Open-access content Friday 16th September 2011
Prosecutions under the CMCHA, and the new Bribery Act 2010, show how important management and working practices have become to corporate risk management
15 September 2011
On 1 July 2011, Lion Steel Ltd was charged with corporate manslaughter under the Corporate Manslaughter and Corporate Homicide Act 2007 (the CMCHA). Three of its directors, Kevin Palliser, Richard Williams and Graham Coupe, have been charged with the common law offence of gross negligence manslaughter. Lion Steel Ltd and the three directors have also been charged with breaches of the Health and Safety at Work CMCHA 1974 for failing to ensure the safety at work of an employee.
The prosecution follows the death of one of the company's employees, Steven Berry, as a result of injuries he sustained when he fell through a fragile plastic roof panel on one of ?the company's sites in Hyde, Greater Manchester.
Lion Steel Ltd is the second company to be prosecuted under the CMCHA, which came into force on 6 April 2008. The first company prosecuted under the CMCHA was Cotswold Geotechnical (Holdings) Ltd. Cotswold Geotechnical was convicted of corporate manslaughter on 15 February 2011 and fined £385,000, payable over a ten year period. In that case an employee, Alex Wright, died while taking soil samples in a deep trench when the unsupported soil walls collapsed, burying and asphyxiating him. Mr Wright was unsupervised at the time. Cotswold Geotechnical was a small company that had eight employees in 2008 and Mr Peter Eaton was its sole director.
The fine imposed on Cotswold Geotechnical should be placed in context. It represented 250 per cent of the company's turnover, to be paid over a period of 10 years. Its imposition meant that there was no prospect of the company surviving. Cotswold Geotechnical appealed against the sentence on the grounds that it was manifestly excessive. The Court of Appeal upheld the sentence, noting that in some cases, putting the defendant ?out of business may be an acceptable consequence for breaching the CMCHA.
Prior to the CMCHA, an organisation could only be criminally liable for gross negligence manslaughter where an individual who was the "directing mind" of the organisation was guilty of the offence. The CMCHA shifted the focus to the way in which the activities of the organisation are conducted. An organisation will be guilty of corporate manslaughter if its activities are managed or organised in such a way that they cause a person's death and amount to a gross breach of a duty of care owed to the deceased, provided that the way in which its activities are managed or organised by senior management is a substantial element in the gross breach. In order to constitute a "gross" breach, the relevant conduct must fall far below what can reasonably be expected of the organisation in the circumstances. Senior management includes those who play significant roles in the making of decisions about how the whole or a substantial part of the organisation's activities are to be managed ?or organised, or the actual managing or organising of the whole or a substantial part of those activities.
The offence only applies where an organisation owed a relevant duty of care to the deceased, but the circumstances in which such a duty will arise are numerous and varied. A relevant duty includes an employer's duty to provide a safe system of work for its employees and others who work for, or provide services to, the organisation; duties that arise from being an occupier of premises and duties arising in connection with the supply of goods and services, the carrying on of construction or maintenance work, the use or keeping of plants, vehicles,and so on and carrying out other activities on a commercial basis.
In the Cotswold Geotechnical case, Mr Eaton was in overall control of the way in which the company managed its affairs. As a result, the case did not provide much guidance on how some of the more difficult provisions of the CMCHA will be interpreted. We are not yet aware of how Lion Steel Ltd will frame its defence, but given that it is a medium-sized company with multiple directors, it is likely that issues such as when the role that senior management plays will amount to "a substantial element" in the gross breach of duty, and what constitutes a gross breach, are likely to be fought out at trial.
Although there is little to connect the subject matter of health and safety to bribery, there is an important common feature of the CMCHA and ?the Bribery Act 2010 (which came into force on 1 July 2011). Both acts place corporate criminal liability on a statutory footing that no longer requires a "directing mind" to be guilty of an offence in order for the company to be liable, but ?instead focuses on the management and work ?practices of the organisation (in the case of bribery, on the organisation's procedures for preventing bribery). Good management is not only a good in itself, but is increasingly important to corporations in managing the risk of corporate criminal liability.
Michelle de Kluyver is a senior associate at law firm Allen & Overy LLP