In Brett v Environment Agency, the appellant appealed against penalty notices served on him by the Environment Agency under the Fluorinated Greenhouse Gases Regulations SI 2015/310, for various breaches of Assimilated Regulation 517/2014, on fluorinated greenhouse gases.
The Assimilated Regulation aims to control emissions of fluorinated greenhouse gases, including hydrofluorocarbons (HFCs). In particular, it prohibits the bulk importation or production of HFCs unless the importer or producer holds a sufficient quota.
Although the instant appeals concerned the regulatory regime in place before the UK withdrew from the EU, the same strict requirements applied under the post-brexit legislation. The 2015 Regulations empowered the Environment Agency to impose civil penalties for breaches. In deciding whether to impose a penalty, and how much to impose, the Environment Agency applied its Enforcement and Sanctions Policy (ESP).
The appellant ran a small business and twelve penalty notices totalling over £1 million had been imposed on him for placing HFCs on the market contrary to the Assimilated Regulation. The breaches included:
In calculating the penalties, the Environment Agency considered the breaches to have been deliberate and took into account as an aggravating factor the financial gain which it believed the appellant had made as a result of those breaches. They believed that gain to amount to some £400,000 and imposed penalties of £200,000 for each of the five breaches. That reflected an upwards adjustment outside the penalty range set out in the ESP, up to the statutory maximum.
The main issues were whether:
There was no binding authority on how the tribunal should approach the 2015 Regulations. They allowed an appeal to be pursued on the ground that the Environment Agency's decision was:
In deciding whether grounds for an appeal were made, the tribunal had to give appropriate weight to the view taken by the Environment Agency as the Parliamentary-appointed regulator. Once it found a ground to be made out on the balance of probabilities, the 2015 Regulations enabled it to decide how the Environment Agency should have exercised its discretion and empowered it to exercise that discretion for itself.
Regarding the breach of placing non-refillable containers on the market contrary to the Assimilated Regulation, the tribunal considered that the appellant sold refillable, but non-returnable cylinders. The Assimilated Regulation did not prohibit the sale of that type of cylinder. The appeal would therefore be allowed insofar as it related to this breach.
The appellant's remaining breaches were deliberate in the sense that he had deliberately failed to put in place, and enforce, systems that could reasonable be expected to have enabled him to avoid committing the relevant breaches. He knew that he had to have a quote for imported HFCs and he knew that he had reporting and record-keeping obligations. He however chose not to ascertain the extent of those obligations.
In regards to financial gain, the Environment Agency had taken its figures from HMRC's records of customs declarations, and it was common ground that those records accurately reproduced what the appellant had declared. The figures were reliable, and the appellant's assertions to the contrary were not sufficient to outweigh them or supported by evidence. It was important that businesses should not profit from breaching the regime, so where any financial gain resulting from a breach significantly exceeded the penalty range, it was appropriate to increase the penalty accordingly.
When considering proportionality, the tribunal concluded that the appellant had caused a very large amount of HFCs to be put into the atmosphere and above quota on which the scheme was based. His breaches were part of a three-year course of non-compliance, and he had shown no remorse for the environmental damage caused by his conduct. Although he had health issues and claimed to be in financial difficulty, the penalties were still appropriate.
The ESP did leave room for the exercise of discretion on compassionate grounds, and compassionate circumstances might justify waiving or reducing a penalty where the breach was minor and the business was otherwise complaint, especially where there was sole proprietor with unlimited liability. However, any compassionate circumstances in the appellant's case were outweighed by the public interest in ensuring that businesses operate lawfully and within the bounds of the regime.
"In conclusion, we therefore allow appeal GGE/2022/0044 on the basis that the Environment Agency's was based on an error of fact. None of the grounds at Schedule 5, Paragraph 4(2) of the 2015 regulations are made out in relation to the appeals".
The appeal was allowed in part.
