Tribunal Considers Appeal Against Civil Penalty for ESOS Non-Compliance in Marshell Oil LLP v Environment Agency

Citation: [2023] UKFTT 948 (GRC)
Judgment on

Introduction

In the case of Marshell Oil LLP v Environment Agency, the First-tier Tribunal (General Regulatory Chamber) considered an appeal against a civil penalty issued under the Energy Savings Opportunity Scheme Regulations 2014 (“the Regulations”). The decision was delivered on the basis of written representations and addressed several key legal and procedural topics.

Key Facts

Marshell Oil LLP (“the Appellant”) appealed against a civil penalty of £67,500 imposed by the Environment Agency (“the Respondent”) for failing to carry out an ESOS assessment and report the assessment in compliance with Part 4 and 5 of the Regulations. The Appellant’s appeal was made out of time, citing administrative issues with their corporate administration undertaken by a third party and a shared registered office with numerous other entities. After considering the circumstances, including an email from the Respondent’s employee and the overriding objective to deal with cases fairly and justly, the Tribunal permitted the appeal to be accepted out of time.

The Appellant challenged the civil penalty on grounds that it was unreasonable, arguing that the Respondent failed to adequately consider the mitigating factors, including the actual or potential harm, the Appellant’s size, and their subsequent compliance efforts. The Respondent maintained that they followed the published guidance and the penalty was justifiable.

The Tribunal reinforced several key legal principles:

  1. Appeal Out of Time: Appeals must be made within specific time frames unless reasonable justification for the delay can be demonstrated. In this case, the Appellant successfully showed the delay was due to administrative issues beyond their control, resulting in the Tribunal allowing the appeal to proceed out of time.

  2. Interpretation of ‘Unreasonable’: In assessing whether the penalty was unreasonable, the Tribunal considered if it was excessive, unfair, or unsound when considering the circumstances.

  3. Culpability and Size Assessment: The Tribunal scrutinized the Respondent’s categorization of the Appellant’s culpability and the determination of its size at the time of the breach. The Tribunal found that the Respondent’s assessment of the Appellant as “negligent” was reasonable, whereas the use of the wrong date to assess the size of the Appellant was incorrect.

  4. Mitigation and Penalty: The Tribunal highlighted the importance of considering mitigating factors, such as acceptance of responsibility, lack of environmental harm, and steps taken to prevent future breaches. It agreed that these factors can lead to a reduction in the penalty.

  5. Setting of Penalties: The Tribunal remarked that the stepped approach, mirroring the Definitive Guideline for the Sentencing of Environmental Offences, was a sound basis for determining penalties if correctly applied.

Outcomes

The Tribunal partly allowed the appeal, modifying the starting point and penalty range to reflect that the Appellant was a medium-size organization rather than a large one at the time of the penalty notice. It also considered the Appellant’s mitigation and adjusted the penalty to £20,000, to be paid by a specified date.

Conclusion

The Tribunal’s decision in Marshell Oil LLP v Environment Agency exemplifies the careful consideration that must be given to several factors when determining the reasonableness of a civil penalty. The case underlines the significance of timely appeals, the Tribunal’s discretion in accepting out-of-time appeals, the assessment of culpability, organization size at the time of the penalty, and the importance of considering mitigating factors in setting penalties. The Tribunal demonstrated a clear application of the Regulations and its Enforcement and Sanctions Policy, while also providing relief where the Respondent’s assessment failed to accurately reflect the circumstances and actions of the Appellant.

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