MLR1PP10200 - Penalty Guidance: The criteria for penalty reductions: Introduction

The first things to consider when applying the reduction matrix to the starting penalty are the reasons for the breaches.

These will fall into one of four sets of circumstances:

1. A mistake or misunderstanding of the requirements of the Regulations. See MLR1PP10250 
2. A failure to take reasonable steps, neglect or negligence. See MLR1PP10300 
3. A deliberate failure to comply with the Regulations. See MLR1PP10350 
4. A deliberate failure where there has been an attempt to conceal the failure See MLR1PP10350 

When a breach has been identified it will normally be a result of neglect, negligence or a failure to take reasonable steps to comply with the Regulations. The business will have either failed to do what the Regulations stipulate, or will have failed to apply the Regulations in accordance with our guidance in Public Notice MLR 8, or guidance produced by external bodies, which has our approval, such as the CCAB Guidance for ASPs.

A breach that has arisen as a result of negligence will have occurred because a business has not exercised the level of due diligence in applying the Regulations, which as supervisor we believe the Regulations say it should have applied.

Regulation 42(2) specifies that we must not impose a penalty unless there are reasonable grounds to indicate that all reasonable steps were taken to ensure the requirements of the Regulations were complied with.

This in practice means that before a breach can be treated as neglect, we will need to establish that there was some degree of culpability. Further guidance can be found in MLR1PP5200 MLR1PP6100 MLR1PP7100 and in MLR 3.

The law of tort established a legal definition of negligence in the case of Baron Alderson in Blyth v Birmingham Waterworks Co, 1856, (11 Ex 781, p784.) This says:

“Negligence is the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do. The defendants might be liable for negligence, if, unintentionally, they omitted to do that which a reasonable person would have done, or did that which a person taking reasonable precautions would not have done.”