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Baroness Buscombe moved Amendment No. 39:


The noble Baroness said: My Lords, in moving the amendment, I speak also to the consequential amendments.

Clause 59 provides licence holders with the power to seek review by the High Court or Court of Session of a financial penalty imposed by the authority. In Committee the Minister indicated that the scope of the review would allow the court to look at the circumstances and facts of the case. The Minister commented:


    "The Government believe that the provisions on financial penalties go further than judicial review and allow for appeal on similar grounds to those provided by the Telecommunications (Appeals) Regulations 1999".--[Official Report, 21/6/00; col. 302."

He continued later:


    "There is no less protection in the Bill than there is in the telecommunications appeal regulations".--[Official Report, 21/6/00; col. 304.".

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However, from the drafting of the Bill it is far from clear that the court has the power to examine all the facts and the circumstances of a case. There is nothing in the drafting of these provisions which indicates that the court's power to consider the reasonableness of a penalty extends beyond the normal public law standard of considering Wednesbury reasonableness. If that is the limit of the court's power, it will be able to vary a penalty only where the penalty imposed is so unreasonable that no authority properly directing itself would impose it.

The amendments would convert the right of review into a right of appeal similar to that provided by the Telecommunications (Appeal) Regulations 1999. They would allow the court to consider appeals on the same grounds as appeals under those regulations and thus meet what appears to be the Government's intention of ensuring, as the Minister puts it, that,


    "there is no less protection in the Bill than there is in the telecommunications appeal regulations".

I beg to move.

Lord Borrie: My Lords, it is a pity that the noble Baroness has repeated an argument put forward on a previous occasion by the noble Lord, Lord Kingsland: that the Bill does not go beyond the judicial review type of decision on the basis of Wednesbury unreasonableness.

I draw the attention of the noble Baroness to two provisions in the Bill. First, as has been said several times, and the noble Baroness agrees, the penalty which may be imposed must be reasonable in all the circumstances of the case. I stress the words "reasonable in all the circumstances of the case". I believe that it is impossible to determine whether a penalty is reasonable in all the circumstances of the case unless the facts are considered.

Secondly, under subsection (4) of new Section 27E, one of the grounds for going to court is,


    "that it was unreasonable of the Authority to require the penalty imposed, or any portion of it".

It seems clear enough that if a penalty is not reasonable in the circumstances of the case, it can be challenged. Under new Section 27E, it will be unreasonable for the authority to require the penalty to be imposed.

That is fundamental to the point the Minister made clear in his intervention following the remarks of the noble Lord, Lord Kingsland, on the last occasion. An aggrieved person who thinks it unjust that the penalty has been imposed can appeal to the court--that is not the word used by the noble Baroness but it has precisely the same effect--and apply on a number of grounds, including that the authority has acted beyond its powers and that the penalty is not reasonable in all the circumstances of the case. Under that provision, the court must be prepared to consider all the relevant circumstances and facts.

Lord McIntosh of Haringey: My Lords, these amendments relate to the statutory right of review which is available under the Utilities Bill in relation to the imposition of financial penalties, and they seek to

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replace that right of review with a right of appeal to the High Court analogous to that provided under the Telecommunications (Appeals) Regulations 1999.

I am afraid that I shall take a long time in responding to the amendment. I had hoped that when I met the noble Lord, Lord Kingsland, and the noble Baroness, Lady Buscombe, after the Committee stage I had persuaded them that if I read out the following long statement it would be satisfactory for the purpose. I go no further than expressing a hope.

The Government are satisfied that the specific rights of review they have provided in relation to financial penalties under the Utilities Bill are appropriate. It has been suggested that they somehow give less protection to licence holders than is afforded in relation to regulatory decisions by judicial review or, in the telecommunications sector, by the Telecommunications (Appeals) Regulations (S.I. 99/3180). That is not the Government's view.

The Telecommunications (Appeals) Regulations, inserting Section 46B into the Telecommunications Act 1984, were made in response to the requirements of two EC telecommunications directives (the Licensing and ONP Directives) which required member states to provide an appeals mechanism against certain regulatory decisions. Section 46B of the Telecommunications Act 1984 provides that:


    "a person aggrieved by a decision to which this section applies may appeal against the decision on one or more of the following grounds:


    (i) that a material error as to the facts has been made;


    (ii) that there was a material procedural error;


    (iii) that an error of law has been made; or,


    (iv) that there was some other material illegality, including unreasonableness or lack of proportionality".

In the Utilities Bill, the Government have provided for electricity and gas companies to challenge the imposition of financial penalties on the following basis: first, that the imposition of the penalty was not within the power of the authority under Section 27A of the Electricity Act 1989 or Section 30A of the Gas Act 1986; secondly, that any of the (procedural) requirements of subsections (2) to (4) or (6) of Section 27A of the Electricity Act or Section 30A of the Gas Act (concerned with the giving of notice) have not been complied with in relation to the imposition of the penalty and the interests of the operator have been substantially prejudiced by the non-compliance; or, thirdly, that it was unreasonable of the authority to require the penalty imposed, or any portion of it, to be paid by the date or dates by which it was required to be paid.

It has been said that a licence holder's rights of appeal against the imposition or amount of a penalty are severely limited--less than the rights available on judicial review--and that the provisions would not allow the court to look at the underlying facts of a case to determine whether the amount of a penalty was unreasonable in all the circumstances. The Government do not agree with this analysis.

Section 27E of the Electricity Act and Section 30E of the Gas Act provide that a licence holder aggrieved by the imposition, the amount or the payment

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schedule set for any penalty may make an application to the court. As I have said, one of the grounds on which such an application may be made is that it was not within the power of the authority to impose the penalty in question.

The formulation that a decision of a regulator or other body is "not within its powers" is common to a number of statutory rights of review in legislation; for example, in planning law. In the planning context, the courts have held that the formulation is wider than a classic ultra vires ground and encompasses challenge on grounds very similar to the grounds of judicial review, including that where the jurisdiction to make an order depends on particular facts there is no evidence to support those facts and that a regulator has otherwise gone wrong in law.

But the Bill goes beyond that. Under Section 27A of the Electricity Act and Section 30A of the Gas Act, the authority only has power to impose a penalty,


    "of such amount as is reasonable in all the circumstances of the case".

If the amount of a penalty is not reasonable in all the circumstances of a case, it follows that the imposition of the penalty would not be within the power of the authority under that section and an application could therefore be made to the court under new Section 27E(4)(a) of the Electricity Act and new Section 30E(4)(a) of the Gas Act.

Accordingly, if a company challenges the amount of a penalty on the grounds that the imposition of it was not within the authority's power under Section 27A of the Electricity Act or Section 30A of the Gas Act, the questions the court will have to consider will include whether the penalty was indeed reasonable in all the circumstances. If it does not think this is the case, it may quash or lower the penalty as it thinks appropriate.

In Committee, the noble Lord, Lord Kingsland, acknowledged that "reasonable in all the circumstances" is the test in the Bill. But, he said,


    "the test in law, the test for an authority acting outside or beyond its authority, requires an action to be so unreasonable that no reasonable person would ever entertain it".--[Official Report, 21/6/00; col. 335.]

The latter test, however, applies on judicial review, whereas we have provided an express and specific right of review on the face of the Bill. The use of the word "reasonable" in this context has the same meaning as when used expressly in any legislation; that is, its ordinary English meaning of "appropriate or fit in all the circumstances". The two tests are distinct.

It has also been suggested that since the authority is required only to be "satisfied" that a contravention has occurred, the imposition of a penalty could be unreasonable under an objective assessment but provided the authority's view that a contravention had occurred was not manifestly unreasonable, there could be no challenge on this ground. Again, the Government disagree.

It is necessary to look at the relevant subsections--that is, proposed Section 27A of the Electricity Act and proposed Section 30A of the Gas Act--as a whole. As

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we have said, the court can and should look at the facts to determine whether the authority acted within its power by imposing a penalty that was reasonable in all the circumstances of the case. Those circumstances must on any reading include the extent of the contravention or failure in question. It is improbable that the authority would be satisfied that there was a contravention or failure where there was none. However, in that unlikely event, the question whether there had been a contravention or failure would be part of the question whether the authority had acted within its power to impose a penalty.

Looking again at the grounds of challenge provided under the Telecommunications (Appeals) Regulations against those provided for in relation to financial penalties under the Utilities Bill, the Government believe that the Bill's provisions match up to the protection afforded by the regulations. For example, the court will have the ability to look at the imposition and amount of a penalty and in so doing will have to look at the circumstance--in other words, the facts--underlying the case. Accordingly, the court will be able to quash or reduce a penalty if there has been a "material error as to the facts".

Procedural error is, as I have already set out, a separate ground for challenge under Section 27E(4) of the Electricity Act and Section 30E(4) of the Gas Act. Error of law, or some other material illegality, including unreasonableness or lack of proportionality, would fall under the ground that the imposition of the penalty was not within the power of the authority--again a specific ground under Section 27E(4) of the Electricity Act and Section 30E(4) of the Gas Act. In light of this analysis, the Government consider that the right of statutory review provided in relation to the imposition of financial penalties under the Utilities Bill is appropriate and provides an equivalent degree of protection to licence holders as that provided by the Telecommunications (Appeals) Regulations 1999 as well as going beyond that provided by judicial review. On that basis, we believe that the amendments are unnecessary.

6.15 p.m.

Baroness Buscombe: My Lords, I thank the Minister for his full response to the amendment. As he will appreciate, at this stage I do not want to make a full reply. I hear what the noble Lord, Lord Borrie, had to say, but in response to the statement I would rather confer with my noble friend Lord Kingsland and then consider whether to return to the matter at Third Reading. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 40 to 51 not moved.]

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