Environment – Pollution – Sentencing – Environmental Permitting (England and Wales) Regulations 2010 – Discharge of sewage without environmental permit – Appellant pleading guilty to offence contrary to regulations 38(1)(a) and 39(1) of 2010 Regulations – Fine of £250,000 imposed – Whether size of fine exceeding that justified by Sentencing Council guidelines – Whether justified by size of appellant company – Appeal dismissed
For several days in late August and early September 2012, untreated sewage was discharged from a sewage pumping station operation by the appellant into a brook which flowed through a 143-acre nature reserve in the North Wessex Downs area of outstanding natural beauty. The discharge was not authorised by an environmental permit. It occurred after the appellant’s staff failed on several occasions to respond to alarms which were triggered to warn of pump failure. Shortly after the incident, the pumps were replaced by newer and more robust models. In July 2014, the appellant pleaded guilty in the magistrates’ court to an offence contrary to regulations 38(1)(a) and 39(1) of the of Environmental Permitting (England and Wales) Regulations 2010. It did not dispute that it should have replaced the pumps before September 2012.
The appellant was committed for sentencing to the Crown Court. The case was the first of its kind to come before a court after the definitive guidelines issued by the Sentencing Council came into effect. In August 2014, a recorder imposed a fine of £250,000, plus a victim surcharge of £120, and ordered the appellant to pay costs of £6,887.48. In her sentencing remarks, she described the appellant’s culpability as negligence, given that the appellant had had a number of warnings that the pumps were breaking down, they were close to a very special nature site and they should have been replaced before the incident occurred.
In calculating the amount of the fine, the recorder took into account the step-by-step approach set out in the guidelines, based on the degree of culpability of the offender, the harm caused by the offence and the size of the offending organisation by reference to its turnover. Since the appellant’s turnover well exceeded the threshold for a “large” company under the guidelines, the recorder applied multiples of the figures suggested for such a company, and, in reaching the final figure, took into account mitigating factors including the appellant’s early guilty plea.
The appellant appealed against the amount of the fine, arguing that the recorder’s approach established a new category of penalties in the case of very large companies which was not sanctioned by the Sentencing Council or by statute. It also alleged that the recorder’s comments contained errors of fact and it sought to adduce fresh evidence, pursuant to section 23 of the Criminal Appeals Act 1968, to show that it was a responsible organisation which conscientiously discharged its duties to the wider community.
Held: The appeal was dismissed.
(1) The appellant should not be permitted to adduce fresh evidence on the appeal. The evidence demonstrated sloppiness in maintaining the pumps, an attitude which was consistent with the recorder’s finding that they should have been replaced sooner. The failings identified by the recorder demonstrated a failure by the appellant as a whole to take reasonable care to put in place and enforce proper systems for avoiding the commission of the offence. At the sentencing hearing, the case had been conducted by both sides on the basis that the recorder could properly conclude that the pumps required replacement before September 2012. Applications to admit fresh evidence on appeal would be dealt with having regard to the guidance in Practice Direction “CrimPD VII B – Determining the Factual Basis of Sentence”. If the appellant sought to demonstrate that that was wrong, it could and should have set that out in a basis of plea, as required by para B.11(a) of the Practice Direction, and put in evidence to support its case, which would have alerted the prosecution to the need to deal with the issue. The appellant could not now invite the appeal court to consider the penalty imposed on it in the light of a case which it did not advance at the sentencing hearing. It was important, both for the parties and the sentencing court, to comply strictly with the requirements set out in the Practice Direction. It could only be in the rarest of circumstances, far removed from the facts of the instant case, that the appeal court would this court would permit an appellant in that type of case to advance a case on appeal which had not been fully deployed below.
(2) The sentencing guidelines proposed a step-by-step approach to the calculation of a fine, based on the degree of culpability of the offender, the harm caused by the offence and the size of the offending organisation, assessed by reference to its turnover. Organisations were divided into four categories – micro, small, medium and large. Large organisations were identified as those with a turnover or equivalent of £50m or more although, in cases where a company’s turnover or equivalent very greatly exceeded the threshold for large companies, the guidance suggested that it might be necessary to move outside the suggested range of fines in order to achieve a proportionate sentence. The appellant fell into that “very large” category of organisation, with a turnover of £1.9bn and profit for the year ending 2014 of £346m.
(3) The starting point to be adopted for very large commercial organisations which were run for profit was the statutory provision for all offenders in sections 142, 143 and 164 of the Criminal Justice Act 2003. In every case, an assessment had to be made of the seriousness of the offence, applying the guidance in steps 3 and 4 of the Sentencing Council’s definitive guideline on environmental offences. It was particularly important, in the case of such very large commercial organisations, to take into account the financial circumstances of the offender as required by section 164 of the 2003 Act, so as to ensure that the penalty imposed was not only proportionate and just but also achieved the object of bringing home to the management and shareholders the need to protect the environment: R v Sellafield Ltd [2014] EWCA Crim 49 applied. The court was not bound by, or even bound to start with, the ranges of fines suggested by the Sentencing Council in the cases of organisations which were merely “large”. In the case of such an organisation, there should not be a mechanistic extrapolation from the levels of fine suggested at step 4 of the guideline for large companies.
(4) In the case of a large statutory undertaker such as the appellant, no amount of management effort could ensure that no unauthorised discharge could ever occur. In the case of an offence which caused no harm and which occurred without fault on the part of the undertaker, it would be difficult to justify a significant difference in the level of fine imposed on two very large organisations, merely because the infrastructure and turnover of one was twice as large as that of the other. Size became much more important when some harm was caused by negligence or greater fault. Repeated operational failure, suggestive of a lack of appropriate management attention to environmental obligations, fell within that category. In the worst cases, when great harm exemplified by category 1 harm had been caused by deliberate action or inaction, the need to impose a just and proportionate penalty would necessitate a focus on the whole of the financial circumstances of the company, including profitability, which might well result in a fine equal to a substantial percentage, up to 100%, of the company’s pre-tax net profit for the year in question, even if that resulted in fines in excess of £100m. Where the harm caused falls below category 1, lesser, but nevertheless suitably proportionate, penalties which had regard to the financial circumstances of the organisation should be imposed. In an appropriate case, a court might well consider, having regard to the financial circumstances of the organisation, that to achieve the objectives in section 143 of the 2003 Act the fine imposed should be measured in millions of pounds.
In the case of a large organisation with a hitherto impeccable record, the fine had to be large enough to bring the appropriate message home to the directors and shareholders and to punish them. In the case of repeat offenders, the fine should be far higher and should rise to the level necessary to ensure that the directors and shareholders of the organisation took effective measures properly to reform themselves and ensure that they fulfil their environmental obligations.
(4) Applying the foregoing principles to the instant case, the appellant’s offence involved negligence caused localised harm. Since 1991, the appellant had been convicted on 106 occasions of 162 environmental offences. Its record did not suggest routine disregard of environmental obligations but it did leave room for substantial improvement. A combination of the facts of the offence and the appellant’s record required the court to take starting point for a fine that was significantly into seven figures. Evidence of that the appellant’s main board had done to address the risk of environmental pollution from the appellant’s activities did show that the appellant took the matter seriously and was spending substantial sums to modernise and improve its infrastructure. That went some way to justifying a starting point as low as that impliedly selected by the recorder. However, recent offences suggested that the steps taken by the appellant might not have been sufficient and might, in the immediate future, require substantially higher fines to be imposed for similar offences. The appellant’s recent record suggested that the appropriate message has not fully struck home. In all the circumstances, the fine imposed by the recorder was lenient and the appeal court would have had no hesitation in upholding a substantially higher fine.
Richard Honey and Alison Pryor (instructed by Berwin Leighton Paisner LLP) appeared for the appellant; Barry Berlin and Rooma Horeesorun (instructed by the Environment Agency) appeared for the respondent.
Sally Dobson, barrister
Click here to read transcript: R v Thames Water Utilities Ltd
