Legal advice: Corporate accountability

So as a company representative, just because you were not aware of an incident - not present during a failed test purchase, say - this may not be defence enough against prosecution. The higher up you are in the management structure, the more likely you are to be in the frame.

If a company holds a premises licence, it is more likely nowadays than previously to be considered liable for the actions of its employees. It has been successfully argued in the past in relation to sales of alcohol to children that it was the individual who committed the offence who should be prosecuted, not the company.

Corporate mismanagement will no longer be tolerated

But the tide is turning and authorities are increasingly looking to book senior management for the offences of staff in their control. This is partly to punish those responsible for managerial strategies that lead to the offence, but also to show that corporate mis-management will no longer be tolerated.

This approach is assisted by the new office created by the government under the Violent Crime Reduction Act 2006. This creates a new Section 147a of the Licensing Act which in turn creates a new offence of persistently selling alcohol to children. (We dealt with the detail of this section in a May issue of The Publican).

Baroness Scotland, Minister of State for the Home Office, captured the mood when she commented, prior to the new section becoming law, that: "Finally on alcohol, the bill introduces a new offence of persistently selling alcohol to children.

"That new offence will create a powerful deterrent by ensuring that sanctions are directed against the business, not just the individuals making the sales."

Section 187 of the Licensing Act 2003 deals with corporate accountability. Anyone in the management structure of a company can be held liable for an offence committed by the company. This will apply to all offences in the Act where the premises licence holder is listed as one of the potential defendants - e.g. selling alcohol to someone who is drunk.

A number of the offences under the Licensing Act carry significant fines and, in some cases, prison sentences.

If you manage premises, are the designated premises supervisor, area manager, an officer of the company, or even a director, you could conceivably be held liable for the acts of your staff if those acts were done with your endorsement or, because of a failure on your part, not prevented. Clearly, the enforcement agencies are more likely to attempt to prosecute up the chain if they perceive that the company is not taking its duties to prevent violations of the law seriously.

Management and staff should be properlly informed and trained

The way to prevent such prosecution, or at least to mitigate any penalty, is to show that the management of premises is 'top down', with systems and training implemented and properly documented so that management and staff can be shown to be properly informed and trained.

It goes without saying that putting systems and training in place is only effective if they are properly undertaken and adhered to.

In many cases, a defence of 'due diligence' exists that allows companies to show they had put in place and effectively monitored systems to prevent incidents or breaches occurring. While not always a cast-iron defence, this does help to mitigate against the more draconian penalties being handed out.

Interestingly, though, as far as the offence of persistently selling alcohol to children is concerned, the due diligence defence is only available to the individual who made the sale.

Finally, it is worth bearing in mind that three of the five enforcement priorities identified in the National Enforcement Priorities for Local Authority Regulatory Services document issued in March are alcohol licensing, food hygiene and workplace health. This means there will be more scrutiny of pubs and restaurants in the immediate future, which means more potential prosecutions to be concerned about.

---

Joelson Wilson & Co specialise in all aspects of legal work covering liquor, entertainment, betting and gaming. The firm also offers advice on litigious matters, acquisitions and disposals and management agreements. The views expressed are given without any assumption of responsibility.