Autumn 2007

In this issueCorporate manslaughter from next AprilAdministration orders and disputed debts – a Pro-fit for creditors?Lasting Powers of AttorneyWitches, murderers and othersBusiness Lease RenewalsThe Negligent Professional

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Corporate manslaughter from next April

The Corporate Manslaughter and Corporate Homicide Act 2007 was finally given royal assent on 26 July 2007, ten years after the Government’s original proposal to introduce this Act.

The Act creates an entirely new offence of corporate manslaughter in England and Wales (corporate homicide in Scotland). Previously it had only been possible for a company to be convicted of manslaughter where the “directing mind” of the company (i.e. a senior director of the company) was also personally guilty of the offence, and then only if the director was sufficiently senior and influential in the company as to be identified with it so that his personal actions and omissions became the actions and omissions of the company. This excluded the possibility of a successful manslaughter prosecution based on organisational failure as opposed to the failure of one individual. Many organisations could not be prosecuted at all, for example government departments (because of the doctrine of Crown immunity) and partnerships (because they are not an independent legal identity). Note the following:

• The new law applies only to corporate bodies, so for example it would not be possible for a managing director to be prosecuted for corporate manslaughter, although there would be no reason for an “ordinary” manslaughter charge not to be brought against a director in appropriate circumstances even if his company has also been separately charged with corporate manslaughter.
• Liability for corporate manslaughter following a death will be dependent on a finding of gross negligence on the part of the corporate body.
• A prosecution can only arise where it is shown that the corporate body owed a duty of care to the victim e.g. the duty owed by an employer to his employees, by a transport company to its passengers, or by an occupier of buildings to visitors or trespassers. The Act sets out in detail the duties of care which are relevant for the Act, and there are many specific exemptions. For example, the Act does not apply to the emergency services when responding to emergencies, to the conduct or preparation of military operations, or to regulatory activities by enforcing authorities such as the Health and Safety Executive. The Act will however cover all commercial organisations, and the House of Lords insisted against the Government’s wishes that the Act also be extended to cover deaths in custody, including police and prison custody.
• Where the court finds that the organisation owed a relevant duty of care to the deceased victim, the jury will be asked to find whether the breach of duty was so gross as to justify a conviction for corporate manslaughter. The test will be whether the conduct of the organisation was so far below what could reasonably have been expected as to be described as a gross breach.
• The traditional objection to prosecuting a company for murder or manslaughter remains: a company cannot be subject to a custodial sentence. The new offence will carry an unlimited fine at the Court’s discretion, and it also introduces powers for the Court to order the organisation to remedy the management failure which was found to lead to the death. Failure to comply with a remedial Order would be another serious offence.
• Professionals will be interested to note that the Act expressly provides for partnerships to be treated as though they owe the same duties of care as a corporate body for the purpose of this offence.

What is the point of the new offence? Those supporting the change have argued for some time that the bigger the company the more difficult to bring home a charge of manslaughter. Everyone along the chain of responsibility could plead lack of knowledge and awareness of the problem. The new law creates a level playing field between corporate bodies, and will also undoubtedly increase the gravity and stigma attached to what is basically a health and safety prosecution. Individual directors should also tread very carefully if involved with a company which has been convicted of a manslaughter offence. The prospects of careless management leading to personal prosecutions against directors in the event of a future fatal accident would clearly be greatly enhanced.

The Act takes effect from 6 April 2008 with the exception of the provisions covering deaths in custody, which are likely to come into effect (if ever) between three and five years from now.

For further information or assistance on regulatory law please contact Judith Kelly by email jhk@meadeking.co.uk or by telephone 0117 (926) 4121.

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Administration orders and disputed debts – a Pro-fit for creditors?

On 17 August in Hammonds (A Firm) v Pro-fit USA Ltd the High Court held that it is possible for a creditor to obtain an administration order against a debtor company despite its debt being disputed, provided that it has a good arguable case that £750 is owed and the company is likely to be insolvent.

In liquidation cases the courts have long taken the view that if a creditor’s debt is disputed then it cannot form the basis of a winding up petition, and must be the subject of contested proceedings.

Until Pro-fit it had been assumed that the practice in liquidation should apply in relation to applications for administration orders. It was held in Pro-fit that as the purpose of administration was entirely different to that of liquidation there was no good reason to apply the same approach to both. To understand why the court took this view it is helpful to look at the two procedures:

Liquidation represents the end of the road for a company - a mechanism to bring the existence of the company to an end.

Administration on the other hand is seen as an alternative to liquidation - a rescue mechanism designed to achieve certain statutory outcomes.

In light of these fundamental differences, the court held that there was no good reason to impose the practice in liquidation upon the administration regime.

The decision in Pro-fit will be welcomed by many creditors as creating a new and potentially highly effective means to exert pressure on corporate debtors.

If you have any concerns about liquidation or administration or other insolvency issues, please contact Keith Mahoney on kwm@meadeking.co.uk or by telephone on 0117 926 4121

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Lasting Powers of Attorney

With effect from 1 October 2007 clients will be able to make a new type of Power of Attorney – a Lasting Power of Attorney (LPA).

An LPA authorises one person (or more) the attorney(s) to act on behalf of another, the donor. There are two types:

LPA for Property and Affairs – allows your chosen attorneys to deal with your financial property and affairs, as specified within the document. This can be used with the consent of the donor if the donor has mental capacity.

LPA for Welfare – allows your attorney to make welfare and health care decisions upon your behalf but the document can only be used if/when the donor lacks mental capacity.

Who should I appoint as an Attorney?

It is important that you appoint an attorney that you know and trust to deal with your affairs and who has the appropriate skills to make prudent financial decisions on your behalf. Many clients may wish to appoint either members of their family or their solicitor or accountant. The attorney must be over the age of 18 years and must have full mental capacity themselves.

More than one attorney can act and if you chose to appoint more than one, then the attorneys can act jointly or jointly and severally.

The attorney must act in accordance with the statutory principles of the Mental Capacity Act and the Code of Practice and must sign a certificate in the power itself stating that they have read and understood the Code and agree to act in accordance with its terms.

What happens once the LPA has been signed?

The LPA needs to be signed by the donor and then the attorney. It must then be certified by a qualified person (e.g. a solicitor or a doctor) that the donor understands the nature and scope of the LPA and entered into it of his/her own free will.

Before the attorney can act, the LPA has to be registered with the Office of Public Guardian (formerly the Public Guardianship Office). The LPA can be registered at any time whether or not the donor has lost mental capacity.

What happens if an attorney abuses his power?

The Office of Public Guardian has a supervisory role for attorneys. The Code suggests that there are certain matters which may raise suspicion for example, obstructing friends and visitors from visiting the donor, unpaid bills and residential care home fees, transfer of assets abroad and unexplained changes in the donor’s living arrangements.

The Office of the Public Guardian has a variety of options available to it if suspicions have been raised with them. For example they can send a Court of Protection Visitor to visit the attorney and the donor to investigate the matter, and in serious cases the matter can be referred to the Court of Protection. The Court can make an order where the attorney has abused their power or failed to act in the best interests of the donor.

I have an Enduring Power of Attorney (EPA) – what will happen to this?

An EPA that has been validly executed before 1 October 2007 will continue to have legal effect.

For further information, please contact Anna Molter at am@meadeking.co.uk or on 0117 9264121.

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Witches, murderers and others

238,546 Employment Tribunal cases were brought between 1 April 2006 and 31 March 2007 representing a 15% increase on the previous year’s figures. Here is a selection of the more unusual:

• A convicted murderer who had served his time and was working as a health inspector for Preston City Council threatened a colleague with an axe during an argument at an Indian restaurant in 2001. The Council, not unreasonably you might think, terminated his employment without notice. He sued for breach of contract successfully and was awarded two week’s wages amounting to £807.50.
• A lesbian shop worker who was sacked for violent and insulting behaviour after throwing a bag of flower at a customer’s head after he told her to “get your sex life sorted out” won her claim for unfair dismissal. The customer also called her a “filthy dyke” but her other claims for breach of contract and discrimination on the grounds of sexual orientation were lost.
• A waitress was awarded £17,618.00 for unfair dismissal and sexual harassment after suffering taunts and lewd remarks over the colour of her hair. She said “it is not nice to be ginger”.
• A teaching assistant in Brighton claimed unfair dismissal against the school claiming that she had been dismissed because she was a witch and had been made to “feel like a freak” after she had been forbidden from wearing a pentagram. The school claimed she had been dismissed for poor attendance. The claim was settled prior to the final hearing.
• Conversely, a teaching assistant who resigned brought a claim for religious discrimination alleging that the school had discriminated against her Pentecostal Christian beliefs after she had been disciplined for refusing to let a child read Harry Potter. She had claimed it was glorified witchcraft. She lost.

For more information please contact Nicola W Hughes on 0117 926 4121 or by email at nwh@meadeking.co.uk

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Business Lease Renewals

Since 1 June 2004 when the reforms of Part II of the Landlord and Tenant Act 1954 came into force, the landlord, as well as the tenant, has been able to apply to the court for an order granting to the tenant a new lease. That right was given as a substitute for the strict time limits which previously had to be observed by a tenant and give the landlord the opportunity to find out the tenant’s intentions at an early stage and to limit any delay.

There could be no question of the tenant being lumbered with a tenancy he does not want so the regulations provide that if the landlord makes an application and the tenant notifies the court that he does not want a new tenancy, the court must dismiss the landlord’s application.

However, the regulations do not say which party is to be responsible for the costs of the application in those circumstances and so that question had to be decided recently by the Court of Appeal in Trustees of the Portman Estate v Littlestone Martin Glenton [2007] EWCA Civ 464.

In that case, the landlord and tenant had been in negotiation for a new tenancy for some time, but were getting nowhere so the landlord served a six months’ statutory notice terminating the tenancy and made an application for renewal less than three weeks later. The tenant filed an acknowledgment of service, agreeing to the grant of a new lease, but disputing the terms. Subsequently the tenant found other premises and told the court that he did not want a new lease.

At first instance the judge made no order for costs (i.e. decided that each party should bear their own) because he regarded the proceedings as having been compromised. The landlord, who had incurred more of the costs, was not happy with that decision and appealed to the CA.

The CA decided that the proceedings had not been compromised but rather that the tenant had made a unilateral decision which was equivalent to a discontinuance. Normally that would justify an order for costs in favour of the landlord and the court found there was no reason to justify a departure from the normal order in the circumstances of this case. Particular emphasis was placed on the fact that the tenant had entered an acknowledgment of service by which, the court said “...the defendants were, in effect, themselves launching proceedings for the granting of a new tenancy but upon terms more favourable to them than the claimants were prepared to offer”.

It remains to be seen whether this will encourage landlords to start proceedings rather than wait for tenants to lodge their applications near the end of the s.25 notice period. A landlord would seem to have little to lose by doing so where a tenant is unwilling to enter into negotiations for a new tenancy or is delaying those negotiations.

For further information on Commercial Property please contact Peter Watkin by telephone on 0117 926 4121 or by email on pjw@meadeking.co.uk

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The Negligent Professional

This is the second in a series of articles covering various aspects of professional negligence.

In the summer edition of The Orchard it was explained that in order to establish a claim in professional negligence, it is necessary to prove that:

• the professional owes of a duty of care;
• the professional is in breach of that duty;
• the client has suffered a loss;
• the breach of duty has caused the loss (causation); and
• the claim is brought in time (ie is not barred by limitation).

The summer article dealt with the existence of a duty of care. This article explains the broad principles necessary to establish that the professional is in breach of that duty in his dealings with his client. (Subsequent editions will deal with the liability of a professional to third parties and the issues of loss, causation and limitation). Inevitably it can only provide a brief snapshot of those principles and show some examples of the way they operate in practice.

Most claims made in professional negligence are brought by clients of the defendant.
It is important to bear in mind that not every “mistake” gives rise to a claim in negligence or even is sufficient to establish a breach of duty. A professional will be negligent if he fails to achieve the standard of skill and care to be expected of a reasonably competent professional.

The yardstick by which a Defendant falls to be judged in a professional negligence action was classically stated in Bolam v Friern Hospital Management Committee:¹

“…where you get a situation which involves the use of some special skill or competence, then a test whether there has been negligence or not is … the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess the highest expert skill; it is well established law that it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular art.”

The standard should not be set too high.

“No matter what profession it may be, common law does not impose on those who practice it any liability for damage resulting from what in the result turns out to be errors of judgement, unless the error was such as no reasonably well informed and competent member of that profession could have made”.²

These classic definitions can be more easily stated than applied. There are various relevant factors:

• Expertise of the professional. The standard of care may vary dependent upon the extent to which the professional holds himself out as specialised in a given area. Thus, a doctor should be judged by the reasonable standards of the speciality in which he practices.
  
  “The language of the Bolam test clearly requires a different degree of skill from a specialist in his own special field than from a general practitioner”.
  
  Equally however, if a general practitioner has a special expertise in, say, obstetrics or anaesthetics, he or she will be judged by that standard.
• Nature of the client. The nature and experience of the client is an important consideration. In Yager v Fishman & Co and Teff & Teff ³ the Court of Appeal held that in the absence of specific instructions from the client, it was no part of the solicitor’s normal duty to remind an experienced businessman that a date for exercising an option in a commercial lease was approaching. Conversely, in R P Howard v Widman Matthews⁴ the Court held that solicitors acting for a small businessman were under an obligation to give him clear advice by reminding him of impending and crucial dates under the Landlord and Tenant Act.
• Urgency. A different standard of care may be appropriate in cases of urgency. The courts are often reluctant to allow a professional to raise a defence based on the fact that he had inadequate time to investigate the matter since he would normally be expected to advise the client of the consequences of proceeding with undue haste. Different considerations may apply to those who have to exercise their judgment in circumstances where they cannot avoid making immediate decisions: the surgeon during an operation or the advocate in court. In Hall v Simons⁵ the position was summarised as follows:
  
  “The standard of care to be applied in negligence actions against an advocate is the same as that applicable to any other skilled professional who has to work in an environment where decisions and exercises of judgement have to be made in often difficult and time-constrained circumstances. It requires [the Claimant] to show that the error was one which no reasonably competent member of the relevant profession would have made”.
• Costs constraints. Should the professional be able to argue that a cut-price service can justify a lower standard of care? There are few decided cases but the likelihood is that other than in exceptional circumstances a cheap service cannot justify a reduced quality of performance. In that respect a cut-price conveyancer is no different from a roofing contractor who cannot generally be allowed to defend a claim for damages for shoddy workmanship on the basis that the customer got what he paid for.

Many cases of professional negligence require expert evidence to determine whether the professional has fallen short of the permitted standard of care. In Bolam itself the Court determined that:

“A doctor is not guilty of negligence if he has acted in accordance with a practice accepted as proper by a responsible body of medical men skilled in that particular art”.

But what happens when expert opinion conflicts with one expert (for the claimant client) contending that the advice given (or action taken) by the professional was wrong and another expert (for the defendant professional) alleging that it was appropriate? Unless the evidence of the expert is unreliable, the likelihood is that the defendant will avoid liability. In Maynard v West Regional Health Authority⁶ it was stated that:

“… a doctor who professes to exercise a special skill must exercise the ordinary skill of his speciality. Differences of opinion and practice exist and will always exist in the medical as in other professions. There is seldom any one answer exclusive of all others to problems of professional judgment. A court may prefer one body of opinion to the other: but that is not basis for a conclusion of negligence”.

Adam Chivers is a regional committee member of the Professional Negligence Lawyers Association; a group of solicitors dedicated to the provision of expert advice to claimants in professional negligence cases. He can be contacted on 0117 923 4028 or ajc@meadeking.co.uk

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(1) [1957] 2 All ER 118
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(2) Saif Ali v Sidney Mitchell & Co [1980] AC198 at 220D
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(3) [1944] 1 All ER 552
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(4) [1983] BCLC17
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(5) [2003] BWLR543
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(6) 1984] WLR 634
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