05 Jan 2021

Thurrock Council has won an appeal from a decision of the First-tier Tribunal to cancel a civil penalty imposed for the offence of managing or being in control of a house in multiple occupation that is required by the Housing Act 2004 to be licensed, when it was not so licensed.

The FTT reached that conclusion because it found that the respondent had the defence of reasonable excuse.

The grounds of appeal in Thurrock Council v Palm View Estates (HOUSE IN MULTIPLE OCCUPATION – defence of reasonable excuse for having control of or managing) [2020] UKUT 355 (LC) were:

  1. The FTT applied the wrong burden of proof.
  2. The FTT made an error of law and made unsustainable findings of fact when it decided that the respondent had a reasonable excuse.

Judge Elizabeth Cooke rejected the first ground of challenge but said the second succeeded.

The background to the case was that the respondent bought a property in South Stifford, Gray’s, Essex, on 18 March 2014. The property was converted for occupation by six people with a shared kitchen.

In 2017, following complaints from two of the residents, Thurrock inspected the property; on 20th September 2017 it served on the respondent two prohibition notices pursuant to section 20 of the Housing Act 2004.

Judge Cooke said the detailed law relating to those notices was not relevant to this appeal; “the crucial point” was that the notices required work to be carried out, including the creation of a kitchen of a suitable size for six households since the one provided was too small. The respondent built an extension to the kitchen so as to comply with the notices.

On 1 October 2018 the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 came into force, which meant that from that date onwards the property required an HMO licence.

The respondent owns a number of other properties and holds HMO licences for them, and the FTT said that it was common ground between the parties that the respondent knew about the licensing regime.

In the meantime planning permission for the respondent’s kitchen extension was refused; the respondent appealed that decision and the appeal was allowed on 13 February 2019.

The appellant council undertook further inspection visits in March 2019; on 14 March 2019 it wrote to an employee of the appellant about (among other things) the absence of an HMO licence. The employee’s brother is the director and shareholder of the respondent.

On 24 May 2019 the employee attended a PACE interview.

On 20 June 2019 the appellant served a notice of intent to impose a financial penalty on the basis of the absence of an HMO licence, and a final notice on 9 August 2019 imposing a penalty of £17,500.

The respondent applied for an HMO licence on 16 July 2019 and appealed the final notice to the FTT on 6 September 2019.

The respondent did not dispute that it had been managing or in control of the HMO without a licence; but it relied upon the defence of reasonable excuse in section 72(5). The reasonable excuse for which it argued was that the respondent’s employee had been told by an employee of the appellant in its planning department, that there was no point in applying for an HMO licence while the planning position for the kitchen remained in dispute.

The FTT in paragraph 41 of its decision said this: “Once the defendant has raised a defence, it is for the prosecution to show that the excuse was not reasonable to the criminal burden of proof.”

Judge Cooke took the view that the FTT made an error of law as the appellant council argued, “because it was wrong about what the reasonable excuse is for”.

She said: “Whatever the reasons for not applying for a licence, what the FTT has to decide is not, as it said in its paragraph 42, whether the respondent had a reasonable excuse for not applying for a licence.

“The issue was whether it had a reasonable excuse for continuing to manage and control the HMO without one. The FTT’s own analysis of what it had to decide…..set it off on the wrong track and prevented it from asking the right question.”

Judge Cooke said she did not agree with counsel for Palm View Estates that to look for a reasonable excuse for managing and controlling the HMO without a licence, rather than for not applying for one, was impermissible because it narrowed the defence.

“On the contrary it is vital to observe what the statute actually says. The focus must be on an excuse for committing the offence; there might be all sorts of reasons for not applying for a licence that might, or might not, not provide a reasonable excuse for the commission of the offence,” she said.

“As the appellant says, there would not be a reasonable excuse where it was open to the landlord to avoid committing an offence altogether by legitimising its position – either by making an application or by taking steps to keep the number of occupants below five.”

Judge Cooke said it was conceivable that a good reason for not applying for a licence might provide an excuse for committing the offence, for example the level of ignorance of the law referred to in Daoudi, noted above. “I am not going to speculate on the possibilities. I am not persuaded that where a landlord fails to apply for a licence because it thinks it will be refused and for an incorrect reason, that amounts to a good reason not to apply (in view of the obvious advantage to a landlord of bringing itself within section 72(4)(b) and in view of the fact that an appeal system exists for cases where a local authority gets it wrong), let alone for committing the offence.”

The judge said that in this appeal the FTT found that that was a good reason for not applying for a licence. However, Judge Cooke said the FTT did not ask itself the correct question, “namely why that amounted to a reasonable excuse for committing the offence”.

Had it done so, she said, it would have recognised that the two things were not the same, and that the reason given by the company’s employee for not applying for a licence was not a reasonable excuse for committing the offence. “The FTT made a mistake of law and thereby reached an obviously incorrect conclusion. For that reason its decision is set aside.”

Judge Cooke decided it would be appropriate to remit the matter to the FTT for a re-hearing, rather than conducting the re-hearing in the Upper Tribunal.

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