Examination of Witnesses (Questions 260
- 279)
MONDAY 7 NOVEMBER 2005
MR GERAINT
DAY, PATRICIA
PETER, MR
PETER SCHOFIELD
AND MS
LOUISE WARD
Q260 Mr Clappison: I am talking not
just about beefing up a remedial order but would you consider
other types of order as well?
Ms Peter: I think we would. It
is one thing we have said in our previous submissions on this,
that we do think very often the issues are probably behavioural
and the remedies might need to be behavioural rather than financial.
We are alert to the issue that if you impose a fine on a company,
the people who actually suffer the loss ultimately are the owners
of the company, not the directors, although the directors do very
often, particularly in major companies, actually lose their positions
if they are involved in companies which are prosecuted for these
sorts of offences.
Mr Schofield: One of the issues
we have discussed is based on the idea of restorative justice,
where the relevant senior managers and the victims' families come
together to resolve how to deal with the aftermath of the event
and its implications for the future, and managers have to acknowledge
the impact of the business's failings on the families, and the
victims can have their loss acknowledged and discussions can take
place about recompense and so on. That is an idea, but we too
have been open to the idea that there may be other forms of remedy.
We are not particularly happy with the notion of remedial orders
as it appears in the current draft Bill because we feel that it
takes a long time for a manslaughter case to come to trial and
actually, in terms of improving health and safety, what you want
very often is a swift order. There is already an existing power
in the Health and Safety Executive to issue prohibition and improvement
notices, and this is in effect contrary to the idea of better
regulation in that you have a duplication of the power, and the
HSE or the enforcement authority is more likely to be in a position
to judge what will work from the point of view of the business
and better health and safety rather than a judge, after the event,
hearing only part of the story about the whole running of the
business, making a remedial order.
Q261 Mr Rooney: You brought up the
point of gross negligence. In my mind, gross negligence involves
a failure to do something. Where then does it lie with the positive
decision to actually do something that causes harm and death?
Ms Peter: If that were to be a
deliberate act . . .
Q262 Mr Rooney: It is different to
gross negligence, is it not?
Ms Peter: It is actually beyond
gross negligence really. It depends. I suppose you could say very
often you make a deliberate decision to do something—a company,
board, some part of the company, management—without taking
regard of the implications, and that makes it gross negligence.
I suppose it depends on whether you are saying, "We know
all about this, we know or we have a 99% certainty that it will
cause an incident which has a high certainty of causing death",
then you are really at the very top end of the scale. Very often
things are not quite as clear-cut as that, because, particularly
in larger organisations, you are going to have the layers of technical
knowledge, technical information, and the board will be operating
at the level of making the strategic decision and will be asking
questions about the risks associated with doing something in a
particular way. They will not actually be saying, to quote your
example, "We are making a decision to use high-alumina cement
because this is going to cause problems." They are actually
going to be saying, "We are going to be using it for a variety
of reasons: sourcing, cost," whatever, without taking proper
regard or asking the proper questions about the implications of
doing that. Rather than making a deliberate decision to do something
they know to be wrong, they are very often just not asking the
questions about whether there is something wrong in doing it.
Q263 Gwyn Prosser: Would you or your
members welcome the introduction of statutory duties for directors?
Ms Peter: Under the Company Law
Reform Bill, which was introduced last week, there are going to
be statutory duties for directors. Personally and as an organisation,
I think these should always be kept as general as possible. The
problem when you start introducing very specific duties is that
people concentrate on the narrow focus of what is in the statute,
sometimes to the exclusion of those things coming from the side
or other things which they really ought to be concentrating on
as well.
Mr Schofield: We wonder whether
it would really add anything to what is already there, again.
It might have a symbolic effect, but, first of all, directors'
duties are owed to the company and not to third parties. The current
duties are. The general law of negligence already imposes duties
on any of us where we can reasonably foresee that our actions
will injure someone. Section 7 of the Health and Safety at Work
Act imposes duties on those directors who are employees to take
reasonable care of the health and safety of others, and, as I
have already mentioned, section 37 imposes duties where there
is neglect or connivance. We wonder really whether this will add
to the improvement of health and safety management where, in our
view, the evidence is that what is important is that responsibility
is diffused throughout a business rather than that it reposes
simply in one person or one group of persons.
Q264 Harry Cohen: The Bill focuses
on senior management failure, and you plainly prefer that to targeting
an individual manager or director, but would any of your members
be concerned if a corporate manslaughter prosecution would effectively
result in senior managers being tried in the eyes of the public
without the opportunity to participate in the proceedings? If
they do, are they right to take that view?
Ms Peter: This concern has been
expressed but, I have to say, not by many of our members. In surveys
and seminars we have conducted on this subject that really did
not come out as the issue. It was more a few small questions around
the definition of "senior management" and what falls
far below the standard.
Mr Schofield: We agree with that.
Q265 Harry Cohen: So you always think
there will be an opportunity for an individual manager . . .
Mr Schofield: Whether there is
a full opportunity is another matter but they will inevitably
be witnesses.
Q266 Harry Cohen: What did you think
of the Law Commission's initial proposals that the offence should
focus more generally on failures in the way a corporation manages
or organises its activities?
Ms Peter: I think we did feel
that was probably too general and really would possibly make it
actually quite difficult to secure successful prosecutions.
Q267 Harry Cohen: Also presumably,
although you do not want to prosecute or target individual managers,
it would not bring out whoever was held responsible, if you take
that view?
Mr Schofield: We certainly think
the focus should be on the strategic level within the company.
If the corporation is going to be liable, then the focus should
be on the activities of those who run it at a strategic level.
We are happy with the focus; we are not quite sure the wording
has got there yet, but we are happy with the focus as described
in the consultation document, if not in the draft Bill.
Q268 Harry Cohen: In earlier evidence
sessions, and indeed in other evidence submitted, the risk has
been put up that health and safety in larger companies would be
delegated well below the level of senior manager to avoid liability
for the offence. What thoughts do you have on this? How would
you suggest that could be avoided?
Mr Day: One anecdote from the
Institute of Directors: one of the things we have been trying
to do in recent years working with HSE and with others is to get
over the message that, just as with any other aspect of corporate
performance, health and safety, or in this case in extremis,
where that results in death, is something that should be taken
very seriously indeed by those people at the level who direct
the resources, who are in general directors, or in the public
sector it might be the cabinet in the council or similar. As we
understand it, in terms of the present draft, the board, for want
of a better term, would not be able to wash its hands and say,
"We delegated this" because it would not be doing such
things as, for example, getting reports on what is going on in
terms of health and safety activities in the organisation, it
would not be having an eye to the culture, which is quite often,
I think, in what I know of the many circumstances where deaths
do result, a culture within an organisation. It is easier to say
that than to address it, but nevertheless, the current Bill as
drafted, if it is not changed, would not allow that board of directors
to absolve itself of that responsibility and would not permit
it. In fact, if it had said, "We have devolved that responsibility",
then I think any court or any investigator would say, "You
shouldn't have done that."
Mr Schofield: We do not quite
share the same confidence, I have to say. We are slightly nervous
that there is a risk of delegation or even the other direction,
off-shoring responsibility, if you like, for this. We confess
we cannot come up with a perfect definition ourselves but we are
interested in exploring with the Home Office the notion that it
is managers having the authority to take strategic decisions that
would have prevented this. That is what we are focusing on. If
we can be assured that that is what the legislation does, that
is what we are looking for.
Ms Peter: We have talked about
this in the context of, rather than being the person who does
do something, rather than somebody who is at a level who does
or should be playing a significant role, again, if you try to
avoid it by not doing something, you should not be absolved.
Q269 Harry Cohen: I hear what you
say and I will have a look closely at the actual comments but
is there not a risk arising that, albeit the board cannot negate
their own responsibility, they may just seek to pin it—maybe
rightly—on someone well down the chain, and therefore say
"We are not responsible" or "We have acted against
whoever was to blame"? Is there not a risk that it could
be pushed lower down instead with the law coming in? They might
use that as a defence in the law.
Mr Day: I think there is another
aspect, going back to the more general factors that affect perception
of an organisation's behaviour in terms of their reputation. Finance
was mentioned in the earlier evidence, I think, and there are
all sorts of factors that cause people to have their reputation
affected. This is a slightly extreme example of that. As I say,
one of the things we have found in dialogue with our own members
is that it is the case, unfortunately, that for some people, a
minority of people, aspects to do with health and safety can be
regarded by that minority as merely a technical issue. We would
say that is no more the case than is the observance of accountancy
law or the observance of food hygiene. The organisation nevertheless
has to address a whole range of complex laws, and one would hope
that it would not seek to avoid laws on taxation or VAT or submission
of accounts any more than it would seek to avoid a health and
safety law.
Q270 Mr Dunne: In the introduction
to the Bill the Government has said they are not trying to stifle
entrepreneurial endeavour. Is it the view of your organisation—I
would like to hear from both organisations—that that is
correct and that as the Bill is currently drafted, it should not
have any impact on recruitment of either executive or non-executive
directors to companies in high-risk sectors?
Ms Peter: I think, certainly as
it is drafted, our members have not really shown—a few have,
but the majority do not think it will have that effect, and that
would be an unfortunate and unintended consequence if it did.
Really, I do not think we think that it would have that effect.
I think it would have that effect if it moved into the area of
individual liability beyond the current area of gross negligence
manslaughter for individuals.
Mr Schofield: I agree with that.
For well-managed businesses, legislation like this draft Bill
should not affect the way the business is managed and therefore
should not affect the attraction of a role as a director.
Q271 Mr Dunne: Do you share the view
if this were to go down the individual line?
Mr Schofield: Yes.
Q272 Mr Dunne: Looking at it from
the victims' perspective, if the Bill does not stop companies
from being averse to risk that could threaten lives, will it have
been effective?
Ms Peter: No. Businesses always
have to weigh risks. Unfortunately, life is not risk-free. One
hopes that prosecutions would be taken where it was shown that
the risks had not been properly evaluated and then managed. The
risks of life will never be totally eliminated, but what we are,
I think, trying to do is to ensure that companies in all their
activities are managing and weighing the risks at all times. We
were talking earlier about the railways. The cost of making every
single railway line 100% secure from anybody ever being able to
climb on to them would far outweigh the benefits secured. That
is something that companies always have to do, and that is an
area the courts, in evaluating and making decisions on prosecutions
under an Act such as this, would have to be very alert to. It
is not the fact of an incident occurring; it is what has led to
that unfortunate incident.
Q273 Mr Dunne: Mr Schofield, can
I ask you a second question? Do you believe that the number of
work-related fatalities and injuries will reduce as a result of
this Bill?
Mr Schofield: Our view is that
it is probably unlikely that this Bill will have this effect.
This is not, in our eyes, essentially a measure to improve health
and safety. It is about retribution, if you like; it is about
appropriately stigmatising the behaviour of companies in certain
situations. It is not really about the sorts of things that the
Health and Safety at Work Act is about, which is improving the
management of health and safety.
Q274 Mr Dunne: You would not say
the discussions about this Act over the last number of years that
you have been involved in have had an impact on health and safety
regimes within your members?
Ms Peter: I actually think they
probably have. We are certainly aware of much greater awareness
and interest amongst our members in actually making sure it is
something they look at strategically within organisations. They
establish cultures that go right through organisations; they receive
reports on activities and incidents. So I do think, in a way,
the publicity surrounding the lead-up to the Bill has probably
had an effect. Whether there would be a much greater effect if
the Bill is passed, I do not know.
Mr Schofield: We have no evidence
either way on the point, I have to say, but you have to remember
that, in terms of keeping the numbers of fatalities down, the
UK is the world leader. Our death rates, our fatal accident rates,
are very low compared to our competitors.
Q275 Mr Dunne: Could I ask you a
final question? In your evidence you talk about the need for a
code of practice as a briefing document to sit alongside the Act.
Mr Schofield: Yes.
Q276 Mr Dunne: Can you explain the
reasoning behind that?
Mr Schofield: It is a question
of better regulation, in a sense. It is a question of transparency,
so that businesses know not only what is expected of them, but
what is not expected of them in terms of compliance with this
legislation. We mentioned, for example, in our response the fear
that some will unscrupulously exploit the passing of the legislation
in order to generate business to convey false messages about what
actually is required. So we think companies should know what this
requires. Actually, for the average layman, I do not think reading
this is going to help you a lot. Reading the preamble to the Bill
may help you, and a document drafted in that sort of language
would help and would also be something which the prosecuting authorities
would rely on in order to bring a prosecution, so there would
be transparency in terms of the standards that you are expected
to adhere to.
Q277 Mr Clappison: Can I ask the
Institute of Directors about the application of the Bill? In your
comments on the Bill you criticise the decision not to extend
the application of the draft Bill to unincorporated bodies. Can
I ask you if you feel, with the offence only applying to companies,
companies will be placed at a competitive disadvantage vis-a"-vis
unincorporated bodies?
Mr Day: As far as we are concerned,
from the point of view of the user, from the point of view of
the customer, from the point of view of the external world, it
should not matter what corporate form an organisation has. We
should not have to know that. I have already mentioned the application
to Crown bodies—we have some reservations about some of
the proposed exclusions. Yes, there are all sorts of other laws—disability
discrimination, finance, and all sorts of other laws of the country—that
any organisation, if it is an employer, has to take account of.
So I think in principle—and it is not to victimise any particular
sector of the unincorporated associations—as I say, it should
not be a factor to be taken into account by a user.
Q278 Mr Clappison: Can I ask Mr Schofield
if he shares that view?
Mr Schofield: I think we share
the view that there ought to be a level playing field, if it is
possible, but, wearing my lawyer's hat, I do see difficulties
in imposing liability on something that does not exist in law,
that does not have a legal personality. EEF is an unincorporated
association but we do by statute have quasi-corporate personality;
in other words, we can be prosecuted and we can be sued, but it
seems to me you would have to make judgments about clubs and other
associations whether it was appropriate to make them quasi-corporate
for this purpose. I do not think you can just put a blanket clause
in. You would have to look at the whole range of clubs and associations
before deciding that it was appropriate to attribute, as trade
unions and employers associations have, quasi-corporate personality.
Q279 Mr Clappison: Mention has been
made of Crown bodies. In the field of equality, do you think the
Government really has achieved its aim of treating public and
private bodies equally when they perform equivalent functions?
Mr Schofield: Certainly we are
happy that where they are providing equivalent functions, we think
that has been achieved and that is what we were seeking. We are
not entirely sure about the drafting, again, of the provision
but we understand this is more work in progress.
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