A fine line

The newly published Corporate Manslaughter & Health and Safety Offences Causing Death Guidelines have stopped short of imposing a fixed correlation between the profits or turnover of companies that have been convicted, and the level of fines that will be imposed. This has disappointed many groups that had wanted to see a very strict deterrent regime in corporate manslaughter sentencing and corporate convictions under the Health and Safety at Work Act 1974 (HSWA) where death has resulted.

The guidelines, which apply to sentencing exercises after 15 February 2010, are very helpful '“ indeed rather prescriptive '“ in terms of clarifying what principles a judge will take into account when assessing sentencing for either corporate manslaughter or a breach of HSWA causing death. They should therefore be carefully considered by lawyers and in-house counsel who advise firms or other corporate bodies, including local authorities, on the potential consequences of being found guilty of corporate manslaughter.

However, what remains unclear is the degree to which fines may be increased or reduced depending on the seriousness of the offence, the mitigating factors or the size of the organisation. The guidelines leave much to the discretion of courts in terms of the amount of fines imposed.

Seriousness of the offence

Despite the Sentencing Guidelines Council's decision not to set down a fixed correlation between profits or turnover, the new guidelines state that the appropriate fine following conviction for corporate manslaughter will seldom be less than £500,000 and may even amount to millions of pounds.

Offences under the HSWA will also be costly, with fines in excess of £100,000 recommended, although the SGC notes that there is a greater range of seriousness for HSWA offences, as liability here is far stricter. Clearly, the SGC's intention is to envisage very significant fines in order to provide a strong deterrent to corporate bodies and to punish those who fall short of acceptable standards.

The guidelines by definition apply to offences where 'the harm involved is very serious' and has resulted in death, but any judge dealing with such a case must also consider the seriousness of the offence itself.

An offence committed under the Corporate Manslaughter Act will generally involve 'systemic failures'. However, the guidelines make clear that there will be a range of seriousness which the court will address initially by considering four questions:

• How foreseeable was serious injury?
• How far short of the applicable standard did the defendant fall?
• How common is this type of breach in this organisation?
• How far up the organisation does the breach go?

The reasonableness of these four questions is apparent, and should go some distance towards ensuring that fines are proportionate to the seriousness of the offence. The second question in particular will be encouraging to companies that have taken reasonable steps to prevent an exceptional type of breach and that will be subject to lower fines. What is unclear, and awaits clarification from the courts, is the degree of involvement expected of company directors in setting health and safety policy, and therefore whether devolving decisions to local managers or health and safety managers will be considered to extend the breach to the very top of the organisation.

After considering the four questions above, the judge will consider aggravating and mitigating factors. The SGC guidelines provide a non-exhaustive list of both of these. Of particular note among the aggravating factors is a 'failure to heed warnings or advice', including warnings by employees, and 'cost-cutting at the expense of safety'. As a result, lawyers need to make sure that managers and directors are firmly aware when responding to reports of dangers or making financial decisions which adversely affect safety, as this could significantly aggravate any fines the company would face in the event of a fatality.

The five listed mitigating factors the court will consider offer significant incentives towards good behaviour by organisations, and again managers and directors should be made aware of these by legal advisers even before any fatalities occur. This includes rewards for good behaviour before the breach, such as a responsible attitude towards health and safety, which the firms can demonstrate, for instance, by commissioning expert advice or consulting with employees as to how to reduce any risks, and a good health and safety record.

Once a fatality occurs, a company may avail itself of some degree of mitigation by promptly accepting responsibility, cooperating fully with the investigation and making genuine efforts to remedy the defect in the future. In addition to mitigation, the standard reduction of sentence for a guilty plea in criminal proceedings is available.

Size and nature of the organisation

Whereas, in November 2007, the Sentencing Advisory Panel had recommended that fines should be linked to between 2.5 and ten per cent of annual turnover, the SGC has rejected such a fixed correlation between size of an organisation on the ground that it would be inappropriate given the variety of circumstances and corporate structures which may be envisaged. How, then, will an organisation's size affect the quantum of fines it may attract?

The SGC insists that the same standard of behaviour must be expected from both large and small companies, but also sensibly acknowledge that a large organisation, with multiple operations, is statistically more at risk of committing an offence than a smaller organisation. This consideration, carried through logically, would lead to the conclusion that larger organisations' fines should be set lower proportionately to their turnover or profits. However, the SGC set a number of obstacles in the way of this conclusion.

First, a larger organisation may have more access to expertise, advice or training which should make the commission of offences less likely. Secondly, and perhaps more significantly, larger organisations require higher fines in order for the punitive effect to be felt. This, the guidelines suggest, follows from the principle established by the Criminal Justice Act 2003 (sub-sections 164(1) and (4)) that 'it is just that a wealthy defendant should pay a larger fine than a poor one', although the fine should be one which the convicted party should be able to afford.

The guidelines then provide more detail on how this principle should be considered in its application to corporations convicted for causing death. The effect of fines on directors and shareholders will not normally be relevant, on the basis that these are groups who either share in responsibility or are deemed to have taken the risk that the mismanagement of a company will cause them loss. Similarly, the effect on prices will not normally be relevant (unless the company is a monopoly) because, presumably, the 'innocent' consumers can take their custom to another company. Civil liability to pay damages will not be relevant, as this should already be covered by insurance in all but the largest organisations that can meet large fines.

The courts will, however, consider 'the effect on the employment of the innocent' of any fine, and whether the fine would have the effect of putting a convicted company out of business. Managers and directors should be aware of the stern warning that 'in some bad cases' putting a company out of business 'may be an acceptable consequence'.

Furthermore, the SGC augments the protection of public authorities from the more stringent aspects of the Corporate Manslaughter Act (which in section 3 already exempts from its ambit decisions which relate to public policy, including the allocation of public resources and weighing competing private interests). In respect of public organisations, punitive fines are still envisioned, but, according to Lord Bingham, a judge must consider whether 'a substantial financial penalty will inhibit the proper performance by the statutory body of [its] public function', as cited in the SGC guidelines.

Other penalties

In addition to fines, the guidelines clarify how other penalties made available under the Corporate Manslaughter Act and the HSWA will be approached by courts. The compensation orders which are available will not generally be made, because in the great majority of cases damages would be more appropriately dealt with in a civil court. They may be made, for instance, where the defendant is not insured in respect of its breach.

For corporate manslaughter convictions, it will be possible for a court to make publicity and remedial orders (sections 9 and 10 of the Act). Publicity orders will, the guidelines make clear, be the normal course in addition to any fines. Procedurally, the prosecution will bring a draft order to court which the judge may endorse, giving consideration to the place where the announcement will be made, its size and the particulars of the offence it details. Newspaper advertisements and notices on organisations' websites should be considered if necessary to draw the conviction to the attention of relevant groups such as shareholders and local people. If conviction is likely to receive significant news coverage, the guidelines suggest a publicity order will be unnecessary.

Finally, the guidelines note that remedial orders should not be necessary, as defendants will have dealt with any failings by the sentencing stage. Should one be necessary it seems to be implicit that the court will wish to deal rather severely with a convicted organisation.

Usefulness of the guidelines

The relative weight of the different factors incorporated into the SGC's guidelines is not provided, and this means that it falls to the courts to determine these issues on a case-by-case basis. This will have two likely negative consequences.

The first is the lack of certainty over the level of fines, other than the broad certainty that figures of £500,000 or more will be contemplated initially. This will make it hard to give precise advice on levels of fines to organisations until the uncertainty is removed by a body of case law.

Secondly, as with any case-by-case development of law, there will be a degree of inconsistency in the quantum of the sentences which come to trial. This is likely to lead to a degree of uncertainty, and even some injustice, which may require further consideration by the SGC in the future. It is a pity that an opportunity to nip this in the bud may have been lost.