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Lifting the Corporate Veil in Health and Safety Cases

Posted on 23rd June, 2019

The introduction of sentencing guidelines for health and safety offences has seen a significant increase in the level of fines and penalties imposed for breaches.  The guidelines require the sentencing judge to consider the culpability of the offender as well as the harm that was caused followed by the financial turnover of the organisation.  The guidelines provide a starting point for a fine then a range within which the penalty should sit.

However, in a recent case the court had to consider whether the turnover of the specific company was the appropriate measure or the turnover of the parent company.  The recent case of R v NPS London Limited [2019] EWCA Crim 229 now provides some clarity.

NPS pleaded guilty to an offence under s.3(1) of the Health and Safety at Work etc Act 1974 for a deficient asbestos survey which exposed workers to dust containing asbestos which had long-term health implications.  The company was fined £370,000 for the breach as the judge assessed the culpability of NPS as high and harm category level 2.  The company had a turnover of £5-£6m putting it in the small organisation category.  This would have indicated a starting point for a fine of £100,000 with a range of £50,000 to £450,000.

NPS was a joint venture owned by NPS Property Consultants Limited (80%) and the London Borough of Waltham Forest (20%).  NPS was loss making and the director’s report stated that the parent company would provide financial support for a period of 12 months – the parent company had a turnover of £125m.  The judge determined that NPS should be treated as a large organisation and increased that starting point of the fine to £1.1m with a range between £500,000 to £2.9m.

The Court of Appeal concluded that this approach was incorrect and only the turnover of NPS should be considered when establishing the level of fine at step 2 of the sentencing guidelines.  There are very limited circumstances where it would be appropriate to ‘lift the corporate veil’ and consider the turnover of connected companies such as the parent company in this case.  For example, if an organisation deliberately gave a contract to a subsidiary to avoid health and safety liabilities then it may be appropriate to consider the link.

It is also worth noting that step 3 of the sentencing guidelines requires the court to ensure that the fine is proportionate to the financial circumstances of the defendant.  At this stage the court can consider the resources of linked organisations allowing it to adjust the level of fine.  In this case the appeal judge substituted a fine of £50,000 after considering all the issues outlined above.

The case provides further clarity that defendant organisations should be considered separately from their group and that there are only limited circumstances where this established approach should not be followed.

Mark Stouph
Regulatory Team, Jacksons Law Firm

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