Corporate Crime analysis: Toby Riley-Smith QC and Abigail Cohen, barristers at Henderson Chambers, comment on the decisions in R v Squibb Group Ltd and R v NPS London Ltd and their significant implications for organisations defending health and safety prosecutions. Lexis®PSL Corporate Crime.

R v Squibb Group Ltd [2019] EWCA Crim 227, [2019] All ER (D) 150 (Feb)

R v NPS London Ltd [2019] EWCA Crim 228, [2019] All ER (D) 148 (Feb)

What are the practical implications of the court’s decisions?

The overall impact of the court’s decision in R v Squibb Group Ltd on sentence was to bring the offence into harm category three with a starting point of £210,000. With mitigation, the court settled on a fine of £190,000—just under half the level of the fine imposed by the trial judge. The reduction of the fine achieved by Squibb was therefore material.

In terms of broader reach, this decision may well have important implications for how defendants and the Health and Safety Executive (HSE) (and other prosecuting authorities) choose to conduct sentencing hearings in the future.

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The significance that the court placed on the expert evidence—despite its acknowledged limitations—in the exercise of determining the correct harm category increases the likelihood that parties will seek to rely on expert evidence for sentencing purposes in appropriate cases. Given the influential role that the ‘likelihood of harm’ plays in setting the level of fine under the sentencing guidelines, this decision may encourage both prosecutors and defendants to obtain such evidence.

If such statistical evidence becomes commonplace in health and safety prosecutions, then it is likely that the cost, complexity and length of such hearings will increase—particularly if such evidence is controversial and has to be heard at a Newton hearing (R v Newton (1982) 77 Cr App Rep 13, [1983] Crim LR 198). And such evidence may play an increasingly central role—as it did in Squibb—in determining the appropriate harm category, with significant impact on the overall fine received.

The decision in R v NPS London Ltd [2019] EWCA Crim 228, [2019] All ER (D) 148 (Feb), on the other hand, confirms an important point for organisations which have linked organisations with high turnover. The court confirmed that it is not appropriate to take the resources of such a linked organisation into account at step two when determining the ‘size’ of the offender. Rather, the court should consider this factor at steps three and four when it ‘steps back’ and checks whether the proposed fine based on turnover is proportionate to the overall means of the offender and whether there are any other factors that warrant adjustment of the proposed fine.

The stage at which this issue is considered in the sentencing exercise is not just of academic interest—it can have a real and significant impact on the level of fine. As the NPS decision demonstrates, if the resources of a linked organisation are taken into account at step two as the trial judge did, this can significantly affect the starting point for the fine. In NPS’ case, it meant a starting point of £1.1m (large organisation) as against £100,000 (small organisation).

Defendant companies and their representatives will be reassured at the definitive answer provided by the court on this issue.

What was the background to the cases?

The prosecution arose from a project to refurbish a school in South London managed on behalf of the local authority by NPS London Ltd. The main contractor was Balfour Beatty Regional Construction Services Ltd. Squibb Group Limited was sub-contracted as a demolition contractor.

The school had been built at a time when asbestos was routinely used in construction. Those involved in the refurbishment were subject to the Control of Asbestos Regulations 2006, SI 2006/2739 to manage the risk of exposure to asbestos. NPS London had commissioned an asbestos survey which identified asbestos in various places in the school building. Steps were taken to remove this asbestos safely and the project went ahead.

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Squibb carried out demolition services in April 2012 and returned to site to complete the job on 23 July 2012. The following day, one of Squibb’s employees discovered a large clump of asbestos. All work immediately ceased. A new asbestos survey was carried out by a different surveyor which confirmed the widespread presence of asbestos. It demonstrated that the parts of the building which had already been demolished had contained asbestos.

NPS London, Balfour Beatty and Squibb were all charged with health and safety offences. NPS London and Balfour Beatty pleaded guilty.

Having pleaded to a breach of duty under section 3 of the Health and Safety at Work etc Act 1974 (HSWA 1974), NPS London was sentenced on 25 July 2017, at Southwark Crown Court, and fined £370,000.

Squibb maintained its innocence and was tried at Southwark Crown Court before HH Judge Beddoe and a jury in July 2017. Squibb was convicted for a breach of HSWA 1974, s 2(1) in that it failed ‘to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all [its] employees’, but was acquitted of breaching HSWA 1974, s 3(1) by failing to conduct its undertaking ‘in such a way as to ensure, so far as is reasonably practicable, that persons not in [its] employment who may be affected thereby are not thereby exposed to risks to their health or safety.’ The company was sentenced to a fine, pursuant to the definitive guideline for health and safety offences (sentencing guidelines), of £400,000.

What did the Court of Appeal decide in Squibb?

Squibb appealed against both its conviction and sentence.

On its appeal against conviction, the Court of Appeal (Criminal Division) (Leggatt LJ, Cutts J and HHJ Wall QC) rejected the argument that the jury’s verdicts on the two counts were inconsistent with each other such as to make the conviction unsafe. It also rejected the argument that the jury should have been directed that it was not open to them to return different verdicts on the two counts. It confirmed that, although an appeal court can interfere with the verdict of a jury if it has returned inconsistent verdicts, the test of inconsistency is a high one.

The appeal court must be persuaded that the jury has returned verdicts which cannot stand together. In this case, it had been open to the jury to find that the risk to Squibb’s employees was greater than to non-employees, that the steps that it should have taken to protect employees were therefore more onerous and that it failed in that regard.

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Squibb also appealed on the basis that the judge should have directed the jury to consider the work done by Squibb in April and in July 2012 separately but this was rejected on the facts.

On sentence, Squibb challenged the trial judge’s assessment on ‘culpability’ and ‘harm’ under the sentencing guidelines.

The court rejected the submission that the trial judge had erred in assessing culpability as ‘high’ and held that the finding that Squibb had fallen far short of the appropriate standard and that there had been a failure within the organisation which was both serious and systemic to address a material risk to the health of its employees, were entirely justified.

As to the level of ‘harm’, it was agreed that this had been level ‘A’ because exposure to asbestos can potentially lead to a person who has inhaled asbestos fibres contracting a fatal disease.

The court accepted, however, that the judge had been wrong to sentence on the basis that the likelihood of the harm occurring was ‘medium’. The judge had been provided with a report from an independent expert which sought to estimate the risk to Squibb’s employees (and others) of contracting an asbestos-related disease as a result of their likely level of exposure. The expert estimated—based on statistical data derived from published studies—that if 100,000 people were exposed to asbestos to a similar extent to Squibb’s employees, about 90 deaths would result. Comparing this to the risks posed by other causes such as smoking, road traffic accidents and workplace accidents, the likelihood of one of Squibb’s employees dying as a result of the breach of duty was, the court accepted, ‘extremely small’.

The court acknowledged that such estimates were necessarily ‘very rough’—not least because long-term risks of this nature are inherently difficult to assess and quantify, the relevant scientific knowledge is far from perfect and any estimate must be subject to a wide margin of error.   However, Leggatt LJ stated: ‘That is not a reason to reject or disregard whatever scientific evidence is available. The rational approach for a court to adopt in these circumstances is to rely on the best evidence that it has.’

The court also noted that the prosecution had not adduced any expert evidence either to put forward any alternative estimate of risk or to criticise the methodology or assumptions used by Squibb’s expert.

In those circumstances the court held that ‘the likelihood of harm arising from the offence was low.’

What did the Court of Appeal decide in NPS?

NPS London appealed against its sentence of £370,000. The issue on appeal was whether the sentencing judge had been wrong to treat NPS as a ‘large organisation’ within the meaning of the sentencing guidelines.

The defendant company, NPS London, was a joint venture company, owned as to 80% by NPS Property Consultants Ltd (the NPS parent) and as to 20% by the London Borough of Waltham Forest.

The sentencing judge had been provided with the accounts of both NPS London and the NPS parent.   NPS London had an annual turnover of £5–6m making it a ‘small’ organisation under the sentencing guidelines. However, the NPS parent had a turnover of around £125m which qualified it as ‘large’.

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When considering step two in the sentencing guidelines, and in particular when deciding the organisation’s annual turnover or equivalent to reach a starting point for a fine, the judge had relied on the passage on page six in the sentencing guidelines which states that ‘normally, only information relating to the organisation before the court will be relevant, unless exceptionally it is demonstrated to the court that the resources of a linked organisation are available and can properly be taken into account’. He had taken into account the resources of the NPS parent as a linked organisation when deciding that NPS London was a ‘large organisation’.

The court concluded that the sentencing judge had been wrong to read the guideline as entitling him to treat NPS London as if it were a large organisation for the purpose of sentencing. It is the turnover of the offending organisation, and not that of any linked organisation, which should be used at step two to identify the relevant table. This reflected the basic principle of company law that a corporation is to be treated as a separate legal person with separate assets from its shareholder(s).

There are circumstances, restated by the Supreme Court in Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] All ER (D) 90 (Jun), in which it is permissible to ‘lift the corporate veil’, for example, it can be appropriate in criminal confiscation proceedings (see R v Boyle Transport (Northern Ireland) Ltd [2016] EWCA Crim 19, [2016] All ER (D) 265 (Feb) ).

The mere fact, however, that the offender is a wholly owned subsidiary of a larger corporation, or that a parent company or other ‘linked’ organisation is in practice likely to make funds available to enable the offender to pay a fine, is not a reason to depart from established principles of company law or to treat the turnover of the linked organisation as if it were the offending organisation’s turnover at step two of the sentencing guideline.

However, the court went on to say that the resources of a linked organisation may more readily be taken into account at step three when examining the financial circumstances of the offender in the round and assessing ‘the economic realities of the organisation’. It may certainly be relevant at that stage, when checking whether the proposed fine is proportionate to the overall means of the offender, to take into account the economic reality—if it is demonstrated to the court’s satisfaction that it is indeed the reality—that the offender will not be dependent on its own financial resources to pay the fine but can rely on a linked organisation to provide the requisite funds.

The court emphasised that this approach was consistent with that in R v Tata Steel UK Ltd [2017] EWCA Crim 704, [2017] All ER (D) 32 (Jun).

The fine was substituted to a fine in the sum of £50,000.

Interviewed by Anne Bruce.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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