Elizabeth Arden (UK) Limited v Environment Agency

The Appellant appeals against the Notice of Civil penalty reference ESOS-ENF-2-05161 dated 09/12/2021. The Notice was issued for failure to comply with the Enforcement notice issued by the Environment Agency dated 16/10/2021 (‘the Notice’). That notice required the Appellant to carry out an Energy savings Opportunity scheme assessment and to report the outcome to the Respondent by 18/01/2021. No notification of compliance had been received by the due date.

The Respondent stated in the Notice of Civil penalty that it had applied its published Enforcement and sanctions policy (“the enforcement policy”) in considering whether to impose a penalty and in deciding how much that penalty should be. Annexes A and D to that policy are relevant in the Respondent’s consideration of whether to impose a penalty for non-compliance with the obligations under the Energy Savings Opportunity Scheme.

The Appellant’s culpability was assessed as Negligent, just one step up from the lowest level of culpability which is Low or no culpability. The enforcement policy states;-

by accident or the act of a rogue employee despite the presence and due enforcement of all reasonably required preventive measures

where such proper preventive measures were unforeseeably overcome by exceptional circumstances

The Notice states;-

“We have considered our penalty setting approach in Annex 2 to our Enforcement and Sanctions Policy and your response to the Notice of Intent.

I have highlighted a section of the text above because it makes it clear that the Respondent had considered the Reply sent to the Respondent to the Notice of Intent to impose a penalty in the Respondent’s exercise of its discretion to impose the penalty that it did impose.

It is not in dispute that the Appellant failed to comply with its obligation to complete an assessment of its energy usage by 05 December 2019. Such an assessment has to be completed and reported every 4 years under the Energy Savings Opportunity scheme. The Appellant failed to report the outcome of such assessment to the Respondent. The Appellant failed to comply with the Enforcement Notice served on the Appellant dated 16/10/2020. The Appellant does not dispute that the Appellant was not a new entrant to the scheme or that it is a medium size enterprise.

What is in dispute is whether the Respondent served the enforcement and penalty notices correctly, applied its Enforcement policy correctly and proportionately and in particular correctly assessed the level of culpability on the part of the Appellant as Negligent rather than Low or No culpability.

On appeal to the first Tier Tribunal (General Regulatory Chamber) the Tribunal may, under Regulation 50 of the Regulations

“(a)cancel the determination, enforcement notice or penalty notice (as the case may be),

(b)affirm the determination, enforcement notice or penalty notice (as the case may be), whether in its original form or with such modification as it sees fit,

(c)instruct the scheme administrator or the relevant compliance body to do, or not to do, anything which is within the power of the scheme administrator or compliance body.

In the Notice of appeal dated 28/02/2022 the Appellant explained what had happened within the company during the Covid pandemic. The offices were closed between March 2020 and October 2021. Staff members were working from home and the consumer email was being monitored. Emails regarding this penalty were sent to and received by the Company at the email address ConsumerEU@revlon.com . Service was not effected by post and neither of the two Directors was personally served.

An employee first picked up the Notice of intention to issue a penalty sent by ESOS to the Consumer email address on 10 August 2021. It was referred on to the Consultant, Mr H Dingra who was employed by the Appellant to advise on IT and related issues. He wrote to Margaret at ESOS enforcement on 17 August seeking further details of what was required of the Company.

Margaret at ESOS then responded by email stating the following

“The deadline to comply with the Enforcement Notice was 18/01/2021. Please can you provide the following information:

 Explanation as to why you were unable to meet the date specified in the Enforcement Notice

On 26 August 2021, the Appellant’s Finance Director wrote to Margaret at the ESOS email address and in his reply (page 21 of 71 in the stitched bundle) he apologised for the delay in compliance and explained that many of the staff had been furloughed, that the remainder were working from home and unable to access data that was in the office and that access would be needed to complete the assessment. It was explained that the company hoped to be back in the office in October but the situation was still uncertain.

Nothing further was heard from the Respondent until the Notice of intention to issue a Penalty notice was served on 16 October 2021.

The Appellant ultimately instructed outside Consultants to complete the assessment and it was submitted on 17/12/2021.

The Appellant submits that the enforcement and Penalty Notices were not properly served as they were not sent by post to either of the 2 Directors.

The Respondent states in reply that service was good because the Notices were sent to two generic email addresses, ukservice@elizabetharden.com and ConsumerEU@revlon.com. It is argued that it was the responsibility of the Appellant to ensure that the communications were passed on to the appropriate persons.

I fully accept the point made by the Environment agency that the integrity of the system must be maintained and that it is the responsibility of each enterprise operating within this jurisdiction to ensure compliance with the legal obligation imposed on it including those imposed under the Energy savings opportunity scheme.

But it is notable that no allowance was made in the consideration of culpability to the pandemic and the impact of that pandemic on the Appellant’s ability to note that important Notices were served by the Respondent by email to generic email addresses. Nor was any consideration given to the Appellant’s ability to comply with the time limits imposed.

The Appellant states that once the Company became aware of its default it did comply and there was full compliance by 17/12/2021. This is not disputed by the Respondent. The Appellant feels aggrieved that no allowance was made for the exceptional circumstance of Covid and complains that service was not effective.

Somewhat surprisingly I could find no reference to specific service requirements for Enforcement notices and neither party has pointed me to any specific requirements, save that the Appellant has stated that the Notices should have been served on the Directors and not on a generic consumer email address.

In its own Enforcement Policy and Guidance the Environment agency sets out the principles to be applied in taking enforcement action. On the 28 April 2020 the Environment agency published its Response to the coronavirus pandemic which stated;-

In the Respondent’s enforcement Policy, there is a section that expressly deals with how the Agency sets the final penalty amount. It reads,

“ step 4

We may adjust the penalty from the starting point within the penalty range by assessing the following aggravating and mitigating factors:

•

financial gain - whether or not a profit has been made or costs avoided as a result of the breach

•

history of non-compliance - includes the number, nature and time elapsed since the previous non-compliance(s)

•

attitude of the non-compliant person - the person’s reaction, including co-operation, self-reporting, acceptance of responsibility, exemplary conduct and steps taken to remedy the problem

•

personal circumstances - including financial circumstances (such as profit relative to turnover), economic impact and ability to pay (only if sufficient evidence is provided). Also for a public or charitable body whether the proposed penalty would have a significant impact on the provision of its service (only if sufficient evidence is provided)

These factors differ to those listed in the Guideline. We have selected applicable factors from the list. We have also taken factors from other steps in the Guideline. We have then adjusted and simplified them so they are relevant to the climate change schemes.

We will normally adjust a penalty within the range but, in some circumstances, we may move outside the range, including waiving the penalty.

If a public or charitable body provides sufficient evidence to show that the proposed penalty would have a significant impact on the provision of its services, we will normally substantially reduce the penalty from the starting point.

At the end of step 4 we will have calculated the final penalty amount.

In this case the Respondent did consider that the Appellant was not a new entrant to the scheme. The size of the enterprise was taken into consideration. Compliance had not taken place by the time the Penalty Notice was issued on 09/12/2021. It took place 8 days later. There was no review of the penalty after compliance had taken place 8 days after the Penalty notice was issued.

I find that the Appellant did not comply with its obligations under the Energy savings opportunity scheme (ESOS) for the second period. The Appellant failed to comply with the Enforcement Notice dated 16/10/2020 requiring it to carry out an ESOS assessment and subsequently failed to file its report on time. I accept that compliance is essential to maintaining the integrity of the scheme.

I find that there were mitigating factors in this case that were not duly considered including in particular the impact of the Covid pandemic on the Appellant’s business operation and its ability to comply within the time allowed with its obligations under ESOS.

I further find that the level of culpability of the Appellant company was not correctly assessed. I find that their behaviour was not negligent but was in the lower category of low or no culpability.

The Respondent’s consideration of the very real issues surrounding the pandemic was unreasonable and disproportionate give the failure to file the report on time did not present any immediate enhanced risk to the environment or to people or animals.

I question the service methods used by the Agency, particularly during the pandemic. Communications were sent and Notices served by email to email addresses that were not used by management of the Appellant’s business and the Environment Agency will have known this. The Respondent could have served the Notices on either of the Directors.

When the Appellant realised the default, it wrote to the Agency one week later and requested additional time for compliance. It was given very little time to comply, to get an assessment done and to file its report, particularly given that businesses were only just re-opening their offices after the pandemic and the Appellant had informed the Agency that its own offices would not be reopening until October at the earliest.

I find that there were factors that should have been taken into account in order to ensure a proportionate response to the Appellant’s non-compliance. Service of the enforcement Notice should not have been effected using email addresses only given that the offices were shut. Service could have been effected on either of the two Directors by post given that their addresses were easily discoverable from the Companies house website. The Respondent has merely stated that it was for the Appellant to pass on the Notices to the Directors. The Agency sent correspondence to the business headquarters knowing that they were not fully functional. The Appellant has stated that the Directors were not aware of the Enforcement proceedings and I accept that this is true given the method of service used by the Respondent. The Respondent did not make any enquiries to ensure that the management or the responsible person in the Appellant’s business was aware of the enforcement proceedings.

No allowance was made for the Covid situation when looking at the lack of response from the Appellant. The guidance issued by the Environment agency quoted above suggests that there should be some leeway given due to the impact of the pandemic but there is no evidence of any such leeway having been given here.

The Environment Agency showed little or no engagement with the points made by the Finance Director in his email response dated 26 August 2021 to the ESOS communication requesting further details as to why there had not been compliance. On 09 December the Penalty notice was issued and there was no review when the relevant ESOS report was filed on 17/12/2021.

I have concluded that the level of culpability in this case was not as high as negligent because although there should have been compliance by 05 December 2019, the Enforcement notice was dated January 2021, this was 9 months into the Covid pandemic but no consideration was given to the impact of the pandemic. I find that the service of this Notice by email to two consumer email addresses without making any contact with the Appellant to ensure receipt in the context of the pandemic and empty offices, was not reasonable. Little was done to ensure that the Appellant had been made aware of the default. Nor in my view was any allowance made for the difficulties the Appellant was facing in completing the relevant assessment at a time of global pandemic. The Appellant did ultimately comply but no allowance has been made for this in any review of culpability.

I have concluded that the level of culpability falls within the lowest category of “Low or no culpability”. The second example given of that level of culpability in the Policy is where such proper preventive measures were unforeseeably overcome by exceptional circumstances”. The Covid pandemic amounted to exceptional circumstances that greatly affected the daily operations of the Appellant’s business and its ability to comply with its obligations under the Energy savings scheme within the time limits imposed. No understanding was shown of the impact of the pandemic on the Appellant’s business operations or its ability to comply.

The Respondent will now need to recalculate the level of the fine that it imposed, applying the formula in its enforcement policy applicable to the lowest level of culpability. I do not accept that the Appellant should not be subject to a civil penalty as it was in default before the pandemic started. But the Respondent’s assessment of the level of culpability was factually incorrect and should be amended to Low or no culpability and the amount of the fine adjusted accordingly.

The appeal is allowed and the Respondent is instructed to issue a revised Penalty notice to the Appellant re-assessing the level of the fine on the formula applicable to Low or No Culpability