Crippling fine for small construction company

Tuesday, August 16, 2016


Over £500,000 fine for small construction company for corporate manslaughter offences under the new 2016 sentencing regime

• Micro organisation fined substantial amount for “highly foreseeable” double fatal accident at construction site
• Court introduced a concerning new approach to company’s accounts
• Damaging Publicity Order against the company

Background

Under the new sentencing regime for health and safety offences introduced in February 2016, a recent construction case demonstrates how financially crippling a corporate manslaughter prosecution can be.

Introduction

The company, Monovan Construction Limited, was undertaking a construction project in Hampstead, London and had put in place site perimeter edge protection around a light well. Two men fell against the edge protection after a fight and then fell down the light well, which had a depth of 3.7 metres. They both sustained fatal injuries.

Court Case

The incident was considered to be a category A (highest culpability) offence and the company was classed as a micro organisation as its turnover was less than 2 million. Despite the size of the company, it was fined £250,000 for each count of corporate manslaughter, a total of £500,000 for both offences, plus £50,000 for the breach of the Section 3 Health and Safety at Work Act 1974 offence.

Safety Smart Case Analysis

As mentioned in previous articles, the new guidelines set a starting point and a range of possible fines based on the size of the organization and turnover.

The guidelines also refer to a list of non-exhaustive mitigating and aggravating factors including previous convictions, steps taken to remedy the wrong, a high level of co-operation and whether the offence was committed for financial gain. In this particular instance, the Judge mentioned the company's good safety record, lack of previous prosecutions and the remedial steps taken after the accident.

Also in this case, the company was put in the highest culpability bracket due to the likelihood of death or serious harm, as the edge protection was inadequate and not fit for purpose and the prosecution’s case was that the company had implemented cost cutting measures which in effect, put profit before the safety of those exposed to the risk of the construction work.

Significant in this case is also the imposition of the Publicity Order, introduced under the new regime, effectively the naming and shaming of the company. The fines were reduced due to the guilty plea by £50,000, although the judge gave no explanation as to why he reduced the fine by this particular amount. Also significant is this case is the fact that the Prosecution sought access to all linked companies, not just those of the defendant company, to provide the court with an accurate assessment of the company's financial position.

Companies will have to be prepared for this level of analysis in the future. All parent and associated group companies could potentially come under the scrutiny of the court, irrespective of potential arguments from defence counsel about the court not being able to “piercing the corporate veil.” This is a very worrying development for all defendant companies who are associated with other companies in some way and makes the future of companies coming before the courts much more uncertain than previously was the case.

Safety Smart Comment

Despite the company in this case only being considered micro in size, it was still considered appropriate by the court to sentence them to a fine of over half a million pounds, an extremely sizeable sum.

This case is a salutary lesson to all organisations, particularly in the construction industry, to ensure that with regard to all aspects to their business, they have properly assessed and managed risk, particularly in the high risk areas which often result in prosecution and death.

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