I remember, from the days of old, that there was case precedent showing the cost of not dealing with people who breached safety rules.

I recall that an employee had repeatedly breached safety rules and had repeatedly been threatened with action by his employer, but the employer never took action. 

Ultimately, the employee broke the rules and was sacked. He took his employer to court claiming that he had been led to believe that there would never be any punishment, because he had persistantly broke the rules and had never been punished, or something like that.

Does enyone recognise this scenario (or anything like it) and if so, can you remember the case in question?

If it  was a employment case it would have gone to an Employment Tribunal, which is not a court of record and therefore would not have set a precedent unless it was  appealed.