Summary and implications

The Court of Appeal sought to answer the question of the appropriate size of fines in health and safety and environmental breach cases when it dismissed appeals. 

The material facts of the cases:

Sellafield Ltd, a nuclear power operator, failed to calibrate its waste monitoring devices and illegally disposed of five bags of low-level radioactive waste in a landfill.

Network Rail unlawfully failed to take appropriate measures to prevent collisions at an unmanned level crossing, causing severe injuries to a driver and his grandson.

Both companies were prosecuted and fined at crown court level. Dismissing their appeals for a reduction of the fines, the Court of Appeal sent a resolute message to all potential offenders, restating the law and adding new principles:

  • A fine for breaches of environmental and safety laws will be large enough to "bring the message home" to managers and shareholders. The company must ensure a safe environment for employees and members of the public. Where the defendant company has a turnover of over £1bn, it will be always necessary to examine "with great care" its structure, turnover, profitability, and, seminally in this case, the remuneration of its directors. Accounts showing these must be provided to the court and prosecution well in advance of the sentencing hearing.
  • There is no ceiling on the fine that can be imposed. In an ordinary company structure, the fine will be crafted to directly affect shareholders. This is exemplified in the fine designed to affect Sellafield's three corporate shareholders. The court found that the breaches were unintentional, no harm was caused, the risk of harm was very small, the company had been co-operative in the prosecution and had pleaded guilty. However, the breaches were caused by basic management failures, in an industry that requires "scrupulous care for public safety". Sellafield, which has a turnover of £1.6bn, was held culpable at a medium level and fined £700,000, over a week's profit; to incentivise its shareholders to promote a more careful company culture and prevent future offences.
  • If the company does not make profit for shareholders and reinvests it in infrastructure for public use, the court will take account of this. Regarding Network Rail, the court emphasised that a significant reduction in bonuses to directors would be a mitigating factor. Network rail was fined £500,000, to force directors and senior management to ensure compliance with safety laws.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.