On 17 January 2014, the Court of Appeal dismissed appeals by Sellafield Limited and Network Rail Infrastructure Limited that fines imposed on them were manifestly excessive[1].

Sellafield Limited had been fined £700,000 after it admitted seven offences contrary to environmental legislation in relation to its failures to adequately set up, test and monitor equipment used to identify and segregate radioactive from non-radioactive waste. There was no actual harm caused and a very low risk of harm.

Following an accident at a level crossing that caused very serious injuries to a child, Network Rail Infrastructure Limited had admitted an offence under section 3 of the Health and Safety at Work etc. Act 1974 (the duty of every employer to conduct his undertaking in such a way as to ensure, so far as is reasonably practicable, that persons not in his employment who may be affected thereby are not thereby exposed to risks to their health or safety) for failing to carry out a proper risk assessment of the level crossing and installing the necessary safety equipment, and were fined £500,000.

Both companies had a turnover in excess of £1billion.

The Court of Appeal made the following points:

  • The court should keep the statutory purposes of sentencing at the front of its mind when fixing the level of a fine. These statutory purposes are punishing offenders; reducing crime; reforming and rehabilitating offenders; protecting the public; and requiring offenders to make reparation to their victims.
  • When the offender is a large company, the court must look at the whole corporate structure in some detail (including turnover, profitability and director remuneration). Only by doing so can the court decide whether the statutory purposes of sentencing are being met.
  • Corporate offenders must provide their company accounts, information about the corporate structure and other relevant information to the court, well in advance of the sentencing hearing.
  • A fine of £1 million is not only appropriate to a major disaster. Instead, there is no ceiling on the amount of a fine that can be imposed, particularly on a very large company.
  • When imposing a fine on a company with a turnover in excess of £1 billion, a Court will need to examine “with great care and in some detail” the company’s structure, turnover, profitability and remuneration of directors.

In the case of Sellafield, the Court decided that the fine was sufficiently high to make it clear to the shareholders and directors how serious the offence was, and to give them an incentive to remedy the failures at the site.

In the case of Network Rail, the Court acknowledged that the position was different because its profits were reinvested in rail infrastructure, so a high fine would not inflict direct punishment on shareholders, but, instead, could be said to harm the public. Nevertheless, the Court still had to satisfy the other statutory purposes of sentencing, including reducing criminal offences, rehabilitating the defendant and protecting the public. The court recognised that Network Rail was attempting to reform its behaviour (by reducing directors’ bonuses and investing in level crossing safety). However, it also said that the fine imposed had been very generously discounted because of these mitigating factors, and that it would not have criticised a much greater fine.

These decisions highlight the importance of complying with environmental, safety and health duties. Companies with high turnovers that breach these duties can expect very high fines, even in non-fatal cases or cases with minimal environmental harm.

[1] R v Sellafield Ltd and R v Network Rail Infrastructure Ltd [2014] EWCA Crim 49