OC International Transport Ltd v Department Of Environment, Northern Ireland (DOENI). (Transport : Traffic Commissioner cases) [2014] UKUT 0346 (AAC)

IN THE UPPER TRIBUNAL
ADMINISTRATIVE APPEALS CHAMBER
[2014] UKUT 0346 (AAC) Appeal No: NT/2014/19Venue (TRANSPORT APPEALS), ON APPEAL FROM THE DECISION OF, THE HEAD OF THE TRANSPORT REGULATION UNIT, NORTHERN IRELAND
Between
OC International Transport LtdDepartment Of Environment, Northern Ireland (DOENI). (Transport : Traffic Commissioner cases)
Date 19 February 2014

Judge Mark Hinchliffe, Deputy Chamber President (HESC); Judge of the Upper Tribunal.

Mr G Inch, Member of the Upper Tribunal.Mr A Guest, Member of the Upper Tribunal.Appellant:

OC INTERNATIONAL TRANSPORT LIMITED

Respondent:DEPARTMENT OF ENVIRONMENT, NORTHERN IRELAND (DOENI).Attendance:For the Appellant: Mr D McNamee, Solicitor.For the Respondent: Ms N Fee, Counsel.

Appeal heard at: Bedford House, 16-22 Bedford Street, Belfast

Date of hearing: 10 July 2014

Date of decision: 25 July 2014

DECISION OF THE UPPER TRIBUNAL :The appeal is allowed.The case is remitted back to the Department to be re-heard and re-considered by an authorised decision-maker other than Mr D Armstrong or Mrs G McIntyre.Subject matter:Constitution of the deciding body; Natural Justice;Advance disclosure to operators of available relevant evidence prior to the public inquiry.REASONS FOR DECISION:1) This was an appeal from what is described as the decision of the Head of the Transport Regulation Unit (TRU), made on 19/2/2014, when he revoked the appellant company’s operator’s licence on the grounds that the company did not satisfy the requirements to be of good repute and have professional competence. The appellant company’s standard international licence authorised the use of two vehicles and two trailers from an operating centre in Co. Armagh. The licence has been in place since July 2012 and Mrs Lorraine O’Callaghan is the sole director of the company.2) So far as it is pertinent to the key issues that we have had to decide, the factual background to this appeal appears from the documents, the transcript and the Head of the Transport Regulation Unit’s written decision, and is as follows:(i) Lorraine O’Callaghan is the wife of a Mr Martin O’Callaghan, who is a director of F&M Refrigerated Transport Ltd (F&M), a company (we were told) now in liquidation but which previously held an operator’s licence. An application for renewal of the operator’s licence by F&M was refused on 7/2/2012 on grounds of loss, or lack, of repute.(ii) On 30/4/2013, information was received in the TRU that a vehicle operated by the appellant company was intercepted by Her Majesty’s Revenue and Customs (HMRC) and found to be carrying Hydrocarbon Oil, upon which UK excise duty had not been paid. The notification from HMRC stated that “the sample taken from the running tank of this vehicle was found to be pale green in colour and the SET Test was positive”.(iii) In layman’s terms, the allegation was that the vehicle was being used on the public highway whilst unlawfully running on green diesel – which is rebated diesel from the Republic of Ireland. Such diesel is identified with a green marker dye, and is known as ‘green diesel’. In Great Britain and Northern Ireland, such diesel is identified with a red marker dye, and is known as ‘red diesel’. There are techniques for removing the dye, generally known as laundering, but such techniques leave a residue that can be detected.(iv) Enquiries revealed that, although the appellant company was operating the vehicle, the registered keeper was F&M.(v) In order to ascertain the true facts surrounding the HMRC report, to further explore possible links between the appellant company and F&M, and to check the appellant company’s financial position in view, particularly, of the HMRC allegation, a public inquiry was called, and the call-up letter dated 24/7/2013 fixed the date of the public inquiry as 29/8/2013.(vi) At the start of the hearing, the clerk of the court announced:
“This is a public inquiry to be held by Donald Armstrong and Gillian McIntyre, Head and Deputy Head of the Transport Regulation Unit, Bedford House, Belfast. Under Section 32 of the Goods Vehicles (Licensing of Operators) Act (Northern Ireland) 2012 Mr Armstrong and Mrs McIntyre will consider matters relating to Standard International Licence Number ON1115042 in the name of OC International Transport Limited. The company is currently licensed to operate two vehicles and two trailers from operating centre 21-23 Rathtrillick Road, Armagh.”
(vii) Throughout the public inquiry, Mr Armstrong appeared to take the lead, but Mrs McIntyre played a full part in asking questions of all witnesses.(viii) For health reasons, Lorraine O’Callaghan was unable to attend the first hearing, but the appellant company’s transport manager, Mr Paul O’Callaghan (Martin O’Callaghan’s brother) attended.(ix) After a discussion around financial standing, Mr Armstrong asked about links between the appellant company and F&M. Mr Armstrong said that, in terms of registration of vehicles, it seemed that Martin O’Callaghan had signed documentation in relation to the appellant’s business which suggested that he was providing some sort of function within the company. Mr McNamee said that there was nothing in the papers concerning this, so he had not directed his mind to it.(x) The exchange continued:Mr Armstrong: The difficulty we have is that documentation in relation to OC International …

Mr McNamee: Yes, I haven’t seen that …

Mr Armstrong: I can provide you with that …

Mr McNamee: I haven’t been provided with copies or instructions on that. I simply haven’t seen it … Sorry, it just didn’t appear in the brief or I would have been able to provide you with an explanation.”(xi) These papers were not included in the appeal papers sent by DOENI to the Upper Tribunal but, at our request, copies were produced at the hearing. The documents provided were applications for tax discs in relation to both F&M and the appellant company, signed by Martin O’Callaghan. There were two such documents for vehicles in relation to which the appellant company was the registered keeper but, even so, Martin O’Callaghan had signed them. As Mr Armstrong said, these documents were relevant to a material issue:
“why somebody who is not even in the company is signing documents on behalf of the company …”
(xii) Attention then moved to what Mr McNamee called the “central concern” – namely the HMRC issue. Mr McNamee made a number of points that it is not necessary to set out in detail given what we consider to be the obvious importance of the regulator ascertaining the true facts (including the true facts surrounding an HMRC referral, notwithstanding parallel legal proceedings in a different jurisdiction), without unnecessary delay and through a fair and judicial process. In considering repute, it is the task of the regulatory decision-maker to establish what explanations there may be for any established wrongdoing or any failure to take reasonable steps to prevent wrongdoing, and after the appropriate balancing exercise to then make an assessment of repute in the light of those findings, and after answering questions addressing the likelihood of future compliance, and whether the operator deserves to be put out of business. Conduct that imperils road safety, is dishonest, or seriously undermines either fair competition or the operator licensing system, is generally regarded with the utmost gravity.(xiii) Mr Armstrong noted that, on this occasion, the vehicle had been seized, which he thought might indicate a previous history of fuel misuse (a proposition challenged by Mr McNamee). It was also noted that the information from HMRC referred to the vehicle being used in the carriage/conveyance of hydrocarbon oil which had not borne UK excise duty whilst, on the same form, it said that the positive sample had been taken from the running tank. Consequently the following exchange occurred.Mr Armstrong: Well, there certainly are issues I want to raise with HMRC. I have resisted the temptation to raise any previous incidents. If in fact the companies are essentially one and the same, this is the eighth incident …Mr McNamee: Of?Mr Armstrong: Of this kind.Mr McNamee: Sorry, in relation to?Mr Armstrong: If F&M Refrigerated Transport and OC International Transport are essentially the same organisation then there is a list of eight incidents of which we have discussed one today …(xiv) Mr McNamee then complained that he had no knowledge of the eight incidents, and it seemed that a fact-finding body had material and was considering material that had not been disclosed. He complained about matters being raised “like rabbits out of hats”. Mr Armstrong said that any offences by F&M would only be relevant if a link between the two companies was established. The public inquiry was adjourned and Mr Armstrong said that any additional information he had relevant to the inquiry would be sent to Mr McNamee.(xv) Before the public inquiry reconvened, a statement from HMRC was obtained which described the fuel as “Laundered Green”, and alleged misuse of rebated fuel. The facts alleged were that, on 11/12/2012, vehicle registration number YLZ3885 was intercepted at Larne Docks. A fuel sample from the running tank was found to be pale green and the SET test was positive. A subsequent post-detection audit was carried out on the operator in respect of fuel misuse. This assessment of unpaid duty amounted to £45,412.52. The statement explains that: “the objective of the post-detection audits is to assess for repayment the rebate allowed on the total quantity of rebated oil used by the offender”.(xvi) An updated DVA Traffic Examiner’s report stated that DVA officials had contacted five customers of the appellant company, three of whom provided information suggesting that their contact with the appellant company was through Martin O’Callaghan. The report also set out details of three occasions in 2007 when vehicles operated by F&M had committed offences such as ‘No Road Freight Licence’ and ‘Tachograph not calibrated’. The report contains no details of any HMRC offences involving F&M.(xvii) The public inquiry reconvened on 4/12/2013. Again the announcement stated that the public inquiry was being held by Donald Armstrong and Gillian McIntyre, and that they would both consider matters relating to the appellant’s operator’s licence. Lorraine O’Callaghan was present, but Paul O’Callaghan was not present.(xviii) Mr McNamee referred to the fuel in the present HMRC incident as “contaminated” and said that any civil liability in relation to unpaid duty was now a matter before the relevant tax tribunal.(xix) In due course, Mr Armstrong raised the Department’s powers. He asked Mrs O’Callaghan what impact it would have if “we were to turn round, for example, and decide to revoke the licence”. Mrs O’Callaghan said that there would be no business. Mr Armstrong then said:
“we could curtail a licence … we could suspend the licence for three months, six months, or whatever we think …”
He referred to:
“information that we can make up our mind about” and assured Mrs O’Callaghan that “ … nor have we come with any predisposition to what action we might take … we do come with an open mind … we will go away, we will think about it, we will check with HMRC and so on and we will come to our decision and let you know as quickly as we can.”
(xx) The written decision, dated 19/2/2014, made no mention of Mrs McIntyre, the Deputy Head of the TRU. The decision referred only to Mr Armstrong, and is headed:
“Decision of the Head of the Transport Regulation Unit”
. In contrast to the final remarks at the public inquiry referring to “we” – the decision has Mr Armstrong referring to “I” – as in:
“In this regard I am satisfied that the main operator is not, in fact, Mrs O’Callaghan, but Mr Martin O’Callaghan, who in turn is seeking to use Mrs O’Callaghan as a front to enable him to operate when he might not otherwise be able to do so under his own name”

and

“In considering whether revocation of the licence in this case is necessary, I have no hesitation in answering that question in the affirmative because to allow it to continue would be to give legitimacy to Mr Martin O’Callaghan to continue, behind his wife’s name, to operate when he has already been refused a licence on repute grounds”.
(xxi) Mr Armstrong also said that:
“It follows on, therefore, that it is understandable that Her Majesty’s Customs and Revenue (sic) would regard the two entities (the appellant company and F&M) as different guises of the one organisation ...”
(xxii) All final decisions were made by Mr Armstrong alone.3) At the hearing of this appeal, the Appellant was represented by Mr McNamee and the Respondent was represented by Ms Fee – both of whom submitted skeleton arguments, for which we were grateful.4) We first asked Ms Fee about Ms McIntyre’s presence on the bench, and her active involvement throughout both parts of the public inquiry in asking many questions, but then her apparent absence as a decision-maker. Ms Fee said that Ms McIntyre participated in order to gather information, but Mr Armstrong had made the decision alone. We asked what would happen if we remitted the case back to be re-heard – who would deal with it? Ms Fee said that the Department was the statutory decision-maker and could easily appoint someone else to preside.5) We consider this a serious procedural irregularity. Anybody watching and listening to the two hearings, including the introductory and closing remarks, would conclude that this was, in effect, a tribunal made up of two persons. There is nothing wrong with this, although it would not happen in any case before a Traffic Commissioner in Great Britain unless, possibly, they sat with an assessor. We accept that the statutory decision-maker in Northern Ireland is the Department of the Environment (Northern Ireland) and that, as Ms Fee said, the Department can appoint anyone to discharge that function. Whether or not this somewhat surprising position is calculated to inspire public confidence in those who have to make these extremely serious and consequential judicial decisions - that are so important to business, and crucial to road and public safety - is another matter.6) The key point here is transparency and clarity as to the nature and composition of the judicial decision-making body. Openness about responsibility for judicial decision-making is a fundamental principle of justice. There may be strictly defined circumstances in which, for reasons of ill health or other misfortune, it is possible, within limits, to change the composition of the decision-making body (such as the sudden illness of a jury member), but generally a change of any significance nullifies the proceedings and the case must be heard again. Suppose someone watching the hearings thought that Mrs McIntyre was much more sympathetic to the appellant than Mr Armstrong – what suspicions would arise if, for no good reason, Mrs McIntyre then appeared to have been excluded from the decision-making? If Mrs McIntyre’s role really was that of, in effect, counsel to the inquiry rather than participating judge, one imagines that the position would have been made clear at the hearing, and that Mr Armstrong would not have referred in his concluding remarks to:
“we will go away, we will think about it, we will check with HMRC and so on and we will come to our decision and let you know as quickly as we can.”
7) That in itself is sufficient basis for us to remit the matter back to be re-heard by someone other than Mr Armstrong or Mrs McIntyre. We understand that Mr Armstrong has now retired, so there may be a new Head of the TRU who can preside. Failing that, we would have suggested that the Department appoint a Traffic Commissioner to deal with the matter since this case is complex, and whoever deals with it will need to be very familiar with the judicial responsibilities involved in conducting transport public inquiries, and the considerable body of tribunal jurisprudence that must be followed.8) This leads us to Mr McNamee’s main point, namely the failure to disclose all the material evidence in advance. The documents signed by Martin O’Callaghan comprised part of the evidence that Mr Armstrong considered in his decision, and placed in the balance against the operator – although we note that, for other reasons, an adjournment occurred after the unheralded production of these documents. However, there never was any disclosure to explain the reference to “the eighth incident”, and there never was any disclosed assertion from HMRC that they regarded the two entities (the appellant company and F&M) as different guises of the one organisation. We can only deduce that this was an assumption by Mr Armstrong, because the vehicle (and its fuel) was seized which, he thought, it would not have been unless HMRC had laid the past transgressions of F&M at the door of the appellant company.9) This tribunal is moving away from long recitations of previous case law in favour of clear statements of the applicable principle. In this case, the principle is that so far as is reasonably possible, an operator called up to a public inquiry should be told about all the material evidence that the decision-maker may reasonably consider to be relevant, and should be given an appropriate opportunity to consider, prepare and present a response to it - at a hearing, should they wish. If information that has a reasonable prospect of becoming relevant to the outcome becomes available at the last minute, it should be disclosed at the earliest opportunity, and time to consider it, or an adjournment, should be offered. This rule applies even if, in the event, the information does not attract adverse weight. If an operator has been put on the back foot by the surprise production of new evidence part way through the hearing, an unfortunate sense of unfairness and injustice may arise – even if the information happens to be available, somewhere on the internet.10) It may well be that the Department has a wealth of information and it is not always clear what is, and is not, likely to be relevant. But in putting the brief together and giving the person(s) presiding the information that they need in order to conduct a robust and thorough public inquiry, the general rule should be - if something is worth telling the decision-maker about, then it is worth telling the operator too. In the present case, the impression of “rabbits out a hat” is hard to discount.11) For this reason also, we find that this appeal must be allowed and the public inquiry re-heard by a fresh deciding officer.12) Mr McNamee made a number of other points that we need not, now, address in detail. However, we think it may be helpful if we say that, in our view, there is no reason whatsoever why the Department should wait for the final disposal of tax tribunal proceedings before addressing the question of repute in a case such as this. There is nothing inherently undesirable in parallel proceedings before different bodies, applying different laws, and with different statutory responsibilities. The avoidance of fuel excise duty through the unlawful use of green or red diesel directly undermines fair competition and no responsible regulator can tolerate it. There is a substantial public interest in regulators speedily preventing operators from avoiding their fiscal responsibilities and competing unfairly by fuel misuse. It would be entirely unconscionable for a regulator to wait years before discharging his or her statutory duties on the basis of different proceedings being carried on elsewhere.13) Operators must therefore be in a position to demonstrate that they take all reasonable precautions to ensure that this unlawful behaviour is avoided and prevented. It will rarely be a good excuse to blame drivers. If abuse and contamination is as widespread as Mr McNamee would have us believe, then operators must put pro-active systems in place to test and detect in order to prevent illegal fuel from being carried on authorised vehicles – either as cargo, or in the running tank, and in our view it matters little which. Such conduct goes to the heart of fair competition and repute, and we can conceive of very few circumstances where the use or unlawful carriage of illegal fuel would not have a devastating effect upon an operator’s ability to continue to hold an operator’s licence.14) We also consider that decision-makers are perfectly at liberty to consider who the controlling mind of a company is, and to lift the veil of incorporation to find out the true culprit if wrongdoing by a company is found.15) We further consider that it is possible for a new company to be, in effect, a front for a company in liquidation where – in truth – the new company is a front for the controlling mind of the person behind the company in liquidation.16) Finally, there is no contradiction in a decision being made to revoke a company’s operator’s licence but not to disqualify its sole director. Disqualification is not automatic following revocation, but following revocation for loss of repute, any fresh application will almost certainly involve a public inquiry and intense scrutiny..17) Having said that, if the facts are properly established in a case such as this, disqualification could well follow. That is because the issues raised in this case, if established following a fair and judicial process, are prima facie matters of significant gravity that undermine both fair competition and the operator licensing system. Consequently, the outcome of this appeal, based upon procedural matters, should not be taken as any indication as to the likely outcome of the re-hearing of the public inquiry. All options, including possible revocation and disqualification, remain open next time.

Judge Mark Hinchliffe, DCP

25/7/2014

Cited in 1 later judgment