Guidance from the Court of Appeal in Sentencing Linked Organisations for Health & Safety Cases: R -v- NPS London Ltd  EWCA Crim 228
Facts of the Case
On 25 July 2017, the NPS London was fined a sum of £370,000 after pleading guilty to an offence of failing to comply with its duty under s.3(1) of the Health and Safety at Work Act 1974.
NPS London was a joint venture company, owned 80% by NPS Property Consultants Ltd (the NPS parent) and 20% by the London Borough of Waltham Forest. The role of NPS London was that of managing on behalf of the London Borough of Waltham Forest a project to refurbish a school. In that capacity, it was responsible for commissioning an asbestos survey carried out by Redhill Analysts. NPS London admitted that it failed to recognise the deficiency of the survey and consequently failed to take further reasonably practicable steps which it should have taken to ensure that all the asbestos which was present in the building was identified and safely removed before the refurbishment works took place. The failure to do this resulted in those who carried out works and others being exposed to dust containing asbestos with a consequent long-term risk to their health.
At First Instance
When applying the Sentencing Guidelines for Health and Safety Offences the sentencing judge at Step One assessed the culpability of NPS London as high and the risk of harm created by the offence as falling within harm category 2.
At Step Two, the court was required to focus on the organisation’s annual turnover or equivalent to reach a starting point for a fine. The accounts of NPS London showed that its annual turnover was in the order of £5-6M. On this basis, for the purpose of identifying which table to use, NPS London was a “small” organisation. For such an organisation, for an offence in the relevant category, the starting point is £100,000 and the category range is from £50,000 to £450,000.
The sentencing judge, however, considered that the relevant table was that applicable to large organisations on the basis of the passage in the guideline which states that, exceptionally, it may be demonstrated to the court that the resources of a linked organisation are available and can properly be taken into account. The annual turnover of the NPS parent company was around £125M. For a large organisation, the starting point for an offence falling in the relevant offence category is £1.1m and the category range is from £550,000 to £2.9m.
Applying Steps Three and Four, the sentencing judge went on to observe that NPS London had no previous convictions, that it had cooperated with the investigation, that its failings were not deliberate but were “the product of poor management and process” and that the “profitability of this enterprise is low and primarily operates for the benefit of local authorities”. Taking these factors into account, the judge adjusted the fine downwards to the bottom of the bracket (£550,000) and then reduced it further by giving full credit to NPS London for pleading guilty at the earliest reasonable opportunity arriving at the final figure of £370,000.
The principal ground of appeal was that the judge was wrong to treat NPS London as a large organisation for the purposes of the sentencing guideline. The Court of Appeal held that:
“We think it clear that the judge was wrong to read the guideline as entitling him to treat NPS London as, or as if it were, a large organisation for the purpose of sentencing. It is the offending organisation’s turnover, and not that of any linked organisation, which, at step two of the guideline, is to be used to identify the relevant table. This reflects 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)”
The Court restated that there are circumstances in which it would be legitimate to treat a corporate defendant as part of a larger organisation for the purpose of sentencing in this context. The illustrative example given where it would appropriate to treat the relevant figure for turnover as that of a parent company was a case where a subsidiary had been used to carry out work with the deliberate intention of avoiding or reducing liability for non-compliance with health and safety obligations.
That being said the resources of a linked organisation are not to be completely ignored. If these resources are available to the offender then this is to 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” and whether the proposed fine is proportionate to the overall means of the offender. An approach that the Court held was consistent with R v Tata Steel UK Ltd  EWCA Crim 704.
The Court therefore substituted the lower fine of £75,000 reduced by a third to £50,000 giving NPS London full credit for its guilty plea.
This judgement provides much needed clarification in relation to the sentencing of organisations which are linked and makes clear that it is only if there is something exceptional about the facts of the case and the nature of the relationship between the two that requires the turnover of the non-offending organisation to be used to determine the relevant starting point. That being said the resources of the non-offending linked organisation may be considered at Step Three when examining the financial circumstances of the offender where they will make these available to meet any fine.