Neutral Citation Number: [2015] UKUT 0443 (AAC)	Appeal No: T/2015/08

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

ON APPEAL FROM THE DECISION OF MR J.A. ASTLE, 
DEPUTY TRAFFIC COMMISSIONER for the WEST MIDLANDS TRAFFIC AREA, 
DATED 9 JANUARY 2015

Before:
Judge M Hinchliffe, Deputy Chamber President (HESC); Judge of the Upper Tribunal.
Mr M Farmer, Member of the Upper Tribunal.
Mr D Rawsthorn, Member of the Upper Tribunal.

Appellant
DIAMOND BUS LTD

Attendance
For the Appellant: 	Mr James Backhouse, Solicitor.

Appeal heard at: 	Field House, Breams Buildings, London
Date of hearing: 	18 June 2015
Date of decision: 	29 June 2015

DECISION OF THE UPPER TRIBUNAL

IT IS HEREBY ORDERED that the appeal be allowed to the limited extent that the penalty payable pursuant to Section 155 Transport Act 2000 shall be reduced to £34,200.

Subject matter	
PSV. Penalty for failing to comply with registered timetables of local services. Ordinary everyday occurrences in bus operation on public roads (such as roadworks, mechanical breakdown, driver absenteeism, traffic congestion etc already allowed for within the 6 minute window of tolerance and not expecting 100% compliance. Failures due to genuinely extraordinary occurrences should be excluded from the data. A small sample is not fatal to the integrity of the monitoring exercise, but may affect amount of financial penalty imposed.

Cases referred to
Ribble Motor Services Ltd v Traffic Commissioner for the North Western Traffic Area [2001]EWCA Civ 267;
First Manchester Ltd [2012] UKUT 270 (AAC)

REASONS FOR DECISION:

Background
1)	This was an appeal from the decision of the Deputy Traffic Commissioner for the West Midlands Traffic Area made on 9 January 2015 when, pursuant to Section 155 Transport Act 2000, he imposed a penalty of £57,000 on the appellant operator - the holder of a standard international public service vehicle operator’s licence authorising the use of 228 vehicles,.

2)	The appellant had 64 registered local services. Following the receipt of complaints by members of the public as to the reliability of the appellant’s buses in relation to timetable adherence, the DVSA monitored 9 of the appellant’s bus routes. Monitoring was carried out, at various times of day and on various routes, over a period of 8 days. A “failure” was recorded, in accordance with a  2005 ‘Practice Direction’ from the then Senior Traffic Commissioner if, when compared with it’s registered route timetable, a bus failed to depart from a bus stop within a window of tolerance of up to 1 minute early and up to 5 minutes late. The Practice Direction states that Traffic Commissioners expect that 95% of buses will depart within this bracket.

3)	Section 155 of the Transport Act 2000 allows a Traffic Commissioner to impose a financial penalty on a bus operator if the Traffic Commissioner is satisfied that the operator of a local service has, without reasonable excuse, failed to operate a local service registered under section 6 of the Transport Act 1985, operated a local service in contravention of that section or section 118(4) or 129(1)(b) of the Act, or failed to comply with section 138 or 140(3) of the Act.
Section 155(2) goes on to provide that the amount of the penalty shall be such amount as the Traffic Commissioner thinks fit in all the circumstances, but the penalty must not exceed an amount determined in accordance with subsection (3). At the present time, that maximum is calculated by taking the figure £550 and multiplying it by the total number of vehicles that the operator is authorised to use under its PSV operator’s licence(s).

4)	Although it would appear that the principal relevance of this multiplier is in calculating the maximum penalty payable (below which sum the Traffic Commissioner may impose a penalty of such amount as he or she thinks fit), the Practice Direction laid down guidelines intended to achieve proportionality and consistency, by creating bands of penalty that reflected both the degree of failure to comply, and the size of the operation. Those bands are:

Compliance Rate	Range of Penalty per Vehicle Authorised	
94% - 90%	£50 - £150	
89% - 85%	£150 - £250	
84% - 80%	£250 - £400	
79% - 70%	£400 - £550	
Less than 70%	£550	

5)	The Practice Direction states that these figures are guidelines only and are simply designed to assist Traffic Commissioners. The Practice Direction recognised that adjustment may be necessary having regard to sample size, and individual circumstances.

6)	The outcome of the monitoring exercise of the appellant’s local services was as follows:

Route	57	226	133	141	51	10	295	303	124	Total	
Obs	14	28	39	68	5	23	47	22	30	276	
Early	3	2	7	0	0	2	4	1	1	20	
Late	0	6	6	3	0	0	31	0	2	48	
Failure	3	8	13	3	0	2	35	1	3	68	
% Failure	21%	28%	33%	4%	0%	8%	74%	4%	10%	24%	

7)	In relation to service 295, where it will be seen that the failure rate is more than twice as bad as the worst of the rest, the raw data shows that of the 31 instances of late running, 15 occurred on one journey which took place on 28/2/2014 between 14:06 and 15:35. The bus monitor sitting on the bus undertaking this journey noted that the driver was driving very slowly because he was conversing, laughing and joking with a passenger who was standing by him as he was driving. The data also shows that a significant part of the total monitoring involved monitors riding on a bus as it followed its route, with the consequence that, once a bus got behind, there would then be a succession of late failures, one after the other, unless and until the bus driver was able to catch up and get back on schedule.

8)	The papers submitted by the operator show that, on 5 April 2014, the driver of the bus operating route 295 (when 15 late failures were noted on one journey due to that driver’s conduct in talking to a passenger) was called to a disciplinary interview with management. The driver said that he did not instigate the conversation with the passenger, and there was dispute as to whether the passenger was standing or sitting. In the event, having considered the evidence, the appellant’s Operations Manager decided that the testimony from the bus monitor was true and a “wholly factual account of events”. He found that the driver had acted in a manner that endangered passengers and other road users and had brought the company into disrepute. The driver was dismissed with immediate effect, with no pay in lieu of notice.

Public Inquiry
9)	At a public inquiry called to consider these results as well as maintenance matters that are not relevant to this appeal, the Deputy Traffic Commissioner had (amongst other things) the benefit of oral evidence, two written reports from the operator, and submissions from Mr Backhouse.

10)	A number of issues were raised in order to explain or mitigate the outcome of the monitoring exercise. As a general point, Mr Backhouse said to the Deputy Traffic Commissioner that the bus monitoring had involved “a very small sample of services”, and this had a number of consequences. For example, the data “is easily skewed by one event”, the data was “not going to be representative of the whole”, and “it is very, very difficult to extrapolate from one event in a data set of eight journeys on one day, reflecting one service”. Mr Backhouse said to the Deputy Traffic Commissioner that to conclude from the small sample of services that the data was indicative of “general poor performance is, in my submission, irrational”. Additionally, a number of specific issues were raised, including a challenge to the reliability of the bus monitors’ watches, the misconduct of the driver (referred to above), a mechanical breakdown, and a road traffic incident causing abnormal flow and congestion.

11)	In his written decision, the Deputy Traffic Commissioner said that the bus monitor’s assertion that the routes monitored were selected to attempt to give a fair representation “was not questioned by the operator in correspondence, or at the PI.” Therefore he concluded that they were a fair representation of the operator’s overall compliance.

12)	The Deputy Traffic Commissioner decided that the data was broadly accurate (the monitors had radio controlled watches which were also checked against the ‘speaking clock’), that the misconduct of the driver was not exceptional and should not be excluded from the data because (amongst other reasons) such conduct is familiar to most regular bus users, should normally be precluded by strong operator rules and regulations, and is allowed for within the window of tolerance and the additional 5% allowance.

13)	The Deputy Traffic Commissioner further found that the mechanical breakdown, and the road traffic incident with consequent congestion were not “exceptional” - and it was in the nature of bus operations that instances of congestion and mechanical breakdown will occur. A good operator will make allowance and, again, these were catered for in the 6 minute bracket of time within which a bus may depart - and, in addition, an understanding that 5% of observations may be outside this bracket without risk of sanction arising.

14)	The Deputy Traffic Commissioner took the compliance rate as 76%, which (as a starting point) produced a likely penalty of £400 - £550 per authorised vehicle. He then considered that the Operator could have “a margin of appreciation” in respect of the positive factors pleaded as reasonable excuse but which he had rejected as such. This allowed him to move the penalty per vehicle into the next more favourable penalty range, i.e. between £250 and £400 per vehicle. He then took into account the significant measures taken by the operator since the monitoring exercise with a view to rectifying the deficiency, and this enabled him to levy a penalty at the bottom end of that range. He therefore imposed a penalty of £250 multiplied by 228, making a sum of £57,000.

Appeal to the Upper Tribunal
15)	At the hearing of this appeal, the Appellants were represented by Mr Backhouse who submitted a skeleton argument for which we were grateful.  The first point made was that, in fact, the appellant did not concede that the sample size was representative, and that he (Mr Backhouse) had made no such concession at the public inquiry. Indeed, he had specifically pointed out that the sample was small (or “tiny” as he said in submissions to the tribunal), and that a single incident could skew the picture significantly. 

16)	Given the size of the sample, Mr Backhouse then suggested that the correct approach was to consider the matter in stages. First, the data had to be cleansed of inaccuracies. Second, specific events that can skew the data, such as driver conduct, mechanical breakdown and disruptive road conditions beyond the operator’s control should be excluded on the grounds of “reasonable excuse”. Third, consideration had to be given to what was achievable, and this will involve an understanding of the management processes within the operator designed to promote compliance. If an operator is doing all that can reasonably be done in order to achieve adherence to the registered timetable, the outcome of a monitoring exercise was likely to reflect the best that was achievable in the circumstances.

17)	Finally, Mr Backhouse submitted that the tribunal’s decision in First Manchester Ltd [2012] UKUT 270 (AAC) was too rigid in that it did not allow an operator to establish reasonable excuse where that is already taken into account in the 5% failure rate permitted. This effectively meant that the 5% was set in stone and fettered the Traffic Commissioner’s discretion to take a more flexible view, having regard to relevant individual factors.

Tribunal’s Conclusions with Reasons
18)	We agree that the Deputy Traffic Commissioner was wrong to proceed on the basis that the operator accepted that the data in this case provided a fair representation of the appellant’s overall compliance. The appellant has 64 registered routes and so, had the Deputy Traffic Commissioner felt that it was necessary to establish whether or not the data obtained from monitoring 9 of them amounted to a “fair representation” of the appellant’s performance generally, he should have explored this further. At the public inquiry, Mr Backhouse had repeatedly drawn attention to the comparatively small size of sample.

19)	Having said that, the need for a representative sample has diminished since the date of the Court of Appeal decision in Ribble Motor Services Ltd v Traffic Commissioner for the North Western Traffic Area [2001] EWCA Civ 267. In this case, the court noted that Section 111 Transport Act 1985 (now repealed) laid down that, if the grounds for a penalty were established with no reasonable excuse made out, the penalty was fixed at 20% of the fuel duty rebate paid to the operator during the previous three months. In all cases at that time, there was no discretion to vary this figure even if, for example, the observations undertaken may not be representative of the operator’s timetable compliance overall. Consequently, since the penalty was fixed by law, the court said that a Traffic Commissioner must be satisfied that the sample of journeys monitored was sufficient and representative of the operator’s operation as a whole. 

20)	The main reason we say that this has changed is that Traffic Commissioners have subsequently been given far more flexibility and discretion in determining the amount of any penalty. Section 155(2) of the Transport Act 2000, which was not in effect at the time of the events relating to Ribble, now provides that the amount of the penalty shall be such amount as the Traffic Commissioner thinks fit in all the circumstances of the case – which gives Traffic Commissioners a much wider discretion – subject only to the penalty not exceeding the statutory amount determined in accordance with subsection (3).

21)	The tribunal recognised this flexibility some time ago, in the First Manchester case:

‘If there is no evidence to suggest that the sample is not representative then the Traffic Commissioner is entitled to assume that it is. On the other hand if there is evidence that tends to suggest that the monitoring exercise may not reflect the general level of performance on all of the operator’s services, the Traffic Commissioner must assess it. If that assessment leads to the conclusion that the overall level of compliance differs from the level found by the monitoring exercise then the Traffic Commissioner may take this into account when deciding into which penalty range the case falls and where in the range it comes’. 

22)	This flexibility is very useful, given that bus monitoring is extremely resource-intensive and costly. In the current financial climate, it may be difficult for the DVSA to justify the human and financial costs of regularly undertaking statistically representative monitoring exercises involving the big bus operators. And yet it remains in the public interest that the DVSA and the Traffic Commissioners play their part in promoting and regulating bus operators in order to ensure timetable compliance. As Mr Backhouse said to the Deputy Traffic Commissioner:

“It is fair to say that reliability cases died off for many years, but they have started coming back”.

23)	Turning then to the correct approach in a case such as this, with what appears to be a relatively small sample, and a mixture of ordinary everyday occurrences with what may be regarded as a genuinely extraordinary occurrence, we have carefully considered how a Traffic Commissioner should approach the task, given the financial and human resource limitations on extensive monitoring, and the practicalities and pressures of time in relation to public inquiries. 

24)	We would begin by reminding ourselves of the words of the words of Simon Brown LJ in Ribble Motor Services:

“It remains important that these statutory powers should not be emasculated by an over elaborate approach to the investigation, or an unnecessary attention to detail. Ultimately, broad judgments have to be made as to the adequacy and reliability of an operator’s published services.”

25)	Obviously, inaccuracies should be eliminated, and this should be done in the pre-inquiry correspondence between the DVSA and the bus operator - which is, at least in part, intended to narrow the issues for consideration by the Traffic Commissioner.

26)	In our view, there is good reason to permit a “window of tolerance” so that a bus departing within a bracket of up to (but no more than) 1 minute early and up to (but no more than) 5 minutes late compared with its registered timetable is not regarded as a failure to comply. In this way, account is automatically taken of many of the ordinary everyday problems that operators routinely face and can reasonably be expected to have contingent plans to deal with – such as roadworks, mechanical breakdown, driver absenteeism, traffic congestion and so on.

27)	Then, having obtained a set of figures that are accurate, a further allowance is made so that (subject to a variation if particular circumstances demonstrably require) an allowance is made – generally this will be a 5% allowance, leading to a 95% punctuality target. As a broad guideline, this is a sensible and pragmatic way to further accommodate short-term problems beyond those that could and should have been taken into account when setting the timetable.

28)	Nevertheless, there may still be some extreme and unforeseeable situations that defeat even the best operators to the extent that it would be unreasonable to regard them as being already factored into the window of tolerance and the additional allowance. As a rule of thumb, this will be because they can rightly be regarded as genuinely extraordinary events. This approach, however, is intended to exclude the vast majority of standard everyday situations and events affecting bus operators which, one way or another, are already accounted for.

29)	To be workable in the context of a time-limited public inquiry, Traffic Commissioners are entitled to look at broad trends and the overall result, rather than being compelled to asses the minutiae of every single reason advanced for the failure of a particular service to operate compliantly. It will often be possible to advance a reason. As we have stressed, however, it will be rare for a reason to constitute a reasonable excuse.

30)	The burden of proof to establish reasonable excuse is on the operator. The Traffic Commissioner’s jurisdiction is essentially inquisitorial rather than adversarial in nature and, there being no-one to adopt a prosecutor’s role in seeking to disprove any excuses proffered, it should be for the operator to establish them. The evidence to support an assertion of reasonable excuse is peculiarly within the knowledge of the operator and so the burden remains upon the operator throughout. If a reasonable excuse is established, the consequent failure or failures should be excluded from the calculations. 

31)	With these principles in mind we return to the facts of this case. Although we think that it is not certain that this sample is a fair representation of the appellant’s overall performance in terms of compliance, we do not consider that the result of that is to render the monitoring exercise worthless. On the nine services monitored, the level of compliance was very poor. Had a more time-consuming and costly monitoring exercise been undertaken, the picture may have been better, or it may have been worse, or it may have been broadly the same. Just as an “S” marked prohibition may or may not be typical of an operator’s overall maintenance standards, nevertheless it will be a cause for concern, and may fall to be dealt with by a Traffic Commissioner exercising his or her discretion to act proportionately and appropriately, with a view to raising standards, upholding the integrity of the regulatory regime, encouraging compliance and fair competition, and preventing or discouraging non-compliance.

32)	We consider that, in this case, the data is accurate enough to form the basis of regulatory action in the form of a civil penalty. We find that all factors other than the extraordinary conduct of the driver talking to a passenger whilst proceeding slowly, are ordinary, routine or everyday occurrences that are already factored into the window of tolerance and an additional 5% allowance. We also have no difficulty with a single journey that started late or got behind its timetable then leading to a succession of ‘failures’. One recorded incident of lateness may then lead on to the next one, but for passengers standing at the various bus stops, each consecutive late arrival and departure is a distinct and separate problem and inconvenience, and can be treated and penalised as such.

33)	Where we disagree with the Deputy Traffic Commissioner is in relation to the driver who was talking and joking with a passenger. The extraordinary nature of his conduct is described by one of the bus monitors in her evidence:

“I mean, at one point it got to the stage that myself and Nicola Darby were considering making ourselves known to the driver because we were worried about our safety and the safety of the other passengers”.

34)	We have recognised that this was a comparatively small sample that may or may not have been 100% representative of the operator’s level of timetable compliance overall. In our view, the key relevance of the smallness of the sample is that, with no allowance made for the driver’s conduct referred to above (which we think was a genuinely extraordinary occurrence) the figures may have become “skewed” - as Mr Backhouse put it.

35)	We consider that there is no evidence that this was a pattern of behaviour repeated anywhere else on this operator’s network of routes, or by any other driver. The appellant’s management dealt with the matter speedily and firmly as soon as they learned of it. In a large sample, the consequences of this one situation may have been lost in the mass of other journeys on other routes on other days, so that the overall result may not be affected to a significant degree. But as is apparent from the figures set out in the table above, that is not the case here. 

36)	As a result, we think that in mistakenly assuming that no issue was taken as to the representative nature of the sample, the Deputy Traffic Commissioner then fell into error by failing to have proper regard to the impact of this driver’s conduct on the overall picture. Had he done so then, rather than lumping this aspect in with the mechanical breakdown and the road congestion, he might - as the tribunal in First Manchester Ltd suggested - have found reasonable excuse and/or made specific allowance when deciding the correct penalty range, and where in the range it fell. 

37)	We have therefore decided to allow the appeal and to substitute our own decision.

38)	The figures for journey 295 are totally out of line with even the worst of the others, and the misconduct of one driver had a dramatic effect on the data for his individual route on one day. Indeed, of the total number of failures (68 recorded, overall), some 40% arose from just three journeys on that same service, on that same day.

39)	We therefore think it right to exclude the 15 failures due the conduct of that one driver, which then reduces the overall failure rate to 19%. We do not exclude any other failures but, in order to reflect the range of other factors presented of a positive nature, including the systems in place at the time of the monitoring exercise and the later improvements made (together with other immediate action evidenced in the papers) we have decided to follow the approach of the Deputy Traffic Commissioner. Thus, having identified a starting point, we have taken the case to the band below. We have then gone to the lowest end, as the Deputy Traffic Commissioner did. This approach produces a figure of £150 multiplied by the number of authorised vehicles.

40)	We consider that, having regard to the size of the authorised fleet and the poor performance demonstrated, a penalty of £34,200 is appropriate - even recognising that this was a small sample and even excluding the effect of one driver’s misconduct. A proportionate penalty of this size, imposed upon an operator with 228 authorised vehicles, should, we hope, act as an incentive to bus operators with registered timetables, of all sizes, to continuously identify and remedy poor timetable compliance before complaints are received. It should also serve as a reminder to the industry as a whole that Traffic Commissioners have a wide range of powers and a broad discretion to exercise them within guidelines - and, to again allude to Simon Brown LJ in the Ribble case, we stress that, quite rightly, Traffic Commissioners will continue to impose substantial sanctions upon those bus operators who seriously fail the travelling public.

Judge Mark Hinchliffe, DCP
29 June 2015