Neutral Citation Number:  [2011] UKUT 46 (AAC)            

                                         Appeal No: T/2010/71

IN THE UPPER TRIBUNAL		
ADMINISTRATIVE APPEALS CHAMBER
(TRAFFIC COMMISSIONER APPEALS)

ON APPEAL FROM THE DECISION OF MILES DORRINGTON, 
DEPUTY TRAFFIC COMMISSIONER for the EASTERN TRAFFIC AREA, 
DATED 27 AUGUST 2010

Before:
	
Judge Mark Hinchliffe,   	Deputy Chamber President (HESC); Judge of the Upper Tribunal.
Stuart James, 		Member of the Upper Tribunal.
John Robinson, 		Member of the Upper Tribunal.

Appellants:
EUROFAST (EUROPE) LTD
MANDESH SINGH LEHAL; KARAMVIR SINGH GILL; UTTAMJIT SINGH NAGRA
DILIP PARMER

Attendance:

For the Appellants: 	Mr C. Harris

Appeals heard at: 	Victory House, London
Date of hearing: 	10 January 2011
Date of decision: 	28 January 2011

DECISIONS OF THE UPPER TRIBUNAL:

IT IS HEREBY ORDERED that the appeals of Eurofast (Europe) Ltd, Mandesh Singh Lehal, Karamvir Singh Gill and Uttamjit Singh Nagra be DISMISSED. The revocation and disqualifications will come into effect at 2359 hours on 25 February 2011.
IT IS HEREBY ORDERED that the appeal of Dilip Parmer be ALLOWED.

Subject Matter:	

Repute; Duties of Directors; Notification to Transport Manager prior to public inquiry.

Cases referred to:

1999 L56 Alison Jones
Dukes Transport 2001/68
Lisa Rafferty t/a 1st Class Limos [2010] UKUT 145 (AAC)
Bradley Fold Travel Ltd & Peter Wright v Sec. of State for Transport [2010] EWCA Civ 695
Subesh & Others v Secretary of State for the Home Department [2004] EWCA Civ 56
S. Sowerby 2003/58

REASONS FOR DECISIONS:

1)	This was an appeal from the decision of the Deputy Traffic Commissioner for the Eastern Traffic Area made on 27 August when he revoked the operator’s licence held by Eurofast (Europe) Ltd, the operator, under section 27(1)(a) of the Goods Vehicles (Licensing of Operators) Act 1995, and also under sections 26(1)(c), (f) and (h) of the Act. The Deputy Traffic Commissioner also found that the good repute of the company’s directors (Messrs Lehal, Gill and Nagra) had been ‘forfeit’ and he disqualified them from holding or obtaining an operator’s licence for a period of 6 months. During the period of disqualification a separate order under section 28(4) of the Act was made. Finally, the Deputy Traffic Commissioner found that the Transport Manager, Mr Parmer, had lost his good repute with immediate effect.

2)	The factual background to this appeal appears from the documents, the transcript and the Deputy Traffic Commissioner’s decision and is as follows:
(i)	The Appellant Company is the holder of a standard international goods vehicle operator’s licence authorising 4 vehicles and 1 trailer. There are 4 vehicles in possession. The operator’s licence was granted in 2001.
(ii)	An unsatisfactory maintenance investigation took place on 13 August and 2 October 2009. It was found that records did not adequately record repair detail, safety inspections were not at the intervals promised, a delayed prohibition was issued on 13 August, there was a poor test history, and a further delayed prohibition had to be issued on 10 September 2009 – which was some 6 days after a safety inspection had taken place at which the fault leading to the prohibition had been identified, but not rectified. 
(iii)	With regard to safety inspections, the undertaking was for 6-week intervals, but one gap of 10 weeks was identified, and 2 gaps of 8 weeks were noted.
(iv)	In relation to test history, 13 vehicles had been presented for test over the 5-year period ending 14 July 2009, and only 4 had passed at the first attempt. In 2008, vehicle R658MRD had failed for poor service brake, secondary brake and parking brake performance and, when presented for re-test 5 days later, it failed again in relation to service, secondary and parking brakes. Then, 2 days later, it was presented for a second re-test and failed once more on service, secondary and parking brakes. It finally passed on its 4th presentation. In fact, service brake performance had been listed as a failure item at 8 tests across the operator’s small fleet, including re-tests and prohibition clearances. Parking and secondary brake performance had each been listed as failure items at 4 tests.
(v)	With regard to the prohibition of 10 September 2009, issued at the Eurotunnel terminal, the defect identified was: “Excessive movement in steering joint, (excessive abnormal movement), at drag link rear ball joint”. The Vehicle Examiner subsequently spoke to Mr Jasvir Lehal, Operations Manager, about why this defect had not been immediately repaired once it had been discovered at the safety inspection that had taken place on 4 September 2009. Mr Lehal explained that he did not order the necessary new part until 10 September 2009, and the vehicle was prohibited on the same day.
(vi)	A call-up letter dated 28 June 2010 was sent to the operator company. Under the heading: “ACTION THE TRAFFIC COMMISSIONER WILL CONSIDER”, the letter states:
“Section 26(1) of the Goods Vehicles (Licensing of Operators) Act 1995 provides that the Traffic Commissioner may direct that a licence be revoked, suspended or curtailed. Section 27(1) of the Act imposes a mandatory requirement on the Traffic Commissioner by whom a standard licence was issued that the Commissioner shall direct that it be revoked if at any time it appears to him that the licence-holder is no longer of good repute, of the appropriate financial standing, or professionally competent; and the Traffic Commissioner will determine whether that is the case in accordance with Schedule 3 of the Act”.
(vii)	The call-up letter also warned of the Traffic Commissioner’s powers to disqualify directors if the operator’s licence is revoked, and advised all directors to attend so that they may give evidence on their own behalf.
(viii)	Under “GROUNDS FOR ACTION” the call-up letter referred only to prohibitions, unfulfilled statement of expectation, unfulfilled undertakings, material change in circumstances, financial standing, and professional competence. In relation to professional competence, the letter merely states that the Traffic Commissioner would wish to be satisfied that the requirements of continuous and effective responsibility are met and that it would be in the operator’s interest if Dilip Parmer, Transport Manager, were to attend the public inquiry and be available to give evidence if required. No separate notice was sent to Mr Parmer in compliance with paragraph 15(1) of Schedule 3 to the Act.
(ix)	At the public inquiry held in Cambridge on 23 July 2010 the operator was represented by Mr M. Arthur, solicitor. One of the three directors attended (Mr M. Lehal), along with Mr J. Lehal (Operations Manager) and Mr Parmer (Transport Manager). Mr Foulds, the Vehicle Examiner, also attended and gave evidence orally.
(x)	At the commencement of the public inquiry, the Deputy Traffic Commissioner warned Mr Arthur that, even though repute was not specifically referred to in the “GROUNDS FOR TAKING ACTION” part of the call-up letter, he nevertheless wished to consider repute. He went on to summarise the features of the evidence that caused him particular concern on the papers, including the issues arising at the unsatisfactory maintenance investigation, and the fact that Mr Parmer appeared to have another full-time employment commitment, which had not been notified to the Traffic Commissioner. The Deputy Traffic Commissioner concluded his introductory remarks by asking Mr Arthur if there were any preliminary matters that he wished to raise. Mr Arthur did not ask for any time to take instructions and immediately said that he did not wish to raise any matters at that stage, and he confirmed that he had already discussed with his clients the manner in which the proceedings would be conducted.
(xi)	Mr Arthur, when cross-examining Mr Foulds, suggested that, since the prohibition of 10 September 2009 was delayed, it was legitimate for the operator to have delayed rectification of the defect after it was reported at the safety inspection on 4 September 2009. This point was pursued even though the defect was not categorised as an advisory item, the roadworthiness declaration on the PMI sheet had not been signed off by the contractor because of the defect that was categorised as “repair required” and, despite all this, the operator had chosen to put the vehicle in service.
(xii)	The Deputy Traffic Commissioner intervened:
“The vehicle was presented for PMI (Preventative Maintenance Inspection) on 4 September, a defect was found that resulted in a part being required that was not ordered for some time afterwards. However, in any event, on the day the part was ordered a prohibitable item was identified and a prohibition imposed. The point, unless I’m sorely mistaken, of the Vehicle Examiner’s evidence is that your client should (a) have ordered the part sooner, and (b) not allowed the vehicle to go on the road with a prohibitable defect.”
(xiii)	In relation to the MOT failure rate, the Deputy Traffic Commissioner was told that two newer vehicles had been recently acquired which would explain why there had been no adverse test history in the 8 or 9 months prior to the public inquiry. However, in relation to the operator’s ability to consistently maintain its vehicles in a fit and serviceable condition over time, the Deputy Traffic Commissioner asked the Vehicle Examiner:
DTC: What is VOSA’s view on an operator who cannot, on that one day of the year (when a vehicle is presented for test) get their vehicle through an MOT at first presentation?
Mr Foulds: If it is presented at the test ready prepared and it still fails, it puts the vehicle at risk the rest of the year … it obviously raises questions as to its condition throughout the rest of the year.
(xiv)	Some further PMI sheets were produced at the hearing, and Mr Foulds picked up on two more extended time gaps between safety inspections - of 9 weeks - in relation to one vehicle and one trailer. The operator maintained that the vehicle in question had not been used and was off the road during part of that period (although it had covered approximately 6,000 km) but there was no VOR (Vehicle Off Road) documentation, and the Traffic Commissioner had not been informed that the operator had ceased to use the vehicle within the required 21 day notice period (see The Goods Vehicles (Licensing of Operators) Regulations 1995, Paragraph 28). In conclusion, Mr Foulds agreed with the proposition that the overriding reason why the operator was found to have an unsatisfactory maintenance inspection was “lack of management control”.
(xv)	Mr Arthur advised the Deputy Traffic Commissioner that the only director present was Mr Mandesh Lehal, but he did not have any involvement on the transport side of the business. He was, nevertheless, called to give evidence and he explained that the directors left responsibility for the transport side of the business with Mr J Lehal (Operations Manager) and Mr Parmer (Transport Manager). It further emerged that this situation continued even after the visits made by Mr Foulds in 2009 that had highlighted maintenance failures in a number of key areas. The Deputy Traffic Commissioner quoted some passages from the Transport Tribunal decisions in 1999 L56 Alison Jones, and Dukes Transport 2001/68, and Mr M Lehal replied that he just left it to the Operations Manager and the Transport Manager, and that situation continued up to the date of the public inquiry.
DTC: Were you aware of how serious the findings were from the Vehicle Examiner? Did you ever discuss with your Transport Manager or your Operations Manager ‘Why is my business in such a bad position?’
Mr M. Lehal: No
DTC: So is that ‘No’ that you did not realise how serious it was or ‘No’ that you did not discuss why it was so serious with them?
Mr M. Lehal: Both.
Mr M. Lehal went on to say that he “hardly ever” went into the office and never received calls from the Transport Manager or the Operations Manager in relation to the transport side of the business.
(xvi)	The Deputy Traffic Commissioner then offered Mr Arthur an opportunity to take further instructions, saying:
“ … your clients are getting more and more into a serious situation from the evidence we are hearing because on the face of the Vehicle Examiner’s report it was a relatively normal maintenance related public inquiry, but what I have now got is something that cuts straight across Dukes Transport and straight across Alison Jones, cuts across it completely. It is not good”.
After a ten-minute break, Mr Arthur advised the Deputy Traffic Commissioner that, before the call-up letter had been sent, a decision had been made that the Operations Manager, Mr J Lehal, would become a director and a minority shareholder, and that instructions to this effect had already been given to an accountant.
(xvii)	After hearing, also, from Mr J Lehal, and Mr Parmer, the Deputy Traffic Commissioner advised Mr Arthur that he would appreciate submissions in relation to disqualification of directors because of what appeared to be “abrogation of responsibility by directors”. In response, Mr Arthur pointed out that the recent prohibitions were delayed and not ‘S’ marked, and he identified a number of mitigating features in relation to the maintenance investigation, and test history. Mr Arthur said that, for the future, one could see “a rosier picture”. The Deputy Traffic Commissioner again invited representations in relation to possible disqualification of the operator’s directors. After taking instructions Mr Arthur said that there were no representations to be made. The Deputy Traffic Commissioner then reserved his decision, and he issued a lengthy written decision on 27 August 2010.
(xviii)	In summary the Deputy Traffic Commissioner found that the directors of the company had abrogated their responsibility for the transport side of the business, that this explained why there were no adequate systems to ensure compliance with undertakings and statements of expectation and, even at the date of the public inquiry, there had been no improvement in the level of supervision and monitoring (that is to say, practically none) being exercised by Mr M Lehal. There was little, if any, evidence of any immediate changes to the maintenance arrangements since the time of the maintenance investigation, and there were still instances of the time gaps between safety inspections being stretched. Finally, the Traffic Commissioner had not been informed that the Transport Manager, Mr Parmer, now had a full-time job (40 hrs per week) in a local petrol station, and the Transport Manager had failed to exercise continuous and effective control. 
(xix)	On the positive side, there was evidence of newer vehicles being acquired, with beneficial consequences for the operator’s recent test history, and greater adherence to the statement of intent relating to safety inspections. The Deputy Traffic Commissioner reminded himself that all operators and individuals remain of good repute until admissible evidence is presented that proves to the contrary, but he nevertheless found that the failure of the directors to ensure compliance with the conditions and undertakings on the operator’s licence was a very serious and fundamental failing. Even if Mr J Lehal took over as director, the Deputy Traffic Commissioner had no confidence that there would be compliance in the future, given Mr J. Lehal’s failure to ensure compliance previously.
(xx)	The Deputy Traffic Commissioner asked himself the ‘Priority Freight’ and ‘Bryan Haulage’ questions and, for the reasons he gave, answered ‘No’ and ‘Yes’ respectively. He concluded that the operator had lost its repute. Additionally, in relation to the prohibition history, breach of undertakings and statement of intent, and material change, the Deputy Traffic Commissioner decided that, taken together and in the context of his other conclusions, revocation was the only appropriate action under section 26 of the Act. The Deputy Traffic Commissioner found that the directors did not know of prohibitions issued and were not aware of the unsatisfactory maintenance investigation – but this was not a mitigating feature. He went on to disqualify the three directors for a period of 6 months, stating that: “this is one of the worst cases I have seen of directors abrogating their responsibility”. 
(xxi)	Finally, the Deputy Traffic Commissioner found that Mr Parmer had lost his repute as a Transport Manager.

3)	At the hearing of this appeal, the Appellants were represented by Mr Harris who submitted a skeleton argument for which we were grateful.  The first point made was that the call-up letter did not cite section 27(1)(a) of the Act as a ground for action regarding the operator’s repute. The tribunal accepts that this part of the call-up letter is silent in relation to section 27(1)(a), but the section entitled: “ACTION THE TRAFFIC COMMISSIONER WILL CONSIDER” refers specifically to section 27(1) and the question of good repute. Moreover, the matter was specifically raised with the operator’s legally qualified representative at the outset of the public inquiry, and no adjournment was sought. The situation here is very similar to that facing the tribunal in Lisa Rafferty t/a 1st Class Limos [2010] UKUT 145 (AAC). Here the tribunal said:
“Our starting point is Mr Laprell’s criticism of the call up letter.  Whilst it does not state in terms that the Traffic Commissioner was going to consider the question of whether the Appellant had been engaged in the unlawful operation of limousines, it did state in no uncertain terms that the Traffic Commissioner was going to consider “any other information as the Commissioner may have as to (the Appellant’s) previous conduct, in whatever capacity, in relation to the operation of vehicles of any description in the course of a business”.  The only capacity in which the Appellant had operated vehicles in the course of a business was as a limousine operator.  The Appellant and her legal advisor (who is an experienced road transport solicitor with experience of prosecuting for VOSA) would have been well aware of the issues that were going to be considered by the Traffic Commissioner in that context …  At the outset of the public inquiry, the Traffic Commissioner made her concerns known and Mr Conybeare did not hesitate in stating that the Appellant could deal with the issue raised.  He did not even ask for a moment to take instructions from the Appellant to ascertain whether she was in a position to deal with the allegation of unlawful operation and whether he should seek an adjournment … Mr Laprell submitted that if the call up letter had included the specific allegation of unlawful operation, then the Appellant could have produced at the hearing, further documents and witness statements perhaps from drivers to confirm that she did not control them when they were driving her vehicles.    Well, that is a matter that Mr Conybeare would have considered at  the point when he determined that the Appellant was able to deal the issues raised.  In the circumstances we are satisfied that there is nothing in this point.”

In the present case, we are satisfied that nothing was left unsaid that would or could have been said, and no topic was inadequately covered that would have been more thoroughly addressed, had the call-up letter specifically referred to section 27(1) as a ground for action. The operator, clearly, was not taken by surprise by the Deputy Traffic Commissioner’s indication at the start of the public inquiry and, if the matter had not been expected, an adjournment could and should have been requested. Essentially, the position is one of fairness. We are satisfied that no unfairness arose, and that the Deputy Traffic Commissioner did all he could to flag up the gravity of the situation as he saw it, and as it unfolded during the public inquiry. We note that, even though disqualification was specifically mentioned in the call-up letter (and disqualification can only be considered after revocation) two out of three directors failed to attend. We do not imagine that the position would have been any different had repute been referred to, not only in ‘ACTION THE TRAFFIC COMMISSIONER WILL CONSIDER’ (where it was clearly referred to) but also in the subsequent sections of the call-up letter. In the circumstances we are satisfied that there is nothing in this point.

4)	Mr Harris’ next submission was that the Deputy Traffic Commissioner did not refer to Schedule 3 in his decision and reasons. For our part, we see no reason why he should have done so. Traffic Commissioners already appear to feel constrained to include standard paragraphs and phrases in their decisions despite the principle that an appellate tribunal will generally assume that a first-instance decision-maker correctly understands the legal framework unless something was done or said that indicates to the contrary. In our view, the routine recitation of standard phrases adds little to the substance of a decision – what matters most is what the Traffic Commissioner thinks, and why he thinks it. In the present case, there is nothing to suggest that the Deputy Traffic Commissioner approached his analysis of repute incorrectly. Indeed, we consider that no careful reader of his decision could be in any doubt about the Deputy Traffic Commissioner’s findings and reasons, or the weight that he decided to attach to the negative and positive features. 

5)	The next sequence of submissions all say much the same thing, albeit in different ways. In essence, the contention is that the Deputy Traffic Commissioner failed to undertake an adequate balancing exercise, failed to set out why the Appellant Company should be put out of business, and took action that was disproportionate. We reject these points. The Deputy Traffic Commissioner acknowledged that the evidence he received from the company’s director was honest, and he specifically recited such positive points as impressed themselves upon him. But he was entitled to conclude that, as the evidence unfolded, the underlying managerial arrangements for ensuring compliance with the requirements of the operator licensing system were woeful, and had so continued even after the maintenance investigation revealed systemic failures in safety inspections and procedures for rectification. 

6)	In our judgment, the Deputy Traffic Commissioner did not attach disproportionate weight to the prohibitions – indeed he accepted during the public inquiry that the incidence of prohibitions was not particularly high – but he was entitled to take a dim view of the calculated decision to put a vehicle into service when a non-advisory defect had been identified at a safety inspection and, as a consequence, the vehicle had not been signed off as roadworthy. The emphasis upon the fact that the prohibition subsequently issued was delayed (after almost a week had passed before the necessary part had even been ordered) was, we think, entirely misconceived. A delayed prohibition is a serious matter. In putting the argument that it did, and in pursuing it vigorously before the Deputy Traffic Commissioner and before the tribunal, the operator did more harm than good, and made it very difficult for the Deputy Traffic Commissioner to conclude that compliance would be achieved in the future – especially as the “new” director was none other than the Operations Manager who had made the fateful decisions in the first place.

7)	In Bradley Fold Travel Ltd & Peter Wright v Secretary of State for Transport [2010] EWCA Civ 695, Leveson LJ in the Court of Appeal approved the words of Laws LJ in Subesh & Others v Secretary of State for the Home Department [2004] EWCA Civ 56.

Laws LJ said:

“An appellant, if he is to succeed, must persuade the appeal court or tribunal not merely that a different view of the facts from that taken below is reasonable and possible, but that there are objective grounds upon which the court ought to conclude that a different view is the right one.”

In agreeing with this in the context of appeals to the Transport Tribunal (now Upper Tribunal (AAC) Traffic Commissioner Appeals) Leveson LJ added that the tribunal might usefully ask itself whether reason and the law impelled it to take a different view from that of the Commissioner.

8)	Clearly, if there has been no balancing exercise, or if the challenged decision lacks either intelligible or adequate reasoning, or those elements that are regarded as the essential ingredients of a written decision are missing, or if there is an apparent and material error in the Commissioner’s understanding of the law or the key facts, then an appellate tribunal will be bound to consider whether it should intervene on the ground that the Commissioner’s decision is plainly deficient or wrong. But an assertion that a decision is “disproportionate” is often little more than an assertion that the Appellant disagrees with the Commissioner’s findings of fact, or thinks that the action taken was too severe. This does not, however, mean that an error of law has occurred, or that reason and the law impel the tribunal to take a different view. We are satisfied that a thorough balancing exercise was undertaken, and the Deputy Traffic Commissioner was entitled to reach the conclusions he did, for the reasons he clearly gave. By way of example, an extremely poor test history over a 5-year period is not wiped away by the acquisition of new vehicles and a relatively uneventful period lasting a few months. An inability to prepare vehicles for test is indicative of something seriously wrong with procedures in place (or not) for the identification of defects and, of relevance in this case, to the rectification of defects. And this operator’s maintenance and managerial arrangements and procedures appear to have remained virtually unchanged. We therefore see nothing wrong or disproportionate in the Deputy Traffic Commissioner’s approach and we find that the submissions relating to proportionality and the balancing exercise are without merit.

9)	Mr Harris challenged the Deputy Traffic Commissioner’s reliance on Dukes Transport 2001/68 and 1999 L56 Alison Jones. We consider that the Deputy Traffic Commissioner was entirely right to have regard to the important principles laid down in these long accepted cases. Directors have collective responsibility for the company that they manage.  It is their responsibility to set the standards that employees are expected to meet; it is their responsibility to ensure that those standards are actually met, and that undertakings and promises made in their name are complied with. They have a duty, whether the company is large or small, to take proper steps to ensure that there are directors with appropriate knowledge of, and accountability for, the company’s arrangements for securing and monitoring compliance, even where day-to-day management of the transport operation is delegated to others. Accordingly, in our judgment, a Traffic Commissioner is entitled to assume, unless the contrary is proved, that an operator company is responsible and accountable for the actions and failures of its employees, and that directors are all equally responsible for the management of a company, with the result that they are all equally culpable for bad management.  

10)	The final point of substance put forward by Mr Harris related to the Deputy Traffic Commissioner’s decision to find that Mr Parmer, the operator’s Transport Manager, had lost his repute. We make no findings on the question of whether the Deputy Traffic Commissioner would have been entitled to reach such a conclusion had a proper notice been served on Mr Parmer, in accordance with paragraph 15(1) of Schedule 3 to the Act. The matter was certainly addressed in some detail at the public inquiry, and the failures of the Transport Manager are fully described in the written decision. But the plain fact is that no such notice was sent and, unless the Transport Manager is also a sole director, a Transport Manager is entitled to notice under paragraph 15(1) of Schedule 3, as affirmed by the tribunal in the case of S. Sowerby 2003/58. Accordingly, this point succeeds, and the Deputy Traffic Commissioner’s ruling in relation to the Transport Manager must be set aside.

11)	In all the circumstances we conclude that the appeals of Eurofast (Europe) Ltd, Mandesh Singh Lehal, Karamvir Singh Gill and Uttamjit Singh Nagra should be dismissed. The revocation and disqualifications will come into effect at 2359 hours on 25 February 2011. The appeal of Dilip Parmer is allowed.

Judge Mark Hinchliffe, DCP
28 January 2011