Neutral Citation Number: [2015] UKUT 0163 (AAC)		Appeal No.  T/2014/85
IN THE UPPER TRIBUNAL		
ADMINISTRATIVE APPEALS CHAMBER
TRAFFIC COMMISSIONER APPEALS

ON APPEAL from the DECISION of
Nick Denton, Traffic Commissioner for the 
South Eastern and Metropolitan Traffic Area dated 2 December 2014

Before:
Her Honour Judge J Beech, Judge of the Upper Tribunal
Michael Farmer, Member of the Upper Tribunal

Appellants:

RICHARD HEARD

Attendances:
For the Appellant: 

Heard at: Field House, 15-25 Bream’s Buildings, London, EC4A 1DZ
Date of hearing: 24 March 2015
Date of decision:   31 March 2015

DECISION OF THE UPPER TRIBUNAL

IT IS HEREBY ORDERED that the appeal be DISMISSED with immediate effect

SUBJECT MATTER:-  Nominated transport manager failing to notify Traffic Commissioner of resignation whilst remaining in employment with the operator as the Financial Director, with knowledge of lack of financial standing, issuing dishonoured cheques and direct debits and acquiescing in regulatory non-compliance.  Whether order of disqualification appropriate and proportionate.  

CASES REFERRED TO:-  Bradley Fold Travel Ltd & Peter Wright v Secretary of State for Transport (2010) EWCA Civ. 695.

REASONS FOR DECISION

1.	This is an appeal from the decision of the Traffic Commissioner for the South Eastern & Metropolitan Traffic Area (“TC”) made on 2 December 2014 when he revoked the standard national operator’s licences of CTR Tipping Services Limited and RPJ Transport Limited, made findings that both Steven Heard and Richard Heard had lost their good repute as transport managers, disqualified Steven Heard from being a transport manager and from holding or obtaining an operator’s licence for a period of three years and disqualified Richard Heard from being a transport manager for a period of twelve months.  

2.	The factual background to these appeals appears from the documents, the transcript and the TC’s written decision and is as follows.  On 9 January 2009, CTR Tipping Services Limited (“CTR”) was granted a standard national operator’s licence authorising five vehicles and five trailers with five vehicles in possession.  Its operating centre was situated in the Old Pumping Station, Brielle Way, Sheerness and its declared office in New Road, Sheerness.

3.	On 4 January 2010, LVH Services Limited was granted a standard national goods vehicle authorising 25 vehicles and 25 trailers.    Its operating centres were at the same addresses shown in paragraph 2 above.  The Appellant’s father, Steven Heard was the Operations Manager of the company and was responsible for the scheduling of the drivers work and for the regulatory aspects of the business although he was not the transport manager.  He also owned a 50% shareholding in the company.  Richard Heard was employed by LVH Services Limited and described himself as an Administrator within the company.

4.	In February 2011, Richard Heard became the sole director of CTR and in October 2011 he became the transport manager.  In June 2013, in his capacity as director of CTR, Richard Heard applied for a change of CTR’s operating centres to a single site at the Old Britannia Site, New Road, Sheerness which was the specified operating centre of Ronnie Wood Limited, a haulage company with an operator’s licence.  Steven Heard owned 100% of the shares of Ronnie Wood Limited and was until June 2013, the sole director of the company.  Philip Heard, another of Steven Heard’s sons later became the sole director of the company.  Also based at the operating centre was RWH Haulage Limited, a freight forwarding company, also described by Steven Heard as a “holding company”.  Richard Heard was the sole director of the company although during the course of the public inquiry, Steven Heard described himself as the manager and Richard Heard as being responsible for the finances. 

5.	On 19 July 2013, Steven Heard replaced Richard Heard as the sole director of CTR (according to Company House records).  The TC was notified of this change.  

6.	Steven Heard was also the sole director of RPJ Transport Limited which was granted an operator’s licence in May 2011 authorising one vehicle and one trailer with none in possession.  The nominated Transport Manager was Richard Heard and its operating centre was in Wharf Road, Gravesend.  According to Company House records, Steven Heard replaced Richard Heard as director of the company on 16 December 2012.  

7.	On 14 October 2013, the operator’s licence of LVH Services Limited was revoked and the sole director (Stephen Pennington) was disqualified for an indefinite period from holding or obtaining an operator’s licence and the Transport Manager (Vivienne Swann) was disqualified from acting  as a Transport Manager for an indefinite period.  The TC’s findings can be summarised as follows:

a)	Nineteen prohibitions (one “S” marked) had been issued for defective vehicles and trailers.  Five prohibitions had been issued for tachograph and weight offences;
b)	Fixed penalty notices had been issued to drivers for overweight and over-height vehicles; 
c)	The six weekly inspection intervals were not being adhered to  with intervals being stretched on more than thirty occasions and by as much as five or more weeks;
d)	The statement of intent in relation to drivers’ hours and records had not been adhered to.  Only a few tachographs were produced for five of the eleven vehicles and of those five, there was 13,149kms of missing mileage;
e)	The company had dishonestly obtained vehicle excise duty (“VED”) discs for sixteen vehicles (by either cancelling cheques or issuing cheques which were not honoured) and had been convicted of seven VED offences, with other prosecutions pending.  In some cases, the VED discs displayed on vehicles which had been dishonestly obtained had themselves expired;
f)	There had been a lack of cooperation with the VOSA staff (as they then were). 

At the date of the public inquiry, the company lacked a director and no one from the operator appeared at the public inquiry.   All 23 of its vehicles had been removed from the licence by the date of the TC’s decision.  Five had been transferred to Ronnie Wood Limited and four were transferred to CTR.  The remainder were de-specified.  Subsequently, Steven Heard was appointed as the sole director of LVH Services Limited with retrospective effect from 1 November 2011.

8.	 On 12 November 2014, the TC held a public inquiry to consider taking regulatory action in respect of CTR and RPJ Transport Limited having received reports from Vehicle Examiner Steven Judge and Traffic Examiner Alison Smith.  They found that:

a)	CTR had transferred to the proposed new operating centre at the Old Britannia Works, New Road, Sheerness without authority (although we observe that whilst the application was submitted in June 2013, as at November 2014 the Office of the Traffic Commissioner (“OTC”) had failed to act upon it);

b)	There had been 22 roadside encounters with CTR vehicles over the previous 5 years.  8 prohibitions had been issued for 12 defects, 5 of those prohibitions had been imposed in the previous 12 months;

c)	One of the prohibitions had been “S” marked issued to a trailer for 10 loose wheel nuts out of 10 on one wheel;

d)	There were no PMI sheets for one vehicle while records for other vehicles showed excessive intervals between inspections by between 1 and 31 weeks;

e)	The driver defect reporting system was inadequate;

f)	The director and transport manager functions were being performed by Steven Heard whereas the licensing records showed that Richard Heard  was the director and transport manager;

g)	One of the operator’s vehicles (GN54 LCF) had been stopped on 27 March 2014 displaying a VED disc which had expired on 28 February 2014.  No VED duty had been paid for the month of March.  In May 2014, DVLA records showed that the VED had then been paid up until 1 September 2014.  However, in June 2014, the vehicle was again showing as being untaxed because the cheque presented for the payment of VED had not been honoured;

h)	The same cheque had been used to pay for the VED for vehicle GN54 LDE.  The DVLA had requested alternative payment from CTR in respect of both vehicles and had not received a response.  The vehicles remained untaxed and the DVLA had lost £1,085 in revenue;

i)	 	Two other vehicles had also been operated whilst untaxed.  Vehicle FJ07 XFG had been recorded on ANPR cameras on several occasions in December 2013 whilst untaxed and vehicle RX07 PZW had also been seen on the roads in the same circumstances in September 2013.  DVLA successfully prosecuted CTR in respect of the use of these vehicles whilst untaxed in February and June 2014 (these convictions had not been notified to the TC);

j)	   On 21 May 2014, Shaun Edwards, a CTR driver, was stopped on the roadside and found only to have 3 tachograph charts in his possession.  He stated that he had handed the other charts which he should have had in his possession to CTR.  He was issued with a fixed penalty notice of £300;

k)	On 19 May 2014, TE Smith sent a section 99ZA letter to CTR requiring production of tachographs and records.  The letter was signed for but no response was received.  As a result, it was impossible to conduct an investigation into CTR’s compliance with the rules on drivers’ hours and records;

l)	   As for RPJ Transport Limited, its operating centre was not in use (having transferred to The Old Britannia Works operating centre) and a request for copies of maintenance records sent to the operator’s correspondence address was not responded to.  Neither was there any response to a s.99ZA letter.  

9.	At the public inquiry hearing, both operators and Steven and Richard Heard were represented by Jim Marsh, a Transport Consultant of The AITAC Consultancy.  The reports of both VE Judge and TE Smith were accepted and it was further accepted that the bank statements produced for both companies did not demonstrate the requisite financial standing until the day before the public inquiry when large deposits had been made into both accounts which met the financial standing requirements.  The deposits had been made by Philip Heard.  

10.	It was the evidence of both Steven and Richard Heard that the latter had resigned as director and transport manager of RPJ Transport Limited in December 2012 and that he had resigned as transport manager of CTR at the same time.  Steven Heard took over as director and transport manager thereafter.  However, Richard Heard remained a director of CTR until July 2013.  It was accepted that when he applied on behalf of RPJ Transport Limited to vary the specified operating centre, he should not have signed the application as a director.  It had slipped his mind to inform the TC of his resignations and the change in directorship details.  He maintained that he was simply an “employee” or “accounts clerk” once his father took over from him at the end of 2012 and that he was unaware that vehicles were being used whilst untaxed.  He was aware of the poor financial position of both companies and that they were “keeping their heads above water”.  He was now aware of the VED liabilities and but he did not see any correspondence in relation to them at the time.  He was the person responsible for writing the cheques to the DVLA and he was aware that those cheques were dishonoured because he checked the bank statements.  He had reminded his father of his legal obligations and his father was aware that he had to pay VED but if the cash was not there, then “we have to let the cheque bounce”.  It was not their intention to issue cheques which would not honoured because if a prosecution resulted, then the proceedings would cost more than the cost of the VED.  When Richard Heard signed cheques, he had every faith that they would be honoured.  Steven Heard accepted responsibility for all of the compliance failings identified by the DVSA officers and attributed his conduct to a desire to trade through financial difficulties and not to trigger a public inquiry sooner than was necessary by responding to requests for information or by notifying the TC of convictions and changes in circumstances.

11.	In his written decision dated the 2 December 2014, the TC was struck by the similarities in the evidence he had heard during the public inquiry regarding the licence of LVH Services Limited and the evidence relating to CTR and that Steven Heard was the common link.  He found that all of the matters set out in paragraph 8 above were made out. In relation to financial standing, both companies had lacked sufficient funds to demonstrate financial standing for the previous two years.  Further, neither operator had always had sufficient funds to pay for vehicle insurance and CTR did not have sufficient funds to pay VED.  The injection of funds the day before the public inquiry was too late to give the TC any confidence that financial standing would be met in the future (particularly in view of the long period over which finances had been wanting).  

12.	As for professional competence, Richard Heard had failed to inform the TC of his resignation as transport manager from both licences in December 2012 and neither operator had applied to nominate Steven Heard as transport manager.  It followed that both operators had lacked professional competence since Richard Heard’s resignation.  The TC conducted a balancing exercise (which is not criticised) and revoked both licences and disqualified Steven Heard as a director and transport manager for three years.  In relation to Richard Heard he said this:

“Richard Heard is still formally the nominated transport manager on the licences.  On the negative side of the balance for him is the fact that he failed to notify me of his resignation as transport manager on the licences and that, while he must subsequently have been aware as financial manager of the companies’ precarious financial position and dishonoured cheques and direct debits, he took no action to address the consequent operation of untaxed vehicles.  He acquiesced in the continuing and gross non-compliance of the operator.  While he may have been a more passive actor than Steven Heard, this acquiescence is nevertheless incompatible with the status of a reputable transport manager.  I therefore conclude that Richard Heard has also lost his repute and I disqualify him under schedule 3 from acting as a transport manager under the licence for a period of 12 months.  This to give him time to reflect on what went wrong, familiarise himself with what the regulatory regime expects of transport managers, undergo formal refresher training and resolve to attach more respect to the rules governing the legal operation of vehicles if ever he is to act as a transport manager in the future”.  

13.	At the hearing of this appeal, Mr Marsh again appeared on behalf of Richard Heard.  He accepted that the TC was justified in making the findings that he did in respect of the companies and no criticism could be made of his orders of revocation and of disqualification of Steven Heard.  The issue was the TC’s findings in relation to Richard Heard.  The TC accepted that Richard Heard had resigned as transport manager in respect of both companies at the end of 2012 and that Steven Heard had taken on the role from that time and that it was the latter who was responsible for all of the non-compliance issues.  The TC accepted that Richard Heard had resigned as director of CTR in July 2013 and that Steven Heard had become sole director in his place at that time.  It followed that the TC was wrong to make any adverse findings against Richard Heard as transport manager when at all material times, he was the Finance Manager.  His failing as a transport manager was limited to his failure to notify the TC that he had resigned as transport manager and had stood down as a director in respect of both companies.  His father had also failed to notify the TC of these changes.   In the absence of any other compliance issues which could be attributed to him as a transport manager it was wrong and disproportionate to find that Richard Heard had lost his good repute as a transport manager which necessarily resulted in a period of disqualification.  

14.	Mr Marsh accepted that when his client had applied to vary the terms of RPJ Transport’s operator’s licence, he signed the application as a Director when he was not.  Mr Marsh was also asked to consider page 50 of the appeal bundle which was a licence checklist submitted on behalf of CTR on 19 December 2013, which was also signed by Richard Heard, describing himself as a director.  He agreed that this demonstrated that on two occasions, his client had misled the TC into believing that he remained the sole director of the two companies when he was not. Mr Marsh accepted that by failing to notify the changes in personnel, Steven Heard was allowed to operate CTR and RPJ Transport “under the radar” of scrutiny by DVSA and the TC and that such scrutiny would have been inevitable as a result of Steven Heard’s known links to LVH Services Limited and the revocation of its licence. 

15.	 Mr Marsh was asked to consider the bank statements.  He confirmed that Richard Heard was the sole director of RWH Haulage Limited which was a freight forwarding company and that it was obvious that this company was the sole source of income of CTR, apart from some inconsequential sums being transferred to CTR by Ronnie Wood Limited.  It followed that as Richard Heard was the sole director of RWH Haulage Limited and that he was responsible for the finances of that company and that he has been variously described as an Accounts Clerk, Finance Manager and Finance Director of CTR, he would have been aware of the income stream CTR could expect to receive at any one time and that when he wrote out cheques for liabilities such as VED on behalf of CTR he would have had knowledge as to whether those cheques would be honoured or not.  Even upon the most superficial scanning of the CTR bank statements, it clear that when Richard Heard wrote out cheques which were not honoured by the bank, there was no reasonable expectation of transfers of equivalent sums being made from RWH Haulage Limited at the material times.  It follows that whilst he was the nominated transport manager for CTR, he was aware that vehicles were being operated untaxed and that vehicle insurance premiums remained unpaid.

16.	This is a bad case.  By means of a web of companies owned or attributed to members of the Heard family, Steven Heard was enabled to continue operating vehicles in precisely the same non-compliant way as RWH Services Limited had operated vehicles, including dishonest and fraudulent evasion of VED.  We are satisfied that Richard Heard was fully aware of how this operation was being run but that his continued nomination as transport manager was essential to allow Steven Heard to operate vehicles in a grossly non-compliant manner without being investigated.  We are satisfied that the TC’s assessment of Richard Heard’s role in the operation of both companies was correct and that it was inevitable that his good repute would be lost.  

17.	We are satisfied that the TC’s findings cannot be faulted and we are not persuaded that either the law or the facts of this case impel us to come to a different view to that of the TC in relation to Richard Heard’s role in these companies as per the test in Bradley Fold Travel Ltd & Peter Wright v Secretary of State for Transport (2010) EWCA Civ. 695. Mr Marsh rightly accepted that if this Tribunal were to come to that conclusion then it could not be argued that the period of disqualification of 12 months was disproportionate.  

18.	The appeal is dismissed.

Her Honour Judge J Beech
31 March 2015