Upper Tribunal Upholds Licence Revocation and Refusal Due to Lack of Good Repute and Financial Standing

NCN: [2018] UKUT 0082 (AAC) Appeal No. T/2017/52

IN THE UPPER TRIBUNAL ADMINISTRATIVE APPEALS CHAMBER [NAME] COMMISSIONER APPEALS

ON APPEAL from the DECISION of the [NAME] COMMISSIONER FOR THE [NAME] (Ms J [NAME])

Dated: 23 June 2017

Before:

[NAME] QC Judge of the Upper Tribunal [NAME] Member of the Upper Tribunal [NAME] Member of the Upper Tribunal

Appellants:

[redacted]

For the Appellants: [redacted]

Heard at:

George House, [ADDRESS], Edinburgh. Date of Hearing: 6 December 2017 Date of Decision: 13 March 2018

DECISION OF THE UPPER TRIBUNAL

The appeal is dismissed.

Subject Matter

Application for a standard national public service vehicle operator’s licence to operate 4 vehicles; financial standing; good repute; shadow director; revocation of restricted licence; disqualification.

Cases referred to:

[COMPANY] & [NAME] –v- Secretary of State for Transport [2010] EWCA Civ. 695

[NAME] and [NAME] [2014] UKUT 0253 (AAC) [NAME] (No. 2) T2002/217

[NAME] v [NAME] & [COMPANY] v [NAME] NT/2013/52 & 53

Appeal No: T2017/35

2 [NAME] T2009/225

REASONS FOR DECISION

Introduction

1. This is an appeal from the decision of the [NAME] Commissioner for the [NAME], made on 23 June 2017. In summary, the [NAME] Commissioner revoked [COMPANY]’s restricted public service vehicle licence on the grounds of loss of repute and material change in terms of section 17(3)(b) and (d) and section 14ZB(a) of the Public Passenger Vehicles Act 1981; and disqualified [COMPANY] director [NAME] and shadow director [NAME] from holding or obtaining an operator’s licence for a period of 30 months. In addition, the [NAME] Commissioner refused the appellant’s application for a public service vehicle operator’s licence to operate 4 vehicles on the ground of failure to meet the requirements of financial standing and good repute in terms of section 14ZB(a) and 14ZB(b) of the 1981 Act.

2. The disqualification of [NAME] has not been appealed and is therefore not an issue in this appeal.

3. The orders made by the [NAME] Commissioner were originally to take effect at 23.59 on 31 July 2017 but subsequently the [NAME] Commissioner stayed implementation of her orders pending this decision. We now direct that they are to take effect from 23.59 on 24 April 2018.

The Relevant Legislative Provisions 4. The 1981 Act provides that on an application for a standard licence, the [NAME] Commissioner must consider and be satisfied that the applicant is, among other things, of good repute and has appropriate financial standing (ss 14 and 14ZA). Further, as regards revocation of a licence, 1981 Act provides:

“Section 17(2) ….. a [NAME] Commissioner may, on any of the grounds specified in subsection (3) below, at any time –

(a) evoke a [NAME]’s licence ….

(3) the grounds for action under subsection (2) above are –

(b) that there has been a contravention of any condition attached to

the licence; (d) In the case of a restricted licence, that the holder no longer

satisfies the requirements of section 14ZB ….

5. Section 14ZB(a) requires that the [NAME] commissioner is satisfied that the applicant is of good repute (as determined in accordance with paragraph 1 of schedule 3).

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6. Paragraph 1(2)(b) of schedule 3 provides, inter alia, that in determining whether a company is of good repute, a [NAME] commissioner shall have regard to all the relevant evidence and in particular to such information as the commissioner may have as to previous conduct of –

(i) The company’s officers, employees and agents in relation to the operation of vehicles of any description in the course of any business carried on by the companies; and

(ii) Each of the company’s directors, in whatever capacity, in relation to the operation of vehicles of any description in the course of any other business.

7. Section 28 of the Transport Act 1985 provides, inter alia, as follows:

(1) Where the [NAME] commissioner for any [NAME] area revokes a [NAME]’s licence, he may order the former holder to be disqualified, indefinitely or for such period as he thinks fit, from holding or obtaining a [NAME]’s licence. (4) where a [NAME] commissioner makes an order under subsection (1) above with respect to any person, he may direct that if that person, at any time during such period as he may specify –

(a) Is a director of, or holds a controlling interest in –

(i) a company which holds a licence of the kind to which the order applies; or

(ii) a company of which a company which holds such a licence is a subsidiary; or

(b) operates any public service vehicle in partnership with a person who holds such a licence;

the powers under section 17(2) of the 1981 Act (revocation, suspension, etc., of PSV operators’ licences) shall be exercisable in relation to that licence by the [NAME] commissioner by whom it was granted.

Background 8. The appellants are a limited company incorporated on 17 January 2013 and the sole director of the company, [NAME]. [NAME] is the only shareholder of the company. The business of the company is stated to be taxis and public houses and bars. The company leases and manages the [COMPANY] at [ADDRESS]. [NAME]’s domestic partner is [NAME]. They had been together for over 7 years by the date of the public inquiry. They live in family together with three children. [NAME] has been made bankrupt on two occasions. He was disqualified under the Companies Acts from acting as a company director in December 2010 for a period of four years. Taxi licences which he had operated in South Lanarkshire were revoked in 2013 as he was found not to be a fit and proper person as he had been operating taxis without insurance (pp. 357-8).

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9. [COMPANY] was granted a restricted passenger service vehicle operator’s licence ([ID]) on 22 July 2014 following a public inquiry on 6 June 2014. This was to allow the running of two 9 to 16-seater minibuses. That licence was granted subject to the following:

a. a warning as to the applicant’s repute;

b. a warning that the licence was restricted meaning that the operation of

the vehicles could not be the company’s principal occupation;

c. a finance condition (not currently relevant);

d. the applicant’s agreement to the following undertakings:

(i) The operator shall, during the life of the restricted licence, keep records of time spent and income earned from all occupations to enable primary occupation to be determined. Records shall be supported by primary evidence such as pay slips, P60 documents, invoices and tachograph records. Copies of the records shall be made available to DVSA or OTC officers on request.

(ii) Should income from, or time spent on, the minibus operation exceed that from all other sources for two consecutive months, the operator will apply for the standard national licence.

e. The application was granted on the express understanding that Miss [NAME] was the sole director of [COMPANY] and that she and not Mr [NAME] was in control of the business. In the event of Mr [NAME] becoming a shareholder or director of [COMPANY], the licence had to be surrendered to the [NAME] Commissioner unless the [NAME] Commissioner had allowed Mr [NAME] to be a shareholder or director.

10. On 14 September 2015 the appellants submitted an application for a new standard national public service vehicle operator’s licence ([ID]) for five vehicles, subsequently amended to 4 vehicles. The restricted licence was to be surrendered in the event that a standard licence was granted.

11. On 1 March 2016, [NAME] emailed the Office of the [NAME] Commissioner in Leeds regarding the application for a standard licence. He said that while he was not involved in the management of the transport division of [COMPANY], he was involved in the overall day to day running of the business which included a hotel lease and pub. He was concerned about the delay in dealing with the application (p. 184.) He said they were a small family business and the delay was having an impact on “our overall business”.

12. By letter dated 8 March 2016, the [NAME] Commissioner informed the appellants that she had decided to convene a public inquiry to consider the application. A call up letter was issued on 18 October 2016 (page 15) stating that the [NAME] Commissioner had concerns about the following issues:

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a. It appeared that the appellants were operating more vehicles than the maximum number on the restricted licence; b. That the following statement made when applying for the licence was either false or had not been fulfilled:

(i) That the main occupation of the licence holder was not the

operation of vehicles able to carry nine or more passengers;

c. That the appellants had not honoured the undertakings agreed to when

the application was made for the licence, namely:

(i) That the laws relating to the driving and operation of vehicles used

under the licence would be observed; (ii) That the [NAME] Commissioner would be immediately informed of

any changes or convictions which affected the licence;

d. That the appellants had breached the conditions on the licence, specifically that the licence would be surrendered should [NAME] become director or shareholder without the [NAME] Commissioner’s consent;

e. The vehicles and drivers had been issued with prohibition notices by DVSA or the the police in the past five years;

f. That the appellants were no longer of good repute;

g. That the appellants were no longer of the appropriate financial standing;

h. That since the licence was issued there had been a material change in the circumstances of its holder, namely that [NAME] was not the controlling force in the business.

A summary of the evidence to be considered at the public inquiry was provided. The letter explained the [NAME] Commissioner’s powers including the powers of revocation of an existing licence and disqualification from holding or obtaining a PSV licence.

13. By letter dated 26 July 2016 Miss [NAME] sought to withdraw the application for a standard licence on health grounds. The [NAME] Commissioner declined request to withdraw (p. 202).

14. A further letter from the Office of the [NAME] Commissioner was sent on 28 October 2016 (p. 252) advising the appellants that the [NAME] Commissioner was concerned that they were operating a 49-seater bus for hire and reward on a restricted licence. Internet prints in support of this allegation were attached.

The public inquiry 15. The public inquiry was set down for 22 November 2016. On that date a motion to adjourn made by [NAME]’s solicitor was granted. The public inquiry ultimately took place on 2 December 2016. The appellants were represented by [NAME] at the public inquiry. [NAME] was represented by [NAME], solicitor. Evidence

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6 was given by [NAME] and [NAME], proposed transport manager. The public inquiry was reconvened on 31

March 2017. On that occasion, [NAME] was represented by [NAME]. Evidence was given by [NAME] and [NAME]. The public inquiry was conjoined with that of another licence (PM 1027703) and licence holder however, as nothing turns on the facts and circumstances relating to them no further mention will be made of them in this decision.

16. The public inquiry briefs for the application and licence were taken as read into the record. [NAME] gave evidence that DVSA had carried out an investigation into the appellants and [NAME] as a result of which there were concerns as to who had effective control of [COMPANY] and whether [NAME] was a director in name only. Statements taken from two contacts of [NAME] namely, [NAME] and [NAME] were considered to suggest that [COMPANY] was controlled by [NAME]. [NAME] stated at the end of his signed interview statement (pp. 64-67) that [NAME] ran [COMPANY] but that it was in [NAME]’s name. He had helped [NAME] finance the purchase of cars. [NAME] paid him in regular instalments from [NAME]’s bank account. He said that it was always [NAME] he dealt with and that he made the decisions. Further inquiries revealed that [COMPANY] had purchased a 53-seater coach, [NAME], from [COMPANY] (a company whose directors included [NAME]) on 27 November 2015. Odometer information suggested that between the purchase date and 12 May 2016, the coach had travelled approximately 6898 kilometers. Internet advertising suggested that [COMPANY] was using the coach for hire and reward. [COMPANY] did not have an operator’s licence for such use this gave rise to the suspicion that [NAME] was operating the coach without a licence.

17. [NAME], a director of [COMPANY], was interviewed under caution by [NAME]. That interview (pp. 68 – 72) formed part of the evidence at the public inquiry. In that interview, [NAME] stated that he thought [COMPANY] was owned by [NAME] and that [NAME] was just his girlfriend. He had not dealt with [NAME] in relation to [COMPANY], only [NAME]. He had sold him a bus through a finance company. He said he had never loaned an operator licence disc to [COMPANY] allowed [NAME] to borrow a bus to take photographs of it parked to demonstrate that the parking site was appropriate for that size of bus.

18. [NAME] gave evidence that he had previously been made bankrupt on two occasions. As at the date of the public inquiry he worked at the [COMPANY] in [ADDRESS] and also did driving work on contracts [COMPANY] had. He was paid a set weekly wage of £178. The vehicles used were taxis and two 16-seater buses. He was in the hotel most days. He worked in the office. Day to day he did marketing and social media to bring in business. He administered hotel bookings. He set up the [NAME] social media page in 2015; he said it was his, he was the editor. He would also do whatever was needed such as work behind the bar or wash the dishes. (Pages 447-448.) He said he was part of the business and he and [NAME] discussed everything; he generally attended and contributed to the Monday meetings of [NAME] and the chef and manager in the hotel; he priced the school transport contracts before the company applied; he had access to the company bank account and debit card; he and [NAME] discussed the general running of the entire business (pages 550 and 552). He said [NAME] makes the ultimate decisions. He makes day to day decisions within his role with her permission (p. 465). The company’s driving contracts were going well and they had discussed applying for a standard licence.

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19. [NAME] denied that he was a shadow director of [COMPANY]. [NAME], he got to know him when he, [NAME], had a taxi in Carluke. In 2012, [NAME] financed a taxi for [NAME] when the latter was unable to raise the finance himself. [NAME]’s taxi business was called [NAME]; the name was derived from his name and that of his daughter. He said if [NAME] was asked about [NAME] he would associate it with him, because that was the name of his taxi business in Carluke.

20. [NAME] and [COMPANY], [NAME] knew them from his taxi days in Carluke as he had rented an office from them. In about July 2013, he obtained his PCV driving licence and was employed by [NAME] driving buses for them until about January 2014. After that, he did occasional driving work for them. That continued even after he had moved to [ADDRESS].

21. [NAME] said that by November 2015, [NAME] believed that the grant of the standard licence was imminent and she asked him to start looking for a suitable bus to buy. He went to see a bus dealer in Carluke and then to [COMPANY]. He discussed the possibilities he had already looked at. He said [NAME] told him he would sell him [NAME] for the same price the other dealer was offering to sell him a bus. He said he would have to discuss it with [NAME]. Also, the other dealer was going to do a trade-in deal for a 16-seater that [COMPANY] owned. [NAME] knew [NAME] as he had previously driven it for [COMPANY]. He discussed the proposal with [NAME] and gave her his opinion. [NAME] was bought by [COMPANY] for £40,000 through a finance company. [NAME] signed the finance agreement as the [COMPANY] director. [COMPANY] took possession of [NAME] on 27 November 2015. The bus was parked at the [COMPANY] or, latterly, at Longtown (p. 469).

22. [NAME] said that he told [NAME] that [NAME] believed that the grant of the standard licence was imminent. He said that [NAME] told him that it would be all right to use the bus for a couple of weeks of hires and to use [COMPANY]’s disc (p. 454). When he collected the bus from [COMPANY] on 27 November 2015 the disc was in the bus. He said he did not take the disc without the knowledge of [COMPANY]. The bus was insured under [COMPANY]’s insurance and also under [COMPANY]’s Insurance through the finance company. After delivery of the bus he said there was not much contact with [NAME] because his wife was terminally ill at the time and in hospital; she passed away a few months later. In support of his evidence that [NAME] and he had an arrangement that he would use the buses with the [NAME] disc, he made reference to a number of telephone text messages between himself and [NAME]. (The text messages are at pp. 400- 421.) He said that [NAME] had asked for the disc back in December 2015 (p. 456). In a text message on 7 January, [NAME] wrote that the bus would be lying at Gretna except for the odd hire (p. 408).

23. [NAME] said he operated the bus at a time when [COMPANY] only had a restricted licence but said he thought it was all right as he had a disc from [COMPANY], the bus had [COMPANY]’s legal lettering, the bus had an MOT and was insured. He bought tickets for “Polar Express” in Durham using the company’s debit card; he advertised the tickets and travel to Polar Express on social media; he undertook that trip in [NAME] on 12 December 2015. He admitted that he did not have the permission of [NAME] to use the bus for this purpose (p. 459). The first trip had to

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8 be cancelled and the contact for refunds was [NAME] in [COMPANY]’s office. He said he did not tell [NAME] about the Polar Express trip in [NAME]. Nor did

[COMPANY] know he was undertaking that trip with their disc. He did another four hires on [NAME] from the St Nicholas Arms near Carlisle, a pub leased by [COMPANY]. He said that pub had not been doing well and he suggested to [NAME] that they should try to make it into more of a football pub to try to get more money out of it. He did trips from that pub to football grounds. He sent the tachographs for these trips to [COMPANY]. He said [NAME] did not know about these hires. He was trying to make more money so that the [NAME] did not harm [COMPANY]. The starting point for the bus each time was [ADDRESS] and it was driven to the pub in Carlisle. (pp. 459-60). He was paid in cash. In addition, he said he drove [NAME] empty, for pleasure.

24. He said he hid the hires in [NAME] from [NAME]. She did not know about the hires and the use of [NAME] until January 2016, by which time the hires were over. She was very angry as, he said, she knew the bus should not have been used without a licence. When asked by the [NAME] Commissioner why he had hidden these hires when he thought he was not doing anything wrong, his response was that he did not think he was doing anything wrong and that he was telling the truth.

25. [NAME] gave evidence that [COMPANY] had two 16–seater buses and three taxis and 5 part-time drivers, including [NAME]; they did school contracts and wedding- related work. She denied that [NAME] ran the business or was a shadow director. She was at the hotel most days but not as often as previously as she had a 21-month old toddler. [NAME] was in the office and did the accounts. [NAME] said she knew what was happening in the office; she was running the business not [COMPANY] applied for a standard licence as the bus work was getting busier. She understood from the OTC in November that the grant of her licence was imminent and decided to buy a bigger bus with financing to buy it. The bus was parked up awaiting the licence. She said she did not know that [NAME] was using the bus for hires in November, December 2015 and January 2016. He had given her money for the children’s Christmas and it was only when she asked him after Christmas where he had got the money that he told her he had been doing hires in the bus. She said she was very angry as she knew this was wrong.

26. Following the public inquiry in December 2016, [NAME] contacted [NAME] to ask him about the evidence of [NAME] that [NAME] had allowed him to use the [NAME] operator disc. [NAME] denied this. [NAME]’s solicitor then wrote to [NAME] on 19 December 2016 denying that [NAME] had been given permission to operate the coach under the auspices of [COMPANY]; that the vehicle had been sold at market value and once paid for no further payments had been received from [NAME] or [COMPANY]; on sale the insurance was cancelled; the operator disc had been left in the vehicle by mistake and as soon as [NAME] became aware of this he immediately demanded its return; no tachographs were received by [NAME] from [NAME]. The letter is at pages 367-8.

27. The [NAME] Commissioner was provided with the letter from [NAME]’s solicitor whereupon she re-convened the public inquiry.

28. [NAME] gave oral evidence at the re-convened public inquiry. He said that when [NAME] sold the bus to [NAME] the insurance was cancelled. At the time, [NAME]’s wife was terminally ill and he had not been present when the bus was taken away on 27 November 2015. The disc had been left in the bus by

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9 mistake. He contacted [NAME] a couple of times to get the disc back. He got it back, he said, in mid December 2015. [NAME] did not return any tachographs.

29. [NAME] did some repairs on the bus. There was no maintenance agreement. [NAME] was not returned to [NAME]. He knew that [NAME] did not have a standard operator’s licence at that time. He was shown the text messages but could not remember them, he did not recognize them and thought they related to [NAME] asking for advice on prices for starting his business with the bus. He also

30. thought [NAME] had a 33-seater bus as well as [NAME] which was a 49-seater. In cross-examination he denied that there was any arrangement between [NAME] and [NAME] for the use of the bus by [NAME] with the [NAME] disc. He had not responded to a text from [NAME] about putting the bus on trains. Many of the text messages, he said, did not make sense. He said the bus had been sold and it was for [NAME] to decide what use he put it to. The bus was not insured by [NAME] once it was sold. If he had given [NAME] the disc, he, [NAME], would have known it was illegal anyway.

The [NAME] Commissioner’s decision

31. The [NAME] Commissioner found that the financial standing requirement for a licence for 4 vehicles was £20,900 and that for a limited company licence the finance needed to be in the name of the limited company. She found that the company did not have such finance. The vouching produced which was in the name of the company showed an average of only £12,847. That was sufficient for the existing restricted licence for which £4,800 was required. That the average vouched was £12,847 has not been disputed in the appeal.

32. The [NAME] Commissioner found that [NAME] was a controlling presence in [COMPANY]. That was based on [NAME]’s evidence, the evidence of others and the inferences she was able to draw from that. In summary, [NAME] gave evidence that he had access to the online banking and the debit card of [COMPANY]; that he was involved in every aspect of the company’s hotel, pub and travel business.

33. She found that [NAME] was the driving force behind [COMPANY]’s plans to expand its transport operation. She found that [NAME] was content to proceed with this given the level of booking inquiries. The application for a standard licence had to be made by her as director. The delay in the progress of the application caused [NAME] to intervene and write to the OTC in Leeds. [NAME] and [NAME] gave evidence that it was [NAME] who borrowed a bus from [COMPANY] to take photographs to illustrate the parking available at the proposed operating Centre in Motherwell. It was [NAME] who looked for a vehicle to buy and who concluded the deal to buy [NAME]. [NAME], as director of [COMPANY], signed the agreement with the finance company. When [NAME] took delivery of [NAME], he did so for [COMPANY].

34. The [NAME] Commissioner found that [NAME] knew [NAME]’s personality, he was “no shrinking violet”. He was paid a fixed weekly wage of £178 but, she found, he did not have the day-by-day accountability of an employee and was not restrained as an employee would be restrained. The [NAME] Commissioner found that [NAME] was running [COMPANY] along with [NAME] as their joint enterprise.

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10 35. The [NAME] Commissioner revoked the restricted operator’s licence granted to [COMPANY]; disqualified the appellant company and [NAME] for 30 months from holding or obtaining a licence; refused the application for a [NAME]’s licence and made a s 28(4) direction (see paragraphs 1 and 7 above).

Grounds of Appeal and the Appeal before the Upper Tribunal 36. The grounds of appeal are at pages 726 and 733-4. These were expanded upon by the appellants’ solicitor, [NAME] at the appeal hearing before the Upper Tribunal. In summary, the main grounds of appeal are that:

(a) there was insufficient evidence to show that [NAME] had been aware of [NAME]’s unauthorized operations and so neither she nor [COMPANY] was responsible for that;

(b) the [NAME] Commissioner was wrong in finding that there was no agreement between [NAME] and [NAME] to allow [NAME] to use [NAME]’s disc and to operate [NAME] under [NAME] and that the [NAME] Commissioner had failed to give due weight to the evidence which it was submitted proved such an agreement;

(c) there was no evidence which would entitle the [NAME] Commissioner to find that [NAME] was running the business and acting as a shadow director of [COMPANY];

(d) even if the [NAME] Commissioner was entitled to find that [COMPANY] had operated [NAME] without a licence that given the limited unauthorised use of the vehicle and the appellant’s and Miss [NAME]’s history of compliance, it was disproportionate for the [NAME] Commissioner to take the view that good repute was lost with the revocation and disqualification following; revocation of the existing licence would cause very significant commercial injury to the appellants;

(e) it was open to the [NAME] Commissioner to grant the application for the standard licence and that if there was insufficient financial standing or the number of vehicles applied for to grant authorisation for the fewer number of vehicles for which financial standing was established.

(f) the [NAME] Commissioner’s impression of the credibility of [NAME] had been unfair and not justified by Miss [NAME]’s demeanour at the public inquiry; in particular, she was wrong to conclude that she was “sleekit”.

Discussion

37. The following principles (extracted from the Digest of [NAME] Commissioner Appeals) as to the proper approach to an appeal in the Upper Tribunal can be found in the decision of the Court of Appeal in the case of [COMPANY] & [NAME] –v- Secretary of State for Transport [2010] EWCA Civ. 695:

(1) The Tribunal is not required to rehear all the evidence by conducting what would, in effect, be a new first instance hearing. Instead it has the duty to hear and determine matters of both fact and law on the basis of the material

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11 before the [NAME] Commissioner but without having the benefit of seeing and hearing the witnesses.

(2) The Appellant ‘assumes the burden’ of showing that the decision appealed from is wrong.

(3) In order to succeed the Appellant must show not merely that there are grounds for preferring a different view but that there are objective grounds upon which the Tribunal ought to conclude that the different view is the right one. Put another way it is not enough that the Tribunal might prefer a different view; the Appellant must show that the process of reasoning and the application of the relevant law require the Tribunal to adopt a different view.

The Tribunal sometimes uses the phrase “plainly wrong” as a shorthand description of this test. (NT/2013/52 & 53 [NAME] v [NAME] & [COMPANY] v [NAME], paragraph 8).

38. Having considered the evidence, and the submissions made for the appellants we are not satisfied that the decision of the [NAME] Commissioner was ‘plainly wrong’.

39. Section 12 of the 1981 Act provides that a PSV must not be used on a road for carrying passengers for hire or reward except under a [NAME]’s licence granted under the 1981 Act.

40. A standard operator’s licence will not be granted unless, amongst other things, the applicant shows that it is of good repute, as determined in accordance with paragraph 1 of schedule 3 to the 1981 Act (s 14ZA(2)(b). The burden of proof of this issue rests on the applicant, in this case, [COMPANY]. In determining whether an applicant is of good repute the [NAME] Commissioner must have regard to all the evidence and, in particular, to information that the [NAME] Commissioner may have as to previous conduct of the company’s officers, employees and agents in relation to the operation of vehicles of any description in the course of any business carried on by the company; and to the conduct of the company’s directors, in whatever capacity, in relation to the operation of vehicles of any description in the course of any other business.

The unlawful use of [NAME]

41. It is not in dispute that [NAME] operated a PSV, [NAME], to carry passengers for reward at a time when neither he, [NAME] nor [COMPANY] had a [NAME]’s licence. [NAME]’s primary position was that he was operating the vehicle for [NAME] with their disc and their permission. This was disputed in evidence by [NAME] of [NAME]. The [NAME] Commissioner has narrated all of the evidence which was before her about this issue and explained what she made of it and why she rejected [NAME]’s evidence on this issue (paragraphs 86-95). She took into account the fact that [NAME] had a long history in the transportation of people, was a PCV licence holder, that he wanted to operate coaches and enjoyed the operating milieu of passenger road transport. He set up and populated the company’s Facebook presence as [NAME] and organized and publicised pre-Christmas coach trips (and later other coach trips) for which he needed a coach and a licence. The purchase, sale and where necessary, the refund of tickets, had been organized by [NAME] through the [COMPANY] bank account. [NAME] drove the bus on these trips.

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12 42. The [NAME] Commissioner explained that she had been open to considering that there might have been collusion between [NAME] and [NAME] to operate [NAME] under the shelter of [NAME]. She considered the text messages between [NAME] and [NAME] to see if they supported [NAME]’s contentions. She considered that the text messages might not be genuine but in the absence of evidence about this she rejected this possibility. However, after a careful examination of the text messages, she found that they did not assist her as they were open to such interpretation as

to be possibly misleading; she therefore did not rely on them. She preferred the evidence of [NAME] that he had not agreed to the use of the [NAME] disc and had not sanctioned the operation of [NAME] under the shelter of [NAME]. She found that he was patently bewildered by the text messages. She accepted his evidence that he had been absent when the bus was collected by [NAME] and the disc had been left in the vehicle by mistake. At the time, his wife was terminally ill. [NAME] had no involvement in the organisation of the coach trips or provision of the driver, nor did [NAME] share in any profit. On the whole she found [NAME]’s evidence credible and thus rejected [NAME]’s evidence and found that he had been operating [NAME] without a standard operator’s licence.

43. It is clear from the documents in the brief, transcripts of the public inquiry and from the [NAME] Commissioner’s decision that she carefully considered and weighed all of the evidence before her. She had the benefit of seeing and hearing the witnesses. She considered and commented on their demeanour and explained why she preferred Mr. [NAME]’s evidence. The decision at which she arrived was one that she was entitled to make and we can see no fault or unfairness in her reasoning on this issue.

The finding that [NAME] was acting as a “director” of [COMPANY]

44. The Companies Act 2006 provides that, “In the Companies Acts ‘director’ includes any person occupying the position of director by whatever name called” (s 250). “Shadow director” means a person in accordance with whose directions or instructions the directors of the company are accustomed to act (s 251).

45. In the case of [NAME] and [NAME] [2014] UKUT 0253 (AAC), which concerned an operator’s licence under the Goods Vehicles (Licensing of Operators) Act 1995, the director of the company was [NAME]. The other person involved in the company, her husband, was a disqualified person under the Companies Acts. The Upper Tribunal had to decide whether Mr. [NAME] had been acting as a director. The Upper Tribunal considered the ways in which a person can be considered a “director” of a limited company.

9. We are satisfied that there is now clear authority for the proposition that there are three ways in which a person can be held to be a director of a limited company. It is only necessary to refer to two authorities to justify this proposition. The first is Secretary of State for Trade and Industry v Dennis George Hollier & Others [2006] EWHC 1804 (Ch). The second is [NAME] v Commissioners for HMRC & another [2010] UKSC 51.

10. The three ways in which a person can be a director of a limited company are these: (i) directors in law, (de jure), (ii) shadow directors and (iii) directors in fact, (de facto). We will consider each category separately.

Directors de jure

Appeal No: T2017/35

13 11. Directors de jure are those who have been lawfully appointed as directors of the company in question and whose names appear as directors of that company on the register at Companies House. There should generally be no dispute as to whether or not a person is a director de jure. If there is then the fact that the person’s name appears in the register at Companies House as a director of the company in question is likely to provide strong proof.

Shadow Directors 12. The expression ‘Shadow Director’ is defined in s. 251 of the 2006 Act, which

provides that it means: “a person in accordance with whose directions or instructions

the directors of the company are accustomed to act”. That definition is followed by a

provision designed to exclude a person giving professional advice to the directors of a

company from being held to be a shadow director. Whether or not a person comes

into the category of shadow director is a question of fact to be decided by assessing

the evidence in each individual case. The essential feature would appear to be that a

shadow director must be shown to play a part in the corporate governance of the

company in question by telling the de jure director or directors what to do. It is not

necessary to show that a shadow director gave all the directions or instructions necessary for the company to function. It is sufficient if he is shown to have played a part in the corporate governance of the company by giving directions or instructions ……

Directors de facto 13. In the case of [NAME] the Secretary of State applied for orders under s. 8 of the Company Directors Disqualification Act 1986, (“the 1986 Act”). The ground relied on was that in the light of information or documents obtained by the Secretary of State under provisions in the Companies Act:

“it is expedient in the public interest that a disqualification order should be made against any person who is or has been a director or shadow director of any company”. The case for the Secretary of State was that [NAME] and some of the other Defendants, although not lawfully appointed as Directors were, nevertheless, de facto directors and, as such, liable to disqualification under s. 8 of the 1986 Act …..”

14. The case was tried by Etherton J, as he then was. His review of the law in relation to de facto directors begins at paragraph 61 of his judgment. He pointed out that s. 22(4) of the 1986 Act provides that: “the expression director includes any person occupying the position of director, by whatsoever name called”. In other words the wording is exactly the same as s. 250 of the 2006 Act. Etherton J continued: “It is common ground, and is now well established, that for the purposes of the 1986 Act, ‘director’ includes a person who acts as a director even though never validly appointed as such (commonly referred to as a ‘de facto’ director)”….

17. In our view it is clear from Etherton J’s review of the authorities in [NAME] that there is no single detailed and all embracing test to determine who is or is not a de facto director. Equally it is clear that it is unwise and potentially misleading to look for or to concentrate on a single decisive factor. Instead what is required is an assessment of all the evidence relevant to the part that the person concerned has played. It is not necessary, in order to become a de facto director, that the person concerned is shown to have participated in decision making over the whole field of the company’s activities. “A person may be a de facto director even though that person does not have day to day control over the company’s affairs and even though he or

Appeal No: T2017/35

14 she acts as a director only in relation to part of the company’s activities”, ([NAME] paragraph 73).

18. At paragraph 81 of the [NAME] judgment Etherton J described being part of the corporate governing structure of the company as the ‘touchstone’ when deciding whether a person is a de facto director. A person can only be held to be a de facto director if they participate or have the right to participate in collective decision making on corporate policy and strategy and its implementation.

46. The [NAME] Commissioner found that [NAME] had a pivotal role in the company; he was involved in every area; that he had a supervisory role; had direct access to the company’s online banking and debit card; he was the public face of [COMPANY], he set up the Facebook page and was perceived by others to be instrumental in [COMPANY]. He was the driving force behind the expansion of the company’s transport operation and [NAME] was content to go along with this. The application for the licence had to be made by [NAME] as director. [NAME] intervened with the OTC to attempt to speed up the progress of the application process. It was [NAME] who organized the photographs of a coach at the proposed operating centre in Motherwell and it was he who investigated the availability and pricing of coaches, organised the purchase of the coach from [NAME] and negotiated the price. [NAME] had to sign the finance agreement as [NAME] was unable to do so. When he took delivery of the coach he did so for [COMPANY]. Payment was made to [NAME] for [COMPANY] by the finance company. The finance agreement was in the name of [COMPANY]. Although not a lawfully appointed director (de jure), the [NAME] Commissioner concluded that [NAME], in fact, acted as a “director” of [COMPANY]. She found that [COMPANY] was a joint enterprise business of [NAME] and [NAME].

47. The [NAME] Commissioner had evidence before her from a number of sources which entitled her to make such findings. The evidence of the interview under caution with [NAME] was to the effect that although the company was in the name of [NAME] it was [NAME] who ran the company. It was argued for the appellants that Mr [NAME] would simply associate the name of “[NAME]” with [NAME] because they had had dealings when [NAME] had previously run a taxi business under the name of [NAME]. However, it is quite clear from the questioning and Mr [NAME]’s answers that he clearly understood that he was being asked about a company called [COMPANY], and that this was different from the taxi business, he was aware that the company was owned by [NAME] and was in her name but all of Mr [NAME]’s dealings with the company were with [NAME] and, he added, “Truthfully, [NAME] runs it.” (pages 64–67).

48. In his interview under caution, [NAME] was aware that [NAME] had been the owner of the taxi firm called [NAME]. When asked who, in his opinion, owned the current company called [COMPANY] operating in Gretna he said he thought it was still [NAME]. He stated that he had never dealt with [NAME] in relation to [COMPANY]. He thought she was just [NAME]’s girlfriend. The only person he ever had any dealings with in relation to [COMPANY] was [NAME]. [NAME] had asked to borrow a bus to check if a site was appropriate for that size of vehicle, he came and collected it and drove it away. He said it was [NAME] who had bought the bus from [NAME]. (See pages 68- 72.)

49. [NAME]’s and [NAME]’s evidence was to the effect that [NAME] was pivotally involved in the running of the company on both the hotel and transport sides (see pages 550-552). In his letter to the OTC, [NAME] stated that he was involved in the day to day running of the business and that the delay was having an impact on “our overall business”. [NAME] took control of [NAME], a valuable asset of the company, and used it to generate income for [COMPANY]. If [NAME] did not know about this, as she claimed, that meant that she was unable to exert control over [NAME] and company assets. She

Appeal No: T2017/35

15 was aware of [NAME]’s history and also, as a result of that history, of the undertakings she has been required to give to the [NAME] Commissioner for the grant of the restricted licence.

50. There was evidence from [NAME] that the bus was usually parked at Gretna then latterly at Longtown. He was admittedly using it for hires without a licence. If [NAME] had been genuinely in control of the company and concerned to ensure no unlawful use of the bus one would have expected her to know what use was being made of the bus and where it was when not parked at the hotel. Likewise, when [NAME] gave her money for Christmas expenses a director in control of the company would immediately query where this cash came from. Her assertions that she was in control of the company are unconvincing against this background.

51. Regarding the evidence of [NAME] and [NAME], the [NAME] Commissioner had to look at this in the light of the background of the previous Public Inquiry, what she knew of [NAME] and [NAME], the undertakings which [NAME] had given and their demeanour at the public inquiry. She was entitled to infer from their evidence about [NAME]’s involvement in the business and his use of [NAME] that he was acting as a director. In making that finding The [NAME] Commissioner had in mind and followed the guidance in [NAME] and [NAME].

52. The [NAME] Commissioner was unable to accept the assertions of [NAME] and [NAME] that the latter was not aware of the unlicensed use of [NAME] to generate income. Based on the evidence which the [NAME] Commissioner had heard of [NAME]’s role in the business, that it was a joint enterprise with [NAME] and that they discussed everything, she was entitled to infer that [NAME] was aware of the operation of the vehicle and to find the assertions to the contrary implausible. We can find no reason to hold that she was obliged to have reached a different conclusion. In any event, having found that [NAME] was a shadow director, the directors of a company are collectively responsible for the company they manage.

53. In summary, it was not in dispute that [NAME] had operated [NAME] for reward without holding an operator’s licence; the [NAME] Commissioner found that there was no agreement between [NAME] and [COMPANY] that the vehicle was being operated by [NAME] for [NAME]; she found that [NAME] operated the vehicle showing the [NAME] disc without the consent of [NAME]; she found that [NAME] was aware that [NAME] was using the vehicle to generate funds for [COMPANY] without a licence and that [NAME]’s participation in the running of [COMPANY] amounted to acting as a shadow director. As indicated above, we can find no reason to hold that The [NAME] Commissioner erred or was plainly wrong in reaching those conclusions.

Revocation of the restricted licence

54. At the public inquiry held to consider the application by [COMPANY] for a restricted licence [NAME] had persuaded the [NAME] Commissioner that [COMPANY] was her company and controlled by her. The [NAME] Commissioner had been concerned to prevent [NAME] having any involvement in an operator’s licence because of his history of losing his taxi licence through driving without insurance, his previous sequestrations and having been disqualified as a company director. It was for that reason that the restricted licence had

Appeal No: T2017/35

16 been granted on conditions. Having found that [NAME] was acting as a shadow director in the company the [NAME] Commissioner was bound to find that there had therefore been a material change of circumstances since the restricted licence had been granted and also a contravention of one of the conditions on which the licence had been granted. The [NAME] Commissioner therefore had to go on to consider whether, in the circumstances, the restricted licence should be revoked (s17(2) of the 1981 Act).

55. In considering revocation the [NAME] Commissioner was obliged to weigh the points in favour and against the operator. She also had to consider the implications of revocation for the appellant’s business and whether, bearing those implications in mind, revocation would be proportionate. In this regard, she made reference to the case of [NAME] (No. 2) T2002/217 in which the Upper Tribunal held:

In cases involving mandatory revocation it has been common for findings to have been made along the lines of “I find your conduct to be so serious that I have had to conclude that you have lost your repute:

accordingly, I have also to revoke your licence because the statute gives me no discretion”. ……. this two-stage approach is incorrect and … the sanction has to be considered at the earlier stage. Thus, the question is not whether the conduct is so serious as to amount to a loss of repute but whether it is so serious as to require revocation. Put simply, the question becomes “is the conduct such that the operator ought to be put out of business?”. On appeal, the Tribunal must consider not only the details of cases but also the overall result.

56. The [NAME] Commissioner also had to ask herself how likely it was that this operator could be trusted to operate in compliance with the operator’s licensing regime in the future ([NAME] T2009/225). Operators cannot be checked on and monitored constantly; it is therefore of paramount importance that they can be trusted to operate compliantly, even when not being “watched” by the regulator.

57. On the positive side, the [NAME] Commissioner noted that DVSA had not reported any roadworthiness concerns or prohibitions; there was sufficient finance for two vehicles; there were no operating centre issues and the principal occupation was genuine. The negative features were [NAME]’s role as shadow director, his use of [NAME] without a licence and his use of the [NAME] disc. She then considered the guidance in [NAME] and observed that the operation of vehicles under the restricted licence was a small part of the overall business of [COMPANY]. In considering the “[NAME] question” of trust she answered that in the negative. Having seen and heard [NAME] and [NAME] and considering the latter’s answers which she found to be dissembling and his demeanour she felt unable to place any trust in the company and the persons directing it. She no longer felt able to trust [NAME]; she had shown herself incapable of controlling [NAME]’s involvement in the business.

58. Clearly, the [NAME] Commissioner has had in mind the appropriate legal guidance when considering the question of revocation and she has applied the law correctly. The conduct of the director and shadow director in operating a vehicle without a licence in contravention of s 12 of the 1981 Act was a matter she was bound to take into account under paragraph 1(2)(b) of schedule 3 (see paragraph 6 above) when considering whether the company was of good repute. Her decision that the unauthorised operation of the vehicle and the breach of the condition that [NAME] would not control the company outweighed the positive factors she found cannot be said to be unreasonable or in error of law. Having seen and heard the witnesses and made the findings of fact that she did she was entitled to find that [COMPANY] had lost its good repute. Good repute is a requirement of s14ZB and loss

Appeal No: T2017/35

17 of good repute is ground for revocation under section 17(2). In the circumstances, we are unable to hold that the [NAME] Commissioner erred in her consideration of and reasoning regarding these issues or that her decision to revoke the restricted licence was in any way disproportionate.

Disqualification of [COMPANY] and [NAME]

59. Section 28 of the Transport Act 1985 gives the [NAME] Commissioner discretion following revocation of an operator’s licence to disqualify the former holder of the licence either indefinitely or for such period as the [NAME] Commissioner thinks fit. The power extends to disqualifying “any officer of a company” where the company was the holder of the licence. The appellants were advised of the power to disqualify following revocation in the [NAME] Commissioner’s letter dated 18 October 2016 (pages 15- 19).

60. Section 28 forms part of a system of regulation of the operation of public passenger vehicles and its purpose is for its powers to be used in order to achieve the objectives of the system of regulation such as the protection of the public and fairness to other operators who do comply with the regulatory requirements.

61. The Senior [NAME] Commissioner’s Statutory Document No. 10, paragraph 93 recommends that each case must be considered on its merits. In the case of a first public inquiry, it advises that [NAME] may wish to take as a starting point a disqualification period of between 1 and 3 years.

62. The [NAME] Commissioner took into account the period of unlawful use of the vehicle which was approximately three months and also that the trust between the operator and the [NAME] Commissioner had been adversely affected by the breach of the condition on which the licence had been granted. Taking these factors into account, the [NAME] Commissioner imposed a period of disqualification of 30 months for both [COMPANY] and [NAME]. ([NAME] was also disqualified for that length of time however, his disqualification is not the subject of appeal.) Further, the [NAME] Commissioner made a direction under s28(4) of the 1985 Act to apply during the period of disqualification to the company and the directors.

63. We consider that the [NAME] Commissioner has taken into account all the material and relevant considerations in this particular case which could bear on the question of disqualification, the period of the disqualification and the s28(4) direction. Given the evidence before the [NAME] Commissioner and her conclusions we can find no defect in her reasoning.

Refusal of application for a standard operator licence 64. Having found that the company was not of good repute and did not have the appropriate financial standing for 4 vehicles, the requirements of ss 14 and 14ZA were not satisfied and therefore a standard licence could not be granted. In any event, given the [NAME] Commissioner’s disqualification orders, a standard licence could not be granted. The [NAME] Commissioner’s decision not to grant the licence cannot be faulted. It is therefore not necessary for this Tribunal to consider whether she ought to have made a different decision on the issue of financial standing.

Appeal No: T2017/35

18

Decision 65. In all the circumstances, the Tribunal concludes that the [NAME] Commissioner’s decision cannot be impugned. The appeal is dismissed.

(Signed)

[NAME] QC

Judge of the Upper Tribunal

Date: 13 March 2018