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Management in the dock

The Corporate Manslaughter and Corporate Homicide Act 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 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. Instead, it concentrates on the way in which the organisation’s activities are managed or organised (‘management failure’) and whether that caused the death and was a gross breach of a relevant duty of care.

The main sanction on conviction for corporate manslaughter under the Act is an unlimited fine. Individuals cannot be convicted of corporate manslaughter and, accordingly, no individual can be sentenced to prison under the Act, although directors and senior individuals can be sent to prison if convicted of one of a number of health and safety offences.

In 2010, the Sentencing Guidelines Council issued 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 different circumstances of defendants. But they 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, while a fine is intended to inflict a painful punishment, it should be one that the organisation is capable of paying.

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. But this was insufficient to take it far below the £500,000 starting point for an organisation convicted of corporate manslaughter.

Mr Justice Field fined the company £385,000 to be payable over 10 years, even while acknowledging that the terms of payment may well put the company into liquidation. He said: “If that is the case, it is unfortunate but unavoidable. But it is a consequence of the serious breach.”

The guidelines provide for payment by instalments but, 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 longer period and there is no limitation to payment within 12 months.

An extended period for the payment of further instalments may be 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 (as in Cotswold Geotechnical).

In Cotswold Geotechnical, 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. If Cotswold Geotechnical appeals its sentence, it will be interesting to see the approach of the Court of Appeal to sentencing an organisation of such a small size.

In any event, 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.
Guy Bastable is a partner in the business crime and regulation department of London-based law firm BCL Burton Copeland

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