ESB Hotels Ltd, R v

Mr Justice Beatson: On 27th May 2004 at the Bolton Magistrates' Court the appellant company pleaded guilty to two counts of contravening the requirements of a fire certificate contrary to section 4 of the Fire Precautions Act 1971. The company was committed to the Crown Court for sentence and on 19th July 2004 at the Crown Court at Bolton His Honour Judge Hope sentenced it as follows: on the first count to a fine of £300,000; and on the second count to a fine of £100,000. The company was also ordered to pay £11,000 towards the prosecution costs.

The company appeals against sentence by leave of the single judge.

The appellant company, a wholly owned subsidiary of Queen's Moat Houses plc, is the occupier of the Bolton Moat House Hotel, a modern seven-storey hotel built in 1990. The sleeping accommodation is on four of the floors. The prosecution arose out of a serious fire at the hotel notified to the fire service by a 999 telephone call at just after half past mid-night on Tuesday 24th April 2001. The source of the fire was seen to be the third floor with smoke coming from the third floor windows as the fire brigade arrived. When fire fighters entered the building, they were presented with intense heat and thick smoke from a fire in the third floor corridor. They required breathing apparatus to tackle it and carry out a search.

The first fire fighter on the scene had to go in on his stomach and to crawl because of the heat. The very thick smoke meant there was no visibility. He came across the bodies of two elderly guests who had been staying in room 310. The occupant of another room was found in a distressed state but was uninjured. Five other people occupying rooms on the third floor successfully escaped down the corridor.

An investigation found that three upright beds placed in the corridor between rooms 310 and 312 had been set alight by an employee of the hotel who was subsequently convicted of manslaughter and is serving a term of life imprisonment.

The hotel premises had, as they were required to, to have a fire certificate issued by the relevant fire authority. This certificate, issued on 11th June 1993, set out the fire precautions the occupier had to take to ensure as much as possible the safety of those using the premises. The certificate detailed the means for securing routes of escape that could safely and effectively be used at all times. Specified means of escape shown on a plan were required to be kept free from obstruction and from storage of combustibles.

Following the fire, the forensic science service reported that the beds in the corridor were combustible and, due to poor housekeeping procedures, they had remained inappropriately placed in the corridor for a prolonged period of time and provided the opportunity for the fire to be set. The evidence was that the beds had been placed in the corridor on the morning of 23rd April; that is, as the sentencing judge found, probably some 12 to 15 hours before the fire was started. These events gave rise to the first offence.

The second offence was not directly related to the fire. It concerned a mattress that at the time of the fire was being stored on the first floor of the hotel. The agreed statement of facts states that this showed that the placing of beds in the third floor corridor was not an isolated incident and that the potential for further injuries or further fatalities was thereby increased.

As well as the report from the forensic fire service, the Greater Manchester Fire Authority investigated the circumstances surrounding the fire. As a result of their investigation the authority had serious concerns about the fire precautions. The personnel and training officer at the hotel, while aware of the existence of a fire certificate, was not aware of the specific information it contained. A risk assessment had been carried out at the hotel in February 2001. This identified that the storing of combustible material, namely mattresses and bunk beds, in the service shaft was a problem at the hotel. It is agreed (see the statement of agreed facts) that this should have alerted the appellant to the fact that the storage of combustible items such as beds in accessible areas would present a potential fire and smoke hazard. Although not contained in the agreed facts, in his sentencing remarks the learned judge stated that the assessor said he drew this to the attention of a member of the hotel staff at the time. It is an agreed fact that a copy of the risk assessment was not available at the hotel immediately after the fire.

It was apparent as a result of the investigation that staff had a mixed understanding that beds and mattresses were potential fire hazards. Some thought that the main reason they needed to be removed was to prevent tripping and obstruction. There was no evidence of formal training regarding the removal of temporary beds. It was passed to staff by word of mouth. It is also agreed that the fire and health and safety training given to managers in respect of the removal and storage of beds was ineffective and hand over procedures to staff coming on duty in respect of this were inadequate. Staff were unclear as to who was responsible for the removal of temporary beds and there was no clear monitor of company policy.

It is agreed that as a result of these failings the appellant failed to uphold a fundamental principle of fire safety by breaching the unequivocal requirements of the certificate not to store combustible material in corridors. It is also agreed that the risks of storing combustible obstructions in the designated means of escape were foreseeable and the danger obvious. Not only were the defendants' employees and fire fighters put at risk, but members of the public were also put at risk. In this case this resulted in the death of the two elderly guests.

In his sentencing remarks the learned judge stated that the fire was started by an employee who had been asked to remove the beds but instead had set fire to them. The beds should never have been stored in the corridor. The fact that a mattress was found in another corridor illustrated that the placing of beds in corridors was not an isolated incident.

The learned judge considered the decisions in F Howe and Sons Engineers [1999] 2 Cr App R(S) 37, and Colthorp Board Mills Limited [2002] 2 Cr App R(S) 80 at 359. With regard to the degree to which the company had fallen short of the appropriate standard in failing to meet the reasonably practicable test, a factor that Howe's case states should be taken into account, the learned judge stated that here substantially sized combustible items were left in corridors when they could easily have been removed with proper organisation if fire safety had been given the highest priority as it should have been.

Referring to the statement in Howe's case that the death of a individual is generally to be regarded as an aggravating factor and the penalty should reflect the public disquiet at the unnecessary loss of life, he stated that here two people were killed and six others put in a position of serious danger. In considering the degree of risk, and the extent of the danger, the judge again referred to the fact that the beds were substantial combustible objects. Some of them had been placed upright which allowed the fire to spread rapidly and with intense heat.

He referred to the fact that the compnay had failed to heed a warning contained in the February 2001 risk assessment about beds as combustibles being stored in an inappropriate place. The failure to heed a warning is one of the aggravating factors mentioned by this Court in Howe's case.

The learned judge stated that all three of the mitigating factors set out in Howe's case applied in this case. There was prompt admission of responsibility, a timely plea of guilty and the company had a good safety record before this incident. The fire assessment report following the fire stated:

Mr Hilton, who appeared on behalf of the company before the judge and has appeared before us, had indicated to the judge that the anticipated profits for 2004 were just below £1 million. The learned judge stated that the objective of the prosecution was to achieve a safe environment for all members of the public and employees and that where a defendant was a company the fine needed to be large enough to bring the message home not only to those who managed the company but also to its shareholders.

The ground of appeal is that the fines imposed were manifestly excessive in all the circumstances. Mr Hilton submitted that the level of the fines, individually and cumulatively, reflected a degree of culpability which was not present on the facts of the case. In particular he relied on the fact that it was the night porter, the person sent to remove the beds from the corridor, who deliberately set fire to one of them, a matter which was unforeseeable. Generally the consequences of breach of health and safety legislation flow directly from the neglect of duty. In this case, this was not so.

He submitted that, although not precisely on all fours, this case was closer to the facts of Cardiff City Transport Services [2003] 1 Cr App R(S) 141 than other cases in which the consequences of the breach flowed directly from the neglect of duty. He submitted that this brought down the level of culpability and, as in the Cardiff City Transport Services case, should have brought down the level of penalty.

Secondly, he submitted that there was undue disparity between the fines in the respect of the two offences. The offences were substantially identical. Indeed, the first offence might have been thought to be less culpable than the second offence, because the appellants were aware of the breach and had taken steps to remedy it. They were not even aware of the breach in respect of the first floor mattress and yet the fine imposed in respect of the first offence was three times that in respect of that imposed for the second offence.

Thirdly, he submitted that the judge failed properly to reflect the appellant's financial position and resources in not considering profit margins and the appellant's net profits before tax when fixing the level of fines. While having regard to the turnover for the current year, he appeared to have taken no account of the increased costs that would fall on the appellants as a result of a change in the terms of their lease, which in 2004 became a full repairing lease.

Mr Hilton also submitted that the learned judge had given no thought to the fact that the fine of £400,000 was substantially in excess of the appellant's pre-tax profits of £240,909 for 2003, although in his submissions before us he accepted that the 2004 position, even with the adjustment for the repairing lease, was likely to be better. No precise figure was given to the judge as to the implications of the lease becoming a repairing lease and Mr Hilton was unable to give a figure to us.

Mr Hilton finally submitted that the judge also erred in aligning the appellant with those defendants guilty of the most serious breaches of health and safety legislation. The unusual facts of this case, he submitted, set it apart from those that have attracted comparative levels of fine in recent years.

We deal, first, with the submissions based on the level of culpability in the present case. Mr Hilton, like the judge, started with the statement in Howe's case that it is often helpful to look at how far short of the appropriate standard the defendant fell in failing to meet the reasonably practicable test. The agreed facts state that the risk of storing combustible obstructions in a designated means of escape were foreseeable and the danger obvious. The judge's conclusion that here substantially sized combustible items were left in corridors, when they could easily have been removed with proper organisation had fire safety been given a higher standard, was one he was entitled to reach. It is not altogether clear for how long the appellants had been aware of the obstruction on the third floor corridor before instructing the night porter to remove it. Implicit in the judge's words is the conclusion that leaving substantially sized combustible items in a corridor for a considerable period of time, when they could easily have been removed with proper organisation, meant that the defendant company fell well below short of the appropriate standard.

He was, in our judgment, entitled to reach this conclusion on the basis of the agreed facts and for two further reasons. The first is that the breach that formed the second charge showed this was not an isolated incident. The second is that the result of the risk assessment two months before the fire should have alerted the appellant to the fact that the storage of combustible items, such as beds, in accessible areas would prevent a potential fire and smoke hazard.

The failure to heed the warning in the risk assessment also means that we do not accept the argument in Mr Hilton's written submissions that, other than the fatalities, this case exhibits none of the aggravating features adverted to in Howe's case. Failure to heed warnings is the first of the particular aggravating features listed at page 43 of the report.

We turn to the comparison made with the culpability and the level of fine in a number of other cases. Mr Hilton relied on the decisions in Friskies Pet Care UK Limited [2000] 2 Cr App R(S) 401, Colthorp Board Mills [2002] 2 Cr App R(S) 80, and Fresha Bakeries Limited [2003] 1 Cr App R(S) 44. Mr Hilton submits that the facts of Fresha and Friskies were worse than this and those in Colthorp were significantly worse.

In Friskies Pet Care the serious and obvious breach of duty which led to a single fatality resulted in a fine of £600,000 which this Court reduced to £250,000. It was stated in that case that fines in excess of £500,000 tended to be reserved for cases where a major public disaster occurred. The Court explained what they had in mind is where the breach has put large numbers of people at risk of serious injury or more: see paragraph 26.

In Colthorp the appellant had two previous convictions for breach of health and safety requirements and had only partially carried out a programme of risk assessment required by a health and safety inspector. That part which it had completed had identified a moderate risk of a serious accident likely to result in very grave injuries. The appellant nevertheless did nothing about it. The accident in that case resulted in serious injury but not death. This Court reduced a fine of £350,000 to £200,000.

In Fresha Bakers Limited, which like this involved a double fatality, employees were allowed into a commercial oven two hours after it had been switched off rather than either the recommended 12 hour period or the planned eight hours, and without checking the temperature gauge. The gauges would have shown the temperature inside the middle of the oven to be 100 degrees centigrade. This Court considered there was no reason on those facts for holding an overall fine of £350,000, as apportioned between two defendants, related companies, to be manifestly excessive. It regarded the case as a very bad one. The job had not been thought through. No risk assessment had been undertaken. Death or really serious bodily harm was inevitable and two lives had been also lost.

Whilst guidance can certainly be obtained from a comparison of the circumstances of cases care must be taken. Those cases were certainly bad cases. But the argument that they were worse cases than this one does not in our view take account of the fact that in the present case the breach occurred in a hotel. It put large numbers of people at risk of serious injury or more. Given the speed the fire spread, it was fortunate that it did not reach other floors and the guests on those floors. The risk was not only to the appellants' employees, but to the hotel guests, some of whom, like those who were overcome, were elderly and would find it difficult to make their way out of the danger area speedily.

It is important in determining the level of penalty in these cases to take account of the degree of risk and the scope of the risk as well as the culpability relating to the particular breach. The potential for really serious injury to large numbers of people in buildings in which people sleep, whether they be hotels or whether they be residential homes, is considerable. As far as Colthrop's case is concerned, we consider it not appropriate to make a close comparison between the level of fine in that case and the present one, notwithstanding the aggravating features of the previous breaches and the failure to do anything as a result of the identification of the risk of very serious injuries, because in that case there had been no fatality.

We turn to the fact that it was the employee, who the night manager sent to remove the beds, who ignited them. In the Cardiff City Transport Services the Health and Safety Executive accepted that the fatality was not caused by the defendant's want of care. In the present case there is no similar concession by the prosecuting authority. In Cardiff City Transport Services two of the company's employees were engaged in moving buses around a depot in readiness for the next day's work. One parked a bus in an allotted space and ran from it without looking around. The other employee was driving a bus alongside and parallel to the first bus. The second employee's bus knocked the first employee to the ground. He struck his head and died from his injuries shortly afterwards. There had been no specific risk assessment relating to pedestrian and vehicles movements. Such an assessment would have revealed the need for high visibility clothing, the enforcement of a one-way system and a lower speed limit.

It was, however, accepted by the Health and Safety Executive that had these three steps been taken the accident in that case would not have been prevented. This is not such a case. Had the beds had not been in the corridor, the employee would not been sent to remove them and this event, which, from the point of view of the company was an accident, but from the point of view of the employee was a serious criminal act, would not have occurred. The steps that were taken by the company were, moreover, not addressing the breach of system. Thus there had been no instructions to remove the mattress on the first floor. Indeed, the company was not aware that it was there. The changes to the system occurred only after the fire.

Nevertheless, we consider that some account should have been taken by the learned judge of the fact that, albeit in an ad hoc way, steps had been taken by the appellant's night duty manager to remove the beds from the third floor corridor. The judge mentioned that the employee had been instructed to remove the beds, but not that this factor affected the culpability of the appellants. We consider that this factor does reduce their culpability, although to a lesser extent than the lack of causality in the Cardiff City Transport case.

We turn to Mr Hilton's submission that it is difficult to discern any rational for the disparity between fines for the two counts in the judge's sentencing remarks. He submitted the offences were substantially identical and arose from the same incident and, as we have noted, that the second was in a sense more serious because no steps had been taken to remedy the breach. We do not agree. The offence arising from the bed on the third floor corridor caused two deaths, which, for the reasons we have given, was a significantly aggravating factor. The learned judge mentioned that death is to be regarded as an aggravating factor. Moreover, the two counts did not arise from the same incident. The second offence, although discovered as a result of the investigations undertaken as a result of the fire, was, as stated in the agreed facts, not directly related to the fire.

Finally, we turn to the appellant's resources. It is not disputed that the appellant's pre-tax operating profits for 2004 were estimated at just under £1 million. Mr Hilton has told us that the judge was informed that the figure did not take into account the expenditure that would fall on the appellant in the light of their new leasing arrangements, but that this was not quantified.

In the cases to which we have referred this Court took into account net profit after tax. The Magistrates' Court Sentencing Guidelines for this type of offence state that when computing penalties the court should look at net turnover. In his sentencing remarks the learned judge only referred to the fact that the company was trading profitably with a gross annual turnover of approximately £4 million pounds. He does not refer to the pre-tax profits of just under £1 million or to any reduction from that figure to reflect the new leasing arrangements.

Howe's case requires courts to take into account the resources of the defendant in determining the level of fine and the effect of the fine on their business. It is important that the court has regard to the pre-tax profits rather than the gross turnover. We consider the judge's omission to have regard to the pre-tax profits of the appellant meant he gave inadequate weight to its financial position in determining the level of the penalty.

In the light of the fact that the appellant had taken steps to address the breach in relation to the third floor, which steps were disastrously frustrated by the criminal act of its employee, and the failure of the judge to take into account the information as to the pre-tax profits of the appellant for the relevant year, we have concluded that the amount of fines was too large. We have concluded that for the first offence the fine should be £175,000, and for the second offence the fine should be £75,000. We therefore set aside the fines imposed and substitute fines of those amounts. To that extent this appeal is allowed.

LORD JUSTICE AULD: Mr Hilton and Mr Copeland, we are grateful to you for your submissions.

MR HILTON: Would you consider a defendant's cost order in the light of this matter?

LORD JUSTICE AULD: Yes, there should be a defendant's costs order. We are grateful to you both for your assistance.