Neutral Citation Number: [2011] UKUT 279 (AAC)

 

Appeal No.  T/2011/21

 

IN THE UPPER TRIBUNAL

ADMINISTRATIVE APPEALS CHAMBER

TRAFFIC COMMISSIONER APPEALS

 

ON APPEAL FROM THE DECISION OF

 

TRAFFIC COMMISSIONER for the  North Western TRAFFIC AREA

Dated: 12 February 2011

 

 

 

Before:

Judge Alan Gamble, Judge of the Upper Tribunal

Leslie Milliken, Member of the Upper Tribunal

Stuart James, Member of the Upper Tribunal

 

 

Appellant: Lombard North Central PLC

 

 

 

 

Attendances:  Mr A Roxburgh, of Counsel

For the Appellants: Instructed by Addleshaw Goddard LLP, Solicitors

 

 

Heard at: Victory House, 30-34 Kingsway, London, WC2B 6EX

Date of hearing: 9 June 2011

Date of decision: 27 June 2011

 

 

DECISION OF THE UPPER TRIBUNAL

 

IT IS HEREBY ORDERED that the Volvo Globetrotter Tractor Unit with the registration number MH54 GDF be returned to the appellant

 

 

SUBJECT MATTER:-  

 

Detention of vehicles under The Goods Vehicles (Enforcement Powers) Regulations 2001 (as amended)

 

 

 

CASES REFERRED TO:-

 

Close Asset Finance Limited –v- Secretary of State for Transport (Transport Tribunal Appeal 2003/3)

 

Capital Bank PLC (Transport Tribunal Appeal 2005/412)

 

 

REASONS FOR DECISION

 

1. This is an appeal by Lombard North Central PLC,  “the owner”, brought under regulation 13 of The Goods Vehicles (Enforcement Powers) Regulations 2001 (as amended), “the Regulations” against a determination of the Traffic Commissioner dated 12 February 2011 by which she refused an application by the owner brought under regulation 10 of the Regulations for the return of a Volvo Globetrotter Tractor Unit with the registration number MH54 GDF.

 

2. Mr A Roxburgh appeared as Counsel for the owner.  We are indebted to him for his helpful skeleton argument, his comprehensive bundle of copies of statutory and case law authorities and his incisive oral presentation. 

 

3. The salient facts and circumstances are as follows:

 

(a) The above vehicle (then registered under the registration number AY54 BFE) was the subject of a sixty month lease purchase agreement dated 2 October 2007 between the owner and Mr D P Coombe, trading as DPC European Transport.

 

(b) When the above agreement was entered into Mr Coombe held a valid operator’s licence.  The owners had satisfied themselves of that fact. 

 

(c) Payments under the above agreement were made only until January 2010 when they ceased. 

 

(d) On 9 December 2009 the Traffic Commissioner revoked the operator’s licences of Mr Coombe, trading as DPC European Transport, and of an associated company DPC Hi-Abs Heathrow Limited. The owner was and remained unaware of those revocations until after the vehicle was detained.

 

(e) On 14 January 2010 Mr Coombe entered into an individual voluntary arrangement (IVA) with his creditors.  The owner received notice of that IVA.  Under an express term of the above agreement Mr Coombe’s entering into an IVA automatically terminated it.

 

(f) In January 2010 and again in July 2010 the owner attempted, using different repossession agents, to recover the vehicle without success.

 

(g) The vehicle was detained by officers of VOSA on 14 October 2010. 

 

(h) On that date the person driving the vehicle was an employee of Mr Eric Nicholls.  Mr Nicholls’ operator’s licence had been revoked by the Traffic Commissioner in May 2010.  When the vehicle was detained it was displaying an operator’s licence in the name of  R Balmer, trading as R B Trucking.  Mr Nicholls was operating the vehicle displaying Mr Balmer’s operator’s licence by agreement between them.  Mr Nicholls had hired the vehicle from “DPC Hi-Abs” with effect from 9 September 2010 under a hire agreement with them.   The owner was unaware of the above facts until after the vehicle was detained.

 

(i) The owner had not made checks which would have revealed the revocation of Mr Nicholl’s operator licence described in sub-paragraph (h) above.

 

4. It is not in dispute having regard to the contents of paragraph 3(c) and (e) that the owner retains rights of ownership in the vehicle under express terms of the lease purchase agreement of 2 October 2007.  Under it Mr Coombe would only have become the owner of the vehicle if and when he had paid all of the rental payments.  Further, his entering into an IVA automatically terminated the agreement. 

 

5. It is also not in dispute having regard to the contents of paragraph 3(h) that the vehicle was lawfully detained by VOSA officials on 14 October 2010,  under regulation 3(1) of the Regulations because those officials had reason to believe that the vehicle was being used on the road in contravention of section 2 of the Goods Vehicles (Licensing of Operators Act) 1995.  When the vehicle was detained it was being operated by Mr Nicholls who did not have an operator’s licence under that Act.  Indeed his  operator’s licence had been revoked by the Traffic Commissioner in May 2010.

 

6. The owner’s application to the Traffic Commissioner for the return of the vehicle was based on regulation 4(3)(c), read along with regulation 10(2)(a), of the Regulations.  The ground on which the owner relied is enacted in the former sub-paragraph as follows:

 

 

“(c) that, although at the time the vehicle was detained it was being, or had been, used in contravention of Section 2 of the 1995 Act, the owner did not know that it was being, or had been, so used;”

 

 

 

 

 

 

7. In the full written reasons for her determination the Traffic Commissioner specifically found in fact that the owner “did not have actual knowledge (in the simplest sense) of the unlawful use of the vehicle”.  Nonetheless by refusing the application for its return she necessarily held that she had not been satisfied for the purposes  of regulation 4(3)(c) that the owner did not know that the vehicle was being used in contravention of section 2 of the 1995 Act.

 

8. We accept Mr Roxburgh’s submissions that the reasoning which led the Traffic Commissioner to that conclusion was flawed and that her determination was thus materially erroneous in law.  

 

 

(i) In her full written reasons she describes the decision of the Transport Tribunal in Close Asset Finance Limited v Secretary of State for Transport, Appeal 2003/3 as an “enormously helpful case”.  However we hold that she misdirected herself as to the true effect of that decision which is the leading authority on the issues arising in this appeal.  The correct import of Close Asset Finance Limited was demonstrated by the careful analysis of it in Mr Roxburgh’s submissions. In particular, we hold that Close Asset Finance Limited establishes that a person can only be treated as having actual knowledge by reason of a failure to make enquiries if his conduct was dishonest and, further, that in determining whether a person acted dishonestly the reason for his failure to make enquiries has to be considered.  Those propositions form key parts of the reasoning in Close Asset Finance Limited especially having regard to the authorities from cognate areas of the law on which the Transport Tribunal relied in e.g. paragraphs 7, 8 and 12 of that case.  The Traffic Commissioner was correct to hold that she required to be satisfied of “a high degree of fault” before holding that a failure to make enquiries constituted the equivalent of actual knowledge.  However, we accept Mr Roxburgh’s submission that she misdirected herself in failing to go on to hold that the “high degree of fault” had to be of a specific kind, i.e. involving dishonesty.  It is crucially important that nowhere in her determination does the Traffic Commissioner make a specific finding of dishonesty in respect of the owner.  In our view, following Close Asset Finance Limited that was fatal to her conclusion.  A finding of dishonesty is required before a failure to make enquiries by an applicant relying on regulation 4(3)(c) can result in him being held to have the equivalent of actual knowledge. 

 

 

 

 

 

(ii) We also consider that the Traffic Commissioner’s approach came dangerously near to holding that a leasing company like the owner is required to take all reasonable steps to satisfy itself that its customer held an operator’s licence.  That position was explicitly rejected in paragraphs 6 and 15 of Close Asset Finance Limited which we follow and apply.  It was similarly held in paragraphs 6 and 8 of the decision of the Transport Tribunal in Capital Bank plc, Appeal 2005/412 that no positive steps to check whether a party to a hire purchase agreement had an operator’s licence are required of a finance house to satisfy regulation 4(3)(c).   We also follow and  apply that decision.

 

(iii) For these reasons, we are satisfied that the Traffic Commissioner’s determination falls to be set aside.

 

 

9. We substitute our own decision which is that the owner has established the ground for return of the vehicle laid out in regulation 4(3)(c).  They did not have actual knowledge of the vehicle’s unlawful use nor its equivalent based upon a dishonest failure to make enquiries. Under the specific power conferred on us by regulation 14, we order it to be returned to the owner.

 

 

 

 

 

 

(Signed)

A J GAMBLE

Judge of the Upper Tribunal

Date: 27 June 2011