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February 17, 2014

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With Corporate Manslaughter and the Offences Act, breaches will be harder to defend


Stephen Barnfield, associate, Hill Dickinson LLP

The gloomy winter forecast just got worse: the heavy rain of Corporate Manslaughter and the 2008 Offences Act now looks to be the start of a storm that’s here to stay.

Last month, the Court of Appeal rejected appeals by Sellafield and Network Rail against fines of £700,000 and £500,000 respectively. Sentencing guidelines for fatality cases had long threatened punishment according to means but. The fines were large by any standard. Sellafield represented about 2% of its operating profit.

Neither case resulted from a fatality (although Network Rail was grave and tragic — its consequences were sufficient to justify the substantial fine). Sellafield was not even a matter where significant harm was likely – “there was in effect no actual harm but there was a very small risk of some harm”.

Both companies were performing public functions, with Network Rail devoting all its profits to that function: ordinary private companies devoted to making a profit for shareholders might expect even worse.

A week later, the Court approved the same approach in environmental matters – Southern Water facing a £200,000 fine for unlawful discharge of effluent.

It is notable that all three companies also had a history of recent similar convictions.

Should we be surprised? If you give a judge a big stick he’s likely to use it. If the point of sentencing is to send a message to shareholders, and if previous fines have failed to prevent further incidents, what else can a court do?

In the same month, January 2014, a government study revealed the impact of the 2008 Offences Act. The Act threatened prison for directors in many more circumstances and increased fines in the lower courts – £20,000 instead of £5,000. The study contrasted prosecutions brought in the three years prior to the Act’s implementation with those brought between January 2009 and March 2013. In short, it showed that the courts have not been slow to use their new / increased powers. Key findings included:

€ᄁ    A rise in average fines in the lower courts. Regulation breach fines rose by approximately 60% whilst fines in cases involving both a breach of regulation and the HSWA a rise of 25%.

The different rates of increase reflect the traditional view — ‘just’ an isolated regulation breach versus a general HSWA breach with broader attendant risks — but clearly that view will need to be refined. As simple regulation breaches attract large fines they become more worthy of consideration when charges are reviewed. At the same time, they remain just as difficult to defend — with many regulations imposing near strict liability.

€ᄁ    A rise in the number of offences dealt with in the lower courts (72% to 86%)

This potential ray of sunlight — that more cases are being dealt with more speedily within the £20,000 per offence cap of the Magistrates’ Court — may mask a more worrying trend. As potential fines grow and costs recovery for successful defence dwindles the commercial pressure to try to plead a case early and keep it in the Magistrates’ Court (and within the cap) increases — often regardless of the merits of the case.

€ᄁ    A rise in the use of custodial sentences (and equivalent sentences) — up from 2% of cases to 7%. That the risk of a custodial sentence still appears relatively small will provide little comfort for the 221 defendants that received such sentences over the study period (compared to 78 in the period leading up to the Act).

The biggest threat for directors and companies is the two-pronged prosecution — Corporate Manslaughter against the company and individual HSWA breaches. An increased threat of imprisonment will focus the mind — not always in the company’s best interests€ᆭ

The HSE might well say that these new powers serve as a nuclear deterrent that will lead to a cold war forcing directors and shareholders to take safety more seriously. Companies on the other hand might well feel that the fall out — in effect punishing companies for their success and heaping further misery on misfortune — could have unforeseen and undesirable economic consequences.

Either, it seems clear that the cost of ignoring safety legislation will be far, far greater than the cost of effective compliance. After Sellafield, it will be difficult to claim that you have not been warned. 


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Mike Kelly
Mike Kelly
10 years ago

Tough treatment for white collar criminals and about time too.

Write up a similar article from the perspective of the dead, maimed and severely ill victims.

Not for nothing did Charles Dickens refer to industry as theNational Association for the Mangling of Operatives