Edward Coakley T/a CRA v [2012] UKUT 77 (AAC)

IN THE UPPER TRIBUNAL

ADMINISTRATIVE APPEALS CHAMBER

[2012] UKUT 77 (AAC)

Venue TRAFFIC COMMISSIONER APPEALS, ON APPEAL FROM THE DECISION OF Ms JOAN N AITKEN,, TRAFFIC COMMISSIONER for the SCOTTISH TRAFFIC AREA

Between

Edward Coakley T/a CRA v

Date 7 October 2011

[1]This is an appeal by the appellant against the decision of the Traffic Commissioner for the Scottish Traffic area of 7 October 2011 by which she refused his application for a PSV licence.

[2]The appellant attended the hearing. He was represented by Mr David Thomson, Advocate instructed by Ms Nicola Irvine, Solicitor of Russel, Gibson and McCaffrey, Solicitors. We are grateful to Mr Thomson for his written and oral submissions.

[3]The factual background to this appeal appears from the documents in the bundle and Mr Thomson’s submissions. It is as follows:(a) The appellant applied for a PSV licence as a sole trader trading as C.R.A. by an application dated 9 February 2009 and received on 8 April 2009.

(b) The Traffic Commissioner held a conjoined Public Inquiry in respect of the above application and an existing licence held by Coakley Bus and Coach Limited. That company changed its name on 10 February 2010 to the Braidhurst Bus Company Limited. It is hereafter called ‘the company’. The shares of the company were one hundred per cent owned by the appellant. The Public Inquiry took place on the following dates, 7 December 2009, 13, 14 and 21 May 2010, 17 June 2010, 20 May 2011 and 14 September 2011.

(d) On 2 March 2011 the Traffic Commissioner decided that the appellant was of good repute but that he had failed to demonstrate appropriate financial standing. She continued the Public Inquiry for him to demonstrate such standing.

(e) On 30 March 2011 HMRC petitioned the Court of Session for the liquidation of the company. By an interlocutor dated 4 May 2011 the Court of Session appointed an interim liquidator and wound up the company.

(f) On 25 May 2011 the Traffic Commissioner revoked the company’s PSV licence.

(g) The appellant has been convicted of two charges of breach of the peace at Hamilton Sheriff Court. He was admonished on each of these charges. He has also been convicted of assault at that court and fined £250.

(h) On 23 June 2011 a warrant was granted for service of an Initial Writ at the instance of the company and its interim liquidator against the appellant. That Writ seeks payment of £1,197,036 from him, alleging gratuitous alienations. The appellant is defending that action - it has not yet been resolved.

(i) On 7 October 2011, the Trafffic Commissioner refused the appellant’s application for a PSV licence on the grounds that she was not satisfied on his repute, his professional competence or his appropriate financial standing.

[4]As narrated in paragraph 3(d) above the Traffic Commissioner on 2 March 2011 had accepted that the appellant was of good repute. That is the clear import of paragraph 130 of her decision of that date. However, she there states that her determination of the issue of repute in the appellant’s favour was “close run”. Using another metaphor, she then goes on to say:

“I am just by a gossamer thread allowing (the appellant) his repute.”

When she took a contrary view on the issue of the appellant’s repute in paragraph 48 of her decision of 7 October 2011 she reused the “gossamer thread” metaphor in describing her decision of 2 March 2011. Indeed she repeated that same metaphor in paragraph 55 of her decision of 7 October 2011 when she puts matters thus: “In March I generously thought repute might be there, albeit by a gossamer thread. I do not believe it to be there now. “ We accept Mr Thomson’s submission that, by however narrow a margin, the Traffic Commissioner had nonetheless found in favour of the appellant on the issue of good repute on the balance of probabilities by her decision of 2 March 2011. We further accept his submission that that should be the starting point of our consideration of this appeal. Mr Thomson did not submit that the Traffic Commissioner lacked jurisdiction to revisit the issue of repute. Nor did he submit that there was any procedural unfairness to the appellant either in her doing so at all or in the manner in which she did so. Rather, his submission was that the Traffic Commissioner had an insufficient basis for her holding of 7 October 2011 that the Appellant did not have good repute arising from events which had transpired in the period between March 2011 and October 2011. In that regard, Mr Thomson submitted, the Traffic Commissioner had erred in law.

[5]It is apparent from the Traffic Commissioner’s decision of 7 October 2011 that the main reason why she held against the appellant on the issue of repute on that occasion was, put simply, the non-communicative attitude, especially regarding the state of the company’s finances, taken up by him at the Public Inquiry of 20 May 2011. He had attended that inquiry. He was represented at it by a solicitor. That same solicitor separately represented the company on that occasion. The relevant passages from the Traffic Commissioner’s decision of 7 October 2011 are as follows: In paragraph 49 she expresses herself thus:

“Those paragraphs serve to highlight my unhappiness at what I had heard and at the procrastinations and lack of transparency I was experiencing from this operator and from the applicant, who was the one hundred per cent shareholder of the operator company. Since then the operator ceased to operate its registered services – and how did I find out? Not from Mr Edward Coakley but from my office receiving word of it primarily through SPT and latterly Mr Archie Brown was in touch. So the finances of the company which I was kept from seeing were such that HM Customs & Excise petitioned for the appointment of a liquidator. Again, I did not learn of this from Mr Coakley but from other sources. Indeed I learned very little from Mr Coakley. At the hearing on 20 May 2011 his position came very close to being one of nothing to do with him. Of course, he has to be careful because he has to maintain a public position of not being involved in the company given the director disqualification. He did not want to engage with me on 20 May.”

She then further continues in paragraph 50:

“I now find that the company had been operating, not substantially with its own finds or financial standing but with its finances being co-mixed with those of Mr Coakley. Thus he knew that the company did not have financial standing of its own. He sat and listened to the evidence and submissions given for the company and the attempts made to deflect me from any vouching of financial standing for the limited company. On the one hand he says he was getting management accounts and information from the director, on the other he did nothing to allow me to have a true picture of the finances of a company of which he was one hundred per cent shareholder. The relationship of a Traffic Commissioner to an operator is one of trust – that is not a statement of my making, it is settled in the case law of this jurisdiction. Counsel for Mr Coakley made the point that there is nothing improper in a shareholder making funds available to a company. I agree. The impropriety I am grappling with is a one hundred per cent shareholder in a bus company who wants his own licence who sat through a Public Inquiry and who did nothing then or before 20 May 2011 to tell me that the company in which he was a one hundred per cent shareholder had no financial standing and was dependent on him for a drip feed of cash to pay the bills.”

She continues as follows in paragraph 54:

“I consider that Mr Coakley allowed me to be misled as to the financial standing of the company – as shareholder he was privy to the financial information for the company.”

Finally, she expresses herself thus in paragraph 55:

“There are too many questions about the operation of the company and (the appellant’s) role in it and in its demise and in how it was represented to me during the course of this inquiry. It is disingenuous of Mr Coakley to distance himself from the manner in which the company was presented to be at the inquiry and what I was told or not told.”

[6]Mr Thomson submitted that the approach of the Traffic Commissioner disclosed in the quotations from her decision of 7 October 2011 laid out in paragraph 5 above was erroneous in law. Cumulatively, his argument ran as follows:(i) It was crucial to note that the Traffic Commissioner did not hold that the appellant had given dishonest, inaccurate or even deliberately misleading evidence on 20 May 2011 or any other occasion. Rather, she focused on non-disclosure on his part regarding information relating to the company, and in particular, its financial standing.

(ii) In the paragraphs cited the Traffic Commissioner had effectively required the appellant to answer for the company. In so doing she was lifting or piercing the corporate veil. It was the directors of the company not the appellant who were responsible for its management and control. The principle of corporate personality meant that even a one hundred per cent shareholder cannot generally be equiparated with a company whose shares he wholly owns. Yet that was essentially the approach taken by the Traffic Commissioner. Such a shareholder can be regarded as effectively the alter ego of the company whose shares he owns if it is held that he is its controlling mind. However, crucially, the Traffic Commissioner made no such explicit finding. She merely makes a hint to that effect in the last sentence of paragraph 49. It was fatal to her approach that she never held in terms that the appellant was acting as the controlling mind of the company. In any event, before she could have made such a finding she should have taken evidence from the appellant with an explicit warning against self-incrimination. It was apparent from the transcript of the hearing before her that she never gave such a warning. The reason for such a warning being required was the appellant’s disqualification as a director. That made it unlawful for him not only to serve as an official director of a company but also to be involved in the management of any company as a de facto or shadow director.

(iii) In Garforth 2002/22, the Transport Tribunal held that a Traffic Commissioner had erred in blaming an operator for failing to volunteer information at a Public Inquiry when he was acting on legal advice and his advocate was present. See especially paragraph 4 of the above decision. The present case was a fortiori of Garforth in that at the Public Inquiry of 20 May 2011 both the appellant and the company were separately represented, albeit by the same solicitor. The appellant and the company for the reasons given in sub-paragraph (ii) above were separate legal entities. The directors of the company were instructing the solicitor to act for them. The appellant was instructing him to act in his interests. There was a strong whiff of the approach criticised by the Transport Tribunal in Garforth in the Traffic Commissioner’s decision .

(iv) The decision of the Transport Tribunal in Crompton 2001/45 established that a Traffic Commissioner must be careful to avoid guilt by association. Separate parties to a Public Inquiry must have their cases separately considered. See especially paragraph 5 of that decision. The appellant was effectively being blamed for the failures of the company, a distinct legal entity, (as emphasised in sub-paragraph (ii) above) and a separate party. There was a clear analogy between the present case and Crompton.

(v) Finally, what was the legal basis of the duty of disclosure effectively placed on the appellant by the Traffic Commissioner? In paragraph 50 of her decision the Traffic Commissioner asserts that it rests on the relationship of “trust” between an operator and the Traffic Commissioner. That was much too unspecific a basis for imposing a duty of disclosure on the appellant especially as the information which it was asserted he should have disclosed related to the company and not to himself personally. The case law to which the Traffic Commissioner was alluding in paragraph 5 was probably the decision of this Tribunal in Ptarmigan Solutions Limited 2009/513. In paragraph 8 of that decision matters are put thus:

“The operator’s licensing system is built on trust. Traffic Commissioners must be able to trust operators to operate within the rules laid down by the licensing regime established by Parliament. Operators must be able to trust their competitors to comply with the regulatory regime.”

That dictum relates in terms to the operation of the licensing system. It does not relate to the conduct of a Public Inquiry. It provided an insufficient foundation for the duty imposed on the appellant by the Traffic Commissioner’s decision.

[7]We found Mr Thomson’s submissions narrated in detail in paragraph 5 above, to be telling and convincing. We accept them. We hold on the basis of them that the Traffic Commissioner erred in law and was indeed plainly wrong in founding, as she very largely did, on the appellant’s non-disclosure of the company’s financial situation at the Public Inquiry of 20 May 2011 as the basis of her decision, to remove the finding of good repute which she held made in her decision of 2 March 2011.

[8]In paragraph 51 of her decision, the Traffic Commissioner stated that the court action described in paragraph 3(h) above “does raise a question as to repute.” She was thus using the raising of that court action as a further supportive factor (in addition to that discussed in detail in paragraphs 5-7 above) for her decision of 7 October 2011 that the appellant was not of good repute. We consider that represented a further error in law on her part. The contents of the Initial Writ in the action raised against the appellant are so far averments and only averments. They have never yet been proved. They are disputed by the appellant as the defender in the action. We therefore hold that the Traffic Commissioner was plainly wrong to consider that the mere raising of that action affected the appellant’s good repute. We accept Mr Thomson’s oral and written submissions to that effect.

[9]We consider it appropriate to set aside the Traffic Commissioner’s decision on the basis of the issues discussed in detail in paragraphs 5-8 above . So far as good repute is concerned, we consider that the most appropriate disposal is to hold that the appellant has established, albeit just established, it on the basis laid out in the Traffic Commissioner’s decision of 2 March 2011. The factors of the appellant’s non-cooperation with the Traffic Commissioner at the Public Inquiry of 20 May 2011 and the raising of the court action of 23 June 2011 were not properly relied on by the Traffic Commissioner to the contrary effect as held by us in detail in paragraphs 5-8 above. That leaves the question of the appellant’s criminal convictions described in paragraph 3(g) above. After careful consideration, we hold, on balance, that these were of insufficient seriousness to alter the finding of good repute made marginally by the Traffic Commissioner on 2 March 2011.

[10]In paragraph 55 of her decision, the Traffic Commissioner state:

“As I am not satisfied as to repute, I cannot be satisfied as to professional competence.”

Given that we have accepted the submissions of Mr Thomson in regard to good repute and have held that it has been established we accept his further submission (in paragraph 3.17 of his written submissions) that there therefore remains “no basis for a finding that (the appellant) lacked the necessary professional competence.” We have thus simply held in our decision that the appellant has established that competence.

[11]Finally, we turn to the issue of appropriate financial standing. Great reliance had been placed at the Public Inquiry of 14 September 2011 on sufficient liquid funds becoming available soon afterwards, arising from the contemplated successful completion of a property sale in England. However, it is clear to us that these funds were not yet available as at the date of the Inquiry. Mr Thomson towards the conclusion of the hearing gave us a general account of what he submitted were readily available assets held by the appellant. We had some dubiety about how readily accessible some of those assets were. We hold that in all the circumstances the issue of appropriate financial standing requires to be looked at afresh with more rigour and in much more detail than was possible for us when no vouching as to the details of the above assets was produced. Indeed so far as we could ascertain, no detailed vouching was available at the hearing. In these circumstances, we remit this issue for re-determination by another Traffic Commissioner or a Deputy Traffic Commissioner at a Public Inquiry restricted to that issue to be convened as soon as practicable. We did not consider it possible for us to reach a proper determination on the issue of appropriate financial standing ourselves. Before that public inquiry takes place, the appellant must clarify how many vehicles he wishes to be covered by the PSV licence he seeks. Further, the appellant should be aware that the public inquiry will be concerned with his financial standing as it stands at the date of that inquiry. In particular, the implications for his financial standing of the progress by that date of the court action described in paragraph 3(h) above will be for consideration. The appellant must thus make full and frank disclosure at the public inquiry of the state of affairs regarding that action (and any other court proceedings in which he is involved) pertaining then. (Signed) A J GAMBLE Judge of the Upper Tribunal Date: 1 March 2012

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