Submitted By: Thomas Brangam.
Question: ‘Discuss the legal significance of R v Sellafield Ltd [2014] EWCA Crim 49’
Introduction
R v Sellafield Ltd[1] is a significant case heard by the Criminal Division of the English Court of Appeal concerning the imposition of fines in a corporate context. The legal significance of this judgment is that it outlines the key factors for a courts consideration when determining the level of fine to be imposed on very large companies for health and safety-related offences.
Factual and Legal Background
This case involved two appeals heard jointly by the Court where both appellants were large companies. Sellafield Limited (Sellafield) and Network Rail Infrastructure Limited (NRIL) appealed their fines on the grounds that they were ‘manifestly excessive.’[2] Previously, both appellants had pleaded guilty at the first opportunity before the Magistrates Court.[3]
Sellafield, a company with an annual turnover of £1.6 billion, was fined £700,000 by the Crown Court in 2013 for offences relating to the improper disposal of radioactive waste.[4] Essentially, Sellafield’s waste sorting system had failed to classify nuclear waste as either ‘exempt’ or ‘non-exempt.’ Significantly, exempt waste was disposed of by ordinary means, whereas non-exempt waste was not due to its radioactivity.[5]
Consequently, non-exempt waste was handled and disposed of by regular means by Sellafield’s employees.[6]Upon discovery of this error, Sellafield had taken immediate steps to ensure that no harm befell anyone.[7] Expert evidence also provided that if this error had gone unchecked, Sellafield’s waste handlers would have experienced a minimal, but perceptible increase in the risk of cancer-related death.[8]
Secondly, NRIL, a company with a £6.2 billion turnover, was fined £500,000 by the Crown Court in 2013 for an offence concerning a collision at an unmanned crossing.[9] This incident involved a farmer and his grandson, who when crossing a rail line in their car, were struck by an oncoming train. This resulted in the grandson suffering life-altering injuries.[10]
The Crown Court held NRIL liable for failing to install a telephone at the crossing which would alert users to approaching trains, as the site lines at the crossing were ‘not good.’[11]
Proceedings and Arguments
Firstly, Sellafield contended that a £700,000 fine was manifestly excessive, as it was characteristic of a sentence imposed for a major public disaster. Sellafield also argued that the Crown Court had granted no credit for their guilty plea and co-operation with authorities.[12] However, the prosecution submitted that Sellafield’s errors had been easily avoidable and that the company had failed on multiple occasions to prevent them.[13]
The Court noted three aggravating factors. Principally, Sellafield’s failure was systematic and not an isolated incident, and the company had exposed its employees to unnecessary risk. Sellafield had also previously been fined for similar offences.[14] Still, the Court considered Sellafield’s guilty plea at the first opportunity and its cooperation with the authorities as mitigating factors. Additionally, the actual harm caused was minimal, and the risk of such harm occurring was ‘relatively low.’[15]
Secondly, NRIL argued that because no fatality had resulted from the collision, a starting fine of £750,000 was unjustified.[16] NRIL also contended that the Crown Court had not given sufficient consideration to its good safety record.[17] Nevertheless, the Court examined the aggravating factors and noted that the injuries suffered were serious and the risk of serious harm had been foreseeable for many years.[18] NRIL had also faced serious charges from 1997 onwards, and a fine of £3.5 million had been imposed in 2005 for an incident involving four fatalities following the derailment of a train.[19] However, the Court deemed NRIL’s guilty plea and action taken following the incident to improve safety as mitigating factors.[20]
Judgment and Reasoning
The Court outlined three general guidelines for imposing fines under the Criminal Justice Act 2003.[21] The offender’s financial circumstances, the seriousness of the offence, and the general circumstances of the case were relevant for the Court's consideration.[22] When assessing the seriousness of the offence, the Court stated that it must consider the harm done, what harm was foreseeable, and the offender’s culpability.[23]
Firstly, the Court observed that Sellafield is an ordinary profit-making company, whereas NRIL has no shareholders and reinvests its profits into the rail infrastructure.[24] Therefore, Sellafield’s shareholders would have no difficulty in holding their board of directors accountable.[25]
Noting this, the Court found Sellafield culpable to a medium degree due to its lax attitude towards health and safety which extended to the company’s senior management.[26] Whilst Sellafield’s guilty plea and cooperation with the authorities deserved significant credit, the Court found that there was no ceiling to the potential fine in this case, or in similar instances.[27]
Hence, the Court concluded that the imposition of a £700,000 fine was appropriate, as Sellafield’s culpability was moderate, the actual harm minimal, and the risk of harm very low.[28] The Court dismissed Sellafield’s appeal with the aim of ‘bringing home’ to its directors the seriousness of the offences committed.[29]
Finally, the Court held in NRIL’s case that there was a high level of harm and culpability as severe injuries had been inflicted upon a child. Although NRIL’s failures were at ‘lower operational levels,’[30] the Court rejected the contention that a starting fine of £750,000 was exclusive to cases involving death.[31]
Crucially, however, the Court considered that the imposition of a fine upon NRIL would not have the same effect as it would upon Sellafield, as it may simply result in a reduction of public funds.[32] Still, the Court stated that a fine would serve to protect the public by reducing similar offences from being committed by NRIL, and would reform and rehabilitate the company.[33] The Court dismissed NRIL’s appeal and stated that a more significant fine would have also been appropriate.[34]
Case Analysis
The decision of the Court to dismiss both appeals is convincing on multiple accounts. Particularly, it could not have convincingly been argued that Sellafield’s failure to meet strict industrial standards was defensible on the basis of what little harm resulted. Likewise, although NRIL is a public company, the Court was correct in observing that this did not mean that its senior management was invulnerable.[35]
However, the Court’s view that a £700,000 fine would have the effect of denunciation and deterrence by ‘bringing home’ to Sellafield’s directors the seriousness of its offences is unconvincing. As Paul Vericco states, ‘The whole principle of justice is in part to create a deterrent.’[36] Realistically, it is difficult to contend that the imposition of this fine had any such effect upon Sellafield, which enjoys ‘weekly profits of £560,000.’[37]
This is evidenced in light of the fact that in 2017, Sellafield was fined £380,000 after a worker was exposed to eight times the annual limit of plutonium.[38] As Nigel Lawrence QC observed in that case, the accident could have been prevented if ‘corroded machinery had been routinely replaced.’[39] This provides some indication that the lax attitude of Sellafield remains, regardless of the Court’s decision to uphold the Crown Court’s fine.
Applying this, it is unclear if the current level of fines imposed upon large companies in industries requiring high standards is effective in serving as a deterrent. This is troubling in a general context, as by 2030, the Government ‘has set out plans to deliver around 16 gigawatts of new nuclear.’[40] Given that the nuclear waste industry is set to expand, it may be argued that heavier fines for offending companies are necessary in ensuring the public’s safety.
Moreover, regarding NRIL’s appeal, the Court’s observation that there was ‘no serious failure by senior management' [41] is debatable. Certainly, it may be contended that NRIL’s senior management, by proxy, were ultimately responsible for the failings of local administration.
For example, Treacy LJ in R v Watling Tyre Service Ltd[42] found the senior management of a medium-sized company liable for the death of an employee. This arose after the explosion of an industrial-sized tire, which local administration had failed to repair on ‘three previous occasions.’[43] This appears similar to NRIL’s failure to remedy the risk posed by the rail crossing despite knowing of the potential danger.[44] That being said, Watling Tyre Services is a considerably smaller company than NRIL, and so the culpability of its senior management for a fatality was arguably greater on this fact.
Though, the Court was convincing in its observation that NRIL’s senior management could be affected by the imposition of a fine, as its remuneration committee enjoys discretionary powers to adjust bonus awards based on safety performances. This was reflected in 2018 in the committee’s statement that ‘There should be no reward for failure.’[45]
Nevertheless, Mitting J in R v Thames Water Utilities Ltd[46]suggested what may be a more effective approach when imposing fines upon very large companies. He stated that fines of ‘up to 100% of the company’s pre-tax net profit for the year in question,’[47] may be appropriate in the worst cases of very large companies committing safety and environmental offences.
However, as Lyndon Harris notes, the Court of Appeal has shown reluctance in suggesting what defines ‘a very large organisation.’[48] As the Court noted, the imposition of severe fines upon public companies may simply result in the public indirectly suffering.[49] Yet, perhaps a more severe approach is necessary, as Howard Fidderman argues, ‘the courts remain far from making anyone sit up and take notice.’[50]
Case Significance
Finally, the legal significance of this case is that it highlights the influence that a company’s finances will have on the severity of fines imposed upon it. This judgment also underlines the importance that the courts will assign to environmental and safety legislation.
From an economic perspective, this judgment may incentivize very large companies to assign resources to ensure that their legislative duties are satisfied. Hypothetically, if the Court had allowed both appeals and found the fines manifestly excessive, this may have evidenced to companies that it would be more economical to pay a fine, rather than adhere strictly to their legislative duties.
Conclusion
In conclusion, the Court of Appeal’s decision to dismiss both appeals is credible, as the Court’s function was to determine if the fines were manifestly excessive. On policy grounds, where the failures of organisations may result in harm befalling the public, such failures should be punished severely.
Still, it may be argued that the legal significance of this judgment remains somewhat uncertain. It is questionable if fines of this level have any true deterrent effect upon very large organisations, and equally, if fines are an effective sentence to impose upon offending public companies. Looking forward, it may be beneficial for the courts to consider what defines a ‘very large organisation,’ and if the imposition of more severe fines would have a greater effect of preventing corporate offences.
Bibliography:
Case Law:
R v Sellafield Ltd [2014] EWCA Crim 49.
R v Thames Water Utilities Ltd [2015] EWCA Crim 960.
R. v Watling Tyre Service Ltd [2016] EWCA Crim 1753.
Journals:
Fidderman H, ‘Deterrent, what deterrent?’ (2009) 377 Health and Safety Bulletin 5.
Harris L, ‘R. v Thames Water Utilities Ltd: Sentencing - Environmental Offences - Very Large Organisations’ (2015) 9 Criminal Law Review.
Verrico P, Crosbie P, ‘Setting Sanctions - A Comparative Paper Considering Corporate Offences’ (2013) 55 International Journal of Law and Management.
Legislation and Other Instruments:
Criminal Justice Act 2003.
Online Sources:
‘Industrial Strategy: The UK’S Nuclear Future’ (HM Government, 2019) <https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/168048/bis-13-627-nuclear-industrial-strategy-the-uks-nuclear-future.pdf> accessed 17 November 2019.
Network Rail, ‘Director's Remuneration Report’ (2018) <https://cdn.networkrail.co.uk/wp-content/uploads/2019/04/Remuneration-Committee-Report-2018.pdf> accessed 18 November 2019.
‘Worker Exposed To Sellafield Plutonium Had Skin Removed’ (BBC News, 2019) <https://www.bbc.co.uk/news/uk-england-cumbria-47786659> accessed 16 November 2019.
[1] [2014] EWCA Crim 49. [2] ibid, [2]. [3] ibid, [12], [38]. [4] ibid, [13]. [5] ibid, [14]. [6] ibid, [18]. [7] ibid, [21]. [8] ibid, [22]. [9] ibid, [47]. [10] ibid, [34]-[36]. [11] ibid, [33]. [12] ibid, [29]. [13] ibid, [23]. [14] ibid, [27]. [15] ibid, [28]. [16] ibid, [48]. [17] ibid, [49]. [18] ibid, [43]. [19] ibid, [46]. [20] ibid, [44]. [21] Criminal Justice Act 2003, s 142, s 143, s 164. [22] Sellafield (n 1) [3]. [23] ibid. [24] ibid, [58]. [25] ibid, [56]. [26] ibid, [31]. [27] ibid, [62], [63]. [28] ibid, [64]. [29] ibid, [65]. [30] ibid, [50], [51]. [31] ibid, [68]. [32] ibid, [69]. [33] ibid, [70]. [34] ibid, [72], [73]. [35] ibid, [60]. [36] Paul Verrico, Philip Crosbie, ‘Setting Sanctions - A Comparative Paper Considering Corporate Offences’ (2013) 55 International Journal of Law and Management. [37] Sellafield (n 1) [64]. [38] ‘Worker Exposed To Sellafield Plutonium Had Skin Removed’ (BBC News, 2019) <https://www.bbc.co.uk/news/uk-england-cumbria-47786659> accessed 16 November 2019. [39] ibid. [40] ‘Industrial Strategy: The UK’S Nuclear Future’ (HM Government 2019) <https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/168048/bis-13-627-nuclear-industrial-strategy-the-uks-nuclear-future.pdf> accessed 17 November 2019, p 7. [41] Sellafield (n 1) [50], [51]. [42] [2016] EWCA Crim 1753. [43] ibid, [15]. [44] Sellafield (n 1) [41]. [45] Network Rail, ‘Director's Remuneration Report’ (2018) <https://cdn.networkrail.co.uk/wp-content/uploads/2019/04/Remuneration-Committee-Report-2018.pdf> accessed 18 November 2019, p 76. [46] [2015] EWCA Crim 960. [47] ibid, [40]. [48] Lyndon Harris, ‘R. v Thames Water Utilities Ltd: Sentencing - Environmental Offences - Very Large Organisations’ (2015) 9 Criminal Law Review, p 739-742. [49] Sellafield (n 1) [69]. [50] Howard Fidderman, ‘Deterrent, what deterrent?’ (2009) 377 Health and Safety Bulletin 5.