Neutral Citation Number [2011] UKUT 222 (AAC)

Appeal No.  T/2011/23
IN THE UPPER TRIBUNAL		
ADMINISTRATIVE APPEALS CHAMBER
TRAFFIC COMMISSIONER APPEALS

ON APPEAL from the DECISION of
Miles Dorrington Deputy Traffic Commissioner for the
South Eastern and Metropolitan Traffic Area
Dated 23 March 2011

Before:			Hugh Carlisle QC  	Judge of the Upper Tribunal
				David Yeomans 	Member of the Upper Tribunal	
				George Inch		Member of the Upper Tribunal

Appellant:
TAJ THE GROCER LIMITED

 
Attendances:
For the Appellant: Richard Orridge, of Spencer Howard, solicitors 

Heard at:	Victory House, 30-34 Kingsway, London, WC2B 6EX
Date of hearing:	31 May 2011
Date of decision:	15 June 2011

DECISION OF THE UPPER TRIBUNAL

IT IS HEREBY ORDERED that the appeal be ALLOWED and that this matter be REMITTED for rehearing by a different traffic commissioner or deputy.

SUBJECT MATTER:  		Restricted Licence – fitness to hold/repute		

CASES REFERRED TO:  	None

REASONS FOR DECISION

1.	This was an appeal from the decision of the Deputy Traffic Commissioner for the South Eastern and Metropolitan Traffic Area on 23 March 2011 when he refused to grant a restricted operator’s licence to the Appellant Company.

2.	The factual background appears from the documents and the transcript of the public inquiry and is as follows:
(i)	The Company applied for a restricted operator’s licence for one vehicle on 19 November 2010.  It appeared to have a connection with an operator called Taj Natural Foods Limited which had gone into administration in March 2010 and whose licence had expired by effluxion of time.  The Office of the Traffic Commissioner asked the Company to explain if there was a connection and it replied that it had purchased Taj Natural Foods’ assets including its vehicle and was “a completely new company”.  More information was requested and on 11 January 2011 Mrs Nazia Khan stated that she is a director of the Appellant Company and is the wife of Mr Amir Khan who was a former director of Taj Natural Foods Limited.  She had given Mr Prakesh Kanji authority to sign and act on the Company’s behalf: he had now been registered as a director of the Company.  Further information was provided by letter dated 19 January 2011 and an interim operator’s licence was subsequently granted.
(ii)	On 11 February 2011 the Company was called-up to a public inquiry.  The call-up letter referred to the provisions of s.13 of the Goods Vehicles (Licensing of Operators) Act 1995 (“the Act”) and continued:-
	“In considering all these subsections the Traffic Commissioner will in particular wish to consider the links with Taj Natural Foods Ltd (OK1053891) which went into administration in March 2010 (the licence has now expired) in particular as Nazia Khan is the wife of Amir Khan who was one of the directors of that company.”
(iii)	The public inquiry took place on 23 March 2011 before the Deputy Traffic Commissioner.  Mr Kanji attended.  Mrs Khan was not present and at the outset the Deputy Traffic Commissioner complained about this.  He pointed out to Mr Kanji that the issue was the connection between the Company and Taj Natural Foods Limited:-
	“The reason for the inquiry today was her link with the previous company.  You cannot speak on her behalf because I cannot question you about what she is doing, what she has done, what her involvement was, why it was so, et cetera.  Therefore we are at an impasse here.  Now the calling-in ….. letter is extremely clear.  It says, ‘NB both Directors should attend the Public Inquiry’.  These Inquiries are not for a cup of tea and a chat.”
(iv)	Mr Kanji described Mrs Khan’s role in the Company but the Deputy Traffic Commissioner was reluctant to accept his evidence:-
	“The Traffic Commissioner:	…..  Now you cannot talk about the administration of the last company – 
	“Mr Kanji:	No.  No.

	“The Traffic Commissioner:	- because you were not a Director of it.  You, I understand, were an employee of it so you cannot talk about it.  You have go not locus standi, no legal position.
	“Mr Kanji:	Yeah.
	“The Traffic Commissioner:	I do not know how we can get round this.”
	Mr Kanji went on to say that the Company’s vehicle had been bought from Taj Natural Foods Limited.  He had been responsible for the application for the previous operator’s licence and for putting the current application together.  He accepted that the vehicle had been bought by the Appellant Company at under value.  He explained that the administration was still continuing:-
	“The problem was there was no debt under Taj Natural Foods Limited.  The problem was he had two other property companies where the debt was.  However, Taj Natural Foods Limited had a cross guarantee with the two other property companies.  The whole thing came down, you know, like a domino effect really.  It wasn’t the retail business which was …..  that was doing really well.  It was the properly side which really knocked him down.”
(v)	Mr Kanji said that Mrs Khan had no involvement apart from being a housewife:-
	“Even at this present time, sir, she doesn’t actually have any hands-on involvement, you know, in the business.  To be honest with you, Mr Khan is assisting me in running this Taj The Grocer Limited.”
	The Deputy Traffic Commissioner referred to Mr Khan:-
	“The Traffic Commissioner:	He may be facing personal liability under the administration of Taj Natural Foods and the other companies and it may well be that she is fronting it knowing that (inaudible) that you may go down.  Not to jail but go down financially.
	“Mr Kanji:	Yeah.
	“The Traffic Commissioner:	Therefore, this could well be seen as a phoenix application, hence I need to speak to her but she has chosen not to attend or provide a statement.”
	Mr Kanji told the Deputy Traffic Commissioner that Mrs Khan had a complication with her pregnancy: he thought that she had “seriously high blood pressure” and that she was having to attend hospital daily.  
(vi)	The Deputy Traffic Commissioner asked about the administration of Taj Natural Foods Limited and Mr Kanji said “it’s looking likely that there will be a surplus coming back to Mr Khan”.  He had obtained this information from discussions but the Deputy Traffic Commissioner indicated that he could not accept this as evidence.  Eventually the Deputy Traffic Commissioner said that he intended to refuse the application: without the attendance of Mrs Khan he considered that he was at “an impasse”.  He said “Mrs Khan has only brought this upon herself by her lack of co-operation and communication”.
(vii)	After a short adjournment the Deputy Traffic Commissioner gave an oral decision.  He had summarised his conclusion on a decision sheet and read this out:-
	“The 100 per cent shareholder, Mrs Nazia Khan, failed to attend the Public Inquiry or to sent written submissions and any evidence and support concerning the central issues in the calling-in letter.  Further, Mrs Nazia Khan failed to communicate at all with the Office of the Traffic Commissioner after the calling-in letter and failed to explain her non-attendance.  Mrs Nazia Khan and her link with Taj Natural Foods Limited via her husband, a former Director of the same, was the central issue in this case.  From the evidence I have heard from Mr Kanji the co-Director of the Applicant but a non-shareholder.. that: (a) the administration of Taj Natural Foods Limited is still ongoing; (b) that company supported the debts of Mr Amir Khan’s two other companies which failed financially; (c) the assets of Taj Natural 

	Foods Limited were bought by Taj The Grocers Limited below market value from the administrator; and (d) Mr Khan is involved with the Applicant Company.  On the face of the evidence before me, this appears to be a phoenix application and Mrs Nazia Khan is not here or has not provided any evidence, submissions, statements or otherwise to convince me that that is not the case.”
	The Deputy Traffic Commissioner later said:-
	“I have decided not to adjourn this matter for the very simple reason that from the evidence I have heard it seems to me that the issues at hand, particularly as to what was said, is that Mrs Khan may not be able to attend a Public Inquiry for some time.  We do not know that but that may be the case and, therefore, any adjournment may allow what I currently think is a phoenix application to continue and I am just not prepared to do that.”
(viii)	The application was refused and the interim licence was revoked.  Subsequently we were informed that the Company was granted a further interim licence and that it had the benefit of this at the time of the appeal.

3.	At the hearing of the appeal Mr Orridge appeared for the Company.  We gave permission to amend the grounds of appeal and he provided us with a skeleton argument for which we are grateful.  He made four submissions, with which we deal in reverse order.  

4.	The final submission was that the Deputy Traffic Commissioner had been wrong to revoke the interim licence.  Mr Orridge said that this had become academic by reason of the subsequent grant of an interim.  Nevertheless, we think that the Deputy Traffic Commissioner’s revocation of the interim licence followed his refusal to grant a restricted licence and cannot in itself be criticised.

5.	Mr Orridge’s third point was headed “Natural Justice” and he submitted that the Company had been “unaware of the true extent of the case it had to meet”.  We do not agree.  We have already quoted the relevant passage in the call-up letter (see para.2(ii) above) and when this is considered together with the earlier correspondence we are satisfied that notice of the issues was properly given.  We note that Mr Kanji did not indicate at any stage that he had been taken by surprise.

6.	Mr Orridge’s first point was that the finding that the Company was a phoenix or fronting operation was not a conclusion which could reasonably have been reached on the available evidence.  His second point was that an adjournment should have been ordered.

7.	We must start by saying that coded words such as “phoenix application” or “fronting” should be used with caution unless explanation is provided: they do not arise in everyday language.  We think that the Deputy Traffic Commissioner took the meaning of such words too readily for granted.  It must also be borne in mind that good repute as such is not a requirement for a restricted operator’s licence.  The latter is subject to s.13(4) of the Act which requires (see Schedule 2) in summary that an applicant for such a licence including those linked to him are “not to be unfit”.  Although there will be 

	circumstances in which a so-called “fronting” situation will make an applicant for a restrictive licence unfit we think that if the right questions are asked this conclusion does not necessarily follow and that there is a difference of emphasis between the requirements for the two types of licence.  

8.	The usual situation in which a “fronting” arises is where eg. a disqualified, convicted or bankrupted operator applies for a new licence under another name in order to continue operating.  Mr Orridge submitted to us that no adverse findings had been made against Mr Khan.  On the contrary, the evidence as far as it went was that there was likely to be a surplus when the administration was complete.  He wanted us to admit the administrator’s report as fresh evidence but accepted that this had not come into being at the time of the public inquiry and that its admission was precluded by para.9(2), Schedule 4, Transport Act 1985.  As to the Deputy Traffic Commissioner’s reasoning, it is within the knowledge of the members of the Tribunal that it is not unusual for vehicles and assets to be sold by an administrator at apparent under value if in a family context, particularly if speed of sale is desirable.

9.	Having read the transcript we think there is force in Mr Orridge’s submission that the Deputy Traffic Commissioner had made up his mind against the Company at an early stage.  If he had asked himself the question of whether any of those involved were unfit to hold a licence we think that he would have had to conclude that there was no evidence to support such a view.  We emphasise that all involved were of good character, without adverse findings of any sort against them: as far as we can see it was accepted that the Company was compliant in all other respects.

10.	We do not accept that an adjournment should have been granted on the basis of Mrs Khan’s stated medical condition.  If she had wanted to apply for an adjournment she could have supplied medical evidence and we think that the Deputy Traffic Commissioner was entitled to assume that she had chosen not to attend.  However, we have also to say that in the light of the evidence from Mr Kanji such as it was we think that unless the Deputy Traffic Commissioner was prepared to grant the licence he should have ordered an adjournment on his own initiative so as to enable evidence of the state of the administration to be obtained.  

11.	All in all, we are satisfied that the Deputy Traffic Commissioner’s order cannot stand.  The appeal is allowed and in the circumstances we direct that the matter be remitted for rehearing by a different traffic commissioner or deputy.  The interim licence will continue until the rehearing.

Hugh Carlisle QC
Judge of the Upper Tribunal
15 June 2011