Asset 2 Asset Ltd [2011] UKUT 290 (AAC)

IN THE UPPER TRIBUNAL
ADMINISTRATIVE APPEALS CHAMBER
[2011] UKUT 290 (AAC)Venue (TRAFFIC COMMISSIONER APPEALS), ON APPEAL FROM THE DECISION OF BEVERLEY BELL,, DEPUTY TRAFFIC COMMISSIONER for the EASTERN TRAFFIC AREA,
Between
Asset 2 Asset Ltd
Date 10 March 2011
[1]This was an appeal by the owners of a Hummer stretch limousine (registration number LN04 AUR) from the decision of the Deputy Traffic Commissioner for the Eastern Traffic Area made on 10 March 2011, when she refused the company’s application for the return the vehicle under the provisions of the Public Services Vehicles (Enforcement Powers) Regulations 2009 (S.I. 2009/1964) (“the regulations”).[2]The factual background to this appeal appears from the documents, the transcript and the Deputy Traffic Commissioner’s decision and is as follows:(i) The employees of a company based in Hemel Hempstead decided to go on a day trip to the London Eye and asked a colleague to arrange transport for 26 November 2010. The colleague used the internet to search for a company offering limousine hire in the Hemel Hempstead area and she identified a company called A1 Stretch Limos. The quoted price for the hire of a sixteen-seat limousine was £450, and the driver would, in addition, need to be given £25 in cash on the day. According to the colleague arranging the transport, the hiring (as far as she was concerned) included the driver.(ii) At around 1730 hrs on 26 November 2010 Hertfordshire Police stopped a stretch limousine (LN04 AUR) carrying fourteen passengers on the A405. The vehicle was then directed to a check-site, and a Traffic Examiner spoke to the driver who said that he was self-employed and, on this occasion, he said that he was working for A1 Stretch Limos. He kept a note of his hours, he received £25 on the day, and A1 would then pay him the balance due. He produced a number of tachograph charts for previous journeys – some 15 or 16 journeys – and he said that all the charts related to work undertaken for A1 Stretch Limos. A check of the DVLA database showed A1 Stretch Limos to be the registered keeper, and no outstanding finance or hire arrangement had been registered. VOSA therefore proceeded on the basis that A1 Stretch Limos were the owners of the vehicle, which was impounded under the regulations, which came into effect on 1 October 2009.(iii) It transpires however that Asset 2 Asset Ltd, a company controlled by Mr A Highland, a former banker, are the lawful owners of the vehicle. The way this came about, and the business arrangements between Asset 2 Asset Ltd, and A1 Stretch Limos, can be briefly summarised. Asset 2 Asset Ltd was set up by Mr Highland in February 2009. At some point prior to August 2009, Mr Highland was put in touch with Mr Ellis, who traded as A1 Stretch Limos. Asset 2 Asset Ltd entered into an agreement with A1 Stretch Limos whereby Asset 2 Asset Ltd provided A1 Stretch Limos with capital to acquire stretch limousines from the United States of America, import them, and convert them for use in the United Kingdom. The first limousine acquired was the Hummer H2, which was later to be registered as LN04 AUR , and receive a Certificate of Initial Fitness from VOSA. Mr Highland had originally intended to sell the vehicle at a profit, but this did not transpire. In due course, Asset 2 Asset leased the vehicle to A1 Stretch Limos, who did not have a PSV Operators Licence.(iv) On 3 December 2010 Mr Highland, on behalf of Asset 2 Asset made application for the return of the vehicle and he relied upon the grounds set out at Paragraph 10(3)(c) of the regulations, namely that, although at the time the vehicle was detained it was being, or had been, used in contravention of section 12(1) of the Public Passenger Vehicles Act 1981 , the owner did not know that it was being, or had been, so used. There was no suggestion made either in the application for return, or at any time subsequently to the Deputy Traffic Commissioner, that VOSA had not been entitled to impound the vehicle after it was stopped carrying fare-paying passengers on 26 November 2010. It was being operated by A1 Stretch Limos, the registered keepers, without the authorisation of a valid PSV Operator’s Licence in circumstances where an operator’s licence was clearly required.(v) A number of emails passed between Asset 2 Asset, VOSA and the Traffic Commissioner’s Office. On 10 December 2010, Mr Highland asserted in an email to VOSA that “following legal counsel, you now have no right to be holding onto our vehicle and we want its return immediately”. Mr Highland went on to say that if he had to go to court to gain possession of the vehicle “I will be pursuing VOSA for damages, as you now have no legal mandate to hold onto our vehicle”. On 20 December 2010, Mr Highland asserted, “I am advised that I would have a good case for damages.” On 22 December Mr Highland wrote to the Head of Corporate Reputation for VOSA in relation to the impounding documentation issued on the day of the impounding. He said:
“Could you please arrange to forward this immediately to ensure that our action can continue as it is unclear this was, in fact, served on our driver at the time of the incident”. (vi) On 4 February 2011 a public inquiry was held in the Deputy Traffic Commissioner’s courtroom in the North Western Traffic Area. The Applicant was represented by Miss Meades, who also appeared before the tribunal. For the purposes of this appeal, it is necessary to refer only to some of the matters arising at the public inquiry. (vii) A number of “Section 9” statements were admitted without challenge, including statements from the person who booked the limousine, from one of the passengers, and the Traffic Examiner who interviewed the driver. (viii) In the course of working out the initial business agreement between Asset 2 Asset Ltd and A1 Stretch limos, and making the arrangements for importing a number of vehicles, Mr Highland said that he met with Mr Ellis at least fortnightly – about twenty times from the summer of 2009 to the summer of 2010. (ix) In March 2010 Mr Highland also set up a company that was eventually called “Limos and Cars Ltd” which would, initially, seek to attract enquiries from potential customers and then transfer the business on to other limousine operators. The website went ‘live’ in September 2010, and began generating business in November 2010. Mr Highland spent two weeks in Spain with a colleague, looking at the websites of limousine operators to whom business might be transferred, and in order to work on the content of the Limos and Cars Ltd website. When it went ‘live’ the website said: “Over 30 years of experience in providing quality cars and other luxury transport … we own and manage the most modern and prestigious fleet of 14 and 16 seater limo, stretch and hummers anywhere in the UK …” (x) Towards the end of the public inquiry, the Deputy Traffic Commissioner asked Mr Highland where those 30 years of experience had come from. A. Well, it hasn’t. It hasn’t. DTC. So what is that then, if you said on a website, in your advertising blurb: “Over 30 years of experience in providing quality cars and other luxury transport”? That is made up, is it? A. In that instance, yes, I’m afraid so. (xi) The essential flavour of Mr Highland’s case to the Deputy Traffic Commissioner emerges from the following exchange with Mr Heaton, who represented VOSA at the public inquiry: Mr Heaton: The point I am coming to is that if you look at lots of websites of limo operators you will come across operators who assert that they hold a Public Service Vehicle Operator’s Licence and you are somebody who is a professional man, a banker, who deals in risk and matters of regulation. It must have occurred to you that limousines ought to be operated under the authority of licences, that the operators needed a licence. Mr Highland: It didn’t. Q. From your researches? A. It honestly didn’t. Q. You are a professional man who deals in risk matters and you are researching in great detail. You go to Spain for a fortnight with your business partner so you can do it in peace and quiet. You look in great detail at the industry and how it presents itself and you do not come across any suggestion that vehicles need a Public Service Vehicle Operator’s Licence? A. I didn’t. I didn’t, that’s all I can say. What I was specifically looking for, rightly or wrongly, was something that was going to attract clients to our website and I wasn’t looking specifically for things that you’ve mentioned. I was looking for hooks that would get people interested in our website, so no is the answer, I’m sorry. Embarrassing in hindsight I’ll admit. Q Is it your case that you were not aware that there was such a thing as a Public Service Operator’s Licence? A. Yes. And subsequently: Q. What was your motivation for not checking the lawfulness of, firstly, Eddie Ellis (of A1 Stretch Limos) and, secondly, anybody else you went into business with? A. Not thinking about it I guess. When asked about the reference to “our driver” in the email of 22 December 2010, Mr Highland said that he did not know who the driver was let alone whether it was his driver or their driver. Mr Highland said that he was distraught at the time. Q Yes, but why describe him as “our driver”? A. I’ve got no idea. And further on: Q Yes. Mr Highland, your case is that you were naïve and wet behind the ears and had never heard of Public Service Operator’s Licences. Is that your position? A. Embarrassingly, in relation to this vehicle I am afraid so… Q. And you say you were not aware that the industry was required to be regulated in any shape or form as far as the operation of it was concerned? A. Yes. (xii) It later transpired in evidence that Asset 2 Asset owned another four stretch limousines that were being operated by A1 Stretch Limos without the benefit of an operator’s licence. The Deputy Traffic Commissioner therefore asked: DTC. Now what I want to know, Mr Highland, is why on earth you have not taken some action to terminate the other four agreements at the point at which you found out that VOSA were saying that this operation was illegal?”
A. The answer to that is I didn’t think it had been proven that it was illegal so what I understood would happen is that VOSA would take the operator to court to prove that it was illegal and as far as I can see that hasn’t happened so from my limited knowledge of this, if they are operating illegally, isn’t it that VOSA would just close the whole operation down? DTC. That is why they impound vehicles A. But wouldn’t they just walk in there and close it down? DTC. It is VOSA’s fault is it, Mr Highland? A. I’m not blaming VOSA, I’m sorry … If that’s the law of the country and they haven’t got a licence, why are they still operating? DTC. Because people like you let them have the vehicles could be one answer A. Okay…. DTC. Well, let us look at it from another viewpoint. You are going into the leasing business and you are going into the limo business, neither of which have you ever been involved in before. Did you think of contacting the trade associations to find out best practice, and get a bit of practical advice of how to do things? A. No DTC. Why not? A. I guess it was a bit of arrogance in thinking you know how to do it. Sorry. … DTC. So the answer is you didn’t look at the trade associations due to arrogance on your part? A. Well, if anybody was looking at it, yes, that’s what I would say. I think its negligence, call it what you like. DTC. Oh, I’d call it recklessness A. Okay DTC. Do you disagree with me? A. No. (xiii) In submissions at the public inquiry, Miss Meades contended that, at the time it was detained, Mr Highland did not have actual knowledge that the vehicle was being used, or h ad been used, in contravention of section 12(1) of the Public Passenger Vehicles Act 1981. Nor was he wilfully shutting his eyes to the obvious, because the requirement for an operator’s licence was not obvious to Mr Highland. Miss Meades submitted that, in this context, ‘wilfully’ meant doing an act deliberately and intentionally, not by accident or through inadvertence. DTC. Where does arrogance come in that? Miss Meades. Arrogance doesn’t come in that, Madam. I think for these purposes he may have been perceived to be arrogant by yourself and considered arrogant. However, he has been … DTC. No, no, no. That was his answer. (xiv) Miss Meades went on to submit that Mr Highland’s primary focus had been to establish a leasing arrangement, so the question he asked himself was “How do I lease a vehicle?” He did not look further down the line. This may have been negligent, but it was not reckless. Miss Meades took the Deputy Traffic Commissioner through some aspects of the Transport Tribunal’s decision in Close Asset Finance Ltd v Secretary of State for Transport [2003/3] . She quoted from paragraph 9:
“mere failure to make all reasonable inquiries is not sufficient to constitute knowledge”, and nothing had put Mr Highland on enquiry that there was anything that needed to be looked into. In these circumstances, she argued, it was not appropriate to find a high degree of fault. (xv) Miss Meades submitted that the Deputy Traffic Commissioner had had the opportunity to evaluate Mr Highland, and the Deputy Traffic Commissioner reserved her decision. (xvi) In her written decision dated 10 March 2011 the Deputy Traffic Commissioner summarised the law and evidence. Turning to her considerations and findings, she said that she considered it appropriate to take account of Mr Highland’s actions and she went on to consider whether or not Mr Highland and the company had been merely negligent or whether, alternatively, they had acted wilfully and recklessly. She found that Mr Highland was an experienced individual in the world of business, that he was well used to managing risk, and that he was aware that many commercial activities were regulated. (xvii) The Deputy Traffic Commissioner found that Mr Highland was not entirely honest and one of the key factors in her decision was the wording of the Limos and Cars Ltd website. She said that: “to make a wholly untruthful representation about the number of years in which an operator has ostensibly been in business where this is a key factor in a customer’s consideration demonstrates a lack of integrity and a complete disregard for customers. The statement is made purely for the purpose of deceiving its customers.” (xviii) The Deputy Traffic Commissioner found that Mr Highland was not as naïve as he would have her believe, as evidenced by his letter to VOSA which, misleadingly, referred to “our driver”, and the attempts to coerce VOSA into returning the vehicle with threats of legal action. The “arrogance” that Mr Highland admitted to was aggravated by the fact that he chose not to seek proper advice with regard to the leasing business, and with regard to the establishment of ‘Limos and Cars Ltd’. (xix) The Deputy Traffic Commissioner found as fact that, even after Mr Highland had been told by VOSA about the unlawful use of the impounded vehicle, he took no action whatsoever to prevent further unlawful use by A1 Stretch Limos of the 4 other vehicles leased by Asset 2 Asset. (xx) The Deputy Traffic Commissioner concluded that Asset 2 Asset, through Mr Highland, had wilfully disregard circumstances which ought to have alerted them to the fact that the vehicle was being used in contravention of the Act. This was evidenced by the apparent wholesale failure to make any inquiry regarding any requirements as to any licensing regime. Having found that Mr Highland was not an entirely truthful man, she found herself not persuaded, on balance, that Mr Highland had no suspicions about the existence of the operator licensing regime. She concluded: “and so finally I come to the nub of this application. In looking at whether there has been a high degree of fault I take account of all of the above factors looking at the matter as a whole. In this case I have no hesitation in finding that there has been not only a high, but indeed a very high, degree of fault on the part of the applicant company as evidenced by all the matters that I have set out above. In summary, for a former banker versed in risk management to enter the commercial vehicle leasing business without (apparently) making any enquiry at all as to any licensing regime, to spend two weeks visiting the websites of other PSV and stretch limousine operators without (apparently) seeing any reference to operator licences, to set up as an internet portal for the operation of stretch limousines and other commercial vehicles without taking any advice from VOSA or the trade associations, to fail to take proper action when the illegal activity is then made plain by a Government Executive agency, and to then seek to set up as an industry expert writing a definitive guide for the benefit of that agency which already has a definitive guide on the internet cannot, in my view, demonstrate anything other than a high degree of fault.”
[3]At the hearing of this appeal, the Appellants were again represented by Miss Meades. We had the benefit of the original Grounds of Appeal, and Supplementary Grounds, for which we were grateful.[4]The original Grounds of Appeal asserted: 1. A1 Stretch Limousines were operating on the basis of dry hire agreements; 2. In any event, an operator’s licence had been applied for in September 2010, although it had not been granted; 3. Although no operator’s licence was held by A1 Stretch Limousines, they were not trying to circumvent the PSV operator licensing requirements as the company was operating to those same standards.[5]With regard to grounds 2 and 3, we find these to be wholly off the point. They do not address any of the grounds set out in the regulations, and whether or not an operator’s licence had been applied for, and whether or not maintenance and other standards were being adhered to, is of little relevance if these factors made no difference to the plain fact of unauthorised use, or of Mr Highland’s state of mind in relation to the unauthorised use, at the time that the vehicle was detained. These matters were, moreover, not raised with the Deputy Traffic Commissioner and we considered that it was too late to raise them with the tribunal.[6]The same point in relation to late evidence and new argument arises in relation to the now alleged ‘dry hiring’ – which is the term used to describe the practice whereby a company leases out a limousine without a driver. If the person hiring the vehicle intends to drive it himself (and holds a suitable driver’s licence and insurance) then this is perfectly legitimate. However, some operators have sought to adopt the practice of offering (or requiring) the hirer to hire a driver from a connected/related company under a separate agreement. VOSA considers that where this practice is adopted in an attempt to circumvent the PSV operator licensing requirements where passengers are being carried for hire or reward, it is illegal. In support of the dry hiring argument, Miss Meades sought to submit further documentation that, possibly, might persuade a different Traffic Commissioner to find that the vehicle, in fact, did not need an operator’s licence, so that VOSA had not been entitled to impound in the first place.[7]The tribunal considered the guidance of the Transport Tribunal in Thames Materials [40/2002] in which, after noting that the tribunal may not take into consideration any circumstances which did not exist at the time of the determination which is the subject of the appeal, recognised that the tribunal had a discretion with regard to evidence which did exist, but which had not been placed before the Traffic Commissioner. In deciding whether or not to admit fresh evidence the tribunal has consistently applied the conditions laid down by the Court of Appeal in Ladd-v-Marshall [1954] 1 WLR 1489 . The relevant conditions are as follows:(a) The fresh evidence must be admissible evidence.(b) It must be evidence that could not have been obtained, with reasonable diligence, for use at the public inquiry.(c) It must be evidence such that, if given, it would probably have had an important influence on the result of the case, though it does not have to be shown that it would have been decisive.(d) It must be evidence that is apparently credible though not necessarily incontrovertible.[8]In our view the ‘dry hiring’ argument, and any supporting documentation, could with reasonable diligence have been placed before the Deputy Traffic Commissioner. Moreover, given the statements from the group of people who hired the stretch limousine in question, the answers given by the driver when stopped and the tachograph evidence of previous journeys for A1 Stretch Limos, and the reference to “our driver” by the Applicant, we can see absolutely no merit in remitting this back to a different Traffic Commissioner to consider. Therefore, after retiring to consider the matter, we declined to admit any fresh evidence to support this new argument, and we were able to indicate to Miss Meades that we were not minded to remit the matter back for reconsideration on this basis.[9]In the supplementary grounds, the Appellant submits that the Deputy Traffic Commissioner placed undue weight on the misleading website when concluding that Mr Highland had shown a lack of integrity and honesty. The Grounds of Appeal assert:
“Accepting that he made a misleading statement does not automatically entitle the DTC to determine that he is not credible in this inquiry; on the contrary he is admitting he has told an untruth. The DTC does not mention anything further that leads her to conclude that he is not a credible witness”
. Miss Meades elaborated this point in her oral submissions, stating:
“Just because someone has made a misleading statement doesn’t mean they are untruthful”
. Miss Meades added that the words on the website were merely “advertising puffery”.[10]It may be that one untruth does not automatically mean that a witness lacks credibility or integrity in all other respects, but it is certainly something a Traffic Commissioner can consider when assessing a witness. The Deputy Traffic Commissioner was entitled to make an adverse finding on credibility, having had an opportunity of seeing and listening to Mr Highland give evidence, even if she was not bound to do so. It was a matter for her having had, as Miss Meades conceded at the public inquiry, an opportunity to evaluate Mr Highland. As it happened, he had little choice but to admit the dishonesty of the statement made on the website. It was manifestly untrue.[11]Moreover, the seriously misleading and dishonest assertions were not the only matters referred to by the Deputy Traffic Commissioner. She also referred to Mr Highland’s misleading email, when he was challenging the documentation provided at the scene of the impounding and where, for the purposes of the challenge, he described the driver of the vehicle as “our driver” – which was not a true description of the situation.[12]Insofar as (once unlawful use is proved) the burden of establishing lack of knowledge is upon the Applicant owner, and insofar as that burden requires to be discharged by placing credible evidence before the Deputy Traffic Commissioner, we find that the Deputy Traffic Commissioner was entitled to reach the negative conclusions that she did in relation to Mr Highland’s honesty and integrity.[13]The next point made was that the emails contained in the Deputy Traffic Commissioner’s bundle were more prejudicial than probative and should not have been included. The tribunal asked Miss Meades who, in VOSA or the Office of the Traffic Commissioner, would have had authority to withhold such evidence from the Deputy Traffic Commissioner. Miss Meades then accepted that a Traffic Commissioner may be permitted to read documentation leading up to a public inquiry but, in the present case, the Deputy Traffic Commissioner should have disregarded these emails.[14]We find nothing of substance in this point. The Deputy Traffic Commissioner was perfectly entitled to see all documentation and to form a view for herself as to relevance and weight. A misleading email is relevant where credibility needs to be evaluated and, where a Traffic Commissioner has the unenviable task of getting into someone’s head to see what they knew, thought, believed, understood and decided at a particular moment in time, their subsequent correspondence and behaviour may well shed light on their state of mind at the relevant moment. Repeatedly, Mr Highland claimed that he had taken legal advice and he repeatedly threatened legal action against VOSA. Yet before the Deputy Traffic Commissioner it was conceded, on the facts, that VOSA did have legal justification for the impounding, even though application had subsequently been made for the vehicle’s return. The Deputy Traffic Commissioner was entitled to form an impression, and Mr Highland can hardly complain if, in this case, the impression was an unfavourable one.[15]We reach a similar view in relation to other post-impounding conduct, especially the failure to immediately prevent unauthorised use of other vehicles leased by Asset 2 Asset to A1 Stretch Limos. There has to be a logical connection between the Applicant’s state of mind at the time of the impounding and any subsequent conduct if the subsequent conduct is to shed any helpful light. But if the Deputy Traffic Commissioner has to decide whether she believes that under no circumstances would Mr Highland have knowingly allowed his vehicle to be operated unlawfully, we think that the evidence that he appears to have knowingly done just that (having been put on notice of the legal situation and the facts by the impounding) is telling evidence that it would be hard for her to disregard. In our view the Deputy Traffic Commissioner treated this evidence appropriately. It was not the centrepiece of her reasoning but, in her discretion, she was entitled to conclude that it shed an illuminating light on the matrix of facts existing as at the date of the impounding.[16]Next, Miss Meades alleged bias and said that, throughout the hearing, the Deputy Traffic Commissioner’s manner was hostile towards Mr Highland, affecting his confidence in giving evidence. Until the supplementary grounds of appeal were submitted just a few days before the hearing before the tribunal, no suggestion of any bias had been made. We reminded Miss Meades that, in relation to any such allegation, the applicable law was as set out in Porter v Macgill [2002] 2 AC 357 at paragraphs 102-103, and that the correct procedural approach was as set out in E.A. Scaffolding [2004/426] . Miss Meades did not pursue an allegation of judicial bias such that the Deputy Traffic Commissioner would be entitled to be given notice thereof and to have an opportunity to comment. However, she maintained that the Deputy Traffic Commissioner had taken an unfavourable view of Mr Highland, that this was apparent during the hearing and as evidenced in the transcript, and that this undermined the fairness of the proceedings and the safety of her findings.[17]The tribunal has had the benefit of reading the entire transcript. We recognise that a transcript may convey matters inaccurately. What may appear to be interruptions might be nothing of the sort. What might appear to be an innocuous question may have been spoken with a touch of sarcasm in the voice. Nevertheless, we have concluded that, read as a whole, the transcript shows nothing more than the Deputy Traffic Commissioner discharging her duties robustly. The role of any Traffic Commissioner is essentially a judicial one, but a public inquiry is an inquiry and a Traffic Commissioner has a public duty, as regulator, to inquire carefully and diligently. It is a pro-active role, although the Traffic Commissioner must always be careful to maintain an open mind until the conclusion of evidence and submissions, and must never assume the role of prosecutor. Nevertheless, the duty of the Traffic Commissioner will often involve ascertaining the true facts, which means exploring and testing the evidence, and resisting so far as practicable those witnesses who attempt to pull the wool over his or her eyes. Sometimes a Traffic Commissioner must play ‘devil’s advocate’ and, even where VOSA are represented, as here, an inquiry remains an inquiry and the Traffic Commissioner has a duty to inquire.[18]We also pointed out to Miss Meades that she had been present throughout the public inquiry, and her brief as Counsel had been to represent Mr Highland and Asset 2 Asset. At no time during the public inquiry had any protest been made, and the original Grounds of Appeal made no suggestion of bias, hostility or inappropriately crossing the line of acceptable judicial conduct. Taking an overall view, we find that there is no substance to this aspect of the appeal. Indeed we found that, throughout the public inquiry, there were numerous occasions where the Deputy Traffic Commissioner took a robust line with Mr Heaton who represented VOSA, and was at pains to ensure scrupulous fairness – see, for example, page 234 of our bundle, where the Deputy Traffic Commissioner complained that Mr Heaton was straying into matters that had not been served on the applicant, and page 237 where the Deputy Traffic Commissioner, of her own volition and without intervention from Miss Meades, questioned the relevance of Mr Heaton’s questioning.[19]At one point, Mr Highland had said that, as a consequence of his experience, he thought he might write a guide for others in relation to the law in this area. The Deputy Traffic Commissioner expressed astonishment at this. Miss Meades submitted that this had caused the Deputy Traffic Commissioner to take a hostile view of Mr Highland. We disagree. The exchange in question needs to be seen in context and - although it added some additional evidence to support Mr Highland’s own description of his approach, at least in one respect, as arrogant - we do not find that the Deputy Traffic Commissioner allowed this somewhat surprising aspiration from Mr Highland to cloud her judgment.[20]Finally, although the Deputy Traffic Commissioner referred to the authorities that have sought to explain the correct approach when determining whether an owner has demonstrated that he or she did not know that their vehicle was being operated in contravention of the operator licensing requirements, it was asserted that she applied the facts to the law incorrectly, and reached unsustainable conclusions as a consequence.[21]Before setting out what we take to be the correct approach to knowledge in impounding cases, we make four observations.a. In Close Asset Finance, and from time to time thereafter, it has been suggested that impounding is a penal provision with the consequence that a strict quasi-criminal approach to the question of knowledge should be adopted. We are not satisfied that this is correct or that such an approach is necessarily appropriate to a professional and commercial regulatory jurisdiction. Impounding is certainly a preventative measure, but the proceeds of sale following impounding and sale are not retained by way of punishment or civil penalty. After deducting from the proceeds of sale the expenses incurred by the authorised person in exercising functions under the regulations in relation to the property, including for the detention, removal, storage and sale of the property, the balance of the proceeds must be returned to the person who was the owner of the vehicle immediately before it was sold, and the balance will not be retained by any organ of the State by way of punishment or civil penalty (see paragraph 20(4) of the regulations).b. Instead, we think that a purposive construction of the regulations is to be preferred, as stated by the tribunal in Close Asset Finance, and the purpose of the regulations is to prevent owners knowingly (in the sense set out below) permitting or facilitating the unlawful use of their vehicles.c. Owner liability or responsibility is not a new, novel or draconian concept. It already covers a range of responsibilities from insurance, to liability for parking ticket penalties, to disclosing who was driving when speeding is alleged. An owner of any vehicle used on the roads has legal duties and responsibilities, although it is clear that he does not have to make all reasonable enquiries or go through a full due diligence exercise. But to suggest that owners need not make any reasonable inquiries in relation to the use others are making of their passenger carrying vehicles, or heavy goods vehicles is, we think, a step too far, since it potentially emasculates the legislation and makes it all too easy for a reckless and irresponsible owner to achieve an advantage over the more sensible person (or company) who bothers to ask the few obvious questions that would occur to any honest and reasonable owner. We do not accept that it can have been Parliament’s intention to endorse a lack of proper caution on the part of the owner of a heavy goods or public service vehicle, or to encourage an indifference to the potentially catastrophic consequences of the unlawful operation of passenger carrying vehicles or heavy goods vehicles, or to render impounding ineffective in all cases except where dishonesty is proved. Such an approach would be wholly unrealistic, especially in relation to commercial leasing companies and, indeed, virtually any arrangement other than that between one individual and another.d. For this reason, we hold that the tribunal’s decision in Lombard North Central PLC (T/2011/21) should not be taken to have wider application. In particular, we find that the law does not require a specific finding of dishonesty in relation to the categories (ii) and (iii) set out in paragraph 24, below. Such an interpretation loses sight of the purpose of the regulations, the evil of unauthorised use that the regulations are intended to address, and the unrealistic and impractical nature of such an approach in relation to commercial leasing companies, especially in a jurisdiction intended to encourage good business practice, discourage conduct that lacks commercial integrity, and which cannot function effectively unless practical steps are possible in order to prevent and discourage the illegal, dangerous and unregulated operation of buses and lorries.[22]The present case is especially unusual - not because it relates to public service rather than goods vehicles (we fully accept that the applicable jurisprudence, including this decision, applies equally to HGV and PSV impounding without difficulty) - but because the Appellant claims ignorance of the law in the most basic sense. He does not say that he knew of the regulatory regime but failed to learn of the unauthorised use. He says, rather, that he did not know that the regulatory regime existed or that an operator’s licence was needed at all.[23]As the tribunal has consistently made clear (see, for example Thomas McKinney & Son Ltd [2007/62] once unlawful use is proved, the burden of satisfying the Traffic Commissioner that the vehicle should be returned on the ground that the owner did not know that it was being, or had been, used in contravention of section 12(1) of the Public Passenger Vehicles Act 1981 , rests firmly with the vehicle owner.[24]The various states of knowledge that may be involved were analysed by Millett J in Agip (Africa) Ltd v Jackson [1992] 4All ER 385 at 405, following the graduated scale suggested in the judgment of Peter Gibson J in: Baden v Société Générale pour Favoriser le Dévelopement du Commerce et de l' Industrie en France SA [1992] 4 All ER 161:(i) Actual knowledge;(ii) Knowledge that the person would have acquired if he had not shut his eyes to the obvious;(iii) Knowledge that the person would have acquired if he had not wilfully and recklessly failed to make such inquiries as an honest and reasonable person would make;(iv) Knowledge of circumstances that would indicate the facts to an honest and reasonable person; and(v) Knowledge of circumstances that would put an honest and reasonable person on inquiry.[25]Category(i) presents no difficulty. Categories(ii) and(iii) are essentially imputed actual knowledge, whereas categories(iv) and(v) are usually regarded as constructive knowledge and, without more, may not establish anything other than negligence.[26]More recently, in BCCI Ltd v Akindele [2000] 4 All ER 221 , Nourse LJ held that, in relation to cases of “knowing receipt”, all that is necessary to impute actual knowledge or find constructive knowledge is that the recipient's state of knowledge should be such as to make it unconscionable for him to retain the benefit of the receipt. A test in that form, he said, might help to overcome those difficulties of definition and allocation to which the previous categorisations have led. Moreover, it should better enable decision-makers to give common-sense decisions in the commercial context.[27]In our view, whichever way one looks at it, the motivation for the owner’s conduct, or failure to take certain steps, is likely to be extremely relevant. If the true situation is obvious, but a person or company says that, nevertheless, they did not appreciate it, the question is: why not? If they shut their eyes to the obvious, then actual knowledge can be imputed, unless some innocent explanation is established. If the true situation would have become apparent if such inquiries had been made as any honest and reasonable person would make, but a person says that, nevertheless, they did not make such inquiries, the question is: why not? In the absence of some innocent explanation, if they failed to do so wilfully (that is to say - deliberately, intentionally and with a high degree of fault) and recklessly (that is to say - with a lack of proper caution) then actual knowledge can be imputed. An example of such failure might be where a person or company deliberately decided that they did not want to know, or that it was not their problem, regardless of the consequences. It may, perhaps, depend on whether the failure was to make all reasonable enquiries (which is not a requirement), or whether it was a failure to make any reasonable enquiries.[28]In relation to categories (ii) and (iii) no separate finding of dishonesty is necessary because these categories inherently involve deliberate and intentional conduct or failure indicative of a lack of integrity. But, as the tribunal stated in Close Asset Finance, a high degree of fault is required for the failure ( to make such inquiries as an honest and reasonable person would make) to be “wilful” so as to constitute actual knowledge.[29]Categories (iv) and (v) are different because the conduct which falls within these categories is not self-evidently done with a dishonest motive or lack of integrity. It follows that, in relation to categories (iv) and (v), particular care will be needed. Here, there will have to be a finding that the owner knew of some of the circumstances, with the result that an honest and reasonable person would then see the full picture or, at least, start to ask some pertinent questions. If they did not do so, the question is why not? Thus, in category (iv) - what was the motive or explanation for the failure to reach the conclusion that an honest and reasonable person would have reached; and in category (v) - what was the motive or explanation for the failure to make the sort of inquiries that an honest and reasonable person would make? In our view, in relation to these categories, there is a strong argument for specifically considering the question of honesty or integrity in relation to the owner’s motive or explanation. Lack of honesty or integrity is not inherently part of these categories although, on the facts found, lack of honesty or integrity may well, in fact, be apparent. It will be a matter for the Traffic Commissioner to consider, on the evidence.[30]In short, category(i) stands alone. Categories(ii) and(iii) do not require a specific finding of dishonesty because, unless there is some innocent explanation, the closing of one’s eyes to the obvious, or the wilful and reckless failure to make such inquiries as an honest and reasonable person would make, inherently involve a type of dishonesty or lack of integrity and w e do not think that Parliament can have intended to give the benefit of such conduct or failure to the indifferent or deliberately ignorant individual or company and not to the business-like or cautious person. But a finding of a high degree of fault is required in relation to wilfulness. In relation to categories(iv) and (v), a Traffic Commissioner should specifically consider the question of honesty or integrity because lack of honesty or integrity is not implicit . Furthermore, it seems to us that, in this context, dishonesty or lack of integrity in relation to the owner’s motivation or explanation is consistent with the “unconscionable” analysis put forward by Nourse LJ.[31]Traffic Commissioners should therefore find such facts as they can on the evidence and then decide whether the owner has discharged the burden of establishing, on balance, that they did not have actual, imputed or constructive knowledge - as defined in the categories discussed above.[32]In the present case, although the Deputy Traffic Commissioner found no actual knowledge, as in category (i), she did find shutting one’s eyes to the obvious, as in category (ii) and she did find wilful and reckless failure to make such inquiries as an honest and reasonable person would make, as in category (iii). The Deputy Traffic Commissioner found a high degree of fault. In effect, as it seems to us from a careful reading of her decision, the Deputy Traffic Commissioner found that Mr Highland made the conscious decision that he did not want to know about regulation and licensing because, he thought, it was not his problem and he did not wish to make it his business. She found no alternative innocent explanation. The Deputy Traffic Commissioner also found knowledge of circumstances (the fact that A1 Stretch Limos was operating the vehicle in order to carry fare-paying passengers) that would put an honest and reasonable person on inquiry about the likely existence of some compulsory regulatory and licensing system that might apply, followed by a reprehensible failure to investigate the situation – which, she thought, was indicative of a lack of commercial honesty and integrity.[33]The Deputy Traffic Commissioner gave cogent reasons for such findings, and she was not persuaded by Mr Highland that his foolishness and naivety extended to the degree that he claimed. How could he, as an intelligent and business-experienced person, not suspect that the carriage of fare paying passengers in a multi-seater passenger-carrying vehicle would be the subject of regulation and licensing? He had every opportunity to find out about the existence of the licensing regime and then, from his regular contracts with Mr Ellis, he had every opportunity to find out whether A1 Stretch Limos actually had a valid operator’s licence. (We also note in passing that it is very easy to go online and find VOSA’s ‘Guidance for Operators of Stretch Limousines’, and do a ‘VOSA Operator Search’). The Deputy Traffic Commissioner, rightly in our view, held that the failure to ascertain the true legal and factual situation was both wilful and reckless, marked by a lack of proper caution and by a high degree of fault. These are reasonable conclusions to reach on the facts and evidence. Insofar as this was inconsistent with Mr Highland’s evidence, the Deputy Traffic Commissioner explained that she did not find him to be entirely credible for the reasons that she gave, and which we consider to be adequate.[34]Although she did not say so in terms, it is clear that, on her findings of fact, the Deputy Traffic Commissioner thought that it would be unconscionable for the owner of this vehicle to defeat the purposes of the regulations by shutting his eyes to the obvious, and by a wilful and reckless failure to make such inquiries as an honest and reasonable person would make, especially given what he must have known of the business environment and the particular circumstances of the case which would put an honest and reasonable person on inquiry. The owner should not derive benefit from this conduct and failure which the Deputy Traffic Commissioner found went well beyond mere negligence. We agree.[35]In the result, we find that the Deputy Traffic Commissioner’s conduct of the proceedings was entirely proper, her findings and conclusions were open to her on the facts found, and her decision was in accordance with the law and was not plainly wrong. The appeal is, therefore, dismissed. Judge Mark Hinchliffe, DCP 14 July 2011

Cited in 1 later judgment