Carol Heaney v The Secretary of State for Business, Energy & Industrial Strategy & Anor

- ANNEX -

- PRELIMINARY DECISION DATED 29.12.21 -

First-tier Tribunal

General Regulatory Chamber

(Environment)

Appeal Reference: NV/2020/0030

Heard by CVP on 24 June 2021

Before

JUDGE MOIRA MACMILLAN

Between

MS CAROL HEANEY

Appellant

and

THE SECRETARY OF STATE FOR BUSINESS, ENERGY

AND INDUSTRIAL STRATEGY

First Respondent

and

GDFC ASSETS LIMITED

Second Respondent

and

ENERGY CONSUMERS COMMISSIONER

Intervener

Representation: Ms Carol Heaney represented herself

Mr Charles Streeten – First Respondent

Ms Kate Urell – Second Respondent

Mr Alistair Wilcox – Intervener

Decision ON PRELIMINARY ISSUE

A) Background

1) This case is one of several appeals currently before the Tribunal against a sanction imposed by the Secretary of State following a finding that a green deal plan has been mis-sold to an energy consumer.

2) The Secretary of State and GDFC Assets Ltd Respondents to each of these appeals. The East Ayrshire Citizen’s Advice Bureau is providing support to some of the appellants, including to Ms Heaney who is otherwise representing herself.

3) The Energy Consumers Commission (‘the ECC’) was made an intervener in this appeal in Case Management Directions dated 24 May 2021. This was following an application by Ms Heaney to rely on Mr Wilcox of the ECC as an expert witness. This application was refused on the grounds that Mr Wilcox’s statement dealt largely with matters of law. Ms Heaney thereafter applied for Mr Wilcox’s statement to be adapted so as to allow the ECC to become an amicus curiae. On 24 May 2021 I decided to make the ECC an intervener, which is the Tribunal’s usual practice in relation to 3^rd parties who have an interest in the outcome of an appeal, rather than a direct interest in the appeal itself.

4) The Parties have asked the Tribunal to determine a number of preliminary legal issues, all of which arise to some extent in the other green deal appeals waiting to be heard. For reasons of case progression these preliminary issues have been dealt with under rule 5(3)(b) of the Tribunal Procedure (First-tier Tribunal) (General Regulatory Chamber) Rules 2009, rather than under rule 18. As a consequence, this Ruling only binds the Parties to this appeal.

5) Following an earlier Case Management Hearing, a Preliminary Issues Hearing was held on 24 June 2021. Subsequent Directions allowed the Parties to serve additional material until 19 July 2021. Mr Wilcox provided further submissions. Ms Urell and Mr Streeten sent further authorities to the Tribunal but these were unaccompanied by any further submissions.

6) Since then other professional commitments have resulted in undue delay to this Ruling being issued for which I can only apologise. I am grateful to the Parties for their submissions, all of have considered, and for their assistance both prior to and during the Preliminary Issues Hearing.

7) I have afforded appropriate weight to the Secretary of States views in accordance with the principle identified by the Court of Appeal in R (Hope and Glory Public House Ltd v City of Westminster Magistrates’ Court [2011] EWCA Civ 31, approved by the Supreme Court in Hesham Ali (Iraq) v Secretary of State for the Home Department [2016] 1 WLR 4799. This means that I have paid “careful attention” to the reasons given by the Secretary of State as the original decision-maker, bearing in mind that Parliament has entrusted him with making such decisions.

B) Legal Framework

7) Pursuant to s. 1(2) of the Energy Act 2011 (‘the Act’), an ‘energy plan’ is “an arrangement made by the occupier or owner of a property for a person to make energy efficiency improvements to the property”. This appeal concerns a type of energy plan known as a ‘green deal plan’, the requirements of which are set out in Part 1, Chapter 1 of the Act.

8) For current purposes, relevant features of the Green Deal Scheme are as follows:

i. s. 1(3) of the Act distinguishes a green deal plan from other energy plans in the following terms:

(3) An energy plan is a green deal plan if—

(a) the energy efficiency improvements are to be paid for wholly or partly in instalments, and

(b) all of the requirements listed in paragraphs (a) to (e) of subsection (4) are met in relation to the plan at the time when it is made.

ii. ss. 2(4) - 2(6) describe the type of energy efficiency improvements that may be the subject of a green deal plan. These include:

a) measures improving the efficient use of, or reducing the consumption of: electricity; gas conveyed through pipes; or any other specified source of energy;

b) measures for increasing the amount of electricity generated, or heat produced, through microgeneration, (which in this context means using technologies such as solar panels, and is subject to a limit on maximum capacity (Footnote: ¹)), or through low-emissions sources or technologies; and

c) measures installed for the purpose of supplying energy generated by or produced in association with specified electricity generating processes. (Footnote: ²)

iii. The occupier or owner who makes the arrangement for a green deal plan is the “improver” and the person who makes the improvements is a “green deal provider” (s. 2(2)).

iv. A significant feature of a green deal plan is that a green deal provider offers a loan towards the cost of the energy efficiency improvements (‘Green Deal Finance’) and arranges for the installation of relevant equipment at the improver’s property.

v. The loan is repaid by the bill payer by way of a charge being added to energy bills, or by small deductions being taken from pre-payment meters. The “bill payer” is the person who, at any specific time, is liable to pay the energy bills for the property. (Footnote: ³)

vi. The “golden rule” of a green deal plan is that the first year repayment instalments must not exceed the estimated first year savings. (Footnote: ⁴)

vii. Some energy efficiency improvements, such as the installation of solar panels, result in the generation of renewable energy by the consumer. This may result in the consumer receiving a payment from the energy provider, known as the Feed-in Tariff (‘the FIT’). The two potential elements of a FIT are:

a) a payment received by the consumer because renewable energy has been generated (which manifests as a lower tariff per unit of energy), and

b) a payment received because extra units of electricity have been generated and not used by the bill payer, and these extra units have been sold back to the energy provider.

viii. s.3 requires the Secretary of State to issue Framework Regulations, establishing a scheme under which the conduct of green deal participants (assessors, providers and installers) is regulated. These are the Green Deal Framework (Disclosure, Acknowledgement, Redress etc) Regulations 2012 (‘the Regulations’).

ix. Conduct of registered green deal participants is also regulated through a Code of Practice, compliance with which is a condition of continued registration (s.3(3)(d) & (e); Regulation 10).

x. The Regulations allow the Secretary of State to impose various sanctions where a party to a green deal plan has breached ‘a relevant requirement’. Regulation 67 provides such a power where a green deal provider is found either to have committed a severe breach of a relevant requirement, or to have committed a series of breaches. The available sanctions are set out in regulation 67(2) & (3):

“(2) The Secretary of State may impose on the green deal provider one or more of—

(a) a compliance notice;

(b) a financial penalty;

(c) withdrawal.

(3) Where the Secretary of State is satisfied that the bill payer has suffered or is likely to suffer substantive loss, the Secretary of State may, in addition to any sanction imposed under paragraph (2), impose cancellation or reduction on the relevant person.”

xi. A breach of a “relevant requirement” by a green deal provider is defined in regulation 63 as a breach of the requirements of regulations 24 to 26 or 42B, or a failure to comply with a sanction other than a withdrawal.

xii. Regulation 78 sets out the rules that apply to sanction notices. Regulation 79 contains the guidance as to how the appropriate sanction is to be arrived at:

“Any sanction imposed under this chapter must be proportionate to the breach in relation to which it is imposed.”

xiii. Regulation 87 provides any person, directly affected by a decision of the Secretary of State to impose or not to impose a sanction, with a right of appeal to this Tribunal. The Tribunal’s powers are set out in regulation 87(4):

The Tribunal may—

(a) in relation to a decision under Part 3 or 8—

(i) withdraw, confirm or vary the decision;

(ii) remit the decision to the Secretary of State;

(b) in relation to a decision whether to impose a sanction under Part 8, impose a different sanction or take different action.

C) Factual background

9) Ms Heaney was sold a Green Deal Plan by Home Energy and Lifestyle Management Limited (‘HELMS’) in 2014. Improvements under the plan included the installation of: solar panels; a gas boiler; external wall insulation; and under-floor insulation. The improvements were paid for by two means:

i) Ms Heaney entered into a Green Deal Finance arrangement with HELMS. Thereafter HELMS assigned the benefit of Ms Heaney’s loan repayments to another company - The Green Deal Finance Company (‘GDFC’) - in return for a lump sum. GDFC Assets Ltd is a subsidiary of GDFC and is the company to which the loan repayments are now due.

ii) Ms Heaney also entered into an arrangement, known as a FIT transfer option, with PV Solar Investments Ltd (‘PVSI’). In essence she agreed to transfer her FIT to PVSI in return for PVSI paying the balance of the cost of installation of her solar panels.

10) The sanction decision under appeal relates solely to Ms Heaney’s agreement with HELMS. GDFC Assets Ltd, as the current payee under this credit agreement, is a ‘relevant person’ for the purposes of the sanction decision, pursuant to regulations 51 and 67(3). This means that the Secretary of State may impose a sanction of cancellation or reduction upon this company.

11) The Secretary of State has no power under the Regulations to make a sanction decision in respect of Ms Heaney’s agreement with PVSI, and this aspect of her energy efficiency arrangement is not before the Tribunal.

12) Ms Heaney’s position is that she was mis-sold the green deal plan by HELMS, because she was unaware that by entering into the agreement she was taking out a loan. The Secretary of State has accepted that Ms Heaney’s plan was mis-sold and has found in addition that she would not have made the energy efficiency improvements to her home had she not been misled by HELMS about the arrangement she was entering into. GDFC does not dispute these findings, but on the basis that it is not in a position to do so due to the difficulty it faces in obtaining relevant evidence.

13) It is not disputed between the Parties that, although Ms Heaney was told she would see a reduction in her energy bills under her green deal plan, in reality her energy bills have increased as a consequence of the dual arrangements she entered in to.

14) The regulation 67 sanction decision made in respect of Ms Heaney’s complaint was one of reduction. That decision was reached following a determination by the Secretary of State that Ms Heaney had received some benefit under her green deal plan. The Secretary of State’s explanation of the sanction decision is that it intended to put Ms Heaney in the position she would have been in, had the correct estimated savings figures been used when her plan was drawn up.

15) Ms Heaney’s substantive grounds of appeal will be considered at a later hearing. This Ruling determines on a preliminary basis the questions that follow.

D) What is a green deal plan?

9) The Parties describe this issue as being largely uncontroversial. They agree that a green deal plan is defined in the legislation as an energy plan that meets the requirements of s.1(3) &(4)(a)-(e), which must be read with ss. 4 & 5, and with the requirements of regulations 30 – 36 when read with regulation 29.

10) ss. 1(4)(c) & (d) introduce a legal requirement that the conditions specified in ss. 4 & 5 (respectively) are met.

i) s. 4 specifies 8 conditions relating to the assessment of the property being improved, and allows for additional conditions to be specified in the Regulations. For example, the 3^rd condition, set out at s.4(4), is that “the green deal provider has given an estimate, on the basis specified in the framework regulations, of the savings likely to be made on the energy bills for the property if the improvements are carried out.”

ii) s. 5 specifies 3 additional conditions relating to the terms of a green deal plan, and again allows for additional conditions to be specified in the Regulation. For example, the 2^nd condition includes, at s. 5(3)(c), a prohibition on the inclusion in a green deal plan of “a term providing for money to be advanced to the improver (except in accordance with the framework regulations or provision made under them).”

iii) In addition to the requirements of s.1(3) &(4)(a)-(e), regulation 29 states that “[a]n energy plan is not a green deal plan unless the conditions in regulations 30 to 36 are met.”

(a) Regulation 30 sets out the ‘golden rule’ by reference to the conditions in s. 4;

(b) Regulation 31 stipulates that the green deal plan must not provide for a payment period that ends after the savings period is expected to end;

(c) Regulation 32 requires a fixed interest rate to be charged for the whole of the payment period;

(d) Regulation 33 limits the circumstances in which the amount of the improvement-specific instalments may increase during the payment period.

(e) Regulation 34 prohibits a green deal plan from restricting a bill payer’s ability to change gas or electricity supplier;

(f) Regulation 35 requires the green deal provider to agree to guarantee the functioning of the improvements and to repair damage caused to the property by the improvements; and

(g) Regulation 36 requires the improver to provide written consent from the current or a subsequent bill payer, if that person is not the improver, to paying instalments under the plan.

Submissions

11) Ms Heaney submits that, if any one of these requirements are “in breach”, then the agreement will be an energy plan rather than a green deal plan. The other Parties put the point slightly differently, submitting that all relevant statutory requirements must be complied with in order for an energy plan to be a green deal plan.

12) Mr Wilcox goes further, submitting that requirements of s.1(3) &(4)(a)-(e), read with ss. 4 & 5, and regulations 30 – 36, read with regulation 29, must also be read with s. 2 and with regulation 26. In relation to the latter, in his view there is a requirement that the parties to an energy plan must intend to enter into a green deal plan. Regulation 26 provides as follows:

26.— Ensuring energy plans are green deal plans and that instalments can be collected on energy bills

(1) Where a green deal provider is to enter into an energy plan which the parties to it intend to be a green deal plan, the provider must ensure that the following are complied with—

(a) the requirements in section 1(4)(a), (b) and (e); and

(b) the conditions set out in section 4(2) to (9) and 5(2) to (4) and regulations 27, 28 and 30 to 36.

(2) Before the first instalment under a green deal plan is collected by the relevant energy supplier, the green deal provider in respect of that plan must ensure that—

(a) the improvements have been installed in accordance with section 7; and

(b) the conditions in section 8(2) and (4) have been met.

13) Regulation 27 sets out the basis upon which a green deal provider must estimate likely energy bill savings and regulation 28 the basis upon which it must estimate the likely savings period.

14) Mr Wilcox’s position is that the classification of an energy plan as green deal plan requires proper scrutiny of the documents relied upon as evidence that necessary conditions have been met. He cites, as the starting point, the need for scrutiny of the Energy Performance Certificate (‘EPC’) which must be valid when the energy plan is agreed, and which he submits may become invalidated within a relatively short period of time. He contends that there should also be scrutiny of the equipment installed, since a change of installation may result in modelled savings not being achieved, thereby breaching the regulation 30 ‘golden rule’.

15) Mr Wilcox is critical of the Secretary of State for having failed to scrutinise relevant documents and equipment when deciding whether to impose a sanction. He submits that the Secretary of State has proceeded in each case on an assumption that the energy plan before him can be classified as a green deal plan.

16) Finally, Mr Wilcox contends that any of the qualifying conditions relating to the assessment process must also be read with regulation 7(b). As a whole, regulation 7 provides as follows:

“7. Definitions of qualifying assessment under section 3(9)

For the purposes of section 3(9) and these Regulations, an energy efficiency assessment of a property is a qualifying assessment where it is carried out—

(a) by a green deal assessor in accordance with the assessor services specification; and

(b) in accordance with any provisions of the code of practice which apply to qualifying assessments.”

17) Mr Streeten, on behalf of the Secretary of State, agrees that a failure to comply with any of the requirements of s.1(3) &(4)(a)-(e), ss. 4 & 5, or regulations 30 – 36, would prevent an energy plan from being classified as a green deal plan. His position is that all legislative requirements must be met, submitting that a green deal plan is analogous with an agreement under s. 106 of the Town and Country Planning Act 1990, since both create obligations that are binding on successors. In the case of a green deal plan, this is because the obligation to pay the instalments under the plan becomes binding upon successive bill payers (Footnote: ⁵).

18) Mr Streeten relies on Southampton City Council v Hallyard Ltd [2008] EWHC 916 in which Morgan J held that that all formal requirements of s. 106 must be met in order to create planning obligations within that statutory scheme:

“77. The ninth question is the consequence of the formal requirements of s.106 not having been complied with. Subsection (9) states that a planning obligation may not be entered into except by an instrument which states what the obligor's interest is in the relevant land. I have held that the Custom House agreement does not state what Cindan's interest is in the St Mary's site. It therefore seems to follow that the obligations placed on Cindan are not planning obligations and the City Council does not have the benefit of s.106 applying to them. The only way as I see it that one could avoid that result, would be to say that the requirements of subs.(9) are not mandatory but are directory only. The language of subs.(9) is not a promising start for a submission of that kind, and indeed, that submission was not advanced.

78. In these circumstances, my conclusion is that the obligations imposed on Cindan by the Custom House agreement are not planning obligations within s.106 . It follows that s.106(3) , which makes a planning obligation enforceable against persons deriving title from the obligor, cannot be relied upon by the City Council. Spelling that out, the City Council cannot rely on s.106(3) to say that Cindan's obligations are binding on Hallyard or on AIB.”

19) Although Mr Streeten’s position is that all legislative requirements for a green deal plan must be met, he notes that the language of the ‘golden rule’ in regulation 30 refers to estimated, rather than actual, savings. He submits that a wrong prediction of first year savings would not necessarily be a bar to an energy plan being classified as a green deal plan, although it a substantial error leading to an inaccurate estimate might be a relevant consideration.

20) In relation to the EPC, Mr Streeten does not accept that these documents only remain valid until superseded, and submits that there is no legislative support for such a proposition.

21) Ms Urell, on behalf of GDFC Assets Ltd, agrees with the Secretary of State in terms of the legislative conditions for a green deal plan, but does not agree that a breach of any of these requirements automatically invalidates a plan as a green deal plan. She submits that the issue of whether an identified defect in the green deal process results in a qualifying condition not being met must be a question of fact and degree that is best determined on the facts of each case.

22) Ms Urell describes the requirements of the Act as ‘cascading’ into the Regulations and Code of Practice, and urges caution when determining which must be complied when identifying the qualifying conditions for a green deal plan. She notes that the Code of Practice, in particular, has a minutiae of restrictive provisions, not all of which equate to qualifying conditions.

23) Ms Urell disagrees with Mr Wilcox that regulation 26 should be read so that, if the parties do not intend to enter into a green deal plan, then no such plan exists. She submits that a breach of regulation 26 is a breach of a relevant requirement, pursuant to regulation 63, rather than a breach of a qualifying condition. Ms Urell also questions the extent to which the recommended improvements need to have been reflected in the paperwork and equipment installed, in order for an energy plan to be classified as a green deal plan. She submits that this is likely to be a technical matter best determined on a case by case basis.

Ruling

Legislative requirements

24) Having considered these submissions and the relevant legislative provisions I conclude as follows:

i) For an energy plan to be classified a green deal plan it must meet the requirements set out in s.1(3) & (4)(a)-(e) of the Act, which must be read with ss. 4 & 5, and with regulations 30 – 36 read with regulation 29. For reasons of clarity I will refer to these requirements collectively as ‘legislative requirements’ and individually as ‘qualifying conditions’.

ii) Accordingly, there are a number of qualifying conditions that an energy plan must meet.

(a) It must relate to qualifying energy efficiency improvements that are made to a property, which are to be paid for wholly or in part by instalments (s.1(3)(a)).

(b) It must also, at the time it is made, meet all of the requirements of s.1(4)(a) – (e). The view that all requirements must be met is supported both by the unambiguous language of s. 1(3)(b), and by the analogous decision of Morgan J in Southampton City Council.

(c) The language of ss. 1(4)(c) & (d) makes clear that the energy plan must also meet all the conditions set out in ss. 4 & 5.

(d) Further, since s. 1(4)(c) refers to a requirement that the “conditions mentioned in section 4 as to assessment of the property and other matters” (emphasis added) are met then, pursuant to s. 4(1)(b), this requirement also extends to “such other conditions… as are specified in the framework regulations.”

(e) Regulation 29 specifies additional (‘other’) conditions as being those set out in regulations 30 – 36.

iii) I further conclude that an energy plan must also meet the requirements of regulations 27 & 28 in order to be classified as a green deal plan. This is because:

(a) s. 4(4) stipulates a condition whereby the estimate of likely savings under a green deal plan must be made on the basis specified in the Regulations. Regulation 27 specifies the applicable basis, and a footnote to regulation 27(1) confirms that “[t]his is the estimate that is required to be made under section 4(4) of the Act.”

(b) Similarly, s. 4(5) stipulates a condition whereby the estimate of the savings period must be made on the basis set out in the Regulations, and regulation 28 specifies the applicable basis. A footnote to regulation 28(1) confirms that “[t]his is the estimate that is required to be made under section 4(5) of the Act.”

(c) Further, the Explanatory Memorandum to the Regulations states (emphasis added):

“Regulations 27 and 28 set out requirements regarding the estimates which must be made, under section 4(4) and 4(5) of the Act, by the green deal provider if an energy plan is to be a green deal plan, being estimates of the likely energy bill savings after energy efficiency improvements are installed under a plan and estimates of the period over which those savings are likely to be made.”

(d) Finally, paragraph 29 of Annex B of the 4^th Edition of the Code of Practice contains the following in relation to regulation 28:

“The Framework Regulations set out conditions restricting the amount of the instalments that can be charged under a Green Deal Plan (see in particular regulations 28 and 30 and regulation 33). These conditions must always be complied with by Green Deal Providers, and failure to do so will mean that an arrangement does not qualify as a Green Deal Plan.”

iv) I note Ms Urell’s concerns regarding the cascading nature of the legislative requirements in this context, and the risk of an inadvertent expansion of qualifying conditions. However, in the context of noncompliance with regulations 27 & 28, the ‘cascading’ intention of the legislation is clear. A green deal provider who has failed to give an estimate on the basis specified in regulation 27 (or, alternatively, in regulation 28) will necessarily have failed to comply with the qualifying condition set out in s. 4(4) (or, alternatively, s. 4(5)). As a consequence, they will not have fulfilled the requirements of s. 1(4)(c) (or, alternatively, of s. 1(4)(d)) and, pursuant to s.1(3)(b), the energy plan will not be a green deal plan.

v) The question of whether a relevant estimate has complied with the requirements of regulations 27 and 28 is one that must be determined as a matter of fact on a case by case basis, having careful regard to the language of the regulations. It was suggested by the Secretary of State in submissions relating to the ‘golden rule’ that, notwithstanding the fact that a green deal provider is only required to provide an ‘estimate’ of first year savings, the identification of a substantial issue which led to an inaccurate estimate might be a relevant consideration when determining compliance. In my view such questions are best determined in a factual, rather than a theoretical, context.

S. 2, regulation 7(b) and regulation 26

vi) I am not persuaded by Mr Wilcox’s argument that s.1(3) & (4)(a)-(e) must also be read with s. 2, regulation 26 or regulation 7(b), for the following reasons:

(a) s.2 provides an explanation of some of the terms used in the green deal legislation. Some of these terms appear in the legislative requirements. However, although s. 2 assists in the interpretation of some qualifying conditions, it does not substantially add to them. Although a minor point, I am satisfied that the legislative requirements (ie those that flow from ss. 1(3) & (4)(a) – (e) ) need not be described as being ‘read with’ s.2 other than as a definition clause.

(b) Having considered the language of regulation 26, I conclude that its main purpose is to ensure that the green deal provider, rather than the improver, is responsible for ensuring that an energy plan meets the legislative requirements for classification a green deal plan, where that is the intended outcome. (Footnote: ⁶) There is no obvious intention to create an additional qualifying condition relating to the intent of the parties, although this may be a legal requirement for other reasons outside the Tribunal’s jurisdiction. Indeed, given the complexity of the legislative requirements, a qualifying condition relating to the intent of the improver would raise difficult issues in terms of what they understood a green deal plan to be.

(c) The suggestion that the requirements of regulation 26 should be read as additional qualifying conditions confuses the ‘legislative requirements’ (that flow from ss. 1(3) & (4)(a) - (e)) with the ‘relevant requirements’ (identified in regulation 63), a breach of which may lead to a sanction being imposed.

(d) There cannot be a breach of a ‘relevant requirement’ of a green deal plan unless there is first an energy plan that can be classified as a green deal plan. It follows that the reference in regulation 63(d) to a breach of a relevant requirement in regulation 26 cannot apply to a breach of a requirement listed in 26(1), since this would be a breach of a qualifying condition. As previously stated, an energy plan which breaches a qualifying condition cannot be classified as a green deal plan.

(e) In a similar vein, a breach of regulation 7(b) is also a breach of a relevant requirement. This is because 7(b) requires an energy efficiency assessment to be carried out in accordance with the relevant parts of the Code of Practice. A failure to comply with the Code of Practice is a breach of regulation 24(1) and therefore a breach of a relevant requirement, pursuant to regulation 63(d). As previously stated, this is a different matter to a breach of the legislative requirements that flow from ss. 1(3) & (4)(a) – (e).

(f) For this reason, and given the reference in regulation 7 to the purpose of s. 3(9), which is not part of the legislative requirements, I conclude that there is no legal basis upon which to conclude that ss. 1(3) & (4)(a) – (e) should be read with regulation 7.

Conclusion

32) An energy plan that fails to meet the legislative requirements of a green deal plan will, by necessity, remain an energy plan rather than a green deal plan. The applicable legal framework thereafter would fall to be determined, and would be a matter in relation to which this Tribunal would have no jurisdiction.

33) The extent to which the Regulations or the Code of Practice will continue to apply to an energy plan that is not a green deal plan is an issue requiring further submissions in the context of a substantive case. However, the following passage from the 2013 Guidance on Green Deal Sanctions and Appeals (‘the Guidance’) is noted:

“Where the Green Deal Provider has failed to ensure that the statutory conditions for the establishment of a Green Deal Plan have been satisfied, the Green Deal Provider is in breach of regulation 26 of the Framework Regulations, which is a relevant requirement, and the Secretary of State is able to cancel the plan. The plan is, technically, an Energy Plan – because the conditions required to establish a Green Deal Plan were not met”

34) Where there is a dispute as to whether an energy plan should be classified as a green deal plan, this should be determined by establishing whether each of the qualifying conditions for a green deal plan have been met. Such a determination is likely to be a largely factual, and can only be made on a case by case basis.

E) Does the existence of a Feed in Tariff (‘FIT’) transfer arrangement breach s. 5(3)(c) of the Act?

31) The relevant parts of the second qualifying condition in s. 5 read as follows:

“(1) For the purposes of section 1(4)(d), the conditions as to the terms of the plan and other matters are—

(a) the conditions set out in subsections (2) to (4), and

(b) such other conditions as are specified in the framework regulation.

(2) …

(3)….that the plan does not include any of the following terms—

(a) …

(b) …

(c) a term providing for money to be advanced to the improver (except in accordance with the framework regulations or provision made under them).”

32) The s. 5(3)(c) prohibition is addressed in regulation 39:

39. Permitted cash advances

A term of a green deal plan which provides for money to be advanced by the green deal provider to the improver is not contrary to section 5(3)(c) if the total amount advanced is no more than the lower of—

(a) £150; or

(b) 5 per cent of the estimated total of the green deal instalments.

33) It is common ground that the Green Deal Finance advanced by the green deal provider to the improver will not necessarily meet the full cost of the energy efficiency improvements. If the improver is not in a position to pay any shortfall, there is no prohibition in the legislation against borrowing the money from a 3^rd party.

34) Ms Heaney met the shortfall by entering into a separate arrangement with PVSI, which she describes as ‘the sister company’ of HELMS. PVSI paid the balance of the cost of the solar panels directly to HELMS and, in return, Ms Heaney transferred to PVSI the benefit of any FIT she would receive once she had entered into the green deal plan. Ultimately this arrangement reduced the extent to which Ms Heaney benefited, in real terms, from the energy efficiency improvements being made.

Submissions

35) Ms Heaney submits that the FIT transfer arrangement she entered in to both advanced to PVSI some of the benefit she would otherwise have derived under the plan and reduced her ability to realise the modelled first year savings. She has not directly addressed the question of whether this arrangement breached the qualifying condition in s.5(3)(c).

36) Both Mr Streeten and Ms Urell contend that a FIT transfer option arrangement is not a term of a green deal plan, but is instead a separate, private contractual arrangement between the improver and a 3^rd party. They agree that such an arrangement is an assignment of rights of future income rather than a loan, and that it is governed by consumer credit legislation rather than by the Act.

37) Mr Streeten’s developed position is that the natural meaning of s. 5(3) is clear: it is concerned with the restricting the terms of a green deal plan in relation to the advancement of money to the improver. He contends that, as such, it is unnecessary to apply a broader, purposive approach to interpreting the legislation. However, should the Tribunal decide to do so, nothing in the legislation suggests an intention to prevent improvers from taking advantage of the option of transferring the benefit of the FIT. Mr Streeten further submits that, while the existence of a FIT transfer contract is not a breach of s. 5(3)(c), the involvement of a green deal provider in making such an arrangement may be relevant to the issue of compliance with obligations under the Code of Practice.

38) Ms Urell’s developed position is that, since a FIT transfer contract is an arrangement whereby money is transferred to the green deal provider rather than the improver, it must be outside the ambit of s. 5(3)(c). She accepts that, hypothetically, the shortfall funding arranged under a FIT transfer contract could be transferred initially to the improver. However, in her view a purposive reading of s. 5(3)(c), when read with regulation 39, supports a view that the intention is to prevent the transfer of money from the green deal provider to the improver, rather than to prevent a transfer of money from any other person. She submits as a consequence that, even if the money for a FIT transfer contract were paid initially to the improver, the s. 5(3)(c) prohibition would not apply as it is an arrangement made with a 3^rd party.

39) Mr Wilcox’s submissions are twofold:

i) Although under a FIT transfer contract the shortfall sum passes from a 3^rd party to the green deal provider, it operates as though the money is passed to the improver who then settles the balance using these funds. He submits that, in any event, the term ‘to the improver’ in s. 5(3)(c) should be read purposively as ‘to or for the benefit of the improver’.

ii) Further, in his view a FIT transfer arrangement operates as an unreasonable inducement upon the improver to enter into a green deal plan, where such an arrangement is relied upon by a green deal provider as part of the sales pitch. Mr Wilcox submits that the overarching purpose of s.5(3)(c) is to prevent such unreasonable inducements from being offered.

44) Although Mr Wilcox provided written representations as to whether a FIT transfer contract is a linked contract for the purposes of s. 19 Consumer Credit Act 1974, these submissions are no longer being pursued.

Ruling

45) Having again considered the Parties’ submissions and the relevant statutory provisions, I conclude as follow:

i) The language of s. 5(3)(c) is clear and unambiguous. It introduces a qualifying condition prohibiting the inclusion, as a term in a green deal plan, a provision that money is to be advanced to the improver, save as might otherwise be permitted under the Regulations or Code of Practice.

ii) The natural reading of this provision is that the prohibition extends to the transfer of money by any person. I am satisfied that there is no legislative support for a conclusion that the prohibition is intended only to apply to a transfer of money from a green deal provider.

iii) Since the green deal provider ‘holds the pen’ on the terms of a green deal plan, the green deal provider is able to control whether a term relating to the transfer of money is included in the plan at all. This view is supported by regulation 26(1)(b) which, as already stated, makes the green deal provider responsible for ensuring that the plan complies with all qualifying conditions, including the condition in s. 5(3)(c).

iv) Regulation 39 provides the only permitted exception to the s. 5(3)(c) prohibition. It allows for a term relating to the advance of money to an improver to be included in a green deal plan, where the money is advanced by a green deal provider and is subject to a cap of the lower of £150 or 5% of the total instalment costs.

v) I am satisfied that, other than this permitted exception and the general prohibition in s. 5(3)(c), nothing in the legislative scheme to prohibits an improver from receiving an advance of money from, or entering into an arrangement with, a 3^rd party. The prohibition is against making such an arrangement a term of the green deal plan.

vi) This is consistent with a presumed policy intention of allowing broad access to the Green Deal Scheme. Since the Green Deal Finance arrangement may not meet the full cost of the improvements, at least some improvers will require additional funding to pay the shortfall. This is the position most of those currently appealing sanction decisions found themselves in. Had the legislation prohibited the improver from arranging shortfall funding with a 3^rd party, the pool of people able to benefit from the Green Deal Scheme would be limited to improvers making modest energy efficiency improvements or those with sufficient means to pay any shortfall themselves.

vii) However, on the face of the legislation, if shortfall funding arrangement with a 3^rd party were a term of a green deal plan and if, under the arrangement, the money were advanced to the improver, even if only initially, it breach the s. 5(3)(c) qualifying condition.

viii) I have gone on to consider whether s. 5(3)(c) should be read purposively, either as suggested by Ms Urell, so that the prohibition only extends to the transfer of money from a green deal provider, or as suggested by Mr Wilcox, so that it is read as ‘money advanced to or for the benefit of the improver’

ix) I have considered the principles derived from R (Quintavalle) v Secretary of State for Health [2003] UKHL 13, [2003] AC 687, recently endorsed by the Supreme Court in R (Fylde Coast Farms Ltd) v Fylde BC [2021] UKSC 18, [2021] 1 WLR 2794 in which, at paragraph 6, Lord Briggs and Lord Sales JJSC provide the following guidance:

“Even where particular words used in a statute appear at first sight to have an apparently clear and unambiguous meaning, it is always necessary to resolve differences of interpretation by setting the particular provision in its context as part of the relevant statutory framework, by having due regard to the historical context in which the relevant enactment came to be made and, to the extent that its purpose can be identified (which may require examination of admissible travaux preparatoires), to arrive at an interpretation which serves, rather than frustrates, that purpose.”

x) The wider context in which s. 5(3)(c) should be understood – as one of several qualifying conditions – is set out above. The specific context is best considered collectively with the other s. 5(3) prohibitions. Taken together they prohibit:

(a) A term that makes a person liable to make payments under a green deal plan, for any period of time other than when they are the bill payer for the property;

(b) A term that requires the bill payer to make an early repayment of the amount outstanding under the plan, other than as may be provided for in the legislation; and

(c) A term providing for money to be advanced to the improver.

xi) No assistance on legislative intention is found in the Explanatory Memorandum. I conclude therefore that the collective purpose of s. 5(3) is, in essence, to prevent onerous, inappropriate financial terms from being included in a green deal plan. Read in context, therefore, the prohibition in s. 5(3)(c) is against money being advanced inappropriately to the improver. This would include, but is slightly broader than, Mr Wilcox’s suggested interpretation of a prohibition on ‘unreasonable inducements’ if that is understood to mean money advanced to the improver as a ‘sweetener’, over and above any benefit to be derived from the installation of the improvements. Alternative arrangements prohibited by s.5(3)(c) might include an initial bonus payment, or a term whereby the improver regularly receives money from the bill payer.

xii) There is some support for this interpretation if the wider purpose of the Green Deal Scheme is considered. This appears to be twofold:

(a) It seeks to reduce domestic energy consumption and to promote the use of more sustainable sources of energy, thereby benefiting the environment; and

(b) It seeks to reduce energy bills, thereby benefiting the improver and/or the bill payer.

xiii) A natural inference from the qualifying condition in s. 1(3)(a) (that the improvements must be paid for at least in part by instalments) is that the intended beneficiaries include improvers who would not otherwise be in a position to fund the installation of energy efficiency improvements in their home. There is no suggestion that an ancillary purpose of the Scheme is to provide improvers with additional financial reward in return for participation.

xiv) However, I find no support from a purposive reading of the legislation for Mr Wilcox’s suggestion that this qualifying condition should be read as relating to money advanced ‘to or for the benefit of’ the improver. The difficulty with his proposition is that the Scheme as a whole is intended to operate for benefit the improver. I am satisfied that reading s. 5(3)(c) as prohibition on any term allowing ‘the transfer of money for the benefit of the improver’ might have unintended consequences, although the extent to which it is appropriate to include a term relating to shortfall funding is a matter in relation to which the Tribunal would benefit from further submissions. This is an issue that may well be revisited during a substantive hearing.

xv) Similarly, I find no support for Ms Urell’s contention that the s. 5(3)(c) prohibition should be read as only applying to money advanced by a green deal provider. A purposive reading of the legislation as a whole demonstrates an intention to regulate the conduct of all green deal participants. It is not unfeasible that a participant other than a green deal provider might be motivated to advance money to the improver as an inducement to enter a plan. Further, Ms Urell’s proposal would permit a term whereby the improver receives money under the plan from the energy supplier or from the bill payer. Either would, in my view, amount to an inappropriate payment read in the context of s. 5(3).

Conclusion

46) S. 5(3)(c) prohibits as a term a provision whereby money is advanced to the improver by any person, save as permitted under regulation 39.

47) A FIT transfer contract does not breach this prohibition since the transfer of money under such an arrangement is not to the improver.

48) However, any term which provides for money to be advanced to the improver, other than as permitted by regulation 39, is likely to breach this prohibition, which is a qualifying condition.

F) What is the relevance of the existence of a warranty/guarantee?

43) S. 5(5)(b) provides that the Regulations may create a further qualifying condition, requiring as a term in the green deal plan a guarantee of the improvements which also specifies who will benefit from this guarantee.

44) Regulation 3 creates such a condition:

“35.— Guarantees to be given by green deal providers

(1) The green deal provider must agree in the energy plan to guarantee the functioning of the improvements and to repair damage to the property which is caused by the improvements (the “guarantee”).

(2) The guarantee must include the requirements set out in Schedule 3 (guarantees).”

45) Schedule 3 sets out a number of requirements, including requirements to rectify defects in the functioning of the improvements and to improve specified damage caused by the improvements or their installation, subject to various time limits and with a minimum level of liability cover of £20,000.

46) Additional requirements as to the nature of the guarantees that must be provided are set out in Annex B of the Code of Practice.

Submissions

47) Ms Heaney notes the statutory provisions and submits that, since the guarantee requirements are a qualifying condition, an energy plan that does not contain such a guarantee in respect of every improvement made would not be a green deal plan.

48) Mr Streeten shares this view. He submits that an energy plan containing terms that fail to meet the guarantee requirements of Schedule 3 will be an energy plan rather than a green deal plan, whereas a plan that breaches the guarantee requirements set out in the Code of Practice will breach a relevant requirement and may liable to a sanction imposed by the Secretary of State. In his view the identification of an appropriate sanction may take into account whether the improver or bill payer has had to expend monies as a consequence of the guarantee failure, and/or whether the failure of the improvements to operate properly results in a failure to generate estimate savings. Mr Wilcox is of the same opinion.

49) Ms Urell shares Mr Streeten’s view of the statutory requirements, and agrees that a breach of Schedule 3 requirements will amount to a breach of a qualifying condition, whereas a breach of the Code of Practice will not. However, she disagrees that any expense to which the improver/bill payer has been put as a consequence of the latter breach is necessarily a factor to be considered when determining whether to impose a sanction. She submits that GDFC Assets Ltd should not have to pay for ‘a customer’s failure to read the paperwork’.

Conclusion

50) This issue appears to be largely uncontroversial. I agree with the parties’ views in relation to the impact of a breach of the guarantee requirements set out in Schedule 3 of the regulation, which are a qualifying condition by virtue of s. 5(5)(b) and regulation 35.

51) I further agree that a breach of the guarantee requirements of Annexe B of the Code of Practice would not prevent an energy plan from being classified as a green deal plan, although it would be a breach of a ‘relevant requirement’ pursuant to regulation 24(1)(a). However, although the existence of such a breach may trigger a decision to impose a sanction, I am satisfied any more detailed analysist of this requirement is best determined on a case specific basis.

G) If in the context of a Green Deal Plan the Provider has breached its obligations, what is the correct approach to determining the appropriate sanction?

H) What is the correct approach to determining whether a sanction is proportionate to the breach?

I) What factors are or may be relevant to determining the appropriate level of reduction?

43) As already identified, regulation 63 sets out the ‘relevant requirements’ with which a green deal provider is obliged to comply. Regulations 67 & 79 provide as follows:

“67.— Sanctions for breaches of the relevant requirements by green deal providers

(1) This regulation applies where the Secretary of State is satisfied that there is a breach of the relevant requirements by a green deal provider and—

(a) the breach is severe; or

(b) there have been other breaches of the relevant requirements by the green deal provider in respect of the property or other properties.

(2) The Secretary of State may impose on the green deal provider one or more of—

(a) a compliance notice;

(b) a financial penalty;

(c) withdrawal.

(3) Where the Secretary of State is satisfied that the bill payer has suffered or is likely to suffer substantive loss, the Secretary of State may, in addition to any sanction imposed under paragraph (2), impose cancellation or reduction on the relevant person.

79. Proportionality requirement

Any sanction imposed under this chapter must be proportionate to the breach in relation to which it is imposed.

44) Further guidance on the level of financial penalties is found in regulation 75:

75.— Financial penalties

(1) This regulation applies where a financial penalty may be imposed.

(2) In determining the amount of a financial penalty, the Secretary of State must have regard to the annual turnover and the number of employees of the person on whom the Secretary of State intends to impose the penalty.

(3) For each breach, the maximum financial penalty is £50,000.

45) The Respondents submit that a sanction decision must be considered from the perspective of it being an interference with the sanctioned party’s right to the peaceful enjoyment of property, which is a right guaranteed by Article 1 of Protocol 1 of the European Convention of Human Rights (A1P1). This provides as follows:

“1. Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

2. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

Submissions

46) Ms Heaney’s position is that the Secretary of State should identify the appropriate sanction by considering all breaches together, which requires him to consider all of the material presented to him and, where necessary, exercise powers to obtain additional material wherever situated. Thereafter, he must follow the Guidance, which requires him to take “a stepped approach, imposing a less severe sanction for a less serious breach, and a more severe sanction for a more serious breach, or… where there have been repeated breaches”.

47) In terms of the regulation 79 proportionality requirement, in Ms Heaney’s view this requires the sanction to be calibrated solely by reference to the severity of the breach in relation to which it is being imposed. She does not accept that there is a generalised ‘proportionality’ requirement.

48) In terms of relevant factors for consideration, Ms Heaney submits that the effect of a sanction upon the party upon whom it is imposed is irrelevant. She notes that the only relevant factor specified in the Guidance is a requirement that Secretary of State “consider(s) the subsequent effects [of a breach] on the customer, for example the ability of a customer to meet other financial obligations.”

49) Mr Streeten disagrees. His position is that appropriate approach to determining a sanction is that which the Secretary of State took in Ms Heaney’s case:

i) The Secretary of State determined that, as a consequence of HELMS’s breach of the Code of Practice (a relevant requirement), Ms Heaney had suffered substantive loss, and the impact of this harm was substantial.

ii) He found that Ms Heaney would receive a ‘windfall benefit’ from the improvements if a sanction of cancellation were imposed; therefore

iii) He imposed a sanction of reduction, calculated to put Ms Heaney back as closely as possible to the financial position she would have been in under the terms of her green deal plan had the Code of Practice not been breached.

50) Mr Streeten rejects any suggestion that the appropriate sanction must be determined by considering only the severity of the breach. He submits as follows:

i) The appropriate starting place is the obligation to comply with the Code of Practice, followed thereafter by a 5 step process. The Secretary of State must:

(a) Identify representative breaches of the Code of Practice;

(b) Consider the severity of the breach(es) (regulation 67(1)(a)), following the stepped approach set out in the Guidance.

(c) Consider context, which will include the overall number of breaches (regulation 67(1)(b));

(d) Consider whether there has been substantive loss (regulation 67(3)); then

(e) Consider proportionality (regulation 79).

ii) Any proportionality assessment must be heavily fact-dependant, requiring consideration of all relevant circumstances. In the context of a green deal plan this will include consideration of whether the improver might receive a ‘windfall’ benefit as a consequence of the sanction decision, as well as the impact of the sanction will be upon the party being sanctioned.

iii) The latter consideration arises because the imposition of a sanction is an interference with GDFC Asset Ltd’s A1P1 rights. Pursuant to s. 3 of the Human Rights Act 1996 (‘HRA’), regulation 79 must be read and given effect in a way that is compatible with Convention rights, and/or pursuant to s. 6 HRA, a sanction cannot be imposed that interferes disproportionately with GDFC Asset Ltd’s A1P1 rights. Mr Streeten relies on Lord Dyson MR’s analysis of Convention case law in Breyer Group Plc and others v Dept Energy and Climate Change [2015] EWCA Civ 408 a paragraphs 28 – 39 & 47 – 49 to submit that Ms Heaney’s credit agreement with HELMS, in relation to which GDFC Assets Ltd is now the payee, is an existing enforceable contract. As such it is part of the ‘marketable goodwill’ of the business and is a possession for the purposes of A1P1.

iv) In his view GDFC Asset Ltd’s A1P1 rights subsist even if the Tribunal finds that the contractual agreement between HELMS and Ms Heaney was flawed. Mr Streeten relies on Sir Andrew Morritt V-C’s conclusions in Wilson v First County Trust Ltd [2001] EWCA Civ 633, reached in the context of considering the rights afforded to pawnbrokers under the Consumer Credit Act 1974. This is considered further below.

v) Mr Streeten also relies on Henderson LJ’s observations in JP Whitter (Waterwell Engineers) Limited v HMRC [2016] EWCA Civ 1160 [paras 68 – 71] relating to the common law principle of proportionality. He submit that regulation 79 requires application of an ‘ends and means’ test, the ‘ends’ being the purpose for which the Secretary of State may decide to impose a sanction. In Mr Streeten’s view it can be reasonably inferred from the Scheme as a whole that the purpose is in part to support the public interest in securing compliance with the regulatory regime. He submits that the other mandatory considerations are:

(a) In accordance with A1P1 obligations, the impact of the sanction upon the person upon whom it is imposed;

(b) The severity of the breach, or series of breaches;

(c) Whether the improver has suffered a substantive loss; and

(d) By extension, whether the improver has received any benefit or saving from the measures that were installed under the plan.

iv) In terms of identifying the appropriate sanction, Mr Steeten’s view is that the Secretary of State is required to conduct a reasonable enquiry, so as to identify a sufficient number of breaches to be satisfied as to the severity of the breach(es) and the issue of substantive loss. He does not accept that all potential breaches must be investigated or identified. This is in part because the number of complaints received by the Secretary of State makes anything other than a proportionate investigation unfeasible. He submits that the regime anticipates the provision of assistance from all parties to ensure that all relevant matters are considered when the sanction decision is made.

v) Mr Streeten accepts that cancellation will be an appropriate sanction in response to the most serious breaches, but does not agree that it will always be appropriate in cases where the improver would not have entered into a green deal plan had they not been misled. He contends that the improver must have understood that they were entering into a plan in relation to which some form of payment would be due, and that therefore the fact that they were misled about the terms and conditions ought only to be one of many considerations.

64) Ms Urell largely agrees with Mr Streeten, and adopts his A1P1 argument and his suggested 5 stage approach. She points out that that there are a range of sanctions available under the Regulations that can be used by the Secretary of State to punish a green deal provider, some of which are mandatory. By contrast, the power to impose a sanction for a breach of a relevant requirement is discretionary and engages different considerations.

65) Ms Urell describes the regulation 79 proportionality assessment as being akin to a fairness jurisdiction, and the test therefore as being proportionality inter partes. She submits that all relevant circumstances must be taken into account as a matter of common law. As such, any suggestion that the appropriate sanction should be determined without reference to any benefit obtained by the improver is ‘just wrong’, and this must include a realistic assessment of the cost of the improvements. In her view it would not be proportionate for the Tribunal to do more than is necessary in order to do justice between the parties.

66) Given this, Ms Urell does not agree that either public interest in regulatory compliance or deterrence ought to be relevant considerations. She points out that HELMS has been sanctioned many times, is now a company in liquidation and there is no longer a message to be sent. She accepts that the impact of the breach on the improver’s ability to meet financial obligations must be a relevant factor, as recognised by the Guidance, but in her view any such consideration must be supported by appropriate evidence. Although an increase in bills as a result of a green deal plan might be a relevant factor, any wider implications that might arise in relation to mortgages and buildings insurance ought not to be relevant, since these will have been specifically addressed under the terms of the plan. However, a shortfall funding arrangement could be a relevant factor for consideration.

67) Ms Urell agrees with Mr Streeten that the sanction of cancellation ought to be reserved for the most severe breaches and suggests that this may be an appropriate outcome where the amount to be repaid under the plan equals or exceeds the received benefits. She also agrees that not all breaches in relation to each complaint need be considered by the Secretary of State, since to do so would cause delay and may not add to the assessment of the overall detriment to the improver.

68) Mr Wilcox, by contrast, largely agrees with Ms Heaney. He submits as follows:

i) Regulation 79 requires the sanction imposed to be proportionate to the breach, which means that the Secretary of State must only consider the nature of the breach, rather than any ancillary issues such as the resources of the person being sanctioned. Otherwise, in Mr Wilcox’s view, the requirement in regulation 75(2) to consider the financial position of a green deal provider before imposing a financial penalty would be redundant.

ii) Had Parliament intended a broader range of factors to be considered as part of the proportionality assessment, including the impact of the sanction on the relevant person, then this would be explicit on the face of the legislation. Mr Wilcox relies in support on the approach taken by Henderson J in Whitter. In that case, which concerned HMRC’s ability to make a negative determination under the Finance Act 2004, the court decided that a range of procedural safeguards provided significant protections. These safeguards comprised (1) a discretions as to whether to make a negative determination; (2) a requirement to give advance notice of a negative determination; and (3) a right of appeal. Henderson J concluded that, had Parliament intended HMRC to also consider the impact of the negative determination upon the taxpayer’s financial position, this would be apparent on the face of the legislation ( see paragraph 60).

iii) Given the similarities between the procedural safeguards considered in Whitter and those in the green deal enforcement provisions, and given a similar absence of a specific requirement to consider the impact of a sanction on the relevant person, Mr Wilcox submits that the conclusions reached by Henderson J should be followed. He notes that these conclusions were endorsed by Lord Carnwath when the matter was considered by the Supreme Court in JP Whitter Ltd v Revenue and Customs Commissioners [2018] UKSC 31, paragraph 22.

iv) In relation to the common law principle of proportionality, Mr Wilcox’s position is that the regulatory requirements of the green deal scheme are clear, and compliance is entirely within the control of the green deal providers. Therefore, providing the Tribunal is satisfied that the ends and means of the enforcement powers are proportionate, the Secretary of State’s exercise of powers under regulation 67 need not be subjected to a wider assessment of proportionality.

v) In relation to identifying an appropriate sanction, and relevant factors, Mr Wilcox submits that Guidance requires the Secretary of State to take a stepped approach – stating that he will impose a less severe sanction for a less serious breach, and a more severe sanction for a more serious breach, or where there have been repeated breaches. Mr Wilcox accepts that the imposition of a severe financial penalty for one breach might be disproportionate, and expects more severe sanctions to be reserved for more severe, multiple breaches.

vi) He considers the Secretary of State to have an obligation to review and consider every known breach that might merit a sanction, and to also consider whether the green deal provider being sanctioned is responsible for a pattern of breaches affecting several customers. The latter must be a requirement because the Secretary of State has an obligation to ensure that there is compliance with regulatory requirements over time. Given this, he must also ensure that all relevant documents are before him when making a sanction decision. Mr Wilcox notes that the Secretary of State has referred to missing documents in some of the appeal cases and suggests that he should have exercised his powers to obtain them.

vii) Although he agrees that the bar for cancellation should be high, Mr Wilcox does not agree that it should be viewed as the most appropriate sanction for the most severe breaches. He points out that the imposition of a financial penalty could result in a higher financial loss for a green deal provider. He further submits that nothing in the legislation suggests that the approach taken the sanction of cancellation should be different if the ‘relevant person’ is not the person responsible for the breach(es).

viii) Finally, Mr Wilcox takes issue with the approach taken by the Secretary of State to calculating the sanction of reduction, in particular the application of a blanket percentage reduction which, he submits, recalculates the benefit of the measures under the plan, and is akin to a finding that the ‘golden rule’ requirements of regulation 30 have not been met.

Ruling

69) I have considered these submissions, as well as the language of the legislation and the Secretary of State’s explanation of the enforcement regime as presented in the Guidance.

The correct approach to determining the appropriate sanction

70) Regulation 79 requires the sanction imposed to be proportionate to the breach. A sanction may only be imposed where the breach is severe, or where is it one of a series of breaches (regulation 67(1)).

71) The Guidance note in relation to regulation 79 is, in full:

“Under regulation 79 of the Framework Regulations, the Secretary of State is required to ensure that any sanction is proportionate to the breach in respect of which it is imposed. Accordingly, where there is a choice of sanctions for a particular breach, the Secretary of State will take a “stepped” approach, imposing a less severe sanction for a less serious breach, and a more severe sanction for a more serious breach, or a case where there have been repeated breaches.”

72) Regulation 67 provides for two categories of sanction: the first comprises compliance notices, financial penalties and withdrawal, which may only be imposed on a green deal provider (67(2)). The second category comprises additional sanctions of cancellation or reduction, which may be imposed on a relevant person where the bill payer has suffered or may suffer a substantive loss (67(3)).

73) I note in passing that the Guidance incorrectly describes the circumstances in which cancellation may be imposed. Paragraph 4.8 states (emphasis added):

“The Secretary of State may impose cancellation if the breach is severe or if there

have been other breaches of the relevant requirements by the Green Deal Provider

or Installer in respect of the property or other properties, or if the bill payer has

suffered substantive loss. Cancellation may be imposed in addition to any other

appropriate sanctions.”

74) However, a regulation 67(3) states that cancellation may only be imposed in this context where the bill payer has suffered, or is likely to suffer, substantive loss.

75) The Guidance provides the following explanation of a substantive loss:

“2.8 Substantive Loss

In some cases, the Secretary of State will need to consider, before imposing a

sanction, whether the bill payer has suffered substantive loss. The Secretary of

State is likely to consider that a customer has suffered substantive loss where the

customer has suffered harm, and is likely to take into account both:

i. the level of harm suffered by the customer; and

ii. the impact of that harm on the customer.

Harm may be:

• significant (for example financial loss);

• moderate (for example, the bill payer was inconvenienced in a minor

way); or

• minor (for example the bill payer did not notice the breach).

In assessing the impact of the harm, the Secretary of State will consider any

subsequent effects on the customer, for example the ability of a customer to meet

other financial obligations. The fact that the complainant did not at first notice the

breach does not necessarily mean that the harm suffered was not significant, once

discovered.”

76) Taking all of this into consideration, I conclude that there are 6 steps to be followed when determining the appropriate sanction. These are as follows:

i) Identify whether there has been a breach of a relevant requirement.

ii) Decide whether the breach is sufficiently severe to warrant a sanction being imposed, or whether there has been a series of breaches by the green deal provider either at the same property or at different properties;

iii) Assess the seriousness of the breach(es) overall, and decide whether the sanctions of a compliance notice, financial penalty or withdrawal are appropriate, by deciding whether the severity of these sanctions are proportionate to the seriousness of the breach.

iv) Decide whether the bill payer has, or is likely to suffer substantive loss by considering whether they have suffered harm.

v) Assess both the level of the harm suffered and the impact of the harm.

vi) Decide whether the sanctions of cancellation or reduction are proportionate, by reference to both the severity of the breach and the harm caused to the bill payer.

The correct approach to determining whether a sanction is proportionate to the breach

77) I conclude that a pattern of breaches by one green deal provider is likely to be a relevant consideration both in relation to the assessment of the seriousness of a breach and in relation to the identification of a proportionate sanction. To some extent, therefore, a series of breaches by a green deal provider may be described as operating as an aggravating feature. To conclude otherwise would conflict with both regulation 67(1)(b) and with the Guidance in two respects:

i) It would undermine the enforcement objective, identified in relation to financial penalties, of maintaining the credibility of the Scheme;

“In considering whether to impose a financial penalty the Secretary of State will pay particular attention to whether:

• the Green Deal Provider has benefitted or intended to benefit from a breach, financially or otherwise;

• the behaviour of the Green Deal Provider undermines the credibility or reputation of the Green Deal scheme; and

• the breach or breaches lead to significant harm or impact on affected persons.”

ii) It would limit the interpretation of the ‘stepped approach’, whereby a more serious sanction may be imposed in “a case in which there has been repeated breaches” so that it reads instead as “a case in which there have been a number of different breaches”. This is because it is manifestly unlikely that there will have been a repeated breach of the same relevant requirement at a single property.

78) It follows that the Secretary of State must bear responsibility for ensuring that related breaches by a green deal provider are taken into account when identifying an appropriate sanction, since the other parties are either unlikely to unable to bring this issue to his attention. However, I agree with Mr Streeten that it is otherwise reasonable for the Secretary of State to expect the parties to make all relevant information available to him at the time of the sanction decision. The investigatory role of the Secretary of State is limited, and in accordance general principles the use of coercive powers to obtain information should be preserved as a method of last resort. I see no objection to the Secretary of State proceeding on the basis of representative breaches, provided he is satisfied that these support a proper assessment of severity overall the purpose of identifying the appropriate sanction. Given Mr Streeten’s submission that the Scheme presumes that the Secretary of State will receive assistance from the parties to a complaint, it follows that he will consider any additional matters brought to his attention prior to the sanction decision in appropriate detail.

79) I am satisfied from the Guidance and from a reading of the Scheme as a whole that one of the purposes of a sanction decision is the maintenance of public confidence in regulatory compliance, and that this may therefore be a relevant factor to the identification of a proportionate sanction. Further, given the directions in the Guidance to pay attention to the behaviour of the green deal provider, deterrence may also be a relevant consideration.

80) I conclude that the identification of a windfall benefit must also be relevant sanction, since this will inevitably go to the level and impact of any harm suffered. However, a windfall benefit ought not to operate as an effective bar to a sanction of cancellation, since it can only be one of several potentially relevant factors. In some cases, for example, that the bill payer may have suffered harm of a different nature which may be assessed as outweighing the windfall benefit, or it may be that the seriousness of the breach(es) justify the imposition of a severe sanction, windfall benefit notwithstanding.

81) I also conclude that considerations such as a negative impact upon the bill payer’s mortgage position or their ability to obtain relevant insurance ought not to be excluded as considerations per se. However, the Secretary of State must be satisfied that any detrimental circumstances relied upon are ‘subsequent effects’ of the breach(es) in relation to which a sanction is being imposed.

82) I am not persuaded by Ms Urell’s submissions that the test for proportionality in this context requires a determination of fairness inter partes. I am satisfied that the impact of the sanction upon the green deal provider and/or the relevant person will only be relevant considerations in exceptional circumstances, notwithstanding subsisting A1P1 rights.

i) Mt starting position is that the Court of Appeal decided in Breyer v DECC (a case relating to the rates payable under a FIT arrangement) that an existing, enforceable contract forms part of the marketable goodwill of a business and is a possession for the purposes of A1P1. This was confirmed by Lord Dyson MR at paragraphs 48 & 49:

“48. There is no challenge to the judge’s conclusion that category (iii) cases (leases signed by both parties) were prima facie an element of the marketable goodwill of Homesun’s business and were therefore A1P1 possessions. At [2015] 2 All ER 44, para 79, the judge concluded that category (i) cases (possible future concluded leases) were not possessions: “they were much too speculative to represent an element of the marketable goodwill in the business”….

49. As I have said, the distinction between goodwill and loss of future income is not always easy to apply. But in my view, the judge was right to see a clear line separating (i) possible future contracts and (ii) existing enforceable contracts. Contracts which have been secured may be said to be part of the goodwill of a business because they are the product of its past work. Contracts which a business hopes to secure in the future are no more than that. For this reason, I would uphold the judge’s classification.”

ii) I am satisfied that the credit agreement Ms Heaney entered into with HELMS, in relation to which GDFC Assets Ltd is now the payee, is an existing enforceable contract and therefore a ‘possession’ such that A1P1 rights are engaged.

iii) The fact that the terms of Ms Heaney’s agreement may not have complied with regulatory requirements of the green deal scheme does not deprive GDFC Asset Ltd of its A1P1 rights. This was considered by the Court of Appeal in Wilson v First County Trust Ltd:

“26. … It was said, in effect, in relation to article 1 of the First Protocol, that, where there was no document signed by the debtor – or where the document signed by the debtor did not contain all the prescribed terms of the agreement – neither the agreement, nor the delivery of the pawn, conferred any enforceable rights on the creditor. So, in the present case, the creditor had no relevant "possessions" to the peaceful enjoyment of which it was entitled, or of which it was deprived by section 127(3) of the 1974 Act. In effect, the creditor – by failing to ensure that he obtained a document signed by the debtor which contained all the prescribed terms – must (in the light of the provisions in sections 65(1) and 127(3) of the 1974 Act) be taken to have made a voluntary disposition, or gift, of the loan monies to the debtor. The creditor had chosen to part with the monies in circumstances in which it was never entitled to have them repaid; so there is nothing to engage the rights guaranteed by article 1 of the First Protocol…

27 There is, if we may say so, such an obvious unreality in treating the pawnbroker as if it were a voluntary disponor that we do not find it a matter of any surprise that the argument advanced on behalf of the Secretary of State cannot be supported. It cannot be supported because, as we have said, a proper analysis of the 1974 Act does not lead to the conclusion that a creditor under a regulated agreement who fails to obtain a document signed by the debtor which contains all the prescribed terms is without rights. The true analysis is that the agreement, and the delivery of the pawn, do confer rights on the creditor; but those rights are subject to restrictions on enforcement.

iv) However, a person’s right to the peaceful enjoyment of their property is not absolute. They may be deprived of their possessions by the state where, to paraphrase the language of the Convention, it is in the public interest to do so or where a legitimate aim is being pursued, and where any action taken complies with conditions provided for in law.

v) I find that, although a relevant person’s A1P1 rights will be engaged in the context of a sanction of reduction or cancellation, the issue of whether the deprivation is proportionate must be considered from the perspective of the legislation as a whole, rather than through the lens of the exercise of the Secretary of State’s discretion in each individual case. In reaching this conclusion I have adopted a number of relevant principles identified by Henderson J in Whitter v HMRC, which was approved by Lord Carnwath when the same matter was considered by the Supreme Court.

vi) The first relevant principle is that that any statutory discretion has to be exercised consistently with the object and scope of the statutory scheme. Henderson J observed (at paragraph 60)

“As a matter of first impression, I cannot find any indication in this tightly constructed statutory scheme that Parliament intended HMRC to have the power, and still less a duty, to take into account matters extraneous to the CIS regime, when deciding whether or not to exercise the power of cancellation in section 66(1). By “matters extraneous to the CIS regime” I mean in particular, in the present context, matters which do not relate, directly or indirectly, to the requirements for registration for gross payment, and to the objective of securing compliance with those requirements. My preliminary view, therefore, is that consideration of the financial impact on the taxpayer of cancellation would fall well outside the intended scope of the power.

61. The position might arguably be different if no real content could be given to the discretion which the power affords to HMRC unless wider considerations could be taken into account…

…

65. …I also find it helpful to refer to the observations of Lewison J in Hilton at [22] to [23]. Although made in the context of a proportionality argument, and section 3 of HRA 1998, the observations are equally applicable to the question of construction which I am now considering. Lewison J said:

"22. … If the legislation were to incorporate a general test of proportionality that would place a heavy burden on tax inspectors to conduct a prospective review or forecast of the potential effect of refusal of a certificate on individual businesses. Moreover, it is not said that it will always be disproportionate to refuse a certificate if the result would be that the taxpayer would be put out of business. So there would require to be a judgment by the inspector not only whether a refusal would have that effect, but also whether that effect is proportionate to the failures.

23. There may be social, economic and administrative arguments for and against the imposition of such a burden or there may be other solutions to perceived injustices in the statutory scheme, but they are matters for debate and legislation not for interpretation by a court."”

vii) Henderson J’s view was upheld by the Supreme Court in the following terms:

“21. Attractively though the appeal has been argued, I have no doubt that the Court of Appeal reached the right conclusion, substantially for the reasons they gave. Apart from the Convention, the company’s submission comes down to a short point: that is, given the existence of a discretion in section 66, it must in the absence of any specific restriction be treated as an unfettered discretion. That to my mind overlooks the basic principle that any statutory discretion must be exercised consistently with the objects and scope of the statutory scheme.

22. Like Henderson LJ, I cannot read the power as extending to matters “which do not relate, directly or indirectly, to the requirements for registration for gross payment, and to the objective of securing compliance with those requirements”: para 60.

viii) In the context of the Green Deal Scheme, the object and scope of the legislation is the regulation of the installation of energy efficiency improvements and ensuring regulatory compliance by green deal assessors, providers and installers. That is the purpose for which the Secretary of State’s enforcement powers are provided and I am satisfied that the financial circumstances of a relevant person are extraneous to the exercise of this discretion. Given my considerations above, I conclude that the legislative scheme and Guidance provides sufficient ‘content’ to the Secretary of State’s powers: in broad terms he is directed to exercise his discretion by considering the seriousness of the breach and any harm it may have caused. Although a tax regime necessarily gives rise to some unique considerations, I am satisfied that the green deal legislation is a similarly ‘tightly constructed statutory scheme’ that provides no legislative basis for reading in a generalised proportionality requirement.

ix) The second relevant principle identified by Henderson J, at paragraphs 68 – 71, is the potential existence of a common law principle of proportionality where this forms part of the legislative background. However, he concluded that the legislative regime before him was clearly proportionate in terms of the balance between struck between ends and means, noting in addition the existence of procedural safeguards:

“71…. there are many contexts in which the common law will require proportionality between ends and means to be observed by a public authority in the exercise of its functions, although whether such a requirement exists as an independent ground of review of administrative action, or only as an aspect of review for unreasonableness, remains a controversial question upon which the Supreme Court has yet to pronounce definitively. Even if that assumption be made, however, I do not think that it assists the Company in the present case. The CIS legislation as a whole is clearly proportionate in the balance which it strikes between ends and means, and in the procedural safeguards for the taxpayer which are built into it. In relation to the power of revocation in section 66(1) itself, the existence of a discretion is one of those safeguards, and it seems to me that any common law requirement of proportionality is comfortably satisfied if the matters which HMRC are entitled to take into account are broadly confined to matters relevant under the statutory scheme to the grant of registration for gross payment, but with a wider margin of discretion than the often highly prescriptive terms of the legislation would otherwise permit.

72. The impact of cancellation of registration on the sub-contractor's business is in my judgment an extraneous factor, and the mere fact that the financial consequences for the sub-contractor's business will be severe cannot, without more, make that factor one which it is relevant for HMRC to consider. …”

x) I am similarly satisfied that the ‘ends and means’ of the green deal scheme are balanced and proportionate, supported by the provision of additional procedural safeguards as identified by Mr Wilcox. Any proportionality-based appeal against the imposition of a sanction in this context would be against severity of the sanction when assessed against the seriousness of the breach. There is, again, no basis upon which to conclude that the ‘ends and means’ of the green deal regime requires consideration of the impact of the sanction decision upon the green deal provider/relevant person for the purpose of this proportionality assessment.

xi) The third relevant principle identified by Henderson J is that, in the context of an assessment of proportionality for the purposes of A1P1 rights, other than in the most exceptional cases, the assessment should be confined to the statutory regime as a whole rather than the exercise of a statutory function by a public body (paragraphs 79-80):

“79…In my judgment, Mr Chacko is right to say that A1P1 has to be considered at the stage of exercise of the discretion conferred by section 66 (1), if only for the simple reason that cancellation of a certificate indubitably involves an interference with the two possessions identified by Ferris J in Vicky. It by no means follows, however, that the proportionality review at this stage always needs to go beyond the proportionality of the CIS regime as a whole. On the contrary, in all save the most exceptional cases it will in my judgment be a complete answer that the discretion as I have construed it forms an integral part of a Convention-compliant statutory regime.”

xii) I therefore conclude that, as a matter of domestic and international law, the relevant question is whether any interference with A1P1 rights by the scheme as a whole is in the public interest or is in pursuit of a legitimate aim and accords with conditions provided for in law. For reasons already given I am satisfied that the green deal enforcement provisions meet this requirement.

What factors are or may be relevant to determining the appropriate level of reduction?

83) It has been suggested by Ms Heaney and Mr Wilcox that, in cases of mis-selling, the objective of the sanction ought to be to put the improver back into the position they would have been, had they not entered into a green deal plan. However, for reasons already given, I conclude that the Regulations require the sanction to be proportionate to the seriousness of the breach. That test is capable of leading to a range of different outcomes. However, nothing in the legislative scheme supports an approach whereby a green deal plan should be effectively cancelled, irrespective of whether this would be a proportionate sanction.

84) There is also a more general dispute between the Parties as to whether a single, generic figure can be relied upon, such as the application of a 30% reduction, in circumstances where case-specific data is unavailable. Having considered the submissions of the parties, I conclude that it would not be helpful to deal with this issue on a hypothetical basis, since a range of factors suggest that such a determination is best made on a case by case basis.

J) If the effective date of the sanction is the date of the complaint to the Secretary of State (‘SoS’), can the SoS remedy a wrongful act that occurred before the effective date?

86) The ‘effective date’ is defined in regulation 51 as follows:

“(a) except where paragraph (b) or (c) applies, the date of the breach;

(b) where the person who was the payee on the date the sanction was imposed was

not the payee on the date of the breach, the receipt date;

(c) where the sanction is in respect of a failure to take a consumer credit modifying

step, such date as the Secretary of State considers appropriate;”

87) The ‘receipt date’ is also defined by the same regulation:

receipt date” means the earlier of—

(a) the date on which a complainant makes—

(i) an eligible complaint; or

(ii) a complaint in accordance with regulation 60; or

(b) the date on which the Secretary of State exercises a power conferred by this

Part following the receipt of information under regulation 52(1)(c);

88) Regulation 51 further defines cancellation, reduction and compensation as being sanctions that may be imposed by the Secretary of State from the effective date. This means that, in cases where the green deal provider is no longer the payee under the green deal plan, the Secretary of State may only impose sanctions that take effect from the date of complaint.

89) Ms Heaney accepts that regulation 51 prevents the Secretary of State from remedying any wrongful act that arose between the date of the breach and the date of complaint, but submits that any loss suffered may be taken into account as a sanction decision is designed to prevent ongoing financial misconduct or harm. Her position is that a finding that an energy plan ought not to be classified as a green deal plan would leave the improver the option of seeking a remedy from the date of breach from the Financial Ombudsman Service.

90) Mr Street broadly agrees in relation to the impact of the effect date and the sanction decision. He describes a sanction decision as being a combination of a penalty and redress, and submits that the Secretary of State is able to reflect in the sanction any loss suffered before the effective date. His position is that nothing in the Regulations prohibits consideration of conduct before the effective date and that the Secretary of State is obliged to take such conduct into consideration where it forms part of the bill payer’s substantive loss.

91) More generally, Mr Streeten submits that the Tribunal has no jurisdiction to consider any matters, such as the availability of remedies for energy plans that are not green deal plans, and it limited to those matters specified in regulation 87.

92) Ms Urell broadly agrees with Mr Streeten. She agrees that the jurisdiction of the Tribunal is limited and does not extend beyond matters specified in regulation 87. She submits that the purpose of a sanction is not to refund payments made before the effective date, although she accepts that the Regulations impose no limit on the level of reduction that may be imposed. However, in her view, the sanction must still be proportionate, and any level of reduction imposed must not go beyond the principle amount loaned to the improver.

93) Mr Wilcox takes a different position. He submits that calculating the level of reduction so as to include loss before the effective date risks making reduction a more serious sanction than cancellation, and also risks taking an approach that is unduly favourable to the consumer.

Ruling

94) The Parties agree that, by virtue of regulation 51, in cases where the identity of the payee has changed, the Secretary of State is bound to treat the date of complaint as being the effective date in relation to any sanction imposed.

95) Although there is no legislative reference to whether the appropriate sanction may be calibrated by reference to conduct and/or consequences suffered between the breach and the effective date, as a matter of common sense any such conduct or consequence may be relevant factors when considering steps (iii) -(vi) of the 6 step process identified above in relation to identifying an appropriate sanction. The steps in relation to which conduct before the effective date may be relevant seem to be:

i) The assessment of the seriousness of the breaches (step (iii));

ii) The assessment of whether substantial loss and harm has been inflicted (step (iv));

iii) The assessment of the level and impact of any harm (step (v)); and

iv) The assessment of a proportionate sanction.

Next steps

96) The next step in Ms Heaney’s case will be the substantive hearing of her appeal.

Directions

97) Parties must, by 5pm on 12 January 2022, send the Tribunal:

i) Any proposals for a revised hearing bundle in light of this Ruling;

ii) Any further Directions considered necessary, which must be agreed to the extent possible; and

iii) Any dates during the period 14 February 2022 – 14 April 2022 when they would unavailable to attend a remote substantive hearing.

98) A copy of the Ruling will be sent to the Appellants in any other cases in which similar issues arise.

Signed:

Dated:

Judge Moira Macmillan

29 December 2021