A matter of corporate life and death

Author: Gillian Birkby

Breaking health and safety law is no longer just a possible matter of life and death for individuals – it can be fatal for companies too.

The courts have sent a clear signal that they are prepared to put companies out of business if they are convicted of causing death by breaching health and safety legislation. In the first case to test the new corporate manslaughter law and the related sentencing guidelines, the Court of Appeal has acknowledged that it is “unavoidable and inevitable” that Cotswold Geotechnical Holdings (Cotswold) will go into liquidation as a result of the fine that it has been ordered to pay following its conviction. Cotswold was prosecuted after one of its employees, a 27 year old geologist, was killed when the pit he was working in collapsed.

The new offence of corporate manslaughter was introduced in the Corporate Manslaughter and Corporate Homicide Act 2007. A company is guilty of the offence if the way in which its activities are managed by its senior management causes a person’s death and represents a gross breach of the company’s duty of care to that person. It remains to be seen whether this makes it easier to convict companies that cause death, and the prosecution of Cotswold was relatively straightforward, bearing in mind the “open and shut” nature of the case and the fact that there was only one director of the company.

There is a perception that, historically, the penalties for companies that were convicted of causing fatal accidents have been too low. This may have been caused by the courts applying the same approach to sentencing companies that they used for sentencing people – where the punishment is a fine, there is a strong connection between the level of the fine and the convicted party’s means, and the courts would not set a fine that the defendant could not possibly pay. However, new sentencing guidelines for corporate manslaughter and other health and safety offences that cause death were issued in 2010. The guidance retains a link between the means of the convicted company and the amount of the fine, but also says that the appropriate level will rarely be less than:

  • £500,000 for a conviction for corporate manslaughter; and
  • £100,000 for other health and safety offences that cause death.

This represents a significant increase on the levels of the fines that have previously been considered normal. The guidance makes it clear that the effect of a fine on the shareholders and directors of the guilty company is not a relevant consideration in determining the amount of the fine, and acknowledges that there may be some cases where it is appropriate that the defendant will go out of business as a result.

In sentencing Cotswold, the judge took account of the new guidelines, and also considered the size and financial standing of the company. He set the fine at £385,000. Cotswold was also given permission to pay the fine in instalments over ten years. Notwithstanding this, the judge acknowledged that the company could still go out of business as a result. The Court of Appeal upheld the level of the fine and Cotswold is now likely to go into liquidation.

The Crown Prosecution Service says that there are a number of further prosecutions “in the pipeline”. Given that Cotswold is a small company with a very simple management structure, this case suggests that bigger companies can expect even larger fines. Whilst corporate manslaughter cases are very widely publicised, the new approach to the level of fines applies to all incidents where a company is convicted of causing death by breaching health and safety law.

Most companies will put health and safety policies in place because they feel that it is both morally right to do so and also good business practice, not just to avoid prosecutions and fines. However, with the courts’ new found willingness to use their sentencing powers, the incentive to comply with the law is stronger than ever.

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