Neutral Citation Number: [2011] UKUT 358 (AAC)

Appeal No.  T/2011/036

IN THE UPPER TRIBUNAL

ADMINISTRATIVE APPEALS CHAMBER

TRAFFIC COMMISSIONER APPEALS

 

ON APPEAL from the DECISION of Miles Dorrington

DEPUTY TRAFFIC COMMISSIONER for the

Eastern Traffic Area Dated 8 June 2011

 

 

 

Before:

H. H. Michael Brodrick, Judge of the Upper Tribunal

Patricia Steel Member of the Upper Tribunal

John Robinson Member of the Upper Tribunal

 

 

Appellant: LWB Limited

 

 

 

 

 

Attendances:

For the Appellant: Hywel Jenkins, of Counsel, instructed by Backhouse Jones Solicitors

 

 

Heard at: Victory House, 30-34 Kingsway, London

Date of hearing: 21 July 2011

Date of decision: 25 August 2011

 

 

 

 

DECISION OF THE UPPER TRIBUNAL

IT IS HEREBY ORDERED that this appeal be DISMISSED, and that the revocation of the Appellant’s licence will take effect at 2359 on 9 October 2011.

 

 

 

 

 

 

 

 

 

SUBJECT MATTER:- Financial Standing, Good Repute and Professional Competence.

 

 

CASES REFERRED TO:- 1994 D41 JJ Adam (Haulage) Ltd,  2005/007 2 Travel Group plc,  2004/373 Rai Transport (Midlands) Ltd,  2004/383 Blue Arrow Ltd and 1999 L56 Alison Jones t/a Jones Motors.

 

 

 

REASONS FOR DECISION

 

 

1.           This is an appeal from the decision of the Deputy Traffic Commissioner for the Eastern Traffic Area to revoke the operator’s licence held by the Appellant on the grounds that it was no longer of appropriate financial standing, or of good repute or professionally competent.

2.          The factual background to this appeal appears from the documents and the Deputy Traffic Commissioner’s decision and is as follows:-

(i)                   The Appellant is the holder of a Standard International Public Service Vehicle licence authorising 10 vehicles, with 10 discs issued.

(ii)                 On 27 October 2008 an application by the Appellant for an operator’s licence for 15 vehicles was granted after a Public Inquiry and after the Appellant had given undertakings, (a) to employ a specialist to check tachograph charts for a period of at least 2 years and (b) that the Appellant would produce bank statements for the months of October, November and December 2008 by 31 January 2009 and for the months of June, July and August 2009 by 30 September 2009.

(iii)                On 12 November 2009 the Appellant was called to a Public Inquiry to be held on 8 February 2010 because of concerns that it was no longer of good repute or of appropriate financial standing, it was in a breach of the undertaking to submit bank statements and concerns that there had been a material change in circumstances in relation to finance.  An adjournment was requested and the Public Inquiry was rescheduled.

(iv)                The Appellant submitted additional evidence in relation to finance, on 1 April 2010, which satisfied the Traffic Commissioner that the operator had sufficient financial resources for 10 vehicles.  In a letter dated 7 April 2010 the Traffic Commissioner indicated that if there was a voluntary reduction of the size of the fleet to 10 vehicles and an undertaking by the Appellant to provide bank statements covering a period of 3 months within 4 months of the date of the decision letter, namely by 9 July 2010, the outstanding Public Inquiry would be cancelled.  However the Traffic Commissioner made it clear that this was on the basis that the letter recorded a formal warning to this effect: “the Traffic Commissioner is satisfied that the company’s repute is severely tarnished but not lost due to the failure to fulfil the undertakings attached to the licence by the stated deadlines”.

(v)                 On 7 April 2010 written confirmation of the reduction in the fleet and the new undertaking was provided on behalf of the Appellant.

(vi)                Bank statements for a current account were received on 12 July 2010, together with an explanation that statements for the deposit account were only published quarterly.  The Office of the Traffic Commissioner [“OTC”], replied on 12 July 2010 that the amount of money in the current account did not meet the requirements for 10 vehicles.  Further bank statements were requested. 

(vii)              On 5 August 2010 the Appellant wrote to the OTC saying that £87,000 had been remitted to the Appellant ‘to re-establish the available funds’, and that the bank had been asked to provide new statements for both current and deposit accounts.  Reference was also made to the transfer to the Appellant of 6 coaches with an equity of £100,000, after allowance for outstanding finance. Further bank statements, for a limited period, were provided on 10 September 2010. 

(viii)             On 13 October 2010 the Appellant was called to a Public Inquiry to be held on 23 November 2010.  The grounds for action set out in the letter were that the Appellant was (i) no longer of good repute, (ii) no longer of appropriate financial standing, (iii) in breach of the undertaking to submit bank statements and (iv) that there had been a material change in circumstances in relation to finance, in that the Appellant no longer had sufficient financial resources, i.e. £48,600.  The Appellant was warned that the previous history would be taken into account.

(ix)                The call-up letter went on to spell out the position in relation to the financial evidence which would be required.  First, it explained that the relevant legislation required that £48,600 should be readily available for a fleet of 10 vehicles.  Second, it made it clear that “the company should provide all relevant up-to-date financial information”, which should include the latest profit and loss account, bank statements for the last three months and details of any overdraft or loan facility.  The documents were requested by 12 November 2010 to allow time for analysis.  In bold type it was made clear that all financial information had to be in the name of the licence holder.

(x)                 On 11 November 2010 the Appellant wrote to the OTC in relation to the financial evidence which had been requested.  The letter stated that the amount of cash in the Appellant’s bank account had been replenished to a figure of at least £48,600.  The late supply of bank statements in the past was said to have been entirely due to the bank, for reasons explained in the letter.  The same problem prevented the Appellant from producing up to date deposit account statements, by the date requested but they were promised as soon as they were received.  The letter went on to confirm that the Appellant did not have any loans or overdrafts, because that would only have been possible after a change in banking arrangements.  Reference was made to the transfer of five vehicles to the Appellant and to the fact that costs had been significantly reduced.  Finally Mr David Stewart, the author of the letter and a director of the Appellant, went on to mention some personal assets, although he indicated that he appreciated that: “personal cash resources may not be strictly allowable”.

(xi)                The Public Inquiry was subsequently adjourned to 2 February 2011.

(xii)               On 17 December 2010 the OTC replied to a suggestion that the Appellant might surrender one disc, pointing out that “compliance is not a matter for negotiation”, that there had been “repeated failure to fulfil undertakings to produce financial evidence”.  The OTC also pointed out that the Traffic Commissioner: “will wish to be satisfied that your client will be compliant in fulfilling undertakings in the future, particularly if they relate to financial matters”.

(xiii)             On 25 January 2011 the OTC wrote to the Appellant following a report of a maintenance investigation which was carried out on 21 December 2010.  As a result of adverse findings other issues were added to those which were already to be considered at the Public Inquiry.  They were, professional competence, failure to carry out maintenance inspections at intervals of no more than 42 days, failure to keep vehicles in a fit and serviceable condition, failure to report defects and failure to keep records for 15 months.  In addition it was indicated that 2 delayed prohibitions would also be considered.

(xiv)             On 2 February 2011 the Deputy Traffic Commissioner heard evidence in relation to financial standing but adjourned the Public Inquiry in relation to the issues raised in the letter of 25 January 2011.  On this occasion the Appellant was represented by Mr Woolfall, of Backhouse Jones, Solicitors.  Although the Deputy Traffic Commissioner was satisfied about financial standing, as a result of documents brought to the Public Inquiry, he made it very clear that operators have a continuing obligation to remain of appropriate financial standing and that the issue of financial standing remained a live issue at the adjourned Public Inquiry.  He stated the position in stark terms: “If you haven’t got the money, you don’t have the licence.  It’s that simple”.  A little later Mr Stewart agreed that he understood the obligation, at the adjourned Public Inquiry, to satisfy the person conducting that Inquiry that the Appellant remained of appropriate financial standing.

(xv)              Shortly before the Public Inquiry was adjourned the Deputy Traffic Commissioner said this:

“… the operator doesn’t have to necessarily rely upon cash assets in the bank but the less obvious it is that you can get your hands on the money, the more you are going to have to do to prove that you can rely upon that to get your hands on the money.  So I have seen documents talking about the value of the vehicle that can be sold but it is how quickly they can be sold, how you can demonstrate that, what the market’s like, is there any finances to be paid off on the vehicles, are there any guarantees with the bank that may be affected by the same, (sale?), all of those things would have to be put forward.  Mr Woolfall can guide you on that but I just say that it is much easier to have it in the bank if possible”.

(xvi)             On the same day the OTC wrote to the Appellant saying this:

“I write to confirm the decision of the Deputy Traffic Commissioner that the operator was able, with the bank statements brought to the Public Inquiry, to demonstrate appropriate financial standing.

The operator was warned that, given the history of problems with appropriate financial standing in the past, if they are not able to satisfy the presiding (Deputy) Traffic Commissioner of appropriate financial standing at the adjourned Public Inquiry then no further time to provide appropriate financial standing will be given and the operator’s licence will be revoked”.

(xvii)            In the middle of April 2011 the OTC became aware that Her Majesty’s Revenue and Customs had lodged a petition with the High Court for the winding up of the Appellant due to a significant sum remaining unpaid.

(xviii)          On 9 May 2011 the Appellant was informed that the adjourned Public Inquiry would take place on 23 May 2011.  The Appellant was reminded that all issues remained to be determined and that appropriate financial standing would have to be demonstrated again, “by production of the most recent 3 months of bank statements and any other recent documents in support”. The letter went on to point out that it appeared that the Appellant had not notified the Central Licensing Unit, [“CLU”], of the appointment of a replacement Transport Manager, to replace Mr Colin Brown, who had submitted a letter of resignation to the OTC dated 14 April 2011.

(xix)             On 20 May 2011 the Appellant wrote to the OTC giving the name and address of a new Transport Manager, Mr Phillip Rollings adding that he “holds the relevant qualifications and his qualifying details will be recorded at Leeds”.  Form TM1(G) was not submitted nor was a contract of employment or the original Certificate of Professional Competence included.

(xx)               On 22 May 2011 Mr Stewart sent a long email to the OTC setting out the Appellant’s position on many of the issues to be considered at the Public Inquiry.  In relation to the position of Transport Manager he said that he had telephoned the CLU, at the end of the previous week, and that they had informed him that Mr Brown had not resigned and was still listed as the Transport Manager.  On that basis he considered that there was no requirement to notify a new Transport Manager, though in practice Mr Rollings had been working in that position since December 2010.  He went on to set out in some detail the poor decisions taken by Mr Brown, his inadequate management of the workshop and maintenance issues and his obstruction of some decisions which Mr Stewart intended to take.

(xxi)             On 23 May 2011 the Public Inquiry re-convened before the same Deputy Traffic Commissioner.  On this occasion Mr David Stewart appeared on behalf of the Appellant.  In the course of the Deputy Traffic Commissioner’s opening remarks Mr Stewart made it clear that he was not aware of Mr Brown’s letter of resignation, which was sent to the CLU.  He also referred to the fact that he had been told by the CLU that Mr Brown was still named as Transport Manager.  The Deputy Traffic Commissioner explained that this was the usual practice when a Public Inquiry was due to be held.  He went on to say that unless there was evidence to the effect that Mr Brown had continued to fulfil the role of Transport Manager he would take the letter at face value and that if there was no such evidence it was Mr Stewart’s responsibility to remove Mr Brown if he was not satisfied with the way in which he was discharging his responsibilities.

(xxii)            The Deputy Traffic Commissioner dealt with financial evidence in camera.  We believe that the details set out below do not require an unpublished annex to this decision.  The Deputy Traffic Commissioner began by setting out the substance of the Practice Direction issued in relation to Financial Standing and in particular the requirement that the amounts put forward to demonstrate appropriate financial standing must be in the name of the entity which is applying for or holds the operator’s licence.  In addition he made it clear that he could not and would not take into account statutory declarations.

(xxiii)           When he was asked what he had got to demonstrate financial standing Mr Stewart replied that there was an amount in excess of the sum required but added: “some of it’s in my name. Some of it’s in another company”.  The Deputy Traffic Commissioner replied: “Well, we can’t take it into account then”.  Mr Stewart explained that because a ‘winding-up petition had been presented against the Appellant the bank account had been frozen.  In answer to further questions Mr Stewart said that he thought that the bank account had been frozen in about mid April.  He accepted that he had not informed the OTC.  He said that the Appellant’s bills were being paid personally or by other companies and that he had not attempted to have the account unfrozen.

(xxiv)          When the Deputy Traffic Commissioner asked for copies of the bank statements Mr. Stewart said that he had brought a statement from mid-April but that there was hardly anything in the account.  He said that he had not brought a full three months worth of bank statements because, depending on what happened with the Revenue “we may or may not have a company”.  The Deputy Traffic Commissioner then asked Mr Stewart about the lack of bank statements for February and March, (ie before the account was frozen).  Mr Stewart conceded that these statements would not have helped and explained what had happened in relation to the business in the early part of 2011.  When pressed as to how appropriate financial standing could be demonstrated Mr Stewart simply said that he did not see what else could have been done.

(xxv)            Mr Stewart then referred to the fact that five vehicles had been transferred to the company.  The Deputy Traffic Commissioner reminded Mr Stewart that it was for him to show what they were worth, how quickly they could be sold and whether there was any unpaid finance on them.  At this Mr Stewart said that a vehicle had, in fact, just been sold, but not one of the five which had been transferred.  The Deputy Traffic Commissioner pointed out that in that case it was irrelevant.  Further discussion followed in which Mr Stewart referred to various assets, either belonging to him personally or to other companies and the Deputy Traffic Commissioner had to remind him that, if they were not in the name of the Appellant, they could not contribute to showing that the Appellant was of appropriate financial standing.

(xxvi)          As the questioning proceeded it became clear that Mr Stewart had not taken any steps to discover whether the frozen bank account could be unfrozen, whether a new bank account could be opened or whether there was any other way in which the Appellant could operate on the strength of its own assets.  In the end the Deputy Traffic Commissioner, sensibly, offered Mr Stewart an opportunity to speak to some of the Appellant’s advisers.  As a result Mr Stewart was able to say that he had been advised that it would be practically impossible to open a parallel bank account.  He went on to indicate that written confirmation would be provided in relation to the steps required to unfreeze the account.

(xxvii)         The Public Inquiry then went into open session in order to deal with other matters.  A Senior Vehicle Examiner, Mr Bradshaw, gave evidence in relation to the visit by Mr Payne, a Vehicle Examiner, who conducted the maintenance inspection on 21 December 2010.  The overall assessment was ‘unsatisfactory’.  The reasons were, unsuitable records, records not properly completed, inspection frequencies exceeding 6 weeks, no forward planning system, no endorsements to the effect that rectification work had been completed and a poor MOT first time pass rate, with vehicles failed for multiple defects.  In addition two delayed prohibitions had been issued in the previous eighteen months.  In his report Mr Payne expressed concern at the lack of knowledge on the part of the Transport Manager, Mr Brown, and at the fact that maintenance systems had gone wrong so soon after the licence was granted.  His pocket book described the maintenance operation as ‘chaos’.  In the light of the response from Mr Brown, Mr Payne’s recommendation was for a strongly worded letter followed by a further inspection.  Mr Stewart accepted the findings in the report and acknowledged that the position was: “way beyond acceptable”.  In answer to the Deputy Traffic Commissioner Mr Bradshaw agreed that the overriding problem was a lack of management control on the part of the operator and a failure to monitor and to supervise, meaning that Mr Brown was unchecked in his work. Mr Bradshaw went on to explain that the first time pass rate for the MOT test was below average, indicating that the vehicles had not been adequately prepared and that some of the defects leading to failure were for safety related items.

(xxviii)        Mr Stewart then gave evidence.  He was asked by the Deputy Traffic Commissioner to explain why he did not check to ensure that the system was compliant and what changes he had made since the deficiencies had become apparent.  He replied that he regarded Mr Brown as experienced, that there were an adequate number of mechanics and that it had appeared to him that all was well.  He added that by November/December 2010 alarm bells were going off and Mr Rollings had been brought in to help as a temporary measure.

(xxix)           Mr Stewart explained that he had sought to resist the appointment of a particular person as workshop manager and that he had tried to suspend him, only to be frustrated by Mr Brown.  He was asked why Mr Brown remained as Transport Manager once it became clear how little he had done.  Mr Stewart replied that Mr Rollings was looking after maintenance and that Mr Brown was left with a more limited role looking after legal things, compliance etc.

(xxx)            There was then some discussion as to whether the Appellant had a Transport Manager on the licence.  Mr Stewart repeated that he had been told, by the CLU, that Mr Brown was still named as Transport Manager and he stated that Mr Rollings had been added by the letter sent the previous week, [see paragraph 2(xix)].  The Deputy Traffic Commissioner pointed out that the addition of a new Transport Manager required a form to be sent to the CLU, [form TM1G], together with a contract of employment.  Mr Stewart replied that he didn’t realise that a letter was not sufficient.

(xxxi)           The Deputy Traffic Commissioner then referred to the passage in the call-up letter of 25 January 2011 requesting that maintenance records for the previous 15 months should be brought to the Public Inquiry.  Mr Stewart had to accept that he had not brought them.  The Deputy Traffic Commissioner pointed out that they would have assisted him to determine whether effective changes had been made to the maintenance systems.  The Deputy Traffic Commissioner went on the explore Mr Stewart’s knowledge of the documents in use in relation to maintenance.  Mr Stewart in effect accepted that his knowledge was limited and he invited the Deputy Traffic Commissioner to direct his questions to Mr Rollings.

(xxxii)         Mr Rollings then gave evidence.  He said that when he came to help in November 2010 he was appalled because everything was chaos.  He said that he did not think that Mr Stewart would have been able to bring 15 months worth of maintenance records, because complete sets of records were only available for the last six months.  He said that he did not have a contract of employment with the Appellant but that he had told Mr Stewart that he would take on the role of Transport Manager.

(xxxiii)        On 23 May 2011 a firm of accountants, acting on behalf of the Appellant wrote to the OTC to explain that a ‘Winding-up Petition’ had been presented against the Appellant and that the Appellant’s bank account had been frozen.  The Accountants went on to say that it would be necessary to apply to the High Court for a validation order, under s.127 of the Insolvency Act 1986 to enable payments to be made from the frozen account and that they had been instructed to make such an application on an urgent basis.

(xxxiv)        The Deputy Traffic Commissioner gave an oral decision, after a short adjournment, but indicated that it would be supplemented by full written reasons in due course.  He concluded that, with the bank account frozen and with no evidence that the Appellant had assets from which money could, reliably, be realised within 30 days, and on the basis of Mr Stewart’s admission that there had been insufficient money in the bank account for part of February and all of March and April, the Appellant was no longer of appropriate financial standing.  He pointed out that the other assets put forward to establish appropriate financial standing were not in the name of the Appellant and could not be taken into account.  He was clearly unimpressed by the failure to heed what had been said, on several occasions, as to what was required to establish appropriate financial standing and by the absence of any real effort to explore possible solutions.  The Deputy Traffic Commissioner then went on to hold that following the resignation of Mr Brown the Appellant had no Transport Manager, with the result that it was not professionally competent.  As a result of those findings the Deputy Traffic Commissioner revoked the licence, as he was bound to do.  The revocation was timed to take effect at 2359 on 27 May 2011.  The Deputy Traffic Commissioner reserved his decision on all other aspects of the case and indicated that he would give full written reasons on all the issues including financial standing and professional competence.

(xxxv)         The Deputy Traffic Commissioner’s written decision is dated 8 June 2011.  After a careful and detailed review of the evidence, which has been summarised above, the Deputy Traffic Commissioner turned to the issues raised by the call-up letter, dealing first with financial standing.

(xxxvi)        The Deputy Traffic Commissioner began his consideration of this issue by setting out the relevant parts of paragraph 2 of Schedule 3 to the Public Passenger Vehicles Act 1981, [“the 1981 Act”].  He went on to consider the definition of “having available” in the Transport Tribunal’s decision in the case of 1994 D41 JJ Adam (Haulage) Ltd, which was set out and followed in the later decision of 2005/007 2 Travel Group plc.  He also had regard to the Tribunal’s decisions in the appeals of 2004/373 Rai Transport (Midlands) Ltd and 2004/383 Blue Arrow Ltd on the need for the assets used to establish appropriate financial standing to be in the name of the company which is the holder of the operator’s licence.  He referred to the Senior Traffic Commissioner’s Practice Direction in relation to financial standing, which makes it clear that the money/other assets used to establish appropriate financial standing must be available at relatively short notice, for example funds in a Building Society account can only be considered to be “available” if they can be drawn down within one month.

(xxxvii)      The Deputy Traffic Commissioner went on to apply these principles to the facts of this case.  He concluded that for the whole of February and March 2011 and for the first part of April 2011, up to the presentation of the winding up petition the Appellant had been unable to demonstrate that it was of appropriate financial standing.  He went on to find that it remained unable to do so from the date of the winding up petition  and that that situation would apply until the next hearing in the High Court, assuming that it was effective, ie until at least mid June 2011.  The Deputy Traffic Commissioner held that the Appellant did not have any other assets, in its name, in addition to the frozen bank account which would enable it to show appropriate financial standing.

(xxxviii)     In relation to professional competence the Deputy Traffic Commissioner held that Mr Brown had resigned as from 14 April 2011 and that there was no evidence to show that he was discharging the role of transport manager after the date of his resignation and that there had been no request for a period of grace, within which to appoint a new transport manager.  He went on to find that Mr Rollings, whilst an international PSV CPC holder, was not and never had been employed by or contracted to the Appellant and that no TM1(G) form had ever been submitted to the CLU or to the OTC, to enable background checks to be made, nor had the original Certificate of Professional Competence been submitted to prove his qualifications for the role.  He considered the letter which had been sent to be inadequate and he explained why he considered that a contract of employment was essential quoting a passage from VOSA’s Guide for Operators of Public Service Vehicles, which stressed that even though a transport manager did not have to work full-time he or she must be employed by the operator.  He pointed out that there is no statutory provision for a period of grace for the appointment of a new transport manager and that by the time of the Public Inquiry 39 days had elapsed since Mr Brown’s resignation so that even if Mr Stewart believed that he had 28 days in which to replace Mr Brown he was, by then, well out of time.

(xxxix)        The Deputy Traffic Commissioner found that the Appellant had breached undertakings in relation to maintenance and the production of documents and that the latter failure meant that there was no way to check whether improvements had, in fact, taken place.  He considered that before Mr Payne’s maintenance inspection Mr Stewart had totally failed to supervise and monitor the actions of the transport manager or the results of the maintenance system and he referred to the Transport Tribunal’s decision in the appeal of 1999 L56 Alison Jones t/a Jones Motors.  He concluded that Mr Stewart should have heard the alarm bells sounding by the low first time pass rate in the MOT but did not.  He also concluded that after the maintenance inspection Mr Stewart should have taken a firm grip on managing the maintenance system but instead relied on Mr Rollings, took what he said at face value and failed to check the maintenance records.  The Deputy Traffic Commissioner went on to say:

“I find that Mr Stewart’s conduct, as detailed in all of the findings I have made above, has directly impacted upon the issue of trust to the extent that I now fell I can no longer trust this operator”.

(xl)                The Deputy Traffic Commissioner then turned to the issue of good repute and, having reconsidered all the evidence and the findings which he had made he asked the question, (generally referred to as ‘the Priority Freight question’): “Is it likely that the operator will be compliant in the future?”  He answered that question in the negative and gave four reasons for reaching that conclusion: (a) Mr Stewart’s continuing failure to supervise and monitor the maintenance system and those responsible for it, (b) the fact that the Appellant had breached specific undertakings given to the Traffic Commissioner, (c) the fact that the Appellant had no transport manager as at the date of the Public Inquiry, and (d) the fact that he no longer felt able to trust Mr Stewart.

(xli)               The Deputy Traffic Commissioner then moved on to what is generally called the ‘Bryan Haulage question’, namely: “Is the conduct of the operator such that it ought to be put out of business?”  He gave the Appellant credit for changes to the maintenance system, despite being unable to assess how effective they had been but then pointed out that the other findings summarized above were generally negative.  He decided that it was proportionate to conclude that the Appellant ought to be put out of business and found that the Appellant had lost its good repute.  He ordered that revocation for loss of good repute should take effect at 2359 on 18 June 2011.

(xlii)             Finally the Deputy Traffic Commissioner indicated that had he not revoked the licence on the three mandatory grounds he would have considered it proportionate to do so on the remaining discretionary grounds, given the findings set out above.

(xliii)            The Appellant appealed against that decision on 26 May 2011 and added further grounds of appeal on 16 June 2011.  In relation to financial standing the Appellant submitted that the approach taken by the Deputy Traffic Commissioner was too restrictive and that he erred in failing to take assets other than those in the name of the Appellant into account.  In relation to professional competence it was submitted that the Deputy Traffic Commissioner erred in that he confused the obligation to employ a properly qualified transport manager with the duty to notify the Traffic Commissioner of any change of transport manager and that the requirement of professional competence was satisfied by the nomination of Mr Rollings as transport manager.  In relation to the finding of loss of good repute it was submitted that because this finding was founded, at least in part, on the findings relating to financial standing and professional competence it followed that if the appeal succeeded on those grounds it should succeed as well in relation to good repute.  This submission was reinforced by further submissions in relation to the findings relating to maintenance.

3.           At the hearing of the appeal the Appellant was represented by Mr Hywel Jenkins, of Counsel, who provided us, in advance, with a helpful skeleton argument, for which we are grateful.

4.           In relation to financial standing Mr Jenkins submitted that the Deputy Traffic Commissioner was wrong to hold that the only assets which could be taken into account, when assessing financial standing, where those in the name of the Appellant.  He submitted that on the evidence in this case other assets were available and should have been considered and that other methods of making money available to the Appellant, such as a Statutory Declaration, should have been taken into account.  Mr Jenkins relied on these words from the decision in the JJ Adam case, (1992 D41): “… or he has some other way in which to come up with money at fairly short notice, should it be needed”.  He went on to submit that the Deputy Traffic Commissioner had been wrong to interpret the decisions in 2004/373 Rai Transport (Midlands) Ltd and 2004/383 Blue Arrow  Ltd as requiring assets to be in the name of the entity which holds the operating licence.

5.           These submissions raise fundamental points concerning the statutory requirement that the holder of an operator’s licence, (or an applicant for such a licence), must be ‘of appropriate financial standing’.  The purpose of this requirement is spelt out in paragraph 2(1) of Schedule 3 to the 1981 Act, which provides that:

“Being of appropriate financial standing ……. consists in having available sufficient financial resources to ensure the establishment and proper administration of the business carried on, or proposed to be carried on, under the licence”.

6.           In our view the words “the establishment and proper administration of the business” should not be narrowly construed.  They should not be confined to running an efficient office.  Instead they extend to cover all aspects of running a PSV operation and, in particular, they cover the efficient and effective maintenance of vehicles as well as setting up effective systems for completing and keeping all necessary records and other documents.  In short they are directed to seeing that the holder of an operator’s licence has the financial resources available to ensure that it’s vehicles are safe to use on public roads, it’s passengers and other road users are not put at risk by them and that it can compete fairly with other operators, within the constraints of the regulatory regime.

7.           It follows that ‘being of appropriate financial standing’ is a continuing obligation.  That, in turn, has important implications in relation to the evidence put forward to satisfy this requirement.  Save for the case of an applicant for an operator’s licence, with no previous track record of operating, a financial ‘snapshot’ showing that the necessary resources are available on a particular day will not suffice, hence the requirement in call-up letters, where finance is in issue, for bank statements covering the last three or four months of operation.  Bank statements over such a period enable a Traffic Commissioner to see whether it appears that the operator is able to pay its way and also whether, if some or all of the amount needed to establish appropriate financial standing has to be spent, it can then be replenished within a relatively short time.  One object of this exercise is to enable the Traffic Commissioner to see whether the operator will be able afford to authorise unexpected repairs immediately, or whether the operator may succumb to the temptation of continuing to use a potentially unsafe vehicle in order to generate the money to pay for it to be repaired.

8.           It is against this background that the submissions made by Mr Jenkins have to be considered.  In our view his reliance on part of a sentence taken from the decision in JJ Adam is misplaced because he has taken the words out of context.  The first paragraph of the passage from the appeal of JJ Adam, (above), which was quoted and followed in 2005/7  2 Travel Group plc is as follows:

“In our judgment the opening words, namely “having available”, provide the key to the meaning of each expression.  “Available” is defined as: “capable of being used, at one’s disposal, within one’s reach, obtainable or easy to get”.  In other words an operator only has available financial resources or capital and reserves if he has money in the bank which is capable of being used, (ie. it is not already needed for the payment of debts in the ordinary course of the business) or an overdraft at his disposal in the sense that there is a balance undrawn before the limit is reached or he has debts which are obtainable because they are due and likely to be easy to collect or he has assets from which money is easy to get in the sense that the assets are items which can be readily sold without any adverse effect on the ability of the business to generate money, or he has some other way in which to come up with money at fairly short notice, should it be needed.  The above should be regarded as examples and not as a comprehensive list”.

9.           Once this passage is considered in context it is quite clear that ‘he has some other way in which to come up with money at fairly short notice’ is governed by the initial definitions of ‘available’, the most important of which, in this context, are: ‘at one’s disposal’ and ‘within one’s reach’.  Both these definitions indicate that the financial resources must be at the disposal of or within the reach of the operator, (in this case a company).  In other words this expression was not intended to enable an operator to rely on assets outside its immediate control it was no more than a ‘sweeping-up’ expression to show that assets at the disposal of the operator, but not covered by the earlier examples, did not have to be excluded.  For these reasons we reject the first point made by Mr Jenkins in relation to financial standing.

10.         Mr Jenkins went on to submit that the Deputy Traffic Commissioner had misinterpreted the Tribunal’s decisions in the cases of 2004/373 Rai Transport (Midlands) Ltd and 2004/383 Blue Arrow Ltd.  He submitted that those decisions did not lay down a requirement that the assets used to satisfy appropriate financial standing had to be in the name of the entity which holds the operator’s licence.  They simply stated that it was the entity which held the licence which had to be able to demonstrate appropriate financial standing.  We do not agree with this submission.  In our view when one takes into account the purpose of the requirement, which we have considered above, the question is: Can the holder of the operator’s licence make an immediate decision to spend the money in question or must it first ask someone else or some other company, (through its directors) to make the money available?  If the holder of the operator’s licence can take an immediate decision to use the asset in question, because it is under the sole control of the licence-holder, then it is capable of being ‘available’ to satisfy the requirement to be of appropriate financial standing.  If the holder of the operator’s licence must first ask someone else or some other company to transfer the money then in our view it is not ‘available’ to the holder of the operator’s licence for the purposes of paragraph 2 of Schedule 3 to the 1981 Act.  For the avoidance of doubt we should add that we would not regard it as appropriate to pose the question set out above in the case, for example, of money held in an account in the name of the holder of the operator’s licence, which is subject to a requirement to give notice before the money can be withdrawn.  The correct approach, in that situation, where the asset belongs to the holder of the operator’s licence, is to concentrate on the speed with which the asset can be made available.  In our view the approach adopted in the Senior Traffic Commissioner’s Practice Direction is correct, namely that money in an account requiring more than 30 days notice is not ‘available’ for the purpose of meeting the requirement to be of appropriate financial standing.

11.        Mr Jenkins also submitted that the Deputy Traffic Commissioner had erred in ruling out reliance on a Statutory Declaration or some other form of guarantee.  It is true that the Deputy Traffic Commissioner did make it clear in the course of the final hearing that he would not be prepared to take a Statutory Declaration into account.  It is important to stress that this was the first occasion on which anything was said about Statutory Declarations. 

12.        There are two reasons why, in our view the Deputy Traffic Commissioner was right to refuse to take a Statutory Declaration into account.  First, in the present case Mr Stewart did not produce a Statutory Declaration or guarantee at the hearing, despite the fact that he had been warned, in the clearest terms, to attend the Public Inquiry with his financial evidence in order and immediately available and despite the fact that there had been no earlier indication that a Statutory Declaration or guarantee would not be taken into account.  It seems to us that the obligation to attend the final hearing with all the material required to establish appropriate financial standing available could not have been made any clearer.  In addition it had also been made very clear that there would be no further adjournment to allow financial evidence to be produced.  In those circumstances it was incumbent on Mr Stewart, if he sought to use a Statutory Declaration or guarantee to establish financial standing, to have the necessary document or documents available at the start of the hearing.  In fact there may be a very good reason why he did not have such documents with him.  The second reason is that it is important to consider the context in which the Senior Traffic Commissioner’s Practice Direction, of October 2004, envisages that a Statutory Declaration may be used to show appropriate financial standing.  The relevant part of paragraph 4 reads as follows:-

“In the case of partnerships or sole traders the finance may at the Traffic Commissioner’s discretion unusually be in different names, but must be supported by a statutory declaration (Example at Appendix 1) signed as at the date of the application by the person(s) holding the money showing that it is available to other person(s). (This could apply, for instance, where a mother wishes to support a son, or if a wife wants a joint account to be available for her husband’s business)”.

In other words the Practice Direction does not envisage the use of a Statutory Declaration where the holder of the operator’s licence is a limited company, which is the case here.  Our provisional view, (because the point has not been argued) is that this distinction is correct. 

The Senior Traffic Commissioner’s Practice Direction, of October 2004, is available on the internet at:

 http://www.vosa.gov.uk/vosa/repository/PD%20Finance%20Rev%20Jul%2010.pdf .

13.        In our judgment, on the facts of this case, the Deputy Traffic Commissioner was plainly right to conclude that the Appellant was not of appropriate financial standing.  The bank account in the Appellant’s name was frozen and, in any event, for several months the average credit balance was nowhere near sufficient to meet the minimum requirement.  In our view the Deputy Traffic Commissioner was right to reject the other assets put forward.  It seems to us that what lies at the heart of the problems in relation to financial standing is a failure on the part of Mr Stewart to distinguish between his position as the owner of his own personal assets and his position as a Director of the Appellant and as a Director of his other linked companies.  He seemed to think that he could simply move assets around as and when circumstances required.  Indeed in this case the operation has continued because as the Tribunal was told the ‘hotel’ company, which made use of the buses, was funding the operation.  What he has overlooked is the decision-making process involved and the capacity in which he would be acting.  If one asks whether the Appellant can make an immediate decision to spend money, which is the personal property of Mr Stewart, the answer must be ‘No’.  The reason is that the Appellant has no power to spend the money until Mr Stewart, acting in his personal capacity, has transferred it to the Appellant.  If one asks the same question in relation in relation to money held by another company controlled by Mr Stewart the answer is also ‘No’.  In this case the Appellant has no power to spend the money until Mr Stewart, in his capacity as a Director of the other company, takes the decision to transfer the money or asset to the Appellant. 

14.        In relation to professional competence the submission made by Mr Jenkins is that the Deputy Traffic Commissioner erred by confusing the formal requirements in relation to the notification of a change of transport manager, by Form TM(1)G, with the fact that a transport manager was, by then, in post.  In addition Mr Jenkins submitted that the Deputy Traffic Commissioner had misinterpreted answers given by Mr Rollings and, as a result, had wrongly concluded that he was not employed by the Appellant, when the reality was that he must have had an oral contract. It seems to us that it is accepted on the part of the Appellant that Mr Brown had ceased to be the transport manager, despite the fact that he was still listed as such at the CLU, and that reliance was placed on the appointment of Mr Rollings in his place.

15.        The starting point for consideration of this issue is that in the case of an applicant for an operator’s licence, who nominates a transport manager, or the nomination of a new transport manager by an existing operator, it is for the applicant or operator to satisfy the Traffic Commissioner that the person concerned can fulfil the role of transport manager.  That role is defined in s.82(1) of the 1981 Act, which provides that it means in relation to a business: “an individual who, either alone or jointly with one or more other persons, has continuous and effective responsibility for the management of the road passenger transport operations of the business”.  It follows, in our view, that when nominating an individual as a transport manager, (whether on an application for a licence or as an addition to or replacement for an individual who has acted as transport manager), it will be necessary to show that the person concerned will be able to exercise ‘continuous and effective responsibility’.  That means that the Traffic Commissioner must be in a position to asses how much time the individual will devote to the business in question, what other demands that person will have on their time and what contractual relationship exists between the individual and the operator.

16.        For a company to satisfy the requirement of professional competence it must come within the terms of Paragraph 3 of Schedule 3 to the 1981 Act which provides that: “a company satisfies the requirement as to professional competence if, and so long as, it has a transport manager or transport managers of its road transport business who, or each of whom, is of good repute and professionally competent”.

It follows, in our view, from the terms of paragraph 3 of Schedule 3, that the appointment of a new transport manager is, on its own, not enough to satisfy the requirement of professional competence.  Instead the operator must go further and show that the person appointed is of ‘good repute’ and ‘professionally competent’ and that the person is under contract to provide “continuous and effective responsibility for the management of the road passenger transport operations of the business”.  That it why notification by TM1(G), is so important because it is the contents of this form, together with the original of the Certificate of Professional Competence, (or other proof of professional competence), the contact and the declaration by the new transport manager forming part of TM(1)G, which enables checks to be made to confirm that paragraph 3 of Schedule 3 has been satisfied.  The existence of a contract is important because, together with other background information and the answers given on TM1(G) it will assist the Traffic Commissioner to assess whether the transport manager will be able to have: “continuous and effective responsibility for the transport operations” carried out under the operator’s licence, as required by s.82(1) of the 1981 Act. 

17.        Form TM1(G) is downloadable from the internet at:

http://www.dft.gov.uk/vosa/repository/TM1%20form%20December%202009.pdf

We are not aware of any provision which makes the use of this form mandatory but it seems to us that that if the form is not used it will be necessary for the applicant or operator to provide all the information which the form requires, by some other means.  In reality the use of the form is likely to prove more satisfactory.  In addition the nominated transport manager is required, when completing the form, to make a number of declarations, which are important in the context of the obligations imposed on a transport manager by the legislation.  If the form is not used we have no doubt that the Traffic Commissioner will, rightly, insist on the same declarations being made in some other form.

18.        Mr Brown’s letter of resignation, which was sent to the OTC, is dated 14 April 2011.  He does not appear to have been copied it to the Appellant.  However on the following day, at the request of the OTC, Mr Brown wrote to give authority for the letter to be disclosed to the Appellant’s then Solicitors, so it seems reasonable to assume that Mr Stewart would have been made aware of the position quite soon afterwards.  Mr Brown was the sole transport manager for the Appellant at the time of his resignation, which means that the provisions of paragraph 5 of Schedule 3 to the 1981 Act are relevant.  They provide that where, for any of the reasons stated, the sole transport manager can no longer fulfil that function the operator: “shall nevertheless not be treated as failing to satisfy the requirement as to professional competence until the expiry of such period as in the opinion of the relevant traffic commissioner is reasonably required for the appointment of a new transport manager”.  There does not appear to be any express requirement to apply to the Traffic Commissioner for time in which to appoint a new transport manager.  This is probably because if one transport manager leaves suddenly it may not be possible to predict how long it will take to appoint a replacement.  However once the operator knows that the transport manager has resigned, or has been dismissed or is for any other reason not performing that role it would amount to a material change in circumstances which must be notified to the Traffic Commissioner within 28 days.  A reasonable period for replacing a transport manager will depend on all the circumstances, including the efforts made to find a replacement.  It may be that as a rule of thumb 28 days is considered to be a reasonable period but it seems to us that it would be wrong to give that period any greater status than a rule of thumb.

19.        On 20 May 2011 the Appellant notified the OTC, by letter, that Mr Rollings had been appointed as the replacement transport manager.  It does not appear that this letter was acknowledged nor does it appear that the Appellant was informed that a letter was inadequate and that TM1(G) had to be used.  While the came close to the date of the adjourned Public Inquiry that, in our view, does not excuse the absence of a reply.  The OTC should have pointed out that the letter was inadequate because, (i) it did not provide the information required to assess whether Mr Rollings could perform the role of transport manager, (ii) it did not provide the original documents to confirm his professional competence and (iii) it did not provide the material needed to assess whether he was of good character, (though we make it clear that in this case there was no suggestion that he was other than of good character).  The Appellant should have been sent a copy of TM(1)G and should have been told that the process of deciding whether or not Mr Rollings could be specified on the licence as transport manager could only begin once a completed TM(1)G had been received or the information required by that form had been delivered in some other form.  Despite the fact that his original certificate of professional competence was not submitted it appears that the Deputy Traffic Commissioner accepted that Mr Rollings was qualified, in that respect, for the role of transport manager.

20.        It seems to us that the passage at page 261 of the transcript, where the Deputy Traffic Commissioner first asked Mr Rollings whether he had a contract of employment and then asked if he was a contractor, and received a negative reply to each question, is perfectly clear.  As far as Mr Rollings was concerned he was not employed by or contracted to the Appellant.  It may be that, as a matter of law, it would open to a court to conclude that there was an implied contract of employment but in our view, on the evidence currently available the terms would be very vague and insufficient to establish whether Mr Rollings would be able to have “continuous and effective responsibility for the transport operations” carried out under the operator’s licence.  While there does not appear to be any provision which expressly requires a contractual relationship between the operator and a transport manager, the reality is that nothing less than a contractual relationship, binding the transport manager to have: “continuous and effective responsibility for the management of the road passenger transport operations of the business”, is likely to satisfy a Traffic Commissioner that the statutory obligations imposed on a transport manager can be met.  The reason is that both the operator and the Traffic Commissioner must be satisfied that the transport manager will not be ‘here today and gone tomorrow’.  Provided that there is a contract, which binds the transport manager to meet the statutory obligation, either for a given period of time or subject to notice it may not matter whether or not it amounts to a contract of employment.  But the terms must be clear and sufficiently detailed and certain to establish this.  For practical reasons this is likely to mean that the contract has to be in writing.

21.        In our view the submissions made in relation to professional competence do not undermine the detailed reasons given by the Deputy Traffic Commissioner for finding that the Appellant was not professionally competent at the time of the Public Inquiry.  In particular it is, in our view clear that there was no written contact with Mr Rollings for the provision of the necessary services, nor was there an oral contract with sufficient clarity and detail to satisfy the Deputy Traffic Commissioner that Mr Rollings would be in a position to fulfil the obligations placed on a transport manager by s.82(1) of the 1981 Act. The finding that the Appellant was no longer professionally competent was correct and cannot be disturbed.

22.        By way of postscript to this part of the decision we would simply add this.  It appears that Mr Brown remained specified as a transport manager of the Appellant, in the records kept by the CLU, [see paragraph 2(xviii)], after his letter of resignation had been received by the OTC.  This may have been done to avoid any suggestion, if his name had been removed, that the Traffic Commissioner had lost the right to take action against him.  Whatever the reason for retaining his name it appears to have caused Mr Stewart, (and possibly also some at the CLU), some confusion as to whether he could still be regarded as the transport manager of the Appellant.  In our view it would probably be advisable, in this situation, for the OTC to write to the operator in order to explain that the person concerned is no longer considered to be carrying out the role of transport manager but remains as a specified transport manager solely to ensure that disciplinary action can be taken against them. The letter should go on to point out the need for a replacement to be appointed and approved within a reasonable time.

23.        In relation to good repute the submission made by Mr Jenkins was that this finding was, essentially, based on the reasons for concluding that the Appellant was not of appropriate financial standing or professionally competent.  If those findings fell then he submitted that the finding of loss of good repute fell with them.  For the reasons we have given we have upheld the findings that the Appellant is no longer of appropriate financial standing and has lost its professional competence so that this argument fails.  In our view the persistent failure to comply with undertakings, more especially following the warning that the Appellant’s good repute was tarnished as a result of earlier breaches, the failure to monitor and supervise both staff and record keeping, the inability to exercise proper control over Mr Brown and the finding that the Deputy Traffic Commissioner could no longer trust this operator, provide compelling reasons for the conclusion that this Appellant had lost its good repute.  We agree with the conclusion that, whatever the financial position, it was not likely that the Appellant would operate compliantly in the future.  We also agree that it was proportionate, given all the findings, for the Appellant to be put out of business.  The finding that the Appellant had lost its good repute therefore stands.

24.        For all these reasons the appeal is dismissed but to allow for an orderly disposal or winding down of the business the order revoking the Appellant’ operator’s licence will come into effect at 2359 on 9 October 2011.

 

 

His Hon. Michael Brodrick, Judge of the Upper Tribunal,

Principal Judge for Traffic Commissioner Appeals.

25 August 2011