The Court of Appeal has today (2 July 2024) handed down its judgment in the case of KLG Trucking SRL v Secretary of State for the Home Department [2024] EWCA Civ 737 – the first Court of Appeal decision under the ‘new’ clandestine entrant civil penalty scheme that was introduced in February 2023.

Background

The clandestine entrant civil penalty scheme was overhauled with effect from February 2023.

The changes included:

• The maximum penalty for carrying clandestine entrants was increased by a staggering 500% from £2,000 to £10,000 per entrant. 
• A new penalty for failing to adequately secure a goods vehicle against unauthorised access (which includes unaccompanied trailers) was introduced with a potential maximum penalty of £6,000. This penalty can be imposed regardless of whether clandestine entrants have gained entry to the vehicle.
• The previously available defence available to operators who could demonstrate an effective system for preventing the carriage of clandestine entrants was removed. The only defence against penalties now is that the driver was acting under duress; however, in my experience, in most scenarios, this is unlikely to be the case – the driver is usually completely unaware that clandestine entrants have gained access to the vehicle. The starting point in practice is, therefore, that penalties are imposed - even if you are operating an effective system to prevent the carriage of clandestine entrants. 
• A new ‘Level of penalty: code of practice’ (“the Penalty Code”) was introduced, which Border Force must follow when considering the imposition of any penalties. The starting point provided for in the Penalty Code is for Border Force to impose the maximum penalty available and then apply a series of discounts as may be relevant to, or appropriate in, the particular case. Such discounts include: (i) whether the driver and/or operator have any previous liability to penalties; (ii) whether the operator is a member of the Civil Penalty Accreditation Scheme; (iii) the driver’s and operator’s financial circumstances; and (iv) whether there has been compliance with the Carriers’ Liability Regulations 2002 (as amended) (“the Regulations”) in terms of operating an effective system to both adequately secure the vehicle and prevent the carriage of clandestine entrants. Border Force may also take into account any other factors they consider relevant.

Under the clandestine entrant civil penalty scheme, the driver and operator are both liable to a penalty (i.e. a maximum aggregate penalty of £20,000 per entrant where clandestine entrants are found, and a maximum aggregate penalty of £12,000 in the case of a failure to adequately secure a goods vehicle) and the operator is responsible for payment of the driver’s penalty as well as their own.

In practice, these changes have been translating into hefty penalties (including many eye-watering six-figure sums) that we are seeing imposed on operators virtually day in, day out.

KLG Trucking SRL

This case related to an appeal against Border Force’s decision to impose a penalty of £4,500 per entrant, i.e. £36,000 in total (reduced from £80,000 following determination of the company’s objection to the original penalty) on KLG Trucking SRL (“KLG”) after 8 clandestine entrants were found concealed in one of the company’s vehicles. It was said by Border Force that KLG had failed to comply with one of the Regulations (Regulation 2E(2)) – relating to keeping records of checks of the securing of vehicles to prevent unauthorised access - on the basis that “[t]he Checklist provided on the day of the incident shows no checks within 24 hours of the incident”.

The £36,000 penalty had been appealed by KLG, but the Judge sitting at Nottingham County Court had concluded that the penalty of £4,500 per entrant was appropriate – the total penalty of £36,000 was therefore upheld.

The Court of Appeal case related to KLG’s appeal of that decision.

The Decision

The central issue before the Court of Appeal was whether KLG had complied with Regulation 2E(2) of the Regulations. 

On the particular facts of KLG’s case, the Court of Appeal found that the Judge had been “mistaken” in concluding that KLG had breached Regulation 2E(2) of the Regulations on the basis that: (i) the initial penalty notice issued by Border Force did not allege that the checks referred to in Regulation 2E(2) had not been duly recorded; and (ii) the Secretary of State for the Home Department had not made it clear in any other way that he was complaining of failure to record such checks.

KLG’s appeal was therefore allowed insofar as the Court of Appeal reduced the penalty imposed upon KLG by 50% from £36,000 to £18,000 to reflect a 50% reduction of penalty where there has been full compliance with the Regulations, as provided for by the Penalty Code.

The Exercise of Discretion to NOT Impose a Penalty

KLG also submitted via their legal representative that, where there has been full compliance with the Regulations, there should be no penalty imposed at all; however, in something of a blow for international operators, the Court of Appeal disagreed stating that they did “not think that the mere fact that a vehicle owner has not been shown to have failed to comply with the 2002 Regulations provides a good reason either for declining to impose any penalty or for imposing one at a level lower than indicated by the Penalty Code.” 

Implications of the Decision

This is a significant, albeit disappointing, decision for international operators. The Court of Appeal are confirming that Border Force are correct to impose penalties in cases where operators have fully complied with the Regulations and there should be a strict application of the Penalty Code in determining the level of penalty. 

Next Steps

I would urge all operators undertaking international haulage or passenger transport operations to review your systems for both adequately securing the vehicle and preventing the carriage of clandestine entrants, and to apply for membership of the Clandestine Entrant Civil Penalty Accreditation Scheme without delay.

The Civil Penalty Accreditation Scheme recognises those operators who take measures to operate an effective system for securing their vehicles and for preventing the carriage of clandestine entrants. Members of the scheme will benefit from a 50% discount from the starting point for any penalties imposed. Previous liability to a penalty does not prevent an operator from joining the scheme. The scheme is free to join, but I would recommend operators take specialist legal advice when completing their applications (we are currently assisting a range of operators from across the UK, Ireland and Europe with this process).

JMW’s Commercial Road Transport team are also currently dealing with a high number of cases where we are challenging penalties – both at the objection and appeal stage. If you do find yourself subject to a penalty, I would urge operators to take legal advice, as there are still various grounds available for challenging penalties and, as was the case in KLG, Border Force don’t always apply the Penalty Code correctly!

Read the full Court of Appeal decision here: KLG Trucking SRL v Secretary of State for the Home Department [2024] EWCA Civ 737 (02 July 2024) (bailii.org)