Bupa Care Homes (BNH) Ltd v Her Majesty’s Inspectors of Health and Safety [2019] EWCA Crim 1691

Bupa Care Homes (BNH) Ltd v Regina (upon the prosecution of Her Majesty’s Inspectors of Health and Safety) [2019] EWCA Crim 1691 concerned an appeal by the appellant company against a fine of three million pounds imposed at Ipswich Crown Court on 14 June 2018 by Her Honour Judge Peters following a guilty plea to an offence under section 3(1) of the Health and Safety at Work, etc Act 1974.

The appellant had admitted that it failed to conduct its undertaking so as to ensure, so far as reasonably practicable, that persons not in its employment were not thereby exposed to risks to their health and safety. The prosecution arose after Kenneth Ibbetson, aged 84, died from Legionnaires’ disease on 23 June 2015 while resident at Hutton Village Nursing Home, owned and operated by the appellant. The appellant was part of the wider BUPA corporate group. Its immediate parent was BUPA Care Homes CFG Plc and its ultimate parent was British United Provident Association Limited. At a preliminary stage the prosecution had also charged British United Provident Association Limited, contending that as parent it bore responsibility for failures of management and control which had permitted a deficient culture to develop. The appellant pleaded guilty on 27 September 2017 but its basis of plea was rejected. Negotiations then ensued during which the appellant put forward an Expanded Basis of Plea dated 16 March 2018 accepting that the sentencing court was entitled to reflect the fact that the breaches were part of a failure to fully implement a system for centralised oversight of Legionella control measures within care services. Importantly, the Expanded Basis also accepted that the sentencing court could properly reflect the economic realities of the appellant as a wholly owned subsidiary with British United Provident Association Limited as its ultimate parent owner. Following the concession that the parent’s financial position could be taken into account in sentencing the appellant, the case against British United Provident Association Limited was discontinued.

The prosecution’s case was that there had been multiple systemic maintenance failures over a number of years. The judge heard a Newton hearing on the extent of the appellant’s failings and on causation. Tests showed that Mr Ibbetson had been infected by the same strain of Legionella bacteria present in a tap in his bathroom. After hearing the evidence, the judge found that the most likely cause of his infection was the failure to flush and disinfect pipes and fittings that had been installed during refurbishment works at the Home which concluded shortly before Mr Ibbetson became a resident. The judge found that the maintenance failures which the prosecution detailed were not the cause of Mr Ibbetson contracting the disease. She nevertheless found that there had been numerous identified problems, many of which were risk factors for the proliferation of Legionella bacterium, few or none of which were adequately tackled. The risk posed by Legionella was well known and the appellant had its own systems intended to control it, supported by specialist contractors. The judge found that risk assessments carried out from 2012 onwards identified deficiencies but that there was no proper record of what remedial work was done. She found that management responsibility for Legionella had been devolved to an untrained person at the Home, namely the home manager, supported by no permanent or trained maintenance man at a time when plumbing was recognised to be a problem and checks were known to have been falsified. The previous maintenance man had been dismissed in 2014 partly because of concerns whether he was conducting water checks correctly and because he had falsified records. The business case for the refurbishment of the Home signed off in October 2014 noted plumbing problems including unsatisfactory hot water temperatures and water flow, but the refurbishment did not address any of those plumbing issues and in fact made matters worse, for example by boxing in thermostatic mixing valves making inspection difficult. No flushing and disinfection took place after the refurbishment work and the appellant never sought certification to show it had been done. Overall, the judge concluded that the appellant had fallen far short of the appropriate standards by allowing problems of which it was aware and which bore directly on Legionella risk to persist over a lengthy period from at least 2012. The judge characterised culpability as high.

On harm, the judge found the seriousness of the harm risked was death, which was not disputed. She concluded that the likelihood of that harm was low, which placed the case in harm category 3. She then considered whether the offence exposed a number of workers or members of the public to risk of harm and whether the offence was a significant cause of actual harm. She found the first question was clearly answered affirmatively as a number of different outlets tested positive for Legionella, exposing a number of employees and residents to risk. On causation of actual harm, she found that the failures she had identified did not themselves contribute to the circumstances which led to the exposure of Mr Ibbetson to Legionella. The most likely cause was the failure to flush and disinfect the pipes after the refurbishment work. The appellant was at fault for not obtaining a certificate to show that the work had been done, but this was not of itself a significant cause of the actual harm of Mr Ibbetson’s death. Overall, she found it right to increase the harm category to Category 2, so that the case was one of high culpability with harm in Category 2.

At Step Two the judge applied the Sentencing Council’s Definitive Guideline for Health and Safety Offences. The appellant’s turnover in 2015 was 77 million pounds and in 2016 was 89 million pounds, so it ranked as a large organisation under the Guideline. For high culpability and harm Category 2 the starting point for an organisation with turnover of 50 million pounds was a fine of 1.1 million pounds with a range of 550,000 pounds to 2.9 million pounds. The judge said that given her assessment of where the case sat in terms of harm and culpability within the range, together with consideration of the appellant’s turnover, there was very good reason to go above that starting point within the range. She noted aggravating factors including a previous conviction in 2011, albeit not related to Legionella, and an improvement notice in relation to Legionella risk management in 2009 in relation to another company in the BUPA group. In mitigation, she noted there had been significant steps to address the cause of the offence and that better measures were now in place, and that there had been remorse within the company albeit not well expressed. Taking account of all relevant factors at Step Two, she reached a fine of 2.25 million pounds.

At Step Three the judge considered the economic realities of the appellant’s position as part of the wider BUPA group. She noted that the entire group’s revenue in 2016 was circa 11 billion pounds and in 2017 around 12 billion pounds, with profits around 485 million pounds in 2017, 386 million pounds in 2016 and 278 million pounds in 2015. In the UK the revenue in 2017 was 287 million pounds with an underlying profit of 231 million pounds. She considered the directors’ remuneration, the global benefit derived from the BUPA Foundation, and the public good in providing services, but noted that there was no question this was a profitable organisation both as a whole and in respect of the subsidiary generally. She said that considering the turnover of the subsidiary, the usual profitability of the subsidiary, the economic realities of the group as a whole, the mitigating aspects of the group including the BUPA Foundation and the lack of shareholders, the need to consider the extent to which the defendant fell below the required standard, the need to have a real economic impact to bring home to management the need to comply with legislation and the mitigation of the steps taken to remedy the failings, and accepting the case was one of high culpability and harm category 2, it was her view that the correct approach was to increase the starting point. She particularly considered this necessary to bring home to management the need for these matters to be taken seriously and dealt with properly. She elevated the starting point at Step Three from 2.25 million pounds to 4.5 million pounds. After full one third credit for the guilty plea this produced the fine of three million pounds.

The appellant appealed on two main grounds. First, it argued that in elevating the starting point at Step Two from 1.1 million pounds to 2.25 million pounds, the judge engaged in double counting because she said this was done to reflect where the case sat in terms of harm and culpability within the range together with consideration of the appellant’s turnover, when harm and culpability had already been taken into account at Step One. Second, it argued that at Step Three the judge wrongly adjusted the fine on the basis of the turnover of British United Provident Association Limited, which was contrary to the approach taken in R v Tata Steel UK Ltd [2017] 2 Cr App R (S) 29 and R v Whirlpool UK Appliances Ltd [2018] 1 WLR 1811. The respondent submitted that the judge was entitled to take into account harm and culpability in fixing a starting point within the indicated range at Step Two, pointing to the fact that the Guideline required consideration of further adjustment within the category range for aggravating and mitigating features expressed as non-exhaustive. In relation to the second ground, the respondent submitted that the judge was entitled to adjust her starting point to reflect the appellant’s economic realities as the wholly owned subsidiary of a company whose turnover was around or in excess of 11 billion pounds, which had been accepted by the appellant earlier in proceedings during discussions on the basis of plea as a result of which the case had been discontinued against the parent. The respondent conceded, however, that the basis of plea did not of itself shut out the appellant from arguing that the judge went wrong in increasing the fine as she did by reference to the large financial resources of the parent, especially as the judge did not expressly or clearly rely on it herself for that purpose.

On the first ground, the Court of Appeal held that the judge had not erred. The Court rejected the submission that at Step Two a sentencing judge is only concerned with turnover and the aggravating and mitigating features set out in the table on page nine of the Guideline, and not with factors relating to harm and culpability. The Court emphasised that as the Lord Chief Justice had observed in Whirlpool Appliances Ltd the Guideline is intended to be flexible and flexibility is necessary to meet the broad range of circumstances which may fall to be considered in relation to offences under sections 2 and 3 of the 1974 Act. Although Step One requires an assessment of culpability in the range very high to low according to the factors listed, the Court did not consider that this meant that in selecting a starting point within the appropriate range at Step Two, the judge must leave out of account or not make a quantitative assessment of the extent of the harm and culpability involved in the offending. For example, an offender whose culpability is high because of the presence of a number of listed factors ought in principle to be punished more severely than an offender whose culpability is high because of the presence of just one factor. Put another way, the presence of multiple culpability factors can properly be regarded as a matter capable of increasing the starting point within the indicated range of fine. In this case, the judge impressively analysed the evidence that she had heard and concluded that there had been multiple failures by the appellant over a number of years which had exposed the Home’s residents to the risk of Legionella infection. This was a very bad case with all of the factors in the high culpability bracket being present, namely failing to put in place measures that are recognised standards in the industry, ignoring concerns raised by employees or others, failing to make appropriate changes following prior incidents exposing risks to health and safety, and allowing breaches to subsist over a long period of time. These matters justified a substantial increase above the starting point of 1.1 million pounds in the relevant bracket. Given that this figure related to an organisation with a turnover of 50 million pounds and that the appellant’s turnover was very significantly in excess of that, the Court did not consider that the judge’s starting point at Step Two of 2.25 million pounds could be faulted in light of her conclusion that a significant number of people were put at risk. The first ground of appeal therefore failed.

On the second ground, however, the Court of Appeal concluded that the judge had erred. The Court reviewed the authorities including Tata Steel UK Ltd, Whirlpool Appliances Ltd and R v NPS London Ltd [2019] EWCA Crim 228. In NPS London the Court had held that it was clear that it was wrong to read the Guideline as entitling a judge to treat a subsidiary as, or as if it were, a large organisation for the purpose of sentencing by reference to the turnover of its parent. The Court stated that it is the offending organisation’s turnover, and not that of any linked organisation, which at Step Two is to be used to identify the relevant table. This reflects the basic principle of company law that a corporation is to be treated as a separate legal person with separate assets from its shareholder or shareholders. The mere fact that the offender is a wholly owned subsidiary of a larger corporation or that a parent company or other linked organisation is in practice likely to make funds available to enable the offender to pay a fine is not a reason to depart from established principles of company law or to treat the turnover of the linked organisation as if it were the offending organisation’s turnover at Step Two. By contrast, whether the resources of a linked organisation are available to the offender is a factor which may more readily be taken into account at Step Three when examining the financial circumstances of the offender in the round and assessing the economic realities of the organisation. It may certainly be relevant at that stage, when checking whether the proposed fine is proportionate to the overall means of the offender, to take into account the economic reality, if it is demonstrated to the court’s satisfaction that it is indeed the reality, that the offender will not be dependent on its own financial resources to pay the fine but can rely on a linked organisation to provide the requisite funds. Both Tata Steel UK Ltd and NPS London were cases where the parent’s turnover was taken into account not because it could somehow be treated as belonging to the subsidiary company but because the economic reality was that the subsidiary would not have been a going concern without it, and so it could not properly be ignored as part of that reality. The parent’s turnover was used in both cases not to reduce the impecunious subsidiary’s fine; they were not cases where it was used to increase a wealthy subsidiary’s fine.

The Court stated that the Guideline has to be applied in a way which does not infringe ordinary and well understood principles of company law. 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. To take the latter course would be inconsistent with what was said in Tata Steel UK Ltd and NPS London, and this means that the

R v Tata Steel UK Ltd [2017] 2 Cr App R (S) 29
R v Whirlpool UK Appliances Ltd [2018] 1 WLR 1811
NPS London Ltd [2019] EWCA Crim 228
Prest v Petrodel Resources Ltd [2013] 2 AC 415
R (Her Majesty’s Inspectors of Health and Safety) v Whirlpool UK Appliances Ltd [2017] EWCA Crim 2186

R (Environmental Agency) v Lawrence [2020] EWCA Crim 1465