1. IOSH LONDON METROPOLITAN BRANCH LEGAL UPDATE 2016 Presentation by Kizzy Augustin, Senior Associate Pinsent Masons LLP Tuesday 8 March 2016

2. Overview of today’s presentation The Sentencing Guidelines 2016: –Drivers for change for the new system –Overview of the 2016 Guidelines –Surprising consequences –Individuals and the Custody threshold? –Cases – effect of the Guidelines Corporate Manslaughter – how have things changed? Fire Safety – sector trends Questions

3. Drivers for change in sentencing? Lack of comprehensive guidance for the Courts – concern that sentences passed for serious H&S offences committed by organisations were “too low”. Recent Environmental Guidelines (Thames Water case ): when sentencing large companies in order to achieve objectives of punishment, deterrence and removal of gain – significant penalty must be imposed. Reflect fines imposed in financial services market for breach of regulations – millions of ££££££

4. Understanding the new system….  Sentencing Council consultation on draft guidelines for health and safety offences, corporate manslaughter, food safety and hygiene offences  Consultation began on 13 November 2014 and ended on 18 February 2015  Definitive guidelines published in November 2015, with implementation on 1 Feb 2016

5. Overview of the Guidelines - Culpability  Firstly, determine Culpability – 4 Categories:  Very high – deliberate or flagrant breach  High “fell far short of the appropriate standard”, “evidence of serious systemic failings …”  Medium – fell short, but between High and Low categories  Low – “did not fall far short of the appropriate standard”, “evidence that failings were minor and not systemic”

6. Then determine the Harm – 4 Categories based on seriousness and likelihood: Overview of the Guidelines – Harm “risked”

7. Overview of the Guidelines - Turnover  Then decide the Organisation Category based on TURNOVER:  Very large organisations: “turnover … greatly exceeds £50m”  Large (>£50m t/o)  Medium (£10-£50m t/o)  Small (£2-£10m t/o)  Micro (<£2m t/o)

8. Understanding the impact of the culpability factors Surprising Consequences

9. What the new fines may look like…  EXAMPLE: Large Company (£50million + turnover):  Very High Culpability / Harm =  Starting point £4m (range £2.6m to £10m)  Low Culpability / Harm =  Starting point £130K (range £50k to £350K)  Corporate Manslaughter =  Starting point £7.5m (range £4.8m to £20m) N.B. – there are also sentencing guidelines for individuals with custody thresholds set at “neglect” (e.g. very high culpability / harm = Starting point 18 mths custody)

10. The Headlines???  Fatal health and safety offences committed by ‘Large Companies’ (£50million + turnover) could carry fines of up to £10million!!  ‘Large Companies’ found guilty of corporate manslaughter could face fines of up to £20million!!

11. What does this all mean?  Fines for large / very large companies are going to be substantially increased  The extent to which processes were in place / isolated lapse may become a litigation battleground  Establishing whether culpability was “low” will be very important in setting fines  Even more important to show existing procedures are in place / what does industry do?  Very large companies may fall outside the ranges in the Guidelines and then… “ALL BETS ARE OFF!”

12. Culpability Factors for Health & Safety Offences by Organisations

13. Assessing ‘Likelihood of Harm’ The difference between basing fines on ‘harm risked’ and on actual harm Surprising Consequences

14. Harm category matrix - organisations

15. Upward adjustment for multiple risk or actual harm

16. What about ‘very large organisations’? Surprising Consequences

17. Very large organisations

18. Court of Appeal – Fines in excess of £100m for very large companies R v Thames Water (June 2015) How to interpret guidelines for organisations with turnover that “very greatly exceeds” £50m? Failure of pumping station; alarms not responded to; 5 days sewage flowing into brook, 600m impact; Total fine £250,000 upheld and described as lenient Fines should ensure that the directors and shareholders took effective measures properly to reform themselves (in the case of repeat offenders) and ensure that they met their obligations Evidence from the Board that it took it’s obligations seriously and taking steps to ensure improvement was significant mitigation

19. 19 There must not be a “mechanistic extrapolation” of tariff fines Court not bound by starting point and ranges for “Large organisations” Fines for environmental and H&S breaches have often not been adequate to bring home the appropriate message to directors and shareholders “This may well result in a fine equal to a substantial percentage, up to 100%, of the company’s pre-tax net profit … even if this results in fines in excess of £100m. Fines of such magnitude are imposed in the financial services market for breach of regulations.” Court of Appeal – Fines in excess of £100m for very large companies

20. Fines in excess of £100m for very large companies Thames Water – January 2016 £1,000,000 fine –plus costs of approx £18,000 The sentencing judge said the £1 million punishment underlined the need for "very large organisations" to "bring about the reforms and improvements for which they say they are striving.“ The sentencing judge applied a multiplier of 20 to the starting point to reflect the size of the company; but Accepted extensive mitigation arguments without which the fine may have been 2-3x as much

21. Culpability Factors for Health & Safety Offences by Individuals

22. Individuals – where is the custody threshold?

24. Recent Cases – effect of the Sentencing Guidelines

25. Case Study – Hugo Boss Fined £1.2m following the death of a four year old boy at one of their stores (turnover £193M) Judge – company failed to have suitable arrangements in place to ensure people not exposed to risk: 18 stone, 7ft mirror left balanced on the floor / previous warnings ignored / lack of H&S management at Board level Mitigation – G plea, high level of cooperation with authorities, start to establish strong H&S culture “from the top down”

26. Balfour Beatty Civil Engineering Ltd Team repairing barriers on the central reservation on the A2 - worker hit on the head and killed when a crane slipped 3 tonne vehicle wasn’t available for the work so employees had to improvise with a 1.5 tonne machine HSE discovered no safe method of work Guilty plea to both s.2(1) and s.3(1) HSWA Dormant company – group turnover: £8.8bn with pre-tax loss of £304m Fine: £1million with £14,977 costs

27. C.RO Ports London Limited Worker’s arm was dragged into a capstan while mooring a boat and sustained serious injuries Company failed to identify and control risk, and ignored warnings from staff Guilty plea to 2.3(1) HSWA Turnover - £25m, pre tax profit - £7.7m Fine: £1.8 million with £14,328 costs

28. National Grid Gas (Plc) Worker suffered a broken leg when gas pipe burst during repair works Company did not comply with its own safety procedures or carry out sufficient risk assessments Convicted of breach of s3 HSWA Turnover: £3bn, pre tax profit of £1bn Fine: £1 million with £26,296 costs

29. UK Power Networks (Operations) Ltd A man ran into a power cable while out jogging and was killed. HSE found that the company should have immediately de-energised the network before investigating the reported faulty cable, but did not. Guilty plea to s.3(1) HSWA Judge said that there were failings in the “culture” of the company. Turnover: £1bn with pre tax loss of £900k Fine: £1million with £153,459 costs

30.  Introduced “new” manslaughter offence for organisations  In force – 6 April 2008 (now 7 years old!)  15 convictions to date (4 trials; 11 guilty pleas)  3 acquittals  4 further charges outstanding:  Baldwins Crane Hire Limited  Sherwood Rise Limited  McGoldrick Enterprises Limited (NI)  Maidstone and Tunbridge Wells NHS Trust  Differing jurisdictional appetite? 17 cases in E&W; 5 in NI; and 0 in Scotland Corporate Manslaughter and Corporate Homicide Act 2007

31. Corporate Manslaughter – ongoing cases....  Baldwins Crane Hire Ltd: employee of Baldwins was killed when a heavy crane he was driving allegedly experienced a malfunction with its brakes, causing it to crash into an earth bank and fall from the road.  McGoldrick Enterprises Limited (NI): a patient died suddenly at a private nursing home. McGoldrick was charged with corporate manslaughter, in that it managed or organised activities in a way that amounted to a gross breach of a duty of care owed to the deceased.  Sherwood Rise Limited: An elderly woman died shortly after being moved from Autumn Grange Care Home in Sherwood Rise, Nottingham. Alleged that the care home staff failed to provide the deceased with adequate food and drinks and check she was taking fluids.  Maidstone and Tunbridge Wells NHS Trust: 2 doctors charged with gross negligence manslaughter and NHS Trust charged with Corporate Manslaughter over the death of a woman who died after giving birth by emergency caesarean section in 2012.

32. Fines For Corporate Manslaughter

33. Reputational Damage  Publicity Order = Discretionary power given to the Court under Section 10 of the 2007 Act  If ordered, the company must publish details of:  Conviction  Particulars of the offence  Level of fine  Any remedial order made  Used in three recent convictions:  Princes Sporting Club Limited = details published in a powerboat magazine  Mobile Sweepers (Reading) Limited = details published in two local newspapers  Peter Mawson Limited = details published in local paper and on the company’s website

34. Fire Safety – Sector Trends NHS Trusts Care Homes Hotels Leisure Facilities Retail What are the issues? –Compartmentation issues –Lack of suitable and sufficient risk assessment –No approved fire protection systems –Lack of fire evacuation strategy

35. ANY QUESTIONS? Kizzy Augustin, Senior Associate, Pinsent Masons LLP kizzy.augustin@pinsentmasons.com

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