Snoozebox Ltd v The Health and Safety Executive
| Jurisdiction | England & Wales |
| Judge | Richard Farnhill |
| Judgment Date | 17 April 2023 |
| Neutral Citation | [2023] EWHC 851 (Ch) |
| Docket Number | Case No: CR-2022-002487 |
| Court | Chancery Division |
[2023] EWHC 851 (Ch)
Richard Farnhill
(sitting as a Deputy Judge of the Chancery Division)
Case No: CR-2022-002487
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Rolls Building
Fetter Lane
London EC4A 1NL
Ms Raquel Agnello KC and Ms Anna Scharnetzky (instructed by Cardium Law Limited) for the Claimant
Mr Jeremy Bamford (instructed by the Government Legal Department) for the First Defendant
Mr Christopher Brockman (instructed by the Government Legal Department) for the Second Defendant
Hearing dates: 27 and 28 March 2023
Richard Farnhill (sitting as Deputy High Court Judge for the Chancery Division):
The dispute
This dispute concerns the recoverability of any fine and award of costs that may be ordered against Snoozebox Limited (the Company) in ongoing criminal proceedings (the Prosecution) being brought against it by the Health and Safety Executive (the HSE).
The Company accepts that the underlying obligation remains extant: the HSE is entitled to pursue the Prosecution, and if the Company is found guilty the Crown Court can fine the Company and order it to pay the HSE's costs of the Prosecution. However, the Company asserts that a company voluntary arrangement (the CVA) it entered into after the events giving rise to the Prosecution but before the Prosecution was commenced applies to any fine or award of costs. Because the HSE (and, so far as it is relevant, HM Treasury) did not submit proofs of loss in the CVA within the required time limits, the Company further submits that it is too late for them now to do so. The practical effect of those submissions, if successful, would be to render any fine and any award of costs uncollectible.
The claim was brought by way of Part 8 proceedings and the facts were almost entirely agreed. The issues for determination were largely set out in Mr Brockman's skeleton. For the reasons set out more fully below, I answer them as follows:
i) As at 16 February 2018, the date of the CVA, did the HSE and/or HM Treasury have contingent claims or debts for any fine or prosecution costs that may be ordered in the Prosecution? The necessary legal relationship had been established and the prospect of liability was sufficiently real to render any fine a contingent liability. Costs arise under a different regime and the relevant legal relationship had not been established at the time of the CVA, such that there was no contingent liability for costs.
ii) Are the HSE and HM Treasury bound by the CVA? The HSE and HM Treasury are both emanations of the Crown, meaning that notice of the CVA was properly given to both of them through notice provided to the HSE. Under the Insolvency Act 1986 (the 1986 Act) the Crown is bound by a CVA like any other creditor.
iii) Do the terms of the CVA limit enforcement of any fine or order for prosecution costs that may be made by the Crown Court? The CVA prevents collection of any fine; for the avoidance of any doubt it does not limit the imposition of such a fine, nor does it affect anything other than collection (for example, the fact that a fine was imposed could still be an aggravating factor in any future prosecution). The CVA does not prevent the collection of any prosecution costs if ordered by the Crown Court against the Company.
iv) Was the Company subject to a debt or liability at the administration date of 8 November 2017? Yes as regards the fine. The investigation giving rise to the Prosecution had commenced a year before pursuant to the HSE's requirements for mandatory investigations. Nothing of substance changed in respect of it between November 2017 and February 2018, meaning that the relevant legal relationship and the prospect of liability were unchanged between those two periods. No as regards prosecution costs.
v) Was the Company released and discharged from any claim or order for a fine or prosecution costs on 18 October 2018 under clause 7.6 of the CVA or otherwise? The Company was released from the obligation to make payment of any fine on 18 October 2018 under clause 7.6 of the CVA. Any order for costs is unaffected. It remains open to the Crown Court to make either or both such orders.
vi) If the CVA covers any fine or award of costs, can the HSE or HM Treasury recover under section 5(2A) of the 1986 Act? Recovery under section 5(2A) is in accordance with the terms of the arrangement. Under the terms of the CVA it is now too late to file a proof of loss, and so no recovery can be made under that provision.
Events giving rise to the CVA and the Prosecution
The Company provides semi-permanent, modular hotel accommodation on an ad-hoc basis for events such as music festivals and sporting events. Until early 2018 the Company was a subsidiary of Snoozebox Holdings plc, an AIM listed company.
In August 2016, the Company rented a site at Primrose Hill Farm, Silverstone, Northamptonshire. It was carrying out works in order to make a barn on the site suitable as a dining area for guests of a nearby hotel. The Company engaged an external contractor to carry out some of those works who in turn engaged Mr Petraru.
On 20 August 2016 Mr Petraru fell through the roof of the barn. He sustained a severe head injury which sadly resulted in his death on 25 August 2016. On 30 August 2016 the Company submitted a report under the relevant regulations to the HSE detailing the circumstances surrounding Mr Petraru's accident.
In September 2016 the HSE appointed Mr Poulter, one of His Majesty's Inspectors of Health and Safety, to investigate the accident. As is usual, the initial stages of the investigation were conducted jointly with the local police. Mr Poulter first attended the site of the accident on 2 September 2016.
By letter dated 16 November 2016 the HSE informed the Company that the accident met the HSE's requirements for mandatory investigation and that its enquiries were ongoing. Plainly, the HSE must by that time have formed at least an initial view of the accident and the Company's potential guilt in order to have reached that conclusion. The letter also notified the Company that the HSE would seek to recover its costs of the investigation if the Company were in due course found to have been in material contravention of health and safety law. Those costs are referred to as the “Fee for Intervention” or “FFI” costs. Under the Health and Safety and Nuclear (Fees) Regulations 2016 ( the 2016 Regulations) regulation 6(a), the FFI does not include costs connected with any criminal investigation or prosecution.
In August 2017 the HSE received primacy for the investigation, meaning that it took the lead, with the police working in parallel.
The Company's financial position was increasingly precarious by this stage. When it proved impossible to restructure its funding arrangements with its secured lender, SQN Asset Finance Income Fund Limited ( SQN), the Company's director considered that it was insolvent and took steps to appoint administrators. On 8 November 2017, the Company entered administration. Jeremy Willmont and Neville Side of Moore Stephens (now BDO) were appointed as joint administrators ( the Administrators).
On 15 November 2017 the Administrators wrote to known creditors, informing them of their appointment. The HSE accepts it received that letter. Mr Poulter discussed the appointment with his Principal Inspector at the time but they decided that there was no need to respond or become involved in the administration as it would not affect the HSE's on-going investigation. The Administrators' letter was also sent to HM Revenue and Customs ( HMRC) and the Department of Work and Pensions ( DWP), but not to HM Treasury (or any other government department).
The Administrators attempted to sell the Company as a going concern and sought indicative offers by the end of November 2017. From the offers received they considered that the one from SQN AFIF (Bronze) Limited ( Bronze), a subsidiary of SQN, represented the best overall outcome for creditors. The Administrators therefore agreed a sale of the entire issued share capital in the Company to Bronze. A condition of the sale was that the creditors of the Company approve a company voluntary arrangement (the proposal for which became the CVA) pursuant to Part I of the 1986 Act.
On 1 February 2018, the Administrators, as joint nominees, sent a letter to all known creditors of the Company enclosing a copy of the CVA proposal (the Proposal) and notice of the meeting of creditors. The Proposal noted that if the CVA was approved SQN and the Company's parent would release claims totalling approximately £58 million and would not participate in any dividend declared to unsecured creditors. The only asset to be included in the CVA was the sum of £400,000 which would be paid by the Company to the Supervisors (defined below) for the benefit of the CVA creditors, to be available for payment of CVA (and related) fees and for distribution to unsecured creditors. The estimated outcome statement in section 16 and Appendix D to the Proposal recorded that (i) under the CVA a dividend of 100p in the £ would be paid to Preferential Creditors (as defined in the proposal) and a dividend ranging from 36p to 83p in the £ would be paid to the Unsecured Creditors (again as defined in the proposal) whereas (ii) in the alternative to the CVA, being a liquidation of the Company, a dividend of only 1p in the £ would be paid to Unsecured Creditors.
The Schedule of Creditors at Appendix C to the Proposal included the “Health and Safety Executive” as a creditor in respect of an unspecified amount and records “FAO: Roy Poulter, Nicker Hill, Keyworth, Notts, NG12 5GG” as the HSE's address. The Schedule of Creditors also...
To continue reading
Request your trial