VISION TRAVEL INTERNATIONAL Ltd, Re [2013] UKUT 0411 (AAC)

IN THE UPPER TRIBUNAL
ADMINISTRATIVE APPEALS CHAMBER
[2013] UKUT 411 (AAC) Appeal No. T/2013/08Venue TRAFFIC COMMISSIONER APPEALS, ON APPEAL FROM THE DECISION OF Miss Sarah Bell, TRAFFIC COMMISSIONER for the WESTERN TRAFFIC AREA
Between
VISION TRAVEL INTERNATIONAL Ltd, Re
Date 20 December 2012
The appeal is allowed.The decision of the Traffic Commissioner is set aside.The following decision is substituted:1. The operator’s good repute is very significantly tarnished but not wholly lost2. The number of vehicles authorised under the operator’s licence is restricted to 10 with effect from 30 September 2013

SUBJECT MATTER:-

1. Lifting of corporate veil2. Sufficiency of reasoning in Traffic Commissioner’s decision3. Fundamental error of fact in Traffic Commissioner’s decision4. Proportionality of sanction

CASES REFERRED TO:-

Edward Coakley t/a C.R.A. - T/2011/63

George Jenkins Transport Ltd - 2004/36

Bryan Haulage (No. 1) - 2002/1

Lorna Eddie, t/a Lorn Freight - 2008/130

REASONS FOR DECISION

1. This is an appeal by Vision Travel International Limited, the operator, against the decision of the Traffic Commissioner for the Western Traffic Area dated 20 December 2012 by which she revoked the Operator’s licence.2. That decision was taken after a Public Inquiry which commenced on 11 September 2012, continued on 12 September 2012 and 14 September 2012 and then concluded on 9 October 2012, four days in total.3. By her decision of the above date the Traffic Commissioner also disqualified a named individual who had been the former nominated Transport Manager for the operators from acting as a Transport Manager. However that aspect of her decision formed no part of these proceedings.4. The operator was represented at the hearing before us by Mr Tim Nesbitt, Barrister. Mr Nesbitt was accompanied by Mr Peter Sharpe, the sole director of the operator. We are grateful to Mr Nesbitt for his written skeleton argument and for his oral submissions developing its salient features.5. The circumstances which form the factual background to this appeal appear from the documents on file and the Traffic Commissioner’s decision as follows:(a) The operator has held a Standard International Public Service Vehicle Operator’s Licence since 7 November 2003.(b) The operator is a private limited company of which Mr Peter Sharpe is the sole shareholder and the sole director. The Traffic Commissioner specifically found in fact that he was “the controlling mind” of the company.(c) The company was authorised to operate 37 vehicles. At all relevant times there were 29 vehicles actually being operated. The references to “13 vehicles” in for example paragraph 4 and paragraph 16 of the Traffic Commissioner’s decision are erroneous. They appear to have originally come from the brief prepared for the Traffic Commissioner for the Public Inquiry which narrates that the operator had “13 vehicles” in possession. Mr Sharpe’s evidence to the Traffic Commissioner at the Public Inquiry was to the effect that the operator had 29 vehicles in operation. We saw no reason why the Traffic Commissioner should not have accepted that evidence as accurate in preference to the statement in the brief. That statement appears to have originated from a reference in a Traffic Examiner’s report.(d) The Public Inquiry was called because of a large number of convictions against the operator and twelve of its drivers in Portsmouth Magistrates’ Court. Those convictions resulted from an extensive investigation by VOSA into the operator’s tachographs and its drivers’ hours. That investigation involved the examination of 542 charts in all and interviews with the drivers and the management team. Full details of the convictions both of the operator and of its drivers were before the Traffic Commissioner in a report from a Traffic Examiner dated 13 March 2012. To summarise, the 12 drivers just referred to were convicted of 76 offences relating to their hours.Those convictions can be broken down into the following categories:

Daily rest offences - 16

False records - 11

Failing to keep a record - 26

Centre field errors - 7

Mode switch errors - 9

Failures to take 45 minutes break in 4.5 hours driving - 5

and

Aiding and abetting a false entry

(for which the Company’s then Transport Manager

was convicted) - 1

The company received 45 convictions, mirroring those of its drivers. Those convictions can be broken down as follows:

Daily rest offences - 17

Failing to keep a record - 7

Centre field errors - 6

Mode switch offences - 10

and

Failures to take 45 minutes break in 4.5 hours driving - 5

All of the convictions of the operator were for the offence of “using” not “permitting”. The offences in question arose for the company as the employer of its drivers when one of its employee drivers committed a tachograph or drivers’ hours offence. The operator was fined £22,500 for the above offences and in addition was ordered to pay prosecution costs amounting to £15,400.(e) In addition, the operator was subject to a maintenance inspection carried out by VOSA on 16 July 2012. That inspection was marked “unsatisfactory”. The operator has only had one “satisfactory” maintenance inspection since 2007 out of a total of five maintenance inspections.6. On the basis of the above facts and circumstances, the Traffic Commissioner decided that the operator had lost its “good repute” and thus no longer satisfied section 14ZA(2)(b) of the Public Passenger Vehicles Act 1981 which lays down “good repute” as a requirement for the holding of a standard public service vehicle operator’s licence. In particular, she considered that “the repute of the operator should be based on (her) findings in relation to the conduct of Mr Sharpe” as she puts matters in paragraph 12 of her decision.7. In his skeleton argument and oral submissions Mr Nesbitt submitted that the approach to the “good repute” of the operator taken by the Traffic Commissioner by linking it to “the conduct of Mr Sharpe” was erroneous in law. This was a new ground of appeal. However, we permitted Mr Nesbitt to rely on it on the operator’s behalf.8. Mr Nesbitt’s position was that in dealing with this aspect of the case in the way in which she did the Traffic Commissioner had failed to keep properly in mind the distinct legal personality of the operator as an incorporated company from that of Mr Sharpe, its sole director and shareholder. It was incorrect in law for her to treat them “as one and the same entity”. The entity which should have been considered for the purposes of whether “good repute” continued to exist was that of the operator as an incorporated company. Its repute and conduct went beyond “that of one individual”, however central he or she may be.9. We reject the above submissions. We agree that a Traffic Commissioner is required to respect the principle of the separate legal personality of an incorporated company. That principle has the result that there is a corporate veil between such a company and its directors and shareholders. Indeed we accept that it is not enough per se that someone is the sole shareholder and the sole director of a company for a Traffic Commissioner to equate him with the company. Had the Traffic Commissioner adopted that approach she would indeed have erred in law. We refer to Edward Coakely , t/a C.R.A., T/2011/63 paragraph 6(ii) where this Tribunal fully accepted a submission by Counsel for the appellant in that case which was summarised as follows:
“In the paragraph 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 100% 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.”
We also refer, as did the Traffic Commissioner in paragraph 12 of her decision, to George Jenkins Transport Limited , 2004/36 where the Transport Tribunal in paragraph 5 referred to and commented on a submission by Counsel as follows:
“Mr Laprell accepted that when a limited company is owned and managed by one man, the reality of the situation may be that the man is the company and vice versa and that the Traffic Commissioner would be entitled to look behind the corporate veil to establish the reality of the situation. However, in those circumstances, the Traffic Commissioner should make it clear that he is approaching the company and the director in that way and set out the reasons for doing so.”
However, in this case the Traffic Commissioner has justified and explained her approach involving the lifting or piercing of the corporate veil and treating the operator and Mr Sharpe as being “one and the same”. She has done so by making an explicit finding of fact, unlike the Traffic Commissioner in Coakley, that Mr Sharpe was “the controlling mind” of the operator. In paragraph 12 of her decision she said:
“The holder of this operator’s licence is a limited company but from an operator licencing perspective Mr Sharpe is the controlling mind. On the face of the evidence he alone owns and managed the company, including the transport operations.”
Then in paragraph 17 of her decision she goes on to say:
“It is a cause for further disquiet that Mr Sharpe appears to have done nothing to look at himself and his own approach on what more he could do as the sole director and (our italics) controlling mind.”
We hold that the Traffic Commissioner’s finding that Mr Sharpe was “the controlling mind” of the operator was an entirely rational conclusion for her to reach on the basis of the evidence before her. We further hold that by making that finding she has justified and explained her conclusion that for the purposes of the “good repute” of the operator she could effectively equate Mr Sharpe’s conduct with that of the company. Mr Sharpe was correctly held to be the alter ego of the operator.10. Mr Nesbitt’s next ground of appeal related to the sufficiency of the reasoning in the Traffic Commissioner’s decision. He submitted, firstly, that she had not carried out a sufficient analysis of the nature and gravity of the operator’s infringements of road traffic law. Secondly, he submitted that she had not undertaken a balancing exercise involving the careful consideration of the features of the evidence before her which were favourable to the operator. In support of those submissions he placed considerable emphasis on Bryan Haulage (No.1) 2002/1, a decision of the Transport Tribunal, especially paragraphs 4 and 6. However, Mr Nesbitt also drew our attention to Lorna Eddie trading as Lorn Freight 2008/130. It is of considerable importance that the Judge who presided over the Transport Tribunal in that case had also presided in Bryan Haulage (No. 1). In paragraphs 8 and 9 of Lorna Eddie the Transport Tribunal put matters thus:8. “We agree with the decision of the Transport Tribunal in K D L European Limited (Supra) that decisions from Traffic Commissioners are directed to operators who will be well aware of the issues involved and the arguments advanced on their behalf. With that in mind, Traffic Commissioners must provide intelligible decisions with adequate reasoning so that operators may understand why the Commissioners came to the decision that they had.9. It is usual for operators to appeal the decisions of Traffic Commissioners either wholly or partly upon the basis that their reasons were inadequate with reliance being placed upon the Transport Tribunals decision 2002/1 Bryan Haulage (No. 1). The importance of that decision should not be overstated. Traffic Commissioners do not need to rehearse in their decisions the entirety of the evidence that has been put before them. Neither do they have to repeat and determine every point that has been raised, only those which go to the principal issues in the case. An appeal based upon the inadequacy of reasoning will not succeed unless it can be shown that the operator has been genuinely and substantially prejudiced by the failure to provide an adequately reasoned decision.”We agree with the above dicta . We consider that the test to be applied for assessing the adequacy of the reasoning in a Traffic Commissioner’s decision is succinctly laid out in the paragraphs which we have just quoted. Applying them and having carefully read the Traffic Commissioner’s decision as a whole in this case we are satisfied that, whatever its deficiencies might be, it meets the legal test of adequacy as thus defined. In our opinion, Mr Sharpe would not have been left in any doubt as to why the Traffic Commissioner decided the case against the operator in the way in which she did by a reading of her decision. We thus reject the ground of appeal under discussion in this paragraph.11. Mr Nesbitt in his skeleton argument and in his oral submissions emphasised the Traffic Commissioner’s factual error in respect of the number of vehicles actually being operated at all relevant times by the operator under the terms of their licence. As we have narrated in paragraph 5(c) above, the correct figure was 29 but the Traffic Commissioner proceeded on the basis that there were only 13 vehicles being so operated. This is demonstrated especially by paragraph 16 of her decision where she puts matters thus:
“In November and December 2010 the operator was authorised to operate thirteen vehicles and thirteen discs were issued, a far lower authority than it currently has the benefit of.”
While we accept that there are other passages in her decision where she appears to recognise that the larger fleet size was authorised the quotation which we have just made represents an error of fact. In our view, that error of fact is sufficiently serious and important to render the Traffic Commissioner’s decision unsafe. We agree with Mr Nesbitt’s submission in his skeleton argument that the error of fact was of such importance that it did not give the operator “any confidence” in the overall decision of the Traffic Commissioner and further that it would be “unjust for a decision of this seriousness to stand in the face of the unavoidable conclusion that the Traffic Commissioner was approaching the case on the basis of a fundamental factual misconception”. Not only do we agree with those submissions but we also agree with the more specific and supporting submissions advanced by Mr Nesbitt in regard to this aspect of the case. The first of these is that a given number of infringements committed by a pool of 13 vehicles and drivers is a more serious situation than the same number committed by 29 vehicles and drivers. The second of those submissions (which leads us on to the matter which we discuss in paragraph 14 below) is that the misconception under which the Traffic Commissioner was labouring may well have had a real bearing on her approach to the appropriate sanction in this case. Had she proceeded on the basis that the number of vehicles involved was 29 rather than merely 13 she may well have taken a different view on the proportionality of the sanction which she imposed. For these reasons, therefore, we accept Mr Nesbitt’s submissions on this aspect of the case.12. We have identified a further significant error of fact in the Traffic Commissioner’s decision. At the end of paragraph 12 of that decision she refers to a public inquiry hearing “at the end of 2010”. So far as we can ascertain from the bundle in these proceedings no such public inquiry hearing took place. The bundle indicates that the only public inquiry relating to this licence which took place prior to that held before the taking of the Traffic Commissioner’s decision under appeal was held on 17 July 2009 to consider an unsatisfactory maintenance inspection.13. Additionally, we have concerns about the lengthy delay between the conclusion of the public inquiry hearings on 9 October 2012, with the main part of those hearings having taken place in September 2012, and the signing of the Traffic Commissioner’s decision on 20 December 2012. It may be that there was a connection between the factual mistakes which we have identified in paragraphs 11 – 12 above and that delay.14. Finally, having regard particularly to the matters discussed in paragraphs 11 - 12 above we consider that the sanction of revocation imposed by the Traffic Commissioner was, on balance, disproportionate in all the circumstances of this case. In our judgement it was too severe even having regard to the seriousness of the infringements of road traffic legislation which had taken place. We agree with Mr Nesbitt’s written submission that “revocation was simply too harsh”, taking everything into account.15. We are thus satisfied that for the reasons laid out in paragraphs 11 - 14 above that it is appropriate for us to set aside the Traffic Commissioner’s decision. In view of the considerable time that has already elapsed since this investigation began we do not consider that it is appropriate to remit the case to another Traffic Commissioner or Deputy Traffic Commissioner for a fresh Public Inquiry. Rather we consider it appropriate to substitute our own decision which we do in paragraph 16 below.16. Having regard to all the facts and circumstances of the case we must emphasise that we take the view that a pattern of serious infringement of road traffic legislation has taken place as we have narrated above. We hold that that pattern very significantly tarnishes “the good repute” of the operator because of the conduct of Mr Sharpe its controlling mind. However, it falls just short of amounting to a loss of “good repute” on their part. We further hold that the appropriate sanction on the operator for that pattern of infringement is to impose a very considerable restriction on the number of the vehicles which can be operated under their public service vehicle operator’s licence to ten vehicles only. We consider that that is a proportionate regulatory response to the pattern of infringements with consequent tarnishment of “good repute” which has been established in this case. The restriction we thus impose will take effect from 30 September 2013.

A J GAMBLE

Judge of the Upper Tribunal

Date: 23 August 2013

Cited in 1 later judgment