are paying close and careful attention to company accounts, particularly given that they are seeking fines to be imposed that bring home the message of the importance of health and safety compliance to directors and shareholders.
Following the upward trend in penalties in such cases, companies will be seriously increasing their fine reserves. Serious health and safety incidents and subsequent investigations will now attract board level attention more and more. This is a result of a number of factors, not just the increased fine levels.
Importantly, the guidelines do not require actual harm to have occurred (although it will be an aggravating feature), only the risk of harm. Therefore previously innocuous risks could now lead to prosecutions where a risk of serious injury or even death is proven. We saw this in the case of Conocophillips who were fined £3m in March 2016 following a gas leak on an offshore gas platform. In that case, no injury occurred, but the risk of injury or death of 66 workers on the platform was evidenced. Prior to the implementation of the guidelines, while the risk of harm was technically relevant, we never saw fines of that level where no actual injury occurred.
Senior management teams in large corporates are also worried about the public relations aspects of such cases and the ongoing effect that this could have on their business. As we have seen in a number of cases this year, the press are now increasingly keen to follow health and safety stories, and as fine levels increase, so will the appetite to follow these stories and publicise them in the press.
Following the Merlin case, a real worry for companies is the fact that, even though Merlin accepted guilt in the aftermath of the accident and cooperated right from the offset, the feeling is that this made no demonstrable difference to the level of penalty. The sentencing judge did state that had the case gone through a trial and Merlin had been found guilty, he would have issued a penalty of £7.5m but he reduced this by one-third to £5m—being a one-third reduction for an early guilty plea. However, the £5m fine still felt to be at the high end of what was expected. Therefore, if the courts aren’t prepared to take such a positive reaction into account in mitigation, what is the likelihood of other companies playing ball? We may well, as a result, see an increase in long, drawn out legal proceedings that will tie the courts up in knots and prolong the discomfort for those involved as companies decide to use litigation to help bring out mitigation.
What practical steps can health and safety lawyers take to try to help their clients avoid such large fines?
Lawyers representing clients in health and safety cases should focus primarily on helping their clients carefully negotiate their way through the incident aftermath and the subsequent investigation. This can be a critical period to help to shape the case in the mind of the regulator with a view to minimising the company’s exposure in a prosecution, or avoiding a prosecution in its entirety. Lawyers need to be quickly engaged by clients to ensure that control is placed over the company’s response to the incident. One common area that trips companies up is their internal investigation following an incident. If this is done without the benefit of legal professional privilege, the regulator can simply request (demand) a copy of this to use against the company. In such internal documents companies are often extremely self-critical and it is hard to imagine many pieces of evidence that would be stronger to assist the prosecution than a document drafted by the defendant themselves criticising their own health and safety compliance.
As well as seeking to avoid or minimise prosecution for their clients from the outset, health and safety lawyers now must also be thinking of the ultimate sentencing exercise that their clients may be facing in court months or years down the line.
Specifically, culpability, likelihood of harm and harm risked will all be ‘up for debate’ in a health and safety case, and this is where a real difference could be made to help clients avoid the large fines.
The key to the new guidelines is trying to narrow and limit the risk of harm to a particular time and incident rather than system failures that have been present for a period of time and exposed a number of people to risk over that time. This is what drives the fine up the category range and HHJ Chambers did exactly that in the Merlin case, allowing him to move up the fine range brackets when sentencing the company.
Additionally, lawyers need to consider the need to quickly obtain additional financial information (eg accountant’s reports) given the level of scrutiny that the courts are placing on company finances and the importance that this information has when interpreting the guidelines. The will allow a case to be focused on the potential outcome from the earliest stage.
What are your predictions for the future of sentencing health and safety offences?
I see absolutely no prospect of health and safety fines reducing in the future, if anything, they will continue to rise as the judiciary become increasingly confident in departing from the old sentencing guidelines.
It has always been expected that it would take a period of time for the new guidelines to be embedded within the judiciary, and as judicial confidence grows and more companies are being sentenced, their begins to be a body of cases for judges to take account of and compare when passing judgment on fines. Judges are likely to have been less confident at the outset given the risk of appeal, and yet large fines were still seen. Therefore, it is not beyond the realms of possibility that fine levels will still continue to rise. We are yet to see an appeal of sentence under the new guidelines, even with the significant fines that have been imposed, and that is because, while the fines feel substantial, they have been well within the allowable levels of the guidelines.
However, as companies face increasing fines, it will surely follow that appeals will become more common and with those appeals, the prospect of further judicial guidance on the implementation of the new guidelines.
Areas of contention between prosecution and defence will undoubtedly be focused on the exercise of categorising culpability, likelihood of harm and harm risked. Therefore, where there is likely to be an acceptance of some form of guilt in a case, I believe that the negotiation between the prosecution and defence around basis of plea will become key as this is where defence teams in health and safety cases can look to reduce fine levels before stepping foot in court.
Given the importance in getting offences categorised as low as possible under the guidelines I predict that there will be a real upsurge in the use of expert evidence that seeks to limit the risk of harm in cases. Also, I expect an increased use of forensic accountants to assist with the financial scrutiny that will be a major feature in such cases.
Even in cases where some form of guilt is potentially accepted by a defendant company, if the prosecution are not willing to sensibly negotiate on matters to be contained within a basis of plea, I can see larger companies conducting mitigation through litigation. For example, if a large or very large company (under the guidelines) is charged with a serious offence(s) and the prosecution are resolute in prosecuting the case at its highest point, companies will seek to go to trial to defend a matter that they know that ultimately they are likely to lose. The reason for this is that the court will then hear the true level of culpability, likelihood of harm and harm risked rather than a snapshot version of the prosecution’s view on this and the defendant’s view on this in a relatively short sentencing hearing that may only last for half a day.
Corporates are taking the view that it is worth running a ‘losing trial’ and the costs associated with that, to seek to at least push the offence level down through the categories under the sentencing guidelines, thereby reducing the fine. Therefore, we may well see, as a result of the recent increased fines in health safety, an increase in long, drawn out legal proceedings through trials that will tie up court time and Health and Safety Executive/Crown Prosecution Service time in prosecuting such matters.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.