Upper Tribunal Rejects Company’s Operator’s Licence Application Due to Untruthfulness

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UKUT 0383 (AAC) Appeal No. T/2016/13 IN THE UPPER TRIBUNAL

ADMINISTRATIVE APPEALS CHAMBER TRAFFIC COMMISSIONER APPEALS

ON APPEAL from the DECISION of [NAME_2], Traffic Commissioner for the North East of England dated 15 February 2016

Before: Her Honour Judge J Beech, Judge of the Upper Tribunal [NAME_4], Member of the Upper Tribunal [NAME_6], Member of the Upper Tribunal

Appellants:

[redacted]

Attendances: For the Appellants: [redacted]

Heard at: Field House, 15-25 Bream’s [ADDRESS], [POSTCODE] Date of hearing: 12 July 2016 Date of decision: 25 August 2016

DECISION OF THE UPPER TRIBUNAL

IT IS HEREBY ORDERED that the appeal BE DISMISSED and that the interim licence be terminated forthwith

SUBJECT MATTER:- Phoenix operations applying for operator’s licences following the liquidation of a previous entity with a debt to the HMRC of £260,000; untruthful answers on application for an operator’s licence; good repute; inadequacies in the call up letter.

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CASES REFERRED TO:- [COMPANY_13] & [NAME_15] v Secretary of State for [NAME_16] (2010) EWCA Civ. 695.

REASONS FOR DECISION

1. This is an appeal from the decision of the Traffic Commissioner for the North East of England (“ the [NAME_17]”) made on 15 February 2016 when he refused an application for a standard national operator’s licence made by the Appellant (“[NAME_10]”). The refusal was under s.13B of the Goods Vehicles (Licensing of Operators) Act 1995 (“the Act”) and the [NAME_17] also terminated their interim licence with effect from 23.59 on 14 March 2016.

Background

2. The factual background to the appeal appears from the documents, the transcript and the [NAME_17]’s written decision. On the 13 August 2014, [COMPANY_18] (“[NAME_18]”), which held a restricted operator’s licence authorising four vehicles, went into liquidation owing HMRC £260,000. The sole director and shareholder of [NAME_18] was [NAME_19]. In previous correspondence with the Office of the Traffic Commissioner (“OTC”), [NAME_21] had described herself as “Company Secretary” of [NAME_18]. She described herself in the public inquiry as the “[NAME_22] Manager” of [NAME_18]. Prior to [NAME_18]’s licence being revoked, there had been an allegation of unauthorised use of an operating centre in [ADDRESS], Heddon on the Wall, [NAME_23]. A preliminary hearing was listed in relation to that issue on 4 August 2015. No one from [NAME_18] attended that hearing and it then became apparent that [NAME_18] had gone into liquidation and the licence was revoked in-office on 13 August 2015.

3. On 17 August 2015 [NAME_7] [NAME_23] Limited (“[NAME_23]”) applied for a restricted operator’s licence authorising four vehicles. The four vehicles to be specified were those which had been specified on the [NAME_18] licence and the proposed operating centre was the unauthorised operating centre which had been used by [NAME_18] in [ADDRESS], prior to its licence being revoked. The sole director of [NAME_23] was [NAME_21] and [NAME_19] was a 49% shareholder. The correspondence addresses and the telephone numbers for [NAME_23] were the same as those of [NAME_18]. At question 14g of the application for an operator’s licence, which asks whether, within the last twelve months, the company had purchased the assets or shareholding of any company that holds or has previously held an operator’s licence in any traffic area, the answer “no” was given. However, the four vehicles identified as those to be specified on the [NAME_23] licence were the same four vehicles which had been specified on the [NAME_18] licence. Neither did the application identify the link between [NAME_18] and [NAME_23] by virtue of [NAME_19]

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being the sole director and shareholder of the former and a 49% shareholder of the latter.

4. On 27 August 2015, the OTC wrote to [NAME_23] asking for further information. In particular, it required [NAME_23] to “confirm what links the company has to [COMPANY_18]”. By an email dated 8 September 2015, [NAME_21] wrote:

“The company has overtook (sic) [COMPANY_18] and I am now the owner and director of this new company, I purchased the vehicles and stock from [NAME_18], we now have no links to that company”.

5. On 15 December 2015, vehicle [ID] was stopped. It was displaying an operator licence disc in the name of [NAME_18]. The driver said that he was employed by [NAME_23], who were the owners of the vehicle and that he had taken his instructions on that day from “[NAME_19], the boss”. Following that road side encounter, [NAME_21] emailed the OTC requesting an interim licence for [NAME_23]. [NAME_25] then telephoned the OTC later that day, stating that he would be hand delivering a letter to the OTC together with an application for an interim licence. That application was never delivered.

6. On 16 December 2015, Traffic Examiner [NAME_27] submitted an environmental report upon the suitability of [ADDRESS] as an operating centre. She concluded that the operating centre was unsafe on road safety grounds.

7. By an application dated 17 December 2015, [COMPANY_8] (“[NAME_10]”) applied for a restricted licence authorising eight vehicles. The four vehicles which had been specified on the [NAME_18] licence and on the [NAME_23] licence were specified on the application. The sole director of the company was said to be [NAME_21] although the application form was signed by [NAME_25] as a “director”.

8. The application was attached to a letter from [NAME_28] which informed the OTC that [NAME_10] was “involved in the supply of [NAME_18] equipment”. It had recently “took over” (sic) the business of [NAME_18] which had gone into liquidation. [NAME_28] had been instructed that [NAME_10] had “won a substantial order” which would allow the company to re-hire several former employees of [NAME_18] but it urgently required an operator’s licence. Such was the importance of securing the work that the company’s “[NAME_29] Director, [NAME_30]” would personally deliver the application to the Leeds office. A failure to obtain a licence “today” would be disastrous for the company; the contract which had been “hard won” would be lost and several prospective employees would remain unemployed. The letter went on:

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“Finally, we understand your office has raised a query over the relationship between the company and [NAME_31] ([NAME_18]). For the avoidance of doubt, [NAME_31]’s assets were bought from its liquidators (via the company) by a third party and we are instructed that the previous officers of [NAME_31] ([NAME_18]) are not involved in the company.”

9. The application itself was unsatisfactory. It listed [NAME_21] as the sole director but was signed by [NAME_25] purporting to do so in his capacity as director. Whilst the application was for a restricted licence, it named [NAME_25] as [NAME_16] manager. The advert accompanying the application was in the name of [NAME_25] trading as [NAME_32] 13b(ii) which asked whether any person named in the application had ever been involved in a company that had gone into liquidation owing money, was answered in the negative. Of course, [NAME_21] had been involved with [NAME_18] and [NAME_19] was a shareholder of [NAME_10]. [NAME_24] should also have been named (see below). Question 14b asked whether any person named in the application had ever held a licence in any traffic area and question 14d asked whether any person named in the application had ever had a licence suspended, curtailed or revoked. The answer was “no” when in fact, the [NAME_18] licence had been revoked and [NAME_25] had been a director of [COMPANY_34] which held an operator’s licence which was revoked in 2011 following the company going into liquidation owing money.

10. By a letter dated 21 December 2015, [NAME_23] was called to a public inquiry listed for 9 February 2016. The [NAME_17]’s principal concerns included [NAME_23]’s links to [NAME_18]; the unauthorised use of a vehicle on 15 December 2015; the suitability of the proposed operating centre. Unfortunately, none of the documents relating to [NAME_23] were included in the Tribunal’s appeal bundle even though [NAME_23] was linked to both [NAME_18] and [NAME_10].

11. On 30 December 2015, the OTC wrote to [NAME_10] asking for further information and clarification of the company’s position. [NAME_21] responded by email on 4 January 2016:

“Section 3b (sic) At the time of signing the application [NAME_25] was not named director. After the application had been submitted it was decided that [NAME_24] should be a named director and the relevant paperwork was signed and sent to companies house. Therefore the two named directors are [NAME_33] and [NAME_30]. In response to Section 14b [NAME_30] was a named director of [NAME_34] for approximately 2 months. The company was liquidated but at no time was he advised that licence [ID] had been revoked or suspended.

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The bank statements are held in the holding company name all payments from customers get paid into this account, there is a [NAME_9] account that has surplus money please see attached email copy and let me know if this will surfice I can transfer money from the holding account to reflect this. …”

In fact [NAME_24] was appointed a director of [NAME_10] on 7 January 2016. The “holding company” was in fact [NAME_23].

12. An application by [NAME_10] for an interim authority was refused and by a letter dated 5 January 2016, [NAME_10] was called to a public inquiry, also to be held on 9 February 2016. The letter highlighted the unsatisfactory nature of the company’s application as set out above and also noted that the bank statements relied upon to provide financial standing were in the name of [NAME_23] and that both applications listed the same vehicles to be specified on each licence. The letter highlighted that [NAME_10] was linked to [NAME_23].

13. On 7 January 2016, [NAME_25] hand delivered a letter to the OTC dated 6 January 2016 which we were informed had been written by [NAME_24]. It advised the OTC that the purpose of the letter was to clarify the issues in relation to both the applications made by [NAME_23] and [NAME_10], “in the spirit of openness and transparency with a view to progressing these matters”. In relation to [NAME_23], the letter advised that as a result of the negative environmental report and the fact that a vehicle had been stopped whilst being operated by [NAME_23], the decision had been made to withdraw the application. The letter acknowledged that as [NAME_21] was the sole director of [NAME_23] and that she was also a director of [NAME_10], that the [NAME_17] would be concerned about the unauthorised use of a vehicle by [NAME_23] and that the [NAME_17] was likely to require further information. However, a further application for an interim authority in the name of [NAME_10] accompanied the letter and [NAME_10] would welcome an opportunity to appear at a public inquiry. After seeking legal advice, [NAME_10] wished to amend its application to one for a standard national licence. Enclosed was a completed TM1 form for [NAME_25] and a bank statement which demonstrated that the company was of financial standing for eight vehicles. Whilst the monies in the account had not been in there for twenty eight days, assurances were given that they would be ring fenced (transfers from accounts in the names of [COMPANY_35] and [NAME_21] were relied on). It was acknowledged that the application was “not fully complete” when it was submitted. Further information had been provided and it was acknowledged that [NAME_25] had attended a public inquiry in relation to a licence previously held by [COMPANY_34].

14. As for a further request for an interim authority, the letter advised that [NAME_10] wished to provide [NAME_16] services to a linked company which provided [NAME_18] services. Until an interim authority was held by the company, the [NAME_16] for those [NAME_18] services would

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have to be “contracted-in” which would provide potential operational difficulties in terms of the availability of [NAME_16] and lack of flexibility and increased overheads. It was suggested that the [NAME_17] met with [NAME_21] in order to receive her explanations about the links between the companies and the unauthorised use of a vehicle.

15. Having considered the letter and despite [NAME_10]’ links to [NAME_23], [NAME_23]’s links to [NAME_18], [NAME_21]’s links to [NAME_23] and [NAME_18] and the unsatisfactory nature of the application generally, the [NAME_17] granted [NAME_10] an interim licence. The [NAME_17]’s brief decision reads:

“Concerns persist with the history of the directors/shareholders companies such that I cannot be satisfied on repute. However, I am content to issue an interim restricted licence for 4 vehicles only”.

The public inquiry hearing

16. The withdrawal of [NAME_23]’s application for a licence was not accepted by the [NAME_17]. At the conjoined hearing which took place on 9 February 2016, [NAME_21] appeared as sole director of [NAME_23] and as a director of [NAME_10]; [NAME_25] appeared in his capacity as a director of [NAME_10] and as the nominated [NAME_16] Manager, although he was not called up separately in that capacity. [NAME_11] represented both companies. He confirmed that the [NAME_23] application was withdrawn because of the environmental issues arising out of the use of [ADDRESS] as an operating centre. He then summarised the position with [NAME_10]: the assertion in the newspaper advert that the application was being made in the name of [NAME_24] trading as [NAME_10] was a mistake; whilst it was wrong to describe [NAME_24] as a director of [NAME_10] in the licence application, that error had been rectified by him having been appointed as a director at a later date. [NAME_11] accepted that there were some “common themes” between the companies and that the unauthorised vehicle use by [NAME_23] was something that affected [NAME_10]. The reason for the same four vehicles being listed on both applications was because the decision had been made not to proceed with the [NAME_23] application and to list the four vehicles on the [NAME_10] application instead. [NAME_11] went through the other issues which [NAME_21] would deal with in her evidence. The [NAME_17] asked “Are you going to deal with the apparent links with [COMPANY_18] and the history of that business?”. [NAME_11] confirmed that he was. He had notes and a flow diagram to assist him. He confirmed that [NAME_19] owned 24.5% of the shares of [NAME_10] and that the driver of the vehicle being operated by [NAME_23] had referred to [NAME_19] as his “boss”. The [NAME_17] asked “Can [NAME_20] talk me through the liquidation of [COMPANY_18] and the £260,000 debt to the Crown?” to which [NAME_21] and [NAME_11] both replied “yes”.

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17. [NAME_21] then gave evidence. She confirmed that she was a director and shareholder of both [NAME_23] and [NAME_10]. She dealt first with the liquidation of [NAME_18]. She referred to “we” when describing steps taken to discover that the company’s previous accountants had given “bad advice” to [NAME_18]. When asked to clarify her reference to “we”, she said that she meant “[NAME_19]”. It was discovered that none of the VAT returns for the company had been submitted by the previous firm of accountants and that as a result, a substantial debt was owed to HMRC which the company could not pay. [NAME_20] had been “just the [NAME_22] Manager in the office” at the time. Attempts were made to come to an arrangement with HMRC but there were complications with “pay as you earn” and the position was not recoverable. They “tried our hardest” to avoid going into liquidation. When liquidation became inevitable, they were advised by the OTC that a new application for an operator’s licence was required. When [NAME_18] went into liquidation, [NAME_19] was the largest creditor. There then followed the application by [NAME_23], although it was [NAME_10] which had purchased all of the [NAME_18] assets, including the websites and telephone numbers. She denied that [NAME_19] had any involvement in [NAME_10] although he did deal with the contractors.

18. Turning to the [NAME_23] application, [NAME_20] stated that once the adverse environmental report had been filed, they knew that the application was not viable. It had also come to their attention that the landlord of the proposed operating centre did not have the necessary planning permission. They had sought advice from the [COMPANY_36] (“[NAME_36]”) and in particular from [NAME_38] who advised that [NAME_10] should make an application. The decision to make a second application on behalf of [NAME_10] was made prior to the vehicle stop on 15 December 2015. [NAME_20] asserted that at the time, she had genuinely believed that [NAME_23] had been granted an interim licence and that it was her “fault for allowing the vehicles to go out”. It was as a result of being told that there was no interim licence in place that they contacted the [NAME_36]. The vehicles were not used after that date until an interim licence was granted to [NAME_10]. It was a “genuine mistake” that the vehicle which was stopped was displaying the disc of the revoked [NAME_18] licence and she should have removed the discs from all of the vehicles. She should have taken more advice before putting the vehicles on the road.

19. When they completed the application form for a licence in the name of [NAME_10], [NAME_24] was under the impression (as a result of consulting [NAME_37]) that he did not have to refer to his links with a previously revoked licence ([NAME_34]) because five years had elapsed. [NAME_20] was not aware that she had to make any reference to [NAME_19]’s link to [NAME_23] (as the shareholder of both). The amended application for a standard national licence for [NAME_10] was because the vehicles would in fact be moving the [NAME_18]

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equipment of “[COMPANY_39]” which employs the labour and holds the contracts.

20. [NAME_20] explained that [NAME_24] would be responsible for the vehicles and she was responsible for the financial side. Whilst [NAME_24] was a non-shareholding director, he would be allowed to have continuous and effective management of the [NAME_16] side of the business. He had already “brought on board” a variety of changes and he understood the rules and regulations. [NAME_10] had an in-house accountant to avoid the difficulties encountered by [NAME_18] in relation to its finances. They wanted to move forward and make the company work.

21. In answer to questions asked by the [NAME_17], [NAME_20] repeated that at the time of the unlawful use of the vehicle, she did not know that [NAME_23] did not have an interim licence. She was asked to look at a letter dated 27 August 2015 (not included within the appeal bundle) which warned in large, coloured print, that [NAME_23] did not have any authorisation to use vehicles weighing in excess of 3 ½ tonnes. She denied that she had received that letter but her email reply to it was then put to [NAME_20] (8 September 2015). She accepted she had been mistaken. She was asked why [NAME_18] did not attend the preliminary hearing concerning the unauthorised use of an operating centre. She did not know why no one from [NAME_18] had attended and confirmed that all correspondence for [NAME_18] was dealt with by either herself or [NAME_19]. She confirmed that both [NAME_23] and [NAME_10] were set up in November 2014 but they did not start trading at that time. It had been the intention that [COMPANY_39] was going to employ the workers; [NAME_10] was going to hold the stock; [NAME_18] North East was going to run simultaneously with [NAME_18] Services and [NAME_23] was the holding company for all of them. The [NAME_23] application was made prior to [NAME_18] going into liquidation because they were aware that the liquidation was going to take place and they wanted to avoid a gap in operations. She accepted that following the revocation of the [NAME_18] licence, the four vehicles had in fact continued to operate up until 15 December 2015 without authorisation. [NAME_18] had operated from an unauthorised operating centre because the authorised operating centre was close to houses and the operation “was quite noisy”. They were then offered [NAME_40], which was more suitable.

22. [NAME_25] then gave evidence. He described himself as the [NAME_29] Director of [NAME_10] and the nominated [NAME_16] Manager. He had previously worked as the Contracts Manager for [COMPANY_34], commencing his employment in May 2010. He had only worked for [NAME_34] for a very short time. When he commenced his employment the company was jointly owned but about two or three weeks before the company went into liquidation, one of the owners ([NAME_41]) took control and made [NAME_24] the [NAME_29] Director. Then, within two weeks or so, the company was

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“suddenly liquidated”. [NAME_24] had not been aware of the company’s financial difficulties at the time but he did attend two liquidation meetings and whilst he had attended a public inquiry when a fresh application had been made for a licence by Mr [NAME_42] which had been “incorrectly signed”, he had not been told that the operator’s licence held by [NAME_34] had been revoked. It was for that reason that he answered question 14(d) on the [NAME_10] licence application form in the negative. He realised that this answer was incorrect but he had taken advice from [NAME_38] from the [COMPANY_36] who had stated that as five years had passed, the information about him having been connected to [NAME_34] need not be divulged.

23. After [NAME_34] went into liquidation, [NAME_41] then set up [NAME_43] and [NAME_24] was then employed by that company for three years. He joined [NAME_10] on 7 or 8 December 2015. His responsibilities were to look after the maintenance of the fleet and “looking after the labour, instructing them on what the requirements are – as [NAME_29] Director overall the run of the company and .. maintaining standards”. Since the interim licence had been granted, the vehicles were being maintained every eight weeks, a daily driver defect report system was in place and minor defects were being rectified in house. He had commenced a regime of tool box talks about loads and security, vehicle checks and drivers cards. He had also instituted a three monthly regime of checking the driver’s driving licenses and they had all signed a declaration that they would take their driving licences in to to be checked. If they did not do so “the company has the authorisation to do a check .. themselves .. through the DVLA”. He did not think that the drivers would exceed the drivers’ hours limits because the drivers were in fact “labourer/drivers” undertaking minimum driving, five days a week. All the vehicles were tracked. [NAME_24] was downloading the digital drivers’ hours information but he had obtained quotes for the analysis to be undertaken by an outside agency. [NAME_24] assured the [NAME_17] that in future, he would ensure that all information given to the OTC was correct.

24. In answer to questions asked by the [NAME_17], [NAME_24] accepted that the question on the licence application concerning previous involvement in a company that had gone into liquidation, was not vague. But he insisted that [NAME_37] had advised him that his involvement with [NAME_34] need not be divulged (the [NAME_17] doubted whether [NAME_37] would give such advice). [NAME_24] stated that when he started working with [NAME_10], he had been told by [NAME_21] that “everything was in place” but he did not look at the vehicles until he appreciated that he was to be the [NAME_16] Manager. He was not therefore aware that the vehicles were displaying discs issued to a revoked licence. He was not aware of the warning given in the letter of 27 August 2015 that the company did not have any authorisation to operate the vehicles. The [NAME_17] returned to [NAME_45]’s involvement with [NAME_34]. [NAME_24] accepted that he was appointed as a director of that company on 21 June 2010 and that the liquidation had taken place on 28 October 2010 (with revocation of its licence in 2011). That period could not be described as a “couple of weeks”. He did not know the full amount the company owed when it went into liquidation as he had been a [NAME_29] director in name only. The [NAME_17] informed [NAME_24] that [NAME_34] had owed £281,000 to its creditors and that HMRC had been owed £63,000.

25. In his closing submissions, [NAME_11] asked the [NAME_17] to take account of the fact that [NAME_10] had written to the OTC with the intention of clarifying matters and with a desire to be transparent and open in relation to its application and links with the other entities. It was clear that the [NAME_10] application had “issues” and that the company was not in the strongest position in terms of the application. However, the stopping of the vehicle on 15 December 2015 had triggered a “very positive response” from the company. Advice from the [NAME_36] had been sought, the company’s position had been regularised and there was a potential for operating “going forward”. [NAME_24] had put all of the necessary systems in place as a [NAME_16] Manager. The officers of the company had accepted their mistakes.

The [NAME_17]’s decision dated 15 February 2016

26. Dealing first with the application made by [NAME_23], the [NAME_17] found that the proposed operating centre was unsuitable on road safety grounds and that [NAME_21] had “freely explained” that the [NAME_23] application was a “device” to allow the business of [NAME_18] to continue, having wiped out its considerable debt to the public purse. He found that such conduct made [NAME_23] unfit to hold an operator’s licence. Further, when asked to explain the links between [NAME_18] and [NAME_23], [NAME_21] had written stating that she was the owner and director of [NAME_23] and that she had purchased the vehicles and stock from [NAME_18] and there were “now no links” to [NAME_18]. This was not the case. [NAME_19] was the former director and shareholder of [NAME_18] and held a 49% share in [NAME_23] (we would add, that the driver of the vehicle which was stopped on 15 December 2015 said that [NAME_19] was “his boss”). The [NAME_17] concluded that [NAME_21] had been untruthful in her response to the enquiry.

27. Turning to [NAME_10], the [NAME_17] noted that financial standing had been demonstrated by a transfer of money from [NAME_21] which was surprising bearing in mind that the company had been operating. He would therefore have expected to see financial standing demonstrated over the period it had been operating. That was not however, insurmountable and he was satisfied that financial standing had been met.

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28. The success or otherwise of the application turned on good repute and the onus was on the company to satisfy him of its good repute. It had been “freely explained to me by [NAME_20] that [NAME_10] was also a device to allow the business of .. ([NAME_18]) .. to continue having wiped away its debt to the Crown. That in itself is enough to conclude the [COMPANY_44] is not of good repute”.

29. [NAME_21] had also admitted that “the [COMPANY_44]” had continued to use vehicles unlawfully throughout 2015. The [NAME_17] was in no doubt that by virtue of the correspondence from the OTC that [NAME_21] knew that the use of the vehicles following the liquidation of [NAME_18] was unlawful and that is what had driven her to make the early application for a new operator’s licence by [NAME_10]. He found that the “[COMPANY_44]” chose to operate vehicles without the benefit of an operator’s licence. The issue of the untruthful statement in [NAME_20]’s email dated 8 September 2015 applied equally to the [NAME_10] application as did the other adverse findings made in relation to [NAME_23] and that as a result [NAME_10] lacked good repute.

30. As for [NAME_24], he failed to declare his involvement in [NAME_34] both in respect of it having gone into liquidation and having had its operator’s licence revoked. He sought to blame the [NAME_36] for his failure but it was [NAME_24] who signed the application. He had also been in post with [NAME_10] for a full week before the vehicle was stopped on 15 December 2015. His failure to check the vehicles and the discs in the windows, demonstrate a lack of due diligence and this appeared to strongly resemble his failures as [NAME_29] Director of [NAME_34] (whether he was in post for two weeks or four months) in respect of the financial problems that business was in. Following the hearing, the [NAME_17] had seen that company’s Statement of Affairs which [NAME_24] had in fact signed when the company went into liquidation.

31. The [NAME_17] was critical of [NAME_24]’s reference to conducting three monthly checks on drivers’ licences by asking them to “fetch their licences in”. This was not a positive feature because it demonstrated that [NAME_24] was significantly out of date as a [NAME_16] Manager. Driver licence counterparts no longer exist and operators must check a driver’s status on line.

32. At best, [NAME_24] had a poor memory and lacked attention to detail. At worst, he had been deliberately untruthful and misleading. Either way, he had failed to demonstrate that he had the necessary good repute to be a [NAME_16] manager. He had not been called up separately in that capacity but he could expect any future application to be a [NAME_16] manager to receive significant scrutiny and to answer the inconsistency between his evidence as to lack of knowledge of the financial position at liquidation of [NAME_34] and his signing of the Statement of Affairs.

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The Upper Tribunal Appeal

33. At the hearing of this appeal, [NAME_11] represented [NAME_10] and he produced a skeleton argument for which we were grateful. His first point was that the [NAME_17] had been unduly harsh in finding that [NAME_20] had explained that [NAME_10] was a device (along with [NAME_23]) to allow the business of [NAME_18] to continue having wiped away its debt to the Crown. He was also critical of the following: a) The call up letter sent to [NAME_10] did not make reference to its possible links to [NAME_18], although it did make reference to its links to [NAME_23]. As the links to [NAME_18] became one of the main issues upon which the [NAME_17] concluded that [NAME_10] lacked good repute, it was essential that the concerns about those links be highlighted in the call up letter so that the issue could be properly addressed at the public inquiry. Such reference should have included the fact that [NAME_18] failed to attend the hearing scheduled for 4 August 2015, as this was something the [NAME_17] asked [NAME_20] about and was mentioned under the heading “Background” in the [NAME_17]’s decision. b) The exchange that had taken place between the [NAME_17] and [NAME_20] about the timings of [NAME_18]’s liquidation, [NAME_23]’s application and the continued operation of the vehicles between the former’s liquidation (and licence revocation) and the vehicle being stopped on 15 December 2015, displaying the licence disc of [NAME_18], was ambiguous and related to the operation of the vehicles by [NAME_23], not [NAME_10]. Again, this should have been referred to in the call up letter sent to [NAME_10]; c) At the outset of the public inquiry, the [NAME_17] asked where [NAME_19] was and whether he was to be called to give evidence. If the [NAME_17] considered that [NAME_19]’s presence at the hearing was required, that too should have been included in the call up letter.

34. Having considered this ground of appeal and in particular, the asserted deficiencies in the call up letter, the Tribunal requested a copy of the call up letter sent to [NAME_23] on 21 December 2015 (summarised above) to ascertain whether it contained any reference to the [NAME_17]’s concerns about links between [NAME_18] and [NAME_23], which it did. The letter was sent to [NAME_11] by email on 25 July 2016, inviting further representations. In response, [NAME_11] submitted that it had not been the intention of [NAME_10] to “avoid or divert from the commonality” between [NAME_23] and [NAME_10]. However, the fact that the links between [NAME_18] and [NAME_23] were referred to in the [NAME_23] call up letter, did not mean that the issue did not need to be raised in the call up letter sent to [NAME_10]. In any event, the [NAME_23] call up letter did not state that the [NAME_17] wished to explore the circumstances in which [NAME_18] went into liquidation.

35. Having considered all of the above representations, we are satisfied that there is nothing in this ground of appeal for the following reasons:

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a) The [NAME_17]’s determination that [NAME_20] had stated that both [NAME_23] and [NAME_10] were devices to allow the business of [NAME_18] to continue, following liquidation and the wiping out of debts (and in particular to the HMRC) was a finding that he was entitled to make upon the evidence before him. We cannot say that the [NAME_17] was plainly wrong in his assessment of the evidence; indeed, it was plainly right; b) It was abundantly clear that as the applications of both [NAME_23] and [NAME_10] were being processed, the OTC and the [NAME_17] were concerned that [NAME_23] was a “phoenix operation” (that is, an entity which applies for a licence in order to continue operating the business of a linked entity which has either gone into liquidation and/or had its operator’s licence revoked) with or without a degree of “fronting” arising out of the liquidation of [NAME_18] and that [NAME_10] was another “phoenix operation” arising out of the decision to withdraw the [NAME_23] application as a result of unlawful operation of vehicles and the request that a previously unauthorised operating centre be authorised for use by [NAME_23] when it was not suitable for such use. All three companies were inextricably linked and that too was abundantly clear from the evidence of [NAME_20]. The [NAME_17] was entitled to find that in the circumstances, neither [NAME_23] nor [NAME_10] was of good repute; c) It is correct to state that there is no direct reference to [NAME_18] in the [NAME_10] call up letter, but there is such reference in the call up letter sent to [NAME_23]. No one was in any doubt that [NAME_20] was going to have to deal with the history of the three companies and the links between them. [NAME_20] was prepared to deal with the issue (although she had left a file at home) as was [NAME_11], who is an experienced practitioner in commercial road [NAME_16] regulation. There was no request for an adjournment or some additional time in order to marshal the necessary evidence. When asked whether the parties were able to deal with the circumstances in which [NAME_18] went into liquidation, both [NAME_20] and [NAME_11] answered in the affirmative. [NAME_20] gave clear evidence about [NAME_18]’s liquidation, the basis upon which [NAME_23] made its application for a licence and the basis upon which the decision was made to withdraw that application and apply for a licence in the name of [NAME_10]. We do not consider in the circumstances, that the absence of any reference to [NAME_18] in the call up letter sent to [NAME_10] is something that gives rise to any unfairness in this case. Further, whilst the failure of [NAME_18] to attend the hearing on 4 August 2015 was referred to by the [NAME_17] during the course of the public inquiry, it was not relied upon at all by the [NAME_17] when came to the adverse findings that he did and in the circumstances, we are not satisfied that this is something that should have been flagged up in a call up letter. The links to [NAME_18] were sufficient and obvious; d) As for the absence of any reference to the unauthorised use of vehicles by [NAME_23] in the call up letter sent to [NAME_10], for

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the same reasons already given, there could not have been any unfairness arising out of the absence of any such reference. The matter was clearly flagged up in the [NAME_23] call up letter and it was acknowledged in the email sent by [NAME_28] on 6 January 2016 that the [NAME_17] would be expecting to hear evidence from [NAME_20] about the unauthorised use of vehicles by [NAME_23] when consideration was being given to the [NAME_10] application as she was a director of both companies. It was abundantly clear to the parties what the issues were in this case. As for the exchange between the [NAME_17] and [NAME_20] about whether [NAME_23] had continued the operation of [NAME_18] without the benefit of an operator’s licence, we do not interpret it as being ambiguous. It was clear from her evidence, that [NAME_20] was accepting that once [NAME_18] had gone into liquidation, the vehicles continued to operate in the name of [NAME_23] (which was described as the holding company of both [NAME_18] and [NAME_10]) undertaking the same business without any gap. To use ordinary language it was “business as usual” and that continued when [NAME_10] was granted an interim licence. e) Finally, in relation to the [NAME_17]’s enquiry about whether [NAME_19] was going to be called to give evidence, the [NAME_17] pointed out that it was for [NAME_23] and [NAME_10] to determine how best to present their cases and the absence of [NAME_19] did not feature at all in the [NAME_17]’s adverse findings of fact.

In all of the circumstances, this ground of appeal fails.

36. [NAME_11]’s next point related to the [NAME_17]’s finding under the heading “The application of [NAME_10]” that the “[COMPANY_44]” had continued to use vehicles unlawfully throughout 2015. This was incorrect as it was [NAME_23] who had been responsible for unauthorised use and to that extent, the [NAME_17]’s decision was plainly wrong.

37. We accept that at first reading, the [NAME_17]’s reference to the “[COMPANY_44]” under that heading, is a reference to [NAME_10]. However, it is implicit in the [NAME_17]’s findings that both [NAME_23] and [NAME_10] were devices deployed by the officers of [NAME_18] in order to continue operating a [NAME_18] business following liquidation and revocation of its operator’s licence. The three companies were in effect “one and the same”. This is a clear case of two successive “phoenix operations” although the [NAME_17] did not say so in those terms. The paragraph to which this ground of appeal relates must be read in that context. At best this ground of appeal is a technical point and at worst it has no merit what so ever and as a result, this ground of appeal fails.

38. [NAME_11]’s next point related to the [NAME_17]’s assessment of [NAME_24] which he described as “damning”. [NAME_24] had not been called to the public inquiry as [NAME_16] Manager for consideration to be given to his good repute. He was then faced with dealing with matters that had

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taken place five years before. Further, the [NAME_17]’s assessment of [NAME_24] as being “significantly out of date” was unfair. [NAME_11] repeated the evidence given by [NAME_24] as to the systems he had put in place and submitted that the [NAME_17]’s reliance upon [NAME_24] making reference to requiring the drivers to bring in their driving licences was unfair as he had made it clear that he was aware that the company could check the status of drivers on line. In short, the [NAME_17] should not have made any findings about [NAME_24]’s good repute without calling him to a public inquiry separately from the company.

39. Our starting point is that [NAME_24] was the [NAME_29] Director of [NAME_10]. When considering the good repute of a company, the [NAME_17] is entitled, by virtue of paragraph 1 of Schedule 3 of the 1995 Act, to consider any information about the previous conduct of any of the company’s directors, in whatever capacity, when considering whether the company is of good repute. It is clear that [NAME_24] had to deal with some difficult issues before the [NAME_17] in his capacity as [NAME_29] Director of [NAME_10]. He had previously been involved in a company which had gone into liquidation and which had had its operator’s licence revoked when he was a director of that company. The application form that he had completed on behalf of [NAME_10] contained inaccurate and untruthful information about his previous involvement in such a company. The call up letter raised these issues and it follows that it would not have come as any surprise to [NAME_24] when he was asked questions about his involvement with [NAME_34] and its status at the time. It is also clear that [NAME_24] had given unsatisfactory evidence about the degree of involvement he had had with [NAME_34] and as to his knowledge about that company going into liquidation. He told the [NAME_17] that he did not know that the operator’s licence of [NAME_34] had been revoked yet the letter dated 6 January 2016, informed the OTC that [NAME_24] had attended a public inquiry relating to that licence. There was also the issue of his lack of due diligence when he joined [NAME_10]. He was not aware that the vehicles, which at that stage, were still being operated by [NAME_23], were displaying discs issued to [NAME_18] and that [NAME_23] did not have any authority to operate those vehicles. Whilst he was recruited as a Director of [NAME_10], he will have been aware of [NAME_23] and the reasons why an application for [NAME_10] was being considered. There can be no doubt that against that background the [NAME_17] was entitled to make adverse findings about the good repute of [NAME_24] as the [NAME_29] Director of [NAME_10] and in his capacity as [NAME_16] manager when it came to a lack of due diligence.

40. However, the [NAME_17]’s finding that [NAME_24] was “significantly out of date” as a [NAME_16] Manager was unfair in all of the circumstances. He had not been called to the public inquiry to consider the issue of his practical competence as a [NAME_16] Manager which might affect his good repute and the [NAME_17]’s conclusion was based on one feature of [NAME_24]’s evidence concerning the checking of driving licences. He

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did say that he was aware of a company’s entitlement to check a driver’s status on line and without further questioning about his state of knowledge, the [NAME_17] should not have come to the conclusion he did solely on that point. We note that [NAME_24] attended a two day CPC refresher course in December 2014 and his up to date knowledge should have been explored by the [NAME_17] if he was considering making the finding that he did. The difficulty for [NAME_24] is the extent to which the Tribunal’s decision can assist him against the background of the findings that relate to him as the [NAME_29] Director of [NAME_10] (which cannot be described as plainly wrong) as opposed to him being a [NAME_16] manager. The [NAME_17] acknowledged that [NAME_24] had not been called up in that capacity and that his findings did not preclude [NAME_24] from applying to be nominated as a [NAME_16] manager in the future but he rightly pointed out that his application would receive significant scrutiny. It seems to us, that the [NAME_17]’s approach was correct. He has not made a formal finding of loss of good repute as a [NAME_16] manager otherwise the [NAME_17] would have been compelled in law to disqualify him from holding such a role but [NAME_24] should not have been further disadvantaged (over and above the [NAME_17]’s findings in relation to [NAME_24]’s conduct as a Director) in the future by a finding that he was “significantly out of date” as a [NAME_16] manager without greater scrutiny. His knowledge and expertise in that capacity will have to be considered separately in due course if and when he chooses to apply to be the nominated [NAME_16] manager on another licence.

41. To conclude, whilst we are satisfied that the [NAME_17] should not have concluded that [NAME_24] was “significantly out of date” as a [NAME_16] manager without further enquiry, we are otherwise satisfied that the [NAME_17]’s decision is not plainly wrong in any other respect and that neither the facts or the law applicable in this case should impel the Tribunal to allow this appeal as per the test in [COMPANY_13] & [NAME_15] v Secretary of State for [NAME_16] (2010) EWCA Civ. 695.

42. We should say something about the delay in completing this decision. The Tribunal’s appeal bundle only contained those papers which directly related to the appeal of [NAME_10] rather than all papers relating to all three entities which were before the [NAME_17] at the public inquiry. As a result, the call up letter sent to [NAME_23] was not within the papers and so the Tribunal asked for a copy and then gave [NAME_11] an opportunity to make further representations about it. As a result of the holiday commitments of his clients and [NAME_11] himself and as a result of clarification being sought by [NAME_11] as the points which the Tribunal invited further representations upon, [NAME_11]’s representations were received on 18 August 2016.

43. We consider that in the future, when there is an issue in relation to linked entities in circumstances similar to those in this case and that a conjoined hearing has taken place, consideration should be given to

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whether all of the papers before a [NAME_17] at a public inquiry, should be placed before the Tribunal irrespective of whether all entities before the public inquiry have appealed.

Her Honour Judge J Beech 25 August 2016