Environment Agency v Elizabeth Arden (UK) Ltd

A penalty notice is legally effective only when it has been validly served. Energy Savings Opportunity Scheme Regulations 2014, regulation 51 applies to notices issued by the regulator, despite the enabling provisions saying that it may serve a notice. It must be construed in the regulatory context so that it is not deprived of practical effect.

The regulator must first prove service by an authorised method. Postal service engages the rebuttable presumption in section 7 of the Interpretation Act 1978; service by email is permitted only at an address supplied under Schedule 3. If service is not proved, the penalty notice has no legal effect and must be cancelled. A recipient's lack of knowledge may be relevant to the reasonableness of a penalty only after valid service has been established.

The Environment Agency imposed a civil penalty of £14,850 on Elizabeth Arden (UK) Ltd for failure to comply with an enforcement notice under the ESOS regime. The company appealed to the First-tier Tribunal under Energy Savings Opportunity Scheme Regulations 2014, regulation 48.

The First-tier Tribunal considered service and the Agency's enforcement policy. It cancelled the penalty notice and substituted a lower penalty based on low or no culpability. The Agency appealed on a point of law.

The Upper Tribunal considered whether the First-tier Tribunal had applied the statutory rules governing service, and the distinct significance of the company's knowledge of a notice.

1. Appeal allowed. The First-tier Tribunal erred in law by stating that there were no specific service requirements. Regulation 51 of the Energy Savings Opportunity Scheme Regulations 2014 expressly governed service and the error may have affected the tribunal's assessment under the Agency's enforcement policy.

2. A penalty notice is the legally significant act which imposes the penalty under regulation 39(1). It becomes legally effective through service. Although regulations 35, 38 and 39 say that the Agency may serve notices, regulation 51 applies when the Agency exercises those regulatory powers. A contrary construction would leave regulation 51 with little practical operation.

3. The First-tier Tribunal had first to determine whether the penalty notice had been served. The Agency bore the initial burden of proving service. It could seek to prove postal service at the registered office under regulation 51(a)(i), including by evidence of posting or of standard posting procedures. Section 7 of the Interpretation Act 1978 then supplied a rebuttable presumption of ordinary delivery. The company could seek to prove that the notice did not arrive. A copy notice bearing its registered-office address did not, without more, prove posting or its date.

4. Email service was available only if the email address had been supplied in accordance with Schedule 3. On the material identified by the Upper Tribunal, the company's general email address had not been provided in that way.

5. If the notice had not been served, it had no legal effect. It was wrong in law for the purposes of regulation 48(1)(b) and should be cancelled under regulation 50(a). Only if service were established could the tribunal consider whether the company lacked knowledge of the notice. Lack of knowledge was potentially relevant to whether the penalty or its amount was unreasonable, but was not necessarily decisive.

6. The First-tier Tribunal's decision was set aside and the case remitted for rehearing before a differently constituted panel.

• Upper Tribunal (Administrative Appeals Chamber): Allowed the Environment Agency's appeal, set aside the First-tier Tribunal's decision for error of law, and remitted the case for rehearing: [2023] UKUT 180 (AAC).
• First-tier Tribunal (General Regulatory Chamber): On 27 September 2022, cancelled the penalty notice and substituted a revised penalty notice based on low or no culpability.