[2025] UKUT 2 (LC)

For the Council, Mr Calzavara reframed the ground of appeal for which the FTT gave permission in a number of different ways, but I prefer the relative simplicity of the FTT’s formulation. The question is whether it erred in its construction of the Council’s policy by placing the conduct in respect of which the financial penalty was imposed in band 3 rather than band 4.

The issue focuses on paragraph 20 of the first decision in which the FTT considered the part of the policy which deals with the penalty for a landlord or agent with a significant portfolio who commits a licensing offence. The FTT’s “sensible reading” of the policy involved these four stages: first, a recognition that the offence was a serious matter; secondly, as a result of being serious, the offence was in band 3 or band 4; thirdly, it was appropriate to make an award of £15,000 which would mean the offence falls in band 4; and fourthly, it was necessary to take any mitigation into account before deciding “whether to take a starting point of £15,000”.

What follows in paragraph 20 of the decision is the FTT’s justification for those steps, and in particular for the fourth step. Paragraph 21 then identifies what the FTT regarded as “very good mitigation”, leading it to three conclusions in paragraph 22, namely: that a penalty of £15,000 was too high; that the case “therefore falls in the other band of ‘serious’, namely band 3”; and that, before discounts, a penalty of £10,000 was appropriate.

The enforcement policies of local housing authorities usually adopt one or other of two different techniques to arrive at an appropriate penalty in an individual case. Some policies suggest a starting point to the decision maker, usually identified by considering the seriousness of the offence and the harm or potential harm to the tenant. The decision maker may then move up or down from that starting point to take account of other relevant considerations. An example of this approach is the policy described in AA Homes & Housing Ltd v LB Croydon [2020] UKUT 181 (LC) at [10] to [13]. Rather than identifying a specific figure as a starting point other policies suggest a penalty range. The decision maker then selects the appropriate penalty within that range, or exceptionally outside it, moving higher or lower to take account of all the relevant features of the case. An example of this approach is the policy described in Sutton v Norwich City Council [2020] UKUT 90 (LC) at [246] (although it might be said that in that case the policy combined features of both approaches by additionally suggesting a starting point within the range).

In his submissions on behalf of the Council, both to the FTT and on the appeal, Mr Calzavara represented the Council’s policy as adopting the first approach I have just described i.e. he suggested that the lower limit of the “band width” for each band in the Civil Penalty Matrix was a starting point for the decision maker when assessing the penalty for an offence in that band. Thus for a band 4 offence the starting point would be £15,000. That was also how the FTT appears to have interpreted the policy in paragraph 20 of its decision. Its complaint was that, in a case with no aggravating factors, the assessment could not take account of the presence of mitigating factors if it could not go below the starting point of £15,000.

With respect to Mr Calzavara and to the FTT, this seems to me to be a misreading of the policy as a whole. There is no reference in the policy to the bottom of the band being a “starting point” and treating it as such gives no weight to the explanation in the policy of how the matrix is intended to be used. That explanation comes immediately after the list of seven relevant factors taken from the DCLG guidance and states: “The Council will consider the above factors when deciding where, within the relevant band of the Civil Penalty Matrix below, a particular offence and penalty fall” (emphasis added). That seems to me to be critical to understanding the approach which the policy requires. It indicates that the Council expects all of the relevant factors to be taken into account in determining where within the relevant band the penalty for a particular offence will be set. In the course of his submissions Mr Calzavara agreed that the seven factors were relevant both to the band into which the Council placed each type of offence, and to the identification by the decision maker of the appropriate penalty for each individual offender within that band. That is not consistent with reading the policy as prescribing a starting point at the bottom of a range, from which the penalty can only be increased.

I appreciate that the bottom end of the band is later referred to as an “indicative minimum tariff”, but the policy does not say that the minimum tariff is to be adjusted to take account of aggravating and mitigating factors; it says that the final level of the penalty is to be adjusted for those matters. I take the reference to a minimum tariff to mean that the penalty for an offence in that band will not be less than that minimum tariff; I do not read it as dictating that the assessment of the penalty should begin at the bottom of the band and then be adjusted for aggravating or mitigating factors as Mr Calzavara initially suggested. Such an approach creates the problem with which the FTT struggled, by making it impossible to take account of mitigation, unless either counterbalancing aggravating features, or exceptional circumstances can be identified. In many cases that would contradict the instruction that the final level of the penalty is to be adjusted to take account of mitigating factors. Additionally, as some of the relevant factors from the DCLG Guidance (such as deterrence or deprivation of benefits) would not count either as mitigation or aggravation it would be inconsistent with the direction that all seven factors are to be taken into account when determining where, within the relevant band, the penalty will be set.

The policy is not as clear as it might be, but the better way for a decision maker to give effect to its intent appears to me to be to approach the assessment without a preconceived starting point, other than that the figure will be within the range for the band into which the offence falls unless there are exceptional circumstances. Where within that band the appropriate penalty sits is to be determined having regard to the seven factors taken from the DCLG Guidance. That assessment will itself incorporate consideration of aggravating and mitigating features. The seven factors include the broad categories of “culpability and track record of the offender” and “harm caused to the tenant” which are capable of accommodating matters which reflect well on a landlord or agent, and not simply those which reflect badly. For example, an offender’s excusable lack of knowledge of a licensing scheme or the absence of any harm from accommodation which, though not licensed as it should have been, was nevertheless fully compliant with relevant safety standards and well maintained, could be taken into account as matters relevant to culpability and harm which would point the decision maker to a figure towards the lower end of the band.

It is clear from paragraph 20 of the decision that the FTT did not read the policy in this way. But even a decision maker who treated the policy as mandating a starting point of £15,000 could not properly have proceeded to a final figure by the route taken by the FTT (in the absence of exceptional circumstances). I agree with Mr Calzavara that it is impossible to read the policy as placing MPL’s offence of managing an unlicensed HMO in band 3 or band 4. The policy is explicit in placing the offence in the higher of the two “serious” bands and as requiring exceptional circumstances before a penalty outside that band could be imposed. That seems to me to be the FTT’s principal error. It was also wrong to consider mitigating factors before selecting a band, but it was only able to adopt that approach because it regarded itself as having a choice between bands 3 and 4, which it did not have.

The explanation which the FTT gave in paragraph 20 for endowing itself with the flexibility to place the offence in bands 3 or 4 at its discretion does not stand scrutiny. The complaint that mitigation must be taken into account before deciding on a band because otherwise the penalty could never fall below £15,000 in the absence of exceptional circumstances disappears if the policy is read as I have suggested it should be. Mitigating circumstances can be taken fully into account in fixing the penalty within the range or, exceptionally, below it. The alternative justification is no more convincing, i.e. that if the Council had intended all such offences to be in band 4, it need only have said so, and need not have referred to the breach being “serious” and attracting a penalty of £15,000 or more. But the Council did say that all such offences were in band 4, £15,000 is the minimum within that band and the reference to the offence being serious cannot be read as a justification for ignoring the other two descriptions which have placed it firmly in the higher of the two available bands.

For these reasons the FTT’s decision to reduce the penalty to £10,000, in the absence of exceptional circumstances, was wrong because it was based on a misreading of the policy. The appeal therefore succeeds on the first issue. Whether the decision should be set aside as a consequence depends on the answer to the second issue for which the FTT gave permission to appeal. Before dealing with that issue, and with the judicial review claim, I will deal with the third issue, concerning the second of the two discounts which the FTT applied to arrive at its final figure.