Tariq Khuja & Anor v Cherwell District Council

This is an appeal by Mr Tariq Khuja against the decision of the First-tier Tribunal in relation to a financial penalty imposed upon him by the respondent local housing authority, the Cherwell District Council, for the offence of failing to comply with the regulations applicable to houses in multiple occupation. He is not the landlord of the property concerned (three flats at The Blarney Stone, Banbury), but he is the sole director of the corporate landlord, OX1 Limited, and the FTT confirmed the penalty imposed on him on the basis that he consented to the commission of the offence by the company. He appeals first on the ground that the conditions for a director’s liability in section 251 of the Housing Act 2004 were not met and, second, that in imposing a penalty both on him and on OX1 Limited the FTT failed to consider the need to avoid double-counting.

The appeal is solely against the penalty imposed on Mr Khuja; permission to appeal against the penalty imposed upon the company on other grounds was refused. OX1 Limited remains a party to the appeal because it has an obvious interest in the ground relating to double-counting.

The appeal was heard on 23 September 2026 together with another appeal, Salford City Council v Brown, Tribunal reference LC-2025-782. Both appeals are about section 251 and it appeared at an earlier stage in the proceedings that a single judgment in the two cases might be a useful commentary on section 251. However, although it was helpful to me to hear both cases together it became clear by the end of the day that since the disposal of Mr Khuja’s appeal was entirely straightforward and (unlike Salford City Council’s) raised no difficult issues it would be better to deliver the present judgment first.

The Housing Act 2004 creates a number of housing offences, including the offence of managing or being in control of a house in multiple occupation and failing to comply with the regulations applicable to it (section 234(5)). That offence is one of those listed in section 249A of the 2002 Act, in respect of which the local housing authority may impose a financial penalty if it is satisfied, beyond reasonable doubt, that the offence has been committed. There is an appeal to the FTT, which must conduct a re-hearing of the matter and may confirm, vary or cancel the penalty; again, the standard of proof of the facts that constitute the offence is the criminal standard.

Section 251 of the 2004 Act says this:

“251.

Offences by body corporate

(1)

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

(a)

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

(b)

a person purporting to act in such a capacity,

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

There is no authoritative case law about section 251. A number of observations can be made about the text of the section. First, it is perfectly clear that the liability of a director or other officer is not established by his position alone; specifically, liability does not follow simply from being the director. Second, the section requires proof that the offence was committed with the director’s “consent or connivance” or was attributable to his neglect, and we must expect the three terms “consent”, “connivance” and “neglect” to mean different things.

Similar provisions appear in other contexts. Section 37 of the Health and Safety at Work Act 1974 is virtually identical to section 251 of the Housing Act 2004. The authorities about that provision give useful indications of what is required in order to prove consent or neglect. Far more has been said about neglect; it is clear that neglect can be inferred where the matters concerned were within the responsibility of the director concerned. Thus in R v P [2008] ICR 96 Latham LJ cited with approval (at paragraph 8) the dicta of Lord Emslie in the earlier Scottish case of Wotherspoon v H M Advocate (1978) JC 74:

“…Accordingly, in considering in a given case whether there has been neglect within the meaning of section 37(1) on the part of a particular director or other particular officer charged, the search must be to discover whether the accused has failed to take some steps to prevent the commission of an offence by the corporation to which he belongs if the taking of those steps either expressly falls or should be held to fall within the scope of the functions of the office which he holds. In all cases accordingly the functions of the office of a person charged with a contravention of section 37(1) will be a highly relevant consideration for any judge or jury …”

In R v Chargot Limited (t/as Contract Services) & ors [2009] 1 WLR 1 Lord Hope said at paragraph 34 that

“… consent can be established by inference as well as by proof of an express agreement. The state of mind that the words “connivance” and “neglect” contemplate is one that may also be established by inference. The offences that are created by sections 2(1) and 3(1) are directed to the result that must be achieved by the body corporate. Where it is shown that the body corporate failed to achieve or prevent the result that those sections contemplate, it will be a relatively short step for the inference to be drawn that there was connivance or neglect on his part if the circumstances under which the risk arose were under the direction or control of the officer. The more remote his area of responsibility is from those circumstances, the harder it will be to draw that inference.”

Neither of those passages tell us what is required to find or infer consent to the commission of an offence.

In Attorney-General’s Reference No 1 of 1995 [1996] 1 WLR 970 the Court of Appeal had to decide whether directors of a company that had engaged in unlicensed deposit taking had consented to the offence. They ran the business and were perfectly well aware of what the company was doing, but they did not know it was an offence. Lord Taylor CJ held at page 981 that to be guilty of the offence they need not know that the facts in question constituted a criminal offence but that “a defendant has to be proved to know the material facts which constitute the offence by the body corporate and have agreed to its conduct of its business on the basis of those facts”.

I take it from that that for consent to be proved, directly or by inference, under section 251 of the Housing Act 2004 and similar provisions it must be shown that the director knew of the facts that constitute the offence. An inference of consent must be an inference of actual knowledge. A finding that the director ought to have known what was happening, or that compliance with the housing regulations was within his area of responsibility, may indicate neglect (depending on the particular facts) but is not a finding of consent.

It is uncontroversial, I think, that section 251 is an anti-avoidance provision; it may be impossible to pursue a company because it has gone into liquidation, or difficult to do so because of confusion about company structure (as is the case in the Salford appeal). But there is nothing to prevent the imposition of a penalty both upon the body corporate and upon one – or more – of the persons described in section 251. If that happens then an obvious question arises about the level of penalty to be imposed on two or more parties and the need to avoid double-counting. In Sutton v Norwich City Council [2021] EWCA Civ 20the Court of Appeal said this:

“38.

In the circumstances, I do not consider that there is any rule that, when deciding what civil penalties to impose on a company and one or more of its directors under section 249A of the 2004 Act, a Court or Tribunal is bound to ask itself first what penalty the offence merits overall and then how that penalty should be apportioned. …

39.

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

40.

With a solvent one-man company, the importance of avoiding double punishment will loom large: the owner of the company might be expected to be the poorer by the total of the penalties imposed on himself and the company. In a case of that kind, the penalty on the owner-director should not be determined without regard to that imposed on the company and appropriate adjustments should be made when using a “Financial Penalty Policy” such as the Council’s. If, say, a “Financial Penalty Policy” indicated a particular “Financial penalty range” for the relevant offence, a penalty of that size should not be imposed on the owner-director personally without considering the implications for him of any company penalty and the appropriate penalty might very well be smaller than any figure in the specified range…”

The cases there referred to are R v Rollco Screw and Rivet Co Ltd [1999] 2 Cr App R (S) 436, R v Snaresbrook Crown Court ex p Patel [2000] 2 WLUK 253, and R v Western Trading Limited [2020] EWCA Crim 1234.

The following account of the facts is taken from the bundle, the FTT’s decision and the explanation Mr Khuja gave at the hearing of the appeal; I believe it is uncontroversial, but if any of it is not I make it clear that I am not making findings of fact. I can in any event state the facts very simply, just for background, because as will be seen the difficulties with the FTT’s decision are such that the factual detail is irrelevant.

OX1 Limited is the freeholder of The Blarney Stone, a property comprising 3 flats above commercial premises; the ground floor used to be a pub but has now been re-fitted by the commercial tenant and put to another use. Mr Khuja is the sole director of the company. The company has let the flats to tenants, and has employed a managing agent to look after them. At the hearing of the appeal Mr Khuja described himself as not being directly involved in the day-to-day management of the property; at the period relevant to this appeal he was raising four children and his wife was very poorly.

On 8, 10 and 16 August 2023 the property was inspected by the respondent. Immediately following the inspection on 8 August the respondent’s officer contacted the agent, LPM, to say that urgent work was required. The property and lettings manager at LPM, Steff Hall, attended; Mr Khuja was contacted and he attended. Immediate measures were taken to address fire hazards, and more work was done subsequently.

In October 2023 the respondent served Improvement Notices on OX1 Limited identifying hazards and requiring remedial work.

On 7 February 2024 a Notice of Intention to issue a financial penalty was served by the respondent both on OX1 Limited and on Mr Khuja. The offence alleged is failure to comply with the Licensing and Management of Houses in Multiple Occupation (Additional Provisions) (England) Regulations 2007; the notice served on Mr Khuja is in the appeal bundle and it states that he

“Tariq Khuja is the sole director of OX1 Limited and in accordance with s.251 of the Act the Council considers him to also be liable for the offences of the body corporate as the offences are attributable to Mr Khuja’s failure to take reasonable steps to prevent the commissioning of the offences.”

The premise of that notice was that the property is a “house in multiple occupation” within one of the definitions provided by the Housing Act 2004, because of the circumstances of its conversion to flats (it is not a typical HMO where the tenants share facilities)e. There is no suggestion so far as I can tell that Mr Khuja or indeed anyone else was aware of this until some time after August 2023, and indeed it was still in dispute at the time of the FTT hearing.

Eight breaches of the regulations are listed in the notice; it is relevant to note (and I come back to this later) that some but not all of the breaches of the regulations related to the interface between the commercial and residential parts of the building. A Final Notice of a decision to impose a financial penalty was issued on 11 July 2024, imposing a penalty £24,975 on each of Mr Khuja and OX1 Limited.

Mr Khuja and OX1 Limited appealed both the Improvement Notices and the Financial Penalty to the FTT.

I do not need to say anything about the procedural history in the FTT. It is apparent from the decision of the FTT that the decision it had to make was complicated; a number of issues were raised. The question as to the basis on which Mr Khuja might be liable under section 251 was not one of the issues listed in paragraph 58 of the FTT’s decision, being the ones it identified at the start of the hearing, and I understand it was raised only in closings.

In its decision the FTT decided, in the respondent’s favour, questions as to whether the respondent’s officer was authorised to enter the property, whether the improvement notices were defective for want of authority of the person signing them, and whether notices had been served on time. It decided that the property was an HMO. It set aside the Improvement Notice, because its scope was far too wide and its requirements were “in effect a fishing expedition” designed to find faults that were not yet known about.

The FTT then turned to the appeals against the financial penalties, and said this:

“In relation to the Financial Penalties, we were satisfied that an offence had been committed because we find that the Property is a HMO and the various breaches of the regulations had taken place.

113.

We find ourselves in a difficult position because, in all probability, section 251 of the Act was designed, at least in part, to avoid the mischief of limited companies being dissolved to avoid payment of penalties. There is therefore the potential for double counting which might potentially be perverse. However, there is a clear statutory basis for an officer of a company to also be issued with a financial penalty where there has been consent, connivance or neglect. As Mr Khuja is the sole director and shareholder of OX1 Limited and the directing mind of the company’s operations, we find that its breaches of the relevant regulations were with his consent.”

The FTT then went on to consider the amount of the penalties. They had been calculated by the respondent on the basis of the familiar matrix of harm and culpability, with additions and subtractions for aggravating and mitigating factors. The FTT took the view that culpability and harm had been over-estimated; it removed a sum added for aggravating factors and increased what had been allowed in mitigation on the basis of the respondent’s evidence that Mr Khuja had been “very willing to assist”.

The FTT’s assessment of the financial penalty was identical for OX1 Limited and for Mr Khuja, save for £1,000 added to OX1’s penalty because it received the rent from the property, and £1,000 added to Mr Khuja’s because he owned other properties. The penalty imposed by the FTT on each was £11,000.

Mr Khuja appeals on two grounds with the permission of this Tribunal: first, that there was no basis for the finding that he consented to the offence, and second that the FTT in imposing identical penalties fell into the error of double-counting.

All that the FTT said about the basis of Mr Khuja’s liability was the final sentence of its paragraph 113 (above\). There was no analysis of section 251; no consideration of whether Mr Khuja knew anything about the defects in the property before 8 August 2023 (and indeed so far as I can tell there was no evidence that he knew anything before that date), and no consideration as to whether the offence was caused by his neglect. He was found to have consented to the breaches of the regulations simply by virtue of his being its sole director and its “controlling mind”. There is no finding of fact, whether from direct evidence or by inference, that he actually knew about the breaches of the regulations before 7 August 2023. He certainly knew after that, but since from then on he was working with the respondent to remedy the breaches it is impossible to infer from that knowledge that the breaches were committed with his consent.

Mt Potterton argued that the crucial point is that he was the “controlling mind”; all the decisions of the company were taken with his consent. I am not sure that that goes any further than the fact that he was sole director; but in any event Mr Potterton cannot point to any decisions of the company, since all the breaches of the regulations were omissions rather than actions.

At the very least, the FTT’s explanation for Mr Khuja’s liability is unexplained. It also appears to be unsustainable on the evidence of which I have been made aware. It is set aside.

Mr Potterton suggested that the matter might be remitted to the FTT for a fresh decision. I come back to that below, as it has to be considered in light of the decision about doble-counting.

Ground 1 disposes of the appeal, because the finding that Mr Khuja was guilty of the offence has been set aside. But it is appropriate to address ground 2 because it has a bearing on whether the matter should be remitted to the FTT.

I can deal with this equally quickly; the FTT was not made aware of the decision in Sutton v Norwich City Council and clearly did not direct its mind at all to the problem of double-counting, despite mentioning the potential for it. It did so in the context of Mr Khuja’s liability, and gave it no further consideration in the context of quantum. It would in fact have merited careful consideration for the reasons explained by the Court of Appeal in Sutton; Mr Khuja is the sole director and shareholder of the company and the penalty affects him, as he put it, pound for pound.

Accordingly, even if ground 1 had failed, ground 2 would have succeeded and the penalty against Mr Khuja (since there is no challenge now to the penalty imposed on the company) would be set aside.

The respondent would like the matter to be remitted to the FTT so that the position under section 251 can be explored afresh, perhaps on the basis of neglect rather than consent.

I have decided not to remit the matter because it would be possibly futile, and certainly disproportionate and unfair, to do so.

Remission could well be futile because on the state of the evidence that I have seen in the hearing bundle the respondent can produce nothing to indicate that Mr Khuja knew anything about the breaches of the regulations before 8 August and so – unless allowed to produce fresh evidence now, which would be unfair and probably impossible – it could not prove consent. The difficulty with an attempt to prove neglect, on the evidence as it stands, is twofold. First, the day-to-day management of the property had been delegated by the company to an agent; for Mr Khuja to be found to have neglected his duties as sole director of the company would require evidence about the relationship between the company and the agent, reporting systems, compliance records, maintenance records and so on. That evidence does not appear to have been adduced by the respondent. Second, most of the breaches of the regulations related to the physical interface between the communal areas of the flats and the commercial premises downstairs, which were in the course of refurbishment. According to Mr Khuja that was why there was a riser missing on the stairs and why wiring had gone amiss. It is very hard to see how he could be shown to have neglected his responsibilities in those circumstances, although much would depend upon evidence about timing, awareness, etc, none of which evidence appears to exist.

Moreover, remission would be disproportionate. The penalty against the company stands. Only £1,000 of the penalty imposed on Mr Khuja was not imposed on the company. It is very difficult to see how any of the rest of the penalty could stand once proper consideration was given to double counting. With only £1,000 in issue it would be disproportionate to remit the matter. It would also be unfair; Mr Khuja has gone through the stress and expense of being found liable for a criminal offence without any proper basis for that finding, and of having to bring an appeal; it would be wrong for him to have to go through another round of FTT proceedings.

The FTT’s decision to confirm and vary the financial penalty imposed on Mr Khuja is set aside, and I substitute the Tribunal’s decision that the penalty is cancelled.