Neutral Citation Number: [2012] UKUT 271(AAC)

Appeal No.  T/2102/17

IN THE UPPER TRIBUNAL

ADMINISTRATIVE APPEALS CHAMBER

TRAFFIC COMMISSIONER APPEALS

 

ON APPEAL from the DECISION of Mary Kane

DEPUTY TRAFFIC COMMISSIONER for the Eastern Traffic Area

Dated 20 March 2012

 

 

 

Before:

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

Leslie Milliken Member of the Upper Tribunal

Patricia Steel Member of the Upper Tribunal

 

 

Appellant:

NCF (LEICESTER) Ltd.

 

 

 

 

Attendances:

For the Appellant: Chris Harris of HTEC UK ltd

 

 

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

Date of hearing: 19 June 2012

Date of decision: 26 July 2012

 

 

 

 

DECISION OF THE UPPER TRIBUNAL

IT IS HEREBY ORDERED that this appeal be DISMISSED and that the revocation of the licence is to come into effect on 19 September 2012.

 

 

 

 

 

 

 

 

 

SUBJECT MATTER:- Repute; Financial Standing; Transport Manager

 

CASES REFERRED TO:-

 

 

 

REASONS FOR DECISION

 

 

1.           This is an appeal from the decision of the Deputy Traffic Commissioner for the Eastern Traffic Area to revoke the goods vehicle operator’s licence held by the Appellant with effect from 30 April 2012.

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

(i)                   The Appellant is the holder of a standard national goods vehicle operator’s licence authorising 7 vehicles and 8 trailers, which commenced on 9 November 2009.

(ii)                 The licence was granted following a Public Inquiry on 20 October 2009.  A condition was attached to the licence requiring the Appellant to provide the Office of the Traffic Commissioner, (“OTC”), within 6 months of the grant of the licence, with evidence to demonstrate that the requirement to be of appropriate financial standing had been met over an up to date period of three months.

(iii)                On 13 December 2010 a ‘production letter’ was sent to the Appellant by VOSA, requesting the production of tachograph record sheets and supporting documents by 23 December 2011.  A total of 219 tachograph record sheets were produced on that date.  However when they were analysed it was apparent from missing mileage that on 23 occasions the vehicle had been used, at weekends, but no record had been provided.  In due course the director and transport manager of the Appellant, Mr Harbhajan Singh, was interviewed about the discrepancies.  He admitted that he had failed to collect the missing charts from the drivers and said that they had now been lost.

(iv)                On 9 February 2011 the Appellant appeared at a Public Inquiry.  The call up letter was dated 20 September 2010.  The Deputy Traffic Commissioner who conducted that Public Inquiry issued a formal warning in relation to breaches of conditions and undertakings and attached a condition to the licence which required the Appellant to submit to the OTC, by 30 June 2011, evidence of appropriate financial standing for March, April and May of 2011.

(v)                 Financial evidence, in the form of bank statements, was submitted by 30 June 2011 but it showed an average balance falling well short of the amount which would satisfy the requirement to be of appropriate financial standing.

(vi)                On 1 July 2011 a delayed prohibition was issued to one of the Appellant’s vehicles as a result of a missing cable on the trailer.  Further investigation revealed that the MOT certificate for the vehicle had expired on 30 June 2011.

(vii)              On 8 July 2011 the OTC wrote to the Appellant pointing out that the financial evidence fell short of establishing the amount required.  Further financial evidence was requested by 22 July 2011.  The Appellant provided financial evidence on that date but, once again, it was insufficient to demonstrate the amount required to operate 7 vehicles.  Further financial evidence was submitted at the end of October 2011.  There was some improvement in the position but it was nowhere near sufficient to cover the amount required to operate 7 vehicles.  There was confirmation of a further sum in a bank account but the evidence in relation to this sum was not sufficiently clear for it to be taken into account.  By the date of the Public Inquiry the amount required to show that the Appellant had financial standing had reduced slightly, as a result of a change in the value of Sterling as against the Euro.

(viii)             On 15 July 2011, following an investigation which commenced on 13 December 2010, the appellant was convicted of an offence of failing to produce tachograph record sheets etc and it was fined £700 and ordered to pay £465 in costs and the £15 victim surcharge.  The conviction was duly notified to the OTC by Mr Harris, acting for the Appellant.  He explained that in mitigation the court had been told that the majority of the tachograph charts, which the Appellant had been unable to produce, had been lost by one driver, who was disciplined and dismissed.  Later it emerged that the vehicle used by the weekend driver had been accessed by an unknown person, who appeared to have taken charts, which accounted for most of the balance of missing cards.

(ix)                On 9 December 2011 the Appellant was called to a Public Inquiry to be held on 13 January 2012.  The letter set out a number of grounds that the Traffic Commissioner proposed to consider at the Public Inquiry.  They included breach of the condition to provide evidence of appropriate financial standing, the conviction, failure to comply with the undertaking in relation to drivers’ hours and tachographs, whether the Appellant had an effective and stable establishment in Great Britain and whether it was of appropriate financial standing and professionally competent.  The Appellant was advised that it would be in its interest for the nominated Transport Manager to attend the Public Inquiry.  It was required to provide evidence of its financial standing by 3 January 2012.

(x)                 The Public Inquiry took place before the Deputy Traffic Commissioner on 13 January 2012.  The Appellant was represented by Mr Harris and Mr Singh appeared as the director and transport manager of the Appellant company.

(xi)                Mr Singh began by giving evidence in relation to financial standing.  He said that he submitted the bank statements on time in compliance with the undertaking to do so by 30 June 2011.  He was asked to explain why the average balances fell short of the amount required.  He said that the client with whom he had worked for 18/19 years had been taken over by an Italian firm, after which payments became slower.  He was asked about money in the separate account, for which he had submitted a letter rather than bank statements.  He said that the account was opened for the specific purpose of helping to demonstrate appropriate financial standing but that statements were only provided quarterly.  He added that he was not aware that the OTC had not included the amount in this account in their calculations.

(xii)               The Deputy Traffic Commissioner was then invited to consider the statement for a ‘Bonus Saver Account’.  She pointed out that there was no name on the account and that, if it was not in the name of the company, she would not be able to take it into account.  A little later Mr Singh was asked how much had been in the account on 30 June 2011 and he replied £10,000.  The Deputy Traffic Commissioner immediately asked “how much is held in it now”?  Mr Singh replied £500.  When Mr Harris attempted to go back to June 2011 the Deputy Traffic Commissioner pointed out that she was obliged to consider the current position.

(xiii)             Mr Singh produced a letter confirming that the Appellant company had an overdraft facility and also confirmed that it was still in existence.  Mr Harris then dealt with the position following a substantial credit to the Appellant company’s current account some two days before the Public Inquiry.  He sought to assert that the balance from this credit together with the overdraft facility and another business bank account meant that the Appellant was very close to the amount required to demonstrate appropriate financial standing.  The Deputy Traffic Commissioner pointed out that if one looked at the previous three months the balance was far smaller and less that she had previously thought.  Mr Singh went on to explain that even after the significant credit the Italian company still owed the Appellant a substantial amount.  He said that he had seen the Operations Manager for this company and had been assured that, in future, payments would be made monthly.  He explained the other steps which he was proposing to take and indicated that he was prepared to give undertakings to provide further financial evidence.

(xiv)             Mr Singh was then asked about the conviction and he confirmed the mitigation, which we have already summarised.  He was asked what the annual test history had been like during the last year.  He replied “very good”.  The Deputy Traffic Commissioner then said: “what is the OCR score”, (ie the Operator Compliance Risk score)?  Mr Singh said: “sorry” and the Deputy Traffic Commissioner asked the question again.  This time Mr Singh said: “Well, we passed first time”.  When the Deputy Traffic Commissioner pressed Mr Singh further it became clear that he did not know what the OCR score was.  It was then pointed out that it had been explained to him during a maintenance investigation in the Summer of 2011.  Mr Singh went on to say that he had been seriously ill during 2011.

(xv)              Mr Singh then dealt with the number of vehicles which were being used.  He said that he had 3 in use at the time of the Public Inquiry but that he was intending to bring it up to 5 vehicles now that he had been promised regular payment of the money outstanding.  He added that the business could survive if the authorisation was curtailed to 5 vehicles.

(xvi)             In answer to the Deputy Traffic Commissioner Mr Singh said that he had held a Certificate of Professional Competence since 1991 and an operator’s licence since 1993 and that the current licence was granted when his business became a limited company.  He said that after his illness he had updated himself on the internet.  He accepted that he had not attended a course run by the Road Haulage Association or the Freight Transport Association but it appeared that he was minded to do so during 2012.  At first he said that he had not been called to a Public Inquiry in relation to the original licence.  Then he accepted that there had been a Public Inquiry as a result of ‘a few GV9’s’ and a conviction for a drivers’ hours offence.  A little later it appeared that there was one prohibition.

(xvii)            The Deputy Traffic Commissioner turned to the drivers’ defect reporting system.  She pointed out that one of the problems which emerged in the 2009 Public Inquiry, (which dealt with the application for a new licence and disciplinary matters relating to the old licence), was that the drivers’ defect system was not working properly.  Mr Singh said that in 2010 the drivers’ defect reports were independently audited and he was given advice.  He accepted that this was no longer being done and that it had, in fact, only occurred once.  Mr Singh was pressed as to why, having been a Transport Manager for 18 years, the reports were not properly prepared.  He explained that they had moved premises and that records had been lost.  He went on to accept that he had not taken copies of the driving licences of some part-time drivers, although he should have done.  He said that many were personal friends.  He accepted that the part-time drivers did not complete drivers’ defect forms and he accepted that he had told Miss Barwell of VOSA that they did not know how to do it.  He said that he trusted them to do a walk-round check before driving.

(xviii)          The Deputy Traffic Commissioner returned to the question of financial standing.  She pointed out that the Appellant did not appear to have had enough money in 2009, when the licence was granted, nor in 2011, when evidence of financial standing was requested.  She asked whether the Appellant had ever had enough money.  Mr Harris intervened to point out that there was one month when there was significantly more money than required in order to establish appropriate financial standing.  The Deputy Traffic Commissioner pointed out that one month during a period of two and half years was of little interest.  She then established that the Appellant’s sole customer was taken over in June or July 2010.  Mr Singh said that from about October 2009 the Appellant was being paid late.  He then explained that he had been very ill between the end of October 2009 and March 2010 and that until about June/July 2010 the Appellant company had a temporary Transport Manager.  The Appellant agreed that in the period since October 2009, with the exception of one month the Appellant did not have sufficient funds to satisfy the requirement to be of appropriate financial standing.  Mr Harris accepted that as at the date of the Public Inquiry the average available funds were not sufficient for the 7 vehicles authorised.

(xix)             Mr Harris then addressed the Deputy Traffic Commissioner.  He pointed out that there was a single conviction and that it was not a ‘serious conviction’ for the purposes of Schedule 3 to the 1995 Act.  He accepted that the undertaking on drivers’ hours and tachographs had been breached but submitted that the breach should carry limited weight.  He went on to submit that the primary consideration was whether the Appellant had breached the condition to provide evidence of appropriate finance by 30 June 2011.  He suggested that the Appellant had “met the spirit of the condition” in that it had provided evidence on time.  He went on to submit that the Appellant “can almost meet the level of financial standing for the fleet in possession – and we are referring to the five vehicles that he currently has in possession although he is only using three”.  He invited the Deputy Traffic Commissioner to curtail the licence to five vehicles and to allow the Appellant 6 months in which to provide a “permanent solution” to its problems with financial standing.

(xx)               The Deputy Traffic Commissioner then indicated that she would retire to consider her decision.  During the adjournment further documents came to light, which were immediately provided to the Appellant and Mr Harris.  They were the Appellant’s OCR score, a roadworthiness prohibition for 1 July 2011, the Technical Roadside Inspection Report relating to the vehicle the subject of the prohibition and the Operator Profile Report from 1 November 2009 to 13 January 2012.

(xxi)             When the hearing resumed the Deputy Traffic Commissioner referred to these documents and there was some discussion about them with Mr Harris.  The Deputy Traffic Commissioner expressed concern that Mr Singh had not told her about the prohibition.  The immediate reaction from Mr Harris was: “Yes, he should have …”.  It then emerged that the vehicle was outside the operating centre, having been returned after being prepared for an MOT test.  The Deputy Traffic Commissioner went on to say that she was highly disturbed that she had not been told about the prohibition, “when I asked the question specifically” and that she was very concerned that the vehicle was without an MOT certificate because it indicated a lack of forward planning.  Mr Harris replied that the vehicle had been prepared, so to that extent forward planning had taken place, but that the garage had been unable to get an MOT test before the deadline.  The Deputy Traffic Commissioner was not impressed pointing out that as Transport Manager Mr Singh had failed to arrange the work in time.

(xxii)            The Deputy Traffic Commissioner then gave an oral decision.  She began by making the point that the good repute of the operator and the Transport Manager had to be judged as at the date of the Public Inquiry.  She then reviewed the evidence, which we have summarised above.  She found that the undertaking to produce evidence of appropriate financial standing had been broken, in that the evidence produced did not establish that requirement.  She found that with the exception of one month the Appellant did not have the funds to meet the requirement to be of appropriate financial standing between 2009 and the date of the Public Inquiry.  She went on to deal with the admissions, which the Appellant had made in relation to driving licences and drivers’ defect reports and his ignorance of OCR scores.  She said: “It is a matter of great concern that you didn’t tell me about the most recent prohibition when I asked this very specific question”.  She expressed other concerns, which included concern that the vehicle with the expired MOT certificate had not been booked in for a test earlier and concern that the MOT pass rate was not as good as Mr Singh had suggested.

(xxiii)           Having reviewed the evidence and made the findings to which we have referred the Deputy Traffic Commissioner asked: “is it likely that the Operator will be compliant in the future”?  She concluded that the answer was that it was unlikely.  She then went on to consider whether it was necessary to put the Appellant out of business.  In the light of the findings which she had made the Deputy Traffic Commissioner concluded that it was not disproportionate to revoke the licence.  One of the factors which led to this conclusion was that the Deputy Traffic Commissioner was not convinced that Mr Singh understood what it was necessary to do in order to operate within the licensing regime or what was required of a Transport Manager.  Another was that if the Appellant was allowed to continue in business the effect would be to compromise road safety and fair competition.  The Deputy Traffic Commissioner concluded that the Appellant had lost its good repute and that Mr Singh, as Transport Manager, had also lost his repute.  After a short discussion with Mr Harris the Deputy Traffic Commissioner ruled that the revocation would take effect from 2359 on 16 February 2012.  Mr Harris went on to clarify the position of Mr Singh.  The Deputy Traffic Commissioner indicated that she had not sought to disqualify him and that she had not sought to put any time limit on his loss of good repute.  After some further discussion about the Appellant making a fresh application for a new licence the Deputy Traffic Commissioner indicted that she was not proposing to do a full written decision unless there was to be an appeal and a request for a full written decision.

(xxiv)          On 20 January 2012 the OTC wrote to the Appellant to inform it that the Deputy Traffic Commissioner, having reflected and reviewed the case papers observed that Mr Singh had not been called to the Public Inquiry in order to consider his repute as Transport Manager.  As a result the Appellant was told that the Deputy Traffic Commissioner intended to issue a full written decision and that no order would be issued until the written decision was completed.  The written decision is dated 20 March 2012.

(xxv)            The Deputy Traffic Commissioner began by setting out the facts which we have summarised above.  She did so in greater detail than her oral decision.  In relation to the financial position she said:

“However, over the life of the licence this figure has fluctuated considerably and Mr Singh agreed that he could not show the required average throughout the 2¼ years in which the licence has been in existence.

Mr Harris, on his behalf, accepted that he has tried to meet the financial condition ‘in spirit’ but had never been able to show sufficient funds”.

(xxvi)          In relation to Mr Singh’s conduct as Transport Manager the Deputy Traffic Commissioner set out the circumstances in which the prohibition of 1 July 2011 came to light, almost at the end of the Public Inquiry.  She went on to say that Mr Singh had not told her about the prohibition but could not explain why he had not done so and that he had said that the MOT pass rate was good, when the documents obtained at the end of the Public Inquiry showed that it was well below the national average.  She set out all the other matters to which we have referred setting them in the context of two previous Public Inquiries and the fact that Mr Singh held an earlier licence as a sole trader.

(xxvii)         In the light of all the evidence the Deputy Traffic Commissioner set out these conclusions:-

“… Mr Singh had very little idea of what the responsibilities of a transport manager or an operator were.  He was not knowledgeable about the state of his own licence in terms of prohibitions, convictions and roadside encounters;

he was not honest about the failure to renew one MOT certificate, nor about the fact that the company had received a further prohibition.  He attempted to mislead me by telling me that the first-time pass rate for the MOT was higher than it actually was”.

The Deputy Traffic Commissioner concluded that the impact of Mr Singh’s conduct was such that she could no longer trust him.

(xxviii)        The Deputy Traffic Commissioner then set out four reasons for deciding that it was unlikely that the Appellant would operate compliantly in the future.  She moved on to the question of whether the conduct of the Appellant was such that it ought to be put out of business.  She concluded, having weighed the positive and negative factors that the Appellant was no longer ‘fit’ to continue to hold an operator’s licence.  She was mindful of the fact that this was the third Public Inquiry to which the Appellant had been called and she was concerned about the impact of continued operation on road safety and fair competition.  She found that the lack of knowledge on the part of Mr Singh meant that the operator was no longer professionally competent and that the fact that he was also the Transport Manager was a matter of great concern.  She also pointed to the fact that Mr Singh had been unable to comply with the promises made at the Public Inquiries in 2009 or 2011.

(xxix)           For all these reasons the Deputy Traffic Commissioner concluded that the Appellant had lost its good repute and was no longer of appropriate financial standing.  She revoked the licence, with effect from 2359 on 30 April 2012.

(xxx)            The Appellant appealed against this decision on 16 April 2012.  The Notice of Appeal raised five grounds of appeal which were as follows:

(a)   That the Deputy Traffic Commissioner’s conclusion that she no longer trusted Mr Singh was not justified.

(b)   That there was a breach of Natural Justice in relation to the material produced at the end of the Public Inquiry.

(c)   That the conviction did not result in mandatory loss of good repute.

(d)   That the Deputy Traffic Commissioner should have considered alternative solutions to the problem of financial standing.

(e)   That, on the facts, the decision was disproportionate.

3.           At the hearing of the appeal Mr Harris appeared on behalf of the Appellant.  He provided us, in advance of the hearing, with a helpful skeleton argument for which we are grateful.

4.           The first point taken by Mr Harris concerned the finding in the Deputy Traffic Commissioner’s oral decision that Mr Singh had lost his good repute as Transport Manager.  He pointed out that the call-up letter did not put the Transport Manager’s repute in issue and that no separate letter had been issued to Mr Singh, in his capacity as Transport Manager.  We accept that this is correct.  Indeed the reason given by the Deputy Traffic Commissioner for producing a written decision was that she had seen that Mr Singh had not been warned that his good repute as Transport Manager was in issue.  The written decision does not include any formal finding that Mr Singh, as Transport Manager, had lost his good repute.  We agree with the Deputy Traffic Commissioner’s second thoughts.  For the avoidance of doubt we make it clear that there is now no formal finding that Mr Singh has lost his good repute as Transport Manager.  Before any such finding could have been made the procedure set out in paragraphs 15 & 16 of Schedule 3 to the Goods Vehicles (Licensing of Operators) Act 1995, ["the 1995 Act"] should have been followed.  It is important to note that Traffic Commissioners now have the power to determine that a Transport Manager is no longer of good repute or professionally competent and that if such a finding is made the Traffic Commissioner must order that the person concerned is disqualified.

5.           Mr Harris then made a number of submissions about the Deputy Traffic Commissioner’s assessment of the evidence.  For example it was submitted that she attached ‘too much weight’ to a single delayed prohibition and to the fact that a vehicle was one day late in passing the MOT test.  It was for the Deputy Traffic Commissioner to assess the weight to be given to the evidence. Challenges made on the basis that too much or too little weight has been attached to a particular piece of evidence seldom, if ever, succeed.  The difficulty of the task faced by an Appellant who relies on this ground was made very clear in the appeal of Bradley Fold Travel Ltd & Peter Wright –v- Secretary of State for Transport [2010] EWCA Civ 695 where, at paragraph 39 Leveson LJ said this, quoting from a judgment of Laws LJ:

“The true distinction is between the case where the appeal court might prefer a different view (perhaps on marginal grounds) and one where it concludes that the process of reasoning, and the application of the relevant law, require it to adopt a different view.  The burden which an appellant assumes is to show that the case falls within this latter category”.

This passage is also applicable to the final general ground of appeal, namely that considered overall the decision was disproportionate.  It seems to us that it makes it virtually impossible for an Appellant to succeed on such a general and unspecific ground.

6.           Mr Harris made more detailed submissions in relation to two findings which led the Deputy Traffic Commissioner to conclude that Mr Singh was not honest.  First he pointed out that the question which Mr Singh was asked in relation to MOT test results was specifically directed to results in the last year, whereas the document produced at the end of the Public Inquiry referred to the annual test history over a longer period and did so in a form which did not set out results for the previous 12 months.  Second Mr Harris submitted that the Deputy Traffic Commissioner had been wrong to assert that she had specifically asked Mr Singh about prohibitions because a careful search of the transcript revealed no such question.  The only question asked about prohibitions was one which related to the previous licence.

7.           In our view both these submissions are justified, with the result that these findings went too far and were not, in fact, borne out by the evidence.  On the other hand, in our view the other, related, submissions made by Mr Harris are not made out.  His description of what happened when the Deputy Traffic Commissioner returned after the disclosure of the documents is simply wrong.  Far from confirming the suggestion that the Deputy Traffic Commissioner told everyone to be silent it is quite clear that Mr Harris had an opportunity to address the Deputy Traffic Commissioner on these new documents.  The suggestion that Mr Singh was ‘ambushed’ is also wrong.  A competent Transport Manager would have been aware of all the matters contained in these documents.

8.           It follows that the Appellant has been partially successful in relation to the findings on which loss of good repute was based.  However, in our view, other findings still stand.  In all the circumstances we do not consider that it is appropriate to remit the matter for a rehearing.  Instead we propose to reconsider the matter in the light of the findings which still stand. 

9.           This was the third Public Inquiry to which the Appellant had been called.  In February 2011 a formal warning was issued but it does not appear to have had any effect in improving the way in which Mr Singh performed the task of Transport Manager.  Despite his involvement in operator licensing since 1993 he never went on any form of ‘refresher course’.  He complied with undertakings and requests for financial information by submitting documents on time but he must have known, when doing so, that on each occasion there was insufficient to demonstrate that the company had the money required to support the number of vehicles authorised.  Despite this he made no attempt to reduce the number of vehicles authorised to a level which would enable the Appellant to show that it was of appropriate financial standing.  His approach to the collection of tachograph charts and to the checking and copying of driving licences demonstrated a lax approach to observing the requirements of the regulatory regime.  We accept that the conviction was not so serious that it led to a mandatory loss of good repute but it was never suggested by the Deputy Traffic Commissioner that it did have this effect.  Instead it seems to us that she did what we must now do, namely look at the overall picture presented by the way in which the Appellant operated.  In our view when one approaches the case in that way we are also driven to the conclusion that the Appellant cannot, under its current management, be trusted to operate compliantly in the future.  We are also driven to the conclusion that it is appropriate and proportionate to conclude that the Appellant should be put out of business.  It follows that the finding of loss of good repute was justified and must stand.

10.        We turn to the submission that the Deputy Traffic Commissioner should have considered alternative solutions to the problem of financial standing.  The suggestion seems to be that the Deputy Traffic Commissioner should have curtailed the licence by a sufficient number of vehicles to enable the requirement of appropriate financial standing to be met.  We reject that suggestion.  In our view it was for the Appellant and not the Deputy Traffic Commissioner to take the initiative in relation to the number of vehicles that were authorised and then for the Appellant to show that enough money was available to meet the requirement for the reduced number of vehicles.  In order to explain why this is the case we need to restate some of the fundamental principles which apply to the requirement to be of appropriate financial standing.

11.        Being of appropriate financial standing has always been considered to be a continuing requirement.  In other words it is a requirement that the operator must satisfy for the duration of the licence.  In our view this is now made crystal clear in Article 7(1) of Regulation (EC) No 1071/2009 of the European Parliament and of the Council, (“Regulation 1071/2009”), which provides: “In order to satisfy the requirement laid down in Article 3(1)(c), an undertaking shall at all times be able to meet its financial obligations in the course of the annual accounting year”.

12.        The purpose of the requirement to be of appropriate financial standing is spelt out, in general terms, in recital 10 to Regulation 1071/2009, which provides: “It is necessary for road transport undertakings to have a minimum financial standing to ensure their proper launching and administration”.  In our view ‘administration’, for the purposes of this Regulation, means the organisation and running of a haulage business which holds an operator’s licence.  In particular the requirement is intended to ensure that vehicles can be operated safely because the operator can afford to maintain them promptly and properly.

13.        In our view four points flow from these considerations. 

14.        First, the requirement to be of appropriate financial standing cannot be satisfied by evidence which simply provides a ‘snapshot’ of the operator’s financial position.  The requirement will not be satisfied by showing that on a particular day or during a particular month enough money was available.  Instead what is needed is evidence that the operator is consistently able to have enough money available for the requirement to be satisfied. 

15.        Second, an operator is not required to have the specified amount available, 365 days per year, throughout every year that the licence is in existence.  The requirement is there to ensure, amongst other things, that vehicles are promptly and properly maintained and in particular to enable an operator to have emergency repairs carried out, promptly and properly, in addition to normal scheduled maintenance.  This is likely to mean that the amount of money available will fluctuate, depending on the size of the bills that have to be paid at any one time.  What the Traffic Commissioner will want to consider is the speed with which the amount of money available recovers to a level at, or above, the amount needed to satisfy the requirement to be of appropriate financial standing.  This is why Traffic Commissioners ask for financial evidence covering a period, normally of three months, and then consider the average figure over the whole period.

16.        Third, the requirement to be of appropriate financial standing can only be met by assets which are available, or can be made available, to pay bills as and when they fall due.  When deciding whether or not it is appropriate to take a particular asset into account when considering whether or not the requirement is met it is important to bear this purpose in mind.  For example bank accounts may or may not require notice before money can be withdrawn.  The Guidance Notes issued by the Senior Traffic Commissioner indicate that one month, or 30 days, is an appropriate cut-off point.  We support this approach.  If the money can be used within 30 days or less then it is likely to be available to pay bills as and when they fall due.  If a longer period is needed before it can be used it is unlikely to be available to pay bills as and when they fall due.  In the case of an overdraft or credit card the amount available will not be the full amount of the overdraft or the credit card limit, instead it will be the amount which can still be drawn or used.  Traffic Commissioners will want to see evidence showing the amount of money regularly available and within what period that money can be used.

17.        Fourth, the requirement can only be met by assets, in whatever form, which are owned by the operator.  Bank accounts, for example, must be in the name of the operator.  Overdrafts and credit cards must also be in the name of the operator.  Similar considerations apply to any other form of asset advanced as a way of proving appropriate financial standing.  Operators must understand that Traffic Commissioners will only be prepared to take into account assets that are shown to belong to the operator.  The only exceptions are Statutory Declarations, which do not apply where the operator is a limited company and Invoice Finance agreements.

18.        While it is unnecessary, for the purposes of this decision, to consider the position where physical assets are put forward to satisfy the requirement to be of appropriate financial standing it may be helpful to consider three points that must be taken into account in that situation.

19.        First, it will be essential to distinguish between ‘working assets’ and ‘surplus assets’.  Working assets are those used to enable the business to function and earn money.  Surplus assets are those that are not needed for that purpose.  We find it difficult to envisage any circumstances in which a Traffic Commissioner will be prepared to take into account the value of working assets when deciding whether or not appropriate financial standing has been proved.  The reason is that the sale of a working asset, coupled with the use of the money to pay bills, is likely to reduce the ability of the business to earn money, which will, in due course, increase the time taken the restore the finances of the business to the level required to meet the requirement to be of appropriate financial standing.  By contrast the sale of a surplus asset does not have the same consequences.  Provided that the factors that follow are taken into account it seems to us that it is open to Traffic Commissioners to take the value of surplus physical assets into account, though they are not bound to do so if there are good reasons to exclude them

20.        Second, it seems to us that operators who put forward the value of a physical asset, in order to meet the requirement of appropriate financial standing, will need to satisfy the Traffic Commissioner that the asset in question in readily saleable and that the net sale proceeds will probably be available to be spent within 30 days of the decision to sell.  Unless it can be shown that the net sale proceeds will be available within 30 days the value of the asset cannot contribute to establishing appropriate financial standing because it is not available to serve one of the essential purposes of that requirement.

21.        Third, at the risk of stating the obvious, a physical asset can seldom, if ever, be used to pay a bill.  It follows that if such an asset is put forward to assist in satisfying the requirement to be of appropriate financial standing the operator will need to provide evidence that the asset can probably be sold and the proceeds received within 30 dayd, the probable sale price and the likely costs of the sale.  We have underlined ‘and’ to stress that it is only the net amount, which is likely to be paid to the operator after deducting any costs or expenses, that will count towards meeting the requirement to be of appropriate financial standing.  The reason is that it is only this amount which will be available to the operator for the payment of bills. 

22.        We accept that, in theory, it is possible to put forward a physical asset in order to satisfy the requirement to be of appropriate financial standing.  However operators, and those who advise them, should be under no illusions as to the difficulties that they will face, in practice, if they attempt to go down that route. Operators who seek to rely on the value of a physical asset but fail to provide satisfactory evidence on all the points raised in paragraphs 19-21 should not be surprised if the Traffic Commissioner declines to take the value of the asset into account.

23.        It is with this background in mind that we come back to the question raised in the grounds of appeal namely whether the Deputy Traffic Commissioner was required to consider alternatives to revocation when considering the level of financial standing achieved by the Appellant.  In our view the answer is that she was not required to do this.  In order to explain why we need to put the matter in context.

24.        The last undertaking recorded on the operator’s licence, when it was granted, required the Appellant to “ensure that the Traffic Commissioner is notified within 28 days of any other changes, for example … a change in the financial status of the licence holder (eg if placed in liquidation or receivership), …”.  Once it became clear or should have been clear to the Appellant that it no longer met the requirement to be of appropriate financial standing there was a material change in circumstances which ought to have been reported to the Traffic Commissioner within 28 days.  It seems to us that at that stage the Appellant had a choice.  If it had authority to use more vehicles that it needed it would have been open to the Appellant to invite the Traffic Commissioner to reduce the number authorised to the number actually required by the level of business being undertaken.  If the financial evidence was sufficient to provide evidence of appropriate financial standing for that number of vehicles it seems to us that it is likely that the application would have been granted.  On the other hand if the amount of money was still insufficient for the number of vehicles which the Appellant wished to operate the probability must be that the Traffic Commissioner would have initiated disciplinary action, with the offer of a Public Inquiry.

25.        An operator called to a Public Inquiry on financial grounds, who has difficulty showing that the requirement to be of appropriate financial standing can be met always has the option to invite the Traffic Commissioner to reduce the number of vehicles authorised to a level at which the requirement can be met.  In our view it should be for the operator rather than the Traffic Commissioner to take the initiative.  The reason is that the operator is in a far better position to decide how best to operate the business with a fleet for which appropriate financial standing can be demonstrated.  It remains open to the Traffic Commissioner to make suggestions or to give hints but there is no obligation on the Traffic Commissioner to do so.  It seems to us that an operator, who takes the initiative and puts forward a plan to operate in a way which will meet the requirement to be of appropriate financial standing, is likely to receive a much more sympathetic hearing than one who simply carries on, hoping for the best.

26.        In our view, once a Public Inquiry has started, an operator who is unable to put forward sufficient evidence to establish that the requirement to be of appropriate financial standing can be met, but nevertheless decides to do nothing but hope for the best, runs the risk of leaving the Traffic Commissioner with no option but to revoke the licence.  The reason is that at the conclusion of the Public Inquiry the Traffic Commissioner will be required to decide whether or not the requirement to be of appropriate financial standing is met and he will have to do so by reference to the number of vehicles for which the operator then has authority.  If the operator cannot show that there is sufficient money to meet the requirement for the number of vehicles still authorised, at that stage, it seems to us that the Traffic Commissioner will be obliged to revoke the licence under the mandatory terms of s. 27 of the 1995 Act.  Unlike s. 26 of the 1995 Act, which does include a power to curtail the only course open to a Traffic Commissioner, once the provisions of s. 27 apply, is to revoke the licence.

27.        The only ways in which an operator can avoid this outcome are (a) to persuade the Traffic Commissioner to accept a voluntary reduction in the number of vehicles authorised or (b) to concede that there has been a breach of the undertaking to notify a material change in circumstances and to invite the Traffic Commissioner to curtail the licence.  In our view it is essential that these courses are raised before the Traffic Commissioner is required to decide the case because it is only after a voluntary reduction has been accepted or a curtailment for breach of the undertaking has been imposed that the Traffic Commissioner can go on consider whether or not financial standing has been established by reference to the reduced fleet.  Ideally the question should be raised before or during the evidence so that the implications can be properly explored.

28.        In the present case Mr Singh said that only 5 vehicles were needed for the business.  As a result there was a rather half-hearted attempt to persuade the Deputy Traffic Commissioner to curtail the fleet to 5 vehicles.  It was half-hearted because the evidence was insufficient to establish appropriate financial standing for 5 vehicles, although there was nearly enough to do so.  In effect the Deputy Traffic Commissioner was invited to proceed on the basis that the amount available was so close that it made no difference because the requirement ‘had been met in spirit’.  In our judgment the Deputy Traffic Commissioner was right to reject this approach.  In our view the position is quite clear and it leaves no room for a discretion to hold that the requirement is satisfied even though the amount available is only marginally less than the amount required.  The requirement lays down a clear dividing line.  If there is sufficient money it is met.  If there is insufficient it is not met.  It is as clear and as simple as that.  It is not a requirement which, although not met in substance, can, nevertheless be ‘met in spirit’.

29.        In the present case Mr Singh accepted that with the possible exception of one month there was never enough money available to meet the requirement to be of appropriate financial standing.  In addition the evidence showed that, at the date of the Public Inquiry, the amount available was insufficient for 5 vehicles.  In those circumstances we are quite satisfied that the decision to revoke the licence under s. 27(i)(a) of the 1995 Act, on the ground that the Appellant could not satisfy the requirement, under s. 13A(2)(c), to be of appropriate financial standing was correct.  In our view there was no other option properly open to the Deputy Traffic Commissioner.

30.        For these reasons the appeal is dismissed.  The revocation of the licence will take place at 23.59 on 19 September 2012.  In exceptional circumstances, (which must be set out) the Appellant may apply for this period to be extended, but must provide good reasons to show why that this is necessary.

 

 

 

 

 

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

Principal Judge for Traffic Commissioner Appeals.

26 July 2012