The risk of a successful prosecution for corporate manslaughter is very much back on the agenda following two significant developments.
While the issue periodically surfaces after major disasters such as the sinking of the Herald of Free Enterprise, the Piper Alpha oil platform catastrophe or any number of rail crashes, little has been done in legal circles.
But in March 2003, gas supplier Transco lost in its attempt to have a prosecution for “culpable homicide” thrown out of the Scottish courts.
A family of four was killed in Larkhall, Lanarkshire, in 1986 when a gas explosion destroyed their house. The prosecution alleges that Transco knew “the risks of explosion, and hence of personal injury or death, from the leakage of gas as a result of the corrosion of ductile iron pipes”.
Moreover, Transco is said to have been aware of the need to deal with such risks “by means of a strategy relative to the use of this type of pipe”, concluded Lord Carloway in his judgment.
That Transco was aware of the risks was evident from its formation of a number of engineering and gas transportation committees. But notwithstanding that, the prosecution alleged: “in the face of said risks of which you were aware and which should have been guarded against, and with a complete and utter disregard for the safety of the public and in particular for the safety of the occupants of 42 Carlisle Road, Larkhall, (you did) fail to devise, institute, implement or maintain any adequate or effective safety policy or strategy for the use, maintenance, inspection repair or replacement of ductile iron pipes …”
Hard-hitting stuff – made worse by the claim that Transco had no adequate records of the age, material, location or history of distribution pipes: “The information held on your recording systems was inaccurate, incomplete and contained inconsistencies,” the prosecution alleges.
Moreover, the Transco records show that the iron pipe responsible for the fatal explosion was, in fact, polyethylene, and that there was no record of a gas leak pre-dating 1994, “it having been deleted”.
Transco tried to argue in court that (a) a company is not able to carry out the actus reus, (the guilty deed), nor to form the mens rea, (the guilty mind) necessary for the crime of culpable homicide. Moreover, the prosecution did not identify the person with the “directing or controlling mind” through whom the crime was committed, and argued that, unless legislation specifically says otherwise, a company could not be found guilty vicariously for any offence committed by its employees.
Lord Carloway concluded, however, that, while it might be necessary under English law to identify the particular person responsible, it was not necessary under Scots law: “If on a given occasion, (a) post-holder knew something or did something then that knowledge, act or omission becomes the knowledge, act or omission of … the corporation … This is not vicarious responsibility but simply an inevitable result of the existence of the corporate veil.”
The criminal trial itself was originally set for early March but is now set to commence in September 2003. Of course, the full facts of the case – and in particular, Transco’s defence – has not yet been made known to a jury and so the company may well be acquitted and absolved of any guilt.
But the very fact that a prosecution could be brought – especially one that puts faulty documentation at the heart of the Crown’s case – must make FDs and other board members give serious thought to all their internal controls and record-keeping procedures.
Law firm DLA says that, though this is a Scottish case, “English campaigners for a corporate killing offence will watch this case closely and will try to use the common law in Scotland as a template for drafting corporate killing legislation in England and Wales.”
DLA adds that the argument for introducing new legislation is to ensure that the “controlling minds” of companies are incentivised “to manage health and safety risks by introducing appropriate compliance schemes.”
In fact, in the second major development in recent weeks, the House of Lords briefly debated the corporate manslaughter issue in February when Lord Faulkner of Worcester, president of the Royal Society for the Prevention of Accidents, asked government whip Lord Bassam of Brighton if there were any plans to introduce legislation. Lord Bassam said that the government would legislate when parliamentary time allows but that a regulatory impact assessment was already under way. “It is a very complex area of law,” he said. “The whole concept of ‘controlling mind’ behind those kinds of incidents and accidents is a very difficult one to resolve. That is why we have been very careful to consult and to ensure that we get the matter absolutely right.” He added that research conducted by the Health and Safety Executive suggested that perhaps 200 of the 400 work-related fatal accidents every year might then result in corporate manslaughter charges.
Deloitte surveyed 124 CFOs and found that uncertainty levels are still high since the Brexit result.
HMRC has defeated a tax avoidance scheme used by Greene King and marketed by EY, protecting around £30m in tax.
Businesses will have to think more strategically about where they can source those non-audit services in the future
Powell, who recently stepped down as chairman and senior partner at PwC, is set to join FTSE 100 firm Capita