High Court Case Examines Challenge to Compliance Assessment Reports (CARs) by Suez Recycling and Recovery UK Ltd

Citation: [2023] EWHC 3012 (Admin)
Judgment on

Introduction

The High Court case of Suez Recycling and Recovery UK Ltd v Environment Agency ([2023] EWHC 3012 (Admin)) raised critical issues surrounding Compliance Assessment Reports (CARs), specifically how entities can challenge the findings within such reports. This article delves into the legal principles the Court applied in deciding whether the Environment Agency (the Agency) complied with its obligations under the Legislative and Regulatory Reform Act 2006 and the Regulators’ Code when issuing CARs for the Byker Reclamation Plant, managed by Suez.

Key Facts

Suez, the claimant, operates the Byker Reclamation Plant and is regulated by the Environment Agency, the defendant. The plant was the subject of two adverse CARs, which recorded significant breaches of the Plant’s environmental permit regarding odour levels. These breaches resulted in an increased Subsistence Payment for Suez, which Suez sought to challenge both on their lawfulness and merits.

Three main issues were addressed:

  1. The Agency’s duty to provide a right of appeal against CAR decisions under the Legislative and Regulatory Reform Act 2006 in relation to the Regulators’ Code.
  2. Whether common law procedural fairness required the Agency to provide a right of appeal against CAR decisions.
  3. The lawfulness of the odour assessments within the CARs, encompassing the officers’ decision-making process and whether it was influenced by mistake, error of fact, or irrationality.

Right of Appeal and the Regulators’ Code

The case centred on the interpretation of “regulatory decision” within the Regulators’ Code and whether such decisions require an appeal mechanism. Fordham J rejected the Agency’s narrow interpretation that an appeal is only required for decisions imposing mandatory obligations. Instead, the Court found that any decision, made in the exercise of a regulatory function which is adverse to a regulated person, falls within the scope of “regulatory decision” and thus requires an appeal mechanism under the 2014 Code, unless there is a reasoned departure recorded by the regulator.

Common Law Procedural Fairness

The argument that common law procedural fairness dictates a requirement for a merits-based appeal against CAR decisions was not upheld. The Court reasoned that procedural fairness is context-specific and did not agree that every adverse CAR, by default, should come with a right to a merits re-evaluation.

Reasonableness of Odour Assessments

When assessing the lawfulness of the CARs, the Court took into account the reasonableness of the Agency officers’ investigations and decisions. Despite Suez’s contention that the investigation was inadequate and failed to comply with internal guidance because the officers did not visit the plant or its buildings, the Court held that the Agency acted reasonably and in compliance with the applicable pandemic guidance at the time.

Outcomes

The Court ruled that:

  1. The Agency’s interpretation of “regulatory decision” was incorrect as it was not limited to decisions imposing a mandatory obligation.
  2. Common law procedural fairness provides no additional right to a merits re-evaluation appeal.
  3. The Agency’s officers acted lawfully in their odour assessments and decision-making regarding CAR1 and CAR2.

The Court granted Suez relief by quashing the Stage 2A decision and remanding Suez’s challenge to CAR1 and CAR2 for reconsideration by the Agency.

Conclusion

The Suez case sheds light on the interpretative challenges posed by the Regulators’ Code and the Agency’s obligations when making regulatory decisions. It clarifies the breadth of the term “regulatory decision” and emphasizes the necessity for agencies to faithfully follow statutory codes or record reasoned departures. Moreover, the decision underscores the Court’s tendency to afford a measure of deference to the judgment of regulatory bodies, provided their actions fit within the bounds of reasonableness. This case will serve as an important reference point for future challenges regarding regulatory decisions under the Legislative and Regulatory Reform Act 2006.