Personal Liability of Governors
Introduction Governors from time to time express concerns about the possibility of their being held personally liable should the corporation sustain a loss as the result of a decision for which they were responsible. Examples of situations where there is the possibility of personal liability include where a corporation becomes insolvent ie is unable to pay its debts or is in breach of contract in relation to a major transaction such as bank loan or construction contract. Where a governor has acted in good faith and following appropriate professional advice they will usually be able to rely upon the protection of indemnity insurance maintained by most corporations. Alternatively governors may by virtue of section 145 of the Learning and Skills Act 2000 apply to the court for orders determining their liability which may extinguished, reduced or varied provided that the governor has acted honestly and reasonably. However, neither the statutory provisions nor provision for indemnity insurance or indemnities by the corporation will apply to criminal liability. The criminal offences in relation to which governors most often ask about possible liability are those relating to health and safety and, in particular, corporate manslaughter under recent legislation. Corporate Manslaughter and Corporate Homicide Act - Application to Governors The Corporate Manslaughter and Corporate Homicide Act 2007 ("CMCHA") provides that an organisation will be guilty of corporate manslaughter if an organisational or gross management failing causes a person's death. Management failings can be aggregated together between an organisation's senior managers, without the need for a specific individual having to be the directing mind and to be guilty of individual gross negligence manslaughter. CMCHA is deliberately focused on organisations rather than companies and the scope of the offence includes educational establishments of all types. It is important to recognise that individuals cannot be prosecuted under the CMCHA; criminal actions against negligent employees will be brought under either the Health and Safety at Work etc Act 1974 ("HSWA") or the common law of gross negligence manslaughter. CMCHA defines a senior manager for the purposes only of this legislation as a person who 'plays a significant role in an organisation in:
An organisation is guilty of the offence of corporate manslaughter if the way in which its activities are managed or organised by its senior managers:·
The offence therefore comprises two elements. The first is that a management failure must have caused the death. Explanatory notes to the CMCHA indicate that such a failure must be more than a minimal contribution to the death and there must be no break in the chain of causation. However, the management failure does not need to be the sole cause of the death. The second element relates to the 'relevant duty of care' which the organisation owed to the deceased. Such a duty can arise from an organisation's role as employer, occupier, supplier of goods or services, constructor or maintainer, or keeper of any plant, vehicle or other thing. Universities and colleges clearly owe duties to a whole range of persons, both as occupiers, employers and suppliers of services. Once the duty of care has been made out, the prosecution must demonstrate gross breach of that duty. Such a failure is defined as conduct which 'falls far below what can reasonably be expected of the organisation in the circumstances'. To assess this, the new law requires a consideration of the organisation's compliance with health and safety legislation. Rather than consider the knowledge and motives of senior managers, the risk of death from any failure to comply with legislation will be evaluated in the first instance. Attention may then be given to the attitudes, systems, policies and accepted practices within the organisation that may encourage or tolerate non-compliance with the legislation in order to ascertain how serious the failure was. The sentencing of corporate manslaughter is intended to reflect serious concern at the consequences of the breach and to send a message to those responsible for the governance of the organisation. There are three sanctions available to the court when sentencing for corporate manslaughter: unlimited fine; publicity order; and remedial order. A prosecution under the new legislation will follow only if an institution is guilty of the grossest failure, inattention, or recklessness, with complete disregard to risk. Because the test is one of failings of a corporate nature involving those people deemed to be 'senior managers' vicarious liability does not apply; a rogue employee acting entirely on their own would not land the institution in court; a prosecution would have to show that senior managers had been complicit in the risk, or had condoned, tolerated or promoted the unsafe practices that resulted in the death. Are Governors “Senior Managers” for the purposes of CMCHA? The answer to this question is 'Yes'. The explanatory notes to the CMCHA clarify the definition of senior managers as being "those persons who play a significant role in the management of the whole or a substantial part of the organisation’s activities. This covers both those in the direct chain of management as well as those in, for example, strategic or regulatory compliance roles." Governors occupy the strategic and possibly the regulatory compliance role envisaged by the Act. However, in reality it is less likely that a governor will perform in a grossly negligent way as respects health and safety responsibilities than, say, an operational senior manager such as a director of service who issues work instructions. A governor or indeed the whole governing body is likely to be in gross breach only if: 1) they delegate health and safety responsibilities in an inadequate manner - e.g. by failing to ensure that the institution has adequate arrangements in place for the effective planning, organisation, control, monitoring and review of preventive and protective measures of health and safety risk; 2) they fail to act on any serious health and safety issues that they are made aware of eg by whistleblowers or by poor audit reports; 3) they become involved operationally in health and safety issues and fail to spot obvious risks/implement poor systems; 4) they fail to ensure that the institution has access to competent health and safety advice, particularly in times of change management; and 5) they fail to review health and safety performance on a regular basis. In 2008 UCEA, USHA, the Institute of Directors and the HSE issued authoritative guidance to Members of University Governing Bodies 'Leading Health and Safety at Work' . That guidance was addressed to members of all higher education senior management and governing bodies, including University Councils and Boards of Governors. The essential principles of the guidance referred to visible, active commitment from the governing body and that the governing body should set out a clear strategy on health, safety and wellbeing. Such a strategy should form an integral part of the institution's culture, values and performance standards. The guidance applies equally to the college sector.In the Planning Section, the guidance explained that "All members of governing bodies should take the lead in ensuring the communication of health and safety duties and benefits throughout the organisation. Executive directors must develop policies to avoid health and safety problems and must respond quickly where difficulties arise or new risks are introduced; non-executives must make sure that health and safety is properly addressed. The Turnbull guidance...has been interpreted by funding councils for HEIs to have in place robust systems of internal control, covering not just 'narrow' financial risks but also risks relating to the environment, business reputation and health and safety." What about Individual Liability for Governors? Employees of an organisation (including operational directors or governors) can be held to account through health and safety legislation and the common law of gross negligence manslaughter. They cannot be prosecuted for Corporate Manslaughter. Section 7 of the HSWA provides that every employee, whilst at work, must take reasonable care for the health and safety of himself and of other persons who may be affected by his acts or omissions at work (e.g. visitors, contractors, customers etc). Employees at all levels of the organisation could be caught by section 7. A failure to comply with section 7 of the HSWA carries with it fines of up to £20,000 in the Magistrates’ Court and unlimited fines in the Crown Court. From 16 January 2009, a breach of section 7 of the HSWA also carries with it a term of imprisonment of up to two years. Section 37 of the HSWA provides that where an offence is committed by the organisation and it is proved to have been committed with the consent, connivance or neglect of any director, manager, and secretary or other similar officer of the organisation then he as well as the organisation may be prosecuted. The phrases consent and connivance imply knowledge and a decision made on such knowledge. The term ‘neglect’ tends to involve a failure to have done what should have been done in the circumstances (a breach of duty of care). In our view it is likely that a governor will be held to be in a position akin to that of a company director for the purpose of section 37. A breach of section 37 of the HSWA carries with it fines of up to £20,000 in the Magistrates’ Court and unlimited fines in the Crown Court. Again, from 16 January 2009, those caught by section 37 face a term of imprisonment of up to 2 years. If a governor were to be successfully prosecuted for a breach of section 37, they could be disqualified as a Companies Act director of any company in which they hold a directorship. Organisations can purchase insurance to protect senior figures. However, this protection can only be obtained to cover the cost of civil damages and the legal costs in defending proceedings, not for criminal fines or penalties. The most serious offence that can be committed by an individual in the context of health and safety events is that of manslaughter. At the outset, it is important to note that the test for individual manslaughter does not change by virtue of the Corporate Manslaughter and Corporate Homicide Act 2007. Essentially, an individual commits manslaughter in a workplace context when he causes death through gross negligence. To prove the offence of gross negligence manslaughter, the jury must be satisfied of the following: (1) the Defendant owed a duty of care to the deceased; (2) there had been a breach of this duty of care; (3) the breach must have been a substantial cause of death; and (4) this breach was so grossly negligent that the Defendant could be deemed to have had such disregard for the life of the deceased that his conduct should be seen as criminal and deserving of punishment. Conviction for the offence can in theory lead to life imprisonment although this maximum penalty is unlikely to be imposed where a preventable accident has led to a fatality. The most severe sentence imposed to date in these circumstances is 9 years imprisonment. It is important to note that while the above penalties could all theoretically apply to an individual governor, there have to date been no successful prosecutions of any governor acting in the course of his governorship under health and safety legislation or for individual manslaughter. What Should Governors Do? Most governors will already be fulfilling their obligations under health and safety legislation. All governors should read and familiarise themselves with the guidance in the UCEA publication discussed above, in particular addressing the questions at Page 8 of that guidance. If necessary, they should closely question the operational leadership of their institution to ensure that good health and safety practices are being followed. Governors should also ensure that all senior management teams are fully trained and briefed on their health and safety responsibilities on a regular basis; all too often staff at the lower levels of a workforce may receive very good health and safety training but there is a knowledge vacuum at the top of an organisation.Good governors recognise the ambit of their role and do not overstep their official responsibilities. If a governor tries to be over- helpful by getting involved in operational matters outside the broad governor remit they may unwittingly assume personal responsibility and culpability if things do go wrong.
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