Upper Tribunal Dismisses Operator's Licence Appeal Due to 'Fronting' Concerns

NCN: [2022] UKUT 00082 ([NAME]) IN THE UPPER TRIBUNAL Appeal No. UA-2021-000333-T ADMINISTRATIVE APPEALS CHAMBER

[COMPANY]:

[COMPANY]

DECISION OF THE UPPER TRIBUNAL

Her Honour Judge Beech, Judge of the Upper Tribunal [NAME], Specialist Member [NAME], Specialist Member

Decision date: 14th March 2022

ON APPEAL FROM:

Tribunal:

[NAME], Deputy Traffic Commissioner for the East of England Appeal Tribunal Venue: Field House, 15-25 Bream’s [ADDRESS], [POSTCODE] Date:

8th March 2022

This front sheet is for the convenience of the parties and does not form part of the decision

1

On appeal from the Decision of [NAME], Deputy Traffic Commissioner for the East of England dated 10th August 2021

[COMPANY]: Upper Tribunal Judge Her Honour Judge Beech

Specialist Member of the Upper Tribunal [NAME] Member of the Upper Tribunal [NAME]

Hearing date: 8th March 2022

Representation: [COMPANY]:

[NAME], the sole Director of the [COMPANY]

DECISION

The appeal is DISMISSED

Subject Matter: Application for operator’s licence; connection with another operator subject to investigation; whether “fronting” operation

Cases referred to: Bradley Fold Travel & [NAME] v Secretary of State for Transport (2010) EWCA Civ.695.

REASONS FOR DECISION

1. This is an appeal from the decision of the Deputy Traffic Commissioner for the East of England (“DTC”) dated 10th August 2021 when he refused the [COMPANY]’s application for a standard international operator’s licence under

[COMPANY] 2 s.13(2)(b) and Schedule 3 of the Goods Vehicles (Licensing of Operators) Act 1995 (“the 1995 Act”).

2. The background to this appeal can be found in the appeal bundle and the written decision and has been helpfully summarised by the DTC in this way: • The company [COMPANY], which was incorporated on 18 September 2020, made an application for a standard international licence authorising 10 vehicles on the 23 September 2020. The sole director of the company is [NAME] and at the time of the application the nominated transport manager was [NAME]. An application to change the nominated transport manager to [NAME] was made on the 3 December 2020. • [NAME] is the sole director and transport manager of [COMPANY]. An operator’s licence is in force for that company authorising 10 vehicles and the operating centre is the same as that nominated in the current application. • While processing the application it was noted that financial standing was established by a bank account held in the company name and deposits through loans into that account had been made by [NAME] and £20,000 from [COMPANY]. A request for information in relation to the latter amount was sent, and a reply received from [NAME] in which he said that the loan had been made on an interest free basis for 48 months. • It was noted that there was an ongoing investigation by the DVSA in relation to the licence held by [COMPANY]. A traffic examiner first contacted [NAME] in August 2020 in relation to the investigation. • Because of the apparent links between the individuals involved in the application and the financial arrangements surrounding the loans it was decided to determine the application at public inquiry.

3. The public Inquiry took place on 4th August 2021. [NAME] (“[NAME]”) attended along with her husband, [NAME] (“[NAME]”). [NAME] (the nominated transport manager and [NAME]’s brother) had confirmed that he would be attending the hearing in person, he in fact flew to Romania the day before the hearing and an urgent application was granted to hear his evidence over a video link. 4. [NAME] told the DTC that he was the sole director of [COMPANY] which held an operating licence authorising four vehicles, with three in possession. The operating centre was in the same yard as [COMPANY] which was also the proposed operating centre of the [COMPANY]. He replaced [NAME] as the nominated transport manager on the [COMPANY]’s licence application because he has more time to devote to the role of transport manager for the [COMPANY]. 5. [NAME] informed the DTC that she was employed in [NAME]’s business which mainly undertakes [NAME] for work along with some sub- contracting for [NAME]. Over time she had gained knowledge about commercial vehicle operations; she had helped her husband with the maintenance records and she had watched him download the digital cards and she had done her own research. At that time, [COMPANY] was operating

[COMPANY] 3 ten vehicles and employed fifteen drivers. Four of the vehicles were no longer new enough for [NAME] and could not be used on the [NAME] contract. It was decided that those vehicles should be used on other work and that four new vehicles would be rented via [NAME]. Mr and [NAME] had discussed their options and it was her suggestion that rather than make an application to extend the vehicle authorisation on the [NAME] licence from ten to fifteen, that [NAME] should apply for her own licence. She averred that [NAME] did not like using large transport operations. During one of the monthly operator audits that [NAME] undertakes, [NAME] had asked about opportunities which might be available for [NAME]. The [NAME] representative/Business Coach confirmed that there were business opportunities for females who wished to start their own businesses (something [NAME] was keen to promote). She would be granted a contract with different rules to that applicable to [COMPANY]. She advised that [NAME] are in control of all aspects of the operation contracted by them even down to paying for the fuel. The only aspect of the business they did not control was the hire of the drivers. [NAME] insisted that the establishment of her business and the application for a licence, being approximately one month after [NAME] had been contacted by the DVSA to notify him of an investigation, was an unfortunate coincidence. Her application had been delayed because of the difficulties in opening a business account with [NAME]. She accepted that she would work with her husband and described the three companies as a “big family”. She told the DTC that she was a trained Forestry Engineer and that her husband had worked hard to maintain the family. 6. [NAME] informed the DTC that a DVSA investigation had begun because his company had encountered difficulties with drivers. One driver did not check his tachographs and then seven drivers left at the same time and returned to Romania. [NAME] was forced to reduce his contracts by half in order to keep going. Moreover, he had had a long association with [NAME], a container company. The rates were low and then as a result of the pandemic, the rates were cut further forcing [NAME] and [NAME] to turn to [NAME]. The contracts were not the best but high standards were maintained. They require operators to use brand new vehicles and no vehicles more than five years old. The vehicles are rented under financial arrangements negotiated on their behalf by [NAME] with truck suppliers and pays £80 per month towards the hire charges for each vehicle which is displaying the [NAME] livery. He had told [NAME] that he did not want to operate more than ten vehicles but had said that his wife would like a business. He agreed with the evidence of his wife. The DTC’s decision 7. The DTC’s findings and decision were set out as follows: “12. .. I am aware that it is likely the operator will be called to public inquiry, and it is possible the outcome could impact on the repute of [NAME] as director and transport manager. It is also the case the (sic) [NAME] and his wife would have been aware that an investigation was underway when this application was made. The operating centre for Trans Chriss Limited and the nominated operating centre is the same as is the number of vehicles authorised and requested. [NAME] was originally nominated as the transport manager on this application, and he was replaced by his brother-in-

[COMPANY] 4 law. Trans Chriss Limited have deposited £20000 in the accounts for [COMPANY] as an interest free loan. The remaining funds have been deposited in the name of [NAME] although no evidence was produced to demonstrate that she had a source of funds separate from her husband. [NAME] emphasised that her motivation for applying for a licence was a result of encouragement from [NAME] and yet she also said that she would be using four vehicles initially which were not suitable for that work. She also said that [NAME] wanted operators with a smaller number of vehicles and yet she had applied for the same number as those authorised under her husband’s company’s licence.

13. Having taken all these factors into account I find that it is more likely than not that [NAME] will be central to the operation of this licence if it is granted. His financial interest and those of his family will be tied into the business and at this stage there is a question mark over his repute, and this will only be resolved once the outcome of the DVSA investigation and whatever follows is known.

14.

For these reasons I do not find that the statutory requirement for the applicant to satisfy me that repute to hold a licence is made out and I refuse the application accordingly. Once the result of the investigation into Trans Chriss Limited is known it may be that a renewed application will be appropriate depending of the outcome (sic) of that case.”.

8. On 28th October 2021, [NAME] sent an email to the OTC asking that the DTC review his decision. By a letter dated 1st November 2021, the DTC responded advising her that it was not possible for him to review his decision; she still had the option (albeit out of time) to pursue an appeal or to resubmit her application, the situation having changed in the case of [COMPANY] (the public inquiry having taken place) and that was likely to be relevant to her application and finally, that if she did make another application, she may wish to consider the number of authorised vehicles applied for bearing in mind her relative inexperience of operator licensing. 9. [NAME] chose to pursue an appeal. The appeal 10. At the hearing of this appeal, [NAME] attended without representation. Her husband and brother did not attend. Her grounds of appeal were in a narrative form; in essence, they amounted to a repeat of the evidence that she had given at the public inquiry. She amplified as follows: a) [NAME] failed to consider the company’s application for a business account. Having delayed for three weeks, she was advised that [NAME] could not deal with the application because of COVID-19. She then made an application to [NAME] and eventually opened an account with [NAME]. All of this contributed to the delay in her making the application; b) She and her husband had decided to expand his business and concluded that the best way to do that was for her to apply for a second operator’s licence rather than applying to increase the existing authorisation on the [NAME] licence. One of the main reasons for doing this was that the insurance premium paid by [NAME] was

[COMPANY] 5 approximately £9,000 per vehicle because of the number of accidents the drivers had been involved in and their insurance broker had advised that the insurance premium payable by a new licence holder would be likely to be in the region of £4,000 per vehicle which represented a considerable saving. The broker had advised them to apply for a new licence; c) Because of [NAME]’s requirement that contractors only use new vehicles, there were four vehicles owned by [NAME]/[NAME] which were surplus to requirements and it was these which were going to be authorised on her licence. When asked why she had stated in emails to the OTC that she had “a big contract with [NAME]” and that she had “made a mistake and bought four trucks, thinking that I’ll will be ready to start working with, in November when the license supposed to be ready and now I pay finance and I have them parked” she stated that she was in fact talking about her husband’s business. They are a family and she was thinking “we” but wrote “I”; d) [NAME] accepted that her operation would not be independent from that of her husband’s. He would help her because they have two children of 16 and 8 years. Her husband has been driving since he was 18 and has more knowledge than she does; e) As for financial standing, she obtained a personal loan from [NAME] in the sum of £25,000 which she transferred into the company’s account along with some savings of her own to make up the £30,000 that was described as a loan to the company on the bank statements. Whilst she was qualified as a Forestry Ranger, she had been looking after the family whilst helping her husband in his business, helping him with the forward planner, MOTs, downloading and checking drivers’ cards and checking driving licences. She received an income from her husband’s company and she was also a School Assistant. f) She did not reapply for a licence as suggested by the DTC in the letter of 1st November 2021 because she thought that it would be easier to appeal. She was not suggesting that the DTC was wrong in refusing the application and she accepted that now [NAME] had attended a public inquiry and had regulatory action taken which did not include findings of loss of repute, the position had changed. Discussion 11. We have set out [NAME]’s oral submissions to the Tribunal in full even though they include evidence which was not put before the DTC during the public inquiry but which was available at the time and could have been put before him. We have done so, so that [NAME] will be satisfied that we have listened to what she had to say. However, we must review the DTC’s decision only upon the basis of the evidence before him at the time.

12. The DTC was plainly right (as [NAME] accepts) to be concerned by the links to [COMPANY], a company which had been informed in August 2020 that a DVSA investigation was to take place, which was a month before the [COMPANY] was incorporated and an application for an operator’s licence made. Moreover, the reliance upon a significant capital sum

[COMPANY] 6 transferred from [COMPANY] to the [COMPANY] in order to meet the financial standing requirements, the nomination of [NAME] initially as transport manager, the sharing of an operating centre and the request for an authorisation of ten vehicles which mirrored the authorisation recorded on the licence of [COMPANY] all raised reasonable doubts about this application being independent of [NAME] and his company which further raised significant concerns that this application was being made as a safety net in the event that the operator’s licence of [COMPANY] was revoked or other substantial regulatory action taken for example, a reduction in authorisation. In other words, that it was likely to be used as a “front”. The concerns and doubts which existed when the call up letter was sent out were only reinforced during the course of the public inquiry. We have no hesitation in finding that the DTC’s decision was plainly right.

13. To conclude, all grounds of appeal are rejected as we are not satisfied that there was procedural unfairness in this case or that the TC’s decision was plainly wrong in any respect and neither the facts nor the law applicable in this case should impel the Tribunal to allow this appeal as per the test in Bradley Fold Travel & [NAME] v Secretary of State for Transport (2010) EWCA Civ.695. The appeal is dismissed.

Her Honour Judge Beech

Judge of the Upper Tribunal

14th March 2022