Neutral Citation Number: [2014] UKUT 0470 (AAC)	       Appeal No.  T/2014/53/54
IN THE UPPER TRIBUNAL		
ADMINISTRATIVE APPEALS CHAMBER
COMMISSIONER APPEALS

ON APPEAL from the DECISION of
Sarah Bell, Traffic Commissioner for the 
West of England Traffic Area dated 5 June 2014

Before:
Her Honour Judge J Beech, Judge of the Upper Tribunal
George Inch, Member of the Upper Tribunal
John Robinson, Member of the Upper Tribunal

Appellants:

CARMEL COACHES LIMITED
ANTHONY GROVE HAZELL
MICHAEL JAMES HAZELL

Attendances:
For the Appellants: Mr Nesbitt of Counsel instructed by Stone King solicitors

Heard at: Field House, 15-25 Bream’s Buildings, London, EC4A 1DZ
Date of hearing: 16 September 2014
Date of decision:   17 October 2014

DECISION OF THE UPPER TRIBUNAL

IT IS HEREBY ORDERED that the appeals be DISMISSED with effect from 23.59 14 November 2014

SUBJECT MATTER:-  Failure to meet statement of intent when applying for an operator’s licence; unlawful use of operator discs; maintenance; good repute; professional competence; revocation; disqualification

CASES REFERRED TO:-  Bradley Fold Travel Ltd & Peter Wright v Secretary of State for Transport (2010) EWCA Civ. 695; NT/2013/82 Arnold Transport & Sons Ltd v DOENI; 2009/225 Priority Freight; 2002/217 Bryan Haulage (No.2).

REASONS FOR DECISION

Introduction
1.	This was an appeal from the decision of the Traffic Commissioner (“TC”) for the West of England Traffic Area made on 5 June 2014 when she revoked the standard international operator’s licence held by Carmel Coaches Limited (“the company/Carmel Coaches”) under s.17(1) of the Public Passenger Vehicles Act 1981 (“the Act”) and found that Anthony Grove Hazell (“AGH”) and Michael John Hazell (“MJH”) were no longer of good repute or professionally competent under s.14ZA(2)(b) & (d) of the Act and disqualified the company, AGH and MJH from holding or obtaining an operator’s licence for a period of 18 months.  All orders were to come into effect at 23.59 on 31 July 2014.  The TC also revoked the operator’s licence of Hirethisbus.com (there is no appeal in respect of that order) and granted an operator’s licence to Carolyn Alderton (the daughter of AGH) authorising 5 vehicles.
2.	The factual background to the appeal appears from the documents and the Traffic Commissioner’s written decision.  In 1984, AGH commenced operating coaches using the trading name AG Hazell trading as Carmel Coaches.  He was the nominated Transport Manager on his PSV licence which ultimately had an authorisation of 30 vehicles.  Neither the licence or AGH had an adverse compliance history.
3.	On 21 January 2010, Carmel Coaches Limited was incorporated.  At the date of the public inquiry, the directors were AGH, MJH and Carolyn Alderton (“Ms Alderton”).   By an application dated 29 June 2010, the company applied for a standard international PSV  licence authorising 23 vehicles to be operated from Station Road, Northlew, 3 vehicles to be operated from Pine Lodge, North Taunton and 10 vehicles to be operated from Grace Road West, Exeter (36 vehicles in total).  The preventative maintenance inspection intervals were 42 days (six weeks) and the maintenance was to be conducted “in house”.  The nominated Transport Managers were AGH with his place of work specified as the Northlew operating centre and MJH with his place of work specified as the Exeter operating centre.  The application was signed by AGH. Within the appeal bundle there was also a TM1 form nominating AGH as a full time Transport Manager and a contract of employment for MJH dated 25 October 2010.  That confirmed that MJH would be the responsible Transport Manager for the Exeter operating centre working 48 hours per week.  There was also a letter from MJH to the Office of the Traffic Commissioner (“OTC”) dated 30 December 2010 confirming that he was a full time employee and Transport Manager of the company.  The letter went onto advise that MJH was also the nominated Transport Manager for his own licence (Hirethisbus.com) with 3 discs which was operated in conjunction with Carmel Coaches and that he was Transport Manager for Keith Sibbick, a retired operator who drove part time for Carmel Coaches and who was not operating any vehicles.  MJH stated that becoming a Transport Manager for the company in addition to his existing Transport Manager obligations would not impair his ability to oversee those operations as they were “fairly small” and he had in any event, been working for Carmel Coaches in a “traffic/operations/managerial role” for several years.
4.	The company was granted a licence on 10 May 2011 with an authorisation of 40 discs, the nomination of AGH and MJH as Transport Managers having been accepted.   
5.	Within three months of the grant of the licence, one of the company’s vehicles was issued with an “S” marked delayed prohibition as a result of an inadequate repair to a silencer strap.  A further delayed prohibition was issued on 6 December 2011 for an air tank leak on a front axle and an oil leak from a brake valve.  There then followed a maintenance investigation by VOSA (now the DVSA) on 19 January 2012 at the Northlew operating centre.  One delayed prohibition was issued for an engine fuel leak and an immediate prohibition (two items) was issued for a defective catch on a flap door and damage to exterior panel work which was likely to cause injury.  It was evident that deficiencies were found in the maintenance systems as a warning letter was issued by the OTC to the company on 21 March 2012 which referred to an email received from the company in which undertakings had been given to adhere to the preventative maintenance inspection (“PMI”) interval of no more than 42 days and that there would be a nil defect driver reporting system with records and reports retained for two years.  By letters dated 28 February 2012, both AGH and MJH were also issued with warnings as nominated Transport Managers for the company.  
6.	A further 5 delayed and 3 immediate prohibitions (one at an annual test for a 44% brake imbalance) were issued to the company’s vehicles between 19 January 2012 and 14 August 2013 when a further maintenance investigation took place.   The investigation was prompted in particular by an “S” marked immediate prohibition issued for a lifted entrance step plate causing a tripping hazard and a rotten threshold to an emergency exit.  

DVSA  Maintenance Investigation Carmel Coaches 14 August 2013
7.	The maintenance investigation was conducted by Vehicle Examiner (“VE”) Hassett at the Northlew operating centre.   He noted that the company’s main source of work was school contracts and “trips”.  The outcome of the investigation was unsatisfactory.  VE Hassett inspected three vehicles and issued 1 immediate and 2 delayed prohibitions.  The immediate prohibition was for evidence of an under bonnet fire caused by an exhaust leak from the turbocharger, which had set fire to the engine ducting.  He found a “very fragmented” driver defect reporting system with evidence of numerous defects not having been actioned or action having been delayed.  Vehicle details and mileages were missing on the reports and the system was difficult to audit as firstly, not all records were held at the operating centre with vehicles being swapped between Exeter and Northlew and secondly there was no central holding facility in which a full set of maintenance records was kept.  VE Hassett noted that the PMI intervals were being stretched by up to 12 weeks.  He gave specific examples:
•	R902 GJO: there were no driver defect reports for the period between 28 November 2012 and 25 June 2013 yet the PMI records demonstrated that the vehicle was in use.  The PMI intervals were up to 8 weeks
•	Y872 GDV: had been issued with the “S” marked prohibition for the rotten floor and step edging.  There was no record of the defects in the PMI inspection 5 weeks earlier.  The defects indicated a lack of proper attention during the inspection.  There was no driver defect report for the defects nor for failed stop lamps, markers and seat defects.  The PMI intervals for the vehicle had been stretched to 9 weeks
•	R467 GGR: there were 3 driver defect reports which had not been signed off for lamp faults and seat belt defects.  The PMI intervals had been stretched to 12 weeks.  
8.	VE Hassett discussed the issue of prohibitions with AGH who left the operating centre before VE Hassett had completed his visit.  However at a later date, he was able to discuss with AGH the PG13G notice which had been issued for an absence of service intervals recorded on vehicle files and for walk round check sheets being “scattered and incomplete, action not recorded, mileages missing, records missing, repeat defects reported”. 
9.	The MOT failure rate at first presentation was 40% (national average 18%) and the prohibition rate which was 35% over 5 years (compared to the national average of 11%) had worsened since the previous maintenance investigation with 10 prohibitions issued since January 2012.  VE Hassett considered that the rate could be improved with better driver reporting of defects.  
10.	Finally it was noted that a number of the company’s vehicles were being used under the Hirethisbus.com licence and that those vehicles had an MOT failure rate of 60% and a prohibition rate of 33%.  The service records of those vehicles could not be inspected at Northlew because they were “held elsewhere” and when MJH was asked to produce the documents at the Exeter depot, he denied that he had any records in his possession (see below).  
11.	VE Hassett concluded that he had concerns about the ability of the company to maintain its vehicles in a fit and serviceable condition and considered that it was not complying with its statement of intent.   

Hirethisbus.com
12.	This standard national licence was granted to MJH in 2006 authorising 3 discs.  It had an operating centre in Exeter (Tedburn St. Mary) authorising two vehicles and it was authorised to keep one vehicle at the Northlew operating centre of Carmel Coaches.  Its maintenance contractor was Carmel Coaches.  
13.	In a checklist completed 19 August 2011, MJH notified the TC that he did not have any vehicles currently specified on the licence.  Then in an application dated 8 February 2013, MJH applied for a variation of the licence to increase the authorisation from 3 to 12 discs.  He indicated that he was only applying for a margin at that stage and that he no longer wished to use the Tedburn St. Mary operating centre.  He was transferring all of his operations to Northlew.  This application resulted in a maintenance investigation being conducted by VE Hassett on 20 April 2013.  Prior to the date of the proposed visit, VE Hassett spoke to MJH and was informed by him that as he had never used the discs on his licence, he did not have in his possession any maintenance records.  Further, whilst his variation application specified the Northlew operating centre, MJH did not in fact have any intention of keeping the vehicles there but rather at the Grace Road West Exeter operating centre of Carmel Coaches.  VE Hassett noted in his report that in any event, he would not have endorsed such a large number of additional vehicles at the Northlew site.  VE Hassett enquired why MJH had not applied for the Grace Road West site of Carmel Coaches to be his operating centre.  MJH was of the view that such an application would “complicate” matters.  
14.	In relation to the reason for the variation application, MJH also informed VE Hassett that he had received an inheritance which had enabled him to finance the increase in the licence authorisation.  However, he did not have any intention of buying vehicles to fill the authorisation.  He simply wanted “a buffer”.  VE Hassett thought it strange that an operator would wish to finance such a large increase in authorisation when he did not operate any routes or contracts.  
15.	VE Hassett’s investigations revealed that Carmel Coaches had been using the discs of Hirethisbus.com since 2008.  One delayed prohibition was issued in March 2010 to a vehicle displaying a Hirethisbus disc for a brake air leak during a school bus check along with an advisory notice for a loose passenger seat (VRN L335 PWX).  The vehicle was owned by Carmel Coaches Limited and sold by the company in December 2012.  VE Hassett would have expected MJH to be aware of the notices issued to the vehicle as its operator and to mention them when records were being discussed.  
16.	Of the three vehicles encountered at MOT testing displaying Hirethisbus discs, there was a 60% failure rate.  On the occasions when they were encountered on the roadside, the vehicles were owned by Carmel Coaches.  There appeared to be a close relationship with Carmel Coaches Limited and Hirethisbus discs were being used in Carmel Coaches vehicles.  It was confirmed by Exeter County Council that the school contract upon which L335 PWX was operated was a contract assigned to Carmel Coaches.  Hirethisbus.com did not have any school contracts with the Council.
17.	The investigation was marked as unsatisfactory, VE Hassett having concluded that MJH was not complying with his statement of intent in relation to maintenance and a PG13F/G form was issued.  MJH did not respond to that form until 3 August 2013 when VE Hassett received an email which stated that MJH did not have any vehicles in his possession although he had operated vehicles in the past.  He dealt with them in turn:
•	L335 PWX: disposed of “over 15 months ago” (we note that this is in contrast to VE Hassett’s findings set out in paragraph 15 above that the vehicle which was owned by Carmel Coaches was disposed of in December 2012)
•	R639 VYB: disposed of and the maintenance records had been passed to the new owner (we note that the obligation remains on the seller to retain copies of the maintenance records for 15 months)
•	Y872 GDV: “Vehicle now operated under licence .. Carmel Coaches Limited and has been for 3+years”.  
MHJ went on to state that to enable him to be granted a variation of his licence, he proposed the following: Firstly “display evidence of a forward planning maintenance system”.  Secondly, to show VE Hassett his written defect reporting system and provide samples of maintenance inspection sheets.  Thirdly, to “forward other systems in place i.e. wheel security and monitoring etc”.  He believed that the Exeter operating centre of Carmel Coaches was adequate to accommodate 12 additional vehicles.  MJH advised VE Hassett that he had recently passed the international CPC examination which reflected his knowledge of transport operations and “built on his repute”.  Having considered this response, VE Hassett was satisfied that it did not alter the conclusions that he had already come to in respect of the licence.

The lead up to the public inquiry
18.	By letters dated 18 and 28 February 2014, the company, AGH and MJH were called to a public inquiry listed for 20 March 2014.  All matters were in issue, including the relationship between the company and Hirethisbus.com and the unlawful use of discs issued to Hirethisbus by Carmel Coaches.  
19.	On 18 March 2014, the company submitted a variation application to add an operating centre at Nailsea, North Somerset to its licence where 3 vehicles were to be kept.  This was the former operating centre of North Somerset Coaches, a firm which had been acquired by Carmel Coaches in 2014 and which had been “re-branded” as Carmel Bristol.  At about the same time (the application is not within the appeal bundle), Ms Alderton applied for an operator’s licence in her own name trading as Carmel Coaches Bristol.  
20.	Immediately, prior to the public inquiry date, the company served upon the TC a hearing bundle including various statements and reports. There were two operator reports with recommendations prepared by Anthony Wood, a transport consultant who had been a Senior Vehicle Examiner with DVSA.  He had known AGH for twenty five years and considered him to be a “reasonable operator” who was “very good to deal with”.  Mr Wood was first approached by AGH in late 2013 about performing an audit of the company’s systems.  They spoke again in February 2014 and an audit was agreed.  Mr Wood attended the Northlew operating centre on 25 February 2014.  He was aware that PSV MOT training had been provided to the company’s fitters in August 2013 (arranged prior to VE Hassett’s investigation).  He noted that old form Chartwell PMI records were being used.  Number plates were not properly recorded on the records and some were not signed off as roadworthy.  One PMI interval was exceeded. The driver defect reports were being marked as rectified save for three and all were filed but not all of the driver defect reports were actioned.  There was no Vehicle Off Road (“VOR”) system or a pre-use inspection following a vehicle being VOR’d.  He recommended an initial inspection for all vehicles prior to MOT followed by a second inspection following repair, preferably by another fitter; the MOT Inspection Manual must be used; multi-type checks must be undertaken prior to MOT’s to confirm brake performance, emissions and headlamp aim; all work undertaken between PMI inspections should be recorded on a job card for each vehicle and a dedicated re-torque form was required.  Mr Wood supplied the company with a copy of each of the Senior Traffic Commissioner’s Guidance documents.  He concluded that AGH was not hard enough on drivers and fitters and “ Tony must in future be harder in his management style”.
21.	On 4 March 2014, Mr Wood attended the Exeter operating centre.  He observed six drivers carrying out their daily defect report checks.  All six drivers failed to carry out their walk round check properly.  Some driver defect reports were found on an office desk and had not been filed.  One driver, who was an approved driving instructor did not record his duty time in that role in accordance with the working time directive provisions.  
22.	Mr Wood found that the workshop was well equipped with four fitters employed but three of the four undertook driving on school contracts.  The wall planner did not show relevant dates six months in advance.  The maintenance paperwork was a credit to Keith Clark (senior fitter) but the PMI sheets did not show the same numbering of items as appeared in the DVSA PSV Manual.  
23.	Mr Wood observed a PMI inspection undertaken by a fitter who failed to fully check the indicator operation or play on the steering wheel; he did not feel the brake hoses whilst under pressure or check the operation of the parking brake (air low).  He did not use the “box section routine” for checking the underside of the vehicle and did not use a tapping hammer to check the tightness of nuts and other items.  As a result, the fitters were given an explanation and demonstration of the “box section routine”.  During the course of the observed inspection, there were a number of distractions for the fitter; drivers were milling around and talking to the fitter and a radio was played at high volume which would have affected a fitter’s ability to listen for any air leaks in braking systems.  
24.	Mr Wood recommended that the driver defect reporting system be improved with emphasis being placed on the drivers responsibility for the vehicles; PMI routines were to be improved and brake testing was to be carried out during every inspection with roller brake testing a number of times a year.  Consideration should be given to the purchase of a decelerometer that produced a print out and improvements made to the underside inspection facilities by extending the pit or purchasing a second set of wheel lifts.  The company should investigate any vehicle that failed its MOT test or received a prohibition with an immediate examination.  Drivers may need more training on carrying out driver defect reporting checks and the company was to ensure that working time directive records were kept.  Whilst the maintenance documentation at Exeter was good, it was not the same type of documentation used at Northlew and that should be rectified.  The company should formulate long term independent auditing to ensure that all systems were fully compliant.
25.	The bundle also included AGH’s first statement dated 17 March 2014 which confirmed his history as an operator and stated that the company was established in 2011 so that AGH could bring his son and daughter into the business at a senior level.  Whilst the present authorisation of the operator’s licence was 40, the company had 50 vehicles in possession.  The company’s primary work was commercial contracts including school contracts and it employed 80 people.  
26.	The maintenance of the company’s vehicles was undertaken in the two workshops at the Northlew and Exeter operating centres.  In Northlew there was one full time fitter, Clive Eldridge and one experienced part time fitter.  At the Exeter operating centre there were five maintenance staff, Keith Clark being the senior fitter.  Whilst the workshops did not have any brake testing facilities, those tests were undertaken by BVS an external maintenance contractor in Okehampton.  That garage also undertook some MOT preparation and repairs.  In Exeter, roller brake testing was undertaken by Stuarts.  
27.	AGH had overall responsibility for both operating centres as Transport Manager, although he spent the vast majority of his time at Northlew.  MJH had been delegated some operational responsibility i.e. allocation of vehicles and drivers and dealing with bookings for the Exeter depot.
28.	AGH accepted that the systems the company had been using had failed and that practices across the different sites had diverged and were sub-standard.  This was a disappointment to him as his maintenance staff were experienced.  He had urgently sought external advice and looked carefully at the failures identified and a range of changes had been implemented to reverse the “unacceptable pattern of faults” which had developed.  He now spent one day a week at Exeter checking records and compliance.  Maintenance records were centrally held and he had revised the chain of individual responsibility.  It had been made clear to all staff in writing and during briefings that failure to comply with their duties in terms of drivers’ hours, driver defect checks, maintenance and record keeping would result in disciplinary action.  Prior to VE Hassett’s maintenance investigation on 14 August 2013, AGH had already booked further training for the workshop staff on vehicle and MOT inspections.  This training was prompted by the “S” marked prohibition issued on 20 March 2013.  The training took place between 19 and 21 August 2013.  AGH was disappointed to see that in spite of the training, the first time MOT pass rate had not improved.  Since February 2014, the company had been using a system whereby one fitter inspected a vehicle, followed by a second inspection by another fitter prior to the MOT test.  Since February 2014, seven out of eight vehicles had passed the MOT test on the first attempt.  One vehicle had its pre-MOT inspection undertaken by an outside contractor and was issued with a PRS notice.  AGH was monitoring the situation to ensure a sustained improvement.
29.	Anthony Wood’s recommendations had been adopted and he had been engaged to undertake periodic audits to provide an assessment of the maintenance staff.  The FTA had agreed to undertake an audit on 8 and 9 April 2014 and it was the intention of AGH that the FTA provide audits at 6 monthly intervals.  
30.	Having recognised that he was responsible for the maintenance failings and that they were the result of poor control on his part, AGH had booked himself and his daughter Ms Alderton onto a Transport Manager CPC refresher course.  MJH had been delegated to draft and implement a Maintenance Action Plan which incorporated procedures on first use inspections, first use inspection audits, driver induction, PMI, MOT and wheel procedures and required a weekly maintenance report from each chief fitter and a prohibition investigation.  Disciplinary procedures were clearly set out.  
31.	AGH was proud of the drivers who were experienced and committed.  New recruits were instructed in the daily driver defects system and the company played the VOSA DVDs on drivers’ hours to his staff. The induction procedure had been revised to emphasise the drivers responsibilities for the daily driver defect system and the new nil defect report system and the disciplinary procedures arising out of any failure to follow procedures and the drivers’ hours rules.  
32.	The new driver defect reporting system required drivers to submit a daily report to a fitter to be countersigned before the vehicle was driven from the operating centre.  If a defect was identified, it would be for the fitter to determine the most appropriate course of action.  If the vehicle was away from base, then the driver was required to report by telephone even if no defect had been found.  Defects identified away from base would be dealt with by a local garage.  In addition four vehicles each week would be re-checked by a fitter following a driver’s check and any defects identified by the fitter which had not been identified by the driver would result in disciplinary action being taken against the driver.  AGH was confident that this new system would work.
33.	As for safety inspections, it was proposed that all documents would be held on a server accessible by staff based at both Northlew and Exeter with the latter operating centre sending scanned copies of records to Northlew on a daily basis.  This would be operational by 21 April 2014.  The software would also produce a print out of PMI’s, MOT’s and calibrations for each week.  AGH accepted that the completion of PMI records by fitters had been sub-standard which was indicative of a failure of supervision on his part.   He was unaware that the problem even existed until VE Hassett brought it to his attention.  The instances of PMI intervals being exceeded were indicative of a failure to supervise maintenance and he accepted that he was aware of vehicles being operated when intervals had been exceeded.  He had since introduced a system whereby the Chief Fitter of both depots submitted a weekly report identifying any slippage in PMI intervals and providing an explanation and confirming that each vehicle inspected had been certified as roadworthy.  AGH intended to check the report against the records to ensure compliance.  Poor workmanship from fitters would result in disciplinary action.  A “vehicle off road” (VOR) system would be introduced and records kept on the computer.
34.	Having accepted his shortcomings as a Transport Manager, AGH recognised that it was sensible to recruit a “Fleet Engineer from outside the business”.  He was “very disappointed” that the company’s vehicles continued to received prohibitions and that this placed the company in “serious jeopardy”.  He further referred to three driver prohibitions issued between August 2011 and June 2013.  On one occasion, a driver had driven without making a record because he had forgotten his digital card.  On another, the company had overlooked the fact that a tachograph was not sealed and on the third, the company had failed to calibrate the tachograph.  
35.	As for the company’s relationship with Hirethisbus.com, MJH operated that licence as a separate business entity to hire out vehicles for short periods although he did not have any vehicles of his own.  Carmel Coaches had lent MJH vehicles without charge but the business had not developed.  MJH then preserved his licence with the business essentially dormant so that in the future, if a business opportunity presented itself, he could resort to the licence.  Meanwhile, there had been several occasions when at peak demand Carmel Coaches had used the discs of Hirethisbus for short periods and generally on single days.  AGH believed that it was legitimate to use a vehicle on another’s licence for a period of 14 days using a “dry hire agreement” having taken advice from the Confederation of Passenger Transport (“CPT”).  He had since been advised that using the discs was unlawful.  It would not happen again and in any event, MJH had decided to surrender the licence.
36.	Turning to North Somerset Coaches, an opportunity had arisen to purchase the assets and goodwill of that company which operated two vehicles and had one registered school service.  The vehicles were maintained by an external contractor.  The firm was purchased by Carmel Coaches and the CPT advised that a new licence was required.  A decision was made to make an application in the name of Ms Alderton as a sole trader.  This was not an attempt to circumvent any potential problems with the company acquiring another business.  Pending the new application, the business continued to operate as North Somerset Coaches with the previous owner’s involvement and with Ms Alderton having applied to be the nominated Transport Manager.  The company had since been advised that this too was unlawful and as a result the operations were suspended on 12 March 2014 with Carmel Coaches taking some of the work.  AGH acknowledged that it was “a mess”.
37.	AGH concluded that he had given considerable thought to the systems and procedures of the company and the reasons for the company’s poor performance.  He had obtained expert advice and mistakes had been eradicated.  He wished to return the business to a respectable and compliant entity and had been encouraged by the improvement in the MOT results.  He recognised that it would take a sustained period of compliance before he could claim that the business had been turned round.  He asked for a chance to salvage his business.
38.	MJH’s statement dated 18 March 2014 informed the TC that he had been involved in his father’s business since leaving university.  He was 31 years of age.  In 2006, AGH took over Tedburn Coaches with the operating centre in Tedburn St. Mary (one of the operating centres for Hirethisbus.com) and effectively allowed MJH to operate the business on his own.  That business eventually became part of Carmel Coaches operating from its Exeter operating centre.  Business increased dramatically when Dawlish Coaches and Hookways (with a joint authorisation of approximately 80 vehicles) ceased trading.  The Exeter operating centre increased its authorisation from 6 vehicles to 20 and that was a strain.  At the same time as taking over and operating Tedburn Coaches, MJH applied for a licence for Hirethisbus.com.  He had plans for that enterprise and ran a registered service using one vehicle between Torquay and Exeter for night club attendees which operated for two years.  He used one of his father’s vehicles for that service.  The licence had been “on ice” since that service came to an end in 2008.  
39.	However, MJH remained interested in exploring business opportunities for the licence and applied for an increase in the licence authorisation to give him an opportunity to operate a business with a margin.  He applied for 12 vehicles because that was the maximum number he could apply for with the finance available.  If a suitable business came up for sale, he could take it over quickly without any licensing issues.  He denied that the Hirethebus licence had been operated for the benefit of Carmel Coaches although on occasions, Carmel Coaches used his discs to operate vehicle on a “busy day” basis and would never have exceeded 14 days.  He did not believe the arrangement to be illegal.  He regretted that there was no documentation in relation to the arrangement but in any event, he was not operating vehicles and was now surrendering the licence and in order to concentrate on Carmel Coaches he had also resigned as Transport Manager from the licence of Keith Sibbeck.
40.	MJH confirmed all of the changes in practices and procedures set out in the statement of his father and referred to an Action Plan that he had devised with his father to improve compliance and performance including a wheel fitment and re-torque policy and a daily workshop diary to record each fitter’s work.  The double checking of vehicles prior to MOT tests had already improved the pass rate in a short period of time.  They also intended to introduce pre-test inspections at an approved test centre which would further improve the pass rate.  As for further prohibitions, a report would be prepared on each one and a course of action would be implemented which would involve training and if necessary, disciplinary action.  MJH accepted that the company’s systems had not been “sufficiently robust” and that considerable changes were needed in addition to a “new fleet manager/transport manager” and an additional mechanic.  The company would do what was necessary to ensure that the fleet maintenance was “on the right course”.  
41.	Carolyn Alderton’s statement confirmed that she was a director of Carmel Coaches and undertook some evening work.  She was responsible for the payroll and compiled revenue reports for Devon County Council.  
42.	In December 2013, she became aware that North Somerset Coaches might be for sale, which included two vehicles.  Carmel Coaches bought the business for her and had been assisting financially in the running of the business.  The plan was that she would buy the business off the company once her cafe business had sold.  As the purchase of North Somerset Coaches happened very quickly, Ms Alderton sought advice and was told that she should apply for a new licence which she did in her own name trading as Carmel Bristol.  She had also applied to be the nominated Transport Manager for David Fricker who had traded as North Somerset Coaches, pending the grant of her own licence.  On reflection, she thought that it may have been easier and more appropriate to apply for a variation in Carmel Coaches licence pending her take over of the business.  She had signed a maintenance agreement with maintenance contractors, JRW which were based at the same operating centre; she had systems in place and she committed 40 hours a week to the business. 
43.	She had since received legal advice and now recognised that she had unwittingly been operating unlawfully.  She had immediately ceased running vehicles and had sub-contracted the one registered service to Carmel Coaches which supplied a vehicle and a disc to cover the work she had.  She had seconded a second vehicle and driver to another operator.  The CPT had approved of this arrangement.  Although Carmel Coaches had become involved in her business, it was her intention that it would be separate.  However, if it needed to be licensed and operated as part of Carmel Coaches then she would operate in that way.
44.	On the day before the public inquiry, VE Hassett submitted an “Encounter Update” in respect of Carmel Coaches which informed the TC that between 15 August 2013 and 19 March 2014, six immediate and two delayed prohibitions had been issued to vehicles operated by the company, along with an advisory notice.  In particular, on 8 February 2014, VRM FJ04 ESG was issued with an “S” marked immediate prohibition for a seriously underinflated tyre, an ABS warning light which was permanently illuminated and a jammed emergency exit door.  The prohibition was “S” marked because interrogation of the driver defect record book revealed that the ABS defect had previously been reported eight times and the jammed emergency door twice.  The tyre defect appeared in the defect report for that day.  When the vehicle was presented for prohibition clearance on 20 February 2014, it was issued with a PG9AC for all three braking systems being below construction and use requirements.  Then on 27 February 2014, VRM WK07 AOJ was issued with an “S” marked immediate prohibition for two out of six wheel nuts not clamping in taper, excessive movement in the steering joint and a brake disc which was fractured through the surface and into the ventilation cavity.  
45.	VE Hassett concluded that there was no one area of maintenance that was below the required standards (we take that to mean “above” the required standards) with a roadside prohibition rate now of 47%.  VE Hassett considered it to be unacceptable that VRM FJ04 ESG had been presented for clearance with deficiencies in all three braking systems.  He was of the view that the mechanical condition of the company’s vehicles had worsened since August 2013 and “there must be a reason for the falling standards which only the operator can answer.”  

Public Inquiry hearing 20 March 2014
46.	The first day of the public inquiry took place on 20 March 2014.  All three directors of the company were present and Christopher Hilditch accompanied them.  Toby Sass of counsel represented the company and the Transport Managers and VE Hassett and Senior Vehicle Examiner (“SVE”) Brookes attended on behalf of the DVSA.  
47.	VE Hassett’s public inquiry briefs were not in dispute and he adopted those along with his Encounter Update dated 19 March 2014.  
48.	In answer to questions put by Mr Sass, VE Hassett stated that he was not aware that of the 8 vehicles presented for MOT since February 2014, 7 had passed on first presentation.  He was not happy with the preparation of the company’s vehicles.  One had been presented for clearance of a prohibition and had then failed again for all 3 braking systems being substandard.  He agreed that an improvement in the driver defect reporting system usually resulted in a reduction of prohibitions being issued.  He had not visited the Exeter operating centre and accepted that the maintenance facilities there should be sufficient for the fleet authorised.  The appointment of a Fleet Engineer would help.  
49.	Having looked at the recent maintenance records of 8 vehicles produced by the company that morning, VE Hassett was able to say PMI intervals in relation to 4 of the vehicles had been stretched by up to 8 weeks; there were driver defect reports which were not signed off and his comments related to multiple drivers and multiple vehicles; there were multiple defect reports which had not been actioned; 3 PMI sheets were not signed off as roadworthy; there was no specific MOT preparation; 6,000kms could pass between a PMI and an MOT test; the current prohibition rate was 47% which had gone up from 35% since his original brief.  
50.	He told the TC that of the prohibitions issued since 13 August 2013, one immediate prohibition had been issued to a bus on 5 March 2014 (VRM WA05 JWW) displaying a Hirethisbus disc for an inoperable sensitive door edge and a defective forced ventilation system affecting more than 50% of the air outlets.  When the vehicle was presented for clearance it failed as a result of defective ventilation and an inoperative passenger bell.  It was cleared on 12 March 2014.  He had noted that there were no quality control checks included in the records.  The company needed to standardise the PMI sheets it used.  
51.	Mr Sass in opening the case for the company, said that AGH and MJH accepted that the company had breached its licence undertakings “in a substantial fashion”.  He acknowledged that the driver defect reporting system was “not effective” and the PMI intervals had been exceeded since 2012.  He did not dispute that there were grounds for regulatory action and that the company was at the TC’s “mercy”.  He pointed to the MOT training of the fitters arranged prior to the first maintenance investigation and the two reports of Mr Wood which had identified deficiencies and improvements.  There was an array of documents produced by AGH and MJH in the fortnight leading up to the public inquiry including the Maintenance Action Plan which Mr Wood had not seen.  Christopher Hilditch, a CPC holder, would be assisting the company until a Fleet Manager was appointed.  Mr Hilditch had looked at the Action Plan and considered that it needed to be “joined up” so that it could be “carried forward in a more connected way”.  He would recommend further improvements.  The drivers had received training in the new driver defect reporting system “this week” and that system would be audited.  A new PMI record had been introduced.  Mr Sass summarised all of the changes set out in the witness statements of AGH and MJH.  He acknowledged that prohibitions were the result of either failures of the fitters or of the drivers and a failure to keep records.  The TC was told that the reason why there was a specimen copy of a Dry Hire Agreement in the bundle was because that was what was supposed to have been taking place when Carmel Coaches used Hirethisbus discs in its vehicles.  Mr Sass accepted that dry hiring was not what was taking place.  The use of the discs by Carmel Coaches was thought to have been legal but in any event, the Hirethisbus licence was being abandoned.  
52.	All three directors then adopted their witness statements.  However, MJH took issue with the suggestion that he had ever been a Transport Manager for Carmel Coaches.  Following a short adjournment, Mr Sass informed the TC that MJH had been a nominated Transport Manager for his father’s sole trader licence and had no recollection of carrying on with the role when the company was incorporated.  The TC pointed out that not only had he been a nominated Transport Manager for the company but in fact only ceased to be a Transport Manager on the licence as a result of his failure to respond to correspondence he was sent in relation to the EU Transport Manager exercise.  The TC would have looked at the licence application and the role of AGH as Transport Manager and director when the application was received and she would have had regard to the fact that MJH was also nominated as a Transport Manager and that he was not a director of the company at the time.  Those factors would have caused her to be satisfied that there would be continuous and effective responsibility for the transport operation.  However, the licence had been applied for and granted under a false premise.  The operator’s licence in fact needed more than one Transport Manager.  Mr Sass submitted that there was a distinction to be drawn between someone carrying out the functions of Transport Manager whilst not having any recollection of having been formerly nominated as such and someone who had been nominated without any intention of carrying out the functions and responsibilities of being a Transport Manager.
53.	In relation to the use of his Hirethisbus discs by Carmel Coaches, MJH went on to state that he first discussed the lawfulness of that arrangement with a solicitor from Stone King who then arranged a conference with Mr Sass on 12 March 2014.  MJH accepted that it would have been a good idea not to have allowed his discs to be used by Carmel Coaches following receipt of the call up letter, until the legal position was clear.  He accepted that the continued use of his discs by the company “looked dreadful”.  
54.	The TC then turned her attention to the application to vary the company’s licence to include the Bristol operating centre of North Somerset Coaches.  She noted that it was only made on 18 March 2013 and the company was relying on a maintenance contract made between Ms Alderton as sole trader and the maintenance contractor.  She was concerned that this further demonstrated a failure by the company to be compliant in the future.  The public inquiry was then adjourned.

The re-convened public inquiry 6 May 2014
55.	At the reconvened public inquiry on 6 May 2014, the same parties were in attendance save for SVE Brookes.  VE Hassett presented a second Encounter Update for the period 21 March 2014 to 1 May 2014.  He had been concerned by the assertion made at the previous hearing by the directors of the company that the MOT success rate had improved leading up to the first public inquiry.  The records from 1 January 2014, revealed an MOT failure rate of 50% which had increased since his initial report from 40%.  Further, since the previous hearing, one immediate and one delayed prohibition had been issued to two vehicles at a school bus check following the disembarking of children on 24 April 2014 which equated to a PG9 rate of 29%.  As at 1 May 2014, neither vehicle had been presented for clearance.  Having examined the maintenance records of those vehicles immediately prior to the hearing, VE Hassett’s evidence was summarised in the TC’s decision as follows:
“In relation to ECZ9139 the immediate prohibition was for “suspension unit deflated, adversely affecting the system, offside axle 2, both units completely deflated”.  As the wheel was not touching the ground properly braking is likely to be impaired.  A Preventative Maintenance Inspection took place on 17 April 2014.  There was no mention of the defects found a week later.  The vehicle was noted as “vehicle off-road” on a driver defect sheet on 2 April 2014 after the third reporting of a suspension defect, but there is no action recorded in relation to that defect on the driver defect sheet.  There was also nothing on the file to indicate the actual dates when the vehicle was off-road.  The defect was of a type that the driver should have noticed there was a problem but there was nothing on the daily check sheet.  It may not have been a defect at the start of the day but it would have been apparent to the driver when it did happen.  There were also a number of defects on the previous driver walk-round check sheets with no remedial action noted. ..
In relation to FJ06BNZ the Delayed prohibition was for “levelling not perfoming its function, but appears unlikely to affect vehicle control, suspension constantly adjusting height”.  There were two advisory items for headlamp issues and excessive “free” play at the steering wheel with early rectification advised.  The Vehicle Examiner accepted that levelling valve was not a safety critical defect (if it was an Immediate PG9 would have been issued” but it is evidence of system failure.  On 5 March 2014 the vehicle had new airbags fitted but there did not appear to be any material investigation by the Operator into the cause of that defect or the advisory matters.  Some recent defect driver sheets did have rectification work signed off but not all of them.  Of particular disquiet was the defect sheet for FJ6BNZ dated 22 March 2014 which included “door opens when moving” but there was no note of remedial action.  Likewise, there remained repeated defects with no remedial action recorded”.
56.	 In addition, VE Hassett noted that in relation to ECZ9139, there were repeat defect reports for an ABS light being permanently on and for defective fog lights.  In relation to FJ06BNZ, an advisory notice had also been issued on 24 April 2014 for an insecure parking brake valve.  The driver failed to report this along with the headlights and steering wheel defects in his daily walk round report.
57.	In his second written statement submitted to the TC, AGH stated that the Action Plan had been implemented; all of the drivers had been “re-trained” on daily driver defect reporting; daily checks were overseen by a fitter and the drivers understood the disciplinary implications of failing to undertake the checks to the appropriate standard.  An audit of the system had revealed that driver’s reports of defects were not being countersigned; the MOT pass rate since 1 March 2014 had improved to 84%; an investigation of one failure revealed that an outside contractor had prepared the vehicle of the test (documents were attached); the PMI intervals would be reduced to 28 days; a record of wheel torquing was to kept (attached to the statement) as well as a workshop diary; the PG9 issued to ECZ9139 on 24 April 2014 was the result of failure of parts which had been fitted by an outside contractor 515kms before the PG9 was issued.  The PG9 issued to FJ06BNZ was the result of the driver’s failings in relation to his walk round check resulting in a written warning (a Prohibition Response sheet with documentation was attached); Mr Hilditch who was a former Managing Director of Stagecoach, was now employed to assist in the implementation of the Action Plan; no Fleet Manager had been employed but two candidates were under consideration; he and Ms Alderton had attended the two day Transport Manager CPC Refresher Course on 3 and 4 April 2014; the FTA had undertaken a compliance audit but the report was not available; another audit was booked six months hence.  AGH stated he would like the opportunity to salvage the business and his reputation.  He was bitterly disappointed that PG9’s had been issued on 24 April 2014 and as a result, the company had relinquished four school contracts and had turned down other work.  When questioned about this, it transpired that in fact the company’s vehicle requirements had only reduced by two.  AGH produced two driver defect reporting audits and a number of weekly maintenance reports.  
58.	In addition to his statements, AGH told the TC that the vehicles to which PG9’s had been issued on 24 April 2014 were based at the Exeter operating centre.  He was normally present at Northlew when the vehicles were checked by the drivers and he supervised the checks along with a fitter.  The company’s drivers were taking them seriously and were arriving at work early in order to undertake their checks and were checking their vehicles again in the evening.  Defects were either rectified immediately or the driver would be given a replacement vehicle.  The new system had been in operation since March 2014.  As for the driver reports of an ABS warning light being permanently on in relation to vehicle FJ04 ESG, such lights were known to have this intermittent problem which could not be identified when a fitter investigated.  In recent months, the company had made efforts to investigate such defects and perhaps in the past the company had been of the view that ABS lights were not really a problem and that the problem would “go away”.  The vehicles with such problems were now taken to BVS where diagnostic equipment was used.  AGH had not identified any problems with the driver defect reporting system at Northlew since the new procedure had been implemented.  As for a Fleet Manager, it was difficult to recruit anyone to the position whilst the public inquiry was on-going.  As a result, the company had an open ended arrangement with Mr Hildtich.  As a result of his advice, a bus washing machine had been purchased and both operating centres had been tidied up.  AGH was devoting more time to maintenance and he spent more time at the Exeter depot although MJH was there on a daily basis.  The vehicles now had two pre-MOT inspections as well as inspections by outside contractors.  Two of the recent MOT failures had followed inspections by BVS and they were deeply apologetic.  
59.	AGH stated that he had been involved in buses and coaches for 40 years and he was shamed and humiliated by public inquiry.  He did not want to lose his livelihood and it would be a tragedy if his son and daughter could not carry on in the business.  AGH intended to remain as the nominated Transport Manager for the company and intended to nominate MJH as a second Transport Manager. 
60.	As for Carmel Bristol, that business had been acquired by the company and the company was a sub-contractor for Carmel Bristol.  The company would continue to support that operator’s licence if his daughter was successful in her application.  Whilst she did not have any vehicles of her own, the company would always provide her with vehicles and AGH would be involved in an “advisory capacity”.  
61.	MJH also gave evidence to supplement the statement he had submitted.  He described himself as being in charge of the Exeter depot under the supervision of his father as Transport Manager.  He had not attended the CPC Transport Manager Refresher Course with his father and sister as he had recently completed the International CPC course and so his knowledge of transport management practices was “quite fresh”.  He accepted that in fact the course in question did not provide any training upon operator licensing or refresher training as a Transport Manager.  Whilst he was responsible for the vehicles, the drivers and maintenance at the Exeter depot, prior to receipt of the call up letter he had done little in terms of auditing and checking maintenance records.  He was more active now and instructed the fitters as to when to undertake auditing of the driver checks.  He read the weekly maintenance reports produced by the fitter and he had investigated the reasons for two of the Exeter vehicles being issued with PG9’s on 24 April 2014.  He produced the PMI sheet for ECZ9139 dated 17 April 2014, the driver’s defect report for the day of the prohibition and the documents relating to the repair which had been undertaken by outside contractors prior to the prohibition being issued.  It was about 4 April 2014 that a driver defect report identified a suspension defect which was brought to MJH’s attention by the chief fitter.  Mr Clarke had attempted to rectify the problem but it re-appeared and the decision was taken to send the vehicle to outside contractors.  When it was pointed out to MJH that the vehicle was VOR’d on 2 April 2014, he speculated that he may have had his dates wrong.  He had not looked out the defect report which had identified the problem in the first instance.  Neither had he seen the record of the work which Mr Clarke had undertaken.  He accepted that defects being signed off as rectified by fitters was something that needed tightening up and that the public inquiry had been a “steep learning curve” and he was “constantly adjusting” the company’s practices.  His explanation for defect reports not being signed off was that the drivers were leaving the depot without their reports being signed off.  The drivers and fitters needed to be told that vehicles were not to leave the depot without a fitter’s signature on the reports.  He was happy to receive further training and would like to be nominated as a Transport Manager on the company’s licence again so as not to be treated as a “scapegoat” in the future.   As for ABS light issues, he had purchased an ABS diagnostic kit the previous Saturday.  He thought that the input of Mr Hilditch was very helpful.
62.	In answer to the TC’s expressed concerns about the inadequacies of the driver defect reporting system, MJH stated that in the past, repairs were undertaken on vehicles but not recorded.  The system had improved greatly including collation and keeping of records.  As for a vehicle going out without fog lights on 1 and 2 April 2014, he could not say whether someone had made the decision to allow the vehicle to go out with that defect.  As for the prohibition issued to FJ06BNZ, his recommendation had been that the driver should be re-trained in the use of the driver defect system.  He acknowledged that the initial driver training had taken place only fifteen days before this prohibition.
63.	Carolyn Alderton supplemented her written statement produced to the TC by stating that North Somerset Coaches still existed.  She had applied to take over the firm’s registered services and Carmel Coaches sub-contracted one service from North Somerset Coaches.  She intended to be a sole trader without any input from Carmel Coaches although she would remain a director of the company and take a more active role in ensuring compliance.  She was applying for five discs.  She acknowledged that when North Somerset Coaches was purchased, one of the options was for Carmel Coaches to run the business as part of its own company.  However she was now keen to operate her own company and was aware of the amount of time it would take to do so.  
64.	Finally, Christopher Hilditch described his background in engineering and with passenger transport companies with authorisations of up to 1,000 vehicles.  He became involved with Carmel Coaches immediately after the adjourned public inquiry.  His first responsibility was to work out what had been going wrong.  The documents had been “scattered” and he had to spend a lot of time “pulling them all together”.  The prohibition record was “quite poor”.  He had proposed shorter PMI intervals of 28 days which would reduce the risk of prohibitions being issued.  He had recommended the acquisition of additional vehicle lifts to avoid delays.  He described the maintenance staff as “variable”.  He had a high regard for the chief fitter in Exeter but less regard for the other fitters who were not PSV experienced.  As a result they were 85% effective.  The chief fitter at Northlew was “better than he thinks”.  Mr Hilditch had not had any part in the recruitment of a Fleet Manager but would continue to give his support.  He estimated that the company spent £500,000 on maintenance annually and he had the support of AGH and MJH who were both honest and who “could be compliant”.  There were now systems in place but they had not been “banged home”.  He felt guilty about the continuing incidence of driver defect reports not being signed off as he had been concentrating on other issues.  The company’s documents were generally “honest and correct”.  He considered that Exeter needed more management because of the miles covered by the vehicles.  He thought that the company had too many vehicles.  It presently owned 51/54 vehicles for a 40 disc authorisation.  The company required 35 vehicles for its business needs.  
65.	In his closing submissions, Mr Sass described the lending of discs by MJH to the company as innocent and submitted that this conduct should not affect the repute of those concerned.  There had been a history of compliant operation and it was believed that what was taking place was lawful.  It was an error for the disc lending to continue following receipt of the call up letter whilst waiting for legal advice on the issue.  It was accepted that the conduct was serious but it would not happen again.  Mr Sass described the company’s approach to disc lending and its approach to the operation of Carmel Bristol as a “compartmentalised approach” which both amounted to “errors of operation”.  He acknowledged that both AGH and MJH had failed as Transport Managers and that they had continued to struggle.  However, now they had sought and followed external advice and they had the ability to turn the company around.  MJH could receive further training and Mr Hilditch could work with them until June 2014.  Mr Sass asked the TC to find that the repute of AGH and MJH was tarnished but not lost.  The most appropriate regulatory action in the circumstances was licence curtailment.  Mr Sass submitted that AGH as the Transport Manager should take the principle blame for what had gone wrong.  If he were to lose his good repute, MJH could become the nominated Transport Manager or alternatively a Transport Manager could be employed who was not a member of the family.  

The TC’s decision 6 June 2014
66.	In the TC’s written decision dated 5 June 2014, she found that in the light of the company’s history since the licence was granted in May 2012, a finding that the company had breached its undertakings in relation to maintenance was inevitable.  The breaches were serious and long standing.  Counsel’s approach had been candid and realistic.  The TC repeated the number and nature of the prohibitions.  She noted that by 24 April 2014, when two prohibitions  were issued following the disembarkation of children from buses, the company had implemented refresher training and enhanced its systems.   On 30 April 2014, a vehicle failed its MOT test.  
67.	The company’s approach to improving compliance had been “at best fragmented and pedestrian”.  Whilst the fitters had received training in August 2013, the lack of improvement was left unchecked for too long and the driver defect reporting system issues had not been effectively addressed despite the warning letter in 2012 and further input from VE Hassett in August 2013.  The assistance of Mr Wood was only sought in February 2014 and the majority of the steps taken by the operator had only been taken following receipt of the call up letter.  Whilst there had been an improvement in the first time MOT pass rate (calculated as 74% rather than 84% as submitted by the company) there were still real issues.  The position may or may not improve with the promised reduction in PMI intervals and the appointment of a Fleet Engineer.  And the driver defect reporting system as at 6 May 2014 remained wanting to a serious level.  The revised systems set out in AGH’s first witness statement had not been fully implemented despite assurances and that was clear from the driver defect reports.  Whilst there was evidence of audits taking place of the driver defect reporting system which indicated an improvement of the quality of the checks, the TC could not be sure of that bearing in mind the failure of the drivers of the two prohibited vehicles on 24 April 2014 to report a number of items.  Further examination of the driver reports for those vehicles demonstrated that since 20 March 2014, there were 8 defects for which no remedial action was shown and with no signatures to demonstrate that the defects had been rectified.  Whilst the company criticised drivers for not checking their vehicles properly, the company and its Transport Manager had failed to address the criticisms of their own performance by producing evidence of a proper audit trail for remedial action and proper sign off once defects had been repaired.  The TC was further critical of the Weekly Maintenance Reports produced for the Exeter depot.  A cursory glance found them wanting.  The report for the week commencing 31 March 2014 made no reference to the reports of fog lights not working for ECZ9139 on 1 and 2 April 2014.  The vast majority of the defects recorded on the document had no rectification marked against them.
68.	The TC reminded herself of the principles articulated in Norbert Dentressangle 2001/49 that where there were repeated infringements there was likely to be some degree of deliberateness or recklessness on the part of the operator.  Further in LWB Limited 2011/36 the Tribunal found that a persistent failure to comply with undertakings, especially following a warning, may provide compelling reasons for concluding that there had been a loss of repute.  
69.	The TC then turned to the nomination of MJH as Transport Manager for the company.  The TC did not find Mr Sass’ distinction between MJH having no recollection of being nominated as a Transport Manager as opposed to not having fulfilled the role to be compelling.  She reminded herself of all of the documents including MJH’s letter to the OTC dated 30 December 2010.  The TC concluded that had MJH fulfilled the role of Transport Manager, she would have expected him to remember.  As a result of his nomination as Transport Manager and MJH’s emphatic denial that he had been a Transport Manager for the licence “at any time” the TC found that the company had failed to comply with its statement of intent which was material to the granting of the licence bearing in mind that MGH was also a director of the company at the date of the application and that two Transport Managers would have been required.  
70.	In relation to the issue of disc lending by MJH trading as Hirethisbus.com, the TC considered the accounts given in the witness statements of AGH and MJH to the effect that they had believed the arrangement was lawful and that as soon as they were aware that it was not lawful, it was stopped.  She found that their assertions were undermined by the evidence that one of the Carmel Coaches vehicles displaying a Hirethisbus disc was issued with a prohibition on 5 March 2014.  It was clear that by that date the company and MJH were on notice from their solicitors that the arrangement was “probably unlawful” and that a second opinion from Counsel was being sought.  Both operators nevertheless made a positive choice to carry on using a disc until after the conference with Counsel had taken place.  Further, the TC was satisfied that the statement of MJH that “I would not have allowed this to happen had I thought it illegal” was not supported by VE Hassett’s report following his first investigation in April 2013.  It was clear to VE Hassett then that discs were being lent to Carmel Coaches.  If MJH was so sure that the use of the discs was lawful, then the TC would have expected him to tell VE Hassett of the arrangement.  At the time of the investigation in April 2013, MJH had not operated any vehicles for many years and therefore mentioning the lending of discs to Carmel Coaches was the only possible explanation for the absence of maintenance records held by him as the operator of Hirethisbus.com.  The lack of candour was wholly unacceptable from any operator or Transport Manager.  
71.	The TC reminded herself of the Tribunal decision of 2006/277 Fenlon in which it was confirmed that trust was one of the foundation stones of operator licensing, not only between TCs and operators but between operators.  It had been acknowledged by Counsel that the parties must satisfy her of their integrity and their competence in the light of the unlawful operation and numerous breaches of licence undertakings over a sustained period.  The continued use of Hirethisbus.com discs in March 2014 when lawfulness was in doubt, the lack of veracity of MJH on the subject when speaking and communicating with VE Hassett and the failure to meet the statement of intent on the company’s licence application that there would be two Transport Managers, left the TC with grave doubts as to the judgement and integrity of both AGH and MJH.  These doubts meant that she was not satisfied that she could accept the assurances as to future compliance moving forward.  In light of the “woeful” failures which remained as recently as 6 May 2014, the TC was drawn on balance to the conclusion that the company, AGH and MJH were not capable or competent to operate the necessary systems to ensure that vehicles remained roadworthy and were operated in a lawful manner.  Despite “copious” amounts of advice and support from the DVSA, a warning letter from the OTC and help from the commercial sector, the company, AGH and MJH were found wanting to an unacceptable degree.  In referring to Barry Flowerdew 2011/31 the TC determined that “a line had to be drawn”.  She did not trust either the company, AGH as a Transport Manager or MJH as an operator or Transport Manager.  There were no reasonable, proportionate or appropriate alternatives but to find that the operator’s licences of Carmel Coaches and Hirethisbus.com must be revoked and that the good repute of Carmel Coaches, AGH and MJH was lost.  The outcome was “absolutely necessary” to protect the legitimate, hard working commercial vehicle industry.  For the same reasons, the repute and professional competence of AGH and MJH as Transport Managers was lost.  
72.	In relation to disqualification, the TC referred to T/2010/29 David Finch Haulage and subsequent cases and determined that as this present case was one of systemic non compliance which had been allowed to persist over time and in view of the potential for harm resulting from disregard for the needs of road safety and fair competition, it was “entirely appropriate and proportionate” that the company, AGH and MJH be removed from the commercial vehicle industry for a period to send a deterrent message to those who did not comply or turn their heads from the obvious.  It was also important for the “legitimate industry” to see that firm action was taken to ensure that they and their loyal customers were not tempted to turn to such competitors (we take this to mean that deterrence was necessary to ensure that other competitors would not resort to such practices).  The TC disqualified the company, AGH and MJH from holding or obtaining an operator’s licence or from being involved in the transport operations of an entity that holds or obtains such a licence for 18 months.  
73.	As for Carmel Bristol, the TC accepted the genuineness of the evidence given about the errors made in the company operating vehicles from the Bristol operating centre without adding the operating centre to the licence and that as soon as the unlawfulness of the practice was discovered, operations ceased.  She found that Ms Alderton was a credible witness and that AGH did not fully understand the problems that still remained at the date of the hearing (for example the maintenance contract being in the name of Ms Alderton).  Having granted Ms Alderton a licence authorising 5 vehicles, she nevertheless found that Ms Alderton’s repute was tainted by her involvement with Carmel Coaches.  

The Appeal Hearing 16 September 2014
74.	At the hearing of this appeal, the company, AGH and MJH were represented by Tim Nesbitt of Counsel who provided us with a skeleton argument for which we were grateful.  He began by reminding the Tribunal of AGH’s history of compliant operation as a sole trader between 1984 and 2011, during which time he was his own nominated Transport Manager with MJH also being nominated alongside him towards the end of that licence.   The licence authorisation was for 30 vehicles.  When the company was incorporated in 2010 and the licence granted in 2011, trading continued in the same style and for all intents and purposes it was the same business.  
75.	Whilst it was acknowledged that there were significant problems with compliance from 2012 onwards which warranted serious regulatory action, it was not the sort of operation that did not have any systems.  It was further acknowledged that the company’s response to compliance issues which were first “flagged up” in February 2012 was too slow and that apart from training for the fitters in vehicle and MOT inspection, nothing had been done prior to 24 February 2014 (the date of the call up letter).  However, between that date and 20 March 2014 (the first day of the public inquiry) a whole battery of steps had been taken to address the deficiencies in the company’s maintenance systems.  Mr Nesbitt went through the fifteen steps that had been taken which he described as “particularly comprehensive”.  VE Hassett’s Encounter Update dated 1 May 2014 demonstrated an improvement in the systems.  The PG9 rate had reduced to 29% and the MOT first time pass rate had increased to 74% (the TC’s assessment). However, Mr Nesbitt acknowledged that even at 6 May 2014, the drivers daily walk round checks were not “sufficiently robust”.  
76.	Mr Nesbitt further acknowledged that another negative feature was the nomination of MJH as Transport Manager on the original application for the company’s licence when by 20 March 2014, he had “appeared to have forgotten” that he had been nominated.  That did not mean that he had failed to carry out the functions of a Transport Manager at the Exeter depot.  And as for MJH lending Carmel Coaches with Hirethisbus.com discs, that was a mistake which was understandable when one considered the terms of reg.22 of the Public Passenger Vehicles (Operators Licences) Regulations 1995 (“the Regulations”), the provision which permits vehicle hiring arrangements between operators.  MJH had ultimately sought legal advice and had ceased the arrangements once he was advised that they were unlawful.
77.	Mr Nesbitt’s main point was that the TC’s balancing exercise was “fundamentally flawed”.  Revocation was a “momentous” decision in respect of a company employing 80 people and considerable care must be taken when making an order that would result in considerable economic loss and loss of employment.  He described the case before the TC as “complicated” and it may be for that reason that the TC “did not keep her eye on all of the issues”.  One of those issues was the long history of compliant operation of AGH as a sole trader prior to the company being incorporated.  Not only was that feature of the evidence not mentioned at all in the TC’s decision but it was not taken into account in the balancing exercise the TC ultimately undertook.   Mr Nesbitt submitted that 28 years of compliant operation by the lead member of the family demonstrated that the company could run compliantly and the TC should have taken account of that and further made it clear that she had done so.  Had the TC conducted a proper balancing exercise, she would or should have found that the AGH’s long history of compliance outweighed the “couple of years of weakness and poor performance” of the company and that it was not proportionate to revoke the company’s licence.  Mr Nesbitt accepted that really serious regulatory action was justified for the regulatory breaches of the company and that curtailment of the licence by up to half would have been proportionate.  
78.	As for the orders of disqualification, AGH’s compliance history was also relevant to the decision as to whether disqualification was proportionate or necessary.  Again, this feature of the evidence was not mentioned.  Mr Nesbitt submitted that the overall picture of AGH’s history as an operator and Transport Manager did not warrant disqualification at all.  The position of MJH was less compelling.  The revocation of the Hirethisbus.com licence had not been appealed.  Further MJH could prey in aide a long history of compliant operation.  However, the failings of the company were “not of the worst kind” and the TC should have stepped back from disqualifying him as well.  

The Tribunal’s Decision
79.	We agree with Mr Nesbitt’s primary submission that there is no evidence on the face of the TC’s decision that she took into account AGH’s compliance history in undertaking the necessary balancing exercise when considering the nature and severity of regulatory action to be taken against the company and himself.  To that extent, the TC’s balancing exercise was flawed and cannot stand.  However, pursuant to our powers under paragraph 17(2) of Schedule 4 of the Transport Act 1985, we are satisfied that it would not be appropriate to remit this matter for rehearing and determination by either the same or a different TC.  We have decided that we should undertake our own assessment of the evidence and make such order as we consider appropriate.  This course was approved in the case of Bradley Fold Travel Ltd & Peter Wright v Secretary of State for Transport (2010) EWCA Civ.695.
80.	There was no evidence before the TC to suggest that AGH had been anything other than a compliant operator for 28 years.  There was evidence that immediately prior to his sole trader business becoming incorporated into a limited company, MJH was involved as a Transport Manager in the business.  The Tribunal must however take account of the fact that the incorporation of AGH’s business, created a very different entity to AGH trading on his own behalf.  There were now three directors all of whom were controlling minds and as a result, the dynamics of the business changed at that point and continued to change as its business expanded.  We note from the documents available to us that the limited company grew very rapidly over a short period of time, increasing its turnover by 86% between 2012 and 2013. To that extent, the weight to be attached to AGH’s previous compliance history is somewhat limited.
81.	The first issue of considerable concern was the nomination of MJH as an employed Transport Manager in charge of the Exeter depot when the application for an operator’s licence was made.  There can be no doubt that for an authorisation of 40 vehicles, two Transport Managers were required in view of AGH’s director status at the time (the current guidelines set out in Annexe 1 of the Senior Traffic Commissioner’s Statutory Document on Transport Managers are that for an authorisation of 30 vehicles or more, one full time Transport Manager is required along with additional assistance).  The assertion made by MJH that he did not know that he had ever been a nominated Transport Manager was unbelievable bearing in mind the various documents contained in the appeal bundle relating to his nomination including the letter written by him to the OTC in December 2010.  Further, he would have been put on notice of his nominated status when he received the warning letter addressed to him in February 2012 from the OTC following the unsatisfactory maintenance investigation.  If he had genuinely failed to appreciate that he had been nominated  as aTransport Manager, that letter would have put him on notice as would the correspondence sent later in 2012 pursuant to the EU Transport Manager exercise.  There is no evidence that the correspondence sent to MJH caused him to make any enquiry about his status with the company if there had been any uncertainty in his mind about it.  Neither was there any evidence of attempts made by him or AGH to alert the TC to an inaccurate nomination of him on the licence or a change in Transport Managers.
82.	Whilst Mr Nesbitt repeated the submissions that a distinction should be drawn between MJH not appreciating his nominated status as opposed to him failing to discharge the functions of a Transport Manager in fact, we agree with the TC that the distinction was not a compelling one.  There was no evidence before the TC that MJH had discharged the functions of a Transport Manager at the Exeter depot effectively or at all either in respect of Carmel Coaches or his own Hirethisbus.com licence.  It is of note that he failed to possess or produce any records relating to vehicles operated by Carmel Coaches using his Hirethisbus.com licence. Further, it is of note that the maintenance failings were greater at the Exeter depot than at the Northlew depot.  It is not surprising that the TC concluded that had she known that MJH was not in fact going to formally discharge the functions of a nominated Transport Manager at the Exeter depot, then the licence would not have been granted at the outset.  We agree with that assessment.  If a nominated Transport Manager fails to appreciate his status or even deny it, then how can the TC be sure that he has fulfilled the role?  Further, not only was MJH’s evidence unbelievable about his state of knowledge on this point, it demonstrated his disregard of the importance of the role that nominated Transport Managers play and the assurance that such a nomination provides to the TC that vehicles would be operated compliantly and safely.  This issue reflects adversely (and to a significant extent) not only upon the repute of MJH but also upon the repute of AGH who was the senior director of the company and the Transport Manager with overall responsibility for the company’s vehicles at both depots.  He was responsible for the nomination of his son and for ensuring that he discharged his responsibilities.  In fact, he left MJH in charge of the Exeter depot without overseeing or monitoring his performance either as a Manager or Transport Manager.
83.	The second matter of considerable concern to us is the history of the lending of discs by MJH to Carmel Coaches, an arrangement which AGH participated in.   There are no lawful circumstances in which one operator can lend another operator a licence disc and whilst AGH asserted in his witness statement that advice had been sought from the CPT, we are satisfied that such a reputable organisation would not have advised that the arrangement between MJH and Carmel Coaches could in any circumstances be lawful.  Further, whilst it was asserted that AGH and MJH thought that they were operating a “dry hiring” arrangement, no documents were produced to demonstrate that this was the case.  Mr Nesbitt submitted that the mistake that AGH and MJH made in relation to disc lending was understandable bearing in mind the complicated terms of reg.22 of the Regulations.  We reject that submission as reg.22 is clear in its terms.  The exemption relates to a vehicle hired by an operator under a hiring arrangement from another operator.  The regulation does not apply to either lending or the hiring out of discs.  We are satisfied that the Hirethisbus.com discs were used to gain commercial advantage by Carmel Coaches when demand for vehicles exceeded the company’s disc authorisation, at a time when it was growing rapidly.  The unlawfulness of this arrangement was aggravated to an unacceptable degree by the continued use of Hirethisbus.com discs by the company once the call up letters had been received and the issue of disc lending had been flagged up.  We are satisfied that such continued use demonstrated the wilful disregard of the need to ensure regulatory compliance by both AGH and MJH even when both operator’s licences were under scrutiny.  The use of the discs demonstrated that the company, AGH and MJH were intent to put commercial advantage over and above compliance and that they could not be trusted even when they were being scrutinised by the DVSA and the TC.  AGH and MJH were instrumental in this unlawful practice.
84.	Turning then to the serious and sustained maintenance failings of the company, AGH and MJH, we consider that on any view this is a very bad case.  Within 3 months of the licence being granted, an “S” marked prohibition was issued.  There was no evidence before the TC of any pro-active steps having been taken within the company to audit maintenance systems in order to identify how it came to be that this “S” marked prohibition had been issued.  A second prohibition was issued followed by the first maintenance investigation conducted by the DVSA which was marked as unsatisfactory and which resulted in the company renewing its undertakings to adhere to PMI intervals, to operate a nil defect driver reporting system and to keep records.  It is clear from VE Hassett’s investigation report arising out of the second maintenance investigation in August 2013 that those renewed undertakings had been significantly breached.  Prohibitions had continued to be issued, PMI intervals were exceeded, the MOT pass rate was unacceptably low and the driver defect reporting system was ineffective.  Little if anything had changed save that arrangements had been made for refresher training for the fitters.  And little changed thereafter.  The prohibition rate increased as did the MOT failure rate.  The second unsatisfactory maintenance investigation should have sounded alarm bells within the company that drastic steps were required to improve the safety of the company’s vehicles and to ensure compliance with the licence undertakings.  Even when the call up letters were received, little changed thereafter.  VE Hassett’s Encounter Update dated 19 March 2014 speaks for itself.  It was only in the two weeks leading up to the first public inquiry hearing that steps were taken to address the maintenance deficiencies, no doubt guided by legal advice and with the assistance of Mr Wood.  Nevertheless, it was apparent from the reports of Mr Wood that the driver defect reporting system was not effective and the maintenance systems were wanting; two of the prohibitions that had been issued since January 2014 were “S” marked.  VE Hassett’s perusal of the maintenance records relating to 8 vehicles revealed that maintenance intervals had been exceeded in the case of 4 of the vehicles and  records were not being signed off properly.  
85.	The company was given a further opportunity to demonstrate that it could be compliant when on 20 March 2014 the hearing was adjourned to 6 May 2014.  This it did not do.  Whilst the prohibition rate improved to 29% and the MOT pass rate improved to 75%, the maintenance records for the two vehicles issued with prohibitions in the interim were again found to be wanting to a significant degree and some of the newly established procedures were also found to be wanting, for example, the weekly maintenance reports.  It was evident that breaches of the company’s undertakings to keep vehicles fit and serviceable continued despite the input of Mr Wood and latterly Mr Hilditch.  It was apparent that the senior management of the company had still not been strengthened by the appointment of a Fleet Manager/Engineer. No offer of employment had been made as at the date of the adjourned public enquiry.
86.	It was accepted on behalf of the company, AGH and MJH that very significant regulatory action was justified for the failings of the company but it was submitted that when taking account of the long history of compliant operation in AGH’s case and the size of the company (to use the colloquial expression – the company was “too big to fail”) the TC ought to have stepped back from revocation.  We disagree.  Dealing first with the very late steps taken by the company, AGH and MJH, the Tribunal reminds itself that an operator’s reaction to an adverse DVSA investigation is significant and informative (see NT/2013/82 Arnold Transport & Sons Ltd v DOENI).  There are four categories of operator reaction: those operators who take prompt and effective action when wrong doing and compliance issues are identified - they are likely to benefit from considerable positive weight being given to their actions; those who delay in taking remedial action until receipt of the call up letter – they will also benefit from positive weight being given to their actions but less so; those operators who take remedial action but leave it until the days immediately leading up to the date of the public inquiry – they will be given some weight but little in the circumstances; those who take no remedial action at all but wait to hear what a TC may have to say about their operation and compliance failings – in all likelihood no weight will be attached to the very late actions they take whilst waiting for a decision to be published or for the promises they make as to future conduct.  In this case, the company, AGH and MJH fall into the third category.  In view of the long history of non-compliance and the number of opportunities the company, AGH and MJH had to acknowledge that their systems were wanting and to take stock and remedy the defects, the very late steps taken in the two weeks leading up to the public inquiry do not warrant the weight that Mr Nesbitt or his clients would wish the Tribunal to place upon them.  That is not to say that no weight should be attached to the range of steps taken but they do not provide a complete answer to the shortcomings identified during the short and chequered history of the company since its formation, even when taking account of AGH’s previous compliance history as a sole trader.  First of all an assessment must be made of whether the company could be trusted to continue to comply with the regulatory regime in the future (2009/225 Priority Freight). In this case, the company continued to operate in breach of its undertakings when it had been on notice since March 2012 that its systems were wanting and that renewed  undertakings were required in order to assure the TC that the company would be compliant in the future.  The company not only breached those renewed undertakings but failed to address the deficiencies in its systems as the number of prohibitions grew and the MOT failure rate rose.  A second unsatisfactory maintenance inspection failed to galvanise the directors of the company into action.   Illegal disc lending had been a feature of the business since 2008 and that continued even when the company was alerted to the fact that the arrangement was questionable and that it would be considered by the TC.  Then there was the conduct of the company whilst under the spotlight of scrutiny in 2014 in purchasing and “re-branding” North Somerset Coaches as Carmel Bristol whilst effectively continuing to use the licence of North Somerset Coaches and operating from an operating centre that the company had not specified and using a maintenance agreement with an outside contractor in the name of Ms Alderton.  We do not take such a magnanimous or generous view of this conduct as the TC did.  This conduct is evidence that the company was prepared to expand its operation without proper consideration to compliance for commercial reasons at the very time when it should have been taking great care to ensure that in all aspects of its operation, the company was fully compliant with the regulatory regime.  We are satisfied that in the light of all of those matters, the TC was right to conclude that the company could not be trusted moving on into the future and we are satisfied that that was the case even when weighing into the balance AGH’s previous compliance history.  Quite simply this is outweighed by the company’s regulatory non-compliance of which he was part.
87.	 The second question to be posed is whether the company in all of the circumstances ought to be put out of business (2002/217 Bryan Haulage (No.2).   Of course, if a company cannot be trusted to be compliant in the future, then it is difficult to answer this question in the negative.  We are sure that, in view of the serious, significant and sustained abuses of the licensing system identified by VE Hassett, the answer to the Bryan Haulage question is in the affirmative.  To allow the licence to continue even with a significant curtailment would send the wrong message to compliant operators that such conduct would be tolerated.  Revocation in this case is both necessary and proportionate and such an order would send a message to those who may be tempted to operate in the same way that such conduct would not be tolerated.  It goes without saying that in view of our findings, AGH and MJH have lost their good repute as directors and Transport Managers.  As a result, an order of disqualification is inevitable in relation to AGH and MJH (see paragraph 7B(2) of Schedule 3 of the 1981 Act).  
88.	Two issues therefore remain.  Firstly whether an order of disqualification should have been made in relation to the company and we have no hesitation in stating that it should for the same reasons that AGH and MJH have lost their good repute.  The second issue is whether the period of disqualification of 18 months was proportionate and necessary in the circumstances.  We agree with the TC’s assessment set out in paragraph 72 above.  In addition, we are satisfied that both AGH and MJH need some considerable time to reflect upon their conduct and failings as directors and Transport Managers and to rehabilitate themselves as compliant operators in the future.   In particular, we do not consider that the order of disqualification of 18 months in relation to AGH was either wrong or disproportionate even when account is taken of his previous history.  The serious regulatory breaches of this limited company whilst he was the senior director and the Transport Manager with overall responsibility were serious and sustained.  
89.	In the circumstances, we uphold the TC’s findings set out in paragraph 1 above and the appeals are dismissed.  The orders of revocation and disqualification shall come into effect at 23.59 on 14 November 2014.

Postscript
On 13 May 2014 (following the public inquiry but prior to the TC publishing her decision), one of the company’s vehicles from its Exeter depot was involved in a fatal accident.  The TC made it clear in her written decision that she did not take the happening of the accident into account when coming to her decision and there was no evidence before the Tribunal that she had in fact done so.  The Tribunal should also make clear that we did not place any weight upon the happening of the accident when considering this appeal.  The matter was raised by the Tribunal when we heard submissions about the length of time the company could be given to wind up its business in the event that the appeal was dismissed.  We were told that the accident was not maintenance related and we were shown a letter to that effect.  We accepted what we were told but were nevertheless satisfied that the TC’s orders should come into effect in four weeks from the date of this decision.  

Her Honour Judge J Beech
 17 October 2014