In February 2010 the Sentencing Guidelines Council (the SGC) issued definitive guidelines to courts on imposing appropriate sentences for corporate manslaughter and health and safety offences causing death. The SGC states that fines imposed on companies found guilty of corporate manslaughter should not fall below £500,000, while fines in respect of health and safety offences that are a significant cause of death should be at least £100,000. Crucially, the SGC declined to provide for a fixed link between the imposed fine and the turnover or profitability of the offending company.
First UK corporate manslaughter trial
The guidelines were issued two weeks before the scheduled start of the UK’s first corporate manslaughter trial. An engineering consultancy firm, Cotswold Geotechnical Holdings, was charged pursuant to the Corporate Manslaughter and Corporate Homicide Act 2007 in relation to the death of an employee who died when a trench collapsed on top of them as they collected soil samples. Company director Peter Eaton has also been charged with the common law offence of gross negligence manslaughter. If found guilty, the maximum sentence that Eaton faces is life imprisonment, while the company may be subject to an unlimited fine. The case has been adjourned and it has been reported that the hearing may not commence until autumn 2010, but commentators will closely watch the eventual trial with interest to see how courts apply the new law and, if relevant, the guidelines laid down by the SGC.
Defining corporate manslaughter
The offence of corporate manslaughter:
- can only be committed by organisations, as opposed to individuals;
- derives from a breach of a duty of care under the law of negligence;
- requires that breach to be a gross breach, such that the relevant conduct falls far below what would be expected of the organisation;
- further requires that the way the organisation’s activities are organised by senior management forms a significant element of the breach; and
- is committed where the gross breach of duty caused a death.
Health and safety offences causing death
While most other offences covered by the guidelines will concern breaches of s2 and s3 of the Health and Safety at Work etc Act 1974, all relevant offences:
- can be committed by both organisations and individuals; and
- derive from a breach of the duty to ensure the health and safety of employees and other members of the public (and therefore do not depend on the law of negligence).
There is clearly an overlap between corporate manslaughter, and health and safety offences that cause death. However, corporate manslaughter will be committed where there is both a gross breach of a duty of care and failings of senior management in the way that the business is run from a safety perspective. These cases will therefore generally involve systemic failures. Health and safety offences, by contrast, are committed where the accused company cannot show that it was not reasonably practicable to avoid a risk of injury or lack of safety. The failing will therefore be operational as opposed to systemic and may well involve instances of minimal failures to reach the standard of reasonable practicability rather than a ‘gross breach’ of a duty.
Significantly, there is a difference in the operation of the burden of proof in respect of each category of offence. In cases of corporate manslaughter, the prosecution have the burden of establishing all elements of the offence. When dealing with a health and safety offence causing death, the prosecutor need only prove that there has been a failure to ensure safety (which is often established simply by pointing to the fact that a death has occurred). The burden then shifts to the defendant to establish that it was not reasonably practicable to do more than was done to comply with the relevant duty.
Ten steps in assessing appropriate sentence
The guidelines set out ten stages to be applied by courts in deciding the sentence to be imposed on convicted companies:
- consider the seriousness of the offence;
- identify any particular aggravating or mitigating circumstances;
- consider the nature, financial organisation and resources of the defendant;
- consider the consequences of a fine;
- consider compensation (although this is primarily a matter for the civil courts);
- assess the fine in light of the foregoing and all the circumstances of the case;
- reduce as appropriate for any plea of guilty;
- consider costs;
- consider a publicity order; and
- consider a remedial order.
Seriousness of offence
Given that death is involved, the offence will be self-evidently ‘serious’. The level of seriousness will be determined by the judge following consideration of such factors as:
- the foreseeability of serious injury (the more foreseeable, the more serious the offence will be);
- how far short of the applicable standard the organisation fell;
- how common such breaches are within the organisation (if the non-compliance was an isolated incident the offence will be less serious, whereas endemic departures from good practice will render the offence more grave); and
- the level of culpability among senior management (the higher the responsibility of those culpable, the more serious the offence will be).
The SGC sets out a non-exhaustive list of aggravating factors in its guidelines, including:
- multiple deaths or an additional very serious personal injury;
- failure to act on warnings or advice (in particular, from employee health and safety representatives) or to respond appropriately to ‘near misses’ arising from similar circumstances;
- cost-cutting at the expense of safety;
- deliberate failures to obtain or comply with relevant licences; and
- injury to vulnerable persons (described by the guidelines as ‘those whose personal circumstances make them susceptible to exploitation’).
A second, similarly non-exhaustive list is set out in the guidelines in respect of mitigating factors. These include:
- prompt acceptance of guilt;
- co-operation with the ensuing investigation into the circumstances of the offence, above and beyond what will always be expected;
- genuine efforts by the organisation to remedy the defect;
- a good health and safety record; and
- a responsible attitude to health and safety, demonstrated by the commissioning of expert advice or consultation with affected employees.
It could legitimately be noted that a company convicted of any health and safety offence is already required to make efforts to remedy any defect in its practices, and is obliged by law to take a ‘responsible’ attitude to its duties in this regard. It is therefore suggested that courts will require that company to exceed the requirements of law for its past record and response to the offending incident to be taken into account as a mitigating factor.
Nature, financial organisation and resources of the defendant
The third stage involves an examination of the defendant’s means. Initial proposals suggested that the SGC would seek to link the level of fine imposed with the offending company’s annual turnover. The guidelines reject this proposal on the grounds that it is ‘not appropriate’. In the course of the consultation on the draft guidelines, the chair of the SGC, Lord Chief Justice Judge, said that the fixed link to turnover:
‘Could inadvertently risk an unfair outcome, was particularly difficult to apply to public and third sector bodies, was likely to create a perverse incentive to adjust corporate structure to avoid the proper consequences of offending and so did not provide the most effective way of assessing the level of fines across such a wide range of situations.’
However, the guidelines do state that ‘a wealthy defendant should pay more than a poor one’ and that the fine should ‘inflict painful punishment’. This is subject to the caveat that the fine should be set at a level that the defendant can afford to pay, even if it takes several years.
The obligation to provide the requisite financial information falls on the defendant. The court is permitted to draw the appropriate adverse assumptions as to the organisation’s means if the defendant fails to comply with this obligation. The court should review three years of financial information (including the year of the offence) in assessing the appropriate fine.
Consequences of a fine
A court should take into account the consequences of the imposition of a given fine on the defendant. The relevant factors to consider include:
- the effect on the innocent employees of the organisation;
- the effect on the provision of public services (so that a public organisation, such as a hospital trust, while obliged to achieve the same standards of behaviour as a commercial operation, may benefit from a different approach to determining the level of fine imposed); and
- whether the fine would put the defendant out of business (although it is noted that ‘in some bad cases this may be an acceptable consequence’).
The guidelines also stipulate that certain factors will not normally be relevant, including the effects on shareholders, the effects on directors, the possibility of a company increasing the prices it would normally charge in response to the fine, the liability for civil compensation and the cost of complying with a remedial order.
Large organisations will be required to pay a fine within 28 days, whereas smaller or ‘financially stretched’ entities can spread payments over a much longer period.
If a defendant makes a quantifiable saving through the commission of the offence, courts are instructed to ‘ensure that the fine removes the profit and imposes an appropriate additional penalty’.
Setting a fine
The SGC appreciates that the application of the guidelines listed above will result in a broad range of fines being imposed. However, in effect, the guidelines provide a starting point for courts to bear in mind when arriving at the appropriate fine.
It is stated that an appropriate fine for corporate manslaughter offences will ‘seldom be less than £500,000 and may be measured in millions of pounds’, while where a health and safety offence has been a significant cause of death, the fine should not fall below £100,000 and may reach ‘hundreds of thousands of pounds or more’.
Reductions to be made in respect of a guilty plea made by the defendant should then be accounted for.
Possible additional orders
There are four additional orders that could be imposed on a convicted defendant in conjunction with the fine.
- Publicity orders should ordinarily be imposed for a corporate manslaughter conviction.
- Remedial orders should be made in cases where the offender has failed to rectify its failings.
- The convicted organisation will normally be ordered to pay the prosecution’s costs.
- Orders for compensation should ordinarily be considered by the civil courts, but the guidelines envisage that occasional cases may arise where a court should consider a compensation order in respect of bereavement and funeral expenses.
If a court makes a publicity order, it should stipulate in which medium a public announcement should be made and should consider requiring a statement to be displayed on the company’s website. A newspaper announcement should not be ordered if the trial has received sufficient media coverage, but, where necessary, the order will specify the publication, form of announcement and number of insertions of the required announcement. In certain cases, the court may order the size of the announcement and may specify that any related comment from the company is separated from the announcement itself. The prosecution will provide the court (and serve on the defendant) a draft copy of the suggested order, which the judge should then personally endorse.
The decision by the SGC to reject a fixed link between a defendant’s annual turnover and the calculation of the appropriate fine to be imposed on it has been criticised by commentators. It has been suggested that a large multinational convicted of corporate manslaughter may now face fines representing less than 1% of its global profits, which may not be an adequate incentive to ensure that its systems and procedures sufficiently protect its employees and the general public.
There also appears to be inherent ambiguity within the guidelines. They provide that fines for corporate manslaughter will ‘seldom be less’ than £500,000, but the fine imposed should not have the effect of putting the defendant out of business. This will create difficulties for a court considering the fine to impose on a small company found guilty of the offence (such as Cotswold Geotechnical Holdings), since a fine of £500,000 would almost certainly be fatal to the continued existence of such a business. While the SGC’s guidelines clearly allow a court to use its discretion to reduce the fine below the threshold in such circumstances, this does raise the question of how useful the stipulated benchmarks will actually prove to be in practice. As a result, the progress of the case against Cotswold Geotechnical Holdings will be subject to close scrutiny as practitioners observe the practical application of the guidelines (and the associated law) for the first time.
By Charles Arrand, partner, and Rachael Histed, associate, DLA Piper.