UK: NO HIDING PLACE.

UK: NO HIDING PLACE. - Corporate responsibility no longer shields culpable individuals.

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Last Updated: 31 Aug 2010

Corporate responsibility no longer shields culpable individuals.

In the past, when deaths occurred as a result of the gross negligence of individuals within companies, those individuals have been able to hide behind the wall of incorporation. Nowadays, the courts are increasingly prepared to tear down the wall and pin-point those directly culpable, prosecuting both them and the company. So how can senior managers protect themselves and avoid company prosecutions if accidents do occur?

The shift in the English approach to corporate liability has been evident since 1987, the year in which the Herald of Free Enterprise capsized off the port of Zeebrugge, with the loss of 197 lives. In that case, the prosecution of the operating company - P&O European Ferries (Dover) Ltd - for corporate manslaughter collapsed. The Sheen Report proved more conclusive: it found that 'from top to bottom the body corporate was infected with the disease of sloppiness'. A separate inquest returned a verdict of unlawful killing.

The issue of corporate responsibility resurfaced several years later when four children died on a canoe trip to Lyme Bay. In December 1994, OLL Ltd, the company which organised the trip, was found guilty of corporate manslaughter. Its managing director, Peter Kite, became the first director to be jailed for gross negligence in the operation of business activities.

Since then, the directors and senior managers of tour operators, transport companies and activity centres - indeed any organisation in which the public places a degree of trust for its safety - have been forced to re-examine their procedures. Peter Stuart, a partner at solicitors Field Fisher Waterhouse, recently sent a legal brief to all the members of the Association of Independent Tour Operators (AITO) emphasising the increasing likelihood of corporate manslaughter prosecutions. AITO, which represents smaller owner-managed companies, may be seen as especially vulnerable; corporate manslaughter requires identifying a person who can be said to be the alter ego or 'controlling mind' of the company. Should an accident occur in the tour operations of one of its members, blame would - in theory - be that much easier to pin-point.

Identification of blame commonly involves a study of both the corporate structure - the powers delegated to individuals, reporting mechanisms and workings of management - and the corporate culture, which includes such things as informal organisational systems. For a jury to find a company guilty of corporate manslaughter, it must consider two questions. Did the individual's act, or failure to act, create an obvious and serious risk of causing personal injury to another? And did the individual give no thought to the possibility of that risk, or, while he recognised that risk, did he take it? The law suggests a two-fold duty: first, that decision-makers recognise the risks; and second, that they adopt systems which minimise those risks and ensure the safety of persons within their care.

So how can a company seek to cover itself? 'It is always possible to insure against the financial consequences of any court proceedings,' says Peter Stuart. 'But at the risk of being facetious, insurance is not the equivalent of a Monopoly "get out of jail free" card.' 'One answer is to carry out regular risk audits,' says Cynthia Barbour of solicitors Nicholson Graham & Jones. 'These should involve a senior director, the customer services manager and the product manager. Problem areas should be identified and safety monitoring systems devised and implemented.' David Dallimore, a director of Camp Beaumont Holidays, notes the effect of the OLL verdict on his own business. 'We immediately reviewed the roles and responsibilities of directors and the lines of communication,' he says. 'More importantly, we gave the directors the power to make critical decisions concerning safety.' Risk assessment, which involves both a cost-benefit exercise and the formulation of risk criteria, looks set to become an increasingly important concern for most companies. Yet given the tight financial budgets typically attributed to safety improvements within organisations, it will often be left to the directors to determine the difference between acceptable and unacceptable risk-taking.

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