Posted by: consula | August 20, 2016

Corporate Manslaughter

In my last article, I looked at a broad range of matters that highlighted the range, scope and breadth of risks facing directors and corporation. In this one I want to focus on the risks and changes in the law relating to corporate manslaughter. 2008 saw significant changes to corporate manslaughter. On the 6 April 2008, the Corporate Manslaughter and Corporate Homicide Act 2007 (CMCHA) came into force. The new Act, whilst in itself not lengthy or complicated, has had an impact across the corporate world and understanding the risk and the nature of the new offence is vital for the senior management and board of any organisation.

Corporate manslaughter is as serious as it gets- it involves the unfortunate death or deaths of a human being., a person, an individual. It is difficult to consider the abstract concepts of this area of law objectively when in reality it will arise as a result of the death of someone, and the effect of that death on their family. As a lawyer, stepping back from the emotive morality, looking at the abstract may seem cold, but in fact, maintaining an objective composure when considering this creates a space in which risk, governance and corporate responsibility can be given due consideration.

The Act only applies to deaths where the conduct or harm, leading to the death, occurs on or after 6 April 2008, anything prior to that date would be covered by the old common law rules. Section 17 of the 2008 Act states Individuals will not be able to bring a private prosecution for the new offence without the consent of the DPP.

The offence was created to provide a means of accountability for very serious management failings across an organisation. The offence works in conjunction with other forms of accountability such as gross negligent manslaughter for individuals and other health and safety legislation. Section 1(2) states the offence applies a corporation, a department of other body listed in schedule 1, a police force and a partnership of trade union or employer’s association that is an employer. I want to explore in particular section 1(3) and 1(4). Section 1(3) states “(3)An organisation is guilty of an offence under this section only if the way in which its activities are managed or organised by its senior management is a substantial element in the breach referred to in subsection (1).”This suggests that the culpability rests on the implementation of policy or decisions made by the board or governing committee of the organisation. Normally, once policy or strategy has been agreed at board level, the implementation is left to the “senior management” of the organisation who report to the board. This is significant for both risk management and for relationship management and risk register management within organisations, particularly organisations which involve staff or the public being exposed to an insured risk. The recent events at Alton Towers Theme Park come immediately to mind.

Section 1(4)(c) makes specific reference to “senior management” and states: “(c)“senior management”, in relation to an organisation, means the persons who play significant roles in—(i)the making of decisions about how the whole or a substantial part of its activities are to be managed or organised, or (ii) the actual managing or organising of the whole or a substantial part of those activities.”

Taking a step back from the definitions and rules in the Act, the risk question that comes to my mind is whether a director or non-executive director, or board member, who agree a strategic or policy issue for the organisation are “responsible” as “senior management” or whether there is a distinction between strategic policy decisions and the implementation of those policies by key senior managers in the organisation. Section 18 of the Act states that there is no individual liability for aiding or abetting corporate manslaughter. It is, to my mind, an important point that the Act makes this distinction.

The difficulty is that many of us who are trustees or directors on boards of various commercial and non-commercial organisations will not likely be faced with the reality of having to face Corporate Manslaughter charges. One recent example is the case of Linley Developments who were convicted of corporate manslaughter and fined £200,000, plus costs of £25,000. This was widely reported in the press in January 2016 and I don’t propose to outline the particulars of the events. I do want to focus, however, on the resulting outcomes of the conviction for the company, its board and senior managers. The company’s managing director and project manager were both given

suspended prison sentences after pleading guilty to breaching CDM Regulations. The investigation found that Linley Developments, failed to carry out a risk assessment or create a method statement for the excavation; had not installed supports or buttresses to prevent the wall falling forward as the trench deepened; and the wall was inherently unsafe because, during construction a year before, the foundations had not been bonded with it.

Trevor Hyatt, 50, of Letty Green, Hertford was given a six month prison sentence, suspended for two years, after pleading guilty to breaching Regulations 28 and 31 of the Construction (Design and Management) Regulations. He was also fined £25,000 with £7,500 in costs. Judge Bright said he had considered disqualifying him as a director but did not believe it “necessary, proportionate or just to do so”.

Alfred Barker, 59, of Gazeley, Suffolk was given a six month prison sentence, suspended for two years, after pleading guilty to breaching Regulations 28 and 31 of the Construction (Design and Management) Regulations. He was ordered to pay costs of £5,000. Mr Hyatt and Mr Baker also faced charges of gross negligence manslaughter, but they were not proceeded with after they pleaded guilty to the two CDM breaches.

Linley Developments was fined £200,000 and ordered to pay costs of £25,000 after pleading guilty to corporate manslaughter on 7 September. It was allowed to pay the fine over six years. The judge also made a publicity order against the company, instructing them to take out an advert in the trade press detailing their prosecution.

As you can see, apart from the consequences to the company itself, a number of individuals, directors and senior managers on-site were handed convictions and fines and it is clear from this case and others that failures relating to health and safety, particularly in relation to higher risk activities, can have very serious, financial, criminal and reputational consequences. Inevitably the risks will vary from organisation to organisation, depending on the nature of what they do and how board decisions impact health and safety related matters.

Mitigating these risks involves a combination of clear reporting, policy, understanding of the risks of the organisation and the personal risks, including having a written and well published health and safety policy, and access for employees to relevant and competent health and safety advice. – and, inevitably – insurance.

Regular reviews of organisations policies, understanding of the risks associated with the work they undertake and documented training ensures staff, including board and senior management, are competent in their responsibilities. As well as the need for insurances there has been a distinct change of focus from corporate to personal accountability- which affects board members who may merely be unfortunate rather than complicit. Claims can be made against both the organisation and individual directors, whose personal assets could also be put at risk. Whatever the size of business, liability associated with corporate manslaughter is potentially unlimited and can be severe both personally and professionally.

Directors’ and officers' insurance can offer peace of mind to you and your management team; putting fully qualified legal experts at your disposal should things go wrong. In reality, though, whilst insurance can cover reputational risks, professional risks, employee risks, legal expense or fines, it does nothing to protect an individual director who has received a conviction, even if the sentence is suspended, from being exposed to a harsh and real, and emotively real, consequence. As with the strict criminal liabilities that relate to money laundering and the weight of regulation that already comes with the “normal course of business” health and safety and the corporate manslaughter consequences to the individual directors and managers held responsible can be mitigated, insured and understood but there is no escape from the inevitable emotive and reputational reality that an individual director may have to deal with.

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