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Monday 23 April 2018

BREAKING NEWS

Safety first

Written by Peter Davy
August 2009

It's been a long time coming, but the first prosecution for corporate manslaughter has finally been brought. Peter Davy reports on the implications for business and insurance


After 12 years' anticipation it was perhaps inevitable that the first prosecution for corporate manslaughter would prove an anti-climax, but that doesn't make the charges announced in April against Cotswold Geotechnical Holdings any less surprising.

When a corporate manslaughter bill was first promised by Labour in 1997, and then in its 2001 and 2005 manifestos, it was in answer to public anger over incidents like the Southall and Ladbroke Grove rail crashes. Despite the failures identified in such cases, it proved impossible to identify gross negligence on the part of senior management who constituted the "controlling mind" of the business - the hurdle under the old law to prove corporate manslaughter. Successful prosecutions tended to be of smaller businesses with a few hands-on directors.

The Act that finally came into force last April was intended to change this. Systems, organisation and management failures were all to be held to account under the new law. "It was designed," explains Marc Spurling, business risk consultant at Marsh's Risk Consulting Practice, "to look at the systemic failures that can affect large organisations." Or, as Nick McMahon, a partner in the health and safety group of solicitors Reynolds Porter Chamberlain, prefers: "The whole health and safety culture of a company is up for scrutiny." If found guilty, companies faced an unlimited fine and a "publicity order" that would require them to publish details of the offence and the court's findings.

Yet only now have we seen the first prosecution, and look at the target: a small Gloucestershire based engineering consultancy with a turnover of £330,000 and a sole director, Peter Eaton. The Crown Prosecution Service (CPS), lawyers note, seems to be playing it safe. "For all the fanfare, I can't see why this wouldn't have been manslaughter under the old law," says Richard Tovell, head of health and safety at Greenwoods solicitors. "The case really doesn't change things much."

Andrew Stokes, head of the Health, Safety and Environment group at Beachcroft solicitors, comments: "They wouldn't have any difficulties identifying the controlling mind here," he points out. Indeed, Eaton also faces personal charges of gross negligence manslaughter. The case returns to court this month, but for the lawyers there's already a clear sense of frustration.

"What everyone was hoping for was the prosecution of a larger company that would indicate how the new Act was going to be applied and how the offence would be investigated," explains McMahon. "We wanted some indication of who would be regarded as a senior manager, how the corporate culture was going to be investigated and these sorts of questions.

"With this prosecution we're not going to see that, whatever the outcome."
And neither can big business necessarily take any comfort from the case. On the one hand, of course, the CPS's caution seems to support those who are relatively relaxed about the new law. At DAS Legal Expenses, for instance, Paul Jacobs says it's not been a huge worry, simply because it expects cases to be rare. "There aren't going to be vast numbers of these," he maintains.

On the other hand, companies continue to face the same uncertainty as the lawyers, about how the Act might play out on a big firm; the case merely postpones the flurry of self-examination and questioning that will follow - particularly around corporate structures.

Few doubt the answers will come, though. There has only been one prosecution to date, but that's no surprise given the complexity and length of such investigations. "It's still early days," says Stephen Barnfield at solicitors Hill Dickinson. "In the context of health and safety prosecutions, a couple of years is no time at all."

How many more there will be remains a key question. At Beachcroft, for instance, Stokes reckons the fact that the CPS has targeted a small firm suggests such cases could be far more frequent than expected. When the government was implementing the new law, he says, it was with the most serious, high-profile cases in mind, and it was therefore anticipated that there would be no more than a dozen or so prosecutions a year.

"This first case suggests the threshold for bringing a corporate manslaughter prosecution has been set a lot lower," he argues. "We can perhaps expect to see many more than we thought."

Nigel Pearson, UK and Ireland underwriting manager for specialist lines at Chubb, agrees. Along with the corporate manslaughter charge, he notes, there's also the personal charge and health and safety offences. "They seem to have thrown the book at them," he says. If the prosecution is successful, it could become a habit, and that would have implications for the insurers and their clients.

When the Act came in, he explains, many insurers added legal expenses cover for corporate manslaughter to their D&O policies almost as an afterthought. Should the industry start to see an unexpected frequency to these, there will, at the very least, have to be some hard questions about pricing. "If they are going to bring a prosecution for corporate manslaughter almost every time there is a death at work, you're very quickly going to get to the point where the margin on that cover is going to be unsustainable," says Pearson.

The wider impacts for companies are less clear. On the one hand, nothing really has changed. The message, say the experts, is the same as ever: keep health and safety as an item of priority. In any case, regardless of corporate manslaughter laws, companies continue to face the prospect of charges under the Health and Safety at Work Act - and much stiffer penalties. Tovell points out that directors now routinely face being told they could face a prison sentence where there has been a fatality (even if it is unlikely to happen), and the Sentencing Advisory Panel are currently proposing increasing penalties for HSWA offences involving fatalities so they are related to turnover (rather than profits), starting at five per cent. "That would represent a massive hike in penalties," says McMahon.

More generally, the Corporate Manslaughter Act puts a renewed emphasis on companies' health and safety culture. It means, says Spurling, that they need to be able to show not just that they have the correct policies and procedures in place, but that these actually work in practice. Internal and external audits, records of disciplinary action where policies were breached, well-documented risk assessments: these are all likely to become even more important to provide a defence if the worst does happen.

"It's all the sorts of things that show the company really is taking safety seriously," says Spurling. In fact, this is perhaps the central lesson that we can take from the first case, suggests Nicky Amor of Access Risk Management Group.

"It doesn't matter how good your risk consultancy is, how many times you risk assess a situation or how good you procedures are; if they aren't documented, monitored, auditable and verifiably signed off by everybody you are on a hiding to nothing," she says. "It's proactive, positive proof that companies need."

At the very least then, it seems, the government's decision to finally make good on its promises over corporate manslaughter mean that companies need to look again at health and safety - and be sure they're making good on theirs.


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