Civil penalties and the tension between companies and their directors

23 May 2022

Marcus Croskell wrote an article last year for Lexis PSL provided by Lexis Nexus after appearing in the Court of Appeal for Norwich City Council. The issues concerned the implementation of civil penalities under the new civil penalty regime under section 249A of the Housing Act 2004 (HA 2004) which came into force in 2017 and the tension of those penalities between the competing interests of the corporation and its directors.

The case concerned the property in Norwich known as Max House at 60 St Faiths Lane, Norwich operated by a plethora of companies controlled by Mr Sutton such as Max Apartments (Norwich) Ltd and the freehold title holder, Faiths Lane Apartments Limited (‘FLAL’). Mr Sutton was the sole director of FLAL and majority shareholder. The penalties imposed by Norwich City Council related to alleged breaches of the 2004 Act concerning compliance with improvement notices served by the Council on FLAL, and breaches of the Licensing and Management of Houses in Multiple Occupation (Additional Provisions)(England) Regulations 2007 (the 2007 Regulations). The Council had concluded that Max House was a house in multiple occupation (‘HMO’) and sought to impose penalties in aggregrate of £236,600 for each. This was a test case as the Council imposed the maximum penalty in a number of instances on both FLAL and Mr Sutton.  Guidance was therefore required whether this was excessive or proportionate in the context of the allegations. Mr Sutton denied every offence and sought for each to be struck out.

Marcus Croskell acted as leading counsel before the Deputy President of the Upper Tribunal, Martin Rodger Qc. In his judgment, the sum was substantially reduced on appeal by the Upper Tribunal sitting as a first instance tribunal to total of a £174,000. It follows that Mr Sutton’s arguments were also defeated as the factual basis for the civil penalities (save one) were all upheld in full. The full judgment is available on Bailii here.

The matter was then brought before the Vice-President of the Court of Appeal, Underhill LJ sitting with Moylan and Newey LLJ.  Marcus Croskell appear again on behalf of the Council who upheld the decision of the Upper Tribunal and discussed the issues of the tension with directors.  Marcus then wrote the article for Leis PSL which is available here with a subscription.  The judgment of the Court of Appeal is available on Bailii here.

If you would like to instruct Marcus Croskell or another member of the civil team please contact the clerks for further information or call 01473214481.

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