Corporate heads will roll

With the key provisions of the Corporate Manslaughter and Corporate Homicide Act 2007 coming into force next April, local authorities and those insuring them must now consider the possibility that senior management will be under fire if gross negligence is proven in a fatality case, as Alan Hunter writes

A great deal has recently been written about the Corporate Manslaughter and Corporate Homicide Act 2007 in both the legal and general press. But one area that has received less exposure is how this Act will specifically impact upon local authorities and their insurers.

Prior to this long-awaited piece of legislation finally hitting the statute books, it had been possible to bring a prosecution for gross negligence manslaughter - a common law offence. But public frustration had grown because large organisations were not being brought to account, particularly where relatives had lost their lives in major incidents, such as recent rail and ferry disasters.

The main difficulty with prosecutions under the common law offence was to identify an individual with sufficient seniority to be considered as a "directing" or "controlling mind" of the organisation whose personal conduct could be considered sufficiently negligent or reckless to satisfy the essential "gross negligence" test. The handful of successful prosecutions under the old law have typically been against smaller companies with hands-on directors; larger organisations with complex management structures have, therefore, been able to escape conviction.

Key provisions

The majority of the Act will come into force by April 2008 although some provisions, including the sections in relation to deaths in custody, have no commencement date as yet. These should be in force by 2011.

Section 1(1) of the Act states that an organisation will be guilty of the offence of corporate manslaughter if the way in which its activities are managed or organised causes a person's death, and amounts to a gross breach of a relevant duty of care owed by the organisation to the deceased.

Section 1(3) adds that the breach must be linked substantially to the way in which the organisation is managed or organised by its senior management. The term senior management is specifically defined in Section 1(4)(c). This is where the Act differs from the old law in that the requirement to identify a "controlling mind" has been removed by the wide statutory definition of senior management.

It is also necessary to show that there has been a breach of a relevant duty of care, which is defined in Section 2(1) and that breach must be "gross". The Act does not specifically define the term gross but in Section 8 various matters are outlined that a jury must take into account. These include failure to comply with health and safety legislation or codes of practice; the seriousness of the failure; the risk of death posed; and whether there have been attitudes, policies, systems or accepted practices that encourage a failure to comply or have produced tolerance.

Examples may be where an employer has turned a blind eye to staff breaching health and safety regulations in order to 'get the job done' or where a culture of bad or risky practices has been encouraged. In general terms, the conduct must fall far below what can reasonably be expected of the organisation. The existing cases on what is termed gross negligence are likely to remain good law.

The offence of gross negligence manslaughter against corporations is specifically abolished by the Act but will remain for individuals. However, the new Act itself does not create personal liability for directors or senior managers either for the offence of corporate manslaughter itself or aiding and abetting the procurement of the offence. This omission is perhaps a dilution of what was originally envisaged by campaigners.

The offence is indictable - in other words it can only be dealt with at the Crown Court and, on conviction, the company or organisation will be liable to an unlimited fine. The court also has power to order a company to take specific steps to remedy any breach of duty or deficiency in its policies or systems. The court may also make a publicity order requiring a company to publicise particulars of the conviction and other details of the offence in a specified manner.

Local authority impact

By virtue of Section 2 of the Local Government Act 1972, local authorities are classed as corporate bodies and the Act will, therefore, extend to them.

It should be remembered that the Act only carries criminal sanctions and does not extend civil liability. Consequently, there is no reason it should provoke a surge in compensation claims. Existing workplace, health and safety and related legislation, as well as common law principles of negligence, remain unaffected.

Nevertheless, as local and other public authorities - such as fire and police forces - are responsible for a wide range of services, occupy land, employ staff, operate vehicles and undertake numerous other activities, it is inevitable that they are going to be exposed to the potential risk of fatalities.

There are many circumstances where liability under the Act could arise. Examples could include an elderly resident in a care home who suffers an avoidable accident or poor care that results in death; or a user of a leisure centre who drowns in a pool or falls from a climbing wall. There are also more common situations where a member of staff has a fatal accident in the course of his or her employment.

Corporate strategy

Within local authorities, the new senior management test is likely to apply to members of the corporate management team who put in place organisational strategy, as well as operational managers who undertake the day-to-day control of staff and other activities. There is also an argument to suggest elected members could be considered part of the senior management team, particularly if they have responsibility for making hands-on decisions regarding safety.

The Act recognises that certain hazardous activities are carried out for the greater benefit of the community and specifically excludes duties of care being owed by fire, ambulance and other rescue services that are responding to emergency situations.

There are also provisions relating to the child protection functions of social services departments. Under Section 7 of the Act, any duty of care that a local authority or other public authority owes, in respect of the exercise of functions conferred by or under parts 4 and 5 of the Children Act 1989, will not be a relevant duty of care - unless that duty is owed in its capacity as an employer; as an occupier of premises; or because the person is detained.

Therefore, the Act will not apply in relation to the exercise of specific functions to protect children from harm or in relation to the activities of probation services. Consequently, it is unlikely that a prosecution would arise where, for example, a child was not identified as being at risk, so not taken into care and, subsequently, fatally injured.

The Act also assists local authorities in relation to public policy decisions. It exempts decisions involving the allocation of public resources or the weighing of competing public interests. However, this exemption will not apply to any duty owed by the local authority to its employees and other people working for the organisation or performing services for it - or any duty owed to visitors as an occupier of premises.

Therefore, a local authority could not argue it was unable to afford and provide certain equipment or put in place other checks and balances if a failure to do this resulted in an employee's death.

Heightened investigation

As already indicated, it is unlikely there will be any increase in the number of civil claims pursued against local authorities as a result of this legislation. But it will inevitably result in fatal accidents being scrutinised and investigated much more thoroughly by the police and Health and Safety Executive.

Even if prosecutions do not follow, it is likely senior officers and managers will be subject to detailed questioning by the police and HSE. Indeed, such questioning may be conducted by way of a formal tape-recorded interview under caution. Quite clearly this will be an unpleasant experience for those involved.

Additionally, even though the Act excludes the possibility of individuals being prosecuted, it is still possible for them to be charged under the old law or indeed under Section 7 of the Health and Safety at Work Act 1974. It can often take prosecuting authorities many months to make decisions and those worries and concerns will potentially hang over people's heads for a long time.

Any investigations carried out by the police or HSE will require that the local authority receives legal representation from a very early stage. Furthermore, if the police or HSE are considering prosecutions against individual officers or managers then there will be clear conflicts of interest - so local authorities should check whether those individuals are already entitled, under the terms of their insurance policy, to independent legal advice.

Being involved with an investigation at such an early stage, attending what could be long police or HSE interviews and consideration of documents will be time-consuming and costly. As a result the costs of representing the local authority and individual officers may increase in the future. Insurers may wish to consider their position in relation to these potentially increased costs.

In broad terms, the new Act should not significantly change the landscape in relation to fatal accidents, their investigation and prosecution. Those authorities and other organisations with good management and safety systems should have little to be concerned about. It is the authority or organisation with a lack of proper management, health and safety systems or reckless disregard to risk where prosecutions are likely to be pursued. Nevertheless, whether or not prosecutions follow, insurers will potentially be exposed to greater criminal defence costs, where their policies extend to cover this.

- Alan Hunter is technical claims manager at Zurich Municipal.

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