Neutral Citation Number: [2015] UKUT 114 (AAC) Appeal No: T/2014/80

IN THE UPPER TRIBUNAL

ADMINISTRATIVE APPEALS CHAMBER

(TRAFFIC COMMISSIONER APPEALS)

ON APPEAL FROM THE DECISION OF SARAH BELL,

TRAFFIC COMMISSIONER for the WEST OF ENGLAND,

DATED 11 NOVEMBER 2014

Before:

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

Mr G Inch, Member of the Upper Tribunal.

Mr A Guest, Member of the Upper Tribunal.

Appellants:

HENRY STANLEY and LYNNE STANLEY

Attendance:

For the Appellant: No attendance or representation

Appeals heard at: Field House, Breams Buildings, London

Date of hearing: 27 February 2014

Date of decision: 10 March 2015

DECISION OF THE UPPER TRIBUNAL:

IT IS HEREBY ORDERED that the appeal be dismissed.

Subject matter:

Financial Standing. Change of Entity.

Cases referred to:

None

REASONS FOR DECISION:

1)    This was an appeal from the decision of the Traffic Commissioner for the West of England made on 11/11/2014 when she revoked the appellants’ standard national goods vehicle operator’s licence authorising 6 vehicles, with effect from 18/11/2014. Although financial standing is a mandatory requirement, the Traffic Commissioner decided to proceed on the basis of material change in the circumstances of the licence holder - albeit material change in relation to the appellant’s financial standing - under Section 26(1)(h) of the Goods Vehicles Licensing of Operators) Act 1995.

2)    The operator is a partnership – a mother and son – Mrs Lynne Stanley and Mr Henry Stanley. Given an authorisation for 6 vehicles, the partnership was required to demonstrate access to readily available capital and reserves in the sum of £27,200.

3)    In 2013, as part of the process of periodic review, the Traffic Commissioner’s office wrote to the partners asking that they provide evidence of financial standing. In particular:

“You must now forward original bank or building society statements covering the last 28 days, the last date of which must not be more than 2 months from the date of receipt of the application, along with proof of any overdraft facility in place (please ensure date commenced is specified if applicable). An offer of an overdraft will not be acceptable, only a formal written commitment will suffice … All financial documents should be in the same name as the applicant or licence holder. In the case of partnerships, they must be in the same name(s) as one or both of the applicants or licence holders.”

4)    The partners replied enclosing a letter from Crystal Business Finance Ltd, dated 14/6/2013 and referring to “Lynne & Leslie Stanley t/a Henry Stanley Compost”. The letter stated:

“This is to confirm that we have several facilities in place for the above client amounting to over £90,000 available against assets which may be plant, machinery, or vehicles. These facilities are valid for the next 3 months and can be drawn down against any assets the above company wishes to purchase”.

5)    On 2/8/2013 the Traffic Commissioner’s office wrote to the partnership explaining that the letter was not acceptable without the original agreement and the completion of a form requiring more details. The partners replied that there was no signed agreement, but they added that Crystal Finance consider that their letter is adequate for the Traffic Commissioner’s purposes. A subsequent letter from the partners, dated 18/9/2013, stated that the partners did not have “funds sitting in a bank account”.

6)    The Traffic Commissioner decided to call the partnership to a public inquiry. On 29/10/2014 (after the call-up letter had been sent, but before the public inquiry took place) a caseworker in the Traffic Commissioner’s office received an email from Mrs Stanley stating that the partnership had come to an end and that her son, Henry Stanley, would apply for a new operator’s licence in his own name.

7)    The public inquiry took place on 4/11/2014. Mr H Stanley attended. He explained that the partnership had been a partnership with himself and his mother. Unfortunately, his father had been in poor health and so his mother was now a full-time carer. Mr Stanley said: “I’ve started trading as, on my own, you know, from 1^st September (2014)”. He also said that “my mum doesn’t want any part of it”, and that he was now only running one vehicle.

8)    The Traffic Commissioner pointed out that there had been a change in entity and the partnership’s discs were not transferable. No financial evidence had been produced and the partnership no longer existed. Mr Stanley agreed that this was the case.

9)    By a decision dated 11/11/2014 the Traffic Commissioner found that the partnership had failed to demonstrate financial standing and referred to the guidance in the Senior Traffic Commissioner’s Statutory Guidance on the subject. Further, the partnership had ceased to exist and, if Mr Stanley wished to operate as a sole trader, he needed to apply for a new operator’s licence in his own name. She revoked the partnership’s operator’s licence.

10) The grounds of appeal re-assert that the letter from Crystal “is funding we have in place when required”. The grounds also assert that the Traffic Commissioner misunderstood the position of the partnership – it had not ceased. The farm still operated as a partnership, although Henry Stanley would operate the compost side of the business on his own.

11) Prior to the hearing of the appeal, an application for a ‘stay’ was refused by both the Traffic Commissioner and the tribunal.

12) At the hearing of this appeal, the Appellants failed to attend and were not represented. No explanation was received. The tribunal decided to proceed to determine the appeal on the basis of the documentary evidence available.

13) The Senior Traffic Commissioner’s Statutory Guidance on “Finance” and “Legal Entities” can be found at

https://www.gov.uk/government/publications/senior-traffic-commissioners-statutory-guidance-and-statutory-directions

14) The 2013 arrangement with Crystal is not a factoring agreement based upon actual or expected invoice receipts. Rather, it appears on the limited information available to be a type of working capital loan facility, and/or a revolving credit agreement with minimum monthly repayments. However, the precise terms of any agreement are not clear, and would need to be considered. For example, in the case of a 12 month working capital loan facility (which is probably the minimum period to be viable), it should be agreed by written document setting out its terms, and should be demonstrably:

a)    available to the entity relying upon it;

b)    available up to a maximum required amount;

c)    available for multiple drawings in a 12 month period;

d)    convert to a 12 month fixed term loan for any amount drawn;

e)    be renewable annually by notice from the bank;

f)     secured on clearly identifiable entity assets other than the authorised fleet; and

g)    have no minimum or maximum amount, up to agreed facility limit.

15) A revolving credit agreement must refer to the revolving credit facility, have an agreed facility (credit) limit and show sufficient amounts to be drawn upon to meet repair and maintenance costs of the authorised fleet. Invoice finance or invoice agreements may also be accepted but only if accompanied by a copy of the signed agreement and a completed schedule signed on behalf of the finance company. The derogation in paragraph 2 of Article 7 of EC Regulation No. 1071/2009 allows Traffic Commissioners to take account of a bank guarantee or insurance provided by a financial institution subject to paragraph 1 of the Article, which requires a standard licence operator to be “at all times” able to meet its financial obligations. It goes on to refer to an annual audit. These provisions do not specifically apply to restricted licences.

16) It will be seen that the letter from Crystal Business Finance Ltd goes nowhere near establishing financial standing. In any event, the facilities referred to were only valid for 3 months from 14/6/2013, and the public inquiry took place on 4/11/2014.

17) This means that this appeal cannot succeed. However we would add, having had an opportunity of reading the public inquiry transcript, that we do not think that the Traffic Commissioner misunderstood what she was told by Mr Stanley. He was clear that the partnership had ceased, and the distinction subsequently referred to in the Grounds of Appeal was not mentioned in the course of the oral evidence.

Judge Mark Hinchliffe, DCP

10 March 2015