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BUPA Care Homes (BNH) Limited's £3m fine for breaches of health and safety legislation reduced to £1.5m on appeal: more certainty for corporate defendants or more confusion following the introduction of 'special factors'?

03 February 2020
BUPA Care Homes (BNH) Limited ("Bupa") received a fine of £3million in 2018 following a guilty plea to an offence contrary to section 3 of the Health and Safety at Work etc. Act 1974. This was halved on appeal in October 2019. 

In 2018 Bupa's residential care arm was fined after an elderly man died of Legionnaire's disease at a nursing home in Essex. It was found that there was a high concentration of legionella bacteria in the water at the nursing home following renovation work. 

The Sentencing Exercise 

When applying the Sentencing Guidelines for Health and Safety Offences the Judge at first instance concluded that Bupa was a large organisation based on its turnover of £89 million. The starting point for the fine was therefore £1.1 million but taking into account aggravating features, the Judge thought it was appropriate to increase the fine to £2.25 million. 

The fine was further increased as the Judge found it appropriate to take into account the turnover of Bupa's parent company, Bupa Care Homes CFG Plc (£12 billion). The fine was therefore increased to £4.5 million on the basis of the 'economic realities' of the group as a whole. Finally, the Judge gave a full one third discount for the guilty plea reducing the final fine to £3 million. 

The Appeal

Bupa appealed the fine to the Court of Appeal where it was held that the Judge at first instance had erred when increasing the fine to take into account the parent company's turnover. The Court of Appeal made clear that simply because a company is a wholly owned subsidiary it does not mean that the resources of the parent can or should be taken into account during the sentencing exercise. It was clarified that the phrase 'economic reality' does not extend to meaning that the resources of a parent organisation can be taken into account. 

This judgment makes it clear that parent company or group company resources should not be taken into account  when considering turnover at Steps 2 and/or 3 of the Sentencing Guidelines,  unless 'special factors' exist.  The introduction of 'special factors' is a new concept in this area and has gone some way to clarify when it is appropriate to take parent or group resources into account, aside from this however the position has remained unchanged. The Court has effectively restated once again that it is the resources of the defendant company that is relevant for sentencing purposes  and the fact that it is a wholly owned subsidiary is not a reason in itself to depart from the established principles of company law or treat the turnover of the linked organisation as if it was that of the defendant .  

The Future

The Court of Appeal have not changed the law in this appeal but have simply restated and reinforced the position from previous cases; there is however some (albeit limited) clarity on when resources of a parent or group company can be taken into account. What is disappointing however is that the Court of Appeal did not go as far as to define what such 'special factors' might be but instead said that it should be determined on a case by case basis. It is likely however, that if a company were to state they did not have sufficient funds to pay a fine, but linked organisations with a group did, the resources of the group or parent could be taken into account. With three cases on this subject in 2019 alone this is certainly an area to watch; DWF will consider the issues as and when they arise.

You can read about the Bupa case here.

 

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