The decision in R v Places For People Homes  EWCA Crim 410 (PPH) is likely to mean business with £250+million turnover will be exposed to the highest categories of fines when prosecuted for regulatory breaches. This increased exposure will apply in relation to environmental, health and safety and other regulatory breaches covered by similar sentencing guidelines.
The previous position
The level of fine following a conviction for certain regulatory breaches is determined partly by the size of the organisation in the applicable Sentencing Guidelines. Size is measured in terms of turnover:
- Micro – less than £2 million;
- Small - £2 million to £10 million;
- Medium - £10 to £50 million; and
- Large - £50 million or over.
The Sentencing Guidelines also state that “where an organisation’s turnover… very greatly exceeds the threshold for large organisations it may be necessary to move outside the suggested range to achieve a proportionate sentence.”
Unhelpfully, the term ‘very greatly exceeds’ is not defined, nor is the extent to which courts need to move outside a suggested range. However, previous case law (e.g. Whirlpool) had determined that the
courts have a discretion to apply the uplift for ‘very large’ companies, and that a turnover of up to £250 million would be unlikely to be considered very large.
In PPH the judge stated that:
- Organisations should be considered on a spectrum of size, not according to distinct categories;
- An organisation’s assets and operating surplus from its core activities should be considered as well as its turnover; and
- With a turnover of 5-6 times the ‘large’ threshold, and bearing in mind b., PPH was indeed a ‘very large’ organisation (despite on turnover alone falling close to the £250 million considered in Whirlpool unlikely to be very large).
Implications for ‘larger’ large companies
In previous cases, as compared to a ‘large’ organisation the fine for a ‘very large’ organisation was:
- Doubled in R v PPH;
- More than doubled from £1.1 million to £2.4 million in R v Tata Steel UK Limited; and
- Multiplied by almost five from £250,000 to £1.2 million in HSE v Whirlpool.
Many regulatory offences are strict liability and can be committed with low levels of culpability and harm. For typical regulatory offences involving some element of negligence and moderate ‘harm’, this could mean the £60k starting point could at least double on moving into the low-end of the ‘very large’ range. For high culpability, high harm offences such as serious pollution incidents and workplace fatalities the difference could mean a £3 million increase of the starting point to at least a £6 million fine.
The PPH judgment therefore has significant implications for many organisations who are previously considered themselves to be ‘large’, rather than very large.
For these businesses it would be wise to carefully assess turnover, assets and operating surplus and consider if this affects your risk profile for regulatory breaches. This could affect future decisions on resourcing, compliance or crisis management.