This is an appeal by Manor Farm Feeds Limited (“Manor Farm Feeds”) against two Fixed Penalty Notices issued by the Environment Agency. Each notice was issued in response to inaccurate reporting by Manor Farm of its emissions, a breach of its obligations under a climate change agreement with the Environment Agency.

In Environment Agency v Amphenol Invotec Ltd [2022] UKUT 318 (AAC), the Upper Tribunal cited the following description of climate change agreements:

The operation of climate change agreements is governed by the Climate Change Agreements (Administration) Regulations 2012. So far as is relevant, the regulations provide as follows:

As can be seen, paragraph 1 empowers the Environment Agency to impose a financial penalty in response to one of the listed breaches of the regulations, but does not oblige it do so. If the Environment Agency does decide to impose a penalty however, then the amount of the penalty is arithmetically fixed. There is no discretion to impose a different amount.

When the Environment Agency exercises its enforcement powers under any piece of legislation, it has regard to its Enforcement and Sanctions Policy (“ESP”). This is published online (Footnote: ¹ ) . The parts of the policy most relevant to this appeal are those that state an “outcome-focused” approach to enforcement, where the Environment Agency will act proportionately, firmly but fairly, consistently, transparently and accountably.

Annex 2 to the policy is specifically concerned with climate change agreements. In deciding whether to impose a penalty, the Environment Agency will consider the nature of the breach, the organisations’ culpability, and the relevant aggravating and mitigating factors. Each of these considerations is then subject to specific guidance. For inaccurate reporting, the Annex further provides as follows:

The regulations provide a right of appeal to the Tribunal:

In Amphenol Invotec, the Upper Tribunal held that regulation 23(1)(b) does not empower the Tribunal to impose a different penalty from that prescribed by regulation 15. The purpose of regulation 23(1)(b) is to enable the Tribunal to correct a situation where the Environment Agency had specified the wrong penalty, or miscalculated it.

I have not been referred to any authority specifically concerned with how the Tribunal should approach an appeal argued on the basis that the Environment Agency should have decided not to impose a penalty at all. The starting point is the legislation. Regulation 21 appears to be aimed at permitting any argument to be pursued by an appellant, and I therefore treat this as a ‘full merits’ appeal rather than a review on public law grounds. The Tribunal finds the facts for itself and makes the decision it thinks fit. It will nonetheless pay heed to the same considerations as should have been considered by the original decision-maker, for example the statutory context and the enforcement policy, as well as give appropriate weight to the view taken by the regulator, informed by its role in the statutory scheme and institutional expertise. The weight that ultimately attaches to the regulator’s reasons will depend on all these circumstances, taking into account their fullness and clarity, the nature of the issues, and the evidence: R. (Hope & Glory Public House Ltd) v City of Westminster Magistrates’ Court [2011] EWCA Civ 31 at [45]; Hesham Ali (Iraq) v Secretary of State for the Home Department [2016] UKSC 60 at [44]-[46].

Manor Farm Feeds admits that it made inaccurate reports for the period between 1 January 2013 and 31 December 2015 (Target Period 1) and 1 January 2015 and 31 December 2016 (Target Period 2). It did so accidentally, reporting the litres of fuel it had used rather than first converting that figure to kilowatt-hours, and voluntarily notified the Environment Agency itself on becoming aware of the error.

Notices of Intent in respect of both target periods were duly sent. Manor Farm Feeds responded with its representations.

The first Financial Penalty Notice (“FPN1”) is dated 20 November 2020 and explains:

The second Financial Penalty Notice (“FPN2”) is also dated 20 November 2020. This is written in precisely the same terms, save that it refers to the report of 19 April 2017 concerning the target period between 1 January 2015 and 31 December 2016 (Target Period 2). Each amount of the penalty value was then calculated in accordance with regulation 15(2), being the greater of £250 or the number of tonnes CO₂e by which Manor Farm Feeds had under-reported in the relevant target period. The amount of FPN1 was calculated at £8,772 and FPN2 at £11,028. There is no dispute over the calculation of these figures.

I can summarise the appellant’s principal contentions (so far as still pursued) as follows:

The Environment Agency’s rule 23 Response counters as follows:

In response to case management directions, further information was provided by the Environment Agency:

I have omitted some other clarifications that have not proved material to the decision. The above comprises the parties’ principal arguments. I shall include the way in which they have been subsequently developed only where necessary to explain my conclusions.

I do not repeat the legal framework set out above, nor the proper approach to be taken by the Tribunal. My assessment of the issues is as follows.

Manor Farm Feeds’ submissions headline proportionality as its principal argument. I agree that proportionality must be considered, and not only by reason of its inclusion in the ESP. That means the amount of the penalty must be considered when deciding whether to impose the penalty at all, and to the extent that the Environment Agency argues otherwise I disagree. Article 1, Protocol 1 of the European Convention on Human Rights (“A1P1”) requires a reasonable relationship of proportionality between the means of enforcement and its legitimate aim: see, for example, Jahn v Germany (2006) 42 EHRR 1084, as discussed in R. v Waya [2012] UKSC 51 at [12]. It is easy to imagine a scenario in which the calculation produces a disproportionate penalty, for example a failure to include a decimal point. Notwithstanding its inability to impose a lesser sum, the Environment Agency would be bound to take the amount of the penalty into account when deciding whether to impose it at all. Beyond that point however, I consider that proportionality in the present case can be addressed in an A1P1-compliant way solely by reference to the ESP.

The requirement to act proportionately at paragraph 3.1 of the ESP includes taking account of, and balancing, several listed factors. In CCA appeals, Annex 2 adds that the nature of the breach will be assessed based on the impact that it has on the integrity of the scheme. I accept the Environment Agency’s argument in the present case that inaccurate reporting has potential consequences that go beyond those for the individual operator. The integrity of the scheme as a means to increase energy efficiency depends on accurate information being held and published concerning its performance. I also accept that delay in correcting data aggravates this breach. Not only will overall data be inaccurate, but as time goes by it becomes more likely that action will have been taken on it. Whereas the discrepancies in this particular case are not large enough to cause nationally significant inaccuracies by themselves, the purpose of individual penalties includes enforcing wider compliance.

Insofar as it is material, I prefer the Environment Agency’s submissions on the purposes of the scheme. Energy efficiency inevitably forms part of wider attempts to reduce carbon emissions and combat climate change, but the United Kingdom’s efforts in that regard are legitimately divided into separate programmes addressing discrete objectives. In any event, I reject that imposing penalties in cases such as this will necessarily undermine the scheme’s objectives by discouraging self-reporting of errors or enrolment in the scheme. In a predictive sense, it could just as easily be opined that robust enforcement will prevent such errors being made in the first place, and encourage operators to ensure that any necessary corrections are promptly identified. The same considerations apply to participation by organisations in the scheme; the continued operation of existing schemes and the introduction of new ones also depends on the integrity of their operation and performance.

The Environment Agency, as the regulator tasked by Parliament with administering and enforcing the scheme, has the best institutional legitimacy and expertise to judge which approach to enforcement will best support the scheme’s objectives. It does so in its published policy, available to those operators who it regulates so that they can reasonably predict the consequences of any contraventions, and by then applying that policy in individual decisions.. The Tribunal will be cautious before disagreeing with a regulator on such matters of policy, and nothing in the present appeals justifies it doing so. I reject Manor Farm Feeds’ argument that it is “perverse” to penalise an operator for inaccurate reporting when it has not actually breached its targets. On the contrary, it is entirely open to the Environment Agency to consider that such penalties are justified to preserve accurate reporting by all operators, including those who meet their targets.

I do not need to resolve a disagreement between the parties as to the benefit Manor Farm Feeds derives by reason of its membership of the scheme by way of CCL reduction. Nothing in the scheme, the ESP or common sense requires that the overall benefit derived from membership of a scheme should inform, in numerical terms, whether penalties should be imposed for breaching that scheme’s discrete requirements. An exception would be where misreporting has enabled continued participation in the scheme, in which case it would be a financial gain that arose from the breach.

The original FPNs were made on the basis that no financial gain arose from the misreporting. The Environment Agency’s arguments on appeal have (implicitly) resiled from that position by asserting that the delay in having to pay a buy-out fee and in having to undergo recertification did financially benefit Manor Farm Feeds. Whether this is right or not, the ultimate decision on this appeal would be unaffected by an additional aggravating factor.

I agree with the Environment Agency that other steps taken by Manor Farm Feeds towards energy saving, such as installation of a wind turbine and a biomass boiler, are unrelated to CCA reporting and do not carry material weight as mitigation in this appeal. The penalty relates to the accuracy of reporting rather than the operator’s ecological credentials more generally.

As already observed, during the appeal the Environment Agency sought to carify that it had taken into account the lack of any non-compliance, Manor Farm Feeds’ cooperation in correcting the error, and that the company is not in financial distress. In general, the Tribunal will approach penalty notices as being issued for the reasons given at the time. In this case I do find that the first two of those matters can be reasonably inferred as having been taken into account without the subsequent clarification, and the third is not material.

Manor Farm Feeds denies that its error can properly be categorised as negligent. I have already set out the way in which that term is defined in the ESP, with which I agree. The way in which the administration of the scheme works is that following the end of each target period, Manor Farm Feeds must provide its performance data to a company called SLR that acts on behalf of the relevant sector association. Without wishing to do injustice to the detailed evidence and argument provided by Manor Farm Feeds on this issue, in summary it argues that SLR had repeatedly advised it that “the same methodology for base year reporting should be used for target period reporting”. Base year reporting is in litres of oil, which explains why Manor Farm Feeds then did likewise with target period reporting. Nor, complains Manor Farm Feeds, did SLR provide conversion factors.

The Environment Agency argues that it is not SLR’s function to ensure that data is correctly reported, and that responsibility lies with Manor Farm Feeds in any event. I agree. While the parties agree that SLR does a ‘sense check’ of high level data, it is clear in this case that the number of litres was not so dissimilar to the potential kilowatt-hours as to obviously raise alarm (compared, for example, to if it had been different by a factor of thousands from what might be expected from such a business). While a number of complaints are made by Manor Farm Feeds that it must be paying SLR for something, and pointing to both other roles it fulfils and that its involvement is a statutory requirement, this falls short of demonstrating a lack of responsibility on Manor Farm Feeds’ part. I agree that Manor Farm Feeds might not be properly characterised as negligent if they had entirely subcontracted their reporting responsibilities to a consultant, and that consultant was demonstrably negligent. None of the evidence provided shows such a relationship. Furthermore, a party relying on the negligence of a third party ought to provide evidence from that third party responding to the allegation. In the absence of any identifiable contractual provision making SLR responsible, or evidence from SLR confirming its position, I am unable to accept this argument as undermining the basis on which the FPNs were issued.

I reach the same conclusion on the claim to have been misled by SLR. While the factsheet from SLR is provided, how “the same methodology” should have reasonably been interpreted by the reader requires greater context and, more fundamentally, direct evidence from SLR. In summary on this topic, for the same reasons as argued by the Environment Agency I find that Manor Farm Feeds was indeed negligent in failing to accurately report the required figures.

I do not accept that the evidence provided of when the Environment Agency has imposed penalties shows that Manor Farm Feeds has been unfairly treated. Greater detail on the facts of other cases would be required. Nor do I accept that it was unfair to impose two separate penalties without reduction when both arose from the same methodological error. They relate to two separate reporting obligations, and disclose two separate negligent failures to properly ascertain the correct procedure. Given that the statutory scheme does not permit a reduction (akin to the principle of totality in criminal sentencing), I cannot accept that the Environment Agency should have entirely waived one of the penalties. This would be contrary to the ESP and the objectives it fulfils.

For the above reasons, and in agreement with those put forward by the Environment Agency, I reject each of Manor Farm Feeds’ challenges to the FPNs. The issuing of the FPNs was in accordance with the ESP. The appeal is dismissed, and each penalty is confirmed pursuant to regulation 23(1)(a). Finally, I recognise the significant delay in producing this decision. This arose from a combination of factors unrelated to this appeal in particular, and I am satisfied that no unfairness arises such that the appeal should be decided by a different judge. I nonetheless provide my sincere apologies to the parties.