Neutral Citation Number: [2009] UKUT 265 (AAC)

Appeal No.  2009/500

IN THE UPPER TRIBUNAL            

ADMINISTRATIVE APPEALS CHAMBER

TRAFFIC COMMISSIONER APPEALS

ON APPEAL FROM THE DECISION OF            

Joan Aitken TRAFFIC COMMISSIONER for the

SCOTTISH TRAFFIC AREA Dated 3 August 2009

Before:

Judge Frances Burton

Leslie Milliken

Stuart James

Appellant:

REIDS TRANSPORT MINISHANT LIMITED

and A. FRASER & R. LAIDLAW

Attendances:

For the Appellant:  Tim Nesbitt of Counsel

Heard at:                       Eagle Building, Glasgow

Date of hearing:           27 October 2009

Date of decision:         27 November 2009

DECISION OF THE UPPER TRIBUNAL

IT IS HEREBY ORDERED that the appeal against disqualification of the Directors be ALLOWED and the appeal against revocation of the operator licence of the Appellant company be DISMISSED. The order of the Traffic Commissioner for revocation shall take effect at 23.59 hours on 29 January 2010, 9 weeks from the date of this Decision.

REASONS FOR DECISION

1.           This was an appeal from a decision dated 3 August 2009 of the Traffic Commissioner for the Scottish Traffic Area in which she revoked the operator’s licence of Reids Transport Minishant Limited and disqualified 2 of its Directors, Mr Andrew Fraser and Mr Robert Laidlaw, for 2 and 3 years respectively.

2.           The factual background appears from the documents, the transcript of the public inquiry and the written decision of the Traffic Commissioner and is as follows.

(i)               A company called Reids Transport Company Limited had operated as a general haulier for 35 years from Cassilis Garage, Minishant, Ayr. Mr Robert Laidlaw had operated the company with his wife Jessie and was a Director and Shareholder. Mr Andrew Fraser was an employee who worked on the management side of the business, which was a general haulier, for 12 years. There was no evidence of any adverse regulatory history during the entire life of that operator company.

(ii)              In 2006 the company got into financial difficulties due to an overvaluation of its assets by its accountant following the closure of Foden’s, the truck manufacturers. On its accountant’s advice the company went into liquidation, and Mr Laidlaw personally settled the debts of the trade creditors, although sums were left outstanding to the Revenue. Notwithstanding trading difficulties, Mr Fraser arranged to take over the company’s customer base to start up a new operation, still using the Reids name through a dormant company with the name of the Appellant, Reids Transport Minishant Limited, which was owned by Mr and Mrs Laidlaw. Mr Fraser was to be sole Director and 100% shareholder. A friend of Mr Laidlaw, Mr Lynch, invested £200,000 to provide financial support.  Instructions to set up the new business on the basis that Mr Fraser was 100% shareholder and sole Director were given to Mr Fergusson, senior partner of the accountants, William Duncan & Sons. An application dated 4 November 2008 was made for a standard national operator licence, authorising 30 vehicles and 30 trailers, and was accompanied by a covering letter from Mr Fraser. On 8 November a board meeting was held at which it was confirmed that Mr Fraser was the sole Director and 100% shareholder.

(iii)            However around this time Companies House records that Mr Laidlaw was also periodically on and off the Register as a Director and once as Secretary.  Mr Fergusson claimed responsibility for this and confirmed that it was an administrative error on the part of his firm. An interim licence was then granted on 29 December 2006 and the application for the full licence was considered at a public inquiry on 19 June 2007, by a Deputy Traffic Commissioner, Mr Richard Macfarlane.  During the inquiry Mr Fraser confirmed that he was still the sole director and sole shareholder that that he regularly sought advice and assistance from Mr Laidlaw.

(iv)            The licence having been duly granted at the public inquiry, on 31 August 2007 Mr Laidlaw was again registered as a Director at Companies House. This was effected by the accountants through an on-line facility which did not required the signature of Mr Fraser. On 14 November 2008 the Traffic Area Office was notified that Mr Laidlaw was more extensively involved, working 50 hours a week, and had been made Transport Manager. Earlier on 27 October 2008 Mr Fraser had intimated to VOSA Traffic Examiner Adrienne Nelson, who had visited the operating centre that Mr Laidlaw might become a Director in the near future. It appeared that the initiative to make Mr Laidlaw a Director had been taken during an informal lunch in August at which funding had been discussed. Mr Fraser then contacted the accountants and a board meeting was arranged for 4 November 2008 at which the situation was regularised: while Mr Fraser had believed he was the sole Director and 100% shareholder, the shares had in fact been transferred to Mr and Mrs Laidlaw contrary to the instructions given to the accountants. The Board minutes confirmed the agreement showing that Mr Fraser, with immediate effect, to be beneficial owner of 100% of the share capital, as previously understood.  Mr Fraser then suggested that he would like “to gift” one third of the shares to Mr Laidlaw and one third to Mrs Laidlaw.The Directorships were left as they then stood. Immediately after the meeting the solicitor acting for the company, Mr Neil Kelly, was instructed to write to the Traffic Area Office to inform them of the meeting and the changes in the circumstances of the operator company of which Mr Fraser was previously unaware.

(v)             On 24 December 2008 the company was the subject of a maintenance investigation which revealed 3 “S” marked prohibitions, deficient maintenance records and excessive inspection intervals. On 21 April 2009 the operator was called to public inquiry, which was concerned with these issues and with the information originally furnished to the Traffic Area Office and the Deputy Traffic Commissioner. The public inquiry commenced on 14 May 2009 and concluded on 3 July 2009. The maintenance evidence as given by VE E. Flynn in the form of a written report but a key part of the hearing was devoted to the issues of the intentions as described to the Deputy Traffic Commissioner at the grant of the licence and the actuality as it unfolded. Mr Laidlaw, giving evidence to the Traffic Commissioner, appeared to state that he had not realised he was a Director until told by TE Nelson at the operating centre visit of August 2007 but that this had been only for financial purposes. He added that he had not attempted to “hide or dodge” anything. Mr Fraser gave similar evidence, adding that he had seen the opportunity to start a new business and had taken it when the old one went into liquidation. He had added that the Deputy Traffic Commissioner had encouraged him to use Mr Laidlaw for advice, but he had not realised that matters had progressed formally beyond that position, and as soon as he had discovered he had corrected the facts by instructing Mr Kelly to write to the Traffic Area Office. Mr Fergusson gave supporting evidence confirming his firm’s errors. At the resumed public inquiry on 3 July Mr Fraser gave further evidence indicating that Mr Laidlaw had been paid the highest salary but denied that he had been manipulated nor that he had set out to deceive, although he conceded he had been “naïve”. He conceded that he had “grabbed” the “best chance” he “could ever have in life”.

(vi)            The Traffic Commissioner then delivered her written decision taking the action referred to in paragraph 1 above. She was severely critical of Mr Fraser, saying that he had been “manipulated” and “a puppet”, and that there was “no doubt that there was a deliberate misleading”, Mr Fraser had “displayed contempt for the truth and accuracy”. She said that Mr Laidlaw and Mr Fraser “had breached trust in a gross manner and at many stages” and that at no time had a “true and honest picture” been given so that she could “repose no trust” in either and that it was proportionate to revoke the licence.

3.           At the hearing of the appeal the Appellant company and Mr Laidlaw and Mr Fraser were represented by Mr Tim Nesbitt of counsel who provided a helpful skeleton argument. He said that he had two basic points which covered the majority of the grounds of appeal. His first point was that the Traffic Commissioner had been too harsh in her treatment of the information that had been given at the time of the original application where her decision had been against significant parts (and the weight) of the evidence. Mr Laidlaw’s and Mr Fraser’s initial intentions were confirmed by Mr Fergusson and supported by some documentation. Mr Fraser had never said Mr Laidlaw was not involved in the business and as soon as the factual situation was discovered and later changed Mr Fraser saw that the Traffic Commissioner was informed. This simply did not add up to the harsh judgment of the Traffic Commissioner. In particular the Traffic Commissioner had erroneously assumed that Mr Laidlaw “would have nothing to do with the company as this was not in the transcript, undermining her whole judgment”.

4.           Mr Nesbitt’s second point was that the decision to revoke was too harsh and failed to take account of the situation at the time of the public inquiry and of matters in favour of the Appellant company and Mr Laidlaw and Mr Fraser. He submitted that in 37 years of operation Mr Laidlaw had had only one blemish in relation to road safety, namely the recent maintenance problems. Apart from that the operator company was employing 52 people and operating in a compliant way. Despite the mistakes made by the accountants considerable efforts had been made to correct the erroneous information with immediate disclosure as soon as the errors were discovered. Moreover if the Traffic Commissioner was relying on the mistakes made at the grant of the licence that had taken place 2 years before since when diligent efforts had been made to put matters right, the operator company was successful and there were no ongoing safety concerns.

5.           Mr Nesbitt further submitted that the disqualifications were also too harsh and asked for the Tribunal to substitute its own lesser sanction.

6.           Asked whether the overall impression from the evidence was that the new company had been a phoenix operation from the start, Mr Nesbitt said that this was not the only interpretation to be put on the history as he had tried to demonstrate. He submitted that if Mr Fergusson was telling lies about his clear instructions from Mr Laidlaw, which his staff had somehow ignored or misunderstood, Mr Fergusson was putting his professional integrity in issue, which was inherently unlikely. He submitted that what had happened was a muddle not a conspiracy. Asked whether it was likely that Mr Laidlaw would give away 100% and then even a lesser percentage of a £650,000 business he said that it did not surprise him as it was clear that Mr Fraser was practically “family” to the Laidlaws. He had worked for them for 12 years and had had a close relationship, even taking his meals with them. Mr Fraser was to inherit their business in due course before the first Reids company had gone into liquidation. Objectively this situation did not tend towards a phoenix operation. Mr Laidlaw had become more involved than originally intended because of the issues of funding in a quasi-family situation. He submitted that it was not meritable that a conspiracy was the only interpretation when the circumstances had been clouded by mistakes. He added that proportionality demanded a fairer disposal.

7.           We are unable to accept all of Mr Nesbitt’s arguments. It may be that the Traffic Commissioner’s decision leaves something to be desired in giving some credit to the operator company but we are not convinced that there is a miscarriage of justice here. There was some misleading of the Traffic Commissioner even though it may have emanated from a chapter of mistakes rather than a conspiracy. The Traffic Commissioner is entitled to know whom she is regulating. She may have been somewhat harsh in her terms in delivering her judgment, however the practical effect was that Mr Laidlaw was involved from the start, even though he relied on Mr Fraser to play the major part. There is, however, a substantial transport business involved which is clearly capable of compliant operation. In that we cannot see where the Traffic Commissioner has gone wrong in relation to the revocation we dismiss the appeal in relation to that issue. However we do not see the rationale for disqualification of the two Directors and allow the appeal in relation to those disqualifications. In our view the appropriate course of action for the operator company is to make a new application, which will inevitably be heard at public inquiry, and this time make full and accurate disclosure to the Traffic Commissioner.

8.           The revocation ordered by the Traffic Commissioner will take effect at 23.59 hours on 29 January 2010, 9 weeks from the date of this Decision. The appeal against disqualification of the Directors is allowed.

 Frances Burton

27 November 2009