Thames Water Utilities Ltd, R v [2015] EWCA Crim 960

Case No 201404543 A8[2015] EWCA Crim 960
IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT AT READING
MRS RECORDER ARBUTHNOT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 03/06/2015
Before
THE LORD CHIEF JUSTICE OF ENGLAND AND WALESTHE RIGHT HONOURABLE LORD THOMAS OF CWMGIEDDMR JUSTICE MITTINGMR JUSTICE LEWIS
Between
REGINACrownTHAMES WATER UTILITIES LTDDefendant
MR RICHARD HONEY AND MISS ALISON PRYOR (who did not appear at the Crown Court) (instructed by BERWIN LEIGHTON PAISNER LLP) for AppellantMR BARRY BERLIN AND MRS ROOMA HOREESORUN(instructed by THE ENVIRONMENT AGENCY) for CrownHearing Hearing date: 18 FEBRUARY 2015
JudgmentMR JUSTICE MITTINGThis is the judgment of the Court to which we have all contributed.Facts
[1]Between 29 August 2012 and 4 September 2012 untreated sewage was discharged from Broadlayings Sewage Pumping Station into the Chase Brook which flows through a 143 acre nature reserve owned by the National Trust in the North Wessex Downs Area of Outstanding Natural Beauty. The discharge occurred otherwise than under and to the extent permitted by an environmental permit. An offence was therefore committed, contrary to Regulations 38(1)(a) and 39(1) Environmental Permitting (England and Wales) Regulations 2010. Thames Water Utilities Limited (the Appellant), as the operator of the pumping station, was culpable.[2]On 18 July 2014 the Appellant pleaded guilty to that offence at the first opportunity at Reading Magistrates’ Court. It was committed to the Crown Court for sentence.[3]On 29 August 2014 at Reading Crown Court, Mrs. Recorder Arbuthnot imposed a fine of £250,000 plus a victim surcharge of £120 and ordered the Appellant to pay costs of £6,887.48.[4]The Appellant appeals, with the permission of the single judge, against the amount of the fine only.[5]The function of Broadlayings Sewage Pumping Station was to receive untreated sewage from the surrounding area and from another upstream pumping station and to pump it to a downstream pumping station and thence to a sewage treatment works. Sewage was pumped by two pumps submersed in a “wet well”. The cause of the discharge was the failure (by tripping) of both pumps. In consequence, sewage was not pumped to the downstream pumping station but discharged directly into the Chase Brook. The cause of the failure of the pumps was well known: they became clogged with “rag” inappropriately discarded into the sewage system by domestic and other users. When this occurred, an alarm was triggered which alerted the Appellant’s staff to the failure. The Appellant laid down a response time to the failure of one pump of 24 hours and to the failure of both, manifested by the triggering of an alarm which signified that the liquid level in the wet well was rising, of four hours. In the five months before the incident, there had been at least 16 instances of failure of one or both of the pumps. Each incident was recorded in the Appellant’s log.[6]On 29 August 2012 alarms signifying pump failure were triggered on 12 occasions between 7.20 am and 8.50 am. The alarms indicated that both pumps had failed and that the water level in the wet well was high. The Appellant’s staff did not respond to the alarms on 29 August 2012 or at all. Further alarms were triggered on 4 September 2012 between 1.17 am and 2.57 am. Again, there was no response. The discharge was first discovered by a member of the public walking in the Chase, who reported it to the National Trust who, in turn, reported it to the Appellant. Once notified, the Appellant’s staff attended and unblocked the pumps.[7]Soon afterwards the pumps were replaced by newer pumps with a more robust specification better able to cope with the ingestion of rag.[8]In her sentencing remarks, the Recorder said this:
“The Crown and Thames Water agree that the culpability of Thames Water can be described as negligence. I agree with that assessment on the basis that the company 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 replaced the pumps before they had to in September after the sewage had run into the brook.”
A central issue in this appeal is whether or not she was entitled to reach those conclusions.

Application to admit fresh evidence - principles

[9]The Appellant seeks permission to adduce fresh evidence pursuant to s.23 of the Criminal Appeals Act 1968, for the stated purpose of correcting what are claimed to be errors of fact. The principal errors are said to be contained in the passage cited; but the application is not limited to them. The fresh evidence is contained in witness statements made by Nigel Membury, Christopher Ralph and Helen Newman which, together with appendices, run to 119 pages. As well as the stated purpose, they seek to demonstrate that the Appellant is a responsible organisation which conscientiously discharges its duties to the wider community.[10]The application raises questions as to the circumstances in which fresh evidence may be adduced on a sentence appeal. If the evidence is in essence fresh information about the offender, a court will normally not require the conditions and formalities of the governing statutory provision, s.23 of the Criminal Appeals Act 1968, to be complied: see R v Roberts [2007] 1 WLR 1109 at [44]. However outside that limited area, the provisions of s.23 must be met: see Beesley, Coyle and Rehman [2012] 1 Cr App R (S) 15 at [33] – [36]. Under s.23(1) the Court may receive evidence not admitted in proceedings from which the appeal lies if the court thinks it necessary or expedient in the interests of justice. The factors to which it must have regard are those set out in s.23(2), “The Court of Appeal shall, in considering whether to receive any evidence, have regard in particular to –(a) whether the evidence appears to the court to be capable of belief;(b) whether it appears to the court that the evidence may afford any ground for allowing the appeal;(c) whether the evidence would have been admissible in the proceedings from which the appeal lies on an issue which is the subject of the appeal; and(d) whether there is a reasonable explanation for the failure to adduce the evidence in those proceedings.”[11]In addressing those factors, in particular that identified in s.23(2)(d) in a sentence appeal, the court will have regard to CrimPD VII B – Determining the Factual Basis of Sentence. The relevant paragraphs are as follows:
“B.6 A defendant may put forward a plea of guilty without accepting all of the facts as alleged by the prosecution. The basis of plea offered may seek to limit the facts or the extent of the offending for which the defendant is to be sentenced. Depending on the view taken by the prosecution and content of the offered basis, the case will fall into one of four categories… (a) A plea of guilty upon a basis of plea agreed by the prosecution and defence. B.7 The prosecution may reach an agreement with the defendant as to the factual basis on which the defendant will plead guilty, often known as an “agreed basis of plea”
. It is always subject to the approval of the court, which will consider whether it adequately and appropriately reflects the evidence as disclosed on the papers, whether it is fair and whether it is in the interests of justice. B.8 R v Underwood…outlines the principles to be applied where the defendant admits that he…is guilty, but disputes the basis of offending alleged by the prosecution; (a) The prosecution may accept and agree the defendant’s account of the disputed facts or reject it in its entirety, or in part; if the prosecution accepts the defendant’s basis of plea, it must ensure that the basis of plea is factually accurate and enables the sentencing judge to impose a sentence appropriate to reflect the justice of the case; (b) In resolving any disputed factual matters, the prosecution must consider its primary duty to the court and must not agree with or acquiesce in an agreement which contains material factual disputes; (c) If the prosecution does accept the basis of plea, it must be reduced to writing, be signed by advocates for both sides, and made available to the judge prior to the prosecution’s opening; (d) An agreed basis of plea that has been reached between the parties should not contain matters which are in dispute and any aspects upon which there is not agreement should be clearly identified. B.11 Where the defendant pleads guilty, but disputes the basis of offending alleged by the prosecution and agreement as to that has not been reached, the following procedure should be followed; (a) The defendant’s basis of plea must be set out in writing, identifying what is in dispute and must be signed by the defendant; (b) The prosecution must respond in writing setting out their alternative contentions and indicating whether or not they submit that a Newton hearing is necessary; (c) The court may invite the parties to make representations about whether the dispute is material to sentence; and (d) If the court decides that it is a material dispute, the court will invite such further representations or evidence as it may require and resolve the dispute in accordance with the principles set out in R v Newton.”[12]In environmental pollution cases, it is now routine for the Crown to produce a “Friskies” schedule of aggravating and mitigating factors (R v. Friskies Petcare (UK) Limited [2000] 2 CAR (S) 401). As from 23 July 2014 this practice is expressly endorsed by the Practice Direction: [2014] 1 WLR 3001 at 3019. Q.3 deals with a case in which the offence is of a character or against a prohibition with which the sentencing court is unlikely to be familiar, “…Save where the circumstances are very straightforward, it is likely that justice will best be served by the submission of the required information in writing: see R v. Friskies Petcare (UK) Limited…. Though it is the prosecutor’s responsibility to the court to prepare any such document, if the defendant pleads guilty, or indicates a guilty plea, then it is very highly desirable that such sentencing information should be agreed between the parties and jointly submitted. If agreement cannot be reached in all particulars, then the nature and extent of the disagreement should be indicated. If the court concludes that what is in issue is material to sentence, then it will give directions for resolution of the dispute, whether by hearing oral evidence or by other means…”

Case at first instance

[13]The Practice Direction and the “Friskies” procedure were followed by the prosecution. In late June 2014 in advance of the hearing before the Magistrates’ Court, they served a detailed 20 page case summary in which their contentions about the cause and effect of the sewage discharge and on the Appellant’s culpability were fully set out. A “Friskies” schedule set out two agreed aggravating factors and nine agreed mitigating factors. One aggravating factor was identified by the prosecution which was not agreed by the Appellant, “3. Financial decisions may have been partly responsible for this incident as work to improve, upgrade or replace the two pumps at Broadlayings SPS would have had costs associated with them. In this instance Thames Water deemed it more effective to attend site and resolve each blockage as they occurred through activities being raised following activation of alarms.” Counsel for the prosecution opened the case to the Recorder on the basis of the facts and contentions set out in the case summary. The Appellant relied on a witness statement by Richard Aylard, External Affairs and Sustainability Director, which expanded upon the agreed mitigating factors.[14]Both sides rightly accepted that the step-by-step approach set out in the Sentencing Council’s definitive guideline on environmental offences should be followed. The prosecution case was that the harm caused by the incident fell within category 2, because it had a significant adverse effect on water quality, amenity value and animal health; and that culpability fell into the negligent category:
“Failure by the organisation as a whole to take reasonable care to put in place and enforce proper systems for avoiding commission of the offence.”
[15]In paragraph 16 of the case summary, the prosecution identified failings in the pumps revealed by the Appellant’s records, “● Between 20/04/2012 and 04/09/2012 Thames Water attended Broadlayings SPS on 16 separate occasions to unblock both pumps and on a further three occasions to unblock a single pump. ● Between 21/06/2012 and 29/06/2012 Thames Water attended the Broadlayings SPS for three separate multiple pump failures and to unblock both pumps. ● On 31/07/2012 both pumps were pulling over-amps even when they had just been unblocked, and that pump number one was missing a ware ring (component of pump) with numerous quotes for spares raised over the past six months. Another job was raised for a new impellor (creates flow through pump) and ware ring that day. ● On the 04/09/2012 as part of the response to the pollution incident another job was raised for new impellors and ware rings for the SPS.”[16]The thrust of Mr. Aylard’s witness statement was that the Appellant took its duties seriously. It explained the cause of the blockage (rag deposited in the sewage system), what had been done to put it right and what expense the Appellant had incurred in consequence. The expense included a sum which the Appellant was under no legal liability to incur: funding a National Trust community warden for three years at a cost of £90,000. The statement also contained a balanced and detailed explanation of the financial and regulatory environment in which it undertook its activities.[17]Significantly, Mr. Aylard’s statement did not dispute the proposition that the pumps required replacement before September 2012. In paragraph 3 he acknowledged “the severity of the incident and the need to do more to seek to reduce the risks of incidents such as this from occurring in the future”. In paragraphs 11 and 12 he explained what had been done about the pumps, “11. The station pumps were replaced shortly after the incident with models less susceptible to blocking by rag. 12. The emergency overflow into the Chase Brook has been sealed and a bunded area created around the pumping station….While we are confident that the actions we have taken will prevent failures of this kind from happening again, the bunding provides a further level of protection.”[18]The thrust of the mitigation advanced by Mr. Bunyan, counsel for the Appellant, in oral submissions was that the harm caused by the offence fell within Category 3, not Category 2. When the Recorder indicated that she thought that it was a Category 3 case, albeit at the top end of the category, he said that he would not “take it any further”.[19]He also expressly accepted on three occasions that culpability was correctly categorised as negligent, though he laid emphasis on the failure to respond adequately to the alarms triggered when the pumps failed and disclaimed any failure by the organisation to put proper systems in place.[20]During the course of Mr. Bunyan’s submissions, the Recorder put to him her principal concern about the cause of the incident and the Appellant’s responsibility for it, to which she got an unequivocal reply, as the following exchange demonstrates:
“The Recorder: I think the biggest problem is the fact that you had all these warnings that the parts were not operating properly, and I think that 16 or more – I think it is more than 16 – you know, is an indication that something should have been done rather sooner. Mr. Bunyan: Well, I do not think…. The Recorder: I am not sure it makes all that much difference, but that is my view. Mr. Bunyan: No, in fairness, I do not think the company would disagree with that.”
Mr. Bunyan: No, in fairness, I do not think the company would disagree with that.”[21]On the basis of all of that material, the Recorder was, in our view, plainly entitled to conclude that, i) The Appellant’s culpability was correctly categorised as negligence. ii) The Appellant’s negligence lay in failing to replace failing pumps before September 2012 and in failing to respond timeously or at all to the pump alarms.

Fresh evidence - decision

[22]Mr. Honey, who did not appear for the Appellant below, seeks to challenge those findings apart from the finding about the response to the alarms. On the material before the Recorder, he argues that the only failure in the pumps was a missing ware ring and that the admitted negligence was not, as Mr. Bunyan conceded, a “failure by the organisation as a whole to take reasonable care to put in place and enforce proper systems for avoiding commission of the offence”. We reject those submissions. Nobody has suggested at any stage in the proceedings that the missing ware ring had any causative effect on the failure of the pumps. Its significance was that it demonstrated sloppiness in maintaining the pumps, an attitude consistent with the Recorder’s finding that they should have been replaced sooner. Further, the two failings identified by the Recorder did demonstrate 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.[23]In an effort to persuade this court to reach a different conclusion from that in effect conceded by the Appellant at the sentencing hearing, it seeks to rely on the witness statement of Nigel Membury dated 7 November 2014. The central paragraphs of his statement are 18 – 23 and 32. “18. In order to clear full rag blockages it is always necessary to attend site and physically unblock pumps. 19. In relation to Broadlayings SPS, this process had worked well previously, ensuring that blockages were cleared without any problem. There had been no particular problem with this SPS prior to this incident, as is shown by the maintenance records, which show a level of blockages which is not abnormally high and which are normally cleared without incident. 20. The is no general problem with C type pumps, as they are perfectly adequate at dealing with rag and pumping sewage, and there is no reason to seek to replace these pumps. C type pumps are widely used in thousands of SPSs across the water industry. These types of pumps are preferred as they only have one leading edge where solids can attach themselves…. 21. The blockages occurring in the period of April to September 2012 were entirely normal in terms of frequency and are not indicative of any particular problem with this SPS. The blockage rate for this SPS is not unusual. For reasons unknown, there seems to be a lot of rag, rubble and brick debris in the network in this area, which all flows into the SPS. The management regime for this SPS was appropriate for these circumstances. 22. There was no underlying problem or deficiency with the pumps at this SPS. The Crown Court findings that:(1) “The company had had a number of warnings that the pumps were breaking down”;(2) Thames Water “should have replaced the pumps” before September 2012 (transcript at 32E) and(3) “had plenty of warning that the pumps were faulty” (transcript at 33E) are unfounded. 23. On (1) it is wrong to say that the pumps were “breaking down” as the pumps at this SPS did not have any operational problems. It is an inevitable consequence of having to deal with the content of modern day sewage that pumps will from time to time become blocked by rag, but this does not mean that they were “breaking down” – the normal outcome of a reported blockage is that the blockage is cleared and the pumps are returned to full working operation quickly and without incident. On (2) there was no need to replace the pumps as there was no problem with this SPS prior to this incident. On (3) the pumps were not faulty, and were brought back to full operation once the blockages had been cleared on all of the previous occasions between April and September 2012…. 32. Action was taken following the incident to replace the existing C type pumps with N type pumps which are even less susceptible to blocking. This was done not because the C pumps required replacing, but on a precautionary basis, as a “belt and braces” approach with the aim of reducing the risk of repeat incidents in the area.”[24]We indicated at the conclusion of submissions on the admission of new evidence that we would not receive Mr. Membury’s witness statement under s.23. Our reasons for doing so can be simply stated. For the reasons which we have explained above, the case was conducted at the sentencing hearing by both sides on the basis that the Recorder could properly conclude that the pumps required replacement before September 2012. If the Appellant wished to demonstrate that that was not so, by evidence of the type given by Mr. Membury, it could and should have set it out in a basis of plea as required by B.11(a) of the Practice Direction, so that the prosecution were alerted to the need to deal with the issue. Further, it could and should have put in evidence to support its case. Had it done so, it might have been the subject of detailed inquiry and challenge by the prosecution in the light of the disputed aggravating feature cited above, not necessarily to the Appellant’s advantage. The Appellant cannot now invite this court to consider the penalty imposed on it in the light of a case which it did not advance at the sentencing hearing.[25]The facts of this case emphasise the importance, both for the parties and the sentencing court, of complying strictly with the requirements set out in the Practice Direction. It can only be in the rarest of circumstances, far removed from the facts of this case, that this court would permit an Appellant in this type of case to advance a case on appeal which was not fully deployed below.[26]Various other alleged errors in the Recorder’s sentencing remarks are identified in the Appellant’s grounds of appeal and referred to in the witness statement of Mr. Ralph. While not resiling from them, Mr. Honey did not advance any oral submission about them. We can, accordingly, deal with them shortly. Mr. Ralph challenges the prosecution case that the discharge caused the death of a significant number of macro-invertebrates (spineless creatures visible to the naked eye, such as crayfish). He says that the cause was lack of water, not pollution. If, which we doubt, this was an issue of any importance, it should have been raised at the sentencing hearing. He criticises the Recorder for mis-identifying the Chase Brook as a “specially protected body of water” and the site into which the sewage was discharged as a “very special nature site”. None of this matters at all. Sewage was discharged into the Brook before it reached the Alder Carr, a patch of marshland which was a sensitive site. He also draws attention to the fact that, according to a report prepared for the Appellant on 19 October 2012 recovery within the Chase Brook took six weeks, whereas the Recorder said that the worst of the pollution had been removed within two weeks with a complete recovery within six months. None of this could possibly have influenced the level of the fine imposed. If it was material at all, it should have been raised at the sentencing hearing.[27]The witness statement of Helen Newman adds nothing material to that of Mr. Aylard.[28]For the reasons given, we decline to receive the evidence of Mr. Ralph and Ms. Newman under s.23.

Sentencing

[29]This was the first case of its kind to have come before a court since the Sentencing Council’s definitive guideline came into effect. The Recorder was faced with a difficult sentencing decision, only partly informed by the contents of the guideline. The guideline proposes a step-by-step approach to calculation of a fine based upon the degree of culpability of the offender and the harm caused by the offence and upon the size of the offending organisation, assessed by reference to its turnover. Organisations are divided into four categories, micro, small, medium and large. Large organisations are identified as those with a turnover or equivalent of “£50 million and over”. The Council, however, makes it clear that the starting points and range of fines suggested do not apply to very large organisations. Step 4 of the guidance states, “Very large organisations Where a defendant company’s turnover or equivalent very greatly exceeds the threshold for large companies, it may be necessary to move outside the suggested range to achieve a proportionate sentence.” This is consistent with step 6, “Check whether the proposed fine based on turnover is proportionate to the means of the offender.” The approach to be adopted is set out in the text:
“The combination of financial orders must be sufficiently substantial to have a real economic impact which will bring home to both management and shareholders the need to improve regulatory compliance. It will be necessary to examine the financial circumstances of the organisation in the round. If an organisation has a small profit margin in relation to its turnover, downward adjustment may be needed. If it has a large profit margin, upward adjustment may be needed.”
[30]The Recorder correctly recognised that the Appellant fell into the very large category of organisation: its turnover was £1.9 billion and profit for the year ending 2014, £346 million. Her solution to the problem was to multiply the starting point for a negligent Category 3 case - £60,000 for a large company – by five to £300,000 and the range - £35,000 - £150,000 – to £175,000 to £750,000. She did so by extrapolating the incremental increases between micro, small, medium and large companies set out in the guidelines. Taking into account the mitigating factors and the Appellant’s plea of guilty at first opportunity, she arrived at a figure of £250,000. She did not explain the mathematical exercise, if any, undertaken to reach that outcome, but it is reasonable to suppose, that but for the mitigating factors and prompt plea of guilty, the fine which she would have imposed would have been not less than £500,000.[31]Mr. Honey submits that, by the approach which she adopted, the Recorder has established a new category of penalties in the case of very large companies which is not sanctioned by the Sentencing Council or by statute. Mr. Berlin, for the Environment Agency, does not seek to support a mechanistic approach to the assessment of fines on very large companies. Since the hearing of the appeal, we have received written submissions from the parties as to the approach which the court might adopt. We are grateful for those submissions. Although in our conclusions which we set out below, we set out the approach that should have been taken, we have very substantial sympathy for the position in which the Recorder was placed.[32]Before we turn to our conclusions, we deal with one further criticism by Mr. Honey of the Recorder’s approach to sentencing. As we have noted, the Appellant agreed to pay for a National Trust warden for three years at a cost of £90,000. The Recorder acknowledged this by stating that, “Thames Water have given some voluntary compensation, in that they have financed a warden for three years and that compensates the public to some extent and also the National Trust for the lack of the use of the facilities for the time that they could not go to the Brook and areas nearby.” Mr. Honey submits that the Recorder mischaracterised the payment as “compensation” a word which suggested that it was monetary recompense for a civil wrong done and should have used the word “reparation”, the word used by Sweeney J in R v. Thames Water Utilities Ltd [2010] 3 AER 47 at paragraph 53. There is nothing in this point. “Reparation” is, in any event, a synonym for compensation. The Recorder did not fall into error by referring to compensation. What matters is that the payment is voluntary and goes beyond what is required to discharge a civil obligation. This the Recorder identified by the words that she used. The approach to be adopted in the case of very large commercial organisations run for profit[33]The starting point of the approach to be adopted for very large commercial organisations run for profit is the statutory provision for all offenders in ss.142, 143 and 164 of the Criminal Justice Act 2003, as summarised in paragraph 3 of R v. Sellafield Limited [2014] EWCA Crim 49 “The general principles 3. It is important at the outset to recall the provisions which Parliament has enacted in the Criminal Justice Act 2003 (CJA 2003) in relation to the duty of the courts in sentencing, as these principles are applicable to all offenders, including companies: i) The courts must have regard in dealing with offenders to the purposes of sentencing which Parliament specified as(a) the punishment of offenders(b) the reduction of crime (including its reduction by deterrence),(c) the reform and rehabilitation of offenders,(d) the protection of the public, and(e) the making or reparation by offenders to persons affected by their offences (s.142 of the CJA 2003). ii) In considering the seriousness of the offence the court must have regard to the culpability of the offender and the harm caused or which might foreseeably be caused (s.143 of the CJA 2003). iii) If a court decides on a fine it must approach the fixing of fines having regard not only to the purposes of sentencing and the seriousness of the offence, but must also take into account the criteria set out in s.164 of the CJA 2003: (1) Before fixing the amount of any fine to be imposed on an offender who is an individual, a court must inquire into his financial circumstances. (2) The amount of any fine fixed by a court must be as such as, in the opinion of the court, reflects the seriousness of the offence. (3) In fixing the amount of any fine to be imposed on an offender (whether an individual or other person), a court must take into account the circumstances of the case including, among other things, the financial circumstances of the offender so far as they are known, or appear, to the court. (4) Subsection (3) applies whether taking into account the financial circumstances of the offender has the effect of increasing or reducing the amount of the fine.” i) The courts must have regard in dealing with offenders to the purposes of sentencing which Parliament specified as (a) the punishment of offenders (b) the reduction of crime (including its reduction by deterrence), (c) the reform and rehabilitation of offenders, (d) the protection of the public, and (e) the making or reparation by offenders to persons affected by their offences (s.142 of the CJA 2003). ii) In considering the seriousness of the offence the court must have regard to the culpability of the offender and the harm caused or which might foreseeably be caused (s.143 of the CJA 2003). iii) If a court decides on a fine it must approach the fixing of fines having regard not only to the purposes of sentencing and the seriousness of the offence, but must also take into account the criteria set out in s.164 of the CJA 2003: (1) Before fixing the amount of any fine to be imposed on an offender who is an individual, a court must inquire into his financial circumstances. (2) The amount of any fine fixed by a court must be as such as, in the opinion of the court, reflects the seriousness of the offence. (3) In fixing the amount of any fine to be imposed on an offender (whether an individual or other person), a court must take into account the circumstances of the case including, among other things, the financial circumstances of the offender so far as they are known, or appear, to the court. (4) Subsection (3) applies whether taking into account the financial circumstances of the offender has the effect of increasing or reducing the amount of the fine.”[34]As in every case, an assessment must be made of the seriousness of the offence. This is to be done be applying the guidance given in steps 3 and 4 of the Sentencing Council’s definitive guideline on environmental offences.[35]The factors taken into account in steps 5 – 11 should also be followed, save where irrelevant, for example, the proviso relating to public or charitable bodies in step 7. It is of particular importance in the case of such very large commercial organisations to take into account the financial circumstances of the offender as required by s.164 of the CJA 2003. This should ensure that the penalty imposed is not only proportionate and just, but will bring home to the management and shareholders the need to protect the environment.[36]The Court is not bound by, or even bound to start with, the ranges of fines suggested by the Sentencing Council in the cases of organisations which are merely “large”.[37]Mr. Berlin, for the Crown, suggests that an organisation should be treated as being “very large” if its turnover exceeds £150 million per year on a three–yearly average. We do not think there is any advantage to be gained by such a definition. In the case of most organisations, it will be obvious that it either is or is not very large. Doubtful cases must be resolved as and when they arise.[38]The object of the sentence is to bring home the appropriate message to the directors and shareholders of the company: Sellafield paragraph 6 and step 6 of the Guideline. Sentences imposed hitherto in a large number of cases have not been adequate to achieve that object. This Court has on two occasions observed that it would not have interfered with fines “very substantially greater” or “significantly greater” than six figure fines imposed for environmental offences: R v. Southern Water Services Limted [2014] EWCA Crim 120 paragraph 21 and R v. Day [2014] EWCA Crim 2683 paragraph 46.[39]Previous convictions will always be relevant aggravating features and in the case of some, seriously aggravating features. Relatively limited weight may be given to offences committed with low or no culpability (in the Sentencing Council’s definition in step 3); but offences which result from negligence or worse should count as significantly more serious. Repeated operational failures – suggestive of a lack of appropriate management attention to environmental obligations – fall into this category. For example, to bring the message home to the directors and shareholders of organisations which have offended negligently once or more than once before, a substantial increase in the level of fines, sufficient to have a material impact on the finances of the company as a whole, will ordinarily be appropriate. This may therefore result in fines measured in millions of pounds.[40]The court should therefore: i) In the worst cases, when great harm exemplified by Category 1 harm has been caused by deliberate action or inaction, the need to impose a just and proportionate penalty will necessitate a focus on the whole of the financial circumstances of the company. We have already outlined the approach by reference to the guideline – starting with turnover, but having regard to all the financial circumstances, including profitability. In such a case, the objectives of punishment, deterrence and the removal of gain (for example by the decision of the management not to expend sufficient resources in modernisation and improvement) must be achieved by the level of penalty imposed. This may 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 (or an average if there is more than one year involved), even if this results in fines in excess of £100 million. Fines of such magnitude are imposed in the financial services market for breach of regulations. In a Category 1 harm case, the imposition of such a fine is a necessary and proper consequence of the importance to be attached to environmental protection. ii) In the case of a Category 1 case resulting from recklessness, similar considerations will apply, albeit that the court will need to recognise that recklessness is a lower level of culpability than deliberate action or inaction. iii) Where the harm caused falls below Category 1, lesser, but nevertheless suitably proportionate, penalties which have regard to the financial circumstances of the organisation should be imposed. In an appropriate case, a court may well consider, having regard to the financial circumstances of the organisation, that to achieve the objectives in s.143 of the CJA 2003, the fine imposed must be measured in millions of pounds, as we have already indicated. iv) In the case of such an organisation, there must not be a mechanistic extrapolation from the levels of fine suggested at step 4 of the guideline for large companies. This is made clear by(1) the fact that by definition a very large commercial organisation’s turnover very greatly exceeds the threshold for a large company, and(2) the requirement at step 6 of the guideline to examine the financial circumstances of the organisation in the round.[41]It is axiomatic that all relevant mitigating features must be taken into account. In environmental pollution cases these will include prompt and effective measures to rectify the harm caused by the offence and to prevent its recurrence, frankness and co-operation with the authorities, the prompt payment of full compensation to those harmed by the offence, and a prompt plea of guilty. In addition, significant expense voluntarily incurred – so-called “reparation” – in recognition of the public harm done should be taken into account in the manner explained in R v. Thames Water Utilities Limited [2010] EWCA Crim 202 at paragraph 53. Clear and accepted evidence from the Chief Executive or Chairman of the main board that the main board was taking effective steps to secure substantial overall improvement in the company’s fulfilment of its environmental duties would be a significant mitigating factor.[42]In the case of a large statutory undertaker, such as the Appellant, no amount of management effort can ensure that no unauthorised discharge can ever occur. In the case of an offence which causes no harm and which occurs 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 becomes much more important when some harm is caused by negligence or greater fault. Even in the case of a large organisation with a hitherto impeccable record, the fine must 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 take effective measures properly to reform themselves and ensure that they fulfil their environmental obligations.

Application of those principles to the facts of this case

[43]The essential facts of this case have been described above. It was a case in which negligence caused localised harm.[44]The record of the offender was highly relevant. Since 1991, the Appellant has been convicted on 106 occasions of 162 environmental offences. For the purpose of determining an appropriate sentence for this offence, it would be desirable to distinguish between those past offences which resulted in little or no harm and occurred without fault on the part of the Appellant and those in which negligence caused harm. It is unfortunately not possible to state with certainty into which category of the Sentencing Council’s guideline each offence would have been put if the guideline had applied at the time. A reasonable proxy for more serious offences – those in which at least some harm was caused by negligence – is the number of occasions on which fines greater than the maximum which could have been imposed by a Magistrates’ Court for a single environmental offence until 6 April 2010 (£20,000) were imposed. From 1999 until 29 August 2014 there were 16 such occasions – just over one per year. In the four years before 29 August 2014, there were four. This record does not suggest routine disregard of environmental obligations by the Appellant, but it does leave room for substantial improvement.[45]But for the explanation given by Mr. Aylard to the Court in his witness statement of 27 August 2014, a combination of the facts of the offence and what can be extracted from the Appellant’s record would, in our view, have required the Court to take a starting point for a fine significantly into seven figures. Mr. Aylard’s explanation of what the main board has done to address the risk of environmental pollution from the Appellant’s activities did show that they took it seriously and were spending substantial sums to modernise and improve their infrastructure. That went some way to justifying a starting point as low as that impliedly selected by the Recorder. Recent offences suggest that the steps taken by the Appellant may not have been sufficient and may, in the immediate future, require substantially higher fines to be imposed for similar offences. In 2014 alone, fines of £75,000, £250,000 and £100,000 have been imposed for environmental pollution offences. If, as is likely, the first and last (like the second) represent incidents in which some harm has been caused by negligence, the Appellant’s recent record suggests that the appropriate message has not fully struck home.[46]In his written submissions Mr. Berlin suggested that the fine actually imposed by the Recorder was lenient. While we have every sympathy for the difficulty facing the Recorder, we agree that it was, even taking into account the significant mitigation afforded by Mr. Aylard’s evidence. We would have had no hesitation in upholding a very substantially higher fine. This appeal is dismissed.

Concluding observation

[47]Sentencing very large organisations involves complex issues as is clear from this judgment. It is for that reason that special provision is made for such cases in Crim PD XIII, listing and classification. Such cases are categorised as class 2 C cases and must therefore be tried either by a High Court Judge or by another judge only where either the Presiding Judge has released the case or the Resident judge has allocated the case to that judge. It is essential that the terms of this Practice Direction are strictly observed.

Cited in 8 later judgments