[2025] UKUT 2 (LC)

The FTT’s reasons for reducing the financial penalty from £12,000 to £6,000 are contained exclusively in its first decision, issued on 15 January 2024. Although it identified an additional point in its first decision it said expressly that it was not necessary to decide it. In its second decision it decided that additional point after all. In its fourth decision it said that it “could perhaps have expressed itself better” when deciding the additional point and gave what on one view was a different explanation of it. It will be necessary to consider some of those extra stages in the context of the Council’s application for judicial review. But for the purpose of the appeal what matters is the first decision.

The FTT first decided that MPL had not shown that it had had a reasonable excuse for managing the HMO without a licence. It was therefore guilty of the offence, contrary to section 72(1), 2004 Act, and the only issue was the amount of the penalty.

Having quoted from the Council’s policy, and having referred to the evidence, the FTT directed itself, in accordance with this Tribunal’s guidance in Marshall that it should apply the Council’s policy although it could and should depart from it in certain circumstances, such as where it had been applied too rigidly.

The FTT’s critical reasoning recited and then addressed a submission by Mr Calzavara on behalf of the Council, saying this:

“19.

[…] Mr Calzavara’s submission is that, if the starting point for a financial penalty is at the bottom of a band, it is never possible to reduce the financial penalty further, regardless of how good the mitigation might be, unless the mitigation was “exceptional”.

20.

In our judgment, this is to misread the relevant part of the policy. The policy provides that an offence such as the current one is “viewed as being a serious matter attracting a civil penalty of £15000 or above [a band 4 offence].” There are a number of elements to this. Firstly, the offence is to be treated as a “serious matter”. Secondly, it attracts a penalty of £15,000 or more. Thirdly, it is a band 4 offence. A sensible reading of this is that the offence is a serious matter (and thus in band 3 or band 4), that it will be appropriate to make an award of £15,000 or more and that that will mean it falls in band 4. However, in deciding whether to take a starting point of £15,000, it is necessary in our judgment to take any mitigation into account before fixing the amount. If mitigation is not taken into account at the stage of fixing £15,000, then the award could never move out of band 4, unless the mitigation was exceptional. A case under the policy will only fall into band 4 if it is £15,000 or more, but the decision to award £15,000 or more must be made before the appropriate band is selected. If the local authority had wanted all awards to be in band 4, then the policy did not need to start with reference to the breach being “serious” and attracting a penalty of £15,000 or more. It just needed to say that the penalty must fall in band 4. (That might then raise issues, which we on our construction do not need to consider, as to whether such a direction fell into the “too rigid” category of exception to a policy identified in Marshall.)

21.

In our judgment, taking the policy as a whole, it is legitimate to apply mitigation to the £15,000 before making a determination of the appropriate band. Here there is in our judgment very good mitigation. Firstly, the only works required to the property were minor. This is not a case (as we so often see) in which the property was in a poor condition. Secondly, we accept that Covid made carrying out the minor works much more difficult. Thirdly, we note that the appellant is of exceptionally good character. Fourthly, we accept that Mr Miah took steps to try and regularise the position and was not helped by the local authority’s planning department.

22.

In our judgment these matters mean that the £15,000 is too high. The case therefore falls in the other band of “serious”, namely band 3. Looking at the mitigating features and the absence of aggravating features in our judgment the appropriate financial penalty before discounts is £10,000.”

The FTT then applied two discounts to its figure of £10,000. The first repeated the 20% reduction given by the Council because a licence had been applied for before the final penalty notice. That reduced the penalty to £8,000. The FTT then explained that the Council had taken an “uncompromising position” by refusing to volunteer an additional discount of 20% if the reduced penalty fixed by the FTT was now paid within 28 days. The FTT did not approve:

“26.

We are afraid that we find this an unacceptable stance to adopt. If the local authority had reached (what we have found to be) the right amount of the financial penalty, then the appellant would only have had to pay £6,000 (assuming it paid promptly). The local authority cannot in our judgment be better off for having had to be successfully appealed. To decide otherwise would be an afront to justice. Awarding £6,000 only means that the appellant has no incentive to pay quickly, but the local authority has put itself in this position by refusing to offer the discount voluntarily.

27.

In these circumstances, we determine the amount of the financial penalty in the sum of £6,000.”

It is apparent from the final sentence of paragraph 26 that the reduction to £6,000 was not conditional on payment being made within 28 days. Nor was it said to be an application of the Council’s policy (which clearly it was not). The discount was allowed to prevent what the FTT thought would be “an affront to justice” arising from the Council’s refusal to extend its discount policy to cover payments made within 28 days of a tribunal decision.