UK: England and Wales: health and safety fines, subsidiary companies and parent company turnover

Judgment was given last week by the Court of Appeal in Bupa Care Homes (BNH) Ltd, R v [2019] EWCA Crim 1691. The court heard an appeal by a company against a fine of imposed by Her Honour Judge Peters at the Crown Court in Ipswich, where the company had pleaded guilty to an office contrary to section 3(1) of the Health and Safety at Work Act 1974.

The fine had been increased by HHJ Peters with reference to the turnover of the company's parent company (at Step Three under the Sentencing Guideline). The Court of Appeal unanimously held that HHJ Peters was wrong to have done this because it did not "properly reflect the economic realities of the situation" (para. [82]). The Court continued (paras. [83] and [84]):

... the Guideline has to be applied in a way which does not infringe ordinary and well-understood principles of company law. Thus, the mere fact that one company may be the wholly owned subsidiary of a larger parent (with larger financial resources) does not mean that the resources of the parent can be treated as available to, or as part of the turnover of, the subsidiary company, because they are not. The Guideline phrase 'economic realities' cannot be extended to mean that the parent's resources belong to the subsidiary simply in order to justify a large increase in fine at Step Three, any more than they can be taken into account to increase the size of the subsidiary's turnover for the purposes of the tables in Step Two .... if it is generally wrong to take into account the parent's turnover so as to increase the subsidiary's turnover at Step Two (which it is) then it is wrong to take it into account to increase the fine at Step Three absent some special factor of the type identified in Tata Steel Ltd [2017] EWCA Crim 704 or NPS London [2019] EWCA Crim 228 (although, as we have observed, these were cases where fines were not reduced because of the parental turnover; they were not cases where fines were increased because of it). We decline to speculate on what such special factors might be; the question will have to be determined as and when it arises".