Jersey Unreported Judgments

[2009]JRC019

ROYAL COURT

(Samedi Division)

9^th February 2009

Before     :

J. A. Clyde-Smith, Esq., Commissioner, and Jurats Bullen and Clapham.

The Attorney General

-v-

Deerglen (Jersey) Limited

Bauunterneghmung E Heitkamp GmbH

(now known as Heitkamp BauHolding GmbH)

Sentencing by the Inferior Number of the Royal Court following guilty pleas to the following charges:

Deerglen (Jersey) Limited

1 count of:

Contravention of Article 21(1)(a) of the Health and Safety at Work (Jersey) Law 1989, as amended.  (Count 1).

Plea: Guilty.

Details of Offence:

Between December 2005 and June 2007 the defendants entered into a joint venture which involved a major redevelopment of the Royal Yacht Hotel.  The majority of the work was carried out by a sub-contractor but the defendants had overall responsibility for health and safety.  There was an extensive log of health and safety malpractices and repeated failures to proactively manage health and safety.  Thirteen formal complaints were made by members of the public.  Nine instances of unsafe working at height practices were identified.  Two Prohibition Notices were served for working at an unsafe height and one Prohibition Notice for unsafe excavation.  There were three recorded instances of scaffolding failing to meet legal requirements including missing guard rails, incomplete working platforms and inadequate stability.  Pieces of timber and lumps of concrete were reported, on five separate occasions, to have fallen outside the boundary of the site and onto public areas, including the Museum Courtyard and the disabled parking area of the Museum.  On another occasion two roof tiles fell from the premises onto a motor vehicle in Mulcaster Street.  Two members of the public reported injury after slipping on a timber covered walkway, as a result of the walking surface having been poorly maintained and heavily contaminated with mud and grit.

Details of Mitigation:

Deerglen's trading was flat.  The company was overdrawn by £160,000.  Sixteen staff had been laid off since the previous court appearance in January.  A total of 26 staff had been laid off in the last six months.  Projects were drying up.  Nothing on the books post May 2009.  Recently paid Judgment of £157,000 in England, in respect of a development at Canary Wharf.  Still £40,000 of outstanding work to be paid for on that development.  In Jersey terms, a substantial company but not of the size or magnitude it was two years ago.  Suffering as a result of the economic climate.

Previous Convictions:

None.

Conclusions:

Count 1:

£25,000 fine.

£2,500 costs.

Total: £27,500.

Sentence and Observations of Court:

Initial sentencing hearing adjourned for further research by the Crown as the Court was "minded to impose a materially higher penalty than that which had been sought by the Crown".

Principles in R-v-Howe have previously been adopted in Jersey - AG-v-Farley.  Each case to turn on its facts.  No relationship between the fine to be imposed and the profits or turnover of a company.

Defendant's acts bordered on the reckless.  Problems were identified on every visit to the site.

Fines to reflect the gravity of the offences and the means of the defendant.  To be large enough to "bring the message home to the shareholders".  Where there is a substantial difference in the means of the defendants it is open to the Court to impose different penalties to reflect those differing means. 

Conclusions granted, 3 months to pay.

Heitkamp BauHolding GmbH

1 count of:

Contravention of Article 21(1)(a) of the Health and Safety at Work (Jersey) Law 1989, as amended.  (Count 1).

Plea: Guilty.

Details of Offence:

See Deerglen above.

Details of Mitigation:

Significant borrowing from banks in Germany.  Plea entered on the basis of negligence ,rather than recklessness.  Pride in health and safety record to date.  Never been before a Court before regarding health and safety.  Submitted to jurisdiction and a representative of the company attended Court voluntarily on three occasions. 

Both companies were owed payment on a project at the Hotel De France and £200,000 remained outstanding from the Royal Yacht joint venture.

Previous Convictions:

None.

Conclusions:

Count 1:

£25,000 fine.

£2,500 costs.

Total: £27,500.

Sentence and Observations of Court:

Initial sentencing hearing adjourned for further research by the Crown as the Court was "minded to impose a materially higher penalty than that which had been sought by the Crown".

Principles in R-v-Howe have previously been adopted in Jersey - AG-v-Farley.  Each case to turn on its facts.  No relationship between the fine to be imposed and the profits or turnover of a company.

Defendant's acts bordered on the reckless.  Problems were identified on every visit to the site.

Fines to reflect the gravity of the offences and the means of the defendant.  To be large enough to "bring the message home to the shareholders".  Where there is a substantial difference in the means of the defendants it is open to the Court to impose different penalties to reflect those differing means. 

Count 1:

£50,000 fine.

£2,500 costs.

Total: £52,500, 28 days to pay.

T. J. Le Cocq, Solicitor General.

Advocate P. M. Livingstone for Deerglen (Jersey) Limited.

Advocate B. H. Lacey for Heitkamp BauHolding GmbH.

JUDGMENT

THE commissioner:

1.        Between December 2005 and June 2007, the defendants, who we will refer to as "Deerglen" and "Heitkamp" respectively, undertook, by way of joint venture, the control and supervision of a major development of the Royal Yacht Hotel which involved the creation of 76 new hotel bedrooms, new conference facilities, a pool/leisure area as well as the refurbishment of the existing hotel.

2.        Although the defendants had employees on site, the majority of the work was carried out by sub-contractors appointed by the owner.  Each sub-contractor undertook to the owner to be responsible for the safety of the site in respect of their own employees, but the defendants had overall responsibility for construction safety at the site and compliance with the Health and Safety at Work (Jersey) Law 1989 ("the Health and Safety Law").

3.        The extensive log of contacts between the Health and Safety Inspectorate and the defendants detail a catalogue of unsafe work practices including:-

(i)        9 instances of dangerous working at height;

(ii)       an instance of working an unsafe excavation (immediately adjacent to the site office);

(iii)      5 instances of material falling on to public areas;

(iv)      4 instances of unsafe scaffolding;

(v)       2 instances of failing to maintain timber walkways used by the public.

There were also contacts about poor housekeeping and poor standards of site lighting.

4.        During the course of the contract, there were 13 formal complaints from members of the public who had seen what they perceived to be dangerous working on the site.

5.        Two prohibition notices were served in relation to dangerous working at height, one of which was served on the day of a pre-arranged visit by the Health and Safety Inspectorate to view arrangements for working at height following a visit two days earlier.  A prohibition notice was also served in relation to the unsafe excavation.

6.        There were a significant number of sub-contractors on site, the majority of whom spoke no English and who often appeared to be working unsupervised.  Warnings by the Inspectorate led to short-term improvements but there was a repeated failure to address the underlying failings of management to proactively manage health and safety on site.

7.        It is the case that no injuries resulted but as pointed out by the English Court of Appeal in R v F Howe & Son (Engineers) Ltd (1999) 2 All ER 249, this is often a matter of chance.

8.        Both defendants have admitted being in breach of their duties under Article 51 of the Health and Safety Law to conduct their undertaking in such a way as to ensure as far as reasonably practicable that persons not in their employment, namely sub-contractors working on the construction site and members of the public who might be affected thereby, are not exposed to risks to their health and safety.

9.        The principles set out in Howe have been adopted by the Courts in Jersey (see AG v Farley (2000/70)) and we have had regard to them.  It is clear that there is no tariff and no specific relationship between the fine and the turnover or net profit of the defendant.  Each case must be dealt with on its own particular circumstances.  In assessing the gravity of the breach, it is helpful to look at how far short of the appropriate standard the defendants fell in failing to meet the reasonably practicable test.  In our view, these breaches were serious and fell woefully short of the appropriate standard.  In the view of the Inspectorate the repeatedly identified hazards were easy to resolve.

10.      Howe identified the following matters as relevant to sentence:-

"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."

In this case the degree of risk and extent of danger were high.  The Crown submits that the defendants' attitude to procedures and requirements for working at height bordered on the reckless.  The Inspectorate say that dangerous work practices exposing persons working on the site to serious and potentially fatal consequences were identified on almost every visit made to the site.  Prohibition notices were not appealed against and resulted in no lasting improvements in safe working practices.  The breaches were extensive and prolonged and there was a repeated failure to heed warnings.  However, the prosecution do not assert that the defendants deliberately profited financially from a failure to take the necessary health and safety steps or specifically ran a risk in order to save money.

11.      Howe states that:-

"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 defendant's attention and (3) a good safety record."

12.      In this case, there has been a prompt admission of responsibility and a timely plea of guilty by both defendants.  Furthermore, both defendants have a good safety record.

13.      Deerglen has been in existence for 8 years and is a Jersey company which employed 80 people at the relevant time.  It has made extensive disclosure of its financial position, providing accounts for the 3 years ending the 31^st March 2005/6 and 7, and a current balance sheet.  Its net profit before tax for 2005 was £346,224, for 2006 £420,499 and for 2007 £1,220,007.  There are no accounts for the year ending March 2008, and the company, like most companies in this sector, is currently experiencing difficult trading conditions.

14.      Heitkamp was founded in 1892, and is the 20^th largest construction company in Germany, employing 1,000 staff with an annual turnover of some €300M.  It is engaged in a number of large projects internationally.  Notwithstanding Mrs Lacey's best efforts, Heitkamp has not provided the Court with financial information other than the above, which was gleaned from the Internet, and a single piece of paper indicating that its capital position is under strain and that it is not currently trading profitably.  We accept that this lack of information is not deliberate, but we have to conclude that the company is not sufficiently concerned as to the level of fine that might be imposed to ensure that its legal representative is properly instructed. 

15.      The overall cost of the works at the site were some £15M.  The joint venture between the two defendants made a profit of €1,868,019.72 which was allocated as to 75% to Heitkamp and 25% to Deerglen.  Deerglen's share of this was €490,325.97.  In sterling terms this equates to £336,713.76, from which certain expenses and overheads were deducted, giving Deerglen a net profit of £249,792.98.  These figures relate exclusively to the joint venture and do not include sub-contract work separately carried out by the defendants.  Whilst the remainder of the profit figure would relate to Heitkamp, we have no information as to the net profit it earned from its share.

16.      The contract clearly started well in that all personnel engaged on the site received safety training in their own language and were issued with a certificate to that effect, again in their own language.  Some 4 to 6 permanent members of staff were on site, including 3 dedicated senior managers. 

17.      Both defendants accept that it was in the area of supervision that they fell down.  They had real difficulty in controlling the sub-contractors.  Orders were not followed.  Height operators who arrived without the harnesses which were supplied, were sent home.  More often than not, however, the defendants were ignored.  The roof area was cleared once because orders were not being followed, but it is accepted that the defendants had not exerted the control and discipline in relation to health and safety that they were engaged to do. 

18.      Both defendants were very apologetic.  Mrs Lacey pointed out that Heitkamp had no presence in Jersey, but agreed to accept service of the proceedings voluntarily and has attended and submitted itself to this jurisdiction.

19.      Howe says this in relation to fines:-

"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 s 18(3) of the 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 prosecution for health and safety offences in the workplace 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 Rose LJ observed in argument there may be cases where the offences are so serious that the defendant ought not to be in business."

20.      Howe was decided some 10 years ago.  Quoting from the judgment, it was "a bad case involving a fatality" but the defendant was a small company with limited resources (see page 252 letter f). 

21.      In this case the junior partner in the joint venture, Deerglen, can fairly be described as a substantial company in local terms, and Heitkamp, the senior partner, as a substantial company in international terms.  Both companies are now trading in difficult circumstances compared to those in 2005 to 2007, following the credit crunch which is affecting most economies.

22.      As is clear from Howe, there is no tariff and each case has to be decided on its own particular circumstances.  In our view, the fine imposed in Farley is therefore of limited assistance.  The key requirement in terms of sentencing is that the fine needs to be large enough to bring the message home.  It is clear from Howe that the fine should reflect the means of the offender.  In this case there is a substantial difference between the means of the defendants and they did not share equally in the remuneration paid for the control and supervision of the site.  Whilst we accept that the defendants are equally liable or equally culpable in law for the contravention and it is not possible to apportion blame for the individual breaches as between them, it is open to us on the authority of Howe and would be fair and just to impose different penalties to reflect their respective means and the mitigation available to them.  To do otherwise would require us to reduce the penalty we would otherwise impose to the level of the defendant the least able to pay.

23.      In terms of disparity, the Solicitor General drew our attention to the following passage from the judgment of Lord Phillips in the case of R v Balfour Beatty Rail Infrastructure Services Limited [2006] EWCA Crim 1586, at paragraphs 47 and 48 as follows:-

"What effect if any should the size of the fine imposed on Railtrack have on Balfours Beatty's appeal?  Disparity between the sentences of two defendants is not an automatic reason for reducing the sentence.  Lawton LJ, giving the judgment of this Court in R v Fawcett (1983) 5 Cr App R (S) 158, 161, approved the following test:

"would right thinking members of the public with full knowledge of all the relevant facts and circumstances, learning of this sentence, consider that something had gone wrong with the administration of justice?" 

That test has been applied to this day, see Archbold Criminal Pleading, Evidence and Practice (2006) para 5-106.  The disparity in the two fines is so great in this case that we consider that the test is satisfied. 

To restore the appropriate proportionality between the two fines would require Balfour Beatty's fine to be reduced to a level at which it failed to give proper effect to the principles that we have discussed above.  We do not consider that this would be right.  Those principles do, however, provide more assistance in identifying the lower limit of an appropriate range of a fine than the upper limit.  They leave a sentencing judge a wide discretion as to the level at which to pitch the fine.  The fine of £10M on Balfour Beatty was severe.  We consider that there is scope for a reduction in the interests of proportionality which will still do justice to the applicable principles and, in particular, to the victims of the Hatfield disaster.  We have decided that Balfour Beatty's fine should be reduced to £7.5M, thereby reducing the disparity between its sentence and that of Railtrack."

24.      This was a major contract involving a significant number of people.  The defendants were engaged by the owner specifically to control and supervise the site and to be responsible for safety. They failed to exert that control and supervision over an extended period.  We accept that some of the sub contractors were difficult to control but the defendants had the power to control them and the responsibility to do so - a responsibility they failed to discharge.  In our view it is necessary to impose a substantial fine to bring home the message that such failure will not be tolerated.

25.      The prosecution have produced a table of fines imposed by the Jersey Court over the last 5-6 years.  We accept that such an exercise, albeit at our request, is of limited assistance because of the very different factual backgrounds of each case.  There is no case involving contractors taking specific responsibility for the health and safety of a large contract of this kind.  The only recent case which met with a significant fine was the case of AG v SGB (CI) Limited [2005] JRC 146, which involved the death of an employee, but following a limited operation involving the movement of a lift.

26.      Some assistance can be gleaned from the Health and Safety Executive summaries provided by the prosecution, although caution has to be exercised as these are not Law Reports, but comprise brief summaries with attendant commentary.  The most relevant of those three cases is the case of Re Bau GmbH.  In that case the company and its UK subsidiary, Reconstruction UK Limited, were fined a total of £150,000 for putting workers and the public at risk during the construction of a supermarket in Sheffield.  The Health and Safety Executive investigated the site in response to a number of complaints from the public about the standard of scaffolding and not because there had been any accidents or injuries.  It was found that the site was not effectively managed and a catalogue of unsafe practices were identified including work at height, excavations and vehicle movements, despite prohibition notices having been served.  Sentencing took place in Nottingham Crown Court on the 23^rd March, 2007.  Each party admitted the equivalent of charges under Article 5 of the Health and Safety Law, namely a failure to protect persons other than direct employees, and were each fined £50,000.  Bau Gmbh also admitted exposing its direct employees to risk and was fined an additional £50,000.

27.      Finally the Solicitor General drew our attention to the English case of R v Rollco Screw and Rivet Company Limited 1999 2 Cr App R, where the Court of Appeal referred to the observations made by Justice Scott Baker in R v Howe, as set out above, and went on to state at page 441 of its judgment, the following:-

"The proper approach to a case of this kind in principle seems to us to be to pose two questions.  First: what financial penalty does the offence merit?  Secondly: what financial penalty can a defendant (whether corporate or personal) reasonably be ordered to meet?"

28.      Adopting the approach set out in Rowe and Rollco, we conclude that the appropriate fine for each defendant, taking into account their respective means, the mitigation put forward and the need to ensure that the message gets home to both managers and to shareholders, is £25,000 in the case of Deerglen and £50,000 in the case of Heitkamp. 

29.      We therefore impose a fine of £25,000 on Deerglen and order it to pay costs of £2,500, with 3 months to pay.

30.      We impose a fine of £50,000 on Heitkamp and order it to pay costs of £2,500, with 28 days to pay.

Authorities

Health and Safety at Work (Jersey) Law 1989.

R v F Howe & Son (Engineers) Ltd (1999) 2 All ER 249.

AG v Farley [2000] JRC 70.

R v Balfour Beatty Rail Infrastructure Services Ltd [2006] EWCA Crim 1586.

AG v SGB (CI) Limited [2005] JRC 146.

Re Bau GmbH.

R v Rollco Screw and Rivet Company Limited (1999) 2 Cr App R (S) 436.

AG v Stansell QVC Ltd [1999] JRC 176.