The First Prosecution

Perhaps the most significant milestone in the last quarter was the conviction in February of Cotswold Geotechnical Holdings Ltd (Geotechnical), which is the first company to be convicted under the Corporate Manslaughter and Corporate Homicide Act 2007 (the 2007 Act). It was fined £385,000 – a sum equivalent to 115% of its annual turnover – which it is being allowed to pay over 10 years on account of what the judge described as its “parlous” financial position. In some ways, the case is a landmark at a time when there is ever-increasing public demand for corporate accountability. However, it was also a bit of a disappointment to those who were hopeful for answers to some of the questions about the Act’s practical application and scope. In fact, some commentators have gone so far as to suggest that the conviction offers little in the way of useful guidance on the legislation and, in particular, on how the large or complex corporate structures it was intended to snare might fare in similar proceedings.

The Case

The prosecution of Geotechnical related to the death of Alex Wright, an employee who was killed when a 3.5 metre trench he had been working in collapsed, burying him. He died from traumatic asphyxiation. Geotechnical had not complied with best practice and guidance which advises against entry into excavations more than 1.2 metres deep without appropriate supports. A jury found that its system of work was unnecessarily dangerous.

At the time of the incident, Geotechnical was a small company, employing only 8 people. The sole director, Peter Eaton, was in overall control of Geotechnical’s daily affairs. Indeed, he had been on site shortly before the incident.

The Charges

Geotechnical was charged with corporate manslaughter under the Act, which has abolished the common law offence of gross negligence manslaughter insofar as it applied to companies. Less publicised were the other common law and statutory charges levelled against Geotechnical and its director. Geotechnical had also been charged with failing to ensure the health and safety of one its employees, contrary to section 2 of the Health and Safety at Work etc Act 1974 (1974 Act) and Mr Eaton was charged with manslaughter by gross negligence, a common law offence, as well as a statutory offence under s37 of the 1974 Act – namely that Geotechnical’s breach of duty was committed with his “consent, connivance...or neglect”.

Ultimately, the charges against Mr Eaton were dropped on account of his poor health (he was suffering from cancer). The charge against Geotechnical under the 1974 Act was also dropped because the CPS was concerned that proving the two separate offences – corporate manslaughter on the one hand and the general health and safety offence on the other – would confuse the jury. For the jury to convict Geotechnical of corporate manslaughter, the prosecution had to prove that there was a “gross breach” and that it occurred as a consequence of the way that senior management organised the company’s activities. However, health and safety offences under the 1974 Act do not require such proof but simply look to establish whether a company has exposed individuals to risk. The prosecution’s evidential burden would undoubtedly have been further complicated had the charge of gross negligence manslaughter remained against Mr Eaton.

The Corporate Manslaughter Offence

The corporate manslaughter offence introduced in the 2007 Act is composed of several parts. Simply stated, a company is guilty if the way its activities are organised causes a death and amounts to a gross breach of a relevant duty of care owed to the deceased. There are three parts to that proposition.

The first part, a “relevant duty”, is defined in the 2007 Act and includes duties owed by a company to its employees and to third parties on its premises under the law of negligence. Secondly, there must be a “gross breach”. That is defined as conduct falling far below what can reasonably be expected of the organisation in the circumstances. When considering whether or not there has been a gross breach, a jury will look at whether or not health and safety legislation, guidance and best practice have been followed. So the jury, in reaching its verdict, can have regard to almost any relevant health and safety publication, code of practice, Health and Safety Executive (HSE) guidance note or local authority direction. Clearly, with such a wide net, the potential for a jury to conclude that a company has not complied with the spirit of health and safety law is high.

Lastly, the way a company’s activities are organised is relevant. Section 1(3) of the 2007 Act provides some explanation: what matters is the organisation by “senior management”. “Senior management” means the people who play a “significant role” in the making of decisions about how activities are organised or the actual management of the activities. In contrast to the old law, this probably now includes those below board level and may extend to regional and divisional managers provided they are sufficiently involved in the organisation’s decision-making process.

This is arguably the most crucial part of the offence – negligence and a gross breach were features of the old law. The “senior management” test widens the scope of the previous law and departs from the identification principle. But how much it departs is precisely the matter at issue; who are “senior management” and what does playing a “significant role” in decision making mean? In large organisations with tiered management structures and compartmentalised responsibilities, how wide does one cast the net? That is, in essence, what people really want to know and it was a question that the Geotechnical case was never going to address on account of the company’s small size and basic management structure.

Until a large company finds itself in the dock, it will remain unclear whether the 2007 Act is capable of snaring a major company, which is its intended aim. That neatly sums up why the Geotechnical case disappoints – it fails to reveal anything about the way in which the new legislation will really work.

The Penalty

Despite initial suggestions, the Sentencing Council in guidance drawn up in 2010 rejected any fixed correlation between a fine under the Corporate Manslaughter and Corporate Homicide Act 2007 and an offending company’s turnover or profit. It had been suggested that, for example, a figure of 5% of turnover might be used, which could result in fines in the many millions of pounds for major businesses. Amongst other things, the Sentencing Council cited concerns about manipulation of company structures designed to circumvent the impact of fines and the varying circumstances (such as business models) of defendant companies.

The Sentencing Council recommended that fines for corporate manslaughter should seldom be less than £500,000 and might be measured in the millions of pounds. The actual sentence should take into account ‘how far up’ the breach went in the organisation, how widespread the noncompliance was and the foreseeability of serious injury. Aggravating factors might include costcutting at the expense of safety and failure to heed warnings. Similarly, good safety records and co-operation with investigations should be taken into account in mitigation.

While the £385,000 fine in the Geotechnical case was ultimately lower that the envisaged lower-end of £500,000, it was nevertheless quite staggering relative to the size of the business, representing 115% of its annual turnover. When size is considered, it was also consistent with the provision in the guidelines that a fine should be one which a defendant is capable of paying. However, the judge did consider that it might cause Geotechnical to be liquidated, which would clearly impact the four people employed by the company at the date of sentence.

The relatively high fine sends out a strong signal that fines for larger companies may be much higher – in the millions and perhaps tens of millions for some companies – and closer to those imposed for breaches of, for example, competition rules.