Kill Bill could be blunted by economy

30/04/2009

By Rhiannon Hoyle. With comments by Nick Horton, Partner and Head of Dispute Resolution. Featured in Construction News.

Court may steer clear of a big fine even if first Corporate Manslaughter Act case leads to conviction.

The economic crisis could result in a softer than expected penalty being handed down if the UK's first corporate manslaughter trial ends with a conviction, according to legal experts.

The Crown Prosecution Service last week charged small Gloucestershire firm Cotswold Geotechnical Holdings under the Corporate Manslaughter Act - the first such prosecution to be announced since the laws were introduced last April.

The legislation was introduced to give Courts the power to impose record fines. But sources say the chances of a fine that in the current climate would make a small company go under are fairly slim.

Thomson Snell & Passmore Head of Dispute Resolution Nick Horton said he believed any judge "would have to take (the recession) into account".

Halliwells regulatory and environmental partner Chris Morrison added: "The criminal courts will always take into account the defendant's means to pay."

Cotswold's is accused of corporate manslaughter over the death of a 27-year old junior geologist in September. Director Peter Eaton has also been charged with gross negligence manslaughter.

Alexander Wright was taking soil samples from a development site near Stroud, Gloucestershire when the pit he was working in collapsed, killing him.

The prosecution has been described as a test case and construction lawyers are expected to be closely watching the outcome, which may set a precedent for future trials. Prior to the Act, a company could only be convicted of manslaughter if a "controlling mind" at the top of the company was personally liable. That rule no longer applies.

Some have suggested, however, that the case will not be indicative because the company to be tried is much smaller than most had expected.

Mr Morrison said "The whole point of the Corporate Manslaughter Act was to address senior management failure, but very small companies tend to have an extremely small management team and proving individual liability tends not to be the difficulty."

He said the laws had been designed to combat problems securing "large fines against large companies", adding: "This is a very, very small company…and the desired effect of having deterrent fines is not going to come out of this case."

The Sentencing Advisory Panel last year suggested penalties under the new Act - which allows for unlimited fines - should start at about 5 per cent of company turnover.

If that method was adopted by the court, Cotswold's - which had a 2007/08 turnover of £333,425 and a pre-tax profit of £26,925 - could face a fine as low as £16,500 if convicted.

But Mr Horton added: "The fine will be a pretty serious one. Even if it is not enough to take a firm under, no company is going to want to have that against them in the current climate."

A judgment will also be made on publicity orders, which could force the company to publish details of its conviction.

The CPS has estimated that up to 13 cases a year may eventually be tried under the Act.

Under the law, companies, organisations and, for the first time, government bodies can face a criminal prosecution and unlimited fines if they are found to have caused death due to their gross corporate health and safety failures.

Mr Eaton will appear before Stroud Magistrates' Court on behalf of both himself and the company, on 17 June.