Examination of Witnesses (Questions 181
- 199)
MONDAY 7 NOVEMBER 2005
MR ADRIAN
LYONS AND
MR AIDAN
NELSON
Q181 Chairman: Good afternoon. Thank
you very much indeed for joining us. This is the third public
hearing the Committee has held looking at the Draft Corporate
Manslaughter Bill. I wonder if you could introduce yourselves
for the record?
Mr Lyons: My name
is Adrian Lyons. I am director general of the Railway Forum.
Mr Nelson: Aidan Nelson, director
of policy and strategic initiative for the Rail Safety and Standards
Board.
Q182 Chairman: Can we start by looking
at the question of the costs for companies that are implied by
the Bill? As you know, the Government has suggested that there
would only be any major costs arising from this Bill if companies
already do not have adequate and proper health and safety arrangements
in place. Would you agree with that?
Mr Lyons: Yes. I would not want
to start with costs because the issues are much larger. We are
dealing with very serious matters of corporate behaviour but in
broad terms I think you are correct. The direct costs fall into
two groups. One, the legislation under such enactments tends to
be very expensive. Therefore, any Bill that turns into an Act
must have some chance of success of prosecution. We have been
through a number of cases where costs have lain between £2
and £15 million so the taxpayers' interests need to be protected.
Secondly, the other direct cost. Despite what is said, I am pretty
sure that two things will happen if this reaches the statute books.
Firstly, companies will need to look at their corporate governance
structures, particularly the more complex, organised businesses,
and that is going to be reasonably expensive; and smaller companies
for different reasons because they are small. Although they may
be told that just following health and safety at work legislation
is fine, they will be very worried and cautious about this Act,
but cumulatively we are talking about costs in the low millions
across the railway industry. Those are not big issues. The big
issue is indirect costs. One has to worry for an industry that
has been through the grinder. The issues of risk aversion have
brought costs to the industry which have been very considerable.
Mr Nelson: I concur with the Railway
Forum's view that the direct and indirect costs relating to litigation
are relatively low. My concern and that of the Rail Safety and
Standards Board is that we do not drive in inappropriate behaviours,
that we are not so risk averse that people keep backing off decisions
which would drive cost into the railway industry.
Q183 Chairman: Can we talk about
risk aversion? You have already been prosecuted for pretty much
the same offences as corporate manslaughter under health and safety
legislation, though the title would be different. Can you explain
what drives risk aversion in the railway industry and why you
think this Bill might lead to more risk aversion when other legislation
does not directly drive it?
Mr Nelson: In part it is linked
to the concern of individuals that they are going to be subject
to litigation. With the Bill as currently drafted, that is not
the core proposition. We need to make sure that there is appropriate
education within industry, that this is not about not taking decisions.
It is not about putting off or even escalating decisions. If you
run your business in good practice, within the scope of the commissioning
regime that there is now for railways and there is a clear understanding
as to what is meant by gross disproportion in relation to offences
under the Health and Safety at Work Act, you can address the issue.
If you do not go out and educate that it is not about targeting
individuals relatively low down in an organisation, you can lead
to inappropriate behaviours and driving costs because decisions
are deferred or escalated.
Q184 Chairman: The example that is
usually given of risk aversion in the railway industry is the
general slow down that took place across the rail network after
the Hatfield crash. The reality there was nothing to do with the
law, was it? It was just that that crash revealed that those charged
with maintenance of the railways had let things get into such
a terrible state that no one knew quite what was the appropriate
course of action. It is reasonable to assume, is it not, that
if this legislation works and makes people more focused on their
responsibilities should an individual accident happen again it
might not have such a sweeping effect right across the rail network?
Mr Lyons: I fully agree. Risk
aversion is an outcome of confusion, to be blunt, people not understanding
what they are meant to be doing or feeling very disorientated.
We certainly saw that at the latter end of 2000. If this Act does
reach the statute books, the fewer loose ends it has the better
because loose ends will lead to confusion. If people are not sure
where they stand, that is where risk aversion starts. We are a
very tightly knit industry. People do talk to each other and if
one person is worried the worry is spread very wide and very fast,
so can I make a plea for clarity?
Q185 Chairman: Mr Nelson, do you
want to add anything to what you have just said about education,
particularly how you think that education should be carried out?
Mr Nelson: It is a tripartite
responsibility in that the trades unions are involved, the management
and other regulators of activity are involved, both in terms of
general health and safety and in terms of railway specifics. I
believe that the parties need to discuss how they are going to
take this forward to provide appropriate reassurance to people
that this is not inappropriately targeting individuals.
Q186 Harry Cohen: In both your memoranda
you argue that individual liability is separate from corporate
liability and remains as such, but we have already heard evidence
that fines, for example, can be pretty meaningless or unfair in
the way that they apply. Some of the safety representatives said
that a company cannot change its behaviour unless you get to the
decision makers in that company and you have a real incentive
to change. How do you respond to the fact that you can only get
a company to change if you get to the decision makers?
Mr Lyons: You are right to have
these concerns. On the other hand, we are talking about a Bill
which is effectively based on corporate behaviours. It would be
a very big jump to move from taking a Bill associated with corporate
behaviours and making it apply to individuals and to have specific
action taken against individuals. I do not think you want to underestimate
the impact of fines on business. They bring severe reputational
risk with them as well and of course the individuals who are involved—again,
I speak for the railway industry which is small and close knit—are
well identified. It is a very unpleasant process to go through
for all concerned. The businesses would go a very long distance
not to be involved in anything like this sort of activity.
Mr Nelson: I agree entirely. What
we are addressing here is failure of a company's management system
and in particular the safety management system of that company.
That is a company system that has quite a pervasive impact on
the company. I do not think that is the right vehicle for dealing
with gross negligence of an individual for which the statute already
provides a way ahead. Indeed, in a railway context, the 1861 legislation
is still in place to deal with that, along with the general provisions
in the Health and Safety at Work Act. I believe it is about management
systems and management systems having that responsibility.
Q187 Harry Cohen: It has not dealt
with any individuals in relation to the recent big railway accident
cases, has it? There have been fines on the companies and boards
but not on any individuals.
Mr Nelson: I have to be careful
in that I am not sure if we are out of time for an appeal on Hatfield.
We are certainly sub judice on Tebay. That comes to trial
in the New Year. On the others, investigations are still continuing.
I cannot comment on whether the CPS and the police have looked
at the other legislation that is there.
Q188 Harry Cohen: This Bill is a
vehicle for individual penalties. Would you favour statutory duties
being imposed on directors?
Mr Nelson: My view and that of
the RSSB is that we do not support such an approach in that the
Health and Safety at Work Act provisions already provide for the
exclusion of someone from the office of director. Therefore, the
statute already provides that. I do not think it is appropriate
for this Bill.
Mr Lyons: Under section two or
three of the Health and Safety at Work Act imprisonment is also
potentially there.
Q189 Harry Cohen: Can we move to
the senior manager test? There is a definition in the draft Bill
that, in your memoranda, you express concern about. To paraphrase,
it talks about a person who plays a significant role in the making
of decisions, how the activities are managed or the actual managing
or organising for a substantial part of those activities. What
is wrong with that? Does that not identify a senior manager?
Mr Lyons: Yes. It is the first
time the term "senior manager" appears in English law
and there must be a natural reluctance to take on another term.
The majority of the industry—certainly that which I represent—recognises
that there are some major problems with the term "senior
manager" because there is a great disproportionality of businesses
in the industry. Take one side of the business, Network Rail,
with a multibillion a year turnover and there are many other engineering
firms with £10 million or £20 million a year turnover.
A senior manager in Network Rail is a person who deploys budgets
of billions, literally. A senior manager in a small engineering
company may have a budget of only £500,000. You are dealing
with very different scales of human operation and interaction.
However, one of the problems we have is that suggesting something
better is extremely difficult. I would just hope that the guidance
notes that accompany this Act would try and be as full as possible.
Q190 Harry Cohen: In your memoranda
you talk about the size difference in the railway industry, with
some very big corporations and some very small. I appreciate that
would apply in a different way but why should it be any different
particularly in the sense that, if it is somebody in the carrying
out of their managerial functions who brings about a death or
neglect brings about a death, it is a manager of Network Rail
or one of these family businesses, if it is directly connected?
Mr Lyons: Of course it should
not. Any death that results from a gross breach of duty is a very
deeply serious issue and action must be taken. I think there is
a slight danger of disproportionality building in. Also, remember
that with a large corporation, the putative senior manager of
Network Rail has a significant staff around to protect them to
some extent from any possibility of a gross breach occurring.
When you are dealing with a much smaller business and the relationship
between senior management and line of duty—in certain cases
you can envisage some of these businesses where the senior manager
is doing some of the job himself—the division of responsibility
becomes much more blurred. One has to be slightly concerned that
one is setting up a structure that may make small sized businesses
feel very worried. What have they to do and what have they to
audit and so on? I know the reassurance is given in the guidance
notes here that any organisation following the Health and Safety
at Work Act does not need to worry, but that is not the way a
lot of managers of small companies think. They are very worried
about this sort of legislation. They do not have the time to understand
the full issues and are pushed to find time. They get themselves
into a bit of over-concern about the impact of this legislation
when they should not really have to be worrying about it.
Q191 Harry Cohen: Should not a smaller
subcontractor in the railway industry only enter into the contract
if he can do the job safely?
Mr Lyons: I hope this would not
occur. We work in a very over-arching contractual relationship
with the industry. This is a permissioning regime. You cannot
if you are Network Rail pass over some of your responsibilities
to a subcontractor. It is the responsibility of Network Rail and
others to supervise the activities of their contractors in certain
aspects related to safety. We are talking about gross breaches
here and I would hope the railway industry structure will cover
it, but I am still concerned that small companies, particularly
those that work not just in the railway industry but across the
boundaries, because a number of them deal with other sectors as
well, will find (a) there is a consistent approach and (b) there
is one that is not going to cause very significant concern that
they have to have complex auditable trails of decision making.
Q192 Mr Clappison: Is it ever justified
to make a parent company liable for the acts of a subsidiary and,
if so, when?
Mr Nelson: You have to look at
the chain of responsibility and the influence that people within
the parent company and particularly subsidiary companies have
had. There are some quite complex trading relationships between
parent and any number of subsidiaries that exist. Therefore, if
you start with the logic of what is the chain of responsibility
and you flow into the parent company, because it does not devolve
authority for certain decisions to a subsidiary but retains them
at a group level, that may take you into a parent company situation.
Q193 Mr Clappison: You are happy
with that, provided the chain of responsibility extends upwards
into the parent company?
Mr Nelson: Indeed, and that the
concept of grossness of the offence is capable of sustaining application
along that chain.
Q194 Mr Clappison: Have you any views
on the operation of the duty of care in these circumstances and
how and when a parent company might owe a duty of care to those
killed as a direct result of the actions of its subsidiary? Would
that follow?
Mr Nelson: It could follow in
that I can conceive of situations where major investment decisions
are taken by a parent company and, if there is a gross breach
in that context, it is there as part of the chain of responsibility
and I can see a logic that takes you there.
Q195 Chairman: We have had in previous
sessions the argument that one of the flaws in the Bill is that
within a single company people would push the responsibility for
health and safety further and further down until it got below
the level of senior manager. The answer to that which we have
been given is that no; if there was any audit trail suggesting
you had pushed it too far down, you would get the directors of
the company for having done that. It sounds as though you are
saying in the case of a subsidiary you think it would be quite
legitimate for a parent company just to say, "We are making
our subsidiaries fully reasonable for health and safety"
and that will be okay. Therefore, the parent company will always
be immune from the corporate manslaughter created by its subsidiaries.
Is that right?
Mr Nelson: That is not what I
was saying.
Chairman: You were talking about how
the line of accountability goes. It almost sounded as though,
if the parent company severed it—
Mr Clappison: That was my understanding
of what you said.
Q196 Chairman: Perhaps you could
clarify how that would work.
Mr Lyons: Would it be helpful
if I set an example? There are in the railway industry a number
of franchises which are jointly operated by two separate companies.
In certain cases railways are not their only business; they cover
a huge range of activities. What should be looked at very carefully
there is where is the appropriate level to manage various types
of risk. Those elements of risk which are probably related directly
to railway business should be with the intermediate company, with
the parent company making sure there is governance oversight.
However, there may be aspects of risk which are regarded as so
important that the parent company retains responsibility for them.
You have to address it on a case by case basis. It could also
be made clear in the Act that the concerns I sense from some individuals
and groups that companies would set up businesses and wind up
the company before it got to court are inappropriate behaviours
and these could be quite carefully indicated as being areas which
the DPP would take a very dim view of indeed.
Q197 Mr Dunne: Would you anticipate
that if this became an Act it would encourage corporate Britain
to move towards either a US or continental model where we have
a non-executive board and all executive decisions get taken down
the chain of command? Would it have an impact on that or not?
Mr Nelson: The last time I came
across that was in the structuring of Railtrack Group over Railtrack
plc, at a time when it was still within the state sector. I have
not considered this as a point here. I have considered whether
there would be any practice of seeking to devolve health and safety
responsibility below a point at which that body thought senior
management applied. I think the answer is no because in the railway
business, if you get it wrong, your reputation is very much on
the line. Therefore, my experience of working in the railway business
is that the parent companies are very reasonable and take a great
deal of interest in how their rail division operates and how,
within their rail divisions, the individual franchises operate.
They hold resources at a corporate level to ensure good oversight.
Q198 Chairman: This is a pretty important
issue. When I came here today on the train from Winchester to
London, which is a franchise operated by a company which is part
of a much larger group, which has very extensive interests in
public transport which have nothing to do with railways, you seem
to be saying to me, Mr Lyons, that if something had gone wrong
the appropriate level of responsibility would lie just with the
subsidiary that operates the rail franchise, not with the parent
company that has the overall interest. I am wondering whether,
as a potential victim, I should be happy with that or whether
I would want the right to see the issue pursued all the way up
to the company at the top.
Mr Lyons: That would have to be
a decision for the main board to make. This is Stagecoach. The
structure of the South West franchise is relatively simple. There
is Stagecoach and there is South West Trains which is an entirely
owned subsidiary of Stagecoach. In that situation there could
be a very straightforward dialogue between the main board and
its subsidiary to decide how risk was apportioned. Clearly, the
day to day operational risk, I believe, would lie with South West
Trains and I believe the main board should absorb certain other
risks, but it should all be well audited and managed. I do not
think those are going to cause the problems. The bigger issue
is when you have more complex structures of ownership and how
the risk is managed in those. What you do not want to do is to
get two or three groups all handling the same sort of risk and
coming to confusing solutions amongst themselves as to where responsibility
lies. In the railway industry there has to be a very clear path
for how risk is managed. We need to ensure that we leave the position
open so that we can create those structures and manage risk if
this Act enters the statute book.
Q199 Mr Clappison: Could I move to
the question of allocating responsibility or blame when something
does go wrong? Can I make clear a bit of a constituency interest
because I do represent Potters Bar. In the case of previous high
profile disasters on the railways, how difficult has it been to
attribute blame for the incidents between the many bodies involved
in regulating, maintaining and running the network?
Mr Nelson: First, one must establish
the cause. The Rail Safety and Standards Board has since its inception
and through its predecessors supported the creation of an independent
asset investigation branch. The prime responsibility for investigation
to establish immediate and underlying causes should be with that
body. It is in light of that that the other authorities that can
prosecute must determine whether there is action that they need
to take forward. Personally, not having been involved in Potters
Bar, I have only seen the media reports on the decisions that
various players took. From my perspective, it is unhelpful to
jump to conclusions and suggest any particular cause of an accident
beyond the control of your company in advance of there being a
clarity as to what exactly did cause the accident. If you have
an objective analysis in establishing, without reference to liability,
the immediate and underlying cause of the incident, it should
in light of that, I believe, bring some clarity.
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