Lion Steel Equipment Limited (Lion) had the unenviable honour in July of becoming the third company in the UK to be convicted of the new offence of corporate manslaughter (which was brought in by the Corporate Manslaughter and Corporate Homicide Act 2007, for workplace deaths on or after 6 April 2008). (Homicide being the Scottish equivalent to Manslaughter).
Behind the legal analysis lies, of course, a preventable death - in this case, an employee who fell through a skylight at Lion's Manchester site. In addition to the Corporate Manslaughter prosecution against Lion, three directors were charged under the common law with manslaughter as a result of the death. After what appears to have been a plea agreement, Lion pled guilty to the Corporate Manslaughter charge with not guilty verdicts being returned in relation to the manslaughter charges against the directors. Some valuable lessons for directors and managers can be derived from Lion and the other two major cases under the 2007 Act:
- Safety systems and risk assessments should be uniform as between different sites. Here, one director had overall charge for one site, and another director for another. The third (Finance) director had no such direct responsibility. The systems and assessments were least robust at the site where the accident occurred. Allowing patchy practice across operations will make it difficult for the corporate to defend itself if a prosecution is taken and highlight different levels of care and responsibility for employees at such sites. The problem will be most acute in multi-site businesses and perhaps riskiest if run by devolved management. The same issue can readily arise if a business with new sites is acquired or absorbed into a group without a clear integration plan for adopting best practice across these sites.
- Care is needed with written communications but especially with emails - the ease with which emails could incriminate by demonstrating knowledge over a period of (in)adequate procedures should be borne in mind. Some caution is needed when communicating with fellow directors in loose terms to which, inevitably, legal privilege will not apply as all written notes, memos and emails are open to discovery and production in a subsequent trial (and thereafter in a civil claim for damages).
- The office of director does not of itself mean a director will be responsible to each and every employee - the issue is one of the director’s control and responsibility over work systems or operations.
- In a smaller company, there is a greater risk of personal liability. The relative distance of tiers of management from decisions may protect individuals. The closer a director is to actual operations, the more exposed to liability if there are failings. In JMW Farms Limited a director of a small pig farming company in Northern Ireland was himself driving the forklift truck from which a load fell onto an employee resulting in his death and the first successful prosecution under the 2007 Act in Northern Ireland.
- Effective training and a climate of risk-avoidance, consistently applied vertically through management downwards, and horizontally across all divisions in a site, will go a long way towards mitigation in relation to the Corporate offence even if not culpability.
- Directors duties, and the new code of these contained within the Companies Act 2006, must be carefully considered - in addition to overall fiduciary and statutory duties, there is a very real prospect of conflicts of interest between, for example, a director in charge of a (more) compliant site and another responsible for another (less compliant) site.
- Who on the Board sanctioned or ignored failings at the less compliant site;
- Or did the Board collectively do so;
- Was it a matter for individual responsibility but not discharged properly; or
- Was a decision overruled in favour of other spending?
- Minutes of meetings, reports with recommendations, and emails or memos could prove to be a sword or a shield depending on your perspective.
The Court in the Balfour Beatty case in 2007 required that fines should be of a size such that they should impact on the shareholders, "thereby providing a powerful incentive on management to comply with the duty". The Court was prepared in Lion to allow payment by instalments as it would be a "highly regrettable consequence" were the fine to imperil the employment of the 140 former colleagues of the deceased. However, a fine of £480,000, even allowing for the guilty plea and being allowed to pay by instalments, shows the direct cost of such breaches leaving aside the human cost.
The Lion case reinforces, if reinforcement were needed, that Health and Safety is integral to good corporate governance. There is a moral, commercial and legal imperative to integrating Health and Safety compliance into business objectives, and naturally the Courts will come down hard on companies that put profit before safety. There was no suggestion that such was the case for Lion but the fine levied inevitably reflected the gravity of the matter, notwithstanding that while the company was profitable it had not paid a dividend for three years, had significant loans, and the directors were not paid extravagant salaries.