In November, the Sentencing Council launched a consultation on its sentencing guidelines for health and safety offences, which closes on 18 February 2015.
When setting a fine the court considers a defendant’s level of culpability and means. The consultation proposes that an offending organisation’s means will initially be based on its turnover.
It is asserted that this is a clear indicator that can be “easily assessed” and “is less susceptible to manipulation”. However, without consideration of the wider financial circumstances, this approach can lead to unfairness. R v R and S Recycling [2014] EWCA Crim 2302 is a case in point.
R and S Recycling had received large quantities of paper, plastic, card and other materials for recycling at its site. The material would either arrive in bales or be baled at site. These bales were then stacked and stored in its warehouse. In February 2011, one of its employees was killed when bales fell from a stack and one landed on him. In the opinion of HSE’s expert, the bales should have been strapped or interlocked.
Shortly before the trial, R and S Recycling changed its plea to guilty. It agreed HSE’s costs at £57,927.47. However, the company was fined £100,000. The judge said that this figure took into account a 20 per cent discount for its guilty plea. The current sentencing guidance for health and safety offences that cause death states: “the appropriate fine will seldom be less than £100,000 and may be measured in hundreds of thousands of pounds or more”.
The company had started trading in 2008 and in its first year had a turnover of £85,000 with a pre- tax profit of £25,000. In 2009, its turnover was £1,157,000 with a pre-tax profit of £172,000. In 2010, turnover was £1,760,000 with a loss of £65,000. In 2011, turnover was
£1,732,000 with a pre-tax profit of£92,000 and in 2012 turnover was £1,464,000 with a loss of £16,000. During this period there had been an injection of capital of £50,000.
The sentencing judge took the view that R and S Recycling had “an established record” that was sufficiently secure to justify the call for additional capital. Because of its increasing turnover, he saw no reason to depart from the sentencing guidance.
When the matter came before the Court of Appeal in 2014, for the tax year ending January of that year its turnover was £2,060,000 with a loss of £14,000. The court reduced the fine to £65,000, saying that the overall figure by way of fine and costs was too high.
The Court of Appeal said: “True as it is that this company has now a track record and true it is that it has a significant turnover; but at the same time one cannot ignore the fact that the net profit and loss position is such that this company cannot be said to be financially secure… the actual resources of the company and its ability to pay, even allowing for payment over a significant period of time, must be given due weight.”
All company defendants are now expected to provide the court with information regarding their means. This is usually the last three years of accounts and may also include management accounts to show the up-to-date position. Given that it is likely the new sentencing guidelines will direct courts to concentrate on turnover, it is imperative that corporate defendants in the future provide sufficient information to be able to demonstrate the level of fine and costs they can actually afford.
Originally published in the New SHP magazine blog on 16 December 2014. http://www.shponline.co.uk/
In November, the Sentencing Council launched a consultation on its sentencing guidelines for health and safety offences, which closes on 18 February 2015.
When setting a fine the court considers a defendant’s level of culpability and means. The consultation proposes that an offending organisation’s means will initially be based on its turnover.
It is asserted that this is a clear indicator that can be “easily assessed” and “is less susceptible to manipulation”. However, without consideration of the wider financial circumstances, this approach can lead to unfairness. R v R and S Recycling [2014] EWCA Crim 2302 is a case in point.
R and S Recycling had received large quantities of paper, plastic, card and other materials for recycling at its site. The material would either arrive in bales or be baled at site. These bales were then stacked and stored in its warehouse. In February 2011, one of its employees was killed when bales fell from a stack and one landed on him. In the opinion of HSE’s expert, the bales should have been strapped or interlocked.
Shortly before the trial, R and S Recycling changed its plea to guilty. It agreed HSE’s costs at £57,927.47. However, the company was fined £100,000. The judge said that this figure took into account a 20 per cent discount for its guilty plea. The current sentencing guidance for health and safety offences that cause death states: “the appropriate fine will seldom be less than £100,000 and may be measured in hundreds of thousands of pounds or more”.
The company had started trading in 2008 and in its first year had a turnover of £85,000 with a pre- tax profit of £25,000. In 2009, its turnover was £1,157,000 with a pre-tax profit of £172,000. In 2010, turnover was £1,760,000 with a loss of £65,000. In 2011, turnover was
£1,732,000 with a pre-tax profit of£92,000 and in 2012 turnover was £1,464,000 with a loss of £16,000. During this period there had been an injection of capital of £50,000.
The sentencing judge took the view that R and S Recycling had “an established record” that was sufficiently secure to justify the call for additional capital. Because of its increasing turnover, he saw no reason to depart from the sentencing guidance.
When the matter came before the Court of Appeal in 2014, for the tax year ending January of that year its turnover was £2,060,000 with a loss of £14,000. The court reduced the fine to £65,000, saying that the overall figure by way of fine and costs was too high.
The Court of Appeal said: “True as it is that this company has now a track record and true it is that it has a significant turnover; but at the same time one cannot ignore the fact that the net profit and loss position is such that this company cannot be said to be financially secure… the actual resources of the company and its ability to pay, even allowing for payment over a significant period of time, must be given due weight.”
All company defendants are now expected to provide the court with information regarding their means. This is usually the last three years of accounts and may also include management accounts to show the up-to-date position. Given that it is likely the new sentencing guidelines will direct courts to concentrate on turnover, it is imperative that corporate defendants in the future provide sufficient information to be able to demonstrate the level of fine and costs they can actually afford.
Originally published in the New SHP magazine blog on 16 December 2014. http://www.shponline.co.uk/