Scania (Great Britain) Limited v Environment Agency
[2023] UKFTT 947 (GRC)
AGCO Limited v Environment Agency
21 March 2024
[2024] UKFTT 241 (GRC)
First-tier Tribunal
A company was fined for breaking environmental rules. The government agency used a very high price to calculate the fine, making it much larger than it should have been. A judge decided the fine was too big and reduced it.
Key Facts
- •AGCO Limited appealed a £95,025 civil penalty notice from the Environment Agency for breaching F-gas regulations by placing equipment with HFCs on the market without sufficient quota authorisations.
- •The Environment Agency calculated the penalty based on the maximum cost of a quota authorisation (£25) in 2021, multiplied by the number of missing authorisations, to eliminate any potential financial gain from non-compliance.
- •AGCO argued that the Environment Agency's method was unlawful, arbitrary, and unfair, as the £25 figure was an outlier, and using the median price would be more appropriate.
- •The Tribunal found that the Environment Agency's methodology was unreasonable and disproportionate, as it led to a penalty over 50% higher than the starting point suggested by its own Enforcement and Sanctions Policy (ESP).
Legal Principles
The Tribunal has the power to review the Environment Agency's exercise of discretion in imposing penalties under the Fluorinated Greenhouse Gases Regulations 2015.
Schedule 5, paragraph 4(2) of the 2015 Regulations; Paragraph 1(5) of Schedule 1.
The Tribunal must afford appropriate weight to the Environment Agency's view, considering its expertise and responsibility for administering the scheme.
Hesham Ali v Secretary of State for the Home Department [2016] UKSC 60 at [45].
'Unreasonable' in the context of the appeal grounds does not mean unreasonableness in the classic public law sense (Wednesbury unreasonableness), but rather unfair, unsound, or excessive.
Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223.
The Environment Agency is entitled to use a reasonable and workable method to ensure no financial gain from non-compliance, but this method must be proportionate and based on likely costs, not an outlier.
Sections 26-29, analyzing the Environment Agency's methodology and the ESP.
Outcomes
The appeal was allowed.
The Tribunal found the Environment Agency's use of the maximum (£25) authorisation cost to calculate financial gain was unreasonable and disproportionate, leading to an excessive penalty. The methodology disregarded the ESP's suggested starting point and failed to consider the likelihood of AGCO paying such a high price.
The Tribunal substituted a penalty notice of £60,000.
This amount reflects the starting point determined by the Environment Agency's own process (uncontested by AGCO), without the unreasonable addition based on the maximum authorisation cost.