18 January 2018
Nick Barnard’s case study on corporate manslaughter in Ethical Business Practice and Regulation
Case study: Corporate manslaughter by an SME
In 2013, 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.
The hoarding was found to be wholly inadequate during investigations following the incident, being only 4ft tall and made of plywood, and would have given way under only moderate force. The site was found to have been in an unsafe condition for several days, which had exposed members of the public, in particular children from a nearby primary school, to serious 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 small family-run 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.
In setting the penalty, the court applied 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 Guideline sets out a sophisticated process, starting 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. The range is 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 circumstances (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 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.
Monavon’s turnover was around £500,000 (reduced from around £2m at the time of the accident). The seriousness of the accident qualified as category A. 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, which falls close 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.
The company was ultimately 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.
Nick Barnard, Associate
This case study was originally published in Ethical Business Practice and Regulation: A behavioural and Values-Based Approach to Compliance and Enforcement, and can be purchased here.