Page 1 of 7 FIRST CONVICTION FOR CORPORATE MANSLAUGHTER On 15 February 2011, Cotswold Geotechnical (Holdings) Limited became the first company to be convicted of corporate manslaughter under the Corporate Manslaughter and Corporate Homicide Act 2007. The conviction came two and a half years after Alexander Wright, a junior geologist and employee of the company, was killed when taking soil samples from the inside of an excavated pit (the Act only came into force on 6 April 2008). Cotswold Geotechnical was fined 385,000, which amounted to 115% of its turnover. This was notwithstanding the fact that the sentencing judge considered that the fine and payment plan might well cause the company s liquidation. Mr Justice Field said that this was an unfortunate but unavoidable consequence of the serious breach. The case brings into focus recent guidelines for sentencing organisations for corporate manslaughter or health and safety offences that cause death, which permit in some bad cases fines that have the effect of putting the organisation out of business. However, it remains to be seen whether the Act will lead to the successful prosecution of large organisations (including multi-nationals) and, if so, how heavily they will be fined. The Offence The Corporate Manslaughter and Corporate Homicide Act 2007 came into force in April 2008. Previously it had been notoriously difficult to convict large companies of the common law offence of gross negligence manslaughter (which, until the Act, had been commonly referred to as corporate manslaughter ), although there had been a number of convictions of small companies. The Act removes the necessity under the old law to identify and establish the guilt of a directing mind, a senior individual who could be said to embody the company in his actions and decisions. In a large or medium-sized organisation, such an individual is often far removed from the events surrounding the death, making establishing his guilt for gross negligence manslaughter unlikely. Instead, the Act concentrates on the way in which the organisation s activities were managed or organised, commonly referred to as a management failure, and whether that caused the death
Page 2 of 7 (although it need not be the sole or principle cause of death; it must only have contributed significantly) and was a gross breach of a relevant duty of care. Further, the way in which its activities were managed or organised by its senior management must be a substantial element of that breach. In addition, unlike the previous common law offence, significantly the Act allows the aggregation of failings by a number of individuals. The identified relevant duties of care are those owed as an employer; as an occupier of premises; or in connection with the supply of goods or services, the carrying on of construction or maintenance, the carrying on of any other activity on a commercial basis, or the use or keeping of any plant, vehicle or other thing. A number of critics have asserted that the Act might be ineffective against large organisations, in particular because the involvement of senior management must be a substantial element of the breach. However, it is important to note that the Act allows the aggregation of failings by a number of individuals. The effectiveness of the Act against large organisations was not tested by Cotswold Geotechnical, as the company was a very small organisation (with only four employees at the time of sentence) and the judge found that the company s sole director, Peter Eaton, was in substance the company he was on site shortly before the accident occurred and was directly implicated in its circumstances. In addition, the company s approach to trial pitting, for which Mr Eaton was responsible, was found to be wholly and unnecessarily dangerous and to have ignored well recognised industry guidance. In such circumstances, the company could well have been convicted of the previous common law offence of corporate manslaughter (which no longer applies to organisations in the light of the Act). Jurisdiction The Act applies to organisations, which includes corporations (except for corporations sole) whether incorporated in the UK or abroad; identified government departments and bodies; police forces; and partnerships, trade unions and employers associations that are employers. The crucial element in relation to jurisdiction is that the harm that resulted in the death must have been sustained within the UK, which unusually is defined as including UK territorial waters and British-controlled ships, planes, hovercrafts, oil rigs and other offshore installations.
Page 3 of 7 It is inconsequential whether the death, the breach or the management failure occurred outside of this defined territory, so long as the harm that resulted in the death occurred within it. This highlights the far reach of the Act. If, for example, an air crash occurred in the UK, the Act would apply to the relevant airline operator (wherever incorporated); however, if the air crash occurred elsewhere, the Act would still apply if the harm that caused death occurred on a British-controlled aircraft. The Act makes the UK one of the few jurisdictions to adopt the management failure and aggregation approach to corporate manslaughter. Australia adopted a similar approach at Commonwealth level under the Commonwealth Criminal Code Act 1995, which provides that corporate bodies can be found guilty of a negligence offence (such as gross/criminal negligent manslaughter) by the corporation s conduct being viewed as a whole and aggregating the conduct of any number of its employees, agents or officers. However, gross/criminal negligence manslaughter is not a Commonwealth offence and, as most Australian states and territories (with the exception of the Australian Capital Territory, which only accounts for 1.5% of the Australian population) have not adopted similar provisions in their criminal codes or legislation, the provision does not apply. In reality, Australia relies on more traditional health and safety legislation to prosecute companies for fatal accidents. The identification doctrine remains the basis for corporate liability in jurisdictions such as Canada and many, if not all, US states. However, in Germany and some other European countries, corporate bodies cannot be held criminally liable at all. Nonetheless, organisations can be sanctioned by other methods. The US in particular focuses on civil law remedies for corporate wrongdoing and the US response to the Deepwater Horizon disaster demonstrates how punitive this approach can be even while investigations are ongoing, BP has been obliged to set aside $20billion in an escrow fund for spill victims. In addition, the US authorities are apparently also considering criminal charges against managers of BP. Federal prosecutors have reportedly not yet ruled out involuntary manslaughter or the relatively obscure offence of seaman s manslaughter, originally intended to regulate steamboats, under which BP managers could be imprisoned for up to 10 years. Investigations and Prosecutions
Page 4 of 7 It is important to note that corporate manslaughter (and health and safety breaches) are criminal offences that are prosecuted in the criminal courts and that the police lead investigations into fatal accidents where such a serious criminal offence is suspected, working in partnership with the Health and Safety Executive, the local authority or other regulatory authority. In addition, the prosecution of corporate manslaughter is the responsibility of the Crown Prosecution Service in England and Wales. The CPS has issued guidance requiring police investigating fatalities to consider the possibility of a prosecution for corporate manslaughter, as well as looking at the actions of individuals for possible prosecution for gross negligence manslaughter under the common law. The CPS has also made it clear that investigations will have a far greater focus than before on the senior management and whether their acts or omissions contributed to the fatality. The Act adds to the range of offences available to the police and the CPS when investigating/ prosecuting an organisation and its employees following a fatal accident. An investigation following a fatal accident will now be undertaken with a view to prosecuting: an organisation for corporate manslaughter an organisation for breaching the Health and Safety at Work etc Act 1974 an individual for gross negligence manslaughter a director/manager for secondary liability in relation to breach of the HSWA by the organisation an employee for breach of the HSWA Furthermore, this situation has been compounded by the coming into force of the Health and Safety (Offences) Act 2008, which for the first time has made most health and safety offences imprisonable, rather than merely punishable by a fine, and increased significantly the maximum fine for certain breaches. Indeed, in Cotswold Geotechnical, as well as the corporate manslaughter charge, the company was originally also charged with an offence under the HSWA. In addition, Mr Eaton was charged with gross negligence manslaughter under the common law and an offence under the HSWA. In the event, Mr Eaton was too ill to stand trial for gross negligence manslaughter or the HSWA offence and, interestingly, the HSWA offence against the company was discontinued when the judge suggested that it might confuse the jury. This was despite the fact that the new Act positively anticipates simultaneous or sequential prosecutions for corporate manslaughter and a breach of health and safety legislation arising out of the same set of facts.
Page 5 of 7 Nevertheless, Cotswold Geotechnical shows that the CPS is willing to deploy the full arsenal of applicable criminal offences following a fatal accident and the CPS and the HSE will undoubtedly continue to target senior individuals with prosecutions for health and safety offences that carry significant sentences, including imprisonment. Sentencing The main sanction on conviction for corporate manslaughter under the Act is an unlimited fine. Individuals cannot be convicted of corporate manslaughter and no individual can be sentenced to imprisonment under the Act, although directors and senior individuals can be sentenced to imprisonment if convicted of one of a number of health and safety offences. This includes secondary liability for breaches by the organisation by reason of the senior individual s consent, connivance or neglect. In 2010, the Sentencing Guidelines Council issued its definitive guidelines for sentencing organisations for corporate manslaughter or health and safety offences that cause death. The guidelines provide that there will inevitably be a broad range of fines reflecting the seriousness involved and the differences in circumstances of defendants, but goes on to specify that fines for organisations found guilty of corporate manslaughter may be millions of pounds and should seldom be below 500,000. For health and safety offences that cause death, fines from 100,000 up to hundreds of thousands of pounds should be imposed. The guidelines also provide that, whilst a fine is intended to inflict painful punishment, it should be one that the defendant organisation is capable of paying. In the case of a large organisation, the fine should be payable within 28 days. In the case of a smaller or financially stretched organisation, it is permissible to require payment to be spread over a much longer period and there is no limitation to payment within 12 months (as is the case generally with individual defendants). An extended period for the payment of further instalments may be particularly appropriate for an organisation of limited means, which has committed a serious offence, and where it is undesirable that the fine should cause it to be put out of business. Significantly, the guidelines further provide that, while the Court should have regard to a number of factors when assessing the financial consequences of a fine (including the employment of innocent employees and the effect of the fine on the provision of public services), in "some bad cases" it may be acceptable that the fine will have the effect of putting the organisation out of
Page 6 of 7 business. Accordingly, in appropriate circumstances, the Court has the power to fine an organisation out of existence. The guidelines broadly follow advice from the Sentencing Advisory Panel that the impact of the fine on the commercial survival of the organisation should be disregarded only in cases of exceptional culpability. However, exceptional culpability would presumably have been a far higher test than the approach finally adopted in the guidelines. In Cotswold Geotechnical, representations were made on the company s behalf that it was in a dire financial position; that it had barely broken even in the previous year; that it had limited assets and no reserves; and that the sole director had kept it afloat. However, this was insufficient to take the fine far below the 500,000 watermark. Mr Justice Field, while accepting that a larger fine would cause the company to be liquidated, fined the company 385,000 to be payable over ten years even while acknowledging that the fine and terms of payment may well put the company into liquidation. Mr Justice Field continued: If that is the case it's unfortunate but unavoidable. But it's a consequence of the serious breach." Mr Justice Field also said that the fine marked the gravity of the offence and the deterrent effect that it would have on organisations to strongly adhere to health and safety guidance. The approach to instalments makes clear the Court s intention to extract the maximum fine possible or even not possible from organisations with limited means when sentencing following a conviction for corporate manslaughter. Bearing in mind the small size of Cotswold Geotechnical, in cases of serious breach, large organisations can expect much larger fines and very large organisations can expect fines in the millions. Although there have not been any convictions under the Act of large organisations, this expectation is borne out by recent sentences, including those that have taken into account the guidelines, and high fines are not limited to breaches causing death: In May 2011, Network Rail was fined 3million and ordered to pay 150,000 towards the prosecution s costs after pleading guilty to safety breaches following the Potters Bar rail crash in which seven people died. In June 2010, after the successful prosecution of five organisations for the Buncefield explosion (the largest peacetime explosion in Europe), in the absence of any serious injury or death, the companies were each ordered to pay fines and costs of up to 6.2million.
Page 7 of 7 In May 2010, the Court of Appeal upheld fines totalling 400,000 against New Look in relation to breaches of the Fire Safety Order following a non-fatal fire in London s Oxford Street. Significantly, Lord Justice Pitchford held that the court does not have to wait until death or serious injury has occurred to express its displeasure at wholesale breaches. In June 2009, Shell was ordered to pay 345,000 after pleading guilty following two small fires in the space of three weeks at the Shell Centre in London. The Future It is clear that fines for organisations that cause death, whether by corporate manslaughter or by breaching health and safety legislation, are set to increase significantly. In addition to high fines, a fatal accident presents other risks for organisations and individuals: criminal conviction imprisonment (from directors to employees) severe reputation damage costs associated with remedial action defence costs prosecution costs More than ever before, as well as improving systems and work practices, it is imperative that organisations and individuals caught up in an investigation following a fatal accident obtain expert legal advice at the very outset. About the Author Guy Bastable is a specialist corporate defence solicitor and a recognised leading expert in fatal accidents, corporate manslaughter, fire safety, and health and safety breaches. He is a partner in the Business Crime & Regulation department of London-based law firm BCL Burton Copeland. 11 May 2011 Guy Bastable BCL Burton Copeland