Optimism over sentencing for deaths falls at the final hurdle
Howard Fidderman laments the Sentencing Guidelines Council's decision to ignore its advisory panel's proposals on fines for fatal failures.
On this page:
Consultation on
fines
How serious is death?
Aggravation
Mitigation
Setting a fine
The role of turnover and
profit
Fixed correlation is "not appropriate"
Relevant factors in assessing fines
The
"minimum" fines
Publicity orders
Problems with draft guideline
What the
council failed to do
Dispropotionate outcome for small
firms
Box 1: The 10-stage sentencing process
Box 2: Remedial orders
Box 3: The panel on
publicity
Box 4: Compensation orders
Table 1: Sentencing advisory panel's revisited proposals for
fines.
The main shortcoming in sentencing for health and safety crimes is
that courts rarely set a fine at a level that will hurt large and medium-sized
employers. In general, smaller firms - as a proportion of their turnover and
profit - are sanctioned far more severely. A more level playing field had
emerged as a possibility when, in December 2007, the Sentencing Advisory Panel
published proposals for how courts should approach a sentence for convictions
for the new offence of corporate manslaughter, which was introduced by the
Corporate Manslaughter and Corporate Homicide Act 2007, and for HSW Act offences involving a death. The aim of
the consultation was to inform the "advice" that the panel would submit to the
Sentencing Guidelines Council, which would in turn consult on a draft guideline
for courts in England and Wales.
Crucially, the panel proposed linking the sentence to the offender's annual turnover (or gross revenue income or equivalent for public and third sector bodies). In summary, the panel recommended a "starting point" for the fine, which could then be adjusted between an upper and lower point (the "range"), with all three points posited as percentages of turnover. The panel proposed higher starting points and ranges for corporate manslaughter than for HSW Act offences involving death, on the grounds that the former was a more serious offence.
Consultation on fines
Following consultation on its proposals, the panel submitted revised "advice" to the council in November 2008. Although the panel reduced the "starting points" and ranges - a recognition of the unprecedentedly huge fines its original proposals could otherwise have paved the way for - it nevertheless maintained the principle of the link, which would still have led to significantly higher fines than courts currently impose.
On 27 October 2009, however, the council released a draft guideline1 for consultation that rejected a fixed link between fine and turnover, relegating the latter to just one of the factors that judges should consider. Instead, it advised that fines should generally start at £500,000 for corporate manslaughter and at £100,000 for HSW Act offences causing death. The council also addressed an ambiguity in the panel's proposals to make it clear that the guidelines in relation to the HSW Act were restricted to where an offence causes, rather than simply involves, a death.
Justifying its position, the council noted that the panel's consultation had elicited 63 responses, many of which "focused on the complexities of fining organisations of different types and sizes". As a result, the council applied the panel's approach to the different ways in which offences could be committed and to the organisations that might commit them. In a letter accompanying the consultation on its draft guideline, the council's chair - the lord chief justice, Lord Judge - advises that the council "concluded that the formula approach could inadvertently risk an unfair outcome, was particularly difficult to apply to public and third sector bodies, was likely to create a perverse incentive to adjust corporate structure to avoid the proper consequences of offending and so did not provide the most effective way of assessing the level of fine across such a wide range of situations".
But the council also acknowledged its differences with the panel, and consequently published the panel's advice alongside its consultation paper, advising that it was inviting views "more widely than usual". The closing date for responses is 5 January 2010, after which the council will publish a definitive guideline. In this feature, we look at the council's draft guideline and how it differs from the panel's advice.
How serious is death?
The council's draft guideline marks the first occasion on which it has addressed the sentencing of organisations rather than individuals; although it sets out, as usual, principles relevant to assessing the seriousness of the offences, "which may involve a wide variation in culpability", Lord Judge notes the guideline differs in that it does not set out specific starting points for fines, and instead "proposes a level below which a fine would not normally be expected to fall, supported by a general indication concerning the extent to which a fine should be above that level".
At the outset, the council highlights the essential differences between corporate manslaughter and HSW Act offences causing death, notably that a conviction for manslaughter will generally involve systemic failures within an organisation, because it requires a gross breach of duty of care and significant senior management failings; HSW Act offences, in contrast, can arise at operational level because they require that a defendant is unable to show it was not reasonably practicable to avoid a risk of injury or lack of safety - "in some cases", the council believes, this can involve "only very limited falling below the standard of reasonable practicability".
The council recommends that judges start with four questions in their attempts to determine the seriousness of the offence:
- How foreseeable was serious injury?
- How far short of the applicable standard did the defendant fall?
- How common was the breach in the organisation ("an isolated breach is likely to be significantly less serious than one which is endemic")?
- How far up the organisation does responsibility for the breach go
("usually, the higher up the responsibility... the more serious the offence")?
The council then sets out non-exhaustive factors that can aggravate or mitigate the manslaughter and HSW Act offences (the factors apply to both).
Aggravation
The five "aggravating factors", along, in parenthesis, with the equivalent revised advice that the council received from the panel for manslaughter (the panel's advice for HSW Act offences was broadly similar) arise where there is:
- more than one death, or very grave personal injury in addition to a death (the panel had proceeded along similar lines, although it believed the offence would be more serious where multiple deaths were reasonably foreseeable, and also highlighted the role that chance plays in determining the number of deaths and whether a person is injured or killed);
- a failure to heed warnings or advice from inspectors, employees or other persons (the panel recommended this too);
- cost-cutting at the expense of safety (the panel proposed that aggravation would arise where the offence "was the result of a deliberate act or omission on the part of senior management who, having weighed up the options, chose to take a risk or proceeded in the knowledge of the risks being taken. If the appropriate standard of care has been breached deliberately with a view to profit, this will be a seriously aggravating factor." The panel also noted that charities and public bodies, while non-profit-making, might "still deliberately compromise safety standards due to financial motives");
- a deliberate failure to obtain or comply with licences, "at least where the process of licensing involves some degree of control, assessment or observation by independent authorities with a safety responsibility" (this appears to weaken the panel's advice by adding the qualification of "deliberate", but also to strengthen it to encompass the failure to comply with, and not just obtain, a licence); and
- injury to vulnerable persons (although the council does not elaborate on
what it means by "vulnerable persons", the panel believed, as an example, that
they would be rendered vulnerable by "language difficulties, financial
hardship, and/or uncertain or illegal immigrant status, and [where the
offender] has exposed them to unsafe working practices").
The council's guidelines do not explicitly address the panel's aggravating factor of "marked or endemic corporate culture encouraging or producing tolerance of breach of duty of care". But it is likely that this will form part of one or more of the four questions that a judge must ask at the outset.
Mitigation
The council's "mitigating" factors include:
- a prompt acceptance of responsibility (this was not listed by the panel);
- a high level of cooperation with the investigation, beyond that which would always be expected (the panel expressed this differently, arguing that a failure to cooperate was an aggravating factor);
- genuine efforts to remedy the defect (the panel had noted that remedial action should generally not be regarded as a mitigating factor because it should be expected as a matter of course, although it accepted that if the offender "has taken prompt action and gone to considerable lengths, exceeding what was necessary to remedy the safety failures ... this should be taken into account");
- a good safety record (the panel noted that while this is an accepted mitigation in relation to HSW Act offences, it should be of "minimal relevance" to corporate manslaughter because the breach of duty will have been "gross"); and
- a responsible attitude to safety, for example in seeking expert advice or consulting employees or others who are affected by the organisation's activities (the panel did not mention this).
The council's draft guideline adds that although the unauthorised act of an employee may establish a breach of the HSW Act by an organisation, it is "unlikely" that it will significantly reduce the culpability of an organisation convicted of corporate manslaughter (because the conviction will have already required the presence of significant senior management failures). The panel had advised that although the senior management test excluded liability of an organisation for such "immediate, operational negligence causing death or indeed for the unpredictable, maverick acts of its employees ... even in those cases there still may be evidence of senior management failure, leading to convictions for corporate manslaughter." An immediate failure of an employee "will only mitigate seriousness where those actions were abnormal or unusual".
Setting a fine
The council is clear that the same standard of behaviour is expected of all organisations, regardless of size, but that size might affect an organisation's approach to safety. Although large organisations, for example, may well be operating to as tight a budget as small firms, "in some instances, a large organisation may have less excuse for not dealing properly with matters affecting safety, since it may have greater access to expertise, advice and training resources, whether in-house or otherwise."
Size, however, will be relevant to the size of the fine, and the council states that the court should request three years of financial information, including for the year of the offence. For companies and partnerships, the information should comprise published audited accounts, with particular attention to: turnover; profit before tax; directors' remuneration (or partners' drawings), loan accounts and pension provision; and assets as disclosed by the balance sheet. The council also sets out the financial information that should be sought from local authorities, police and fire authorities, similar public bodies, health trusts and third sector organisations. If a defendant fails to provide the information, the council advises, the court "is justified in making adverse assumptions as to its means".
The role of turnover and profit
In its advice to the council, the panel stated that its proposals for linking the fine to the size of the offender's turnover had "been devised to have an equal economic impact on organisations of different sizes, from companies of small means to those with very large resources". Insisting that "consistency of approach, rather than outcome (ie quantum) is the aim, as the organisation's ability to pay must be taken into account," the panel concluded that linking fines to turnover was preferable to profitability and liquidity and offered "the fairest and most stable measure of an organisation's financial resources". While profits and liquidity may influence the amount of, and timescale for, paying the fine, the panel decided that turnover compares most closely with the income of an individual, which is typically the primary measure for assessing an individual's ability to pay a fine, and is also used by the Office of Fair Trading and the European Commission when imposing financial penalties for competition law infringements.
The panel's consultation therefore proposed a starting point fine of 5% of turnover (and a range of 2.5%-10%) for manslaughter and 2.5% (range of 1%-7.5%) for HSW Act offences involving death. The range would be affected by the degree of culpability, harm and mitigation. Having considered the responses to its consultation, many of which indicated the proposed starting points and ranges would result in fines beyond levels it may have envisaged, the panel maintained the link between fines and turnover but:
- replaced its proposal for a single starting point and range for each of the manslaughter and HSW Act offences causing death with three starting points and ranges for each offence based on the level of risk that the breach gave rise to (see table 1);
- lowered the bottom point of the range for manslaughter; and
- reduced the top and bottom points of the range for HSW Act offences causing death.
The panel also stated:
- significant aggravating factors - such as previous convictions - or mitigating factors might take the fine outside of the range;
- the turnover should be the average for the three years prior to sentencing;
- where the offending organisation is a holding company, the court should use the consolidated turnover of the group; and
- where the offender is a public authority, courts should use the starting points and range, but then consider the potential impact on the provision of public services to see whether there was justification for reducing the fine.
Fixed correlation is "not appropriate"
The council's guideline, however, rejected the panel's advice on the link, insisting that: "A fixed correlation between the fine and either turnover or profit is not appropriate. The circumstances of defendant organisations and the financial consequences of the fine will vary too much; similar offences committed by companies structured in differing ways ought not to attract fines which are vastly different; a fixed correlation might provide a perverse incentive to manipulation of corporate structure."
Nevertheless, the council does accept that a judge should "look carefully at both turnover and profit, and also at assets, in order to gauge the resources of the defendant". It is, the council insists, "just that a wealthy defendant should pay a larger fine than a poor one; while a fine is intended to inflict painful punishment, it should be one which the defendant is capable of paying."
Relevant factors in assessing fines
The council's draft guideline states that in assessing the financial consequence of the fine, the court should consider:
- the effect on the employment of the innocent, which "may be relevant";
- the effect upon the provision of services to the public - "although a public organisation such as a local authority, hospital trust or police force must be treated the same as a commercial company where the standards of behaviour to be expected are concerned, and must suffer a punitive fine for breach of them, a different approach to determining the level of fine may well be justified." (This is, in effect, a restatement of R v Milford Haven Port Authority2, where the Court of Appeal held that a "very substantial financial penalty ... [that would] inhibit the proper performance by a statutory body of the public function ... is not something to be disregarded"; and
- whether the fine would put the defendant out of business, although "in some bad cases this may be an acceptable consequence."
Factors that are not normally relevant are:
- effects on shareholders, because those who invest in, and finance, a company "take the risk that its management will result in financial loss";
- effects on directors;
- the possibility that the defendant might increase the prices that it would normally charge (unless it is a monopoly supplier of public services);
- liability for civil compensation, because this will normally be met by insurance; and
- the cost of complying with a remedial order, because such an order only requires an offender to do what it should have done in the first place (although it will be relevant if it affects the overall financial position of the defendant).
In addition:
- "In some cases it may be apparent that a broadly quantifiable saving has been made by the defendant by committing the offence. In such cases it will normally be the proper approach to ensure that the fine removes the profit and imposes an appropriate additional penalty"; and
- a plea of guilty should be recognised by the appropriate reduction.
The "minimum" fines
When weighing up all the above considerations, the council reminds judges that: "Fines must be punitive and sufficient to have an impact on the defendant [and] must be capable of being paid." They must also be "tailored" to what the defendant "has done" and to its "individual circumstances". Underpinning these considerations is the council's belief that an appropriate fine for corporate manslaughter "will seldom be less than £500,000 and may be measured in millions of pounds". The council also states that, observations in Friskies Petcare3 notwithstanding, it is no longer the case that fines of £500,000 are reserved for major public disasters. Where an HSW Act offence has caused death, "the appropriate fine will seldom be less than £100,000 and may be measured in hundreds of thousands of pounds or more."
The council's proposal for a minimum amount contradicts the view of the panel, which had "considered whether there is a minimum amount, in monetary terms rather than a percentage of turnover, below which a fine would never be appropriate", but had concluded "in view of the wide range of organisations and financial circumstances ... that setting a minimum fine is not possible, but a court should always be mindful of the need to punish the offending organisation and to reflect serious public concern at the unnecessary loss of life."
Publicity orders
The council's guideline also covers remedial orders (see box 2) and publicity orders. The latter are restricted, by the 2007 Act, to corporate manslaughter. The council states that they should "ordinarily" be imposed, and that their objective is deterrence and punishment. The order should specify the fact of conviction, particulars of the offence, the fine and the terms of the remedial order. The order should also state where the public announcement is to be made and ordinarily contain a provision to ensure that shareholders are aware of the conviction (and local people in the case of public bodies). "Consideration," states the council, "should be given to requiring a statement on the defendant's website. A newspaper announcement may be unnecessary if the proceedings are certain to receive news coverage in any event", but if it is required, the order should specify the publication. The prosecution should supply the court with a draft of the order before sentencing, with the judge "personally" endorsing the final form.
The panel had likewise proposed that the imposition of a publicity order should be the norm and that it should contain the same information as above. The panel was, however, more precise about where the order should be published (see box 3) and more strident about the purpose of the order, noting that it "is primarily intended as an additional deterrent designed to put offending organisations at a disadvantage in comparison with competitors who comply with the law", but that it would also be particularly appropriate where the organisation was publicly funded. The panel was also less willing to accept that media coverage would obviate the need for an order, pointing out that an order will allow a more comprehensive and accurate publication of the information "in a way that is designed to reach the attention of all interested parties". Overall, an order would be inappropriate, advised the panel, only in exceptional circumstances, such as where it would threaten national security.
Problems with draft guideline
The council's draft guideline is undoubtedly simpler than the panel's advice, dealing with the two offences together rather than separately, in about a quarter of the space. Unfortunately, as a result, too many of the council's factors for judges to consider are left as single sentences without elaboration, and it is to be hoped that the council will restore some of the detail of the panel's advice - much of which it does not appear to disagree with - to its final guideline. It is fortuitous, however, that the council has rejected the panel's introduction of three "risk of death" categories that, in the absence of any proper explanation, would have most likely confounded, rather than enlightened, judges.
That the guideline will increase some sentences cannot be in doubt: there have been just 22 fines for health and safety crimes that have exceeded £1/2 million, and the manslaughter "minimum" will surely boost that number. The extent of the impact on HSW Act offences is less certain: there have been almost 300 fines for health and safety offences of £100,0000 or more although, again, the guideline's "minimum" of £100,000 should increase that total. There is, however, a possibility that judges may interpret the manslaughter minimum as a maximum for HSW Act fines and, in some circumstances, impose lower sentences for HSW Act offences than they would otherwise have done.
What the council failed to do
All this is as nothing, however, when set against what might have been. The council had a rare opportunity here to use its guideline to kick-start a step change in sentencing for safety crimes, but instead settled for the smallest impact it can probably get away with. In so doing, it has let down those employers that do their best to adhere to the law, but see many of their competitors (and also suppliers and customers) disregard basic health and safety standards and then, if they are brought to court, face a fine that rarely approaches 1% of profits, let alone of annual turnover, even where death is involved.
A sanction based on turnover - even at the lowest end of the panel's revised range - would have dramatically increased fines where an organisation's conduct had caused a death - regardless of whether the offence is founded in corporate manslaughter or a breach of the HSW Act. Such an increase - while not a magic bullet - would have made many more employers take notice of the potential consequences of their failures; it would have acted as a deterrent and benefited those employers that genuinely try to look after their workers.
Further, two of the council's main objections to turnover-based fines simply don't stand up:
- while there may well be problems basing the fine of a public body on its revenue, that is precisely why the panel offered the courts considerable leeway to take account of the fact that the fine will come from the public purse. The council's "justification" is little more than the tail wagging the dog: the public sector difficulties cannot justify jettisoning the turnover link in the private sector, which is precisely where most deaths occur; and
- although the council could be correct in fearing that some corporate bodies might have restructured to reduce the amount of fine they would otherwise have faced, this is not raised as an objection to sanctions in competition law - where fines can be as high as 10% of turnover - so why should it be such a stumbling block for sentencing corporate killers?
Disproportionate outcome for small firms
The council has also failed to deal with the fact that smaller firms often face disproportionately high fines, and that larger firms - even those facing some of the highest fines imposed for safety failings - rarely meet a sanction that bites. It is ironic then that the council's chair, Lord Judge, should claim that linking the fine to an offender's annual turnover "could inadvertently risk an unfair outcome", when this is precisely what a link would have overcome. Even the government's own "independent" inquiry into sanctions headed by Professor Macrory, in the wake of the business-friendly Hampton report, was equally concerned about the inconsistency, inequality and unfairness of fines.
There is also a large question mark over the practicality of applying the £500,000 minimum for a manslaughter conviction. Despite the intentions behind the 2007 Act, the offence is still likely to apply predominantly to smaller firms - the only company to be charged with the offence to date is small. But fines at this level for such small companies may exceed their turnover several times over and will put them out of business, whereas fines of a 100-fold magnitude will barely scratch the profits of large firms. HSB readers can read about the largest fine for a workplace safety failure - the $87 million fine recently imposed on BP for the Texas City refinery explosion dwarfs anything that has been handed down in the UK, but does not begin to touch BP's total revenues of £365,700 million for 2008 or its "profit before interest and taxation on continuing operations" of £35,239 million.
In the end, we are left with the impression that faced with the opportunity to make a difference, the Sentencing Guidelines Council saw the implications for big business and balked at the final hurdle. All organisations may well be equal before the law, but some - the larger ones - are going to remain more equal than others.
1 Sentencing Guidelines Council (2009), "Corporate manslaughter and health and safety offences causing death", consultation guideline, and Sentencing Advisory Panel (2008), "Advice to the Sentencing Guidelines Council", (external website).
2 [2000] 2 Cr App R(S) 423.
3 [2000] EWCA Crim 95.
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Box 1: The 10-stage sentencing process The Sentencing Guidelines Council sets out a 10-step process for courts to follow when sentencing organisations convicted of corporate manslaughter or HSW Act offences causing death: 1 Consider the seriousness of the offence. 2 Identify any particular aggravating or mitigating circumstances. 3 Consider the nature, financial organisation and resources of the defendant. 4 Consider the consequences of a fine. 5 Consider compensation (although this should normally be left to the civil court); 6 Assess the fine in the light of the foregoing and all the circumstances of the case. 7 Reduce as appropriate for any plea of guilty. 8 Consider costs. 9 Consider a publicity order. 10 Consider a remedial order. |
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Box 2: Remedial orders Remedial orders, which require the offender to remedy specific failings, are available for both offences, although they have rarely been used for HSW Act breaches. The Sentencing Guidelines Council believes a defendant "ought by the time of sentencing" to have already implemented what a remedial order would otherwise require. A failure to do so, it warns, will deprive an offender of "significant mitigation". A remedial order, it advises, "should be considered if it can be made sufficiently specific to be enforceable", and the sentencing judge should personally endorse the final form of the order. The Sentencing Advisory Panel similarly believed that most organisations will already have remedied the failures by the time the case reaches court. It added, however, that remedial orders could have a role where the offence discloses a deficiency in an organisation's health and safety policies and systems of practices, and that they may be particularly appropriate for publicly funded bodies, where they could ensure that those responsible for governance are properly aware of the need for a safe environment. |
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Box 3: The panel on publicity The Sentencing Advisory Panel was more prescriptive than the Sentencing Guidelines Council about the types of publications in which an order should appear. Emphasising that its advice constituted "minimum standards" only (with courts able to impose "other additional ways" such as an email to shareholders), the panel stated that a publicity order should appear as:
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Box 4: Compensation orders The Sentencing Guidelines Council advises that in "the great majority of cases, the court should conclude that compensation [to victims and their families] should be dealt with in a civil court, and should say that no order is made for that reason. There may be occasional cases, for example if the defendant is uninsured and payment may not otherwise be made, when consideration should be given to a compensation order in respect of bereavement and/or funeral expenses. The Sentencing Advisory Panel, however, had advised the council that courts should, as a matter of principle, make a compensation order wherever appropriate, in the knowledge that it will be taken into account if any damages are awarded subsequently in civil proceedings. |
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Table 1: Sentencing advisory panel's revised proposals for fines | ||
|
|
Fines (% annual turnover) | |
|
Corporate manslaughter |
Starting point |
Range |
|
Gross breach of duty of care creating: |
||
|
- very high risk of death |
5% |
2.5%-10% |
|
- high risk of death |
3.5% |
2%-7% |
|
- some risk of death |
2% |
1%-4% |
|
Panel's original proposal |
5% |
2.5%-10% |
|
HSW Act offences causing death |
Starting point |
Range |
|
Breach of duty creating: |
||
|
- very high risk of death |
2.5% |
1%-4% |
|
- high risk of death |
1.25% |
0.5%-2% |
|
- some risk of death or serious injury |
0.5% |
0.25%-1% |
|
Panel's original proposal |
2.5% |
1%-7.5% |
