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	England and Wales Court of Appeal (Criminal Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Criminal Division) Decisions >> Ineos Chlorvinyls Ltd, R v [2016] EWCA Crim 607 (4 March 2016) URL: http://www.bailii.org/ew/cases/EWCA/Crim/2016/607.html Cite as: [2017] Env LR 7, [2016] EWCA Crim 607

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IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL
		Friday, 4th March 2016

1. LORD JUSTICE McCOMBE: On 18th June 2014 in the North Cheshire Magistrates' Court this appellant pleaded guilty to an offence of causing or knowingly permitting a water discharge activity or ground water activity otherwise than under and to the extent permitted by an environmental permit, contrary to regulations 12(1), 38(1)(a) and 39(1) of the Environment Permitting (England and Wales) Regulations 2010. It was committed for sentence to the Crown Court and on 12th June 2015 in the Crown Court at Chester before His Honour Judge Shetty the appellant was ordered to pay a fine of £166,650 and costs of £28,811.78. It now appeals against that sentence by leave of the single judge.
2. We can say one thing at the outset. It is agreed between the appellant and the Crown that the costs figure was wrongly stated and/or wrongly calculated and that the relevant figure should have been £27,311 and if nothing else for that purpose we will give leave to appeal and will quash the order at the higher sum and substitute a costs order of £27,311.
3. The facts of the principal matter however were these. The appellant company is a manufacturer of PVC and caustic soda and operates a chlorine production plant at Runcorn in Cheshire. On 17th January 2012 caustic soda was being pumped from the appellant's premises onto a ship berthed on the appellant's jetty in the Manchester Ship Canal. A filter through which the chemical was being pumped under pressure failed because of inadequacy in the welding of lugs that held down a lever fastening the lid. Approximately 3.8 metric tons of caustic soda escaped into the jetty and its estimated that approximately 500 litres escaped into the canal.
4. The filter device had initially been hired by the appellant in 2007 and was purchased by it in July 2008, some three-and-a-half years before the incident in question. We are told the filter had been used about 20 times but had not been systematically inspected.
5. Following the incident the appellant laudably informed the Environmental Agency of what had occurred. The assessment of the environmental situation was that it was thought that the chemical would have sunk to the bottom of the canal. There were no signs of dead fish or other obvious environmental harm. Recovery from any impacts below quay level was thought to be expected to complete within a few weeks. The impact was localised and there was no significant or lasting harm to water quality or other eco-systems to amenity or to legitimate use of the waterway. There were no costs incurred in restorative work following the incident.
6. The appellant's investigation found that the main caustic transfer system was regularly inspected, in contradistinction to this particular item of machinery, but that the filter had not been part of the relevant inspection regime. The failure was found by the learned judge to be an isolated event and the appellant has since that time purchased a new system for the purpose of the relevant activity.
7. There was an agreed basis of plea before the learned judge from which it is only necessary to pick out certain salient features, although we have had regard to the whole (and we mean no disrespect if we fail to refer to matters in that admirably comprehensive document prepared by the parties which the parties would have wished us to refer to).
8. First of all, in relation to causation, at paragraph 25 of the basis of plea said this:

"The incident was caused by the sudden fracture of the welds to the lugs holding the lid of the filter in place. Subsequent detailed investigation has shown this to have been caused by cracks in the welds. A manufacturing design defect was identified whereby the welds lacked sufficient depth penetration and therefore strength. This led to cracking. The lack of weld penetration was a latent defect which could not have been discovered unless it manifested itself in some defect such as cracking detectable by close visual inspection or by dye testing during a formal inspection. A related defect was also identified, namely the absence of a weld seam on one side of each lug, which would have further contributed to the lack of weld strength. It is likely that one lug would have failed first, placing greater stress on other lugs and causing them to fail."

Secondly, at paragraphs 36 to 38 we quote:

"36. The caustic soda would have gradually dispersed and become diluted and neutralised by the water in the Canal.

37. Any fish present would be likely to have been relatively near the surface and would not have been effected by the caustic soda at depth. No dead fish were observed either at the time of the incident or later.

38. Biological samples taken by Dr Smith indicate that the species which would have been present at the depth and might have been infected by the caustic soda were aquatic... worms and... (a species of crustacean resembling an aquatic woodlouse). These are common species and are not rare or endangered. They are mobile and would have been able to move away from the affected area. Any impact on these species would have been restored naturally within a few weeks, as they are creatures with a short life and reproductive cycle."

Remedial steps. We wish to quote paragraph 42 to 44:

"42. The Defendant investigated the cause of the failure and the working of its SAP system for recording and inspecting equipment. The failure to register the filter was found to be an isolated event, not part of any systemic failure.

43. The arrangements for filtration (where necessary) have been modified by purchasing a new filter system which is located within the bund at the tank farm, not at the loading jetty.

44. As part of the process of continuous improvement in health, safety and environment, the lessons learned from the incident have been quickly disseminated within the Runcorn site, within the wider Ineos Chlor Vinyls sites within Europe and made available to group companies and contractors."

The financial position is stated at paragraph 46 with reference to the relevant accounts:

"46. These show a turnover for 2012 [reference to the accounts] of £851 million as compared with £588 million in 2011. However, in 2012 the company made a loss of (£59 million) as compared with a profit of £12 million in 2011. The Directors' report shows that the lower turnover in 2011 was because the figures include only 3 months' turnover from the vinyls business acquired from INEOS Vinyls UK Limited on 1 October 2011. On a like for like basis, turnover in 2012 decreased, due in part to a reduced demand for PVC in Europe."

Those figures were supplemented by the time of the hearing in the Crown Court by the 2013 figures with turnover of £904 million with a published loss of £37 million.

9. "Culpability": the most material paragraph, two of which were referred to by Mr Tromans this morning, are these:

"47. This was an unexpected accident caused by a defect in equipment which had been required from a reputable supplier and manufacturer. The equipment was being used properly and within its specification at the time of failure.

...

52. The Defendant had in place a system for registering and inspecting equipment. The filter was not registered following its purchase and so was not inspected. This was a failure on the Defendant's part, but it was an isolated occurrence and not a systemic failure by management to put systems in place or to operate them.

...

54. It is not a case where the Defendant has taken risks or cut corners to save money, or has been guilty of sloppy or negligent management of environmental risks. The Defendant takes health, safety and environmental matter versus seriously."

That concludes our brief citation from the basis of plea which, we emphasise, we have read in full.

10. The learned judge heard evidence from a Mr David McIntyre, a consulting engineer instructed by the appellant, from Mr David Bolmer of the Environment Agency and Mr Michael Maher, the chief financial officer of the appellant's parent company, Kerling Plc.
11. In passing sentence the learned judge sought to follow the Definitive Guideline on sentencing for these offences published by the Sentencing Council. The judge found that there was a failure to enforce a proper system for avoiding the commission of the offence. The equipment concerned was a substantial item and an important piece of equipment through which dangerous substances would be flowing at high pressure. The judge took the view that failure could have dramatic consequences. He said it was therefore critical that the equipment should be rigorously subject to inspection and maintenance regimes. The equipment should have been registered and examined at the time of purchase and inspected periodically while the defect might not been staring the appellant's staff in the face, it was not such, said the judge, that reasonable steps could not have detected it. In the circumstances culpability lay within the negligent categorisation of the guidelines but towards the lower end. The harm was therefore, found the judge, within category 3 of the guideline categories.
12. Applying the guidelines, the judge noted that the starting point for sentence in respect of a large organisation within the guideline category identified the starting point as a fine of £60,000, with a fine range of £35,000 to £150,000. The judge noted the turnover of the company and its published loss. He referred to it being a corporate group headed by Kerling Plc and said that the fact that the company was loss making was not significant in judging the fine since the appellant was clearly able to obtain all necessary finance from the parent.
13. The judge noted the mitigation, which Mr Tromans has been at pains to emphasise this morning and which we also have taken carefully into account. There are no previous convictions. This was a one-off event. The existence of a compliance and ethics programme was non-controversial. The offence was not commercially motivated or corner cutting. There had been a voluntary report to the authorities and subsequent co-operation with them. The judge said that he would afford a full one-third credit for the plea at the Magistrates' Court, being the first opportunity to enter such a plea. He referred to the then very recent authority in this court of Thames Water Utilities [2015] EWCA Crim 960, and he set out central factors emerging in paragraph 59 of the judgment in that case to which we have also had regard.
14. The judge concluded that the offence disclosed a moderate degree of negligence. The company had not been intent on cost cutting to maximise profit. The problem arose because it had failed to follow a proper system of inspection. While the failure was negligent it could not be said that there was a systematic problem or lax attitude. The appellant had a very good record in respect of health and safety and environmental matters which the judge said he took into account. The judge said he adopted a starting point for the fine at £250,000, to which he applied the one-third reduction leading to the fine of £166,650.
15. On the present appeal it is argued that the fine was excessive. The single judge's reasons for granting leave to appeal were these:

"Although the Judge was entitled to categorise the applicant's culpability as negligent due to failures to test the equipment, it is arguable that, despite its turnover, the fine was disproportionate given the low culpability and mitigating factors."

16. It does not seem to us that that reasoning amounted to a grant of leave to argue against the culpability findings made by Judge Shetty. However, the appellant has advanced three grounds of appeal. First, that the judge wrongly categorised the offence as negligent within the terms of the guideline. Secondly, that he failed to have regard to his finding that the case was towards the lower end of the "negligent category" and was not a case of systemic fault or negligent management. Thirdly, the judge wrongly moved outside the sentencing range indicated by the guideline document given the financial and other circumstances of this case and of this appellant. In the context it is submitted that the judge did not properly explain how he reached his starting point figure for the fine.
17. In our judgment, as we have said, we do not consider that the appellant has the requisite leave to argue the first ground, having been refused leave on that point by the single judge and having not formally renewed the application. However, we have considered all the grounds on the merits, in particular with regard to the question of proportionality of the fine and Mr Tromans has very realistically directed his arguments to that element as regards any questions of culpability.
18. On the first ground, taking that shortly, treating the matter not simply as a matter of proportionality but addressing Mr Tromans' initial argument that the culpability category was wrongly assigned, with respect to the arguments we reject them. There were numerous features in the evidence, which the judge heard and read, entitling him to find that the appellant's offence was properly to be categorised as negligent. Those factors which are pointed out in Mr Bradley's helpful respondent's notice can be summarised as follows. First, the filter was not inspected on purchase. Secondly, it was not registered so that it would be subject to a periodic testing. Thirdly, none of the operatives noted or acted upon the fact that it was missing the relevant pressure valve number. Fourthly, it was an important piece of equipment whose failure could have had dramatic consequences. Fifthly, it was critical that such equipment was rigorously subject to inspection and maintenance. Sixthly, it had been in the possession of the appellant for a number of years and used on a number of occasions. Seventhly, there was a failure to enforce a proper system for avoiding the commission of the offence, and eighthly, this was not a case where the defect was of such a nature that the reasonable steps could not have detected it.
19. Turning however to the remaining two grounds of appeal, on which more substantive argument has been addressed to us this morning, it is submitted by Mr Tromans that the learned judge was wrong in three principal respects. First, it is submitted that he did not properly consider whether it was necessary to impose a higher figure of fine than that indicated by the indicative fines specified under step 4 for large organisations. Secondly, he submits that the learned judge focused inappropriately on the question of turnover, and thirdly, overall, the learned judge appears to have adopted a starting point that would have taken the fine, before any other discounts, to a level of fine within the standard brackets which might have equated to a much more serious culpability level.
20. We note however that the turnover of this company upon which the guideline fines are based is vastly larger than the indicative figure given in the baseline for "a large" organisation. True it is that it has had some losses in recent years on the face of the accounts. However, as the guideline indicates the court is entitled to take into account, as did the judge here, the resources of any linked organisation available to the particular offender. Further, director's remuneration, although it was significant, even though not at the top range of comparable industries. We note the point taken in that regard in the papers.
21. We note also the important emphasised box on page 7 of the guideline document which says:

"Very large organisations. Where a defendant company's turnover or equivalent greatly exceeds the threshold for large companies it may be necessary to move outside the suggested range to achieve a proportionate sentence."

We consider that the judge was fully entitled, in the light of those factors, to go outside the bracket concerned.

22. We think there is some force in the observation made by Mr Bradley in his skeleton argument for the respondent, that the fine represented roughly the appellant's turnover for an hour and a half. Accordingly, it seems to us that the fine must have been a mere pinprick in the company's finances.
23. In our judgment, it is impossible to say that this fine was excessive in any respect, let alone manifestly excessive and we dismiss the appeal.