The firm, responsible for the upkeep of the railways, accepted it was at fault for the derailment which which killed one passenger and left 86 others injured, 28 of them seriously.
Margaret Masson, 84, from Glasgow, died after a Virgin Pendolino London to Glasgow train crashed on the West Coast main line near the Cumbrian village ofGrayrigg on the night of February 23, 2007.
Network Rail Infrastructure Ltd admitted a charge under section 3(1) of the 1974 Health and Safety at Work Act last month and was sentenced at Preston Crown Court today.
The 300-tonne train derailed at 95mph after hitting a badly maintained and faulty set of points, with all nine carriages coming off the tracks.
Stretcher bars holding the moveable rails a set distance apart when the points are operated had failed, causing the train's wheels to come off the tracks.
A Rail Accident Investigation Branch (RAIB) report confirmed the "immediate cause" of the derailment was poor maintenance of the failed points.
But during the inquest into the death of Mrs Masson, held last year, details emerged of a catalogue of problems with maintenance within Network Rail.
Passing sentence, Mrs Justice Swift said: "This was a very serious offence and could have easily led to greater loss of life than actually occurred."
The judge said if convicted after trial the penalty would have been £6 million but credit was given for the guilty plea.
Network Rail was ordered to pay the fine, along with £118,037 costs, within 28 days.
In a statement outlined in court today Mrs Masson's granddaughter said the manner in which she died was "bitter" because it could have been avoided.
Nicholas Hilliard, QC, representing the Office of Rail Regulation, summarised a victim impact statement from Margaret Jones.
"She explains how mother and father also received serious injuries in the same incident and spent time in hospital," he said.
"She says her mother is still in pain and taking medication and could not return to work.
"She describes a much-loved grandmother, dreadfully missed by all the family,
"At 84 she was still active and independent, and an integral part of the family.
"The manner in which she died is bitter because she feels it could have been avoided."
Outside court, solicitor Soyab Patel, speaking on behalf of the family, said: "The fine of £4 million together with costs will ultimately be borne by the taxpayer.
"Mrs (Margaret) Langley (Mrs Masson's daughter) is a taxpayer.
"Her mother died in the crash. She and her husband suffered serious injuries.
"She finds it offensive she is contributing to the fine."
The inquest had heard that maintenance supervisors had complained of a "shambles", of being overworked, under-staffed and not having the right tools or enough time to do their jobs amid "bully boy" management.
Mrs Masson's family put the blame squarely on the rail firm's management saying maintenance workers were "scapegoats".
Last month Network Rail was fined £1 million for safety breaches after the 2005 deaths of two schoolgirls at a level crossing in Essex and paid a £3 million fine last year for the Potters Bar disaster in 2002 which left seven dead.
The Potters Bar crash also involved safety breaches at a faulty set of points.
Mr Hilliard told the court that Network Rail brought track maintenance in-house in 2004, in contrast to its predecessor Railtrack, which used individual contractors.
He said Network Rail had admitted that between January 2005 and October 2007 it had identified 115 point ends out of 13,500 set points as having four or more repeat stretcher bar failures.
One point end had 22 failures in the sample period, he said.
"It is a clear indication that the significance of repeat failures was not picked up," he said.
He pointed out that Grayrigg was not the first accident involving the failure of a set of points.
"Potters Bar ought to have made it abundantly clear, if it needed outlining, that the proper maintenance of a set of points including correct clearance was essential for the safe operation of the railway," he said.
"We submit that the failures were systematic and extended over a considerable period of time."
He said the Office or Rail Regulation (ORR) accepted Network Rail had accepted its responsibility promptly, had co-operated fully with all investigations and that positive action had been taken to address the failures.
But he said the regulator believed "further work still needs to be done" on analysing data on set points to identify accident risks.
Mr Hilliard told the court the ORR also had had to use enforcement action on a number of occasions in regard to Network Rail's track patrolling.
In a statement issued after sentencing, Network Rail chief executive Sir David Higgins said: "Nothing we can say or do will lessen the pain felt by Mrs Masson's family but we will make the railways safer and strive to prevent such an accident ever happening again."
He went on: "We have learnt from the accident, determined to recognise what we got wrong and put it right. An event like this affects everyone in the company, and especially those with responsibility for the track.
"Since the accident, much has changed in the way we plan and carry out maintenance work with new systems put in place to improve the quality and safety of our railway which is why we now have one of the safest passenger railways in Europe."
But Ian Prosser, director of railway safety at the Office of Rail Regulation, said improvements had been implemented too slowly at times.
He said: "Under Sir David Higgins's leadership, Network Rail is focused on driving safety measures and I welcome the company's progress on implementing safety recommendations made after this incident.
"But the pace of carrying out improvements has, at times, been too slow and the rail regulator has had to repeatedly push the company to bring about change."
Mr Prosser went on: "Britain's railways are safe and are one of the safest in Europe. But there is absolutely no room for complacency.
"Where failings are found those at fault will be held to account and the entire rail industry must continue to strive for improvements to ensure that public safety is never put at a similar risk again."
The judge said: "I am acutely conscious that no fine, however large, can put a value on the life lost as a result of the Grayrigg derailment or the pain and suffering of those who were injured on that day.
"That is not its purpose.
"The fine is imposed in order to mark the seriousness of the offence and to emphasise the fact that those who bear responsibility for ensuring the safety of the public must exercise proper care.
"Over 1.32 billion passenger journeys are made every year on Britain's railways and the importance of implementing safe and adequate systems for the inspection and maintenance of the infrastructure is paramount, in order to ensure that accidents like the ones at Potters Bar and Grayrigg do not occur again."
Mrs Justice Swift said she took into account that any fine imposed would be paid from an income which is "substantially derived from public funds and is likely to have the effect of reducing Network Rail's ability to generate profits which can be re-invested in the railway network, including maintenance and safety".
In assessing the seriousness of the offence, she found the level of failures "gave rise to an obviously and wholly foreseeable risk of serious injury or death".
The company had fallen "far short" of the necessary standard.
"This was not a case of a systemic single failure or an error by one or two individuals," she said. "There were multiple failures, both individual and systemic, which in combination led to the derailment."
She said the critical importance of points and their potential for failure should have been evident after the Potters Bar derailment.
"I accept that the nature of the failure at Grayrigg was different from that at Potters Bar. But many of the underlying systemic failures - lack of adequate standards and procedures, non-compliance with systems that were in place and failure properly to train maintenance staff - were the same.
"The need to investigate the cause of defects found in the course of inspections had been appreciated after the Potters Bar derailment. It had been prescribed in written standards. Yet no guidance had been given as to how this should be achieved.
"Given all these circumstances, I consider that Network Rail fell very far short of the standards required of a company with responsibility for the maintenance of railway tracks and the safety of rail users and railway staff."
She added there were "very serious failings" by local staff responsible for the day to day inspection and maintenance of the relevant section track and by those responsible for managing and supervising those staff.
But she said their task was "made far more difficult" by the various omissions in the documents containing the standards and procedures.
"Responsibility for those matters lay with those at senior management level within Network Rail," she said.
The judge said she was satisfied that Network Rail had taken active steps to remedy the failures that caused Grayrigg and there was evidence that its safety performance had improved since.
"These improvements, if maintained, afford reason to hope that, in the future, rail passengers will be able to have confidence that those responsible for rail safety are properly carrying out their responsibilities."
Following sentencing, Georgina Sheldon, a serious injury lawyer at Irwin Mitchell, who successfully acted for a number of passengers who suffered physical and psychological trauma, said: "It has been a long wait for justice for all of those caught up in the terrible events in Cumbria, but we hope that this sentencing will allow everyone affected by the horrific crash the opportunity to move on with their lives.
"While we were able to help a number of people in their search for answers following the incident, the tremendous, lasting impact it has on those involved simply cannot be underestimated. The trauma of what happened five years ago will likely be something that lives with them for the rest of their lives.
"However, we know from speaking to clients that, following last year's inquest into the death of Margaret Masson in the crash and the hearing today, they hope significant lessons have been learned in relation to train safety which will ensure that nothing like this ever happens again on the railways.
"We would also urge authorities to use the opportunity to demonstrate the steps they have taken to provide better protection to all passengers and workers who regularly make use of the rail network across the UK."
PA
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