Clause 1

Corporate Manslaughter and Corporate Homicide Bill – in a Public Bill Committee at 9:00 am on 19th October 2006.

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Photo of Ian Stewart Ian Stewart Labour, Eccles 9:00 am, 19th October 2006

I beg to move amendment No. 87, in page 1, line 3, leave out subsection (1) and insert—

‘(1) An organisation to which this section applies is guilty of an offence if—

(a) the way in which any of its activities are managed or organised—

(i) causes a person’s death,

(ii) amounts to a gross breach of a relevant duty of care owed by the organisation to the deceased, and

(b) the gross breach could have been prevented had all reasonable precautions been taken and all due diligence been exercised by all those at a senior manager level within the organisation.’.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss the following: Amendment No. 34, in page 1, line 3, leave out from ‘if’ to end of line 5 and insert

‘a management failure by the organisation’.

Government amendments Nos. 1 to 4.

Amendment No. 35, in page 1, line 16, leave out paragraph (a).

Government amendment No. 5

Clause 2 stand part.

Amendment No. 76, in title, line 3, after ‘homicide;’, insert

‘to make provision for orders to encourage remedial action; to create an offence of causing death which was preventable by better corporate organisation or management;’.

I should perhaps, for clarification, explain why we are taking clause 2 stand part now. The group of amendments effectively relates to clause 2 as well as clause 1 and, were they to be carried, clause 2 would not exist.

As a matter of guidance to the Committee, those who have not served under my chairmanship before will probably be unaware that I am more than willing to have a stand part debate at the start of a clause, if that facilitates debate, rather than at the end, but I do not propose to have both. It is for the Committee to decide whether it would be beneficial to have a broad-ranging debate on a first group of amendments, which may be considerable—as this one is. That would be perfectly acceptable, on the strict understanding that you cannot have your cake and eat it later.

Photo of Ian Stewart Ian Stewart Labour, Eccles

The amendment goes to the heart of what the Bill is intended to do, as identified by the Opposition and others. Currently, there can be individual responsibility for manslaughter, but as soon as we move on to address the corporate issue, a fundamental question arises: who represents the corporation? The corporation cannot be found guilty and put in prison. That is the core of the argument about the Bill and whether it is complete.

Subsection (1)(a) of the amendment is straightforward and speaks for itself; the company is guilty if activities “managed or organised” on its behalf cause a person’s death. Subsection (1)(b) of the amendment identifies the important concept of the relevant duty of care owed by the organisation, not only the individual, to anybody who has been killed. The “gross breach” has to be identified as having been preventable. That raises the question of who could have prevented it.

Is the responsibility an individual or corporate one? The amendment seeks to introduce those concepts so that we can move on to establishing who would be responsible on behalf of the corporation. The concept of due diligence is important in identifying that corporate responsibility.

Photo of Gerry Sutcliffe Gerry Sutcliffe The Parliamentary Under-Secretary of State for the Home Department

At this early stage, I should like to state the Government’s position. The argument is not about who but how; the Bill is about how an organisation has contributed to that corporate manslaughter, not who has.

Photo of Ian Stewart Ian Stewart Labour, Eccles

That is helpful. I do not disagree with that. You will see from our amendments and new clauses, Mr. Gale, that the “who” follows what the Minister says. The problem is that the Bill does not move on to the “who”, and that is why we have tabled the amendments.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General 9:15 am, 19th October 2006

We have come quickly to one of the hearts of the issue. How can we fix corporate liability within organisations? How can we move away from the current position on corporate and individual manslaughter? That requires such a high test to be passed that prosecution of corporations is extremely difficult unless one can effectively show that the individual director of the relevant corporation had a level of responsibility sufficient to fix him personally with a manslaughter conviction.

We have to be careful because, understandably, the public often wish to see people punished for accidents that cause death. However, as the hon. Member for Eccles (Ian Stewart) knows, one of the problems that the Government had at the outset was whether it was possible to alter the test of corporate manslaughter and still include individual liability. We may come back to that later in our consideration of the Bill, but my broad view has always been that we should be cautious about doing that and I think the Government’s approach is correct.

If we accept the principle that individuals should not be fixed with liability, even as directors of corporations, so that they should not be sent to prison—this is the key issue—it is, if I may use the expression, permissible to start to look at how we can beef up the legislation to make it easier to convict corporations. That is what the hon. Gentleman is talking about. In tabling amendment No. 87, he has sought, along with his colleagues, to try to focus the Committee’s mind on what we allege should cause a person’s death and the extent of the default that would be required of the organisation before it would be fixed with criminal responsibility. To be frank, the hon. Gentleman’s amendments, mine, which we can come on to, and the Minister’s are all trying to tinker with the same issue.

I have reservations about the way in which the Bill is drafted. The definition of what constitutes a senior manager must mean that only failures at senior management level that lead to death will be sufficient  to fix criminal responsibility on the corporation. That is in stark contrast to the Health and Safety at Work, etc. Act 1974, where section 2 provides a general duty on employers to look after the health and safety of their employees at work by taking all reasonably practicable steps. If an accident happens, the burden is on the employer to show that he did everything reasonably practicable to prevent it. That usually requires an exercise on the part of the prosecution, or perhaps the corporation’s or employer’s lawyers, of running through a list saying what was done from top to bottom to ensure safety on the work floor.

What frequently happens, in my experience, is not that the senior manager is directly responsible for the accident but that the chain from top to bottom has a number of chinks in it that mean that the safety culture does not percolate from the director to the floor, such that one certainly cannot say that the poor senior director is directly responsible. I say poor because I have some sympathy with such senior directors, although, of course, one might sometimes find that they are responsible, and I have come across some unpleasant cases in my time that have made my hair stand on end. But generally there are a series of contributory causes, as is so often the case in accidents.

We must aim to beef up the safety culture. I think that the expression that was used in the Health and Safety Executive was, “You have to walk the talk.”

Photo of Ian Stewart Ian Stewart Labour, Eccles

The hon. Gentleman has laid out the lines of responsibility clearly. However, does he accept that the test for corporate responsibility might not be proven but as things stand an individual could still have responsibility for manslaughter? Is it not dangerous for us to remove one and have the other?

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

As matters stand, the Bill does not interfere with the law of manslaughter. If an individual kills another person by gross negligence, he can still be indicted for manslaughter. It is difficult to pick an example. Let us suppose that the director of a building company goes on to a site and, seeing that a wall is manifestly in an unstable and dangerous condition, tells one of his 17-year-old apprentices to take a sledgehammer and smash out some of the bottom bricks to make a hole. If the wall were to collapse on the apprentice’s head, although we would need to examine all the facts it seems to me that that director would be liable to prosecution for manslaughter. Nothing in the Bill will make any difference to that, which does not trouble me.

The traditional test of manslaughter is the same for a corporation as for an individual, but it is harder to get at a corporation as it must be shown that the directing minds are guilty of the offence. I am in favour of moving away from that principle, but I wish to fly a flag that I will be unhappy if the hon. Gentleman says at a later stage of our deliberations that he wishes personal responsibility to be fixed on directors on the same basis as those directly responsible and the directors therefore sent to prison. If we are to focus merely on corporations, as I believe we should, the hon. Gentleman’s amendment makes a great deal of sense. I am not sure whether mine does, but it would take us in the same direction. I will listen to what the Minister has  to say, but he will be pleased to hear that I believe his amendment might make even more sense than mine or that of the hon. Gentleman.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

It is a good start. I am in favour of what we are trying to do. If I understand the Government amendment correctly, they are attempting to move away from the direct fixing of a senior management decision and towards a senior management failure being a substantial cause of the accident. That goes a long way towards answering my point about the chain of causation.

We must face the fact that accidents happen for a variety of reasons, and often because the person killed does something stupid. Part of the safety culture that we must create is protecting people from their own mistakes. I shall give the hon. Member for Eccles an example of a dreadful case that I once worked on. Two employees were sent to the top of a dome in an oil refinery. There was a plug in the dome and they were told to remove the tangs securing it to the sides. They stood on the plug while they removed the tangs, thinking that the plug was inserted so that it could not fall through, but the moment the last tang was removed, one of them fell 100 ft to his death. The company was prosecuted under the 1974 Act and pleaded guilty. There were subcontractors on site and repair work was taking place.

The case might not have been suitable for a corporate manslaughter prosecution, either under the Minister’s proposals or the previous provisions, butthe truth is that there was a failure to acquaint the employees with the risk and there was an assumption that they would understand it. That failure ran from the top to the bottom of the organisation. The decisions taken on site had nothing to do with senior management, but it could be argued that to establish a safety culture, senior management should have examined the way in which their junior management were managing employees. I emphasise again thatthe case might not be suitable for a corporate manslaughter prosecution, but such examples are important. If the Minister is trying to tweak the law, as I believe he is, to enable a jury better to examine an organisation from top to bottom, that is a sensible approach when dealing with the responsibilities of a corporation.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry)

We have a veritable menu of alternatives before us. Concerns about the original phrasing of the senior management test were expressed on Second Reading and in the briefings that we have received. The first point of concern is that the problem experienced under the previous legislation of identifying an individual—working out which senior managers were involved—would remain. I am not yet sure whether the Bill deals with that.

There is also a problem of perverse incentive. Senior managers might be advised by a good corporate lawyer it would be reasonable to move responsibility for all health and safety issues down to the lowest point, thereby avoiding any potential future prosecution for corporate manslaughter. That would be a retrograde step both for health and safety and for the desire to amend current problems in the law.

Concern was also expressed that the Bill would not deal with the small-large issue. Under existing law, small companies tend to be caught and larger companies tend to avoid prosecution.

Those are the type of tests we need to look at when considering the options before us, including the Government amendment. I am pleased that the Government have moved their position and like the hon. Member for Beaconsfield, I think they are moving in the right direction, but we will certainly probe the Minister, particularly after he has spoken to the Government amendment.

The amendment tabled by the hon. Member for Eccles and his hon. Friends has some attractions. It seems a sensible idea to introduce the notions, well known to many corporate bodies, of reasonable precautions and due diligence. Several of those who responded to the consultation thought that was the way to go—indeed, the British Retail Consortium thought that introducing a due diligence test was sensible because it would establish that senior management, when organising a company, ought to demonstrate due diligence in more than just financial matters. A due diligence test would be understood by senior managers. It would not necessarily require them to be actively involved in an incident or the causation to be absolutely clear; instead, it would reflect an idea of corporate culture. That has some merit.

My only concern about amendment No. 87 centres on the ultimate sentence:

“all due diligence been exercised by all those at a senior manager level within the organisation”.

That seems a very hard test to pass because all senior managers would have to be identified in order to check whether or not they had taken reasonable precautions or demonstrated due diligence. That may be something we can come back to—I am sure it is not a hard and fast aspect of the hon. Gentleman’s intentions. It will be interesting to see whether the Minister has any guidance give us on that because it does not seem to take us in the direction that the hon. Member for Eccles wishes to go, despite the other merits of his amendment.

By chance, my hon. Friend and I tabled the same amendment as the hon. Member for Beaconsfield did—perhaps we read the same brief that was sent by e-mail. However, my hon. Friend and I intended to focus more on management. There is a balance to be struck. I cannot speak with the same legal experience as the hon. Gentleman has, but it seems to me that on the one hand we want to ensure that the whole corporation acts in the best interests of health and safety and takes these matters seriously, and that that should be part of the culture; but on the other hand, we should not expect a corporation to be guilty of corporate manslaughter if a very junior person makes a mistake. Such a mistake needs to be dealt with in isolation so it does not have an effect on the reputation of the whole company. It is a question of balance and how we can achieve that.

I argue that amendments Nos. 34 and 35 get the balance right, because the natural, common-sense understanding of the term “management” would exclude the idea that a very junior operative could create a  situation in which the whole corporation was deemed to be guilty of the offence. I believe that, if a case was being prosecuted in a court of law, reasonable people would understand what was meant by management failure and could make those decisions. By restricting the provision to senior managers, we still have the problem identified with the Government’s original wording.

I want to deal with the Government amendments when the Minister has spoken to them, if I catch your eye, Mr. Gale.

Photo of Jim McGovern Jim McGovern Labour, Dundee West 9:30 am, 19th October 2006

Does the hon. Gentleman share my concern that a company could make itself almost corporate manslaughter-proof by devolving all health and safety responsibilities to the most junior management level?

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry)

I am concerned that the original phraseology would have had that effect—indeed, I am sure that it would have done. The Select Committees that considered the draft Bill found from some of the evidence that they took that corporations were doing precisely that, in anticipation of the legislation.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I am not sure that I entirely agree with the hon. Gentleman on that point, because even under the original wording, if senior management devolved all their responsibilities downwards, that would be the failure in itself. It seems to me that the new wording, wherever it comes from, but perhaps particularly if comes from the Government, will knock on the head even a suggestion of being able to mount that defence.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry)

I disagree. I think that the original wording did have that problem, and the evidence presented to the Select Committees shows that that was the case. Corporations were acting in anticipation of the legislation. It would have been a reasonable defence to say, “Well one size does not fit all when you have a number of factories throughout the country. It is totally reasonable that an individual in each of the company’s 15 or 20 factories should take responsibility for health and safety at that site. It has nothing to do with the directors.” That could have been a reasonable defence, so there would have been the perverse incentive that the hon. Member for Eccles and many others were worried about. The hon. Gentleman is right to say that the amendments before us begin to address that weakness.

My point is that amendments Nos. 34 and 35, which are less restrictive in the definition of management by not attaching the word “senior” to it, are the sort of provision to which an ordinary jury would react seriously and properly. I am concerned that if we retain the qualification of “senior”, we will not achieve the effects that we are trying to achieve. Such a qualification will create greater complexity. The process of identifying exactly who was a senior manager will be part of the debate in the court, lengthening the proceedings and making it much more difficult to secure the prosecutions that we know ought to have happened in the past but have not happened because of previous legal complexities.

With those introductory remarks, I hope that the Minister can try to persuade us that the solution he has come up with is better than the solutions the rest of us have come up with.

Photo of Tony Lloyd Tony Lloyd Labour, Manchester Central

Despite never having served in one of your Committees before, Mr. Gale, I, too, pay tribute to your chairmanship.

The debate has been interesting in that there is a degree of consensus on what we are trying to achieve with the clause. We can and we certainly will debate later whether we should separate corporate responsibility from individual responsibility. There is a major issue about whether, when death is caused in the workplace or similar, we ought to recognise that both the corporate body and individuals should be liable. However, there is consensus on our aim, which is to remedy a gap in the law which allowed some headline cases and, as important, many cases that did not achieve public notice of failure to prosecute corporations for manslaughter.

The debate has centred on how we approach the matter. One of the most notable cases of failure to prosecute related to the sinking of the Herald of Free Enterprise. The controlling minds of the company simply failed in their duty to provide the proper health and safety culture to which the hon. Member for Beaconsfield referred. It is astonishing that no prosecution was possible under existing law. We must ensure that what we introduce is sufficient to ensure that such cases will lead to corporate prosecution. I believe that there should have been individual prosecution in that case because there was clear individual failure at senior level in that company, but we must ensure that the gap is closed so that corporate prosecution is possible.

The concept of due diligence is attractive to me, in part because it is already well defined and in part because the courts recognise failure to operate with due diligence. That is well established in case law. The courts understand it and the public understand it. It is something on which common sense and judicial practice come together. That is important in efforts to create a health and safety culture, which are not helped if laws are difficult for management and those who work in organisations to interpret, even if the courts properly understand what the law says. It will be best if the legislation is never used because it has driven forward the health and safety culture and changed the way in which organisations operate. I urge the Minister to accept the concept of due diligence because that is important.

I want to press the Minister on the debate that the hon. Members for Kingston and Surbiton and for Beaconsfield have opened up a little, on the application of the Government amendments. There is concern about the emphasis on the role of senior management and particularly that of senior managers when making decisions on how the whole or a substantial part of a company’s activities are to be managed. That goes to the nub of how the legislation will operate in practice. The concern is that because of the definition of“a substantial part”, in large organisations with a complex structure the failure in a relatively small part of the organisation could allow a defence at the top level—the controlling mind level. Senior management  could simply say, “We are the senior managers in control of the whole or a substantial part of the organisation, but we are clearly not responsible for an issue that should and could adequately have been dealt within a lower part of the organisation.” It would not be possible to prosecute the smaller part of the organisation because it does not have corporate existence and those responsible at that level would not meet the senior management test.

The hon. Member for Beaconsfield said that it would not be possible to delegate health and safety on that basis, so failure in a division of the corporation would still be the responsibility of the most senior management because of the due diligence test. Even if that is the case, I would still prefer to see the phrase due diligence in the Bill, because it makes the relationship between senior management and those who operate parts of the organisation absolutely clear. The concern is that, in their own defence, senior management could say, “Yes, of course we are the controlling minds of the company. We are the ones who control the whole or some central parts of the organisation’s decision-making, but this took place at a level below that for which we could be held responsible.”

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

Clearly, some delegation must be permissible. No organisation can operate without delegation. If an organisation delegates down to the junior management level in a responsible fashion and it is a junior manager who, having been properly trained and told what his duties and responsibilities are, makes a mistake, it would be wrong if the company were to be fixed with a corporate manslaughter conviction.

The point that I was making earlier to the hon. Member for Kingston and Surbiton was that the idea that a corporation could be run without at least one director being responsible for health and safety is extraordinary. If an accident occurred and the directors all said, “We’ve got a wonderful new system in this company. We’ve delegated all health and safety responsibility away from senior management level,” that argument would not, I hope, get very far in court, because all corporations must have a director with a specific health and safety responsibility—[Interruption.] The hon. Member for Kingston and Surbiton shakes his head. I accept that legally there might be no such obligation, but the idea that a corporation would survive a prosecution for corporate manslaughter if it had not appointed such a director is fantasy. In the same way, under the 1974 Act, if a large company were to say, “Well, actually, at director level we’ve got nobody responsible for health and safety at all”, it would be taken to pieces in court.

Photo of Roger Gale Roger Gale Conservative, North Thanet

Order. I require Front Benchers to set an example. Interventions are interventions.

Photo of Tony Lloyd Tony Lloyd Labour, Manchester Central

In fairness, Mr. Gale, that was a useful intervention, because we are collectively getting to the nub of the argument. In any health and safety regime there must be a defence available for the most senior management. I believe that we ought to have a health and safety director, just as we have nominated finance directors of incorporated bodies. In any health and safety regime there would have to be a legitimate defence available to the health and safety director—that controlling mind. Such a person ought to be able  to argue that he took all reasonable care and operated with due diligence, and there was a health and safety regime that ought to have worked, but those down the organisation failed by neglect properly to implement the policy that the controlling mind had set. That must always be a proper defence available.

The problem is not whether that is the case; it is more subtle. As the hon. Member for Beaconsfield, with his long experience of health and safety matters, knows, as do those of us who see the issue from the other side, there are grey areas and cases are often not clear cut. Of course there are cases when the safety guard is taken off the shredding machine and an individual goes in. I have come across such cases. They involve clear breaches and it is obvious what should happen, but they are not the norm.

The normal health and safety breach is much more subtle, and it is much more difficult to pinpoint exactly where in the organisation things have gone wrong. It is therefore much more difficult to say whether there should be a defence for directors at the most senior level that something had been delegated reasonably to a lower level within the organisation, precisely because those who might have that delegation thrust upon them would not be covered by the test that the clause establishes.

That is the difficulty with the Government amendments. I am totally on board with what my hon. Friend the Minister is attempting to achieve. I know what he has said privately and I have a good suspicion of what he will say to us in a few moments. There is no difference between us on what we are trying to achieve. The debate is about what form of words is adequate to ensure that, when such cases come to court and common sense says that corporate guilt should be proven, that is what happens.

The case of the Herald of Free Enterprise might not be a good example, but the official inquiry talked about the company being riddled with the disease of sloppiness through and through. Nevertheless, under this clause the most senior manager may have had a defence even if they admitted to being sloppy, incompetent and useless, because of the large organisation under which the Herald of Free Enterprise worked. I believe that it was owned by a subsidiary of P&O, which was itself a subsidiary of a larger organisation. That cascading of companies would have allowed the most senior management to say, “No, this most certainly resided below us because we are merely a corporate holding operation,” while at a junior level people could say, “We are clearly not the controlling minds or even the controllers of a central part of the corporate mind.” That is a real concern.

Photo of Jim McGovern Jim McGovern Labour, Dundee West 9:45 am, 19th October 2006

Perhaps I can help my hon. Friend by giving another example. The judge in the case of the Hatfield train crash said that it was one of the worst cases of industrial negligence that he had ever come across, but he ruled that there was insufficient evidence to prosecute anyone for corporate manslaughter or under any health and safety legislation.

Photo of Tony Lloyd Tony Lloyd Labour, Manchester Central

My hon. Friend is right. That is the gap that we are trying to plug to ensure that we do not have cases such as Hatfield and the Herald of Free Enterprise.

There is no difference between the Minister, hon. Members who have spoken on this and me on what we are trying to achieve. We are talking not about the narrowness of definition, because definition is all-important, but whether within that definition we allow wriggle room for those we want to prosecute successfully. We want to ensure that there is no easy escape for such people. Of course, Hatfield and the Herald of Free Enterprise were the large and celebrated cases, but there are many other cases for which we need to ensure that the law works properly.

Photo of Jeremy Wright Jeremy Wright Conservative, Rugby and Kenilworth

I welcome you to the Chair, Mr. Gale. I am glad to follow the hon. Member for Manchester, Central(Tony Lloyd) because I want to address his point about the wording of the Government amendments. I am specifically concerned about the word “substantial” in Government amendments Nos. 3 and 5. Precisely what does the Minister mean by substantial? As a former practising barrister, I know that my former colleagues will look forward to arguing over exactly what that means, and he may be able to cut short that argument today.

It seems to me that there are two possible definitions: a large part of what the company does, and a more than insignificant part of what the company does. There is a distinction between those two definitions, and I hope that the Minister will tell us which interpretation he would put on the word. That is important for the reasons that the hon. Member for Manchester, Central has given: when one looks at a large company with many different branches—a large national or international supermarket chain, for example—it is important to know whether the substantial element of management failure can be allocated to the management of the entire international corporation or the management of the group of stores or the store itself. I hope that the Minister can provide some clarity regarding the definition.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

I should first declare an interest as a non-practising solicitor, albeit that this is outside my area of expertise or knowledge, unlike several of my colleagues present.

I want to develop the point that my hon. Friend the Member for Rugby and Kenilworth (Jeremy Wright) highlighted about this aspect of the management of activities and whether it means activities as a whole. On Second Reading, I made a point that was taken up by the hon. Member for Manchester, Central about the structure and organisation of corporates, which I would like to develop a little further. Clearly, large organisations organise themselves in various ways, and it is not inconceivable that a large holding company might have a raft of subsidiaries and intermediate holding companies beneath it. A particular activity may be isolated in a subsidiary that is several levels removed from the ultimate holding company. If some action that is manifestly wrong or failure in systems or management occurs at the subsidiary company level, how do we read the amendments and interpret the clause to determine whether the organisation that is referred to in the clause is the subsidiary or the ultimate  holding company further up the chain, or to determine whether it is appropriate in any event for the directors or management of the holding company to be liable? There may be a local management and a separate board of directors for the subsidiary company—it may not be the same as the board of directors at the holding company level or at various levels in between.

It is this complexity that we struggle with in many respects. When the bereaved of the deceased person argue for justice, they are probably looking a bit further up the chain than the local management. We must strike a balance between what is right and appropriate in terms of ultimate culpability, and the desire for justice to be seen to be done.

The other aspect of the issue is that it is not inconceivable that a subsidiary may be a relatively small operation. It may have a small number of employees and only a limited management but still be part of a large group. If an unlimited fine is sanctioned against the subsidiary—a fine is levied against that individual corporate body as a legal person—the subsidiary’s resources may not be sufficient to meet it. The question then is whether the overall group allows the subsidiary merely to become insolvent and to default—ultimately, the fine is not paid and the business shuts down—or whether there is any mechanism for making the intermediate holding companies and companies up the chain in some way bear responsibility and at least pay the fine.

Photo of Tony Lloyd Tony Lloyd Labour, Manchester Central

That is an important point. The clause as amended by the Government would most certainly cover offshore ownership, as there is no test of individuals or locations. Nevertheless, the hon. Gentleman’s point is interesting, because an offshore company could easily evade responsibility—even for unlimited fines—in a way that a subsidiary could not. As he said, if the subsidiary is insolvent, there would be a long and difficult chase to find recompense from the offshore owners.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

The hon. Gentleman’s point is clear. It comes back to the references in clause 1(1) to an organisation

“to which this section applies” and then

“amounts to a gross breach of a relevant duty of care owed by the organisation to the deceased.”

In effect, a holding company may merely hold shares in an intermediate holding company that in turn holds shares in the subsidiary company where the problem has actually occurred. We need some clarification of the language. For example, does the holding company owe a duty of care if it is just an investment company that does not necessarily play an active role in the management at the local level? These complexities are difficult—I am not saying that they are not. It is those issues that we struggle with when we try to strike a balance between a desire to seek justice and the need for working legal constructs.

It will be interesting to hear how the Government view those issues. We will be able to reflect on what the Minister says and refer to it in any subsequent comments that we make in the debate.

Photo of Ann McKechin Ann McKechin Labour, Glasgow North

I, too, would like to question the Government on their amendments Nos. 3 and 5. The Minister will recall that on Second Reading my hon. Friend the Member for Lanark and Hamilton, East (Mr. Hood) referred to the case of the Larkhall explosion in his constituency six years ago—commonly known as the Transco case. The key element in the case was the fact that a failure of management occurred over a fairly long period, when the company changed its identity. Three separate management failures were identified, which cumulatively resulted in the tragic death of the family in Larkhall.

Does the Minister consider that the clauses would permit the courts to consider the issue of aggregation—that is, could the organisation or company be guilty if the relevant acts were done by a number of different office-holders at different times, but were sufficient, considered together, to constitute an offence? In view of what the hon. Member for Hornchurch (James Brokenshire) has said, and given the complexities of corporations nowadays and the way in which ownership is transferred over time, it is particularly important to note that management failures are not necessarily of a moment. They can take place over time, and it is essential that that aspect of the law should be covered.

Photo of Gerry Sutcliffe Gerry Sutcliffe The Parliamentary Under-Secretary of State for the Home Department

This is not a unique occasion. I have worked on several Bills on which there was general consensus, when hon. Members were driven by the need to reach a workable solution, rather than, as happened with some other Bills, a clear political divide, when they wanted to knock spots off each other politically. I do not see that happening in this Committee, because, clearly, there is a wealth of expertise here. I pay tribute to the hon. Member for Beaconsfield for his history in this regard. I shall say at the outset that I am not a lawyer, although, of course, there are many on the Committee. I shall, like the hon. Member for Kingston and Surbiton, continue to develop my arguments with a degree of strength and severity similar to theirs, to get my points across. The spirit in which the debate on the liability test has been conducted is useful. I am grateful for the spirit in which the amendments have been debated.

The key reason for reforming the law is the failure of the current test of liability—the directing mind principle—to reflect the way in which modern organisations are run. The principle requires a directing mind—an individual senior enough to be said to embody the company inhis actions or decisions—to be guilty personally of manslaughter. That means that unless a such an individual can be linked directly to the cause of the death and shown to be grossly negligent, an organisation cannot be found guilty of manslaughter, no matter how negligently the company was run and how poor its approach to health and safety.

We need to ensure that the new test will mean that gross failures that are properly the responsibility of the organisation can form the basis of liability, but that not every work-related death will result in a conviction for manslaughter, even where there has been gross negligence by some individuals. For example, courts must be able to convict companies in which little or no thought has been given to health and safety or to safe systems of work. However, as hon. Members have said, companies should not be blamed where individuals have behaved  in grossly negligent ways outside good and safe processes. The test must properly capture corporate failures, not individual ones.

A couple of hon. Members, in particular the hon. Member for Kingston and Surbiton, have mentioned perverse incentives to devolve matters down to other organisations or management levels. I am quite heartened by the fact that 79 per cent. of respondents to a Health and Safety Executive survey of people in private sector organisations reported that health and safety was directed at board level. That figure is up by 58 per cent. from the previous survey in 2001. One of the top four reasons given for the board-level direction is the prospect of the new offence of corporate manslaughter. To return to the point made by my hon. Friend the Member for Manchester, Central, we are, in effect, trying to create a law that we hope will be redundant. We want a change in the culture.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry) 10:00 am, 19th October 2006

Will the Minister confirm that as a result of that same research the Health and Safety Executive found that

“in relationship to those companies that had delegated responsibility down, one of the main reasons why the companies had done that was because of the forthcoming corporate manslaughter legislation.”

So there is a perverse incentive, even though he is correct to say that other companies have reacted positively.

Photo of Gerry Sutcliffe Gerry Sutcliffe The Parliamentary Under-Secretary of State for the Home Department

If I had read on, I would have made that point. I was trying to explain where there has been a shift in attitude, but I accept the hon. Gentleman’s point. Alongside the introduction of this Bill, we have to continue the excellent work that has been done to promote health and safety cultures. In my previous existence as the Minister with responsibility for employment and employment law, I was happy to discuss such issues with many members of this Committee.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry)

The Minister may say that we shall do this as our work goes on, but my concern is that good companies, which already have good health and safety records, will have appointed a director in anticipation of the legislation, but the ones likely to be problem companies in the future are delegating down. The companies that we need to catch in legislation, always the minor ones, are reacting in the wrong way. That is the real concern.

Photo of Gerry Sutcliffe Gerry Sutcliffe The Parliamentary Under-Secretary of State for the Home Department

It is a concern, but I still think that we can introduce a combination of measures in addition to the legislation that we have passed. We shall certainly home in on companies that are not performing well.

I was making the point that the concept of a rogue employer was close to my heart in my previous existence. I remember writing to the director general of the Confederation of British Industry to ask what his definition of a rogue employer was. It took some time—in fact, a good few months—to get a response, and I had to remind him. He wrote back to say that a rogue employer was one that did not pay the national minimum wage. Clearly, that is not acceptable. Since then, we have seen in the corporate culture an awareness of the impact of  individuals in companies. How often do we hear the phrase, “the company’s success is down to how we treat our people”? That culture is developing. Good, fair businesses want to make sure that rogue employers are no longer part of the economic climate.

I am sorry for drifting away, Mr. Gale. Getting back to the amendments, the Government’s intention has always been to find a test that works. Our starting point was the excellent work of the Law Commission, which, as I said to my hon. Friend the Member for Manchester, Central, proposed a test that fundamentally changed the question from “Who caused the death?” to “How was the death caused?” Our concern about that, however, was that it was not sufficiently clear that the failings were those of the organisation as a whole. That is why we introduced the senior manager test, which captured failings in the strategic management of activities where there had been inadequate systems or practices in the organisation as a whole.

The many criticisms of the senior manager test voiced by, among others, the scrutiny Committee, and the amendments tabled in this Committee show that others do not share our view that that test would work. The main concern is that the test would only slightly widen the current identification principle, requiring individual senior managers to be identified as personally guilty of gross negligence.

It is important that the new offence commands public confidence. We recognise that the senior manager test does not. The scrutiny Committee recommends reverting to the Law Commission’s original test—of gross management failings—with a specific provision to deal with a concern that failings at a solely junior level could form the basis for liability.

Government amendments Nos. 1 to 5 replace the senior manager test with a new test for liability, much along the lines of the recommendations of the scrutiny Committee. I was heartened to hear the hon. Member for Beaconsfield say that he thought I was heading in the right direction; I hope that I shall not make matters worse by explaining what we are going to do. The new test would remove the need to find gross negligence in the way in which senior managers managed or organised a particular activity. It would be framed explicitly in terms of how the activity was managed or organised by the organisation—and by that we mean the organisation as a whole. Prosecution will be based on evidence of how the death occurred by reference to how the activity was managed at all levels, including the senior level.

Government amendments Nos. 1 and 2 would achieve that. Government amendment No. 2 removes the requirement to look at how the activity in question was managed by senior managers. Amendment No. 1, which would remove the words “any of” in relation to the activities in question, may need a little further clarification. The test is intended to examine how the activity was managed at all levels. Leaving “any of” in clause 1(1) would mean that there was a risk that certain parts of how any activity was managed could be looked at in isolation, and that management at one level could be looked at in isolation. Deleting “any of”  will remove that risk, but it does not mean that the prosecution will have to consider how all of the organisation’s activities were managed or organised. That is because the activities involved in the offence are the ones that caused the death and involved the breach of the duty of care. The starting point for the offence is how an activity was managed, judged in terms of management of the organisation as a whole. As the hon. Member for Beaconsfield said, we all seem to agree that that is the right starting point.

The Government amendments remove the need for amendments Nos. 34 and 35. We believe that the amended subsection (1) would, on its own, mean that the management of health and safety at the senior level would have to be lacking before the organisation as a whole could be found guilty. That is because the question will be whether the organisation overall was grossly negligent, and it is difficult to see how the organisation overall could be guilty if the senior management were diligent in their approach to health and safety.

We have to recognise that the offence has worried businesses and other organisations that take a conscientious approach to health and safety. One of the key worries has been that liability for the offence is out of the control of their senior managers. We do not want the offence to make good companies fearful and risk averse. Without certainty in the Bill, we will not allay those fears.

As it would be entirely clear that the test must look at how the activities were managed at all levels, and that solely junior failings could not form a basis for liability, the new test would put on the face of the Bill a requirement that the failures must include ones at senior level. We do not think that it is right that an organisation could be guilty if there was only a minimal element of senior management failure in the gross breach.

Photo of Tony Lloyd Tony Lloyd Labour, Manchester Central

For the sake of the record, will the Minister make it clear that gross breach by senior management would cover both the omission of policy and organisational structure as well as their commission? It can never be a defence to say, “We didn’t get round to it.” I know that my hon. Friend will agree with that, but it would be helpful to have it on the record.

Photo of Gerry Sutcliffe Gerry Sutcliffe The Parliamentary Under-Secretary of State for the Home Department

Clearly the courts would consider that. They would ask what the failure was and at what level it took place, and how the death occurred. That consideration would include my hon. Friend’s suggestion.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

It seems to me that that very point is inherent in clause 9, “Factors for the jury”. That may be of some assistance to the hon. Member for Manchester, Central. The factors that are laid out in that clause, including the extent to which the 1974 Act and its regulations are being complied with, ought to prevent senior managers getting off the hook. They will have to show that they are following best practice.

Photo of Gerry Sutcliffe Gerry Sutcliffe The Parliamentary Under-Secretary of State for the Home Department

I am grateful to the hon. Gentleman for clarifying that point. I hope that it satisfies my hon. Friend.

The amendments tabled by my hon. Friends are aimed at encouraging better corporate governance, which is a sentiment that I wholeheartedly support. However, we do not think it is right that simply not taking all reasonable steps could lead to liability; that seems too harsh a basis on which to rest liability for manslaughter. The Government amendments would require the failings at senior management level to have played a substantial role—we shall come back to what substantial means shortly—in the breach. We think that Government amendment No. 3 achieves that.

At this point, let me make something absolutely clear. Amendment No. 3 does not require the prosecution to identify individual senior managers and prove their failures. In many cases that may be an important part of the evidence and the prosecution’s case. Where the evidence shows that senior management as a group failed to put in place safe systems and to ensure that they were adhered to, there will be no need to show that each individual senior manager failed to have a safe system in place. The prosecution will need to show only that there was no safe system where there should have been one. The ability to look generally at senior management is reinforced by moving from references to senior managers to references to senior management. Together they remove entirely the risk of the identification principle being read back into the Bill.

There has also been an accusation that by making senior management failures part of the test, we will somehow encourage senior managers to delegate responsibility for health and safety—a point made by the hon. Member for Kingston and Surbiton. That is clearly wrong. The new test reinforces the Government’s message that health and safety should be led from the top of organisations. Only companies whose senior managers take seriously their responsibility for health and safety can be sure of avoiding liability for prosecution for the offence.

Amendments Nos. 4 and 5 will replace the current definition of “senior managers” in clause 2 with a new definition of “senior management” in clause 1. Senior management is defined in the amendment as those persons who play a significant role in managing a substantial part of an organisation’s activities. By “significant role” we mean one that influences the way in which decisions are taken and management is conducted. By “substantial part” of an organisation, I mean a large part. What that will mean to any particular organisation will depend on its size and nature. The definitions are intended to capture the level of management that has overall responsibility for the way in which an organisation manages or organises an activity.

For investigators, prosecutors and ultimately jurors, the questions to ask will be “How did a death occur?”, “What failures by the organisation led to it?” and “Did failures at a senior level play a substantial role?” Government amendments Nos. 1 to 5 will replace the widely criticised senior manager test with a workable test for liability and, as you have said, Mr. Gale, make clause 2 unnecessary.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry)

My point touches on the one made by the hon. Member for Rugby and Kenilworth on the meaning of “substantial”. The Minister has just said that that will mean a large part of an organisation. That seems a more natural use of the word than that used in criminal  law, where substantial is widely understood to mean “more than trivial”. I wish to be clear on the matter; it is crucial, as the hon. Gentleman said.

Photo of Gerry Sutcliffe Gerry Sutcliffe The Parliamentary Under-Secretary of State for the Home Department

I am grateful for that intervention, and I shall address the matter in greater detail. I wonder whether the hon. Gentleman aspires to become a lawyer.

It was suggested that business will want a due diligence test as well. Managers of organisations can be confident that if they are duly diligent in their approach to health and safety, their organisation will not be found guilty of manslaughter. That is clear in the new test. To spell it out in the Bill would suggest that anything short of senior managers taking all reasonable steps could be enough for an organisation to be found guilty. The offence is about gross negligence, and a lack of due diligence is not a high enough threshold for an offence as serious as manslaughter.

Exactly who counts as a senior manager will depend on the nature and scale of an organisation’s activities. The definition is intended to cover those who take decisions about how the whole or a substantial part of a corporation’s activities are run, including regional managers in national organisations and the managers of operational divisions. It will be for a jury to decide whether a person is a senior manager. On the meaning of substantial, raised by the hon. Member for Rugby and Kenilworth, we do not believe that there is any ambiguity, considering the word’s natural meaning. It is clear in clause 1 that substantial will mean large, noteworthy and so on, rather than just more than minimal. The hon. Gentleman might know the context of that definition better than I do because of his expertise.

The issue of holding companies was raised by the hon. Member for Hornchurch, but we believe that it is something of a distraction. I know that that was not his intention. A subsidiary company owes a duty of care and can be prosecuted. The parent company is a separate entity, and just as individuals cannot be convicted for the acts of others, neither can companies. That is not new; it is how the law currently works. Notably, in the Hatfield case the subsidiary of Balfour Beatty was prosecuted.

Photo of Tony Lloyd Tony Lloyd Labour, Manchester Central

I hope that the Minister will reflect on what he has just said. We know that an increasing number of equity-owning companies operate offshore in our economy. That is a perfectly normal process, whether or not it is good. We are considering the most extreme cases, for which fines can be unlimited and could be enormous. There is significance in the point made by the hon. Member for Hornchurch about the possibility of a holding company avoiding liability simply by making a subsidiary bankrupt. That is not a divergence, but concerns a real and important measure that undermines the impact of the legislation.

Photo of Gerry Sutcliffe Gerry Sutcliffe The Parliamentary Under-Secretary of State for the Home Department 10:15 am, 19th October 2006

My hon. Friend raises an interesting point, and I should like some time to consider the likely impact, although I may have an answer on it fairly  quickly. The point has been made about Balfour Beatty and its subsidiary. I will consider with interest my hon. Friend’s comments, and I will come back to the Committee on this point.

My hon. Friend the Member for Glasgow, North (Ann McKechin) asked about aggregation. The effect of the test in the Bill is to allow the courts to consider how the company is arranged. There is no need to aggregate the acts of individuals because the test is framed in a way that allows conduct and omissions across an organisation to be considered for a systemic view of what took place.

This has been a useful debate and I hope that I have clarified matters for the Committee. I appreciate why the amendments were tabled, but I hope that hon. Members will agree that the new test that we have proposed removes the need for them, and I invite hon. Members not to press their amendments and to support Government amendments Nos. 1 to 5.

Photo of Ian Stewart Ian Stewart Labour, Eccles

The importance of probing the Minister’s words and understanding of the measures is, as my hon. Friend the Member for Manchester, Central pointed out, that the answers will go into the official record and can be used in court when a serious case arises. My expertise on this matter is through industrial tribunal work, which is, I acknowledge, very different from criminal court work, but my last point stands for both types of work.

The hon. Member for Kingston and Surbiton made a point that needs to be examined, and it was useful to hear the Minister’s explanation about the “who”—who has substantial responsibility in these matters. I do not propose to put myself in the place of the more learned members of the Committee in presenting at court, but I would like there to be a single piece of legislation covering all aspects of this subject rather than several pieces.

The hon. Member for Beaconsfield raised some important issues about chains of responsibility and the difficulties with them. I make no apology for differing with him on this. I shall raise the issue of the “who” at a later stage. My inclination is that someone should be identified, as happens in matters of finance, as my hon. Friend the Member for Manchester, Central pointed out. The Minister mentioned the previous CBI director-general Mr. Digby Jones. Having worked with the Minister for several years, which involved sitting behind him and looking at the back of his head, I was privy to the conversations that went on, and I know that the director-general said his organisation took the view that these matters should be raised in the consciences of company directors to the same level as matters of finance and the environment. Therefore, I will, at some point, probe the possibility of identifying a director.

The debate has been useful and illuminating and has gone to the core of what is relevant to the group of amendments and what we seek to examine. Having heard the Government’s view I shall not be pressing the amendments, but we will consider the matter and may table improved amendments at a latter stage. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 1, in clause 1, page 1, line 4, leave out ‘any of’.

No. 2, in clause 1, page 1, line 4, leave out ‘by its senior managers’.—[Mr. Sutcliffe.]

Photo of Jo Swinson Jo Swinson Shadow Secretary of State for Scotland

I beg to move amendment No. 107, in page 1, line 7, at beginning insert

‘in England and Wales and Northern Ireland,’.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss amendment No. 108, in page 1, line 8, at end insert—

‘(c) In Scotland amounts to a reckless disregard for the safety of the deceased.

(1A) A manager is reckless where as regards a circumstance or as to a possible result of an act he is or ought to have been aware of an obvious and serious risk that the circumstances or that the result will follow but nonetheless acts where no reasonable person would do so.’

Photo of Jo Swinson Jo Swinson Shadow Secretary of State for Scotland

Thank you, Mr. Gale. I am delighted to serve under your chairmanship, once again, and I am sure that together we will have a pleasant and useful discussion.

I shall give the Committee the background to amendments Nos. 107 and 108, which refer to the Scottish elements of the Bill. They present an intriguing example of how the boundaries between devolved and reserved powers are not always very clear. The hon. Member for Glasgow, North referred to the Transco case in Scotland—the tragic explosion in 1999 when four people were killed—which led to a charge of culpable homicide. Unfortunately, on appeal, that was not upheld. Transco was given a heavy fine, but the culpable homicide charge was dismissed on the basis that the duty of care concept had no part in assessing guilt of a criminal offence—it was only a civil law concept.

Photo of Ann McKechin Ann McKechin Labour, Glasgow North

My understanding of the Transco case is that there was a problem with identifying a controlling mind. The civil law test was discussed, but it was not the basis of the dismissal, which was that there was no identifiable controlling mind.

Photo of Jo Swinson Jo Swinson Shadow Secretary of State for Scotland

I thank the hon. Lady for her intervention. I take her point that the controlling mind issue was an important point in the case, but the ruling read:

“it appears to me to follow that civil common law duties of care, or civil statutory duties of care, can play no direct part in the assessment of guilt”.

There was more than one reason why the appeal was dismissed.

As a result of that, there was, obviously, controversy in Scotland, and in April 2005, the Scottish Executive set up an expert group on corporate homicide, which produced a report in November 2005. Initially, the idea was that a private Member’s Bill be introduced in the Scottish Parliament, but in the past two to three months lawyers have discussed the matter and concluded that, although it is proposed Scottish legislation, it would be  more appropriate, as it is a health and safety issue, to deal with it here in Westminster, rather than in the Scottish Parliament.

Photo of Gerry Sutcliffe Gerry Sutcliffe The Parliamentary Under-Secretary of State for the Home Department

I should like to make it clear that that was a joint decision by the lawyers, the Scottish Executive and others.

Photo of Jo Swinson Jo Swinson Shadow Secretary of State for Scotland

I thank the Minister for that clarification. Indeed, lawyers from both Parliaments made that decision.

It is important, however, that the Scottish dimension is considered, and my amendment seeks to address the problem in the Transco case. The expert group, which obviously has looked in some detail at that issue, considered how best to deal with the charge of corporate homicide in Scotland. It looked at the possibility of incorporating the duty of care concept into criminal law, but concluded:

“This principle of duty of care, which is drawn from the civil law of negligence, is familiar to the English law of manslaughter. However, the ‘duty of care’ does not feature in the Scottish criminal law of culpable homicide.”

It continued:

The Group feel strongly that, as far as Scotland is concerned there are no particular advantages to importing the concept of ‘duty of care’ into a criminal offence of corporate homicide.”

The Law Society of Scotland has examined that matter and proposed the recklessness test outlined in the amendments, which is already a concept in Scottish law.

Obviously, Scotland has a different legal system and we should not be attempting a one-size-fits-all approach. Given the amount of thought and consideration that has gone into that issue already in Scotland, we need a clear reason from the Government for ignoring that expert advice. I hope very much that they will accept the amendment.

Photo of Ann McKechin Ann McKechin Labour, Glasgow North

As the hon. Member for East Dunbartonshire has indicated—

It being twenty-five minutes past Ten o’clock,The Chairmanadjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at Two o’clock.