BUPA fine halved in welcome decision for corporate defendants
Earlier this month a fine of £3m imposed on BUPA Care Homes (BNH) Limited (hereafter referred to as ‘BNH’) in respect of health and safety failings has been reduced to £1.5m on appeal.
In 2018, BNH had pleaded guilty to an offence contrary to section 3 of the Health and Safety at Work Act 1974 following the death of Kenneth Ibbetson, aged 84, from Legionnaire’s disease in June 2015. At the time of his death, Mr Ibbetson was a resident at a nursing home that was operated by BNH. Although not definitive, tests showed that the most likely cause of death was BNH’s failure to flush and disinfect pipes that had been installed during refurbishment works at the home.
During the sentencing exercise, and when applying the Sentencing Guidelines for health and safety offences, at Stage 2, the Judge concluded that BNH was a ‘large organisation’ as it had a turnover of £89m. Although the start point was identified as £1.1m, having considered additional aggravating features, the Judge concluded that an increase in the fine to £2.25m was appropriate.
Thereafter, having moved onto Stage 3 of the Guidelines, the Judge deemed it appropriate to increase the fine further to £4.5m, having taken into account the turnover of the parent company which was in the region of £12 billion and the ‘economic realities’ of the group as a whole. Having reached this figure, the Judge than gave the full one third discount for BNH’s guilty plea, reducing the fine to an eye watering £3m!
On appeal, it was held that the Judge had erred when increasing the fine from £2.25m to £4.5m based on the Parent company’s turnover. In its reasons, the Court of Appeal made it clear that the guideline phrase ‘economic realities’ cannot be extended to mean that the parents resources belong to the subsidiary in order to justify a large increase in a fine at stage 3 any more than they can be taken into account to increase the size of the subsidiary’s turnover for the purposes of stage 2. Absent some ‘special’ factor of the type identified in the ‘Tata Steel’ case, the mere fact that one company may be the wholly owned subsidiary of a larger parent company does not mean that the resources of the parent can be treated as available or as part of the turnover of the subsidiary.
The Court of Appeal concluded that there was no such ‘special’ factor here. BNH did not delegate its health and safety responsibilities to its parent and it, alone, bore criminal liability. BNH was a large profitable organisation in its own right and there was no suggestion that it would be unable to pay the fine. Those were the ‘economic realities’.
In cutting the fine in half, this case represents a welcome reinforcement by the Court of Appeal that the criminal Courts should not be tempted to simply use the turnover of a parent company to justify the imposition of a higher fine on a corporate subsidiary defendant.
Going forward, the interpretation of ‘special’ factor will be of interest as we fully expect the regulators to continue to push this issue and argue for the existence of such factors in cases where, frankly, this is dubious. Only time will tell whether the Courts will hold firm on this front and companies need to be aware that this is an area which may expose them to greater financial penalties in the future.
Contact our Compliance & Regulatory team today for health and safety advice and guidance regarding the application of the Sentencing Guidelines.
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