Sutton v Norwich City Council

This is an appeal from a decision released by the Upper Tribunal (Lands Chamber) (Martin Rodger QC, Deputy Chamber President, and Peter D McCrea FRICS) (“the

Part I of the 2004 Act introduced a new system for assessing the condition of “residential premises” and enforcing housing standards in relation to such premises. The expression “residential premises” is defined in section 1 in such a way as to include an “HMO”, i.e. a “house in multiple occupation” within the meaning given in section 254 of the 2004 Act.

Sections 11 and 12 of the 2004 Act empower, and in more serious cases require, a local housing authority to serve an improvement notice in respect of a “hazard”. By section 2, “hazard” means “any risk of harm to the health or safety of an actual or potential occupier of a dwelling or HMO which arises from a deficiency in the dwelling or HMO or in any building or land in the vicinity (whether the deficiency arises as a result of the construction of any building, an absence of maintenance or repair, or otherwise)”. An improvement notice requires the person on whom it is served to take such remedial action in respect of the hazard concerned as is specified in the notice: see sections 11(2) and 12(2).

Someone on whom an improvement notice is served may appeal to the First-tier Tribunal (“the FTT”) in accordance with schedule 1 to the 2004 Act. In the absence of an appeal, however, an improvement notice normally becomes operative 21 days after it is served: section 15(2). In that event, the person on whom it was served commits a criminal offence if he fails to comply with it without a reasonable excuse: section 30. Where the recipient of an improvement notice is a body corporate, officers and managers may also be guilty of the offence if it was committed with their consent or connivance or is attributable to any neglect on their part. In that connection, section 251(1) provides:

“Where an offence under this Act committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of–

(a)

a director, manager, secretary or other similar officer of the body corporate, or

(b)

a person purporting to act in such a capacity,

he as well as the body corporate commits the offence and is liable to be proceeded against and punished accordingly.”

The 2007 Regulations were made under section 234 of the 2004 Act, which provides for regulations to “make provision for the purpose of ensuring that, in respect of every house in multiple occupation of a description specified in the regulations– (a) there are in place satisfactory management arrangements; and (b) satisfactory standards of management are observed”. A person commits an offence if he fails to comply with a regulation made under section 234, and section 251 once again applies. A company director thus commits an offence if the company commits an offence with his consent or connivance or the offence is attributable to any neglect on his part.

Regulations 2-11 of the 2007 Regulations apply to any HMO in England to which section 257 of the 2004 Act is applicable: see regulation 1(2). Such an HMO (“a section 257 HMO”) is a building which has been converted into, and consists of, selfcontained flats and in respect of which:

“(a)

building work undertaken in connection with the conversion did not comply with the appropriate building standards and still does not comply with them; and

(b)

less than two-thirds of the self-contained flats are owneroccupied”.

As the UT noted in paragraph 50 of its decision, the evident object of section 257 was “to bring converted blocks of flats which do not satisfy modern building standards within the scope of regulation under the 2004 Act”.

The relevant parts of the 2007 Regulations for present purposes are regulations 4, 5, 7, 8 and 10. Regulation 4 is in these terms:

“The manager must ensure that his name, address and any telephone contact number are clearly displayed in a prominent position in the common parts of the HMO so that they may be seen by all occupiers.”

So far as material, regulation 5 provides:

“(1)

The manager must ensure that all means of escape from fire in the HMO are—

…

(b)

maintained in good order and repair.

…

(4)

The manager must take all such measures as are reasonably required to protect the occupiers of the HMO from injury, having regard to— (a) the design of the HMO;

Regulation 8 imposes a duty to maintain common parts, fixtures, fittings and appliances. By regulation 8(4):

“The manager must ensure that—

outbuildings, yards and forecourts which are used in common by two or more households living within the HMO are maintained in repair, clean condition and good order….” Regulation 10 reads:

“The manager must—

(a)

ensure that sufficient bins or other suitable receptacles are provided that are adequate for the requirements of each household occupying the HMO for the storage of refuse and litter pending their disposal; and

(b)

make such further arrangements for the disposal of refuse and litter from the HMO as may be necessary, having regard to any service for such disposal provided by the local authority.”

Under regulation 2(c) of the 2007 Regulations, “the manager” is defined (“uninformatively”, as the UT noted in paragraph 51 of its decision), to mean “the person managing the HMO”.

With effect from April 2017, the 2004 Act was amended by the Housing and Planning Act 2016 to include a new provision, section 249A. This is in these terms:

“(1)

The local housing authority may impose a financial penalty on a person if satisfied, beyond reasonable doubt, that the person’s conduct amounts to a relevant housing offence in respect of premises in England.

(2)

In this section ‘relevant housing offence’ means an offence under—

(a)

section 30 (failure to comply with improvement notice),

… or

(e)

section 234 (management regulations in respect of HMOs).

(3)

Only one financial penalty under this section may be imposed on a person in respect of the same conduct.

(4)

The amount of a financial penalty imposed under this section is to be determined by the local housing authority, but must not be more than £30,000.

(5)

The local housing authority may not impose a financial penalty in respect of any conduct amounting to a relevant housing offence if—

(a)

the person has been convicted of the offence in respect of that conduct, or

(b)

criminal proceedings for the offence have been instituted against the person in respect of the conduct and the proceedings have not been concluded.

(6)

Schedule 13A deals with—

(a)

the procedure for imposing financial penalties,

(b)

appeals against financial penalties,

(c)

enforcement of financial penalties, and

(d)

guidance in respect of financial penalties.

…

(9)

For the purposes of this section a person’s conduct includes a failure to act.”

By schedule 13A to the 2004 Act (as amended), a local housing authority must give a person on whom it proposes to impose a financial penalty under section 249A notice of its proposal (a “notice of intent”): see paragraph 1. If the authority ultimately decides to impose a penalty, it must give the person a notice (a “final notice”) imposing the penalty: paragraph 6. A recipient of a final notice may, however, appeal to the FTT and by paragraph 10 such an appeal:

“(a)

is to be a re-hearing of the local housing authority’s decision, but

(b)

may be determined having regard to matters of which the authority was unaware”.

Paragraph 12 of schedule 13A to the 2004 Act requires a local housing authority to have regard to any guidance given by the Secretary of State about the exercise of its functions under schedule 13A or section 249A. Such guidance is to be found in “Civil penalties under the Housing and Planning Act 2016 ‒ Guidance for Local Housing Authorities”, which was re-issued in April 2018. Paragraph 3.5 of this document says that local housing authorities “should develop their own policy on determining the appropriate level of civil penalty in a particular case”. Paragraph 3.5 further explains that, to help ensure that the civil penalty is set at an appropriate level, local housing authorities should consider the following factors: “Severity of the offence”,

“Culpability and track record of the offender”, “The harm caused to the tenant”, “Punishment of the offender”, “Deter the offender from repeating the offence”, “Deter other from committing similar offences” and “Remove any financial benefit the offender may have obtained as a result of committing the offence”. The level of the penalty should be high enough “to help ensure that it has a real economic impact on the offender and demonstrate the consequences of not complying with their responsibilities” and to be “likely to deter the offender from repeating the offence”. Further, an important part of deterrence is “the realisation that (a) the local housing authority is proactive in levying civil penalties where the need to do so exists and (b) that the civil penalty will be set at a high enough level to both punish the offender and deter repeat offending”.

In accordance with this guidance, the Council adopted a “Financial Penalty Policy” in June 2017. After listing the factors identified in paragraph 3.5 of the Secretary of State’s guidance, the policy states that the Council “will use a consistent approach which is based on the Magistrates’ Court Sentencing Guidelines issued by the Sentencing Council”. The policy next provides a matrix allocating offences to bands by reference to harm (high, medium or low) and culpability (very high, high, medium and low). At one extreme, a case involving low harm and low culpability falls within band 1a; at the other, a case of high harm and very high culpability would be placed in band 6. In respect of each band, the policy then gives a “Financial penalty range”, an “Assumed starting point” and an “Adjustment increment”. For band 5, for instance, the “Financial penalty range” is £14,000-£20,000, the “Assumed starting point” is £16,000 and the “Adjustment increment” is £2,000. The policy further explains that the Council “will apply the ‘Totality Principle’ in cases where more than one penalty has been imposed, with a view to ensuring that the total penalty or penalties properly reflect all the offending behaviour and are just and proportionate in all the circumstances”. Finally, an appendix to the policy describes, and gives examples of, each level of culpability and harm.

Upper Tribunal Judge Cooke had to consider a comparable policy, adopted by Waltham Forest London Borough Council, in Marshall v Waltham Forest LBC [2020] UKUT 35 (LC), [2020] 1 WLR 3187, which involved appeals against penalties imposed under section 249A of the 2004 Act. Judge Cooke said in paragraph 54:

“The court is to start from the policy, and it must give proper consideration to arguments that it should depart from it. It is the appellant who has the burden of persuading it to do so. In considering reasons for doing so, it must look at the objectives of the policy and ask itself whether those objectives will be met if the policy is not followed.”

Judge Cooke further discussed the weight which a Tribunal should attach to the local housing authority’s decision when hearing an appeal against a penalty. In that regard, she said this is paragraph 62:

“the court is to afford considerable weight to the local authority’s decision but may vary it if it disagrees with the local authority’s conclusion”.

No one took issue with Judge Cooke’s observations before us and I for my part see no reason to dissent from them.

Max House was built as an office building, but by 2015 work had been undertaken to convert it to apartments which were advertised as available to let. When the Council’s housing team leader, Ms Ellen Spencer, visited the building in December 2017, she found 34 of its 47 apartments occupied.

On 12 February 2018, the Council issued eight improvement notices under section 12 of the 2004 Act requiring remedial action to be taken by 29 June. All the notices were addressed to FLAL. As the UT explained in its decision:

“15.

Six of the improvement notices required remedial action to be taken to remedy excess cold hazards affecting flats 001, 003, 012, 101, 102 and 112; the remedial action required was the provision of double or secondary glazing, and the installation of central heating, storage heaters or fixed panel heating.

16.

A seventh notice required remedial action in relation to fire safety hazards throughout the building, including the installation of fire breaks behind electrical socket boxes, fire stopping collars around ducting and pipe work, and the provision of an electrical test certificate for the entire installation showing it to be free of the most serious (Code 1 and 2) deficiencies.

17.

The eighth notice related to electrical hazards. It recorded that some work had already been carried out in the plant room (which required to be certified) and repeated some of the requirements of the seventh notice. It also required remedial action to be taken to remedy defects in the distribution boards serving individual flats, and to rectify the inadequacy of the sub-main circuit which was described as under-sized, overloaded and insufficiently earthed.”

By 17 September 2018, Ms Spencer had concluded that offences had been committed under section 30 of the 2004 Act in relation to five of the eight improvement notices and she arranged for the service of five notices of intent to impose financial penalties

The UT summarised what happened next as follows in paragraph 23 of its decision:

“No representations were received from either Mr Sutton or the company in response to the notices of intent and on 17 October 2018 final notices imposing the proposed penalties (including one in respect of flat 112, given on the erroneous assumption that an appropriate notice of intent had been sent on 17 September) were served on both. In aggregate each set of five notices imposed penalties of £140,000 on Mr Sutton and [the] same sum on FLAL.”

In the meantime, Ms Spencer had become satisfied that breaches of the 2007 Regulations justified the imposition of separate financial penalties. On 11 June 2018, notices of intent to impose such penalties were served, five on FLAL and five on Mr Sutton as its director. The notices alleged breaches of regulations 4, 5, 7, 8 and 10.

This time, Mr Sutton argued against the Council’s proposals in written representations on behalf of both himself and FLAL. However, on 17 September 2018 the Council nonetheless served final notices on FLAL and Mr Sutton imposing financial penalties totalling £96,600 on each of them.

On 30 October 2018, the Council served a prohibition order in relation to Max House barring its use as residential accommodation with effect from 27 November. The building was subsequently emptied of its residents and, as a result, FLAL’s rental income came to an end and it became unable to service its borrowing. On 16 August 2019, the company went into administration.

Well before this, Mr Sutton and FLAL had both appealed to the FTT against the Council’s imposition of penalties on them. On 4 November 2018, the FTT transferred the appeals to the UT and they were heard by the UT in January 2020. FLAL by then being in administration, it was not represented. Mr Sutton appeared in person.

The issues before the UT were much more extensive than those we have to address. The conclusions which the UT reached in the course of its full and careful decision included these:

With regard to penalties, the UT:

More specifically, the UT imposed the following penalties:

The main reason why the penalties imposed on Mr Sutton were higher than those imposed on FLAL was that the UT took into account the former’s dealings with another property in Norwich called Hardwick House. The UT said this on the subject in paragraph 268 of its decision:

“In our judgment the evidence in relation to Hardwick House is relevant to the culpability of Mr Sutton. He did not dispute that the conversion project was one of his, and indeed he was clearly very proud of what had been achieved in bringing a derelict building back into use. He sought to direct blame towards others, including leaseholders, but he did not suggest that he had been unaware of the issues concerning fire safety or the underlying dispute over the electricity bill which appears to have been the cause of the excessive delay in resolving a serious situation. We treat his dealings with Hardwick House as evidence of Mr Sutton’s disregard for the safety of others, his dilatory approach to the resolution of concerns about fire precautions, and his disinclination to comply promptly with enforcement action leading to statutory authorities having to step in with emergency remedial action, all of which are features of what occurred at Max House. To the extent that similar behaviour is evident at Max House we will treat the management of Hardwick House as a relevant aggravating factor. FLAL is a separate company which had nothing to do with Hardwick House and we do not consider the events there to be relevant to the penalties to be imposed on it.”

Mr Sutton applied to the UT for permission to appeal on a variety of grounds. While otherwise refusing such permission, the UT granted it in respect of the grounds concerning penalties, noting that the imposition by local housing authorities of civil penalties as an alternative to prosecution for conduct amounting to a housing offence was recent and had not yet been considered by the Court of Appeal. With one exception, accordingly, the issues before us relate exclusively to the penalties which the UT imposed rather than whether the relevant misconduct had been proved. The exception concerns regulation 10 of the 2007 Regulations. As I understand it, the permission to appeal granted to Mr Sutton is wide enough to allow him to challenge the UT’s finding that regulation 10 was breached.

The grounds of appeal in respect of which Mr Sutton has permission to appeal have respectively the headings “Penalties inconsistently applied” and “Penalties not applied in accordance with case law”. So far as the former is concerned, it is said that the penalties imposed by the UT “are far in excess of any Tribunal Decisions to date applying to all Local Housing Authorities” and “are not consistent with any Financial Penalties levied by Norwich City Council”. Under the latter heading, Mr Sutton addresses in turn the penalties he challenges after first citing R v Rollco Screw and

I find it convenient to follow a similar course. I shall therefore address the “Penalties inconsistently applied” ground of appeal before considering general principles relating to penalties as between companies and their directors and then individual penalties in turn. At the outset, however, I shall say something about the circumstances in which an appellate Court/Tribunal is entitled to interfere with a civil penalty imposed by a lower Court/Tribunal.

Where the decision of a lower Court or Tribunal involved evaluation or the exercise of a discretion, an appellate Court or Tribunal is not entitled to interfere merely because it might have come to a different conclusion. In G v G (Minors: Custody Appeal) [1985] 1 WLR 647, Lord Fraser said at 652 that an appellate Court should interfere with an exercise of discretion only if it considers that the judge of first instance “has not merely preferred an imperfect solution which is different from an alternative imperfect solution which the Court of Appeal might or would have adopted, but has exceeded the generous ambit within which reasonable disagreement is possible”. In Abela v Baadarani [2013] UKSC 44, [2013] 1 WLR 2043, Lord Clarke spoke at paragraph 23 of an appellate Court interfering with a value judgment based on the evaluation of a number of different factors only “if satisfied that the judge erred in principle or was wrong in reaching the conclusion which he did”. In R (R) v Chief Constable of Greater Manchester Police [2018] UKSC 47, [2018] 1 WLR 4079, Lord Carnwath said this at paragraph 64 in the context of a challenge to a proportionality assessment:

“The decision may be wrong, not because of some specific error of principle in that narrow sense, but because of an identifiable flaw in the judge’s reasoning, such as a gap in logic, a lack of consistency, or a failure to take account of some material factor, which undermines the cogency of the conclusion. However, it is equally clear that, for the decision to be ‘wrong’ under CPR r 52.11(3), it is not enough that the appellate court might have arrived at a different evaluation.”

A Tribunal’s decision as to what civil penalty it should impose for either a breach of the 2007 Regulations or failure to comply with an improvement notice involves, as I see it, both evaluation and discretion. An appellate Court/Tribunal is not, accordingly, entitled to overturn a penalty just because it thinks it would have imposed a different one. To interfere, the Court/Tribunal must conclude that the decision under appeal was an unreasonable one or is wrong because of “an identifiable flaw in the judge’s reasoning, such as a gap in logic, a lack of consistency, or a failure to take account of some material factor, which undermines the cogency of the conclusion”.

I can dispose of this ground of appeal very shortly. As I have mentioned, it proceeds on the basis that the penalties imposed by the UT “are far in excess of any Tribunal Decisions to date applying to all Local Housing Authorities” and “are not consistent with any Financial Penalties levied by Norwich City Council”. However, Mr Sutton did not develop the point in his submissions and we were not referred to any materials which could support it. We were neither taken to any other Tribunal decisions nor given details of any other penalties imposed by the Council. This ground of appeal cannot succeed, therefore.

Rollco involved challenges by a company and two directors to sentences imposed on them for offences under the Health and Safety at Work Act 1974. At 441, Lord Bingham CJ, giving the judgment of the Court of Appeal (Criminal Division), referred to submissions on behalf of the company “that a period for payment of a fine of the length contemplated in this case is well beyond anything which the court should sanction and that there is for this purpose no distinction to be drawn between a personal defendant on whom a fine is imposed and a company” and continued:

“We return to consider later the period in this particular case, but address at once the question of principle. … We would nonetheless be inclined to accept that with a personal defendant, with a fine hanging over him, there are arguments for keeping the period of that continuing punishment within bounds. It appears to us that those arguments are much weaker (if indeed they apply at all) when one is considering a corporate defendant. There is not the same sense of anxiety as is liable to afflict an individual, and it appears to us to be acceptable on proper facts and in appropriate circumstances for a fine to be payable by a company over a substantially longer period than might be appropriate in the case of an individual. We would, however, accept a further submission made by [counsel for the appellants] to the effect that one must avoid a risk of overlap. In a small company the directors are likely to be the shareholders and therefore the main losers if a severe sanction is imposed on the company. We accept that the court must be alert to make sure that it is not in effect imposing double punishment. On the other hand, it seems to us important in many cases that fines should be imposed which make quite clear that there is a personal responsibility on directors and that they cannot simply shuffle off their responsibilities to the corporation of which they are directors.

The proper approach to a case of this kind in principle seems to us to be to pose two questions. First: what financial penalty does the offence merit? Secondly: what financial penalty can a defendant (whether corporate or personal) reasonably be ordered to meet? That second question inevitably raises the question of time.

Addressing the first of those questions with particular reference to the instant case, we note that the total penalty imposed on the company and the directors together amounted to £50,000. We have to ask ourselves whether that sum represented an appropriate penalty to be imposed for this offending. In considering that question we have to bear in mind the glaring public need for effective sanctions in a field such as this where the health and the safety of the public are so very obviously at risk. The situation is the more important when, as here, the illeffects of exposure to brown asbestos may take very many years to appear. In the interim of course no individual can know whether he will ultimately suffer or not.

We consider that the division of £40,000 attributed to the company and £10,000 to the directors was an appropriate split. We also consider that the total sum divided between the two was appropriate recognition of the gravity of this offending.”

Mr Sutton argued that Rollco shows that, where a company and a director have both committed an offence, the right course is first to ask “what financial penalty does the offence merit?” and then to apportion the figure between the company and the director. After all, “what financial penalty does the offence merit?” was identified in Rollco as the first of the two questions posed and the Court proceeded to say that “the division of £40,000 attributed to the company and £10,000 to the directors was an appropriate split” and that “the total sum divided between the two was appropriate recognition of the gravity of this offending”.

Even so, I do not myself find it altogether easy to interpret the Rollco judgment. When the Court specified the two questions that were raised, it was not obviously dealing with how penalties on a company and its directors should relate to each other.

Rollco was cited by Lord Bingham CJ himself in R v Snaresbrook Crown Court ex p Patel [2000] COD 255 (“Patel”), a decision of the Divisional Court. In that case, fines had been imposed both on a company and on its sole director and majority shareholder. In response to an invitation from counsel to lay down guiding principles in respect of the imposition of double fines, Lord Bingham (with whom Klevan J agreed) said this:

“18.

… In my judgment there can be no guiding principle independent of the facts of a given case. In R v Rollco Screw & Rivet Co Ltd and others [1999] 2 Cr App R(S) 436, 441, the court said:

19.

‘We accept that the court must be alert to make sure that it is not in effect imposing double punishment. On the other hand, it seems to us important in many cases that fines should be imposed which make quite clear that there is a personal responsibility on directors and that they cannot simply shuffle off their responsibilities to the corporation of which they are directors.’

20.

That seems to me to be a proper approach to this matter. It is also in my judgment right that the corporate vehicle through which an individual carries on business with the benefit of limited liability should bear a penalty. There is no conventional ratio which governs the relationship of the fine imposed on an individual and the fine imposed on a company. It all depends on the facts.”

Rather more recently, there was reference to Rollco in R v Western Trading Ltd [2020] EWCA Crim 1234 (“Western Trading”), where fines had been imposed on a company and an individual who was a shareholder and the sole director in respect of breaches of a listed building enforcement notice and a planning enforcement notice. Having noted that factors relevant to the level of penalty to be imposed for alteration of a listed building without consent had been mentioned in R v Duckworth [1994] 16 Cr App R (S) 529, Bean LJ, giving the judgment of the Court of Appeal (Criminal Division), said this about the “two defendants issue”:

“15.

It seems to us that within the parameters of the relevant Sentencing Guidelines there are three approaches which might be taken to the imposition of fines in a case such as this, where one Defendant is a small company and the other is a director of that company. The first is, as this court appears to have done in the Rollco case, to form a view as to the appropriate total penalty before deciding how to apportion it between the defendants. The second, in a case where the direct financial benefit sought to be obtained or cost sought to be avoided is that of the company, is to take that factor into account in the way described in Duckworth in the case of the company, and then consider what penalty should be imposed on the director as having been the controlling mind of the company causing it to commit the offence and seeking thereby to achieve the financial benefit or avoid the cost for the company. The third is simply to sentence each defendant separately as if he, she or it stood alone; but this would in cases of actual financial benefit infringe the principle set out in Rollco that the court must avoid imposing double punishment; and neither Mr Andrew Smith QC for the Appellants nor Mr Joseph Millington for the Respondent suggested that it would be the right course to adopt in a case of this kind. Putting the matter another way, insofar as the purpose of a fine or fines is, in accordance with the General Guideline quoted above, to remove an actual financial benefit, that benefit should only be removed once.

16.

Mr Smith accepted that the second approach is consistent with the Sentencing Guidelines as well as with the reported cases such as Duckworth. We consider that it is the one we should adopt in this case in considering whether or not the fines of £25,000 imposed on each Appellant by the judge were excessive.”

In the circumstances, I do not consider that there is any rule that, when deciding what civil penalties to impose on a company and one or more of its directors under section 249A of the 2004 Act, a Court or Tribunal is bound to ask itself first what penalty the offence merits overall and then how that penalty should be apportioned. Whether or not Rollco might have been thought to support such an approach, the Court did not proceed on that basis in Western Trading, and in Patel Lord Bingham eschewed any “guiding principle independent of the facts of a given case”. Equally, there is no rule as to how the penalty imposed on a company should relate to the penalty/penalties imposed on a director or directors. As Lord Bingham said in Patel, “It all depends on the facts”.

On the other hand, Rollco, Patel and Western Trading all testify to the need to beware of double punishment. An individual with an interest in a company may be worse off to the extent of some or all of a fine imposed on the company and a Court must have that in mind when deciding what, if any, fine to impose on the individual personally. Rollco, Patel and Western Trading were criminal cases, but the point must apply with equal force in the context of civil penalties under section 249A of the 2004 Act.

With a solvent one-man company, the importance of avoiding double punishment will loom large: the owner of the company might be expected to be the poorer by the total of the penalties imposed on himself and the company. In a case of that kind, the penalty on the owner-director should not be determined without regard to that imposed on the company and appropriate adjustments should be made when using a “Financial Penalty Policy” such as the Council’s. If, say, a “Financial Penalty Policy” indicated a particular “Financial penalty range” for the relevant offence, a penalty of that size should not be imposed on the owner-director personally without considering the implications for him of any company penalty and the appropriate penalty might very well be smaller than any figure in the specified range. In that particular scenario, the Court/Tribunal could find it helpful to ask itself the questions: what total penalty is merited and how should the figure be divided between company and owner? That said, the Court/Tribunal might also wish to ensure that the penalty on the ownerdirector confirmed that “there is a personal responsibility on directors and that they cannot simply shuffle off their responsibilities to the corporation of which they are directors” (to quote from Rollco and Patel).

Different considerations would arise if a director held only a proportion of the company’s shares or the company were insolvent. The extent to which a directorshareholder stands to be affected by a penalty imposed on the company depends of course on the size of his shareholding. Where the company is already insolvent, there may be no risk of double punishment: his shares being worthless, a directorshareholder should be no worse off as a result of a penalty on the company unless, say, it somehow served to increase his exposure on a guarantee he had given for company indebtedness. More difficult assessments may be called for where a company is of doubtful solvency or where penalties are also being imposed on other directors, who may themselves perhaps own shares.

In the present case, the UT was fully conscious of the danger of double punishment. It observed in paragraph 250 of its decision that, since Mr Sutton was a director of

This passage suggests, in my view, that the UT was in fact adopting an approach which was overly generous to Mr Sutton. The risk that a penalty imposed on FLAL might go unpaid was, I think, something that could properly be taken into account because it bore on the potential for double punishment.

The UT next addressed a submission by Mr Sutton to the effect that he was the “main loser” out of the development at Max House and had “already suffered enough financially” (see paragraph 254 of the decision). As to that, the UT said this in paragraph 257:

“[Mr Sutton] is an experienced professional person and could easily have produced information regarding his own means or the extent to which he been funding FLAL from his own resources, but he has chosen not to do so. We will approach the question of the appropriate level of penalty to be imposed on him on the assumption that he is a person of means; we will give no separate weight to the suggestion that he has already incurred significant personal losses in connection with Max House.”

In that connection, the UT had said in paragraph 256:

“A corporate or individual appellant who wishes the Tribunal to have regard to their own financial standing when considering the appropriate financial penalty to impose, should provide upto-date evidence of their assets and liabilities. The information provided by Mr Sutton in submissions about the expenses and liabilities FLAL had incurred was not supported by any documentary record, and he provided no information about his own resources. The Tribunal has no solid foundation on which to form a view of how the development project has been funded.”

These observations were, as it seems to me, entirely legitimate.

It is also relevant at this stage to refer to the fact that section 249A(4) of the 2004 Act stipulates that the “amount of a financial penalty imposed under this section … must not be more than £30,000”. There is thus a cap on the size of penalty that can be imposed on any particular person in respect of an offence. However, there is no bar on the aggregate of penalties imposed on two or more persons exceeding £30,000. The £30,000 cap relates to the “financial penalty on a person” (emphasis added) which can be imposed pursuant to section 249A(1). In principle, therefore, £30,000 penalties could be imposed on both a company and one or more of its directors.

I agree.

I also agree.