Dealpoint is a regular briefing on issues relevant to corporate transactions, notably M & A and reconstructions. Each edition of Dealpoint will focus in detail on one area of law and practice which may be of interest to principals and practitioners in the corporate transactions area.

In this issue of Dealpoint we focus on the Corporate Manslaughter Bill.

Corporate Manslaughter Bill Receives royal Assent

The Corporate Manslaughter Bill received Royal Assent on 26 July 2007, finally fulfilling the Government’s 1997 manifesto promise to bring onto the statute books an offence of corporate manslaughter (corporate homicide in Scotland). The Act will come into force on a date yet to be specified.

Background

The Act will bring an end to the long-standing confusion over whether corporations can be guilty of manslaughter. The common law position was that corporations could only be guilty of manslaughter if the death in question was attributable to the acts or omissions of an individual, who was also a directing or controlling mind of the organisation. This test meant that it was virtually impossible to convict a large organisation of manslaughter, as the failed prosecutions of undertakings such as P&O Ferries, Balfour Beatty, and Barrow-in-Furness Council testify.

The new offence

The new offence is intended to make it simpler to convict corporations in appropriate circumstances. There will no longer be any need to identify an individual as being responsible for a death. Instead, the relevant considerations are whether:

• the organisation owed a relevant duty of care to the deceased person;
• there has been a gross breach of that duty of care; and
• the breach was wholly or substantially caused by the way that the organisation’s activities are managed or organised by senior management.

Definitions

The most relevant duties of care will be those owed to employees and contractors and to other visitors to the company’s premises where the death is as a result of the company’s duty as occupier of its premises or is connected to some service provided by the company to such visitors. The question of whether or not the company owed a duty of care to the deceased in any given circumstances is a question of law and will be decided by a judge.

Whether or not there has been a gross breach of a relevant duty of care is a question of fact to be decided by a jury. The Act requires the jury to consider whether there is evidence that the organisation failed to comply with health and safety legislation, and if so how serious that failure was. The Act also states that the jury can take into account evidence that shows that the culture of the organisation was such that the failure to comply with health and safety legislation was encouraged or tolerated. Guidance on health and safety matters can be taken into account, as well as any other evidence the jury considers relevant.

“Senior management” is defined as the persons who play significant roles in decision making within the organisation, and also those who actually manage the activities of the organisation, ie this extends the liability beyond the board of directors.

Penalties

Corporations who are convicted under the Act face an unlimited fine, and the possibility of remedial orders or orders requiring the organisation to publicise its conviction. Individuals cannot be convicted of aiding and abetting or procuring the offence of corporate manslaughter.

Implications for Companies

Business related fatalities are thankfully rare, but not unheard of. In the unfortunate and statistically unlikely event of a fatality, the principal effect of the Act is to shift the emphasis from the scrutinising the role of individual senior officers in the fatality to an assessment of the corporate safety culture and management of the company. It will therefore be important to be able to demonstrate not only that the company has appropriate safety systems in place but also that these are rigorously enforced.

All those involved in decision-making and management will need to be aware that responsibility for health and safety is an integral part of their functions and not a bolt-on that can be left entirely to specified health and safety officers. The company should consider whether their arrangements for health and safety need to be revised in light of the new offence, and may also wish to consider an appropriate awareness-raising campaign amongst those who fall within the definition of “senior management”.

Due Diligence

Corporate acquirers will need to consider the implications of fatalities in target companies not just from an insurance perspective as regards civil claims but also the criminal risk. It may be the transaction should be structured as an assets deal to leave the criminal liability in the corporate entity which is not acquired.

We will be running a seminar on the new offence later this year, but if you have any queries in the meantime, please contact:

• Richard Underwood, Partner on 0870 763 1591 or richard.underwood@martineau-uk.com; or
• Richard Wrigley, Partner on 0870 763 1586 or richard.wrigley@martineau-uk.com.

August 2007