Vehicle Operator Services Agency v FM Conway Ltd [2012] EWHC 2930 (Admin)

Case No CO/216/2011[2012] EWHC 2930 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
Venue Royal Courts of JusticeDate Date: Wednesday, 3 October 2012
Strand
London WC2A 2LL
B e f o r e:
MR JUSTICE IRWIN
Between
VEHICLE OPERATOR SERVICES AGENCYAppellantv
Between
FM CONWAY LIMITEDRespondent
Computer-Aided Transcript of the Stenograph Notes ofWordWave International LimitedA Merrill Communications Company165 Fleet Street London EC4A 2DYTel No: 020 7404 1400 Fax No: 020 7831 8838(Official Shorthand Writers to the Court)
Miss Margia Mostafa (instructed by Inyama and Company) appeared for AppellantMr Geoffrey Mott (instructed by Clarkson Wright and Jakes Ltd) appeared for Respondent
Judgment
[1]MR JUSTICE IRWIN: This is a prosecutor's appeal lodged by the Vehicle and Operator Services Agency (VOSA) against a decision made by the Bexley Magistrates' Court, on 5 October 2010, to dismiss a case taken by the agency against FM Conway Ltd. The respondent company, FM Conway, was charged with an offence under section 38 of the Goods Vehicles (Licensing of Operators) Act 1995. It was alleged that the respondent company had lent and allowed Kevin Harris (the subcontractor) to use an operator's licence belonging to the respondent company with intent to deceive on 14 December 2009.[2]The respondent company argued successfully at the close of the prosecution case that those holding positions of authority within companies would not be responsible for the actions and omissions of their staff for the purposes of prosecutions such as this, unless they were directors or company secretaries, office holders, or - in the shorthand deployed in the authorities - "the brains of the company". The prosecutor's case was then dismissed. It is the appellant's submission that that ruling should be overturned.[3]The appeal proceeds, of course, by way of case stated. The facts as found by the magistrates were summarised by them as follows: A) On the 14th of December 2009 in Hailey Road Belvedere, an Iveco-Ford tipper heavy goods vehicle registration number G N51 DLZ was selected at random to be stopped as part of a multi-agency vehicle check. B) The vehicle was registered to the respondent, FM Conway Ltd. C) The vehicle was displaying an operator's licence identity disc (OKO204948) issued to FM Conway Ltd. D) The licence itself was valid but the Iveco-Ford tipper GN51 DLZ was not a vehicle to which the licence applied. E) The driver of the said vehicle was Mr Kevin Barry Harris dob 26.1.57 of 13a Bourne Road, Bexley, DA5 1LW. F) Mr Harris was not at that time an employee of FM Conway Ltd, but was working as a sole trader sub-contracted by FM Conway Ltd. G) An operator's licence is not transferable and Mr Harris was not entitled to drive the [vehicle] with the operator's licence identity disc issued to FM Conway Ltd displayed in the vehicle. H) The person with responsibility for the administration of matters concerning the company's operator's licence was Mr Roy Hedderman. Mr Hedderman was employed as a Plant and Asset Manager for FM Conway Ltd, and was the holder of a certificate of professional competence. I) On the 19th of March 2010 Mr Frederick Linger, a traffic examiner attached to the enforcement division of VOSA, attended the premises of FM Conway Ltd to interview Mr Hedderman under caution. J) Mr Hedderman was not a director of FM Conway Ltd. K) Whilst on the respondent's premises Mr Linger did not make any request to speak to, and did not speak to, a company director or the company secretary about this alleged offence. L) Mr Hedderman produced to Mr Linger two letters. One was a letter of authority to Mr Hedderman to act on behalf of the company signed by Mr Ian Gay, Plant and Transport Director for FM Conway Ltd. The other was written by Mr Hedderman himself admitting responsibility for this offence before the court. Both letters were, however, [and I comment, somewhat curiously] dated the 8th of May 2009, some seven months prior to the commission of the offence. (M) Mr Linger agreed that it was possible that the letters could have been compiled from a template previously used for another unrelated matter. (N) When asked in interview if FM Conway Ltd had allowed the driver, Mr Harris, to use the company's operator's licence, Mr Hedderman replied 'yes'. O) Mr Hedderman was not asked if he had spoken to an officer of the company about allowing Mr Harris to use the company's operator's licence. Neither was Mr Hedderman asked if it was within his knowledge that any officer of the company knew that Mr Harris had been allowed to drive on the company's operator's licence."[4]So those were the facts as found by the Magistrates' Court. The relevant parts of section 38 of the Goods Vehicles (Licensing of Operators) Act 1995 ("the Act") read as follows:
"38. Forgery of documents etc, (1) A person is guilty of an offence if, with intent to deceive, he: ... (b) lends to, or allows to be used by, any other person a document or other thing to which this section applies; ... (2) This section applies to the following documents and other things, namely: (a) any operator's licence."
[5]It was argued before the Justices that the offence concerned was an offence of strict liability. It was also argued that there was an obligation on the prosecutor (this was an argument from the respondent) to lay evidence to show that the company had formed the necessary intent to deceive. Those two contrary propositions were advanced before the magistrates.[6]In the course of the helpful and elegantly drafted statement of the case coming from the magistrates, they reached the following conclusions:
"2. This is not an absolute offence. In our opinion the appellant does bear an evidential burden to adduce evidence from which the court can draw a reasonable inference that the respondent company could have formed the necessary intent to deceive."
They went on to record their further reasoning as follows:
"3. There was insufficient evidence for the court to infer that Mr Hedderman's position in the company was equivalent to that of a director, and nor could he fairly be described as part of the 'brains' of the company rather than the 'hands'. The appellant made much of the fact that Mr Hedderman was the holder of a certificate of professional competence and, whilst it was explained what a certificate of professional competence is, the court heard no evidence of what a CPC holder's role and responsibility is in terms of general decision-making that would affect the entire company. We heard no evidence that Mr Hedderman was authorised to carry out any function which is exercisable only by a director of the company or the company secretary. 4. There was no evidence that Mr Hedderman had spoken to Mr Gay or any company officer about allowing Mr Harris to drive Iveco-Ford Tipper GN51DLZ displaying FM Conway's operator's licence identity disc. Neither the letter signed by Mr Gay nor the letter written by Mr Hedderman disclosed that anyone else was involved in the decision to allow Mr Harris to use the said identity disc. There was no direct evidence linking Mr Hedderman's actions with any company officer therefore anything said by Mr Hedderman should not be taken to be an admission on the company's behalf. 5. We also noted that although Mr Gay describes himself as a Plant and Transport Director it was not established as a fact that he is a director of the company. Mr Linger may describe Mr Gay as a director but there is no evidence that Mr Linger has done any more than repeat what was stated in the letter. There was no conclusive evidence that 'Plant and Transport Director' is anything more than a job title. 6. We find that the appellant has adduced insufficient factual evidence for the court to draw an inference that Mr Gay was a company director or that Mr Gay, or any other company officer, was party to the decision to allow Mr Harris to drive vehicle GN51 DLZ displaying FM Conway's operators licence identity disc either at the time of, or prior to, the offence being committed. 7. The respondent company cannot form an intention to deceive in the absence of knowledge of the facts constituting the offence. 8. There was no evidence before us from which any reasonable tribunal could infer that, at the material time, any officer of the company knew, or could possibly have known, about the misuse of the operator's licence so as to form the necessary intent to deceive."
[7]Both party's counsel before me have put the matter with admirable clarity. Miss Mostafa for the appellant contends that the facts here were sufficient to show that Mr Hedderman was in charge of this aspect of the company's business, that this aspect of the company's business had been delegated to him. She does not suggest that he was a shadow director of the company, but rather her case rests on the proposition that he was a senior employee in charge of this area, or sufficiently in charge of this area of the company's operations to constitute, for present purposes, "the brains" of the company.[8]Mr Mott for the respondent contends that is not enough. Clearly, he says that if a director of the company properly constituted, or another officer of the company, knew of the misuse of the badge, then that would be evidence sufficient to found a conviction. Clearly, he also concedes if an individual is acting as a shadow director, meaning that they have such a degree of control over the affairs of the company that they are to be regarded by operation of law as a director even though not properly appointed, then if such a person has the requisite knowledge so as to form the intent, that intent could be fixed upon the company.[9]I do not take Mr Mott to do more than make the concession that those situations could arise depending on the facts of a given case. He was not making the concession in relation to this case, but a concession for the purposes of illustration only.[10]Mr Mott goes on to say that the requirement is that the mind of the company should go with this offence, particularly where there is a specific intent. He also commented in the course of argument that the evidence disclosed by the magistrates might indeed not have been enough to reach a proper conclusion that there was the necessary intent on the part even of Mr Hedderman himself, since the nature of the admission by Mr Hedderman in his letter was of a mistake. Of course since the prosecution was stopped at the close of the prosecution case, it follows that Mr Hedderman would not have given any evidence before the magistrates. Hence this point does not arise on this appeal.[11]Against the backcloth of those facts I turn to the relevant authorities. It is remarkable that there is a cluster of three cases, all now more than 40 years old and all close in time. The first is the case of Hill & Sons (Botley & Denmead) Ltd v the Chief Constable of Hampshire [1972] RTR 29. That was a case concerning regulation 79(1) of the Motor Vehicles (Construction and Use) Regulations 1969. The relevant part of the regulation provided:
"Every part of every braking system... fitted to a motor vehicle... shall at all times while the vehicle...is used on a road - (a) be maintained in good and efficient working order and be properly adjusted..."
[12]The appellant in that case was a company of haulage contractors. One of their lorries was involved in an accident because of an un-lubricated handbrake mechanism. There was a conviction. They appealed the conviction to Quarter Sessions. The conviction was sustained and the matter came before the Divisional Court by way of further appeal. The facts were that the managing director of the appellant company had established a regular four weekly maintenance system. The foreman fitter in charge of the team was of experienced maintenance assistance and 35 years experience in the industry. The records showed that the vehicle service by an assistant about a month before the accident included lubrication of the handbrake, but it had not in fact been lubricated and the record was faulty.[13]The magistrates and then Quarter Sessions found that the company was nonetheless reckless in making no check, and had constructive knowledge of the defective lubrication of the brake by their responsible officers "in the sense of being reckless and closing their eyes to knowledge of defects in the vehicle". On that basis the appeal to Quarter Sessions was dismissed.[14]The Divisional Court allowed the appeal from the decision by Quarter Sessions. The principal ground was that the conclusion that the company had been reckless was not justified merely because the vehicle's examination was not scheduled to take place more frequently than at four-weekly intervals. However, in the course of the case Lord Widgery LCJ made remarks about the necessary proof for the mind of a company to be affected by an offence other than an offence of strict liability. The relevant remarks are to be found at page 34.[15]After dealing with, and quoting from, some of an earlier authority, Magna Plant Ltd v Mitchell [1966] 110 SJ 349, Lord Widgery made a further reference to a passage from the judgment of Lord Parker CJ in that case, whom he quoted as saying as follows:
"The justices had rightly found there had been recklessness and that the person concerned must have been a member of the maintenance depot. The justices, however, had felt that they could impute the knowledge of a servant to the appellant company because the appellants had handed over their responsibility to the depot engineer. In so finding the justices had erred in law. A company was not criminally liable in the absence of knowledge of the facts constituting the offence for the failure of a servant to whom it had delegated a task. The servant was not in the position of the brains of the company and his knowledge could not be imputed to a director..."
That is the quote from Lord Parker. The judgment from Lord Widgery continues as follows:
"I find that judgment valuable for two reasons, first of all it reminds one of the undoubted principle that, when the accused person alleged to have permitted a wrongful act is a company, one must look to the mind of those officers of the company who can fairly be described as its brains rather than its hands. In the present case, therefore, one must look to the mind of Mr Hill, the director, and not to the individual workman. Furthermore that case emphasises that, even if an individual is guilty of reckless conduct, that is not sufficient to impute knowledge to the employer unless the recklessness is the act of someone who can fairly be described as the brains of the company."
Partly on that basis the appeal was allowed.[16]The next case is Ross Hillman Ltd v Bond [1974] RTR 279. This again was a decision of the Divisional Court. In this instance Lord Widgery CJ was sitting with MacKenna and May JJ. The case was concerned with a similar provision: section 40(5) of the Road Traffic Act 1972, which provides that:
"...a person... ... (b) who uses on a road a motor vehicle... which does not comply with any... regulations or causes or permits a vehicle to be so used, shall be guilty of an offence."
This was again a case concerning a motor lorry where the gross weight of the vehicle was excessive. The appeal here was allowed on the basis that the true construction of the word "causes" in section 40(5)(b) of the 1972 Act required proof of mens rea and knowledge of the facts rendering the user unlawful. In a case of a limited company, such knowledge had to be that of someone exercising a directing mind over the company's affairs. May J, in a close analysis of the authority dealing with the existence of the necessity for mens rea, rather than strict liability, said the following (page 283J):
"It might have been thought reasonable in the past, when the provisions now contained in section 40(5)(b) were first considered, to have construed the three types of offence in the same way, holding that proof of knowledge was either necessary in each or unnecessary in all. However, a full court decided otherwise in James & Son Ltd v Smee [1955] 1QB 78."
[17]He then went on to analyse the relevant statutory provision in Smee and to rely on the conclusion in Smee that using-type offences could be committed without proof of knowledge. His judgment goes on quoting from Hill and Sons (Botley and Dunmead) Ltd: the passage which I have already quoted.

(b) that:

"... I would myself tend towards a construction of the section which treated the offence of causing the unlawful user in the same way as the offence of permitting the unlawful user has to be treated. If the latter requires some mens rea ... then it would seem logical that the former should do so also."
[18]Having decided the issue arising in that case, that both causing and permitting requires mens rea, although obviously of somewhat different kind, May J then concluded that in reliance upon Hill v Hampshire it was impossible to fix a company with liability in the absence of proof that a director or company officer held the requisite intent.[19]The third case from the 1970s is P Lowery & Sons Ltd v Wark [1975] RTR 45. This too was a decision of the Divisional Court headed by Lord Widgery CJ, on this occasion sitting with Ashworth and Bristow JJ. The court there too was concerned with the same section of the Road Traffic Act 1972, section 40(5)(b). The court there too held, by the same logic and relying upon the same line of authority, that causing and permitting both required mens rea, and that proof of mens rea in relation to a company required knowledge of the facts rendering the user unlawful to be attached to those who could be fairly described as the "brains" of the company. This case is, in effect, a straight application of Ross Hillman Ltd v Bond.[20]Curiously, there appear to be no further reported cases in reliance on that strain of authority, or bearing on the point at issue, until Cambridgeshire County Council v Associated Lead Mills Ltd [2005] EWHC 1627 (Admin), [2006] RTR 8. The Divisional Court consisting of Kennedy LJ and Walker J considered the parallel provisions of section 5(1) of the Road Traffic Regulation Act 1984. That section concerns an offence that is recited in the section as follows:
"A person who contravenes a traffic regulation order, or who uses a vehicle, or causes or permits a vehicle to be used in contravention of a traffic regulation order, shall be guilty of an offence."
[21]It is of interest that their Lordships disagreed as to the outcome of the case, but they did agree that where a mental element was required of an offence, then a company could not be fixed by that mens rea in the absence of evidence that established that those with real authority within the company held the relevant mens rea. The Justices in that case made findings which included the following:
"There was no evidence before the court as to the mind of the company."
[22]In his judgment Kennedy LJ, who in the event was in the minority, dissented with Walker J and in the circumstances of that case therefore disagreed with the outcome. He said this: "But what about the employer? Unless the words 'cause or permit' in this context give rise to strict liability it cannot be suggested on the facts of this case that the employer contravened the prohibition in the Order, and Mr Magee rightly did not contend that the employer contravened the Order. Authorities such as Ross Hillman (cited above) and Vehicle Inspectorate v Nuttal [1999]] 1 WLR 629 demonstrate the need for some prior knowledge on the part of the defendant when these words are used".[23]In the course of his judgment Walker J cited Ross Hillman Ltd v Bond and quoted the relevant passages from it, although the principal purpose of his quotation was to establish his view of the necessary mental element in the case before him. It is clear that, by implication, he agreed with the requirement that a company could only acquire the necessary mens rea consistently with the observations of the court in Ross Hillman Ltd.[24]Indebted as I am to the argument by both counsel, I have also, since rising to consider this judgment, turned to the 13th Edition of Smith and Hogan's Criminal Law. Usefully at chapter 15.4 the authors of Smith and Hogan consider the area of corporate manslaughter, to use the shorthand. It will be recalled that the necessary mens rea for manslaughter may be as limited or low a threshold as gross negligence, on first principles a lower threshold in terms of mens rea than a specific statutory intent to deceive.[25]In their helpful summary of the history of the development of the law of corporate manslaughter, the editors of Smith and Hogan tell us the following:
"Public disquiet with the lack of a specific offence for corporate killing increased with each successive failure to secure convictions for gross negligence manslaughter in any of the large scale disasters such as the Southall, Paddington, Hatfield and Potters Bar rail crashes, the Zeebrugge (Herald of Free Enterprise) and Marchioness shipping disasters and the Piper Alpha and King's Cross fires. ... The immediate background to the Act is traceable to the Law Commission Report from 1996 [number 237 legislating the Criminal Code: Involuntary Manslaughter (1996)] recommending the creation of a new offence of 'corporate killing' ... ... The Law Commission Report was followed by a Home Office Consultation Paper in which the Government accepted the need for reform, recognising the need to restore public confidence that companies responsible for loss of life can properly be held accountable in law ... Following a Report of The Home Affairs and Work and Pensions Committees in 2005, the Government produced another Bill which, after much controversy in Parliament, became the present Act."
That is to say the Corporate Manslaughter and Corporate Homicide Act 2007.[26]In discussion of the laws, which predated the Act, the editors of Smith and Hogan go on to say this:
"It required there to be an individual holding a sufficiently senior position in the company who could be identified with the company as its 'directing mind and will' and who individually fulfilled the elements of the gross negligence offence: fatality following a gross breach of a duty of care which posed a risk of death. The only successful prosecutions against corporate entities for gross negligence were in relation to small companies, where there was more likely to be a single person directly and immediately responsible for the death and who was senior enough to be regarded as the 'directing mind and will' of the company. There were few successful prosecutions for gross negligence manslaughter against corporations."
[27]It seems to me that those passages from Smith and Hogan are instructive, because the ingredients they spell out, as necessary for an offence of manslaughter to be brought home against a company, are entirely consistent with the run of authorities cited in this very different area of criminal law. It seems to me that that reinforces the message to be drawn from those authorities. Had it been otherwise, it seems to me that the impetus towards the development of the law so as to make companies responsible for offences of much greater harm, but lower requirement in mens rea, would have carried the law farther, so as to render the Act unnecessary.[28]I return to the question in this case: is there a requirement before a specific intent of this kind can be proved against a company, to demonstrate that a director or office holder, whether fully appointed or by operation of law because of assumed control, had the necessary mens rea? None of the historic cases have dealt with the situation where responsibility for a whole operational area has been delegated to a senior employee who is not an officer of the company, or a formal legally appointed director.[29]With that caveat in mind, I remind myself that we are here dealing with criminal liability, that therefore the policy of the law where there is any ambiguity is to sustain a narrow reading of the law. I would therefore say that, even where there has been delegation of a significant area of operations to a senior employee, there is still a requirement that those with general direction of the company should be fixed with the necessary criminal intention, before the offence can be brought home against the company. That must be particularly so where the necessary intent is an intent to deceive.[30]I return therefore to the three questions set out for the opinion of this court by the magistrates. (1) Was the offence before the court one of strict liability and therefore should the respondent company have been convicted? The answer is "No" by consent of all the parties here. 2. Assuming the answer to the first question is "No", was the court in error in finding that Mr Hedderman did not fall within the class of persons who could properly be held to be the 'brains' of the company and could not, therefore, have committed an offence in the name of the company? The answer I find to that question is "No". (3) Assuming the answer to the first question is "No", was the court in error in finding there was no evidence from which a reasonable tribunal could infer that an officer of the company did have knowledge of the facts at the time the offence was committed so as to have been able to form the necessary intent to deceive? The answer to that question also is "No". It follows that the appeal is dismissed.[31]MR MOTT: My Lord, the question of costs rears its ugly head as ever. I do not know whether your Lordship wishes, in accordance with CPR 52, to carry out a summary assessment of the respondent's costs, or whether your Lordship is content, as it were, to make a more general order that the appellant should pay the respondent's costs to be the subject of a detailed assessment in the form of an agreement.[32]MR JUSTICE IRWIN: I will not say at this stage that I will not make an assessment, but do you have a statement of costs for me to look at?[33]MR MOTT: I do, my Lord.

MR JUSTICE IRWIN: Have you had a chance to look at it?

[35]MISS MOSTAFA: My Lord, I have just been given it.

MR JUSTICE IRWIN: You have not seen it before.

[37]MISS MOSTAFA: No. (Same-handed).[38]MR MOTT: Just by way of background, my Lord, your Lordship may not be aware that in the present case what took place was that following the dismissal of the prosecution below, as a result of a submission, the learned clerk to the Justices then drew up a draft case stated and sent it out to the parties for any comments, observations or refining points to be made and invited submissions. Submissions were then made before the final case stated was produced. So when one looks over the page in relation to disbursements, and in relation to those fees which relate to my input, my Lord, that is what those figures there set out relate to.[39]I do not know whether your Lordship, in what seems to be the time honoured way of dealing with it, wishes to hear from my learned friend, Miss Mostafa, first.[40]MR JUSTICE IRWIN: I think that is sensible. As long as she feels she has had enough time to think about it. I see you do not have anyone with you.[41]MISS MOSTAFA: That is the difficulty I have. I do not have an instructing solicitor, who I am afraid is abroad at the moment, nor do I have anyone from the Vehicle and Operator Services Agency who will be landed with the bill. I make the following observations: in view of your Lordship's ruling I accept that we would have to pay costs, however I have not really had an opportunity to discuss these costs with those who instruct me and any representations they would wish to make in relation to these costs. May I ask for time? I would have to ask that the costs position is reserved until there can be an agreement in terms of costs.[42]MR JUSTICE IRWIN: It is open to you to agree. What I will say is this: I think if I am not to make a summary assessment, which on a case like this I would normally if you had had time to take instructions, but I do not want to put you in a difficult position, the alternative is to order the respondent's costs to be assessed, if not agreed, but with an interim payment. I do not see why the respondents should be kept out of any of their money for what will be quite a long period while the assessment takes place. Miss Mostafa, given what you have said, if I made that order, but order that there should be an interim payment of £4,000 within 28 days, it gives plenty of margin for some discussion, and let us hope there can be an agreement. Is that acceptable?[43]MISS MOSTAFA: My Lord, thank you very much. That gives me time to speak to my instructing solicitors. Hopefully there will just be agreement.[44]MR JUSTICE IRWIN: The respondent's costs to be assessed, if not agreed and £4,000 by way of interim payment of costs to be paid within 28 days of today. Thank you both very much.[45]MR MOTT: I am grateful, my Lord.