A Court of Appeal decision to uphold a £400,000 fine imposed against retail giant New Look for breaches of fire safety obligations has no doubt left other industry players feeling a little hot under the collar, says Ron Reid of legal firm Shoosmiths.

The decision sparked initial surprise given that the fine, which was administered in respect of breaches not leading to fire or death, was in excess of the figure reserved as a start point for cases of corporate manslaughter.

In dismissing the appeal, the Court of Appeal sent a clear message that those in control of premises subject to the Regulatory Reform (Fire Safety) Order 2005 (the RRO) cannot afford to dedicate fewer resources to ensuring compliance with fire safety obligations than they would in meeting health and safety requirements.

The starting figure used by the judge at first instance for assessment of the fine was £600,000. Endorsement by the Court of Appeal represents a departure from the former judicial tendency to reserve fines in excess of £500,000 for cases of major public disaster. Assessment of the seriousness of a breach can now be expected to be made with principal reference to the risk created.

In light of this clear message as to the financial consequences inherent in creating, or neglecting to address, fire safety deficiencies, those with control of premises subject to the RRO are well advised to ensure that their specific obligations have been adequately identified and addressed. Procedures and training policies must be comprehensive, up-to-date and kept under review if risks are to be guarded against.

Prosecution of the clothing retailer flowed from numerous breaches of the RRO, which were consensually consolidated into two offences:

• failure to identify via appropriate assessment of the specific risks posed to individuals, the precautions necessary to ensure compliance with the regulations
• failure to ensure that employees were provided with adequate safety training.

These offences attracted fines of £250,000 and £150,000 respectively. New Look was further responsible for the £136,000 prosecution costs.

The fire caused massive disruption in Oxford Street

Investigation of the retailer’s Oxford Street premises began after a fire which broke out on 26 April 2009. The cause remains unknown, but has not been attributed to acts or omissions under the RRO. Around 400 people were evacuated from the building. Escape routes were not clearly identified and were obstructed, in some places by combustible materials.

The court said the absence of competent fire marshals to coordinate the evacuation showed the retailer’s failure to implement an organised system and its shortcomings in relation to staff training.

Disproportionate penalties?
On appeal against the level of the fine, the Court of Appeal was asked to consider whether the penalties imposed were disproportionate to the offences committed, given that the breaches were not individually or collectively causative of fire or death. It was invited to undertake this exercise with reference to the Sentencing Guidelines Council guidelines on corporate manslaughter and health and safety offences causing death (click here to read our previous advice in this topic).

In particular, clarification was sought as to whether a principle has been established that a higher level of fine is, in general, appropriate for breaches of duty in respect of fire safety precaution than is appropriate for breaches under the Health and Safety at Work Act 1974 (HSWA).

The court confirmed that the actual consequences of breach are an important consideration in determining sentence. Notwithstanding this, there came an unequivocal message that where realisation of a very real risk of harm to individuals, created by serious and perpetual breach of the RRO, is avoided by mere good fortune, then to extend too great a degree of mitigation may in itself offend the principle of proportionality. The court acknowledged that the £400,000 penalty was severe, but did not deem it to be disproportionate to the circumstances.

At first instance, the judge explained that: “The absence of death and injury is plainly an important matter in this case, but I consider there are circumstances in which a court may not need to wait for the onset of human tragedy to send out a clear message that safety of customers and staff, or indeed anyone who may be affected, must be regarded as of paramount importance.”

The level of fine handed to New Look has ignited criticism in some camps, as it is perceived as inconsistent with those applied for breaches under the HSWA. The message from the court appears to be that permitting fire safety risks to persist creates a risk of almost unrivalled proportions to individuals and that this should be reflected in any corresponding penalty.

At first instance, the judge noted that the guidelines for sentencing in cases of corporate manslaughter and health and safety offences Involving death could offer only limited assistance in the circumstances.

The court was plainly not of the opinion that fines for breaches of provisions designed to protect health and safety ought to be synchronised by reference principally to whether or not the risks flowing from those breaches translated into human tragedy. Rather, it appears, consistency will flow from assessment of the risk posed.

Sentencing considerations
The three principal considerations of the court in passing sentence were: the seriousness of breach; the capacity of the organisation to meet the fine; and the need for the fine to make an impact on shareholders and senior managers.

The seriousness of the breach, and corresponding penalty, was mitigated, to a degree, by the absence of resulting fire or injury, together with an early guilty plea and prompt, post sentence, remedial action. Whilst these factors reduced the starting point, set by the trial judge at £600,000, the resulting fine comfortably exceeded the previous record fine imposed under the RRO last year upon Shell of £300,000.

The retailer was on notice to at least some of the substantial risks posed to the safety of individuals, having received a relevant enforcement notice in December 2000 at the same premises and having itself highlighted deficiencies during a risk assessment conducted in April 2007. New Look was particularly criticised for having only one fire safety advisor for a group of over 600 shops. This, together with the fact the risks could have been removed without too great a cost or inconvenience to the retailer illustrated, according to the court, a dismissive attitude towards its fire safety obligations.

The hefty fine administered extinguishes any doubt that retailers, and other organisations responsible for fire safety, can ill afford complacency when it comes to compliance with the RRO.

Consequences of the judgement
Looking forward, those in control of premises subject to the RRO may wish to review current policies to ensure compliance. Consideration should to the specific structure and layout of the premises, as well as the practices performed within it. Changes to any of these should prompt re-examination of the risks posed and the magnitude of the corresponding obligations they create.

In assessing the risks specific to the premises in question, those charged with responsibility for fire safety ought not to overlook factors flowing from the location of the building and its immediate landscape. A higher threshold of obligation may arise from by virtue of a highly populated location or due to the features of neighbouring structures.

Outside areas and vacant premises must not be overlooked, or underestimated, when risk assessments are carried out. Training must be thorough and up-to-date, which is a more onerous obligation for those in fields where staff turnover is high but, as the New Look judgment has highlighted, an expensive duty to neglect.

Whatever the opinion formed as to the fairness or otherwise of the level of fine upheld in this case, there is no question t

Ron Reid is partner and regulatory specialist at legal firm Shoosmiths.