England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
(CRIMINAL DIVISION)

		Royal Courts of Justice Strand, London, WC2A 2LL
		Friday 6th November 1998

Mr Justice Scott Baker:

Reasons for Decision

The appellant appeals by leave of the single judge against fines totalling £48,000 and an order for costs of £7,500 imposed in respect of four offences under the Health and Safety at Work Act 1974 and related regulations.

The company appeared before Judge Fanner in the Crown Court at Bristol on 10 November 1997 and pleaded guilty to the following offences:

Count 1: Under section 2(1) of the Health and Safety at Work Act 1974:

failing to ensure so far as was reasonably practicable the safety at work of its employees, for which it was fined £40,000.

Count 2: Failing, so far as was reasonably practicable to maintain an electric cable to a machine under regulation 4(2) of the Electricity at Work Regulations 1989 to prevent it constituting a danger to the health and safety of its employees, for which it was fined £2,000.

Count 3: Failing to make a suitable and sufficient assessment of the risks to which its employees were exposed by the dangerous state of disrepair of the electric cable to the machine, contrary to regulation 3 of the Management of Health and Safety at Work Regulations 1992, for which it was fined £2,000.

Count 5: Failing under regulation 11 of the Electricity at Work Regulations 1989 to ensure that means were provided to protect the electrical system supplying the machine from excess current, for which it was fined £4,000.

Count 4, alleging a breach of the Electricity at Work Regulations by using a piece of electrical equipment called a residual current device in such a manner as to create a risk of fire was ordered to lie on the file on the usual terms.

The prosecution came about as a result of a fatal accident which occurred on 13 August 1996 when Giles Smith, who was a 20 year old employee of the appellant was electrocuted. At the time of the accident he had been cleaning the appellant's factory which had been shut down for the purpose. Working with him was Timothy Howe, the 18 year old son of the appellant's managing director.

The cleaning operation took place four or five times a year and generated quite a lot of water on the floor which needed to be collected by an electric vacuum machine known as a "Freddy". The machine in question had been purchased second-hand by the appellant at an auction in April 1995. The cable to the machine became trapped between one of its wheels and the floor, causing damage to the conductor and consequently the machine became live. Giles Smith was holding it at the time. He was unable to let go until the power was turned off at the mains. He was then taken immediately to hospital where he was certified dead.

A Health and Safety Inspector visited the premises the same day and a full investigation was carried out. The immediate cause of the accident was the cable to the machine. There were three obvious areas of damage to it, and one of those areas appeared to be consistent with the cable having been crushed by a heavy load whilst it was lying on a hard surface. Inspection would have revealed the areas of damage quite easily. A far greater degree of safety would have been achieved by the use of a cable armoured with copper braid.

The wall mounted socket into which the 15 amp cable had been plugged was fitted with 32 amp fuses which had been subsequently bridged by fuse wire.

The electricity supply to the premises was fitted with a Residual Current Device (RCD) designed to trip the system if a fault developed anywhere within the circuit. In other words it was a circuit breaker. It was apparent that the RCD had been deliberately interfered with in a way which rendered it inoperable. The RCD had been fitted in about May 1995. At that time the company had been experiencing problems with the electricity supply cutting out. They called in a company, whom they had used on a number of occasions before, who sent out a fitter called Hitchcock. Hitchcock identified the existing RCD as being at fault and obtained a new replacement from a local company.

Following the accident the appellants employed an electrical contractor to examine the RCD. The test button failed to operate. The contractor also noted that the connection to the RCD consisted of three cables connected to the incoming side and three corresponding outgoing cables. It was in fact designed for four connections either side. The neutral connections had not been connected. Further investigations revealed that the neutral connection was made directly from the supply to a connection block bypassing the RCD. More detailed examination of the RCD revealed that it had been opened and its tripping function rendered inoperative. Two separate sections of wire from the circuits associated with the trip coil and damping circuit had been removed. The tripping capability of the device had thus been deliberately negatived.

Hitchcock remembered fitting the replacement RCD in May 1995. He remembered connecting three cables, three in and three out. He could not remember the neutral. No one from the appellant ever called him back to say the RCD was tripping out or not working properly. On several occasions he was called to the appellant's factory to rectify electrical faults on machine controls and motors. He found in a number of instances that someone had tried to install contactors but the piece of equipment was not working and he had to rectify it. Sometimes Mr Howe mentioned that he had done the connections and Hitchcock told him if he did not understand something he should ask. He had advised Mr Howe both orally and in writing that he was overloading the supply. Hitchcock was never asked to look at the Freddy.

There was no evidence who had tampered with the RCD, albeit Hitchcock may well have been responsible for bypassing the neutral connectors. It was the appellant's case that Hitchcock, rather than any of its employees, was responsible for the interference with the RCD. This was denied by Hitchcock and in any event was most unlikely because the act of interference involved breaking the manufacturers seal on the item which immediately negatived the manufacturer's guarantee. It seems to us quite unnecessary to explore this issue any further. The appellant pleaded not guilty to the only count which specifically related to the RCD. This was accepted by the prosecution. The judge sentenced on the basis that the appellant's employees did not themselves interfere with the RCD and we approach this appeal on the same basis. However, there was a period of thirteen months between the installation of the RCD and the accident. During this time the appellant made no effort to check the RCD or indeed even to check whether the test button was operating. These failures clearly form an important part of the picture of failing to ensure the safety of work of its employees which was the charge in Count 1.

The test button could have been pressed at any time and would have revealed that the device was not working. Good practice dictated that it should have been checked every three months. Mr Dixey on behalf of the appellant says that both the South Western Electricity board and other contractors had carried out work at the premises and no one had pointed out either that anything was wrong with the RCD or the need for regular inspections. The precise circumstances in which the Board was at the premises is unclear. But whatever they were it was the responsibility of the appellant to look after its own electrical equipment.

It is necessary to revert briefly to the four offences to which the appellant pleaded guilty.

The obligation imposed by section 2 of the Health and Safety at Work Act (Count 1) for which the appellant was fined £40,000 is a general one, namely to ensure so far as is reasonably practicable the safety at work of employees.

In essence what happened here was that Giles Smith was required to work with a piece of machinery that was in the result lethal. The test is not an absolute one to provide a safe working environment but the appellant had to ensure the safety at work of its employees "so far as was reasonably practicable". The various deficiencies pointed out by the Health and Safety Inspectorate, not least that the appellants had no system at all for checking its electrical equipment, indicate that it fell far short of the appropriate standard in this case. The tragedy that befell Giles Smith was unfortunately an accident waiting to happen.

The other three offences are more specific:

Count 2 relates to the failure to maintain the cable. Again the test is so far as was reasonably practicable and again the appellant fell far short of meeting it.

Count 3 is directed at the failure to carry out any risk assessment which the appellant plainly did not do.

Count 5 is directed at the socket outlet and the fact that neither the 32 amp fuses originally fitted nor the bridging fuse wire inserted as a replacement afforded adequate protection.

The appellant company was incorporated in 1962 having been started by Mr Derek Howe and his father. It is a small precision engineering company. Approximately 75% of the company's business consists of grinding engine mounts for Honda. At the time of the accident there were twelve employees. This has now reduced to ten. There were two working directors, Mr Derek Howe and Mrs Kathleen Little. Mrs Little dealt with the administration of the company. Mr Howe, who is now 68, retired from full time work with the company in September 1997 and is suffering from Parkinson's Disease. He owns 80% of the shares in the company.

The company accounts reveal that for the year ended 30 April 1997 the annual turnover was £355,000 (1996 £378,000); the net profit after tax was £26,969 (1996 £33,651); and the net book value of the company was £129,288 (1996, £99,994) but this included £68,227 in respect of assets held under finance leases and hire purchase contracts.

The company did not pay any dividends and retained its annual profit in order to finance improvements and acquire further machinery. Neither of the working directors received an income in excess of £20,000 per annum. There was no pension scheme and no company car. The employees, including the directors, received a modest bonus at Christmas 1996. Any fine of significance is likely to be felt by the management of the company and its shareholders.

We were told that the freehold value of the site exceeds the book value but apparently the site, which is said to be worth in the region of £63,000, is owned not by the appellant but by Mr Howe himself. The buildings on the site are however owned by the company. The legal relationship between Mr Howe and the appellant in respect of the site and buildings is unclear.

Following the accident the appellant spent £15,000 on a complete overhaul of its electrical system.

We turn next to the grounds of appeal. The appellants contention is that the total fine was excessive. The original grounds of appeal set out six grounds. They are:

(1) The level of risk involved in the task being performed at the time.

(2) The previous good record of the company.

(3) The plea of guilty.

(4) The size of the company and its inability to provide its own specialist safety and electrical personnel.

(5) The means of the company.

(6) The level of fines imposed generally for offences of this nature.

In argument Mr Dixie added two further grounds namely (1) that there was no deliberate flouting of safety regulations for reasons of economy and (2) the appellant's responsible attitude after the offence and in particular the fact that £15,000 was spent on rewiring the premises.

Taking these points in turn, we are not impressed that the level of risk involved in using the Freddy is a mitigating factor. Had the cable to the machine been properly maintained and had the company's electrics been in proper working order there would have been no risk. As it was the machine was lethal. The previous record of the company is a mitigating factor to the extent that it has no previous convictions nor has it been warned by the Health and Safety Executive. Also, no employee has lost time from work through an accident since 1991. On the other hand, this case illustrates a continuing dangerous state of affairs rather than an isolated lapse. The plea of guilty we accept of course is a mitigating factor.

We are not persuaded that the size of the company and its lack of ability to provide its own specialist safety and electrical personnel mitigates these offences. The means of the company is, on the other hand a very material factor to the amount of the fine. As to the level of fines imposed generally for offences of this nature, it is the view of each member of this court that they are too low and therefore not an appropriate yardstick for determining the level of fine in the present case. We shall say more about these matters in a moment.

As to Mr Dixey's additional points, we take into account the appellant's attitude after these offences and in particular the expenditure on rewiring. We accept that this is not a case where safety regulations have been deliberately flouted for reasons of economy. Had they been this would have been a seriously aggravating feature.

We turn next to make some general observations about cases of this nature. First, the employers general duties under the Health and Safety Act are qualified by taking steps so far as is reasonably practicable. Thus the law requires employers to do what good management and common-sense requires them to do anyway i.e. look at what the risks are and take sensible measures to tackle them. Failure to fulfil the general duties under the Act are particularly serious as those duties are the foundations for protecting health and safety.

In the early 90's Parliament introduced the exemplary maximum fine of £20,000 for breach of the general duties under sections 2-6 of the Act where the offence is dealt with summarily. Following this the average fine in the magistrates courts (per offence prosecuted) for breaches of the general duties increased from £844 to £2110 in 1992/93 and this has since risen to £6223, but it is still less than one third of the maximum. And almost half the fines in magistrates courts for these offences in 1997/98 was below one quarter of the maximum of £20,000. In the Crown Court where the level of fine is unlimited the 1997/98 average fine per offence was £17,768.

Disquiet has been expressed in several quarters that the level of fine for health and safety offences is too low. We think there is force in this and that the figures with which we have been supplied support the concern. There has been increasing recognition in recent years of the seriousness of health and safety offences. The circumstances of individual cases will, of course, vary almost infinitely and very few cases have reached this court. Accordingly it is difficult for judges and magistrates, who only rarely deal with these cases, to have an instinctive feel for the appropriate level of penalty.

We shall endeavour to outline some of the relevant factors that should be taken into account. In doing so we emphasise that it is impossible to lay down any tariff or to say that the fine should bear any specific relationship to the turnover or net profit of the defendant. Each case must be dealt with according to its own particular circumstances.

In assessing the gravity of the breach it is often helpful to look at how far short of the appropriate standard the defendant fell in failing to meet the reasonably practicable test.

Next, it is often a matter of chance whether death or serious injury results from even a serious breach. Generally where death is the consequence of a criminal act it is regarded as an aggravating feature of the offence. The penalty should reflect public disquiet at the unnecessary loss of life.

Financial profit can often be made at the expense of proper action to protect employees and the public. Cost cutting is a crucial tool in achieving a competitive edge. A deliberate breach of the health and safety legislation with a view to profit seriously aggravates the offence.

There is some evidence that safety standards in small organisations may generally be lower than in larger ones and that proportionately more accidents occur in companies with less than fifty employees than those with a large staff. We wish to emphasise that the standard of care imposed by the legislation is the same regardless of the size of the company. A man who, for example, works with a circular saw should be no less safe if he works for company A than for company B. The size of a company and its financial strength or weakness cannot affect the degree of care that is required in matters of safety. Otherwise the employee of a small concern would be liable to find himself at greater risk than the employee of a large one. How an individual company discharges its health and safety obligations will depend on the particular circumstances. A large organisation with a health and safety department will approach matters differently from a smaller one with perhaps one safety officer or none at all. Those organisations who do not have their own expertise in house can obtain it, if necessary by seeking assistance from the Health and Safety Executive.

Other matters that may be relevant to sentence are the degree of risk and extent of the danger created by the offence; the extent of the breach or breaches, for example whether it was an isolated incident or continued over a period and, importantly, the defendant's resources and the effect of the fine on its business..

Particular aggravating features will include (1) a failure to heed warnings and (2) where the defendant has deliberately profited financially from a failure to take necessary health and safety steps or specifically run a risk to save money.

Particular mitigating features will include (1) prompt admission of responsibility and a timely plea of guilty, (2) steps to remedy deficiencies after they are drawn to the defendants attention and (3) a good safety record.

Any fine should reflect not only the gravity of the offence but also the means of the offender, and this applies just as much to corporate defendants as to any other. See section 18 (3) Criminal Justice Act 1991. Difficulty is sometimes found in obtaining timely and accurate information about a corporate defendant's means. The starting point is its annual accounts. If a defendant company wishes to make any submission to the court about its ability to pay a fine it should supply copies of its accounts and any other financial information on which it intends to rely in good time before the hearing both to the court and to the prosecution. This will give the prosecution the opportunity to assist the court should the court wish it. Usually accounts need to be considered with some care to avoid reaching a superficial and perhaps erroneous conclusion. Where accounts or other financial information are deliberately not supplied the court will be entitled to conclude that the company is in a position to pay any financial penalty it is minded to impose. Where the relevant information is provided late it may be desirable for sentence to be adjourned, if necessary at the defendant's expense, so as to avoid the risk of the court taking what it is told at face value and imposing an inadequate penalty.

The objective of prosecutions for health and safety offences in the work place is to achieve a safe environment for those who work there and for other members of the public who may be affected. A fine needs to be large enough to bring that message home where the defendant is a company not only to those who manage it but also to its shareholders.

Mr Dixey argued in the present case that the fine should not be so large as to imperil the earnings of employees or create a risk of bankruptcy. Whilst in general we accept that submission, as the Vice President observed in argument there may be cases where the offences are so serious that the defendant ought not to be in business. That, however, is not this case.

Mr Dixey argued that an order for costs of £7,500 was excessive, particularly in the light of fines totalling £48,000. The power to award costs is contained in section 18(1) of the Prosecution of Offences Act 1985 and permits an order that the defendant pay to the prosecutor such costs as are just and reasonable. This includes the cost of the prosecuting authority carrying out investigations with a view to prosecution. See Associated Octel Ltd [1997] 1CAR (S) 435. Sometimes costs awarded have been scaled down so as not to exceed the fine. We can see no reason in principle for doing so. Where a defendant is in a position to pay the whole of the prosecution costs in addition to the fine there is no reason in principle for the court not to make an order accordingly. The decision remains, of course, in the courts discretion in the terms of the statute. The court must look at the whole sum (fine and costs) that it is minded to order the defendant to pay and consider the impact upon him. In this case the prosecutor's total costs exceeded £12,000 and the court ordered the appellant to pay £7,500.

We return finally to the order made in the present case. The Judge in passing sentence referred to the size of the company, the state of its finances and the appalling state of the wiring, the fuses, and the RCD. He also referred to the fact that a death had resulted from breach of the safety regulations. All this, he said, dictated a substantial penalty. We agree. Because Count 1 embraced all the defects, he imposed the major part of the penalty upon it. Nevertheless, he imposed additional penalties on the other three counts which related to specific matters.

In our judgment this was a bad case and the Judge rightly referred to the electrical state of the equipment as appalling. There appears to have been a flagrant disregard for the safety of the company's employees. Corners were cut and no real attention was paid to electrical safety.

The case came before the Crown Court because the Magistrates, following submissions by the prosecution, declined jurisdiction. In our judgment they were right to do so. On a summary trial an offence under section 2 of the Health and Safety at Work Act 1974 carries a maximum fine of £20,000, but on indictment the fine is unlimited. This was a bad case involving a fatality. In our judgment magistrates should always think carefully before accepting jurisdiction in health and safety at work cases, where it is arguable that the fine may exceed the limit of their jurisdiction or where death or serious injury has resulted from the offence.

In our judgment the learned judge in the present case gave inadequate weight to the financial position of the appellant. It may well be that he did so because such financial information as he had was not supplied until the very last moment. This is a small company with limited resources. As Mr Dixey pointed out in argument neither the fines nor the costs are deductible against tax and therefore the full burden falls upon the company. In our judgment an appropriate fine was, in the circumstances, one totalling £15,000. This will be imposed on count 1 of the indictment with no separate penalty in respect of the other offences. The order for costs will remain undisturbed. Thus the total financial burden upon the appellant will be reduced from £55,500 to £22,500. The appeal is therefore allowed to that extent.