Small firm Cotswold Geotechnical was fined 115% of its annual turnover under the Corporate Manslaughter Act. But will larger organisations suffer a similar fate?
In February this year Cotswold Geotechnical (Holdings) 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. Cotswold Geotechnical was fined £385,000, which amounted to 115% of its turnover for the year of the accident, to be payable over 10 years. This was notwithstanding the fact that the judge considered that the fine might well cause the company’s liquidation.
The case sheds light on a number of aspects of the new law, not least in relation to the approach of the court to sentencing. However, the effectiveness of the act was not really 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. And so it remains to be seen whether the act will lead to the successful prosecution of larger organisations.
The Corporate Manslaughter and Corporate Homicide Act 2007 came into force in April 2008. The act removes the necessity under the old law to identify and establish
the guilt of a “directing mind” or a senior individual.
Instead, the act concentrates on “management failure”, and whether that caused the death and was a gross breach of a duty of care.
The prosecution of corporate manslaughter is the responsibility of the Crown Prosecution Service (CPS) in England and Wales. The act adds to the range of offences available to the police and the CPS when investigating or prosecuting an organisation and its employees following a fatal accident:
- An organisation for corporate manslaughter
- An organisation for breaching the Health and Safety at Work, etc Act 1974 (HSWA)
- 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 section 7 of the HSWA.
The main sanction on conviction for corporate manslaughter is an unlimited fine. Individuals cannot be convicted of corporate manslaughter and, accordingly, no individual can be sentenced to a term of imprisonment under the act, although directors and 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 as a result 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, 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. Very large organisations can expect fines in the millions.
However, while a fine is intended to inflict punishment, it should be one the defendant organisation is capable of paying. For a large organisation, the fine should be payable within 28 days. Smaller or financially stretched organisations can spread payment over a much longer period and there is no limitation to payment within 12 months (as is the case with individual defendants).
An extended period for the payment of further instalments may be particularly appropriate for an organisation of limited means.
Guy Bastable is a partner in law firm BCL Burton Copeland