Health and safety prosecutions against companies in liquidation - Part 1: public interest
This article was co-authored by Sally Milner, Litigation Assistant, Sheffield.
It is not uncommon that a company faces prosecution for alleged breaches of health and safety duties notwithstanding insolvency proceedings.
The prosecution may be brought before or after the company goes into liquidation. Further, there is nothing to prevent a company under investigation for breach of health and safety legislation or which has been charged with such an offence, making itself subject to insolvency proceedings.
A dissolved company ceases to exist and cannot be prosecuted. However, prosecuting authorities can and sometimes do make court applications to prevent a company from being dissolved and as necessary to restore dissolved companies to the register for prosecution purposes.
Permission of the court must be obtained to bring proceedings against a company in administration or compulsory liquidation. The court may refuse or grant permission on such terms as it considers appropriate. However there is no statutory provision preventing prosecution of a company in voluntary liquidation. Court permission is not required in those circumstances and the interests of the creditors are not taken to override all other considerations.
The Health and Safety Executive (HSE), and other prosecuting authorities, will prosecute a company in liquidation if in their view the evidence demonstrates a breach and there is a public interest to do so. In the event that the evidence is judged sufficient for a conviction, the public interest will usually be judged to favour a prosecution.
HSE public interest policy
It is not HSE policy that all prosecutions will be stopped or prosecutions not pursued against companies in administration, liquidation or other formal interventions. The HSE can and regularly do take and/or continue a prosecution against a company in liquidation and justify it on the basis that there is a public interest in doing so to send out messages to industry concerning the safety duties upon employers.
Each case is required to be considered upon its own merits and by reference to both the Enforcement Policy Statement (which sets out the HSE’s approach to enforcement, “when issues of non-compliance, hazard or serious risk have been identified”), and the Crown Prosecution Service’s Code for Crown Prosecutors (the Code).
The Code requires prosecutors to consider a series of questions to identify and determine the relevant public interest factors tending for and against prosecution including whether a prosecution is a proportionate response.
It refers to the cost of bringing a case when weighed against any likely penalty. However whilst the likely penalty is one public interest factor in considering a prosecution, it is by no means the only one. If a decision is taken not to prosecute or stop a prosecution, this has to be a balance of all the public interest factors which go for or against a prosecution. A prosecution is not only intended to punish the defendant but also to deter others and this needs to be taken into account.
A prosecution will therefore usually take place unless the prosecutor is satisfied that there are public interest factors tending against prosecution which outweigh those tending in favour.
Public interest factors that weigh in favour of a prosecution
These include, amongst others:
- The seriousness of the offences alleged, taken with the seriousness of any actual or potential harm to the victim; the level of culpability of the suspect
- The history of the company's compliance with health and safety legislation
- Whether the company has fallen far below the standard required giving rise to significant risk
- Whether there has been an intentional obstruction of the investigation/inspectors in the lawful course of their duties
- Whether there has been a failure to comply with other enforcement action e.g. improvement notice or prohibition notice.
Public interest factors that weigh against a prosecution
These include, amongst others:
- The question of proportionality and that HSE is unlikely to recover its costs and a nominal penalty may be imposed
- A defendant may not attend Court and a Court may be reluctant to proceed in absence.
Penalties for corporate health and safety offences
Penalties include very severe fines assessed by reference to the size of the organisation, the degree of culpability and the level of harm at risk. Where a company is in liquidation and has laid itself upon the mercy of the court, the fine will either be nominal based on the company’s lack of finances or it will be substantial to send out a message even if the company’s finances may dictate that the fine is unlikely to be paid.
In the Buncefield prosecution, Mr Justice Calvert-Smith acknowledged that the Crown had embarked on the prosecution knowing that any penalty imposed on Motherwell Control Systems 2003 Limited, who went into administration before the case reached a sentencing hearing, would be nominal.
However, it was also emphasised that Motherwell had “escaped its just desserts by putting itself into voluntary liquidation and reforming itself under a new name with the same personnel”, and it was clearly in the public interest to understand where the faults lay which contributed to the explosion at the oil storage and transfer depot and its consequences.
However in that pre-sentencing guideline case, it was recognised that the creditors of Motherwell were in no way to blame and any penalty imposed would diminish the amount left to repay them. He therefore imposed a nominal fine
Conversely, in a more recent case, a recycling company was prosecuted under health and safety legislation after an employee was involved in a workplace accident which resulted in the amputation of his arm.
The company entered a guilty plea within the early stages of the prosecution, however prior to the sentencing hearing, the company went into administration and was purchased by a new owner who had not purchased the company’s liabilities. While it was submitted on behalf of the company’s administrators that any fine payable would have no deterring effect on the company as it no longer existed, the court highlighted the need to serve the public interest by imposing a correct fine.
The Judge took a similar viewpoint to the HSE by stating that “the whole point of prosecution is to hold companies to account who do not ensure the safety of their employees”. It was also stressed that for the taxpayer, justice being seen to be done is an important element of a prosecution, despite there being no possibility that the company could repay a fine. The Judge ordered a fine of £1,275,000 taking into account the company’s turnover for the previous year and its previous conviction for a health and safety offence.
Content included within this article was first published in the August 2019 edition of RECOVERY magazine and reproduced with the permission of R3 and GTI Media.