Plastic Omnium Automotive Limited v The Environment Agency

The appellant company develops and produces intelligent exterior systems and in particular automotive tailgate and bumper systems for vehicles. It manufactures and designs the majority of such units for Jaguar Land Rover vehicles. Within that range of vehicles there are many thousands of configurations for the tailgate and bumper systems, the company receives specific configurations for a vehicle four hours before the items are required at the construction plant assembly point.

The appellant has participated in a climate change agreement scheme. In short such schemes allow operators to receive discounts on their energy bills provided they meet targets for the reduction of carbon emissions by their business. The appellant’s scheme took baseline energy consumption levels from 2018. The appellant company was adversely impacted by a number of issues from 2020 onwards :-

The company continued to make energy savings throughout the period in question however because of a significantly reduced turnover, the company could not achieve the reductions in CO2 emission volumes that were required to avoid buy out fees under the agreement.

The respondent has served notice dated 5^th May 2023 requiring the appellant to pay a buy out fee of £92,592.00 in order continue to receive the benefit of energy bill reductions under the climate change agreement scheme.

When a business taking part in the climate change scheme fails to meet its targets, the Environment Agency is obliged by the relevant regulations to pay a fee to offset the carbon savings that have not been achieved as anticipated. The buy out fee in this case is calculated to meet that sum required to be paid by the environment agency. It is calculated by an agreed and prescribed formula set out in the body of the climate change agreement, it is not a sum in which the environment agency has any discretion when calculating it.

The appeal is made under the Climate Change Agreements (Administration) Regulations 2021 and is also impacted by Rule 13.1.2 of the underlying climate change agreement for the Surface Engineering Sector, made between the parties.

The Regulations and Agreement work together to provide for a right of appeal

Reg 20 (1) Where a financial penalty is imposed under regulation 15, the operator may appeal to the First-tier Tribunal (“the Tribunal”) against the decision to impose the penalty.

confirm the penalty;

reduce the penalty; or

quash the penalty.

On determining such an appeal, the Tribunal may allow an extension of time for

On determining an appeal under regulation 20(2) against the termination of the

confirm the termination;

permit an extension of time to remedy the failure that led to the termination; or

quash the termination.

On determining an appeal under regulation 20(3) against a decision of the

affirm the decision;

quash the decision; or

vary the decision.

The agreement provides that :-

In the present appeal the appellant advanced the appeal on the basis that the decision to impose a buy out penalty was unreasonable because the appellant had only been prevented from meeting the required targets by international events that were beyond the control of the appellant. The appeal was advanced before me pursuant to section 13.4.3.

Oral evidence was heard on behalf of the appellant. Mr O’Sullivan confirmed his status as company secretary and chief accountant and indicated that the appeal notice signed by him represents evidence that is true to the best of his knowledge and belief. The notice is full and set out the appellant’s position, in the circumstances of this appeal and with the agreement of Mr Collins I treated that notice of appeal as a witness statement from the company secretary.

In oral evidence Mr O’Sullivan also brought to my attention the fact that the company had made efficiency improvements in energy efficiency despite reduced turnover. He added that only since May 2023 has the company returned to full production levels with three shifts a day running for five days a week. He was clear that had the company remained at those production levels prior to 2023, they would have substantially exceeded the minimum required emission reductions under the present agreement.

Also present at the hearing were Mr Neil Champ, technical manager for the company, and Mr David Bennett, health and safety manager for the company. They were both extended the opportunity to give evidence and did so by confirming the accuracy of the evidence contained within the appeal document and the account of Mr O’Sullivan.

There was no cross-examination of any of the witnesses, there being no significant factual dispute in this case.

The respondent had served a response to the grounds of appeal and a further skeleton argument. Mr Collins indicated that the respondent sought to address the appeal by means of submissions in the light of those documents addressing the specific assertions of the appellant.

The tribunal was very much assisted by the constructive and helpful approach adopted by all parties. The parties agreed as to the fact of the agreement between them, a copy was provided to me, and that the buy out sum had been properly calculated. At the outset it was confirmed that the appellant did not dispute the method of the buy out sum calculation. It was accepted that this sum had been arrived at by the agreed mechanism under the agreement between the parties.

The respondent, in a response to the grounds of appeal, had also addressed the topic of an alternative method of assessing targets, referred to as the Novem approach. The agreement makes provision for such an alternative method of assessment to be adopted however in order for that to occur an application for such an alternative method must be made. In the present appeal it was agreed between the parties that the appellant had made no such application. Furthermore the appellant indicated that given the hugely variable types of bumper unit that they are required to manufacture, it was not a target that was suitable for their company hence the fact that no such application had been made.

Accordingly the parties agreed that the appellant was out of time for any alternative method of calculation and did not pursue it in any event.

The sole issue was the reasonableness of the buy out sum in principle given that it has been caused and incurred as a result of events that were beyond the appellant’s control.

I make findings of fact to reflect the assertions of the appellant, set out and summarised in the background and paragraphs 10 and 11 above.

The appellant sought to remind me of the fact that pursuant to section 13.6 of the underlying agreement in this case, set out at page 39 of the bundle, on appeal the tribunal has three apparent options, to affirm the decision, quash the decision or vary a decision. The appellant invited me to vary and reduce the decision in view of the fact that intervening events had had such a profound impact upon the appellant.

As set out above, in the present appeal the appeal relates to paragraph 13 of the original agreement, and the tribunal, in determining the appeal has the powers set out in Regulation 20 (3) and paragraph 13.6 of the agreement.

The respondent took me to the following decisions of the Upper Tribunal, Environment Agency v Amphenol Invotec Ltd [2022] UKUT 318 (AAC) and Environment Agency v Taylor Engineering and Plastics Ltd [2022] UKUT 317 (AAC). The decisions concern appeals against penalty notices which, although imposed under a different provision, concern the same statutory powers for the tribunal as are relied upon in the present appeal.

Mr Collins submits that in relation to buy out fees such as the one in the present case, neither the respondent in making its initial decision nor the tribunal on appeal has any discretion to reduce the amount of the fee. The respondent simply follows an agreed method of calculation as has happened in the present case.

I have noted the appellant’s submission in which they seek to distinguish the authorities above on the basis that the financial penalties in question were of a different nature. The submission is correct however the provisions of the regulations relevant to the powers of the tribunal when considering an appeal are common to both this appeal and those considered by the Upper Tribunal.

The Upper Tribunal decisions before me establish the principle that a tribunal in circumstances such as the present appeal, does not have powers wider than those of the respondent. I note at this point that as all parties agree the respondent in the present decision had no discretion as to calculation of the buyout fee, it was the product of an agreed method of calculation. Neither did the agreement give the respondent of discretion as to whether or not a buyout fee could be imposed. It follows, as was established in the decisions referred to, that I do not have the discretion that the appellant urged me to exercise in reducing the buyout fee. That poses the rhetorical question as to what can be achieved in an appeal such as the present one and of course the appeal would be important if the calculation of the buyout fee were the subject to dispute or argument or if an error of another type had been made.

In my judgement I am required to follow the decisions set out in the Upper Tribunal decisions above, the present case concerns an identical issue as to the scope of an appeal despite the fact that the subject matter is slightly different. As a consequence of that finding, I have no power to reduce the amount of the buy out fee on the basis of the reasons asserted by the appellant. I cannot reduce it because the respondent could not reduce it, and I do not have powers beyond those of the respondent in such circumstances.

Whether or not the agreement is reasonable in failing to provide such a discretion is not a matter upon which I have jurisdiction. I note in passing, as Mr Collins pointed out to me, that an annex to the agreement did make alterations to take account of Covid restrictions however it was the supply chain issues rather than Covid that caused acute difficulty for this appellant for the period of time with which these proceedings are concerned. I also recognise that despite the buyout fee having been imposed in this case, the appellant has still made considerable savings over the full period of the climate change agreement. That is of course to their credit but also supports the suggestion that the current iteration of the agreement is workable despite the difficulties encountered by the appellant in this case.

The powers of the tribunal in this case do not include a discretion of the type urged upon me by the appellant. The tribunal does not have that power because despite the wording of the relevant regulations and agreement, the environment agency did not have any such discretion when settling the original buyout fee.

For the reasons set out above the appeal is dismissed and the respondent’s notice is affirmed.