Sutton v Norwich City Council

An appellate court may interfere with a civil penalty imposed by a lower court or tribunal only where the decision is unreasonable or contains an identifiable flaw in reasoning, such as a logical gap, inconsistency or failure to consider a material factor. A different evaluation is insufficient.

Under section 249A of the Housing Act 2004, no fixed method governs penalties imposed on a company and its directors. The decision-maker must guard against double punishment while recognising personal responsibility. The £30,000 statutory cap applies to each person, so aggregate penalties may exceed that amount.

Nicholas Sutton, the sole director and majority shareholder of Faith’s Lane Apartments Limited, appealed against penalties imposed for breaches of the management regulations applicable to houses in multiple occupation and for failure to comply with improvement notices under the Housing Act 2004.

The Upper Tribunal (Lands Chamber), in [2020] UKUT 0090 (LC), upheld the findings of liability and reduced the penalties to £75,000 for the company and £99,000 for Mr Sutton. The appeal concerned the proper approach to appellate review, the relationship between penalties imposed on a company and its director, double punishment, assessments of harm and culpability, and whether regulation 10 had been breached.

Lord Justice Newey gave the judgment of the court. Lord Justices Moylan and Underhill agreed. The appeal was dismissed.

1. Appellate review. A civil penalty involves evaluation and discretion. An appellate court or tribunal may interfere only if the decision is unreasonable or contains an identifiable flaw in reasoning, such as a gap in logic, inconsistency or failure to take account of a material factor. It is insufficient that the appellate court would have reached a different evaluation. The court applied the principles in G v G (Minors: Custody Appeal), Abela v Baadarani and R (R) v Chief Constable of Greater Manchester Police.
2. Penalty policies and apportionment. The court endorsed the guidance in Marshall v Waltham Forest LBC: the tribunal should start from the local authority’s policy, consider properly any case for departure, and afford considerable weight to the authority’s decision. There is, however, no universal rule requiring the court first to identify one overall penalty and then apportion it between a company and its directors. The relationship between the penalties depends on the facts.
3. Double punishment. The decision-maker must consider the risk that an individual may bear some or all of a company penalty, while ensuring that a director’s personal responsibility is recognised. Relevant matters include shareholding, solvency, other directors’ interests and the penalties imposed on the company. Possible non-payment of a company penalty may be relevant to double-punishment risk, although it cannot justify imposing a personal penalty greater than would otherwise be appropriate.
4. Statutory cap and overlapping offences. The £30,000 cap in section 249A(4) of the Housing Act 2004 applies to each person. It does not prevent aggregate penalties imposed on a company and director from exceeding £30,000. Penalties for a regulatory breach and for a later failure to comply with an improvement notice may be distinct, provided the decision-maker accounts for overlap.
5. Application. The Upper Tribunal was entitled to assess harm for itself on the evidence. The HHSRS categorisations did not determine the appropriate penalty classification. It was also entitled to infer from later evidence that insufficient bins existed on the earlier alleged date, despite the absence of contemporaneous photographs. No identifiable error, inconsistency or irrationality had been shown in the penalty assessments.

1. Court of Appeal (Civil Division) — appeal dismissed.
2. Upper Tribunal (Lands Chamber) — in [2020] UKUT 0090 (LC), upheld the findings of liability and reduced the penalties imposed on Faith’s Lane Apartments Limited and Mr Sutton.
3. First-tier Tribunal — the appeals against the Council’s penalties were transferred to the Upper Tribunal on 4 November 2018.