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Corporate Manslaughter, Its Implications On D&Os

Oct.20.2009

The Corporate Manslaughter and Corporate Homicide Act 2007 (The Act) came into force on 6 April 2008. The Act itself creates no new duties, but creates a new offence, that of Corporate Manslaughter.

The Act applies to conduct and events that allegedly constitute the offence which have occurred after 6 April 2008. It is of no surprise that only one case to date has been brought namely against Cotswold Geotechnical Holdings Ltd. The trial is due to take place in February 2010.

The Act abolishes the common law offence and creates a statutory offence. The key elements of the offence requires:

  • A duty of care owed to the deceased by the company
  • A breach of that duty caused the accident and directly lead to the death of the individual
  • The breach of duty was gross and
  • Was substantially attributable to the way in which senior management at the organisation managed and organised the company's activities.

The Organisation

The common law offence only applied to corporate bodies. This new offence applies to corporates; certain Government departments; partnerships and police forces. The Ministry of Justice guidelines confirms that public bodies incorporated by statute will be caught by the Act with certain exemptions.

Senior Management

The Act defines senior management as those who play a "significant" role in

  • The making of decisions about how the whole or a substantial part of the company's activities are to be managed/organised; or
  • The actual managing or organising of the whole or a substantial part of the company's activities.

Two important matters arise. It will now be possible to aggregate management failure rather than having to point to a "directing mind" and his or her failures. The Act also covers those layers of management that "actually manage or organise". This no doubt will enable the conduct of those that implement policy decisions to be caught. This is an issue that organisations need to take immediate heed of. The title or label given to an individual will not be determinative as to whether they are "management". The investigation will go much deeper looking at the reality of the situation. Nevertheless, care needs to be taken when creating and reviewing an organisation's organogram or chain of responsibility. This will be meticulously scrutinised by the investigators when attempting to aggregate conduct enabling there to be sufficient evidence of "management failure".

Who will investigate?

The police will have primacy in conjunction with the Health and Safety Executive (HSE) or Local Authorities (LAs). It should not be assumed that the approach will mirror that adopted pre 6 April 2008 where there was a work place death. Generally the police in those instances would at a fairly early stage conclude that there are no charges to be brought and handover the investigation to the HSE or the LAs.

Organisations should be prepared for a far more robust thorough and intrusive investigation with the police utilising their powers of search and seizure and in particular their powers of arrest. Only a "reasonable suspicion" is required to justify an arrest. Organisations should ensure that their senior managers are aware of this and have access to legal advice in the event of an arrest. It is unlikely that arrests for offences suspected under the Act will be pre arranged, but rather could and are likely to occur outside normal office hours and to the convenience of the investigating officers.

The investigation

This will go to the heart of the corporate culture. It is unlikely to be limited to the immediate facts or circumstances of the incident and will cover:

  • Corporate structure and culture
  • Health and safety management systems
  • Training procedures
  • Risk assessments/method statements
  • Implementation of these on a day to day basis
  • Audit procedures and frequency
  • Industry norms and standards

Senior Managers, unless already familiar with these matters, should ensure they are and any dust that is gathering on the relevant files should be quickly dusted off and reviewed to ensure that they are up to date and properly reflects the organisation.

Penalties

An unlimited fine is the main provision but with the option for a publicity order and/or a remedial order. The Sentencing Guidelines Council is currently reviewing its recommendations. It has been suggested that the fine should be attached to turnover starting at 5% averaged over a period of 3 years. This will be a major departure from current sentencing guidelines if it is implemented. The Wrigley company was recently fined £150,000 on 10 July at Plymouth Crown Court for various health and safety breaches to which it had pleaded guilty. The fine represents 0.5% of Wrigley's 2008 pre tax profits on an annual turnover of £198.6m.

Costs

The costs associated with a corporate manslaughter investigation will be significant. The thorough and detailed approach referred to above, which will threaten the public image and brand position of an organisation, will be demanding. Aside from legal and experts fees there will be the commitment of time required on the part of the organisation, its senior managers and Directors. In conjunction with a corporate manslaughter investigation there may also (more likely than not) be an investigation into individual Directors, managers and/or members of staff. These investigations will be with a view to charges being brought under Section 37 and/or Section 7 of the Health and Safety at Work etc Act 1974. The Solicitors Regulation Authority guidance points to the need in many instances for individuals to be represented by lawyers other than those representing the company.

Effect D&Os

There was much dismay in many corners that the Act did not catch individuals. There remains a drive to codify the health and safety responsibilities of Directors and senior managers. It is perceived that the Institute of Directors (IOD) and HSE voluntary guidance is not having the desired effect .While the corporate manslaughter legislation targets organisations, indirectly it will have an effect on individuals. Individuals will be investigated with a view to individual manslaughter charges being brought or charges under the health and safety legislation. Less obvious is the brand damage and affect on share price such that shareholders may seek to hold Directors to account. In response to the changing legal landscape, some D&O policies are now providing entity cover which includes legal expenses in relation to corporate manslaughter investigations. The introduction of publicity orders triggers the crisis management clause to provide cover for PR expenses. The interaction between D&O policies and other general liability policies normally in place for organisations where health and safety is a day to day issue should be reviewed as should the limit of indemnity and the exclusions. Recessionary influences mean that an organisation may have limited or no financial resources to meet a fine by the time it is prosecuted and convicted. The process can take years from the date of the incident and the accompanying investigation costs are likely to exhaust the limit of indemnity before the investigation is concluded. On the basis that there will be a desire to find "someone accountable" that in itself may lead to Directors being pursued based on the perception that they may have deeper pockets to meet a fine or alternatively with a view to them being imprisoned if found guilty and/or disqualified from acting as Directors.

It is essential that every organisation considers and reviews the adequacy of its D&O cover and ensures that it properly understands how it will respond.

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