Upper Tribunal (Administrative Appeals Chamber)

Arnold Transport & Sons Limited v Department Of Environment Northern Ireland (DOENI) (Transport : Traffic Commissioner cases) [2014] UKUT 162 (AAC) (07 April 2014)

 

 

 

 

 




Neutral Citation Number: [2014] UKUT 0162 (AAC)                        Appeal No.  NT/2013/82

 

IN THE UPPER TRIBUNAL                    

ADMINISTRATIVE APPEALS CHAMBER (Transport)

TRAFFIC COMMISSIONER APPEALS

 

ON APPEAL from the DECISION of Donald Armstrong HEAD of the TRANSPORT REGULATION UNIT

Dated 14 November 2013

 

 

 

Before:

His Hon Michael Brodrick,     Judge of the Upper Tribunal

Stuart James,                           Member of the Upper Tribunal

David Rawsthorn,                    Member of the Upper Tribunal

 

 

Appellant:

ARNOLD TRANSPORT & SONS LIMITED

 

and

Respondent:

 

DEPARTMENT of ENVIRONMENT NORTHERN IRELAND (DOENI)

 

 

                                        

Attendances:

For the Appellant: Terry MacAlister of MacAllister Keenan & Co. Solicitors

For the Respondent: Ms Nessa Fee, of Counsel

 

 

Heard at:                         Bedford House, 16-22 Bedford Street, Belfast.

Date of hearing:               20 March 2014

Date of decision:             7 April 2014

 

 

 

 

DECISION OF THE UPPER TRIBUNAL

 

IT IS HEREBY ORDERED that this appeal be DISMISSED.  The revocation of the licence will take effect at 2359 on 20 April 2014

 

 

SUBJECT MATTER:-             Repute, Financial Standing and Professional Competence  

 

CASES REFERRED TO:-

 

T/2012/17 NCF (Leicester) Ltd          

NT/2013/52 & 53 Fergal Hughes v DOENI & Perry McKee Homes Ltd v DOENI

 

REASONS FOR DECISION

 

 

1.         This is an appeal from the decision of the Head of the Transport Regulation Unit to revoke the standard international goods vehicle operator’s licence held by the Appellant and to disqualify Paul Arnold, a director of the Appellant company, from holding or obtaining an operator’s licence for a period of three years and from acting as a Transport Manager for a similar period.

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 international goods vehicle operator’s licence, authorising 12 vehicles and 12 trailers.  It has two directors, Paul Arnold, (“Mr Arnold”), and his brother Shaun Arnold.  At the material time Mr Arnold was the nominated Transport Manager.

(ii)              On 21 May 2009 one of the Appellant’s vehicles was found to have tachograph recording equipment, which was not sealed and five other defects.  In respect of the unsealed tachograph the Appellant was subsequently fined £200.  Attempts to interview a representative of Arnold Transport in relation to this matter were unsuccessful.  In respect of the other matters defect notices were issued and the vehicle was required to be presented for a partial test.  There is no record that it ever underwent a partial test.

(iii)             On 20 August 2011 the DVA, (“Driver and Vehicle Agency”) and the PSNI, (“Police Service of Northern Ireland”), commenced a joint investigation into tachograph and driver’s hours offences committed by the Appellant.  In the course of the investigation ten vehicles were examined.  Five of these vehicles were found to have complex and well-hidden devices capable of interrupting the signal to the tachograph and also able to override the speed-limiter device, with the result that the vehicle was capable of exceeding the legal limit of 56 mph by about 50%.  Three other vehicles, (examined later), showed evidence of tampering with the tachograph recording system.  Two vehicles were cleared.  Further investigation of tachographs disclosed 201 fraudulent records.  Mr Arnold was interviewed on three occasions.  He made full and frank admissions and accepted responsibility for having the devices fitted and for his use of the devices and for their use by drivers.  Six drivers were also interviewed.  Most denied knowledge of the devices but accepted that they had manipulated their tachographs by removing a fuse.  One driver admitted use of the device.

(iv)            On 23 February 2012 Dean Arnold was cautioned for using one of the Appellant’s vehicles with no Road Freight Vehicle Licence.  The licence had expired on 25 November 2011.  On 12 March 2012 Mr Arnold was interviewed under caution.  He explained that the absence of a Road Freight Vehicle Licence was an oversight and that the licence had been renewed on 23 February 2012.  The Appellant was also cautioned.

(v)             On 6 May 2012 a driver employed by the Appellant was fined £120 for failing to ensure proper use of recording equipment.  He had failed to put the date on the tachograph chart that he was using.

(vi)            On 20 January 2013 an investigation of the tachograph charts produced by another of the Appellant’s drivers showed four occasions on which he had not taken ‘daily rest’.  When interviewed under caution the driver agreed that the charts were a true account of his driving.  When the failure to take daily rest was pointed out he replied: “I have nothing to say it was unforeseen circumstances”.  At the time of the Public Inquiry his prosecution was pending.

(vii)           On 24 March 2013 a third driver was fined £120 for failing to ensure proper use of the recording equipment because he failed to put the date on the tachograph chart that he was using.

(viii)          On 15 May 2013 the six drivers were sentenced at Omagh Crown Court.  All were sentenced to terms of imprisonment, which varied from 6 months to 18 months.  All the sentences were suspended for 2 years.

(ix)            On 14 June 2013 Mr Arnold was convicted of one count of forgery.  Seven counts of conspiracy to commit forgery were ‘left on the books’.  Mr Arnold was sentenced to 2 years imprisonment suspended for 2 years.

(x)             In the three year period ending in July 2013 vehicles authorised under the Appellant’s licence underwent a total of 44 vehicle tests, of which 5 were failures, a pass rate of 89%.  In the course of the evidence the Head of the Transport Regulation Unit, (“TRU”) pointed out that a pass rate of 89% was higher than the overall UK average pass rate of about 80% and significantly higher than the Northern Ireland average of 75%.

(xi)            Between May 2009 and July 2013 vehicles operated by the Appellant company were encountered and examined by the DVA on six occasions.  Enforcement action was taken on each of those occasions, a 100% non-compliance rate.

(xii)           On 14 August 2013 the Appellant was called to a Public Inquiry, which was due to take place on 1 October 2013.  The Appellant was warned that the Head of the TRU, would consider taking action under s. 23(1) of the Goods Vehicles (Licensing of Operators) Act (Northern Ireland) 2010, (“the 2010 Act”), to revoke, suspend, or curtail the licence and under s. 24(1) of the 2010 Act to revoke the licence.  The letter went on to warn that if the licence was revoked the Head of the TRU would consider whether to disqualify any director of the company from obtaining or holding an operator’s licence.  The letter set out the evidence, which the Head of the TRU would consider.  It warned that if it was determined that the Appellant’s Transport Manager was no longer of good repute it might follow that the Appellant was no longer able to fulfil the requirement to be professionally competent.  The letter advised that in order to satisfy the requirement to be of appropriate financial standing the Appellant should provide financial evidence, in the detail specified, by 28 August 2013.

(xiii)          On 18 September 2013 Solicitors acting on behalf of the Appellant requested an adjournment of the Public Inquiry on the ground that they, and Counsel who had represented Mr Arnold and the Appellant at the Crown court hearing, were unavailable on 1 October 2013.  By agreement the Public Inquiry was adjourned to 10 October 2013.

(xiv)         On 3 October 2013 the TRU emailed the Appellant’s Solicitors to ask whether any financial information was going to be provided.  On 7 October 2013 the Appellant’s Solicitors forwarded Bank Statements and confirmation of an overdraft facility to the TRU, together with a number of Daily Defect and Safety Inspection sheets.  The Bank Statements covered the months of July, August and September 2013.  The average balance when added to the overdraft facility was insufficient to meet the amount required for a fleet of 12 vehicles.

(xv)          The Public Inquiry took place before the Head of the TRU on 10 October 2013.  Mrs McIntyre, the Deputy Head of the TRU was also present.  A number of people were present from the DVA compliance team.  Mr Arnold was present on behalf of the Appellant.  The Appellant was represented by Neil Moore of Counsel instructed by Mr MacAllister.  John Logue, a Transport consultant employed by the Appellant was also present.

(xvi)         Mr Armstrong began by explaining the purpose of the Public Inquiry.  The number of vehicles specified on the licence was then considered and it was agreed that 9 vehicles were specified, although the authorisation was for 12.

(xvii)        Mr Curran, who represented the DVA then called Mr Wightman, the lead investigator in the joint investigation into drivers’ hours and tachograph offences.  He described how the tachograph could be overridden using a remote control so that the tachograph would appear to show that the vehicle was at rest when in fact it was being used.  He said that it became clear in the course of the investigation that the use of such devices was ‘systematic’.  He explained that it had been possible to use vehicle tracking information to compare the actual movements of vehicles with what appeared in the tachograph records.  A number of vehicles, which were not located when the investigation commenced, were seen later.  When they were examined it was clear that they had, at one stage, been fitted with devices for manipulating tachographs but that those devices had since been removed.  Mr Wightman confirmed that when Mr Arnold was interviewed about these matters he made full and frank admissions about his own use of these devices and explained that he had had the devices fitted without the knowledge of his brother and co-director Shaun Arnold. 

(xviii)       It emerged that devices were found in five out of the eight vehicles originally seen and that devices appeared to have been fitted but later removed from three other vehicles seen at a later stage.  Mr Wightman described the devices found as “complex” and said that it was only the second time that devices of that particular type had been found in Northern Ireland.  He added that it appeared that they had been installed in a manner that was aimed at thwarting detection.  A Police Officer involved in the investigation described how it took a day and a half to find the device fitted to one vehicle.  He described the fitting of the devices as “very professionally done”.  A member of the DVA compliance team with experience as a vehicle examiner said that there was “not a chance that a standard vehicle examiner would have been able to find these devices on a standard MOT test”.  He went on to explain that by operating the remote button the speed, distance and mode recording made by the tachograph would be switched off, without leaving any physical mark on the tachograph chart that could be detected when the chart was analysed.  In addition he said that the use of the device disabled the speed limiter, though he accepted that there was no evidence that any vehicle had been used at excessive speed.

(xix)         On behalf of the Appellant Mr Moore said that the company had been established in 1996.  He submitted that when one looked at the record as a whole it was that of a well-run company.  He explained that Mr Arnold decided to have the devices fitted in order that drivers could work longer hours in order to be able to retain their jobs.  In the event it was found that the lorries had actually lost money by being on the road for longer.  While Mr Moore accepted that the Appellant had not had a blemish free past he stressed the high MOT pass rate as reflecting well on the company.  He accepted that Mr Arnold: “falls foul of the Act and Regulations …”.  He went on to explain that consideration had been given to the future of the company and that an alternative Transport Manager had been identified and it was proposed that Mr Arnold’s wife and Shaun Arnold’s wife should become directors of the Appellant company.

(xx)          Mr Arnold then gave evidence.  He said that he and his brother began the business in 1996 with two lorries and grew it to the point where they were operating 12 lorries.  Then in late 2010 or early 2011 he said that his brother was diagnosed with a terminal illness, which meant that he was unable to do much work for the company.  In relation to fitting the tachograph interrupters he explained that as times got harder for the haulage industry generally he felt that using the devices would enable him to keep a roof over his head, keep the business going and keep the Appellant’s employees in work, “basically keep the wolf from the door”.  He added that he had told the investigating officers the name of the person who had fitted the devices, who was, by then, dead.  He said that fitting the devices was intended to keep people in work not to make a profit and that in fact it turned out that the Appellant had lost money as a result of the decision.  He stressed that the decision to fit the devices was his and his alone and that his brother Shaun was not involved and not aware of what he had arranged to do.

(xxi)         Mr Arnold was asked about his responsibility as Transport Manager.  He said that whenever a driver had been stopped he would discuss any problems that had been found to discover what had gone wrong.  He would also encourage drivers to perform thorough ‘walk-round’ checks.  He added that when the drivers became aware that there was to be a Public Inquiry several of them left.

(xxii)        Mr Arnold described the specialized work that the Appellant did for Ultra Galvanizers and the steps, which might have to be taken if it proved impossible for the Appellant to continue that work.

(xxiii)       In relation to the future of the company Mr Arnold provided details of the proposed new Transport Manager.  He said that he held an International CPC certificate and that he was prepared to take on the job.  In relation to the company he said that his wife and Shaun’s wife were both prepared to become directors of the Appellant so that he could “if need be, step back”. 

(xxiv)       He was asked by Mrs McIntyre what he had done since the discovery of the first tachograph offences to ensure that they were not repeated.  Mr Arnold explained that for the work they did in England there was a set rule that the driver either went to Milton Keynes or to Bracknell and that there was no more “go here go there”.  He went on to explain that since being called to a Public Inquiry he had asked for the services of a person to analyse tachograph charts and to instruct drivers on how to complete them.  Mrs McIntyre pointed out that there had been two tachograph offences in 2013.  Mr Arnold explained that on one of these occasions the driver had opened the head of the tachograph to see how much time he had left before taking a break and had then failed to close the head properly.  In relation to the other matter Mr Arnold explained that the driver had freewheeled down a hill, giving the appearance that the speed-limiter was not working.  A little later Mr Arnold accepted that he had never given warnings or dismissed a driver because of infringements.

(xxv)        In answer to Mr Armstrong Mr Arnold explained that after August 2011 the company began to use defect sheets and driver’s declarations and it re-arranged the work in the UK in order to avoid driver’s hours offences.  He went on to describe the paperwork in relation to maintenance and safety inspections.

(xxvi)       In his concluding remarks Mr Moore stressed that in the criminal proceedings Mr Arnold and all the drivers concerned fully accepted that the drivers’ hours regulations are in place to protect the public.  He added that Mr Arnold had pointed out in his evidence that in addition he accepted that his conduct had put lives at risk.                              

(xxvii)      Following the Public Inquiry further Bank Statements were submitted covering April, May and June 2013.  This was done with a view to supporting a reduction in the number of authorised vehicles from 12 to 9.  The average credit balance was insufficient to show appropriate financial standing for the 12 vehicles authorised or the 9 vehicles being used. 

(xxviii)     On 14 November 2013 the Head of the TRU gave a written decision.  He began by setting out the history and the grounds on which the Appellant had been called to a Public Inquiry.  He set out the evidence heard at the Public Inquiry, which we have summarised above.  He then set out the favourable and unfavourable factors.  He concluded that following the conviction Mr Arnold could no longer meet the requirement to be of good repute.  He was satisfied that on the basis of the financial information provided the Appellant no longer satisfied the requirement to be of appropriate financial standing.  He concluded that Mr Arnold, in his capacity as Transport Manager, no longer satisfied the statutory requirements for that position and that, as a result the Appellant was no longer Professionally Competent.  He concluded that despite engaging a tachograph analyst the Appellant could not demonstrate that it had satisfactory arrangements for securing compliance with s. 12C(2) of the 2010 Act, as amended, (drivers’ hours). 

(xxix)       He went on to consider the impact of various different courses of action concluding that in view of the nature and extent of the infringements and the lack of progress in addressing those issues revocation was necessary.  He said: “This is a very serious case of an operator clearly setting out to commit fraud and forgery and who, through the thorough work of the DVC and PSNI has been detected, prosecuted and found guilty in court”.  He then considered whether he could rely on the Appellant’s assurances as to it’s future conduct.  In answering that question he said that: “I take account of the actions of the operator and not just the words”.  He went on to explain that he had no confidence that he was dealing with an operator committed to change.  As a result he concluded that it would be right to remove the Appellant from the industry, adding: “This operator compromised road safety and fair competition to an extremely serious and extensive degree.  The industry in Northern Ireland must be aware that the practices employed by Mr Arnold will not be tolerated and must be dealt with firmly when encountered. The message to other operators, tempted to indulge in such practices, should look at this case and think again.  The rules for access to the freight industry are there for a reason and must be applied”.

(xxx)        Having reached those conclusions the Head of the TRU revoked the Appellant’s operator’s licence on the grounds that (i) it no longer satisfied the requirement to be of good repute, (ii) that it was no longer of appropriate financial standing and (iii) that it had ceased to be professionally competent.  He then moved on to consider the question of disqualification.  He asked himself whether Mr Arnold could be trusted to comply with the requirements of the 2010 Act.  He concluded that the answer was ‘No’ and that the appropriate course was to disqualify him from holding or obtaining an operator’s licence for a period of 3 years.  In addition he concluded that, as Transport Manager, Mr Arnold did not meet the requirement to be of good repute with the result that he must be disqualified from acting as a Transport Manager for a period of 3 years.

(xxxi)       On 28 November 2013 the Appellant filed a Notice of Appeal.  The grounds of appeal simply stated that it had been hoped that the result of the Public Inquiry would have been a lesser penalty enabling the company to continue to trade and to continue to employ a significant number of people.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

3.         At the hearing of the Appeal the Appellant was represented by Mr MacAllister and the Department was represented by Ms Fee.  Mr Arnold also attended.

4.         At the outset Mr MacAllister frankly conceded that the Appellant was unable to meet the requirement to have appropriate financial standing.  We explained to Mr MacAllister that given the terms of s. 24(1) of the 2010 Act this meant that the appeal was bound to fail because, in those circumstances, revocation of the operator’s licence was mandatory.  Mr MacAllister went on to stress that there had been no finding of loss of good repute in relation to the other director of the Appellant company, Shaun Arnold, and that he was anxious to find some way in which the company could remain in business.

5.         We are well aware that the 2010 Act and the various Regulations made under that Act have only been in force since June 2012 and that appeals from decisions taken by the Head of the TRU are a recent addition to the Tribunal’s jurisdiction.  The Tribunal set out some background information to this jurisdiction in paragraphs 3-10 of the decision in the appeals of: NT/2013/52 & 53 Fergal Hughes v DOENI & Perry McKee Homes Ltd v DOENI   

6.         It is important for operators in general and Transport Managers in particular to become familiar with the relevant provisions as soon as possible.  We agree with the Head of the TRU when he said: “The rules for access to the freight industry are there for a reason and must be applied”.  The reason is that they are intended to ensure that Heavy Goods Vehicles are operated safely and responsibly and that operators compete fairly and resist the temptation to ‘cut corners’ as a result of other operators appearing to get away with such conduct.

7.         We are also aware that those instructed to represent operators, whether at a Public Inquiry or on appeal to the Tribunal, face difficulties in the absence of any text book or other guidance as to the meaning of the legislation or as to the relevant considerations which the Head of the TRU and the Tribunal are likely to take into account.  With this in mind we would repeat the point made in the appeal cited in paragraph 5 namely that one of the main purposes of the 2010 Act is to establish a common regulatory regime for the operation of Heavy Goods Vehicles throughout the UK.  In fact it goes further than that because the need for “common rules on admission to the occupation of road haulage operator” throughout the European Community is stressed in the first recital to Regulation (EC) No 1071/2009 of the European Parliament and of the Council (“Regulation 1071/2009”), While Member States are given some discretion as to some aspects of the Regulation it is clear from the Regulation as a whole that considerable importance is attached to road safety and fair competition.

8.         Many of the provisions in the 2010 Act and in the Regulations made under it are either identical or similar to provisions in the Goods Vehicles (Licensing of Operators) Act 1995, ("the 1995 Act") and the Regulations made under that Act.  There is now a considerable body of Tribunal decisions dealing with various aspects of this body of legislation and, to a lesser extent with the terms of Regulation 1071/2009.  Where the legislation in force in Northern Ireland is identical to a provision in force in Great Britain our view is that Tribunal decisions, whether relating to GB or NI appeals are equally applicable.  The Tribunal publishes a Digest of its appeal decisions that can be accessed at: Digest

9.         With these considerations in mind we believe that it may be helpful if we deal with some general principles as well as all aspects of this appeal.  The full text of the Acts and Regulations to which we refer in this decision can be found on the internet by a search using the full title of the Act or Regulation in question

Some General Principles

10.      An operator’s licence can only be granted if the applicant satisfies the Department that the relevant requirements, set out in s. 12 of the 2010 Act as amended, have been met. [The expression Department is used in the legislation but for the purposes of the decisions required to be taken under the legislation it is the Head of the TRU who takes them].  The relevant requirements are now set out in Paragraph 17(5) of the Goods Vehicles (Qualifications of Operators) Regulations (Northern Ireland) 2012, (“the Qualifications Regulations), which substitutes a new s.12 and adds ss. 12A-12E to the 2010 Act.  The Qualifications Regulations also contain important provisions in relation to Good Repute, Professional Competence and Transport Managers.

11.      The grant of an operator’s licence does not mean that an operator can then proceed on the basis that the requirements that must be met in order to obtain a licence can thereafter be disregarded.  In our view it is clear both from the terms of the 2010 Act and from Regulation 1071/2009 that these are continuing obligations, which an operator is expected to meet throughout the life of the licence.  It is implicit in the terms of s. 23, which gives the Department power to revoke, suspend or curtail an operator’s licence, that this can take place at any time and for any reasonable cause, including matters covered by the requirements of s. 12 as amended.  It is explicit in s. 24, which provides that a standard licence shall be revoked if at any time it appears that the licence-holder is no longer (i) of good repute, (ii) of appropriate financial standing or, (iii) professionally competent.  The underlining, in each case is ours.  First, we wish to stress that once it appears that the licence-holder is no longer of good repute, or of appropriate financial standing or professionally competent the licence must be revoked because the Act makes it clear that there is no room for any exercise of discretion.  Second, the use of the expression ‘at any time’ makes the continuing nature of the obligations crystal clear.

12.      The Tribunal has stated on many occasions that operator’s licensing is based on trust.  Since it is impossible to police every operator and every vehicle at all times the Department in Northern Ireland, (and Traffic Commissioners in GB), must feel able to trust operators to comply with all relevant parts of the operator’s licensing regime.  In addition other operators must be able to trust their competitors to comply, otherwise they will no longer compete on a level playing field.  In our view this reflects the general public interest in ensuring that Heavy Goods Vehicles are properly maintained and safely driven.  Unfair competition is against the public interest because it encourages operators to cut corners in order to remain in business.  Cutting corners all too easily leads to compromising safe operation.

13.      It is important that operators understand that if their actions cast doubt on whether they can be trusted to comply with the regulatory regime they are likely to be called to a Public Inquiry at which their fitness to hold an operator’s licence will be called into question.  It will become clear, in due course, that fitness to hold an operator’s licence is an essential element of good repute.  It is also important for operators to understand that the Head of the TRU is clearly alive to the old saying that: “actions speak louder than words”, (see paragraph 2(xxix) above).  We agree that this is a helpful and appropriate approach.  The attitude of an operator when something goes wrong can be very instructive.  Some recognise the problem at once and take immediate and effective steps to put matters right.  Others only recognise the problem when it is set out in a call-up letter and begin to put matters right in the period before the Public Inquiry takes place.  A third group leave it even later and come to the Public Inquiry with promises of action in the future.  A fourth group bury their heads in the sand and wait to be told what to do during the Public Inquiry.  It will be for the Head of the TRU to assess the position on the facts of each individual case.  However it seems clear that prompt and effective action is likely to be given greater weight than untested promises to put matters right in the future.

Financial Standing

14.      For the purposes of a standard licence the requirement to have appropriate financial standing is to be determined in accordance with regulations and Article 7 of Regulation 1071/2009, see s. 12A(2)(c) of the 2010 Act.  Article 7.1 sets the amount required for the first and each subsequent vehicle in Euros and provides for an annual conversion into Sterling.

15.      For the purposes of the present appeal these provisions required the Appellant to have available £51,200 for the 12 vehicles authorised under the licence or £39,200 if the authorisation was reduced to the 9 vehicles then in use.

16.      The call-up letter required the Appellant to produce, amongst other financial information, original bank statements for the last three months.  In our view that was appropriate because the requirement to have appropriate financial standing cannot be met by evidence that provides a ‘snapshot’ of the operator’s financial position.  What is required is evidence that the average amount available over a period of time, (generally 3 months), is sufficient to cover the amount required by Article 7.1.  The purpose of having appropriate financial standing is to ensure, amongst other things, that vehicles are properly and promptly maintained and that if emergency repairs are needed the money is available to enable them to be carried out.   Since the purpose is to ensure that money is available to pay the bills for maintenance and repairs, (amongst other things), it follows that only assets which can be used to pay such bills can be used to satisfy the requirement to have appropriate financial standing.  For more detailed consideration of financial standing see paragraphs 10-27 of the decision in T/2012/17 NCF (Leicester) Ltd.  

17.      We have considered all the bank statements that were made available together with the evidence of the overdraft facility.  We agree with the Head of the TRU that the average amount available was insufficient even for a reduced authorisation of 9 vehicles.  It follows that Mr MacAllister correctly conceded that the Appellant could not succeed in showing that this finding was plainly wrong.

Good Repute

18.      The provisions in relation to Good Repute are set out in Regulations 5-9 of the Qualifications Regulations.  The scope of the requirement to be of good repute can best be assessed by considering the terms of Regulation 5(1), (in relation to individuals), and Regulation 5(2), (in relation to companies).  Regulation 5(1) permits the Department to have regard to “any matter” but requires it to have regard to (i) any convictions or penalties incurred by the individual or any other relevant person and (ii) any other information which appears to the Department to relate to the individual’s “fitness” to hold a licence.  Regulation 5(2) requires the Department to have regard to “all the material evidence” but, in particular, to (i) any convictions or penalties incurred by the company, company employees or any other relevant person and (ii) any other information as to past conduct on the part of the company or any relevant person if the conduct appears to the Department to relate to the company’s “fitness” to hold a licence.  We have underlined the word ‘fitness’ in both these provisions because it is critical to understanding the breadth of the requirement to be of good repute.  It means, for example, that an operator who cannot be trusted to comply with the operator’s licensing regime is unlikely to be fit to hold an operator’s licence.

19.      In the present case Mr Arnold was convicted of an offence of forgery for which he was sentenced to 2 years imprisonment suspended for 2 years.  It was an offence intended to obtain an unfair advantage in relation to the Appellant’s competitors.  The fact that it is now asserted that it did not achieve that purpose should, in our view, carry little if any weight.  One reason is that it is the underlying intention that matters. Another reason is the potential impact of unfair competition on other operators.   The impact of unfair competition is insidious in that it gradually and subtly undermines the confidence of compliant operators that their competitors will comply with the regulatory regime and thus compete fairly.  What matters is the perception that other operators are competing unfairly not whether they are achieving any benefit as a result.  Once rumours, of unfair competition spread, (or clear evidence of it becomes apparent), the assumption will be made that it must be advantageous because there would be no point in running the risks involved if it was not.   It is also corrosive because once rumours of unfair competition, (at the very least), begin to spread the perception that some operators are competing unfairly, (whether or not they profit by doing so), has a damaging effect.  It means that normally compliant operators will feel tempted to ‘cut corners’ in relation to the regulatory regime in order to remain in business.  Some may decide to resist that temptation but others are likely to succumb.  The end result, if swift and effective steps are not taken to stamp out unfair competition, is that the operators who are most determined to remain compliant will be at greatest risk of being put out of business, even though they are the very operators who most deserve to remain in the industry.  Trust, (whether between operators and the Traffic Commissioner or between operators themselves), is all too easily destroyed.  Rebuilding it, if that is even possible, is likely to be a long and slow process.

20.      The sentence of 2 years imprisonment suspended for 2 years means that Mr Arnold has been convicted of a ‘serious offence’ within the definition set out in Regulation 7 of the Qualifications Regulations.  One consequence of being convicted of a serious offence is that the Department was required by the terms of Regulation 6 to determine that, as an individual, he was not of good repute.  In our view this has other consequences in relation to the Appellant’s good repute and professional competence and also in relation to Mr Arnold’s position as Transport Manager.

21.      In determining whether or not the Appellant company was of good repute the Head of the TRU was required to take Mr Arnold’s conviction into account.  He was also required to take into account the other convictions and penalties which we have summarised above and the reaction of the company to its failure to comply with the requirements of the regulatory regime.  We entirely agree with the quotations from the Head of the TRU’s written decision, which we have set out in paragraph 2(xxix) above.  In our judgment the Head of the TRU was entitled to find that the Appellant was not fit to hold an operator’s licence and that, as a result, the Appellant was no longer of good repute.  Given the gravity of the conduct involved it was both appropriate and proportionate to revoke the licence on this ground.  It follows that the finding that the Appellant was no longer of good repute must stand.

Professional Competence

22.      Regulation 10(1) of the Qualifications Regulations makes it clear that the requirement of professional competence falls to be satisfied by an individual.  This is hardly surprising given the provisions of Article 4 of Regulation 1071/2009 which require an undertaking which engages in the occupation of road transport operator to designate at least one natural person, who is of good repute and professionally competent, and who “effectively and continuously manages the transport activities of the undertaking”.  In addition that person must have a genuine link to the undertaking. 

23.      In the case of a company Regulation 10(3) of the Qualifications Regulation provides that a company satisfies the requirement to be professionally competent “if and so long as” it has a Transport Manager, (or Managers) who is (i) of good repute and (ii) professionally competent.  Regulation 11 sets out the circumstances in which an individual is to be regarded as professionally competent.  It is not necessary to consider this regulation in greater detail because there was no challenge to Mr Arnold’s qualifications.  Regulation 12 provides that in determining the good repute of a Transport Manager regulations 5-9 apply, as they apply to an individual, with one exception which is not material to this appeal.

24.      The effect of these provisions is that not only did Regulation 6 require the Department to determine that Mr Arnold was not of good repute as an individual but it also required the Department to make the same determination in relation to his position as Transport Manager.  In other words he ceased to meet one of the essential qualifications to be a Transport Manager.

25.      In our view it follows from this that the Appellant is no longer professionally competent, because the company could only satisfy that requirement ‘as long as’ it had a Transport Manager who was, amongst other things, of good repute.  We accept that the Appellant had taken steps to identity a possible replacement as Transport Manager but the problem it faced was that as at the date of the Public Inquiry the replacement had not been ‘designated’ nor had he been approved by the Department.

26.      We are satisfied that revocation on the grounds that the Appellant no longer satisfied the requirement to be professionally competent was not only correct, but inevitable, given the absence of a Transport Manager who satisfied the requirement to be of good repute.

Conclusion

27.      For these reasons we are satisfied that revocation on all three grounds was proportionate, appropriate and justified by the evidence.  The appeal against revocation must be dismissed.  The revocation of the licence will take effect at 2359 on 20 April 2014.

28.      In relation to disqualification a discrepancy emerged after the end of the hearing.  On page 1 of the decision, in the box headed ‘Decision’ it is said that: “the Operator is disqualified from holding or obtaining a licence for a period of 3 years, with effect from 00.00 hours on 12 December 2013”.  However at paragraph 70 of the decision it is clear that what is being considered is the disqualification of Mr Arnold and at paragraph 72 it is expressly stated that it is Mr Arnold who is to be disqualified from holding or obtaining an operator’s licence.  Then at paragraph 73 it is Mr Arnold who is disqualified from acting as a Transport Manager for 3 years.  It seems to us that what is said in the body of the decision is correct and that what appears on the box headed ‘Decision’ ought to be corrected.

29.      We are satisfied that this was an appropriate case for disqualification.  In the case of the 3 year disqualification from holding or obtaining an operator’s licence the gravity of what Mr Arnold did makes disqualification entirely appropriate and there can be no question of 3 years being disproportionate.

30.      In relation to Mr Arnold’s position as Transport Manager the inevitable finding that he was no longer of good repute meant that the Department was required to order that he be disqualified from acting as a Transport Manger, either indefinitely or for such period as the Department thinks fit, (see Regulation 15(2) of the Qualifications Regulations).  Again we take the view that a term of 3 years was in no way disproportionate.

31.      If the Appellant wishes to remain in the transport industry it will be necessary for it to make a fresh application for an operator’s licence.  That means that the Appellant will need to show that all the statutory requirements are met.  We have underlined ‘all’ to stress that what follows should not be misunderstood as suggesting that the other requirements to not matter.  In particular it will be necessary to show that the Appellant is of good repute, in the sense that it will be fit to hold an operator’s licence and will be managed by a person or persons with the necessary integrity and knowledge of the industry and the regulatory regime to ensure that it operates compliantly.  In that respect the role, if any, to be played by Mr Arnold is likely to receive close attention.  In addition the Appellant will need to show that it will have a Transport Manager who will effectively and continuously manage the transport activities of the undertaking.

 

 

 

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

Principal Judge for Traffic Commissioner Appeals, President of the Transport Tribunal.

7 April 2014