Select Committee on Home Affairs and Work and Pensions First Report

12  SANCTIONS

260. The draft Bill currently provides for organisations found guilty of the offence to be liable to a fine or remedial order.[325] These two different kinds of sanctions are discussed in turn below. We then consider possible alternatives.

Unlimited fines

261. The draft Bill proposes that organisations guilty of corporate manslaughter should be "liable on conviction on indictment to a fine". [326] No restrictions on the level of such a fine are provided, meaning that the level of fine which a court could impose is unlimited.[327] The Home Office's introduction to the draft Bill explains that "where the circumstances of the case merit, a fine can be set at a very high level".[328]

262. There were mixed views on the proposals for fines to be unlimited. A number of organisations believed that some restrictions needed to be set. Suggestions included basing penalties on the size and turnover of the organisation.[329] As to the level of the fine, it was suggested that "mitigating circumstances" such as past health and safety record should be taken into account.[330] Keoghs Solicitors suggested a suspended fine, related to improvements in health and safety, with a company becoming liable to an additional fine if it failed to improve within a set time.[331]

263. On the other hand, many witnesses, particularly unions and victims' groups, believed that even unlimited fines would constitute an inadequate sanction in many cases, especially where large companies were involved.[332] One reason expressed for this view was that current fines were often insignificant and therefore an inadequate deterrent. Alan Ritchie, the General Secretary of the Union of Construction Allied Trades and Technicians, gave the Sub-committees one such powerful example:

"I go back to a case in Scotland. They were digging a trench and the site agent contacted the company and said, 'Look, this needs to be shored. I've got to get machinery in to put the shoring in.' 'Well, how long will that take?' 'About a couple of days.' 'Look, get the job done.' The JCB came in, dug the hole, the lad went down directing the pipes in, it caved in on top of him. Dead".

He explained:

"the company went into court and pleaded guilty: 'Yes, we breached the Health and Safety at Work Act - fair cop, Guv' -and we killed the employee.' The judge was scathing on the company and then fined them £7,500. We think that is a scandal. I cannot justify that to the dependents or to the widow, that that is justice…Not only that, one of the directors put it to me in this way: 'Alan,' he said, 'one of your contracts has got £20,000 a day plus penalty clause for every day it is late. For us to introduce health and safety and to be rigid on it could possibly put that contract behind, whereas, if we break the Health and Safety at Work Act and kill the employee, we face an average fine of £7,000. It is a big choice for us as a company, isn't it?'. [333]

264. Witnesses argued that there was nothing in the proposals that would result in fines being imposed at a greater level than for current health and safety offences, unlimited fines being currently available for companies committed to the Crown Court for offences under the Health and Safety at Work etc. Act 1974.[334] Many therefore recommended that the Government should introduce a requirement or draft sentencing guideline that fines be commensurate with the seriousness of the offence, significantly higher than for convictions under the 1974 Act and linked to the profitability of the company.[335] They also argued that this would be fairer to smaller companies then receiving the same level of fine as a large company.[336] A level suggested by many was 10% of a company's annual turnover,[337] a figure that the Financial Services Authority can impose for financial mismanagement.

265. Other evidence suggested that before the sentencing process, courts should be given full information about the company, "including turnover, annual profits, history of relationship with the regulatory agency or its general health and safety record" in a report akin to social inquiry reports produced for individuals awaiting sentence.[338]

266. During the process of our inquiry Network Rail, formerly Railtrack, and Balfour Beatty were found guilty of breaching health and safety offences and given record sentences.[339] Network Rail was fined £3.5 million, a record for a rail firm on health and safety grounds, and the maintenance firm Balfour Beatty was fined £10 million. They were also ordered to pay £300,000 each in costs. However, union representatives believed that such levels of fines were exceptional and that fines for individual deaths in the workplace, rather than in very public disasters, would still remain low.[340] Professor Tombs from the Centre for Corporate Accountability also argued that the experience in other jurisdictions suggested that it was not sufficient to rely on judges to increase levels of fines:

"if we allow discretion for judges and rely upon judges to push up the fines for the bigger companies, actually beyond a certain level probably they will not do that. The evidence in the United States in the nineties, in fact, indicates that beyond a certain level judges simply will not go because the fines look absolutely outrageous, even though they may be a very small percentage of turnover".[341]

267. We note that some industry groups also called for sentencing guidelines. Case law has set out aggravating and mitigating features in relation to health and safety offences[342] and some of these organisations wanted clarity on whether these would be the criteria on which fines for corporate manslaughter would be based.[343]

268. We welcome the higher sentences given in recent cases by courts following convictions for high profile health and safety offences which involved deaths. Nevertheless, the evidence suggests that there is a need for an improved system of fining companies. We recommend that, following the enactment of the Bill, the Sentencing Guidelines Council produce sentencing guidelines which state clearly that fines for corporate manslaughter should reflect the gravity of the offence and which set out levels of fines, possibly based on percentages of turnover. The Committee recognises that a term such as turnover would need to be adequately defined on the face of the Bill. It is particularly important that fines imposed for the corporate manslaughter offence are higher than those imposed for financial misdemeanours. We also believe that it would be useful for courts to receive a full pre-sentence report on a convicted company. This should include details of its financial status and past health and safety record.

269. The Government's 2000 consultation document welcomed views on whether it would ever be appropriate for the prosecuting authority to institute proceedings to freeze company assets before criminal proceedings start in order to prevent them being transferred to evade fines or compensation orders. However, there was no mention of this in the draft Bill. Some witnesses expressed concern that if prosecuting authorities did not have this power, some guilty companies might avoid fines by shifting assets or going into liquidation.[344]

270. We discussed the possibility of freezing a company's assets in oral evidence with representatives of the Confederation of British Industry. They believed freezing the assets of a company under investigation "would be contrary to our concept of natural justice" as this would punish and possibly even ruin a company that might yet be found innocent.[345] However, they did float the idea of using "escrow accounts" as an alternative (albeit with many caveats).[346] This would involve putting the assets into the accounts of a third organisation until the outcome of an investigation and/or trial. We believe that it is right in principle that prosecuting authorities should have the power in appropriate cases to ensure that companies do not try to evade fines by shifting assets.

Remedial orders

271. The draft Bill also proposes that the courts be given the power to make orders requiring convicted organisations to remedy either (a) the gross breach of the duty of care; or (b) any matter resulting from it and appearing to have been a cause of the death.[347] Such an order would have to specify a period within which the required steps must be taken, which could be extended by application to the court.[348] Failure to comply with an order would be an offence punishable with an unlimited fine in the Crown Court or a fine of up to £20,000 in the magistrates' court.[349] Courts already have these powers under the Health and Safety at Work Act, but they appear never to have been used.[350]

272. Many witnesses welcomed the inclusion of remedial orders in the draft Bill.[351] They were seen to have a number of advantages, including offering the opportunity to ensure breaches did not reoccur;[352] and providing an alternative to a fine in cases of changed ownership between death and prosecution, where the error had not yet been resolved but, arguably, the new firm should not be penalised.[353]

273. Others expressed reservations about remedial orders. A frequently raised concern was that remedial orders would needlessly duplicate the existing powers of the Health and Safety Executive (HSE) and local authorities to require improvements.[354] Witnesses pointed out that the HSE and local authorities would be able to intervene much earlier, while remedial orders would presumably have to wait until a long investigation and complex Crown Court trial had led to conviction.[355] However, Mr Rees, Chief Executive of the HSE felt that there was still a case for giving courts remedial powers even if they were rarely used in practice. He told the Sub-committees:

"it seems to me that there is a case for a remedial power but I think in practice, certainly for the territory covered by the Health and Safety at Work Act, I would be very surprised if it were used very greatly".[356]

274. Others also expressed concern that the Crown Prosecution Service and/or the courts would lack the safety management expertise needed to decide what remedial orders were appropriate.[357] Mr Adrian Lyons from the Railway Forum, for example, argued that:

"to leave it to a judge whose main focus is not on the safety process to make recommendations that could be binding on the industry would be particularly unsound in many cases".[358]

Yet JUSTICE believed that judges would rely on advice from the HSE when determining remedial orders.[359]

275. We consider that remedial orders are unlikely to be frequently used in practice, as the Health and Safety Executive and local authorities are likely to have acted already. However, we believe they are an additional safeguarding power for cases where companies do not take appropriate action. We recommend that judges who do make use of this power should make full use of the expertise of the Health and Safety Executive and local authorities available to them.

276. The evidence we received also made two suggestions about remedial orders. The first was that the draft Bill should include provision for an enforcement body to monitor and report on whether or not the organisation has complied with the remedy.[360] For example, Mr Christopher Donnellan of the Law Reform Committee of the General Council of the Bar argued;

"there needs to be clear identification of who is going to investigate that the compliance has been met".[361]

We believe this is a sensible suggestion. We recommend that the Government considers mechanisms for monitoring whether an organisation, including a Crown one, has complied with a remedial order and includes a provision for this in the Bill.

277. Second, Anne Jones from the Simon Jones Memorial Campaign argued that it should be possible to charge directors of a company with "contempt of court" when a company failed to follow the steps of a remedial order:

"I cannot see why, if the judge says, 'You have got to put everything right that causes death, you've got to increase staffing, improve training, improve communications, get the right machinery in place,' and so on, 'and you have got three months to do it,' if the company fails to do that then the directors are not in court on a 'contempt of court' charge, for which there is a custodial sentence. That might focus their minds on correcting the errors and omissions which caused the death in the first place".[362]

278. We believe it is sensible to encourage directors of a company to take responsibility for ensuring their company complies with a remedial order. We therefore recommend that the Government amends the Bill in order to make it possible for directors to be charged with contempt of court if the company has failed to take the steps required by the court.

Application to Crown bodies

279. The draft Bill currently provides for Crown bodies convicted of the offence to be liable to fines and/or remedial orders.[363] In its introduction to the draft Bill, the Home Office invited comments on the argument that fining a Crown body served little practical purpose and was simply the recycling of public money through the Treasury and back to the relevant body to continue to provide services. Some organisations agreed with this argument.[364] Others pointed out that money might not pass back to a fined body and then the public services it delivered would suffer.[365] A number of witnesses also raised concerns that remedial orders would place the courts in the difficult position of telling the Government how to govern.[366]

280. However, a majority of the evidence submitted to us expressed the view that fines and remedial orders should apply to Crown bodies, arguing that this was important to ensure that justice was seen to be done. [367] The Institute of Directors, for example, wrote:

"One problem that is being sought to be addressed by this legislation is the feeling that such a serious failing as causing death renders the perpetrator subject to nothing more than a slap on the wrist. It would be wrong if this were seen to be perpetuated for Crown bodies".[368]

281. Several witnesses argued that sanctioning Crown bodies would send out a powerful public message of culpability.[369] Some suggested that these sanctions could also lead to strengthening of accountability within a Government department[370] and that without such sanctions Crown bodies might not learn from their failures.[371] The Association of Train Operating Companies pointed out that fines could support remedial orders by being "targeted to the underlying systemic failures. For example restrictions could be made upon future budgets".[372] The Business Services Association argued that not having fines for Crown bodies would result in difficult questions as to whether groups made up of both private and public sector bodies could be fined and, if so, how fines should be distributed.[373]

282. We believe that it is important that Crown bodies do not escape sanction and that fines and remedial orders can serve a practical purpose in signalling culpability. However, some of the criticisms advanced against imposing fines and remedial orders upon Crown bodies do have some validity. This strengthens our later argument that other sanctions should also be considered for this offence (see below).

Other sanctions

283. Some organisations did not agree that other sanctions were necessary, arguing that the damage done to a convicted company's reputation would be a deterrent in itself.[374] However, many witnesses believed the combination of fines and remedial orders would neither provide a sufficient deterrent against poor health and safety practices nor deliver justice.[375]

284. Many witnesses felt that an opportunity was being missed to introduce a wider and more innovative range of penalties.[376] Great disappointment was expressed that the Government had not taken the time in the eight years in which it had been planning this legislation to review alternatives. It was also pointed out that other jurisdictions imposed wider sanctions in similar laws.[377] For example, Mr David Bergman of the Centre for Corporate Accountability told the Sub-committees:

"If the Government can be criticised for one thing, for which there is absolutely no excuse, it is the way it has dealt with sentences. It has had years to consider alternative ways of sentencing organisations and companies. Canadian provinces and Australian states have produced report after report after report detailing alternative forms of sentences that can be imposed upon organisations. They are out there, they are used, there are options available, and the fact that the British Government has not been able to do the sort of work that one small Canadian province or Australian state has been able to do in the last ten or 15 years is extraordinary. I just want to put that on the record".[378]

285. The Parliamentary Under-Secretary of State for the Home Office also told us that she welcomed "the fact that witnesses have suggested more innovative sanctions". She added that "it seems to me absolutely essential that we have a proper consultation process. I would be reluctant to delay the Bill in order to do that".[379] The Government has now established a review team in the Better Regulation Executive which amongst other things has been asked for views about ways of modernising the penalty regime in the regulatory system. Its review began in August 2005 and will run until September 2006. Its terms of reference include examining "whether alternative penalties, such as restitutive or restorative Orders, could be used as an alternative to fines in some cases".[380]

286. We believe that the key issue when determining whether alternative sanctions are needed in the draft Bill is whether those bereaved would find the suggested sanctions meaningful. It is clear from the evidence we received that they do not. For example, Ms Pamela Dix of Disaster Action told us:

"If I can deal briefly with the issue of fines in themselves, we think basically, on a philosophical basis, that they are meaningless…What is the point, except for a headline in a newspaper?...we would argue that it is not particularly meaningful either as punishment or deterrence".[381]

287. We share the disappointment of many that the Government has not included more innovative corporate sanctions in the draft Bill. We welcome the fact that the Government is now looking at the issue of alternative penalties but believe that the scope of this review should be widened to look at alternative sanctions for non-regulatory offences. Remedial orders and fines provide an inadequate range of sanctions for sentencing. It is not clear, for example, if remedial steps already taken by an organisation will be taken into account in assessing the level of a fine. There clearly would be difficulties if fines made a company bankrupt if it had already taken successfully implemented remedial orders. We therefore think a wider range of sanctions is essential.

288. Suggestions for alternative corporate sanctions presented to us in evidence included:

• company probation orders[382] or a corporate "death sentence" (i.e. mandatory dissolution);[383]
• naming and shaming organisations, through the Health and Safety Executive's Public Register of Conviction and/or publicity in the media, by notice or in the company's annual report;[384]
• confiscation of assets associated with the offending and prohibition of the corporation from business activities associated with the offending;[385]
• cessation from any activity in the company or company branch until an acceptable plan of action is introduced or the revocation of any relevant licence or statutory authorisation allowing the organisation to undertake its respective business activity;[386]
• equity fines;[387]
• punitive damages to be paid to relatives of victims.^;[388]
• the power to order the seizure of dangerous or defective equipment prior to conviction and the forfeiture and destruction of such equipment after conviction; [389]
• restorative justice mechanisms; [390] and
• ensuring that conviction affects a company's Comprehensive Performance Assessment or leads to an Audit Commission inquiry. [391]

289. Witnesses also suggested that directors should face individual sanctions, including custodial sentences,[392] disqualification,[393] training orders;[394] and community service orders.[395] Since individual liability for directors is a key issue we deal with this separately in Chapter 13 below.

290. In our evidence gathering, we focused on three options for sanctioning companies in particular: equity fines, punitive damages and restorative justice.

Equity fines

291. Equity fines would require an organisation to create shares up to a particular value which would either be taken by the Government or go into a victims' fund. Amicus and Disaster Action felt that an advantage of such fines would be that they would reduce the value of shares in a company, which would be what companies feared most.[396] Mr Griffiths argued:

"we think the chemistry between the management of the company, the investors represented by the shareholders and the workers in the company, to which management have a responsibility, is quite interestingly mixed by the application of an equity fine".[397]

Punitive damages

292. Some of the victims' groups that appeared before us criticised the levels of compensation currently available to victims. Ms Sophie Tarrasenko from Disaster Action argued that currently: "A death is very cheap if the person is over 18 and has no dependants and that is a glaring flaw in any system for us".[398] Mrs Eileen Dallaglio, who lost her daughter in the Marchioness disaster, told us:

"the compensation took ten years to arrive… and it totalled £310.46".[399]

293. Under section 130 of the Powers of Criminal Courts (Sentencing) Act 2000, criminal courts can award compensation following conviction for an offence. There was a conflict in evidence we received about the powers for awarding compensation under this Act. The Law Reform Committee of the General Council of the Bar stated, that the Act only applies to an offender who is an individual, so if the Government intended to make it possible for the Act to apply to an organisation, then the bill would need to clearly spell this out.[400] Ms Sally Ireland from JUSTICE, however, believed that the Act would already give courts the powers to order companies to make compensation.[401] Irrespective of this dispute it is our view that the draft Bill should make provision for companies to be required to pay compensation.

294. Most victims pursue damages through the civil courts. Some witnesses felt that the draft Bill should contain a provision allowing punitive damages to be awarded without recourse to civil action.[402]

295. However, other evidence warned against this proposal, arguing that "you are beginning to blur the boundaries between someone being sentenced for the offence and damages, which is a civil matter";[403] that criminal courts might not have the relevant expertise to set levels of damages;[404] and that the family would not be represented - only the prosecutor and the defendant.[405]

Restorative justice

296. The Restorative Justice Consortium pointed out that the Government had clearly stated that it intended to maximise the use of restorative justice in the Criminal Justice System and argued that corporate manslaughter was a "prime example" of the type of case where restorative justice would be "highly appropriate".[406] They suggested that "relatives and survivors should be offered the opportunity to meet senior managers …(or communicate with them indirectly if they did not wish to meet) so that they could ask questions, express their feelings and discuss the form, which any reparation or compensation should take".[407] In oral evidence, Mr Peter Schofield from EEF, the manufacturers' organisation, stated that his organisation had also considered the possibility of such a sanction.[408]

297. However, the Institution of Occupational Safety and Health argued that "[t]hough early evidence on the effects of re-offending seems encouraging, it is inconclusive, and there needs to be more research into its efficacy with respect to particular offences".[409]

298. We have not had the time in our oral evidence sessions, due to the tight Government timetable for pre-legislative scrutiny, to give full consideration to all the alternative sanctions suggested to us and we have therefore not taken a view about which of these sanctions would provide the best form of penalty. We believe the Government should be aiming towards implementing a wide package of sanctions for corporate manslaughter, so that courts have the flexibility to match sanctions to the broad range of cases that might come before them.

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325   Clauses 1(4) and 6 Back

326   Clause 1(4) Back

327   Home Office, Corporate Manslaughter: The Government's Draft Bill for Reform, Cm 6497, March 2005, Explanatory Notes, para 12 Back

328   Home Office, Corporate Manslaughter: The Government's Draft Bill for Reform, Cm 6497, March 2005, para 52 Back

329   Volume II, Ev 11 and 210 Back

330   Volume II, Ev 44, 88, 102,130,197,199,210, 247 and 250 Back

331   Volume II, Ev 212 Back

332   Volume II, Ev 11, 53, 65, 67, 83, 112, 127, 143, 172, 21, 234, 256, 263, 285, 295, 304 and 308 and Volume III, Q 17 [Ms Jones] and Q 316 [Mr Perks] Back

333   Volume III, Q 343 Back

334   Volume II, Ev 11, 83, 112, 127, 133, 134, 172, 197, 218, 223, 234, 256, 263, 285 and 295 Back

335   Volume II, Ev 112, 143, 218, 223 and 285 and Volume III, Q 69[Mr Bergman]  Back

336   Volume II, Ev 130 Back

337   Volume II, Ev 83 Back

338   Volume II, Ev 128 Back

339   The court case followed the derailment in October 2000 of a London to Leeds train at Hatfield because of a broken rail. Four people died and 102 were injured in the incident. Back

340   Volume III, Q 30 [Mr Camfield] Back

341   Volume III, Q 69  Back

342   R v Howe (1999) and R v Friskies Petcare UK Limited (2000) Back

343   See for example, Volume II, Ev 92. Back

344   Volume II, Ev 83, 127, 144 and 221 Back

345   Volume III, Q 391 [Mr Roberts] Back

346   Volume III, Q 396 [Dr Asherson] Back

347   Clause 6 Back

348   Clause 6(2) and (3) Back

349   Clause 6(4) Back

350   Volume II, Ev 111 Back

351   Volume II, Ev 43, 47, 67, 121 and 207 Back

352   Volume II, Ev 71 Back

353   Volume II, Ev 36 Back

354   Volume II, Ev, 92, 111, 114, 128,152, 190 and 231 Back

355   Volume II, Ev 144, 152 and 205 Back

356   Volume III, Q 540 Back

357   Volume II, Ev 64, 79, 93, 114, 128 191 and 338-339 Back

358   Volume III, Q 211 Back

359   Volume III, Q 486 [Ms Ireland] Back

360   Volume II, Ev 121 and 136 Back

361   Volume III, Q 133 Back

362   Volume III, Q 17 [Mrs Jones] Back

363   Clause 1(4) and 6 Back

364   Home Office, Corporate Manslaughter: The Government's Draft Bill for Reform, Cm 6497, March 2005, para.53. See also Volume II, Ev 25, 43 137, 144, 222 and 234 Back

365   Volume II, Ev 208, 304 and 312 Back

366   Volume II, Ev 312 Back

367   Volume II, Ev 76 Back

368   Volume II, Ev 47 Back

369   Volume II, Ev 42, 43, 121 and 297 Back

370   Volume II, Ev 76, 121 and 228 Back

371   Volume II, Ev 327 Back

372   Volume II, Ev 92 Back

373   Volume II, Ev 53 Back

374   Volume II, Ev 200, 241, 247, 252 and 266 Back

375   Volume II, Ev 7, 17, 25 and 30 Back

376   Volume II, Ev 7, 11, 25, 62, 133, 172, 190, 195, 263, 299, 308 and 322 Back

377   Volume II, Ev 9 and 172 Back

378   Volume III, Q 68 Back

379   Volume III, Q 599 Back

380   http://www.cabinetoffice.gov.uk/regulation/ Back

381   Volume III, Q 16 Back

382   Volume II, Ev 7, 11, 112, 133, 172, 207, 218, 222, 237 and 256 Back

383   Volume II, Ev 11  Back

384   Volume II, Ev 11, 26, 61,133, 172, 218, 237, 286 and 295 Back

385   Volume II, Ev 11 Back

386   Volume II, Ev 83 and 144 Back

387   Volume II, Ev 11, 26, 172, 237 and 332 Back

388   Volume II, Ev 26, 61, 112, 144, 192, 218 and 286 Back

389   Volume II, Ev 144 Back

390   Volume II, Ev 292 Back

391   Volume II, Ev 207 Back

392   Volume II, Ev 7, 11 and 112 Back

393   Volume II, Ev 17, 26, 35, 133, 218 and 256 Back

394   Volume II, Ev 26, 47, 172 and 256 Back

395   Volume II, Ev 26, 47, 172 and 256 Back

396   Volume II, Ev 234 and Volume III, Q 16 [Ms Tarrassenko] Back

397   Volume III, Q 48 Back

398   Volume III, Q 16 Back

399   Volume III, Q 319 Back

400   Volume II, Ev 122 Back

401   Volume III, Q 489  Back

402   Volume II, Ev 61, 127, 218 and 325, Volume III, Q 129 [Mr Antoniw] Back

403   Volume III, Q 129 [Mr Donnellan] Back

404   Volume III, Q 489[Ms Ireland] Back

405   Volume III, Q 489[Ms Ireland] Back

406   Volume II, Ev 291 Back

407   Volume II, Ev 291 Back

408   Volume III, Q 260 Back

409   Volume II, Ev 207 Back

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Prepared 20 December 2005