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21 Jul 2016

Nick Barnard interviewed in Lexis PSL regarding corporate manslaughter sentencing guidelines

Putting the corporate manslaughter sentencing guidelines to the test

Corporate Crime analysis: Monavon Construction Ltd has become the first company to be sentenced for corporate manslaughter following the implementation of new sentencing guidelines in February 2016. Nick Barnard, associate at Corker Binning, assesses the significance of this case, and the differences in the approach to sentencing under the new guidelines.

What was the background to and the key issues in the case?

In 2013, partners Gavin Brewer and Stuart Meads were walking along Hampstead Road in London after a night out. CCTV footage showed them having an altercation, as a result of which both men fell through a building site hoarding and into an uncovered lightwell approximately 12ft below. They sustained head and spinal injuries and died at the scene.

Subsequent investigations showed that the hoarding was wholly inadequate (being only 4ft tall and made of plywood) and would have given way under only moderate force. Furthermore, the site had been in an unsafe condition for several days, which had exposed members of the public, and in particular children from a nearby primary school, to risk. Overall, the company’s approach to health and safety planning and training for those on the site was poor.

On 9 May 2016, the company responsible for the site, Monavon Construction Ltd, pleaded guilty to two charges of corporate manslaughter and a breach of section 3 of the Health & Safety at Work Act etc 1974 (HSWA 1974)—which concerns the safety of those other than employees.

A charge against director Michael McGowan under HSWA 1974, which he had denied, was ordered to lie on file following the company’s guilty plea.

What sentence was imposed?

The company was fined £500,000 for the two offences of corporate manslaughter and £50,000 for breaching HSWA 1974, s 3 and ordered to pay prosecution costs of £23,653.

A publicity order was also made, which will require Monavon to publish a notice in a form directed by the court announcing the conviction and sentence.

What approach was taken to the sentencing?

In line with the Sentencing Council Definitive Guideline on Health & Safety Offences, Corporate Manslaughter and Food Hygiene Offences, which applies to all offences sentenced after 1 February 2016, the court identified the following:

  • the company’s turnover of around £500,000 (reduced from around £2m at the time of the accident) classified it as a ‘micro’ company (the lowest level, referring to any organisation with a turnover of less than £2m)
  • the seriousness of the offence meant that it was the more serious category A rather than category B—in making this decision, the court would have concluded that:
    • the risk of serious injury from a poorly guarded lightwell was highly foreseeable, and
    • the company had fallen far short of the standard required to address that risk

The fact that two deaths had occurred would also have weighed in favour of a category A offence.

In mitigation, it was acknowledged that Monavon had a good safety record, no previous health and safety convictions and had acted swiftly to remedy its practices. Monavon also successfully argued that the accident had not been caused as a result of cost-cutting at the expense of safety—a significant aggravating factor.

The guideline range for a ‘micro’ company guilty of category A corporate manslaughter offence is £270,000 to £800,000, with a starting point of £450,000. Therefore, a fine of £500,000 (for both offences taken together) represents a slight increase or aggravation on the starting point.

Monavon received a reduction of £50,000 against each corporate manslaughter charge for pleading guilty on 9 May 2016. Although the judge did not explain his reasoning for this one-sixth reduction, it falls closer to the 10% usually allowed for a plea ‘at the door of the court’, rather than the maximum one-third reduction allowed for a plea at the earliest opportunity.

How do the new sentencing guidelines differ from the old ones? What is the difference in the approach to sentencing?

As outlined above, the new guideline begins by assessing the seriousness of the offence by reference to the risk posed and the company’s culpability in creating or failing to manage that risk. The size of the organisation is then established first by reference to its annual turnover, although other financial factors may be taken into account if the court considers it necessary to ensure the eventual fine is proportionate.

These factors are applied to a matrix which gives a sentence range and starting point. These range from £180,000–£540,000, with a starting point of £300,000 for a ‘micro’ company committing a Category B offence, to £4.8m–£20m, with a starting point of £7.5m for a ‘large’ organisation committing a category A offence. A ‘large’ organisation is defined as one with a turnover in excess of £50m, although the guideline does give discretion for a court to increase fines outside of the suggested range where a company has turnover far in excess of this amount.

Having established the range and starting point, the court should then consider any aggravating factors (eg previous relevant convictions, cost-cutting at the expense of safety or obstruction of the investigation) and mitigating (eg no previous relevant convictions, evidence of remedial steps and self-reporting and cooperating with the investigation). Having applied these factors, the court may then adjust the starting point to reach an initial fine.

The court has a general discretion to adjust the initial fine up or down in order to ensure that the objectives of sentencing are fulfilled. In the case of corporate manslaughter, the particularly relevant objectives will be punishment, deterrence and the removal of gain derived through the commission of the offence. In the words of the guideline, the fine:

‘must be sufficiently substantial to have a real economic impact which will bring home to management and shareholders the need to achieve a safe environment for workers and members of the public affected by their activities.’

Finally, the court should undertake a review of the adjusted fine taking into account the defendant’s financial circumstances. In particular, the guideline notes that the court should:

  • consider whether the defendant has a small or large profit margin relative to its turnover, and adjust the fine accordingly
  • add any quantifiable economic benefit derived from the offence on top of the fine

The guidance also requires that the court considers whether the consequence of the fine will be to put the defendant company out of business, but expressly acknowledges that this may be an acceptable consequence. Indeed, it appears that this will be the case for Monavon.

The previous guidance (Corporate Manslaughter & Health Safety Offences Causing Death: Definitive Guideline, published in 2010) provided nothing like such a structured approach (eg by providing defining sentence ranges and starting points). Rather, it provided an outline of matters of seriousness, aggravation and mitigation factors that should be taken into account. As a result, judges had an extremely broad discretion in setting fines for such offences.

The previous guidance stated that there should be no fixed correlation between the fine and a defendant’s turnover or profit. As a result, there was no expectation that a small company such as Monavon should receive a substantially different fine to a multinational PLC for equivalent offences.

Aside from the more structured approach, the most significant feature of the new guideline is that the level of fines has increased dramatically. While the previous guidance suggested a baseline of £500,000 for a fatality, with the possibility of fines in the millions, the new guideline makes it plain that large companies should expect fines in the millions as a starting point.

This is line with the key message of the guideline that ‘it should not be cheaper to offend than to take the appropriate precautions’, as well as the general trend of the last two years for rapidly increasing fines for corporate offenders (indeed, in R v Thames Water Utilities Ltd [2015] EWCA Crim 960, [2015] All ER (D) 31 (Jun) it was indicated that a fine in excess of £100m could be contemplated for a sufficiently serious offence by a sufficiently large organisation).

What are the trends in this area?

Early guilty plea

Given the hugely increased level of fines (construction companies having been reportedly fined almost £8m in the five months since the guidance came into force), the issue of credit for entering an early guilty plea will become all the more important.

The Sentencing Council is currently consulting on new guidelines for early plea credit, the current draft of which has two significant implications for defendants in health and safety cases:

  • it is proposed that the window of opportunity for pleading ‘at the earliest opportunity’ is brought forward to ‘the first point at which the charge is put to the offender’, and
  • that drop-off in benefit for a later plea is made steeper (the current step from one-third to one quarter being increased from one-third to one-fifth—an immediate potential loss of five percentage points)

The former is of particular concern for those accused of health and safety offences. Often in such cases, the facts of the incident itself are not in dispute. However, it is only when the charge is formally put by the prosecution that the defendant can properly consider the merits of its case and any defences. In most cases, expert evidence will be required. For corporate defendants, the information and instructions required may not be immediately available. All of these things add to the time it takes for a defendant to make an informed decision on plea. As such, a rigid application of guidelines requiring a plea at a very early stage will put defendants in a difficult position. Given the potential cost of not receiving the full benefit, the decision of whether to plead guilty at an early stage may become an unjustly significant factor.

Assessment of harm and culpability

There is likely to be further development in the way harm and culpability is assessed, in order to establish the harm category of an offence. In hindsight, it is easy to argue that, where a fatality has actually occurred, it was foreseeable and so the offender must have fallen far short of the required standard.

However, given that the guideline provides for a category B of corporate manslaughter culpability, it must be the case that some accidents, although resulting in death, were nonetheless at the lower level of foreseeability and resulted from less serious breaches. Given that a shift between category A and category B can result in an increase in fine of 50% or greater, this will become a significant battleground.

Corporate manslaughter convictions

We still await a corporate manslaughter conviction against a very large organisation—an attempted prosecution against the Maidstone and Tunbridge Wells NHS Trust was halted during trial in January 2016.

Monavon is typical of corporate manslaughter convictions so far, in that it involved a small family-run company (against whom it is far easier to prove the necessary substantial involvement of senior management) which will almost certainly go out of business as a result of the fine. The first conviction of a large or very large organisation will be significant—the upper limits of the sentence ranges and the issues of credit for early plea and offence categorisation will both be tested. In such cases, every percentage point lost or gained might be well worth a six-figure sum to the defendant.

This article was originally published in Lexis PSL and can be found here.

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