STEPHEN COTTERILL by maclaren1

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									                                 STEPHEN COTTERILL
                                           and
                                  K & S (428) LIMITED

                                     Appeal 117/2002


                                      REASONS


1.   This was an appeal from a decision of the Traffic Commissioner for the West Midlands
     Traffic Area on 11 July 2002 when he refused the application of K&S (428) Limited
     (“K&S”) for a standard international licence upon the ground that Stephen Cotterill (“the
     Appellant”) who was the sole Director and shareholder of K&S was not of good repute
     under s.13 of the Goods Vehicles (Licensing of Operators) Act 1995 (“the Act”).

2.   As a direct result of the Traffic Commissioner’s findings, on 9 September 2002 the
     Traffic Commissioner for the Eastern Traffic Area revoked the licence of K&S in his
     area. The Appellant and K&S have appealed against that decision and the success of that
     appeal is dependent upon the outcome of this present appeal.

3.   The factual background appears from the documents and the transcript of the public
     inquiry and is as follows:

     (i)     In April 1999, JSR International Limited (“JSR”), a specialist flour haulage
             business, was granted a standard international operator’s licence to operate from
             Tunstall, Stoke-on-Trent. The sole Director and Transport Manager was the
             Appellant. The licence authorized 20 vehicles and 15 trailers and had a blemish-
             free enforcement history until February 2001.
     (ii)    In February 2001 JSR began the process of merging with Sigma Logistics Limited
             (“Sigma”) which had an operating centre in Carrington, Manchester. Sigma’s
             Director and Transport Manager was Robert Newton. The process of merging
             was completed and formalized in June 2001. In August 2001, the Appellant
             resigned as Director from both JSR and Sigma. He did not resign as Transport
             Manager of JSR. By September 2001, he had taken the vehicles that he had been
             in possession of prior to the merger away from Sigma and was operating from his
             operating centre in Tunstall.
     (iii)   In November 2001 an application for an interim licence was granted to K&S
             authorizing 9 vehicles and 6 trailers. The sole Director of K&S was the
             Appellant. The Transport Manager was Anthony Cotterill, the Appellant’s father
             and the operating centre was that of JSR.
     (iv)    On 11 July 2001 JSR was called to a public inquiry for the Traffic Commissioner
             to consider whether action should be taken in relation to the licence. Maintenance
             and drivers hours and records infringements were in issue. The Appellant was
             also called up as JSR’s Transport Manager for the Traffic Commissioner to
             consider his good repute. At the same time, K&S’s application for a full licence
             was to be considered.
     (v)     At the hearing of the public inquiry, the Appellant appeared along with Mr
             Anthony Cotterill and Mrs Dawn Stubbs, the Company Secretary of K&S.
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(vi)    The Traffic Commissioner heard evidence from Traffic Examiner Patricia Earp,
        who had conducted a joint tachograph investigation with Sarah Bell of the North
        Western Traffic Area relating to JSR and Sigma. The period covered was 1 April
        to 1 September 2001. Her evidence was that JSR had failed to produce any
        tachograph records when requested to do so, the Appellant informing her that any
        records that existed were in the possession of Sigma. When the charts produced
        by Sigma were analysed the Traffic Examiners found the following:
        a) there was 300,000 kms of missing mileage referable to JSR vehicles;
        b) vehicles were regularly parking where the drivers lived in the Wellingborough
             area which is outside the West Midlands Traffic Area and near to a company
             with whom Sigma had a contract;
        c) there were numerous drivers hours offences ranging from insufficient daily
             rest to working seven or eight days continuously;
        d) there was no evidence that there was a system of analysis in place but the
             Appellant had stated that prior to the merger he had used a company called
             Farnsworth to undertake the analysis.
        Miss Earp further stated that on 9 May 2002 JSR had been fined a total of £4,200
        inclusive of costs at Stoke-on-Trent Magistrates Court for failing to produce
        tachograph records. A similar prosecution failed against Sigma because the
        company went into liquidation before the court hearing. She set out the history of
        JSR and Sigma as she understood it to be from the Appellant and other statements
        taken during the course of the investigation. She stated that essentially the
        Appellant and Mr Newton blamed each other for the collapse of the merger
        although she referred to a voluntary statement made by Mrs Stubbs, an employee
        of Sigma, who wanted her concerns to be put on record as to how Mr Newton had
        operated Sigma and stated that she was “sick and tired of the lies and deceit”.
        Miss Earp had formed the view that the JSR vehicles had been operated by Sigma
        following the merger and that the Appellant had had no involvement with the
        business, although he was the nominated Transport Manager. She stated that the
        Appellant had told her that at one stage he been locked out of the Sigma premises
        and had no access to check the records. She considered that he was nevertheless
        responsible as the Transport Manager and she attributed the blame 50:50 between
        the Appellant and Mr Newton.
(vii)   The Traffic Commissioner also heard from Harry Marsh, Traffic Examiner, who
        conducted an announced maintenance inspection of the fleet in September 2001 at
        the Tunstall operating centre. His evidence was that 72% of the fleet was
        inspected and that one delayed prohibition and nine inspection notices were
        issued. In relation to record keeping, brake performance readings were not
        completed and advice was given to the Appellant about that. Safety inspection
        sheets for the trailers for the period March to September 2001 were not available
        and he was told by the Appellant that the reason for this was that safety
        inspections during that period had been organized by Sigma. The problem had
        since been resolved following de-merger. Mr Marsh also stated that there was
        little evidence that the driver defect reporting system which was in place was
        being used and guidance was given. The annual pass rate for the fleet was 87%.
        Mr Marsh concluded that there was clear evidence of a significant failure in
        maintenance arrangements although he accepted that prior to the merger all of the
        records had been in order.


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(viii) The Appellant told the Traffic Commissioner that he had operated his business,
       which specialized in flour distribution, successfully until February 2001. In early
       2001, he was approached by Robert Newton of Sigma with a view to the two
       businesses merging. It was proposed by Mr Newton that JSR became a wholly
       owned subsidiary of Sigma with the business of JSR being run by the
       management of Sigma. The attraction of the merger to Sigma was that they were
       both specialist hauliers (plastics in the case of Sigma) and that the Appellant had a
       good credit history and could supply financial backing for the expansion of
       Sigma’s business.
(ix)   From February 2001 the two companies began the process of merger, the
       Appellant becoming a Director of Sigma and Mr Newton becoming a Director of
       JSR. Both the Appellant and his wife received a substantial shareholding in
       Sigma and the Appellant provided funding and guarantees for the expansion of
       Sigma’s business. Thereafter, JSR’s vehicles were transferred to Sigma’s
       operating centre at Carrington with a view to an application being made to
       increase the authorization on Sigma’s licence in the North Western Traffic Area.
       In the interim, the company relied upon the temporary dispensation contained in
       s.54(b) of the Act.
(x)    Within a comparatively short period of time, the Appellant found that the
       management style of Sigma was not compatible with his. For example, rather
       than employ agency drivers to ensure that JSR’s flour contracts were fully
       covered over the weekends, Sigma simply let the clients down. Further, the
       tachograph records were not being collected and analysed, despite the Appellant’s
       repeated requests that they should be and that the tachograph analysis firm that he
       had previously used should continue to be utilised. He noticed that JSR’s vehicle
       maintenance programme was not being complied with but could not persuade the
       traffic planners to take the maintenance intervals into account. He was concerned
       by the level of expenditure but was unable to exert any influence or control over
       the running of the business despite being a Director and the Transport Manager of
       JSR. He felt in awe of Sigma’s management team which consisted of about eight
       men who had all come from big plc companies. Having made extensive financial
       commitments to and on behalf of Sigma to the value of £250,000, he felt that he
       had little choice but to continue with the venture when the time came to enter into
       the formal merger agreement in June 2001.
(xi)   In August 2001, matters came to a head and the Appellant resigned from both
       Sigma and JSR and commenced legal proceedings to officially de-merge. With
       the agreement of Mr Newton he moved the vehicles and contracts that had
       previously been with JSR back to Tunstall and continued to operate as JSR, which
       he thought he could do because he was still a shareholder and the Transport
       Manager. It was upon legal advice that he set up K&S and applied for a new
       licence. In relation to that licence, he satisfied the Traffic Commissioner in
       relation to finance and that there were sufficient systems in place for maintenance
       and to ensure that the rules as to drivers hours and records were complied with.
(xii) The Traffic Commissioner also heard from Anthony Cotterill in relation to his
       experience as an operator and as a CPC holder. The Traffic Commissioner was
       satisfied as to his suitability to be the Transport Manager for K&S.
(xiii) In closing, the Appellant asked the Traffic Commissioner to accept that he had
       been naïve but that he had learned a lot over the previous twelve months. He
       stated that he ran a successful business in a specialist part of the transport market
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             and that he had worked hard to attain the level of business that he had. He hoped
             that the bank statements would speak for themselves and he asked the Traffic
             Commissioner to take into account how his business operated prior to the merger.
     (xiv)   In an oral decision, the Traffic Commissioner determined that he was entitled to
             take action against JSR upon the basis of the convictions, the failure to fulfill
             undertakings and that there had been a material change in the circumstances of the
             operator. The Traffic Commissioner considered the failures to be sufficiently
             serious as to justify the revocation of the licence. He further found that the
             company was no longer of good repute, of the appropriate financial standing nor
             professionally competent. The last finding directly related to the Traffic
             Commissioner’s determination as to the Appellant’s good repute which was as
             follows:
             “ .. you sat your CPC and you passed the examination. Part of the syllabus is knowing
             and understanding about operator licensing and it is quite clear that you lost all sight of
             what you were supposed to be doing in regard to operator licensing during last summer.
             In fact, to quote your own words back at you, operator licensing was the last thing on
             your mind in the course of last summer. I have to say to you, Mr Cotterill, that that is not
             acceptable. If you are a licence holder, you have to think about operator licensing and do
             it right but, if you are transport manager as well, you have a particular duty. One of the
             duties of a transport manager is to make sure that everything is done in accordance with
             the law of operator licensing and you quite clearly failed to do that. For the whole of the
             relevant period you were the sole transport manager and the only person you could have
             shared any responsibility with was Mr Newton for the period during which he was a
             director (inaudible) June.
             Therefore, my finding is, I think inevitably on the evidence, that you have lost your good
             repute as a transport manager. …”
             In relation to K&S the Traffic Commissioner was satisfied by all matters save for
             repute. He determined:
             “ .. Having thought around it all ways, my finding is that in view of your past conduct
             under the previous licence, which I have talked about earlier, and you are the sole
             director of the company and, therefore, the company is not of good repute.”
             The consequence of this finding was that the application for a full licence by K&S
             was refused.

4.   At the hearing of this appeal, the Appellants were represented by Mr Nesbitt of Counsel.
     His first two points were that in determining that the Appellant had lost his good repute,
     the Traffic Commissioner had failed to undertake the appropriate balancing exercise,
     weighing up all matters favourable and unfavourable to the Appellant. This he argued
     was particularly important when the undisputed evidence of the Appellant had been that
     he was a successful and reputable businessman who had been the victim of a business
     deal which was close to being an elaborate “sting”. His failings as a transport manager
     were limited to the seven month period during which he agreed to merge with Sigma and
     then effect a de-merger. The Appellant had lost £250,000 as a result of the failed
     business venture. Mr Nesbitt referred the Tribunal to a number of its earlier decisions
     including Bryan Haulage Limited 1/2002 and submitted that the Traffic Commissioner
     had failed to weigh into the balance the Appellant’s unblemished enforcement history
     both prior to February 2001 when the de-facto merger occurred and the conduct of his
     transport operation following the de-merger in September 2001. He argued that the
     Traffic Commissioner “jumped” from a finding that the Appellant’s conduct in the
     summer of 2001 was unacceptable to that of a loss of repute. Further, the Traffic

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     Commissioner failed to assess repute at the time of the public inquiry (which took place
     some nine to ten months following the de-merger) as he was required to do. Mr Nesbitt
     referred the Tribunal to the decision in Norbert Dentrassangle UK Limited 49/2001. We
     agree with his submissions. The failings of the Appellant in the undisputed circumstances
     he set out before the Traffic Commissioner during the summer of 2001 were not so gross
     as to make a finding of loss of repute inevitable. It was therefore incumbent upon the
     Traffic Commissioner to consider the Appellant’s conduct as an operator and transport
     manager before and after his failed venture with Sigma and to judge the Appellant’s
     repute as at the date of the public inquiry. This he failed to do. This ground of appeal is
     therefore allowed.

5.   Mr Nesbitt’s third point was that in the circumstances of this case, loss of repute was too
     harsh a finding to come to and was disproportionate. He relied upon the Appellant’s
     exemplary record, the fact that the failed venture had ruined years of work building up a
     profitable and responsible transport operation and that the Appellant’s failings were naïve
     rather than culpable. We consider there to be considerable force in this submission and
     we are satisfied that had all matters been taken into account, loss of repute would not
     have been considered appropriate. This ground of appeal accordingly succeeds.

6.   In the event, the appeal is allowed. It follows that the connected appeal against the
     decision of the Traffic Commissioner for the Eastern Traffic Area is also allowed.




                                                                              Jacqueline Beech
                                                                                24 March 2003




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