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Health and Safety: One sentencing size does not fit all

Blogs19/02/2018

Whirlpool case helps cast light on sentencing fines for ‘very large’ organisations, but Court of Appeal decision unlikely to stem flow of hefty fines.

A judgment by the Court of Appeal has significantly reduced a recent fine for appliance manufacturer, Whirlpool, but has reiterated that profit margin did not factor in the decision. Whirlpool UK Appliances Limited was originally fined £700,000 in March 2017 following a fatal accident, but had appealed the size of fine, suggesting the sentencing guidelines displayed a level of inconsistency for ‘very large’ organisations.

Background

The company was originally sentenced to pay the fine having pleaded guilty to an offence pursuant to Section 3(1) of the Health and Safety at Work Act 1974. Section 3 (1) 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. The prosecution followed the death of a self-employed contractor as a result of an accident at Whirlpool’s premises. The contractor was working on the fire and heat detector systems from a mobile elevated working platform which he had manoeuvred between hanging baskets on the overhead conveyor system. The system was set in motion by an employee of Whirlpool 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 the contractor to fall. He suffered multiple fractures and tragically died ten days later from complications arising from his injuries.

The failings which gave rise to the breach of S.3 included Whirlpool not insisting on a job specific risk and method statement and not preparing a more detailed Permit to Work. This specifically identified the potential risk posed by a working platform being used in the vicinity of the overhead conveyor and the control measures required.

Whilst Whirlpool had accepted responsibility for the incident, it disagreed with the approach that the court had taken in applying the sentencing guidelines for health and safety offences. The guidelines had been in force for almost two years at this point and, whilst it was intended that the guidelines would bring consistency and certainty to the sentencing of health and safety offences, there have been some instances, particularly in relation to organisations categorised as ‘very large’ (with a turnover of more than £50 million), where sentences have still been described as inconsistent.

The Appeal

Whirlpool challenged the sentence on the basis that, amongst other things, the company had disproportionately low profit margins in the context of the size of the fine. The judgment in Whirlpool’s appeal against sentence was delivered by Lord Chief Justice Burnett on 20 December 2017. The Court of Appeal considered three issues:

  1. The impact of a death on the approach to the ranges set out in the Guideline;
  2. How one identifies and then treats a ‘very large organisation’ for the purposes of the Guideline; and
  3. The impact of relatively poor profitability in the context of an organisation with a substantial turnover

The Fine

Whirlpool’s recorded turnover in 2014 was £672,842,000 whilst in 2015 it was £710,798,000. In 2014, the company’s profit before tax was £24,738,000, however the company registered a loss of £165,041,000 in 2015. The sentencing court had determined that the ‘starting point’ for the fine should be £1.2 million. It then reduced the figure to £700,000 based on there being no aggravating factors, a wealth of mitigating factors, and the fact that the company pleaded guilty straight away.

However, the Court of Appeal took a slightly different approach to the applicability of the sentencing guidelines. It agreed Whirlpool was still within the category of ‘very large’ organisations but determined that the appropriate starting point was £250,000. This figure took into account that the sentencing court had not applied the sentencing guidelines correctly at the start of the process. The fine was adjusted to £500,000 due to the company’s substantial turnover, then, taking into account mitigating factors, reduced to £450,000. Finally the company’s early guilty plea reduced the fine by a further third to £300,000.

The company’s profits during this period were unusually affected by a national programme of repairs to thousands of potentially dangerous tumble dryers, and were therefore discounted.

Conclusion

Since the implementation of the sentencing guidelines there has been a lot of publicity around the fact that a company’s turnover is one of the key factors in determining the level of fine to be imposed. This case is a good illustration that profitability of a company is relevant and should also be taken into account in the right cases. The guidelines state that “If an organisation has a small profit margin relative to its turnover, downward adjustment may be needed. If it has a large profit margin, upward adjustment may be needed.” Lord Chief Justice Burnett gave further guidance in respect of this aspect of the guidelines by confirming that “an organisation with a consistent recent history of losses is likely to be treated differently from one with consistent profitability.”

Whilst this case does confirm that matters such as culpability, likelihood of harm and harm itself should be properly reflected in any fine, this case clearly sends out the message that health and safety cases turn on their individual facts and that, despite this decision, the guidelines provide for substantial fines where the offender is a large or a very large organisation.

The fact that the appeal succeeded does not give large or very large organisations any comfort, nor is it likely to prevent the general increase in large health and safety fines.

Lord Chief Justice Burnett went on to say “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.”