First-tier Tribunal Upholds Environment Agency Penalty in Safeguard World International Holdings Limited Case Under ESOS Regulations 2014

Citation: [2024] UKFTT 34 (GRC)
Judgment on

Introduction

The case of Safeguard World International Holdings Limited v Environment Agency presents an appeal to the First-tier Tribunal (General Regulatory Chamber) regarding a penalty notice issued under regulation 39 of the Energy Savings Opportunity Scheme (ESOS) Regulations 2014. This analysis will dissect the case law, identifying the pivotal topics discussed, and exemplify the legal principles applied, with direct references to the case summary.

Key Facts

Safeguard World International Holdings Limited (“Safeguard”) was penalized for its failure to adhere to the requirements of ESOS, a mandatory assessment and energy-saving initiative. The company was categorized as a ‘large undertaking’ and was therefore obligated to comply with the ESOS regulations. Safeguard failed to respond to compliance and enforcement notices and did not take steps mandated by the Environment Agency. Consequently, a penalty notice was served, which Safeguard appealed on the basis that the amount was “unreasonably high.”

The tribunal applied several legal principles in its reasoning:

  • Nature of Breach and Culpability: Regulation 46 outlines the penalties for failure to comply with notices. The agency categorized Safeguard’s non-compliance as ‘negligent,’ indicating a failure to implement and enforce adequate systems, leading to the commission of the offense.

  • Size of the Organisation: As a ‘large’ organization with over £50 million turnover, the penalty calculation reflects Safeguard’s substantial economic resources.

  • Aggravating and Mitigating Factors: The Environment Agency considered Safeguard’s failure to respond to communications and continued non-compliance as aggravating factors. However, it also acknowledged mitigating factors, such as Safeguard’s apology, acknowledgment of compliance obligations, and initial steps taken towards compliance post-notice.

  • Reasonableness: Following the guidance of Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223, ‘unreasonable’ here refers to its everyday meaning — unfair, unsound, or excessive — but a more nuanced interpretation is applied, balanced against the Environment Agency’s specialist role.

  • Discretion: The tribunal’s discretion under regulation 50(b) allows for modification of the penalty notice as it seems fit, provided it does not deviate from being ‘reasonable.‘

Outcomes

The Tribunal dismissed the appeal, holding that there was nothing unreasonable in the Environment Agency’s decision to serve the penalty notice and the amount established. The penalty was within the appropriate range, and the Agency was justified in scaling the penalty amount based on aggravating and mitigating factors.

Conclusion

In the case of Safeguard v Environment Agency, the tribunal maintained the decision of the Environment Agency, affirming the penalty imposed on Safeguard for their non-compliance with ESOS regulations. It confirmed that the penalty notice adhered to the principles outlined in the Energy Savings Opportunity Scheme Regulations 2014 and the agency’s Enforcement and Sanctions Policy. The tribunal found no error in the Agency’s exercise of its discretion and assessment of the penalty, taking the view that the regulatory body’s expertise and understanding of maintaining the integrity and effectiveness of the scheme must be accorded due respect. The appeal was consequently dismissed, upholding the principle that entities must adhere to regulatory frameworks, especially in relation to mandatory environmental compliance schemes.