Tata Steel UK recently secured a significant reduction of a health and safety fine by appealing the fine to the Court of Appeal. It is understood to be the first successful appeal by a large company of a Crown Court judge's sentencing decision pursuant to the new Health and Safety Definitive Guideline (see our article on the Definitive Guideline here).
Tata Steel UK had been fined £185,000 and £1.8 million originally for two separate incidents involving hand injuries following employees placing their hands into machinery. The second of these fines was reduced following a finding by the Court of Appeal that the sentencing judge had erred in deciding that the likelihood of harm arising for one of the offences was "high".
The Court of Appeal judgment is important because it:
- Provides rare insight into the sort of arguments that can succeed on appeal against sentence under the new Definitive Guideline;
- Demonstrates the wide discretion available to judges to move outside fine ranges specified in the Definitive Guideline when sentencing very large organizations; and
- Gives an indicator of the circumstances where parent company accounts can be taken into account when determining the appropriate fine for a subsidiary company.
The Crown Court decision
Offence 1 involved a worker who suffered injury through a practice whereby blockages on a conveyor for steel tubes would be cleared by hand. Despite the injured worker having been provided with training, culpability was deemed to be "medium". The judge also found there to be a "medium" likelihood of harm arising. Applying these findings, the Definitive Guideline indicated a starting point of £300,000.
However, exercising the discretion allowed under the Definitive Guideline to move outside the specified ranges for "very large companies", the judge deemed £300,000 for Offence 1 to be too low for Tata Steel UK. In view of the turnover of the company, he modified the starting point to £600,000. This would have been the starting point had the likelihood of harm arising been categorised as "high". Whilst an initial fine of £700,000 was proposed, the early guilty plea and requirement to ensure a just and proportionate sentence for both offences led to a fine of £185,000. These reductions were described by the Court of Appeal as very generous.
Offence 2 involved a piece of machinery again being insufficiently guarded to protect a worker, who lost part of a finger. An Improvement Notice had been issued after the first incident, and the prosecution argued that if sufficient steps had been taken to comply with the Improvement Notice, the second incident would not have happened. Culpability was deemed to be "high", and it was also decided that there was a "high" likelihood of harm arising. Applying these findings, the Definitive Guideline indicated a starting point of £1.1m.
However, again exercising the discretion allowed under the Definitive Guideline to move outside the specified ranges for "very large companies", the judge deemed £1.1m for Offence 2 to be too low for Tata Steel UK. This time the judge moved the starting point to £2.4 million – the starting point for an offence involving a more serious level of harm. For a number of reasons, including what he described as an inadequate focus by senior management on day to day safety, and also to ensure a real economic impact as required by the Definitive Guideline, the judge increased the starting point to £2.75 million. After a one-third reduction of this figure for the early entry of the guilty plea, the overall fine for offence 2 was £1.8 million.
The Court of Appeal decision
The overall fine (i.e., the total for both offences) which was being appealed was £1,985,000. On appeal the Court of Appeal decided to modify the fine for offence 2 to £1,315,000 but to dismiss the appeal for offence 1. The net result was a reduction in the overall fine of nearly £500,000. Here are the key points of interest about the decision:
- The Court of Appeal decided the sentencing judge had incorrectly categorized the likelihood of harm for offence 2. When assessing the likelihood of the harm materializing, the period of operation of the machine without incident is persuasive authority against the finding of a high likelihood. There had been 150,000 man hours without incident. The fact a previous incident with the same piece of equipment which the judge relied on to justify the higher likelihood of harm was 15 years earlier carried weight in favor of a lower level of likelihood. So this element of the appeal was successful, and led the Court of Appeal to adjust the judge's sentencing decision on this point.
Very large companiesThe Court of Appeal considered whether the judge was entitled to move outside of the category range in view of Tata being a "very large organization". The Court held that the guidelines should not be applied mechanistically or construed as statute, and that the sentencing judge was entitled to ensure proportionate sentencing by modifying the harm category. This shows that the Court of Appeal is reluctant to interfere with a judge's discretion to move outside of the penalty ranges. This appears to be the case even where, as here, the way in which the judge exercised this discretion (simply "bumping up" the harm level and using the increased range which resulted) appears somewhat arbitrary.
- The Court of Appeal did not accept arguments advanced by Tata Steel UK that the losses made by the company warranted a downward adjustment in the fine. Rather, the Court of Appeal decided that the sentencing judge was entitled to take into account the resources of the parent company and concluded that there was no need to adjust the fine downwards. This is important for any group of companies where there are operating subsidiaries which are funded by larger or more profitable parent companies.
This appeal was successful for Tata Steel UK, resulting in a significant reduction in the fine. It serves as a useful pointer on the sorts of arguments that can have potential on appeal (e.g. based on culpability or likelihood of harm); and the sorts of arguments that are likely to be more challenging (e.g. the exercise of a sentencing judge's discretion to move outside penalty ranges for very large organizations).
It also serves as a reminder that where a parent company is funding the activities of a subsidiary, then even where there is operational separation between the parent and the subsidiary, the court may look to the resources of the parent when determining the fine.