Fri, 09 Mar 2018
The new year has begun with three important appeal decisions that will be of particular interest to anyone practising in Health and Safety (“H&S”) law. They cover subjects as wide ranging as sentencing, enforcement notices and litigation privilege that are also relevant to a much wider spectrum of regulatory investigations and enforcement.
New sentencing guidelines for H&S offences were introduced in 2016 which have undoubtedly increased penalties both for organisations and individuals. Indeed, in the first of the three judgements considered here, the Lord Chief Justice of England and Wales noted that the position for organisations is now as follows:
“The Guideline provides for very substantial financial penalties in appropriate cases, particularly when the offender is a large or very large organisation … Large commercial entities in many areas of business are vulnerable to very substantial financial penalties for regulatory failings. The same is true for breaches of health and safety or environmental law in appropriate cases.”
SENTENCING – Whirlpool UK Appliances Limited v R (Upon the prosecution of HM’s Inspectors of Health and Safety)  EWCA Crim 2186
Whirlpool, the home appliance manufacturer, had been fined £700,000 following the death of a self-employed fire alarm fitter at its Bristol premises in March 2015. This fine was imposed despite the company having an exemplary prior H&S record and no previous convictions. The sentencing judge accepted there were no aggravating factors, Whirlpool’s level of culpability as assessed under the sentencing guidelines was low and the applicable harm category was level 3 (level 1 is highest of the four available). The judge had taken a starting point for the fine of £1.2 million in light of Whirlpool being a very large organisation with an annual turnover in excess of £500 million. The judge had then reduced this figure by £150,000 for Whirlpool’s remorse and good character, and then by a further one third to reflect its early guilty plea to arrive at £700,000.
On appeal, Whirlpool successfully argued that its fine had been manifestly excessive and the Court of Appeal substituted a fine of £300,000. The judgement is useful not least because the Court took this opportunity to give guidance on how the guidelines should be used in practice clarifying that an arithmetic application should be resisted, and no two health and safety cases are the same. The judgement continues that a sentencing court “…should not lose sight of the fact that it is engaged in an exercise of judgement appropriately structured by the Guideline but, as has often been observed, not straitjacketed by it.”
One of the key issues on the appeal had been the financial health of Whirlpool and where this fell to be considered under the guidelines. Starting points and band ranges for fines are determined at Step 2 of the guideline and by the size of an organisations turnover. The Court made clear that financial health comes into play but only at Step 3 where a court must “…check whether the proposed fine based on turnover is proportionate to the overall means of the offender.” In considering Step 2, the Court decided that in Whirlpool’s case the correct starting point should have been £500,000 which it reduced to £450,000 for mitigation. The Court then proceeded to consider Step 3 and, having considered Whirlpool’s overall financial means, decided that its alternative starting point of £450,000 required no further adjustment since the company had an underlying profitability. The fine was then reduced to £300,000 to reflect Whirlpool’s early guilty plea.
In conclusion, the Lord Chief Justice commented that “Step Three in the Guideline does not provide an invitation to the court to disregard what has gone before, but to adjust any conclusion to reflect the economic realities.” This followed his earlier remarks that the guideline “…is subtle enough to recognise that culpability, likelihood of harm and harm itself should be properly reflected in any fine, as well as turnover.” For organisations of all sizes, therefore, the Whirlpool judgement leaves much scope for further argument in future sentencing exercises.
UPDATE - The Court of Appeal has since revisited the guideline in R v John Henry & Sons Limited  EWCA Crim 30 where it ultimately reduced the fine for a medium sized company from £550,000 to £500,000 after finding that insufficient weight had been given to the company’s mitigation. The Court again considered Step 3 in the guideline but refused to make a further downward adjustment to reflect that the substituted fine still exceeded the company’s profit before tax of £349,000 in its most recent accounts as submitted at sentencing. The Court reiterated that Step 3 provides only that a court may (as opposed to “must”) adjust a fine for a small or large profit margin. The Court also stated where updated accounts for a company become available before sentencing then these must be placed before the court and any failure to do so will fall short of the obligation on an offender to provide comprehensive accounts for the last three years at Step 2. The Court continued that a prosecutor should at least be able to inform a court if new accounts have not been filed by the deadline of nine months after the end of the accounting year. Finally, the Court refused to reduce the prosecution’s cost award of £166,217.86 despite accepting that the levels of costs claimed were high since it was not persuaded the sentencing judge had been, “…in error in this respect or that he exceeded the bounds of discretion available to him.”
ENFORCEMENT NOTICES - HM Inspector of Health and Safety v Chevron North Sea Limited  UKSC 7
The Health and Safety at Work etc. Act 1974 (“the 1974 Act”) applies equally in Scotland as it does to England and Wales. This Scottish appeal was heard by the Supreme Court in late 2017 with judgement being handed down on 8 February 2018.
Section 22 of the 1974 Act enables HSE Inspectors to issue a prohibition notice to duty holders where the Inspector is of the opinion that any activities, “…as carried on or likely to be carried on by or under the control of the person in question … involve or … will involve a risk of serious personal injury.” It is a criminal offence to breach a notice and there is a right of appeal against a notice to an Employment Tribunal.
The facts were that Chevron operates an offshore installation in the North Sea. In April 2013, an HSE Inspector visited this installation where he issued a prohibition notice after identifying corrosion on the stairways and stagings providing access to the helideck which he considered to render them unsafe giving rise to a risk of serious personal injury from falling through them. Chevron appealed the notice. Later, in March 2014, Chevron obtained an expert report confirming all the metalwork had passed the British Standard strength test, and there was no risk of personnel being injured by falling through it save for one panel which had been damaged during the inspection by an Inspector striking it with a fire fighting axe to test the extent to which it was corroded. Armed with this, Chevron successfully appealed against the notice and the HSE then further appealed that decision.
Before the Supreme Court, both parties agreed that an appeal against a notice is not limited to a review of the genuineness and/or reasonableness of the inspector’s opinion but requires the tribunal to form its own view of the facts, paying due regard to the Inspector’s expertise. The tribunal should focus on the risk existing at the time when the notice was served.
The Supreme Court considered the position in England and Wales as had existed since the Court of Appeal decision in the earlier case of Hague (One of Her Majesty’s Inspectors of Health and Safety) v Rotary Yorkshire Ltd  EWCA Civ 696. There, it had been decided that it was only the facts which were known or ought to have been known to the inspector at the time of the decision that should be considered on an appeal. The HSE argued, therefore, that Chevron’s expert report should not have been considered at the appeal since the results of the strength testing had not been available to the Inspector at the time of his inspection. The Supreme Court dismissed the HSE’s appeal confirming that an appeal is not against an Inspector’s opinion but against the notice itself. The Employment Tribunal had to decide whether, at the time of the Inspector’s visit, the metalwork was so weakened by corrosion so to give rise to a risk of serious personal injury. There was no good reason for confining the appeal to consideration of material that was, or should have been, available to an Inspector.
In light of this decision, the position now is that where evidence shows that there was no risk of serious personal injury when the notice was issued then, notwithstanding any finding that an Inspector was fully justified in serving the notice at that time, it will be modified or cancelled on appeal. The Supreme Court concluded that an Inspector should not be deterred from serving a notice in future by the possibility that, should more information become available at a later stage, his concerns may turn out to be groundless pointing out that in those circumstances the position can then be corrected on appeal. This decision is likely to lead to more notices being successfully appealed in future given the often highly prejudicial effect they have for recipients in tendering for new work.
LITIGATION PRIVILEGE – Regina (for and on behalf of the Health and Safety Executive) v Paul Jukes  EWCA Crim 176
Mr Jukes was convicted after a trial of failing to discharge his duty to take reasonable care of the H&S of employees (contrary to section 7 of the 1974 Act) and appealed against his conviction. In 2010, he had been the transport and operations manager for a waste company at which another employee, Mr Galka, was tragically killed in a baling machine used to compact paper and cardboard into bales. His co-accused, the Managing Director, was also prosecuted but pleaded guilty before the trial.
Mr Jukes was interviewed under caution by the HSE in 2012 when he denied having been responsible for H&S at the company in 2010. He later repeated this in his Defence Statement and in evidence at his trial. The prosecution case at trial was that he had been responsible. They pointed to a statement signed by Mr Jukes dated 9 February 2011 which he had given to his employer’s solicitors and in which he had admitted taking formal responsibility for H&S before the accident. He accepted that the signature on the statement was his but claimed to be unable to recall signing it. It was argued at trial for Mr Jukes that the statement was inadmissible since it was a legally privileged document, but the judge rejected this admitting it instead as material evidence. Mr Jukes was convicted and appealed.
On appeal, it was argued for Mr Jukes that the employer’s solicitor had represented both the company and all the individuals associated with it (including Mr Jukes) at the time when his statement was signed. It was therefore privileged, having been created with the assistance of solicitors for the dominant purpose of anticipated civil or criminal litigation and should not have been seized by the HSE. However, it was argued for the HSE (and accepted by the Court of Appeal) that the statement was not privileged. The Court restated that a document will only attract litigation privilege, whether in the context of civil or criminal litigation, if three conditions are satisfied:
(1) litigation is in progress or reasonably in contemplation;
(2) the relevant communication or document is made or created with the sole or dominant purpose of conducting that litigation; and
(3) the litigation is adversarial, not investigatory or inquisitorial.
The Court found that no decision to prosecute had been taken by the HSE when the statement was signed and matters were still at the investigatory stage. It approved the High Court’s earlier ruling in Serious Fraud Office v Eurasian Natural Resources Corporation Ltd  EWHC 1017 QB (where a claim to privilege was similarly rejected) that:
“Criminal proceedings cannot be reasonably contemplated unless the prospective defendant knows enough about what the investigation is likely to unearth, or has unearthed, to appreciate that it is realistic to expect a prosecutor to be satisfied that it has enough material to stand a good chance of securing a conviction.”
The Court of Appeal rejected Mr Jukes’s claim to privilege because he could not point to any evidence to suggest that at the time when his statement was signed either he or the company had enough knowledge of what the HSE investigation would unearth (or had unearthed), that it could be said they appreciated that it was realistic to expect the HSE to be satisfied that it had enough material to stand a good chance of securing convictions. The Court decided it was not enough merely to suggest that the HSE will normally prosecute where there is a death arising from a breach of duty. Thus, in Mr Jukes’s case, the statement was never privileged at all. Further, the Court held that if it was privileged then privilege was exclusive to the company or its Managing Director on whose behalf the solicitors preparing the statement were instructed. In those circumstances, the Court held that Mr Jukes was at best a potential witness who could not rely upon the company or its Managing Director's privilege for his own benefit.
The Court of Appeal will revisit the issue of litigation privileged in July 2018 when it hears the appeal in the Eurasian case. Individual directors and employees at risk of personal prosecution should now take care when providing signed statements to solicitors instructed by their employer pursuant to internal accident investigations since litigation privilege (if it applies at all) will thereafter sit with their employer alone.
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