Neutral Citation Number: [2014] UKUT 0276 (AAC)                            Appeal No: T/2014/13

 

IN THE UPPER TRIBUNAL            

ADMINISTRATIVE APPEALS CHAMBER

(TRAFFIC COMMISSIONER APPEALS)

 

ON APPEAL FROM THE DECISION OF J.A. ASTLE,

DEPUTY TRAFFIC COMMISSIONER for the WEST MIDLANDS TRAFFIC AREA,

DATED 8/1/2014

 

Before:

Judge M. Hinchliffe, Deputy Chamber President (HESC); Judge of the Upper Tribunal.

Mr S. James, Member of the Upper Tribunal.

Mr A. Guest, Member of the Upper Tribunal.

 

Appellants:

MM TELFORD LTD

and

RMT TRANSPORT LTD

 

Attendance:

For the Appellants:      Mr M Laprell, Counsel instructed by DWF LLP, Solicitors.

 

Appeals heard at:     Field House, Breams Buildings, London

Date of hearing:        5 June 2014

Date of decision:       16 June 2014

 

 

DECISIONS OF THE UPPER TRIBUNAL:

 

IT IS HEREBY ORDERED that the appeals be allowed.

The Deputy Traffic Commissioner’s decisions are set aside.

 

MM Telford Ltd and RMT Transport Ltd have both demonstrated good repute.

 

In relation to professional competence and financial standing in each case,

fresh public inquiries must be held by a different Traffic Commissioner.

 

 

 

Subject Matter:        

 

Repute. Professional Competence.

 

Cases referred to:

 

T/2014/08 Duncan McKee

T/2012/34Martin Formby t/a G & G Transport

Aspey Trucks 2010/49

REASONS FOR DECISIONS:

 

1)    This was an appeal from the decision of the Deputy Traffic Commissioner for the West Midlands Traffic Area made on 8/1/2014 when he refused applications by both appellants for standard international licences. He did so because (in each case) he was not satisfied that the appellant was of good repute, as determined in accordance with paragraphs 1 to 5 of Schedule 3 of the Goods Vehicles (Licensing of Operators) Act 1995, was not satisfied that the appellant was professionally competent, as determined in accordance with paragraphs 8 to 13 of Schedule 3, and was not satisfied that the appellant had designated a transport manager who was of good repute, as determined above, and professionally competent, as determined in accordance with paragraph 13 of Schedule 3.

 

2)    The Deputy Traffic Commissioner made no finding in relation to financial standing.

 

3)    The factual background to this appeal appears from the documents, the transcript and the Deputy Traffic Commissioner’s decision and is as follows:

(i)    This appeal concerns two companies: MM Telford Ltd (“MMT”) and RMT Transport Ltd (“RMTT”). The companies do not share (and do not propose to share) the same shareholders, directors, vehicles or drivers, but they do wish to share the opportunities afforded by work available from CML Foods Ltd (“CML”), and the directors of the two companies are known to each other and aspire to work in cooperation and friendship with each other. They have both nominated Brockton Business Park in Telford as their operating centre, which is where CML is based, and propose maintenance contracts with the same firm. MMT has applied for 10 vehicles and 20 trailers. RMTT has applied for 20 vehicles and no trailers (but, it seems, may need trailers).

(ii)   RMTT is based in England.

(iii)  MMT is part of a larger family of companies based in Northern Ireland.

(iv) The other companies in the family of Northern Ireland Companies are: Total Freight Ltd, Donnelly Distribution Ltd, Morgan Transport & Distribution Ltd, Cool Transport Ltd, and Morgan T & D Ltd. Apart from Morgan T & D Ltd, all the companies are involved in transport operations. They have separate operator’s licences issued in Northern Ireland, although all trade under the umbrella trading name of “Morgan McLernon”.

(v)  Morgan Transport & Distribution Ltd has 3 directors, one of whom is Michael McLernon. Mr McLernon is also a director of MMT, one of the appellants in this case. By the time the case came to public inquiry, Mr McLernon was also the proposed transport manager for MMT.

(vi) Prior to its commencement of trading, between 19/6/2007 and 2/12/2008, Mr McLernon was also a director of Total Freight Ltd.

(vii)The other companies in the “Morgan McLernon” family of companies each have entirely different shareholders and directors (and since December 2008 this also applies to Total Freight Ltd). The only shared directorship is Mr McLernon himself, who is a director of both Morgan Transport & Distribution Ltd  and MMT, the latter being set-up, essentially, to take over much of the work on the mainland, previously undertaken by Morgan Transport & Distribution Ltd.

(viii)       Morgan T & D Ltd acts as employment agency for drivers, and supplies all the driver requirements for all the Northern Ireland based companies within the Morgan McLernon family of companies on an agency basis. It is therefore quite possible for drivers to work for one company in the Northern Ireland family of companies on one day, and for another on another day. All the vehicles in the Northern Ireland family of companies are liveried as “Morgan McLernon” – which is a shared trading name. However (apart from Morgan T & D Ltd) all the companies have their own individual operator’s licences issued in Northern Ireland, and all have their own vehicle operator licence discs.

(ix) The director of Morgan T & D Ltd, the driver employment agency, is Killian Morgan. His influence and interest, it is acknowledged, spreads beyond his own company because he supplies drivers on an agency basis to the other companies within the Northern Ireland family of companies. Mr Morgan has a legal qualification and so he is Company Solicitor to Morgan Transport & Distribution Ltd and Compliance Manager for all the other companies in the family of Northern Ireland companies - but he is not a director or shareholder thereof.

(x)  The companies are not a formal ‘group’ in terms of company law. There is no shareholding by one company in another, apart from that mentioned in (vii) above there are no shared directors or shareholders, there is no lead or holding company or head office, and there are no subsidiary companies. This arrangement, therefore, is not based upon the sort of legal or financial ties that would generally characterise a corporate ‘group’ in the formal sense - although the companies do aim to work cooperatively, such that if one is unable to undertake a certain piece of work it will try to arrange for the work to be given or sub-contracted to another suitable company within the family of companies.

(xi) All the directors and shareholders are, in the main, related to each other - either through blood or marriage, but each company is a separate and independent entity.

(xii)From time to time, vehicles from the various Northern Ireland operators come across to the mainland in order to undertake the carriage of goods. Since Northern Ireland is part of the U.K., this is little different from vehicles based in the Yorkshire area driving over to Lancashire. A difficulty arises, however, if the Yorkshire operator obtains a large contract in Lancashire and then begins to base vehicles there without permission. This, it seems, is what might have happened with Morgan Transport & Distribution Ltd – which is based in Northern Ireland, but which had a profitable contract with CML in Telford.

(xiii)       Although no regulatory action has been taken against Morgan Transport & Distribution Ltd in relation to this, the issue of having Northern Ireland vehicles spending too long on the mainland goes some way to explain the current application by MMT, which seeks to have its operating centre in Telford and to take over some of the CML work previously undertaken by Morgan Transport & Distribution Ltd.

(xiv)       However, taking over all the work that CML has to offer is not an attractive proposition to Mr McLernon. For a number of reasons, both operational and personal, he prefers to remain based in Northern Ireland and is content to share the CML work with a ‘friendly’ operator in the UK, with whom he can have a cooperative working relationship similar to that which appears to work reasonably well within the family of companies in Northern Ireland.

(xv)        RMTT was formed in 2013 and its sole director is Mr Ross McPhillips. He is also the proposed Transport Manager of RMTT.

(xvi)       Mr McPhillips gained his CPC qualification in International Road Haulage in 2009 whilst working as Head Transport Planner for a company called Grocontinental in Whitchurch. He began working in their traffic operations department in December 2003. By 2009, the company had 62 vehicles and 110 trailers, and employed 85 drivers. Mr McPhillips organised drivers’ work, monitored drivers’ hours compliance, and scheduled and monitored vehicle maintenance.

(xvii)      Mr McPhillips and Mr McLernon are business acquaintances because Morgan Transport & Distribution Ltd undertook some work for Grocontinental (as well as for CML). In due course, Mr McPhillips wanted to work nearer to his home, and Mr McLernon “put in a good word” for Mr McPhillips with the boss at CML.

(xviii)     Mr McPhillips was offered a job at CML and so, after 10 years at Grocontinental, Mr McPhillips moved to work for CML as Transport Planner.

(xix)       CML does not operate its own vehicles, relying entirely on using haulage contractors. However, it appears that the stage has now been reached where it is no longer viable to use hauliers on an ad hoc basis, and CML considers that it would like to give its work to one or more dedicated haulage companies, based locally in Telford and, ideally, at the same business park as CML.

(xx)        Mr McLernon already undertakes business with CML, albeit through his Northern Ireland company. Mr McPhillips has always wanted to run his own transport company.

(xxi)       Thus it was that MMT and RMTT applied for operator’s licences, intending to work as separate entities, but collaboratively, and to jointly take advantage of the business opportunities that CML offered. So far as RMTT is concerned, the business model involves a type of ‘open book’ arrangement whereby RMTT undertakes the required haulage work and then submits a schedule of its costs to CML. CML will then pay a sum equivalent to the costs plus a percentage uplift. Even this model, however, requires a reasonable ‘float’ to pay upfront expenses and wages, and to ensure satisfactory cash flow before payment is received. The new company also needs to demonstrate financial standing. For a licence authorising 20 vehicles, the relevant sum generally required to be readily available (over and above the everyday “ins and outs”) is £83,200.

(xxii)      Mr McPhillips does not have any available capital of his own, so the company had neither a float sufficient to start up, nor readily available capital and reserves in the sum required. Accordingly, Mr McLernon introduced Mr McPhillips to his bankers, Danske Bank in Belfast. They must have been reasonably impressed with the business opportunity available to the company and with the business plan, or received a satisfactory guarantee, because on 16/8/2013 the Corporate Banking Development Manager wrote to RMTT confirming that they had awarded to them an available facility of £100,000 on the bank account that RMTT had, by then, opened with Danske. In the absence of any suspicious circumstances, this may have been sufficient to allow a Traffic Commissioner to proceed with the application, albeit with some requirement to further explain the business plan and start-up costs, and to submit further evidence of finance once trading had got underway.

(xxiii)     Mr McPhillips and Mr McLernon say that, at this stage, they were badly advised by a transport consultant that an overdraft facility would not be enough, and that RMTT had to have the required sum actually in their bank account. Consequently, on 16/9/2013, £100,000 was lent to Mr McPhillips by MMT and another company linked to Mr McLernon (MMLT). The purpose of these loans was simply to show £100,000 in the RMTT bank account. The bank statement, clearly showing the source of the funds deposited, was sent to the Traffic Commissioner’s office in support of RMTT’s application, and this is how the links between RMTT and MTT were first identified. It also appeared, on the face of things, that an attempt had been made to deceive the Traffic Commissioner into believing that RMTT had actual funds at its disposal that, in truth, it may not have unless this was a legitimate business loan, although it did have the entirely legitimate overdraft facility which had been agreed a month earlier by Danske Bank.

(xxiv)    Other factors then came to the notice of the Traffic Commissioner’s office, including:

• Mr McLernon had not disclosed on the MMT application his previous directorship of Total Freight Ltd that had lasted for 18 months, from June 2007 to December 2008. However the licence for Total Freight was not granted until 2008 and no compliance issues arose during Mr McLernon’s limited period as a director. Mr McLernon did, however, disclose his current directorship of Morgan Transport & Distribution Ltd;
• Morgan Transport & Distribution Ltd has been prosecuted for a number of offences. In 2009, it made 7 court appearances for various tachograph and drivers hours offences. In 2009, and again in 2010, it was prosecuted for failure to produce charts (one court appearance each year). Thereafter there have been no further tachograph or drivers hours convictions, but there was a conviction for ‘drag link excessively worn’ in February 2012. Apparently, all these tachograph or driver's hours irregularities occurred before or in 2010, and nothing untoward has happened since. No regulatory action appears to have been taken against the operator in Northern Ireland.
• In October 2012 a vehicle operated by Total Freight Ltd was stopped for tachograph irregularities. The driver said he worked for “Morgan McLernon”;
• In March 2013, a vehicle being operated by Donnelly Distribution Ltd was stopped. Issues arose re tachograph records and removal of a tachograph card. The driver said he worked for “Morgan McLernon” and added that he had been told to remove the card by a man called David West (who called himself a yard supervisor);
• Some of Morgan Transport & Distribution Ltd’s Northern Ireland vehicles appeared to be based in Telford;
• There is a general suggestion that the companies in Northern Ireland, and Mr West at Telford, have been uncooperative with investigating authorities.

(xxv)     A public inquiry to consider the two applications was heard on 2 and 10 December 2013 by the Deputy Traffic Commissioner.

(xxvi)    In addition to evidence from DVSA and the appellants, the Traffic Commissioner had a written report and heard oral evidence from “Traffic Law Solutions”,  a firm of Transport Consultants, which sought to demonstrate how both applicants would be able to comply with all tachograph and drivers’ hours requirements in future. Mr Lever and his business partner from the Consultants are both former police officers, who personally undertook to report any non-compliance directly to the Traffic Commissioner’s office. However, at one stage, the Deputy Traffic Commissioner suggested that this demonstrated that the applicants had no confidence in their own ability to operate compliantly.

(xxvii)   Amongst other things, the Deputy Traffic Commissioner also concluded that:

• The family of companies in Northern Ireland showed many hallmarks of a single transport undertaking with Mr McLernon “the fulcrum of its connection with CML”. This meant, it appears, that Mr McLernon was required to persuade the Deputy Traffic Commissioner that he was not aware of, did not participate in, or take advantage of: “the unlawful operations and unlawful use of the proposed operating centre”. The Deputy Traffic commissioner found that Mr McLernon had failed to do so.
• Morgan Transport & Distribution Ltd has a significant history of non-compliance, although nothing has happened since 2010;
• Total Freight Ltd has a significant history of non-compliance, although nothing before November 2010;
• Two agency drivers employed by Morgan T & D Ltd (the company supplying drivers to the other companies in the Northern Ireland family of companies) seemed to be unclear which company was the operator when they were stopped, referring to the umbrella trading name, although the vehicles were displaying the appropriate discs.
• There was a suspicion that some companies within the Northern Ireland family of companies, including Morgan Transport & Distribution Ltd, had been using Brockton Business Park, Telford as their de facto base without having it specified as an operating centre. The Deputy Traffic Commissioner said that he was not satisfied that this was not the case.
• David West appeared to be regarded as the transport manager on the mainland;
• Killian Morgan was uncooperative when enquiries were being made about the incidents in October 2012 and March 2013 concerning vehicles operated by Total Freight Ltd and Donnelly Distribution Ltd;
• Mr McPhillips had not persuaded the Deputy Traffic Commissioner that he was not either a willing and conscious participant in fronting, or was not naively being used as a front, in the event that MMT’s application was refused.
• Mr McLernon would not be able to fulfil the requirement for professional competence on the part of MMT, even on a temporary basis. Although Mr McLernon holds an International CPC, granted in 1996, the Deputy Traffic Commissioner had been “presented with no evidence that he has experience of acting as a transport manager and he does not currently do so.” The Deputy Traffic Commissioner was not persuaded that Mr McLernon would devote the necessary time or expertise in fulfilling his duties.
• Mr McPhillips has never before worked as a transport manager and his experience as a transport planner “is a different thing from acting as hands-on transport manager, in which capacity he has no experience – especially since he will also be general manager of the business (albeit with just one customer, and based where the customer is based).

(xxviii)  The Deputy Traffic Commissioner refused both applications on grounds of repute and professional competence. He did not make any finding, positive or negative, in relation to financial standing.

(xxix)    The Grounds of Appeal suggest that:

• The Deputy Traffic Commissioner asked questions that were accusatory or “conclusional in nature” which gave the impression that he had already reached conclusions;
• The Deputy Traffic Commissioner’s finding that the family of companies in Northern Ireland were a corporate ‘group’ - such that the sins of one could be laid at the door of another - lacked any solid evidential basis. The companies cooperate together, all use a particular agency for the supply of drivers, and share a trading name, as many franchised or other trading entities might choose to do, especially within an extended family. But the companies all have separate operator’s licences, separate directorships, different shareholders, different transport managers, different operating centres and separate financial structures. They have separate accounts and they distribute profits individually and separately. There is no holding company and there are no subsidiary companies.
• The Deputy Traffic Commissioner’s findings on “fronting” were not justified on the evidence. In any event, both operators had applied for a licence so there could be no question of an unacceptable or prohibited person or company hiding behind another with a semblance of respectability, with both parties deliberately and dishonestly seeking to deceive the Traffic Commissioner;
• The findings against Mr McPhillips’ repute lacked any substantial evidential basis. Indeed, the Deputy Traffic Commissioner did not make a finding that Mr McPhillips had given dishonest evidence or that his application was a sham – and there would have been no foundation for any such finding. Merely finding that Mr McPhillips had not persuaded him that he was not a potential “front” for Mr McLernon was not the correct way to proceed;
• Although Mr McLernon’s other company had a regulatory history, none of the tachograph/drivers hours issues occurred more recently than 2010, when a wide range of remedial measures were put in place with clear benefits. Since then, there had been no driver’s hours or tachograph irregularities at Morgan Transport & Distribution Ltd, which was the only company that Mr McLernon was responsible for.
• The issue of unlawful use of an unauthorised operating centre had not been adequately established. All such issues are questions of fact and degree and many operators have vehicles that rarely return to their operating centres other than for maintenance. An ‘operating centre’ means the base or centre at which the vehicle is normally kept when not in use. However, it was accepted that the commercial needs of CML now militated towards the use of hauliers with local operating centres – hence these applications.
• In relation to repute, the Deputy Traffic Commissioner had not asked how likely it was that, if granted licences, the applicants would operate in compliance with the operator licensing regime (the “Priority Freight” question).
• The findings on professional competence were flawed. Both Mr McLernon and Mr Phillips had Certificates of Professional Competence. The Deputy Traffic Commissioner had failed to have regard to the very straight-forward business model, with both companies having only one customer located adjacent to their proposed operating centres, and using outside contractors for maintenance.
• Additionally, systems set up by Consultants (Traffic Law Solutions) and monitored by them would contribute to the successful discharge of transport manager duties.
• In any event, it was Mr McLernon’s intention to spend three days per week acting as transport manager physically in England until he could recruit a local transport manager, which he planned to do if the licence was granted. None of this had been properly considered by the Deputy Traffic Commissioner.
• Mr McPhillips did not have an adverse regulatory history and there was no reason why, in the particular circumstances of his business, and given his experience, he could not serve as his own transport manager.
• If the Traffic Commissioner’s concerns related to the size of the proposed fleet(s), then the Deputy Traffic Commissioner should have said so, and thereby initiated a discussion about the possibility of a smaller fleet or fleets.

 

4)    At the hearing of this appeal, the Appellants were represented by Mr Laprell who submitted a skeleton argument further developing the Grounds of Appeal, for which we were grateful.

 

5)    Mr Laprell gave an example of questioning by the Deputy Traffic Commissioner that appeared to be “conclusional” rather than inquiring. To the same witness he had asked:

 

·         “Is it, in effect, one company run as one enterprise, one business?”

·         “.. they are, in effect, operating as one company, are they not?”

·         “Is not the truth of it that the group runs as one company and as far as CML is concerned, it deals with their business as a company?”

 

6)    We asked Mr Laprell to address us about the monies placed in RMTT’s bank account by MTT – which gave rise to the initial suspicions. Mr Laprell accepted that this had been ill-advised. Ironically, it had also been unnecessary, since Danske bank had confirmed in August 2013 that RMTT had an available facility of £100,000 on their bank account. The loan of actual funds to enable RMTT to start up had been made on the basis of poor advice but, in any event, there had been no attempt to hide the source of the funds, or the dates of the transfer into RMTT’s bank account. This, said Mr Laprell, was not a sufficient basis on which to conclude that ‘fronting’ was taking place.

 

7)    The tribunal, as an expert tribunal, has carefully read and considered all of the documentary evidence, the transcript of the public inquiry, the Deputy Traffic Commissioner’s written decision, and the documents in support of the appeal.

 

8)    We say, at the outset, that this was a complicated case, and we sympathise with the Deputy Traffic Commissioner in having to consider a wide range of issues in the context of complex corporate arrangements, some unhelpful responses from certain members of the family of companies to entirely legitimate enquiries by the authorities, and a foolish transfer of funds between companies which sparked a number of reasonable suspicions.

 

9)    We reject Mr Laprell’s complaints about the Deputy Traffic Commissioner’s questioning. In T/2014/08 Duncan McKee the tribunal has recently considered the difficulties inherent in conducting a robust investigation whilst remaining judicial. We said:

 

“We also consider it axiomatic that, although public inquiries inevitably involve a dialogue between the Traffic Commissioner and others (especially since the proceedings are an inquiry with no advocate acting on behalf of the State), that dialogue should not descend into a prosecution, and all Traffic Commissioners must attempt to choose their words carefully, even when putting damaging evidence to a witness for comment. The inevitable ‘rough and tumble’ of a public inquiry is no excuse for an approach that lacks the essential hallmarks of a fair and judicial process, namely courtesy, impartiality, fairness of process and procedure, and an obviously open mind until the final decision is made at the conclusion of the evidence and submissions. There is a line that separates robust but fair judicial examination, and partisan cross-examination.”

 

10) We consider it far better that a Traffic Commissioner be open about their concerns and suspicions, rather than for the first suggestion of something contentious to appear in a written decision some time later. Nor does a Traffic Commissioner have to meekly accept everything that they are told without probing and testing, and it is often necessary for the Traffic Commissioner to put the contrary point of view (sometimes more than once) and to highlight the evidence that undermines the assertion being put forward. This allows a witness to have a chance of responding. In this case, we do not consider that the Deputy Traffic Commissioner crossed the line.

 

11) Although the Deputy Traffic Commissioner’s decision is a lengthy one, our concern is that the findings he eventually made do not have a firm enough evidential basis. This is especially so, given that a finding that repute has not been established is a serious and grave finding to make – with likely repercussions both for a person who already holds an operator’s licence elsewhere in the United Kingdom, and for a person who has never before held an operator’s licence, has no convictions, has no adverse regulatory history - but who has substantial relevant experience, a good reputation in his field, and a real business opportunity to exploit.

 

12) We bear in mind that it is not for us to simply substitute our own decision in the event that we would, ourselves, decide something different on the evidence. But if one goes to the heart of this case, and looks for the solid evidential basis, then we have had to conclude that a number of the Deputy Traffic Commissioner’s findings cannot stand.

 

13) As Mr Laprell said to us, a first reading of the Deputy Traffic Commissioner’s decision is somewhat deceptive as it appears that the evidential basis for his findings are fully set out and listed. But we agree that, upon closer examination, many of the ‘reasons’ for the findings are insubstantial, or re-make the same point in slightly different ways. To many of the matters highlighted, Mr Laprell said that his response was “So what?” We would not ourselves be quite so direct, but we accept the underlying point. A lot of very little may not add up to very much, and if one strips away the findings unsupported by solid evidence, what is left is insufficient to justify some of the Deputy Traffic Commissioner’s conclusions.

 

14) We do not think it is possible to find that the family of companies in Northern Ireland are a ‘group’ such as to enable the Deputy Traffic Commissioner to hold all contraventions by all companies against MMT or Mr McLernon personally. Whilst the Deputy Traffic Commissioner was entitled to look at the reality behind the structure, we consider that his ultimate conclusion, which could have a number of company law, taxation and other consequences, is not supported by the hard evidence. In determining whether this company was not of good repute, we consider that the Deputy Traffic Commissioner has gone beyond that which is envisaged by paragraphs 1 to 5 of Schedule 3 of the Goods Vehicles (Licensing of Operators) Act 1995, particularly paragraph 2.

 

15) This means that we do not think it is appropriate to hold all contraventions by all companies against MMT or Mr McLernon. He resigned as a director of Total Freight Ltd the same year that it obtained an operator’s licence, now some six years ago. There is nothing arising during Mr McLernon’s short period as a director that has any substantial relevance to the present case. Although he did not include this directorship in the application form, there is no possible reason why this should be construed as deliberate deception when he did disclose his directorship of Morgan Transport & Distribution Ltd – a company with a poor regulatory history of drivers hours and tachograph contraventions, at least up to 2010 when robust steps were taken to address the problems, with a positive outcome.

 

16) The only adverse matters that count against Mr McLernon, in our view, are those attributable to Morgan Transport & Distribution Ltd, including the tachograph and drivers hours contraventions in the past (but balancing against that the complete turn-around some three and a half years ago), the deposit of funds in the bank account of RMTT in order to assist Mr McPhillips to demonstrate financial standing, and (possibly) the apparent use of CML as an operating centre when vehicles were working away from home in the West Midlands Traffic Area.

 

17) However, it is our view that the Deputy Traffic Commissioner had no conclusive evidence on which to make a firm finding of unlawful use of an operating centre by Morgan Transport & Distribution Ltd - and we note that this company has never been subject to regulatory action by the Northern Ireland regulatory authorities in relation to this issue.

 

18) Having said that, if the time has come when questions can properly be asked about this then we think that it was not inappropriate for Mr McLernon to take the view that he will ask permission to establish a small separate fleet in Telford, and will thereby submit to the authority of the local Traffic Commissioner.

 

19) So far as the movement of monies issue is concerned, we consider that insufficient weight was given to the fact that RMTT had a genuine and legitimate overdraft granted before this manoeuvre took place. We do not say that this overdraft facility necessarily established financial standing, but it must give credence to the argument that the short-term loan of monies, for no better reason than to actually show funds in the bank rather than the facility of funds, was a misjudgement rather than something that fatally damages repute. There was no sophisticated attempt to conceal the source of the funds, and at no time was an untrue explanation offered for what happened. It clearly is not a positive feature, but in the context of a case where unsubstantiated suspicions seem to have a heavy presence, this feature (we think) should be kept in proportion.

 

20) Moreover, we do not think that this can reasonably form the basis for a finding of “fronting” when one looks at the overall picture, including the fact that both companies have made applications. Mr McLernon already holds an operator’s licence through Morgan Transport & Distribution Ltd, and he has not had a licence revoked or been disqualified - which is a typical “fronting” scenario. Although one may speculate that one application could have been made as a contingency, in case the other was refused, we find nothing cogent in the evidence to support such a view, and certainly no persuasive evidence of dishonest intent on the part of Mr McPhillips – the alleged potential front. To ask him to prove that he wasn’t acting as a potential front was, we think, the wrong approach, notwithstanding that this was a new application.

 

21) The Deputy Traffic Commissioners did not ask in terms whether, on the evidence, the applicants had established that he could trust them to operate in compliance with the regulatory regime and, if not, why not. Such an analysis would have helpful (see T/2012/34Martin Formby t/a G & G Transport) and may have assisted the Traffic Commissioner to distinguish the evidence based features, and the other matters he considered or found, which appear to lack a solid evidential foundation.

 

22) In the event, whilst we recognise that Traffic Commissioners are the gatekeepers for new entrants to the industry (see Aspey Trucks 2010/49), we can find no basis for concluding that MTT and/or RMTT failed to establish good repute.

 

23) The requirement of professional competence falls to be satisfied by an individual, and where a company is required to satisfy the requirement, it does so if and so long as it has a transport manager or managers (and such number of them as the Traffic Commissioner may require), and such manager is of good repute and professionally competent.

 

24) Paragraph 13(1)(b) of Schedule 3 of the Act provides that an individual shall be regarded as professionally competent if he is the holder of the applicable Certificate of Professional Competence. Both proposed transport managers have valid Certificates of Professional Competence. Whether or not a professionally competent person is in a position to provide continuous and effective control then depends upon the size of the fleet, the time to be devoted, the complexity of the business, and a range of other factors.

 

25) Unfortunately, the question of the applicants’ professional competence has become intertwined with the repute matters raised above, and we have not found it possible to disentangle the Deputy Traffic Commissioner’s findings to see how things would stand if the unsubstantiated suspicions are set aside, and the unsupported findings are removed from the overall consideration.

 

26) Mr McLernon’s plan to act as initial transport manager until a local transport manager can be found may or may not be satisfactory. Had repute not clouded the issue, the Deputy Traffic Commissioner may have considered seeking an undertaking about this, or limiting the time such a temporary arrangement would be permitted. He may have discussed reducing the number of vehicles to be authorised. The input of Traffic Management Solutions may also have provided fodder for an undertaking, and offered a way forward. Turning a positive feature (the use of expert and highly regarded Transport Consultants to support and monitor drivers hours compliance) into a negative feature is not, in our view, particularly helpful.

 

27) Mr McPhillips’ ability to provide continuous and effective control of his fleet needs to be seen in the context of his business model, which is comparatively simple, and his previous experience, which is not insubstantial or irrelevant. Again, we do not think that this aspect has been sufficiently analysed. The Senior Traffic Commissioner’s Guidelines are a helpful starting point, but we think that the Deputy Traffic Commissioner became distracted with other matters so that the ability or otherwise of Mr McPhillips to act as his own transport manager remains, in our view, to be properly determined.

 

28) The Deputy Traffic Commissioner did not reach any final views in relation to financial standing. For our part, we consider that the financial picture in relation to both companies, but particularly RMTT, needs close scrutiny.

 

29) As we said above, the agreement with CML appears to be a type of ‘open book’ arrangement whereby RMTT undertakes the required haulage work and then submits a schedule of their costs to CML. CML will then pay a sum equivalent to the costs plus a percentage uplift. Even this model, however, requires a reasonable ‘float’ to pay upfront expenses and wages, and to ensure satisfactory cash flow before payment is received. CML may need some considerable time to audit the claimed expenses before they make payment. For a licence authorising 20 vehicles, the relevant sum required in readily available capital and reserves is an average of £83,200 (over and above the everyday “ins and outs”). This leaves less than £20,000 from the overdraft facility for start-up trading and float. Is this going to be sufficient? We do not know and cannot reach a judgment on the evidence before us.

 

30) In all the circumstances we have concluded that the appeal should be allowed and the Deputy Traffic Commissioner’s decisions should be set aside. So far as repute is concerned, we are able on the evidence to substitute our own decision. We find that both MMT and RMTT have demonstrated good repute. Unless something new has arisen or arises, we would see no good reason for this aspect of the applications to be revisited.

 

31) However, before operator’s licences can be granted – either for the numbers of vehicles or trailers sought or for a different number – we consider that further public inquiries should be held by a different Traffic Commissioner, addressing both professional competence and financial standing in each case.

 

32) Although we accept that it was previously appropriate to hold a conjoined public inquiry, we have taken the view that these further public inquiries would be better heard separately, albeit by the same Traffic Commissioner, and albeit on the same day (for example, one in the morning and one in the afternoon). This way, each applicant will receive individual and separate consideration, but any contradictory evidence will not go unnoticed.

 

33) Finally, Mr Laprell asked us to consider making or recommending the grant of interim authorisations, perhaps for half the authorisations sought, pending determination of the applications by a different Traffic Commissioner. Our view is that we have no power to do the former, and that it would be inappropriate to do the latter. There is no statutory power to make any recommendation of this sort and we consider that there is too much uncertainty (especially in terms of MMT’s professional competence, and RMTT’s financial standing) to justify a non-statutory recommendation. We therefore leave it to the applicants to make such applications for interim licences to the Traffic Commissioner as they deem necessary to retain the goodwill of CML, and to prevent loss of business opportunities.

 

34) If the Traffic Commissioner declines to grant interim licences, we hope that he will expedite the holding of the public inquiries that we have ordered. If licences are eventually granted, the relevant Traffic Commissioner may consider the value of undertakings relating to (amongst other things) the use of outside consultants, the nature and length of Mr McLernon’s tenure as transport manager in the short term, a locally based transport manager in the longer tem, financial evidence after a reasonable period of trading, drivers being clear which particular operator they are driving for on any given day, and excluding Mr West from all operations.

 

Judge Mark Hinchliffe, DCP

16 June 2014