Scottish Sheriff Court Decisions

SHERIFFDOM OF TAYSIDE, CENTRAL AND FIFE AT STIRLING

 

Case No. B200/12

JUDGEMENT   of     SHERIFF K. J. McGOWAN   In the cause     NAEEM ASHFAQ Pursuer   Against   THE SECRETARY OF STATE FOR THE HOME DEPARTMENT Defender

 

Stirling, 1 October 2012

The Sheriff, having resumed consideration of the cause, sustains the second and third pleas in law for the pursuer, repels the third plea in law for the defender, and allows the appeal to the extent of reducing to the sum of £2500.00 the civil penalty to be paid by the pursuer to the defender.

 

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Sheriff

 

 

 

 

Note

Introduction

[1]   This is an appeal, by way of summary application, under Section 17 of the Immigration, Asylum and Nationality Act 2006 ("the 2006 Act") against the imposition, by the defender of a civil penalty the pursuer.

[2]   The appellant was ably assisted by his cousin, Mr Muhammad Kashif. I am grateful to both parties for agreeing as much of the factual material as they did in advance of the hearing. The issue in dispute was well focussed and I am also grateful to Ms Anderson for her helpful written submissions which comprehensively set out the statutory scheme and the approach taken by the defender in applying it.

[3]   I heard evidence from Leighsa Boyd and Ashleigh Pears, both Immigration Officers with the UK Borders Agency ("the Agency") . There was no cross examination of either witness. The appellant did not give or call any evidence.

[4]   Having heard the evidence and submissions, I made the following findings in fact.

Findings in fact

[5]   The pursuer carries on business as AA Newsagent, Barnsdale Road, Stirling, FK7 0PT. The defender has responsibility for immigration into the UK and related matters and for the activities of the Agency.

[6]   On 23 March 2012, Leighsa Boyd and Ashleigh Pears, both Immigration Officers with the Agency, visited the pursuer's shop premises as part of a joint operation with Central Scotland Police. On entering the premises, they found two males sitting behind the till area. One was the pursuer. The other male identified himself to Ms Pears as Sajad Ali and was identfified as Sajad Ali by the pursuer to Ms Boyd. The Immigation Officers were advised that Mr Ali had commenced work for the pursuer "a couple of months" earlier. The pursuer was asked if he had been shown a passport or other document vouching Mr Ali's permission to obtain work in the UK. The pursuer produced a copy of a National Insurance Number Card ("NINC") and a copy of a "Young Scot" card, both in the name of Richard Jenkins. The latter had a date of birth of 7 July 1993 and showed a photograph of a young male of Caucasian origin.

[7]   The pursuer advised the Immigration Officers that he had taken copies of the NINC and Young Scot card to ascertain that the man known as Sajad Ali was entitled to work in the UK. The pursuer confirmed to the Officers that he did not call Mr Ali by the name of Richard Jenkins. The Officers found a liquor licence questionnaire in the name of Sajat Ali at the till point in the shop.

[8]   Based on these circumstances and the difference in appearance between Mr Ali and the photograph on the Young Scot card, the Officers were suspicious of Mr Ali's immigration status and he was arrested.

[9]   It was subsequently established that Sajat Ali is a Pakistani national born on 28 January 1982. He did not have leave to enter or remain in the UK.

[10]           The visit by Immigration Officers to the pursuer's premises was the first such visit. The pursuer had no history of having employed illegal migrants. The pursuer co-operated during the visit.

[11]           In employing Mr Ali, the pursuer was in breach of Section 15 of the 2006 Act.

[12]           In terms of Section 15(2) the defender was empowered to give a notice to the pursuer requiring him to pay a penalty.

[13]           The defender served such a notice on the pursuer on 19 April 2012, requiring him to pay a penalty of £5000.00

[14]           The pursuer's business has made the following profits in recent years:

Year ending Net

31 March 2008 £14,168

31 March 2009 £17,251

31 March 2010 £21,611

31 March 2011 £23,439

 

[15]           The pursuer's tax returns disclose the following information

Year ending Gross income Net

5 April 2009 £17,502 £14,659.24

5 April 2010 £21,858 £17,905.96

5 April 2011 £23,350 £18,980.20

[16]           For the period 6 May 2011 to 7 June 2011, the opening balance of the pursuer's business bank account was £6,603.63 and the closing balance was £8,410.29. The pursuer had a business loan with a balance due of £80,138.85.

[17]           For the period 7 June 2011 to 7 July 2011 the opening balance of the account was £8,410.29 and the closing balance was £6,641.34. . The pursuer's business loan had a balance due of £79,714.58.

[18]           For the period 7 July 2011 to 5 August 2011 the opening balance of the account was £6,641.34 and the closing balance was £7,626.08. The pursuer's business loan had a balance due of £78,831.83.

[19]           For the period 5 August 2011 to 7 September 2011 the opening balance of the account was £7,626.08 and the closing balance was £5,918.96. The pursuer's business loan had a balance due of £77,949.08

[20]           For the period 7 September 2011 to 7 October 2011 the opening balance of the account was £5,918.96 and the closing balance was £5,217.37. The pursuer's business loan had a balance due of £77,512.60

[21]           For the period 7 October 2011 to 7 November 2011 the opening balance of the account was £5,217.37 and the closing balance was £4,070.69. The pursuer's business loan had a balance due of £76,629.85

[22]           For the period 7 November 2011 to 7 December 2011 the opening balance of the account was £4,070.69 and the closing balance was £1,656.44. The pursuer's business loan had a balance due of £75,747.10

[23]           For the period 7 December 2011 to 6 January 2012 the opening balance of the account was £1,656.44 and the closing balance was £5,307.73. The pursuer's business loan had a balance due of £75,298.37

[24]           For the period 6 January 2012 to 7 February 2012 the opening balance of the account was £5,307.73 and the closing balance was £1,566.95. The pursuer's business loan with a balance due of £74,415.62

[25]           For the period 7 February 2012 to 7 March 2012 the opening balance of the account was £1,566.95 and the closing balance was £6,159.30. The pursuer's business loan had a balance due of £73,532.87

[26]           For the period 7 March 2012 to 5 April 2012 the opening balance of the account was £6,159.30 and the closing balance was £9,228.31. The pursuer's business loan had a balance due of £73,071.95

[27]           For the period 5 April 2012 to 4 May 2012 the opening balance of the account was £9,228.31 and the closing balance was £8,277.71. The pursuer's business loan had a balance due of £72,189.20

[28]           For the period 4 May 2012 to 7 June 2012 the opening balance of the account was £8,277.71 and the closing balance was £7,960.60. The pursuer's business loan had a balance due of £71,306.45

[29]           At no time during the foregoing period was the business bank account in overdraft.

Grounds of decision

The appeal framework

[30]           As already noted, the appeal is brought under the 2006 Act. The 2006 Act empowers the defender to impose a civil penalty upon employers who are found to have employed an adult who is subject to immigration control and does not have leave to enter or remain in the United Kingdom or whose leave to remain is invalid or does not permit the employment. The recipient of a notice has a right of appeal against the penalty notice under Section 17 of the 2006 Act. (The recipient also has the right to object to a notice. In the present case, the pursuer did object. That objection was unsuccessful. Nothing turns on that for the purposes of this appeal.)

[31]           The possible grounds of appeal which may be deployed are set out in section 17(1) and are that:

a.       The employer is not liable to imposition of a penalty;

b.      The employer is excused by virtue of S15(3);

c.       The amount of the penalty is too high.

[32]           This appeal proceeds upon the third ground, namely that the penalty imposed was too high.

[33]           Section 17(3) of the 2006 Act states that appeal shall be a re-hearing of the Secretary of State's decision to impose a penalty and shall be determined having regard to:

a.       The Code of Practice issued under section 19 ("the Code") where the appeal relates to the amount of the penalty; and

b.      Any other matters which the court thinks relevant including matters that the defender was unaware of.

[34]           Section 17(2) provides that the court may

a.       Allow the appeal and cancel the penalty

b.      Allow the appeal and reduce the penalty, or

c.       Dismiss the appeal.

[35]           Thus, it will be seen that the scope of the appeal is a wide one.

[36]           In particular, Ms Anderson accepted that :

a.       where, as here, the appeal appeared to be directed to the level of the penalty, then the appeal was also a re-hearing of the defender's decision to impose a penalty at that level;

b.      even if the appeal is directed only at the level of the penalty the Court may exercise all three options set out in Section 17(2) available to it (as the section states no limitation on those powers based upon the ground of appeal relied upon); and the pursuer may put forward evidence in support of his appeal that was not available to the defender at the point in time of serving the penalty notice.

[37]           In an appeal directed at the level of the penalty, the legislation envisages that the Court will have regard to the Code and any other information that is considered relevant.

[38]           Ms Anderson accepted that in carrying out the exercise of considering the Code and assessing the relevant evidence, the objective is not restricted to a consideration of the reasonableness of the defender's decision. The appeal is a re-hearing of the defender's decision and entitles the Court to pose and answer that question: "Would I have served a penalty at this level?"

The defender's position

[39]           In summary, Ms Anderson's position on behalf of the defender was that:

a.       following the enforcement visit on 23 March 2012 the Immigration Officers were justified in concluding that the Pursuer was in breach of S15 of 2006 Act;

b.      if the Defender was justified in concluding that there had been a breach of S15 the legislation empowered the Defender to impose a Civil Penalty upon the pursuer;

c.       the Defender was acting in compliance with the legislation by applying the provisions of the Code of Practice to calculate the level of the penalty;

d.      in light of the information before it the Defender correctly applied the Code of Practice;

e.       the Pursuer operates a profitable business and has failed to demonstrate that he would be unable to pay the Civil Penalty imposed; and

f.        having had regard to the code of practice and the evidence available to the court the Civil Penalty of £5,000 is an appropriate one and the appeal should be dismissed.

The pursuer's position

[40]           The pursuer did not seek to challenge the point a - c. Instead, it was contended that based on the information available to the defender about the pursuer's financial position (or in the alternative, the information available to the court now), it was clear that the penalty was too high.

Discussion

[41]           In my view, there is no doubt that the defender was entitled to issue a notice in the circumstances of this case.

[42]           It is also clear that in arriving at the level of penalty, the defender is required to have regard to the Code: Section 19. The Code came into force on 29 February 2008: The Immigration (Restrictions on Employment) Order 2007, Article 11.

[43]           The Code (titled "Prevention of Illegal Working: Civil Penalties for Employers") bears to have been presented to Parliament under Section 19 of the 2006 Act.

[44]           The Code is a statutory one, approved by the Secretary of State and laid before Parliament. The Code does not impose any legal obligations on employers, nor is it an authoritative statement of the law but it can be used as evidence in legal proceedings and courts must take account of any part of the Code that might be relevant: Paragraph 1.5 it is stated:

[45]           Paragraphs 2.1 and 2.2 provide: "If we find you to be employing illegal migrant workers, we may look at certain factors when deciding the level of your civil penalty."

[46]           Table 1 sets out a framework designed to assist the Border and Immigration Agency with the assessment of whether to issue a penalty notice to an employer, and if so, at what level. It provides a sliding scale with minimum and maximum penalties, but the actual amount will be decided by the Border and Immigration Agency on a case by case basis. The framework is provided for guidance purposes. There are also explanatory flowcharts at Appendix 2.

[47]           Ms Anderson submitted that reading Section 19 of the 2006 Act and the Code together:

a.       The Code had been issued in accordance with the intention stated in Section 19 of specifying factors to be considered by the Defender when determining whether or not to serve a penalty notice and in assessing the amount of the penalty;

b.      The Code sets out a framework for the Defender to apply in assessing the level of penalty;

c.       The Code does not set a tariff and the Defender is to assess the amount of a penalty on a case by case basis;

d.      By applying the framework set out in Table 1 on page 4 of the code the Defender takes a justifiable approach that takes into account the relevant factors and complies with the 2006 Act.

[48]           I have no difficulty with that proposition save for one comment. If the defender restricts the question of level of penalty to analysing the situation before it to the approach set out in Table 1 in an over-mechanistic manner, there is a risk that insufficient account will be taken of other relevant circumstances. It must be borne in mind that the actual amount must be fixed on a case by case basis: Coode, para2.2; and should take account of the 'fairness' of the penalty: Code, Appendix 4. In other words, the Part 2 Code can provide a 'first' answer to the question of fixing the level of penalty, but not a 'final' answer.

[49]           It was a matter of agreement and admission that the penalty notice issued to the pursuer was a first occasion and that the pursuer co-operated with the Immigration Officers undertaking the enforcement visit to his premises. In my view, the pursuer did not undertake any documentary checks of any of the specified documentation in any true sense.

[50]           Ms Robertson submitted that the pursuer had not undertaken even a partial check in this case. I agree: the Young Scot Card does not satisfy any of the requirements of Lists A or B either alone or in combination with any other document. The National Insurance Card could provide grounds to consider a partial check to have been carried out but when viewed together with the Young Scot card. It was or ought to have been apparent to the pursuer that neither identity document belonged to Sajad Ali.

[51]           This justifies the conclusion that no documentary checks have been carried out in this case.

[52]           The defender has started with the Maximum Penalty of £10,000; the penalty imposed was a first occasion with no documentary checks carried out so the maximum penalty is reduced to £7,500; the penalty is reduced by up to £2,500 per worker to reflect the pursuer's co-operation, leaving a penalty of £5,000. The same level of penalty is reached by following the flowchart at Appendix 2 on page 11 of the Code.

[53]           I accept that the penalty of £5,000 has been calculated in accordance with the Code and in compliance with the legislation, subject to requirement that cases be decided on a case by case basis and take account of other relevant factors: Appendix 4.

[54]           In particular, Appendix 4 provides that the additional factors include "the ability of the employer to pay".

[55]           The pursuer produced detailed financial information in support of this court action. The defender says that the pursuer is operating a profitable business.

[56]           Ms Robertson submitted that the following conclusions could be drawn from the financial information:

a.       In the years 2008 to 2011 the Pursuer operated his business so as to generate a profit in each financial and tax year.

b.      The level of net profit increased year on year over that period.

c.       The Pursuer's business bank accounts demonstrate that notwithstanding a degree of fluctuation the bank account operates without recourse to an overdraft. In 10 out of the 13 for which bank statements have been produced the closing balance of the account would be sufficient to pay the £5,000 penalty in full (7.2.8.1, 2, 3,4,5,8,10,11,12 and 13)

d.      The Pursuer has a business loan that can be seen to be decreasing.

[57]           She submitted that that taking an overview of the financial information that the Pursuer is operating a profitable business and that there is no support for the proposition that he would be unable to make payment of a penalty of £5,000.

[58]           I agree that the pursuer appears to be operating a profitable business, but in my view, it is necessary to look not only at the fact but also to look at (i) the level of profitability and (ii) since the pursuer is a sole trader, his individual or personal financial circumstances as well as those of his business, as these are in effect overlapping if not indistinguishable.

[59]           The figures show a business generating small profits (£450 per week in the last full trading year). The pursuer's net income, although rising, was about £365 per week in the year to 5 April 2011. I was told also that the pursuer is married and has two children.

[60]           A business needs working capital which can be provided by (i) loans or (ii) cash from the owner. The latter is provided in this case through the sums at credit of the business bank account. It does not seem to me that the latter is excessively high i.e. there is not a lot of unused cash floating around in the business. The business as a whole has substantial debt (the loan).

[61]           Furthermore, as I have already indicated, given the pursuer's trading status, I am satisfied that his personal finances and circumstances are a relevant factor. He has a family to support.

[62]           Finally, in my opinion, the question is not whether the pursuer can show that he is unable to pay a penalty of £5000, but instead whether such a penalty is appropriate in all the circumstances.

[63]           I observe here that the employment of a person who does not have the right to enter or remain in the UK may lead to prosecution: 2006 Act, Section 21. A person convicted of such an offence is liable to imprisonment or a fine of up to £10,000: Section 21(2)(b).

[64]           Now, if the pursuer in this case had been prosecuted and was appearing before the Court for sentence, the the Court, in fixing the level of any fine would be obliged to take account not of his personal and financial circumstances, but also of his ability to pay such a fine within a reasonable period of time. To fail to do so would be an error of law.

[65]           In my view, the same principle must apply here. The starting point remains that this is a serious mater and the defender (or rather the Agency) has a legitimate power to impose a penalty. And while I do not ignore the sums at credit of his business bank account, I acknowledge that he needs access to such capital to operate his business. I also take account of his relatively modest income and the need for the pursuer to support his family.

[66]           I have concluded that in the circumstances the appeal should be allowed and the penalty should be reduced to £2500.

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Sheriff