Michael Jewell outlines two appeal decisions made by the Upper Tribunal during 2012.

Introduction

This article looks at two recent decisions made by the Upper Tribunal concerning financial standing, and cabotage and combined transport operations.

Financial standing

In an appeal by NCF (Leicester) Ltd, the Tribunal laid down what can and cannot be taken into account by a Traffic Commissioner when considering the requirement to be of “appropriate financial standing”.

The Tribunal said that being of appropriate financial standing is a continuing requirement that the operator must satisfy for the duration of the licence. The requirement cannot be satisfied by evidence that simply provides a “snapshot” of the operator’s financial position. What is needed is evidence to show that the operator is consistently able to have enough money available for the requirement to be satisfied.

An operator is not required to have the specified amount available, 365 days per year, throughout every year that the licence is in existence. The requirement is there to ensure, among other things, that vehicles are promptly and properly maintained and, in particular, to enable an operator to have emergency repairs carried out, promptly and properly, in addition to normal scheduled maintenance. This is likely to mean that the amount of money available will fluctuate, depending on the size of the bills that have to be paid at any one time.

What the Traffic Commissioner will want to consider is the speed with which the amount of money available recovers to a level at, or above, the amount needed to satisfy the financial standing requirement. This is why Traffic Commissioners ask for financial evidence covering a period, normally of three months, and then consider the average figure over the whole period.

The financial standing requirement can only be met by assets that are available, or can be made available, to pay bills as and when they fall due. If the money can be used within 30 days or fewer then it is likely to be available to pay bills as and when they fall due. If a longer period is needed before it can be used, it is unlikely to be available to pay bills as and when they fall due. In the case of an overdraft or credit card, the amount available will not be the full amount of the overdraft or the credit card limit; it will instead be the amount that can still be drawn or used.

The requirement can only be met by assets, in whatever form, that are owned by the operator. Bank accounts, overdrafts and credit cards, for example, must be in the name of the operator. Similar considerations apply to any other form of asset advanced as a way of proving appropriate financial standing. The only exceptions are Statutory Declarations, which do not apply where the operator is a limited company, and Invoice Finance agreements.

It is essential to distinguish between “working assets” and “surplus assets”. Working assets are those used to enable the business to function and earn money. Surplus assets are those that are not needed for that purpose. It is difficult to envisage any circumstances in which a Traffic Commissioner will be prepared to take into account the value of working assets when deciding whether or not appropriate financial standing has been proved. The sale of a working asset, coupled with the use of the money to pay bills, is likely to reduce the ability of the business to earn money. In due course, this will increase the time taken to restore the finances of the business to the level needed to meet the requirement to be of appropriate financial standing. The sale of a surplus asset does not have the same consequences.

Operators who put forward the value of a physical asset, in order to meet the requirement of appropriate financial standing, will need to satisfy the Traffic Commissioner that the asset in question in readily saleable and that the net sale proceeds will probably be available to be spent within 30 days of the decision to sell.

Cabotage and combined transport operations

In an appeal by Nolan Transport Ltd, the Tribunal laid down two key points in relation to cabotage operations.

First, paperwork is essential, and it should be in the driver’s possession. Second, it is down to the operator to justify what its vehicles are doing in a Member State in which it is not established.

The Tribunal also laid down the requirements for combined transport operations. It said that to carry out lawful cabotage operations the haulier must hold a Community licence. If the vehicle in question was being driven by someone who was not a national or long-term resident of a Member State then that person must hold a driver attestation. In addition, a certified true copy of the Community licence must be carried in each of the haulier’s vehicles and must be presented at the request of any authorised inspecting officer.

It was a pre-condition to the right to carry out cabotage operations that there had been an “incoming international carriage”. The right to conduct cabotage operations only commences once “the goods carried” on the incoming international carriage “have been delivered”.

Cabotage operations must be carried out by the tractor unit responsible for the incoming international carriage. An operator could conduct cabotage operations using the same trailer used for the incoming international carriage or a different trailer; a tractor unit other than the one which hauled the goods brought in on the international carriage could not be substituted for the incoming tractor unit if the cabotage operation was to be lawful.

It was for the haulier to produce the clear evidence to bring it within the definition of cabotage. Unless and until the haulier had produced the clear evidence, including evidence of the incoming international carriage, the haulier would be unable to show that journeys made after delivery of the goods carried on the incoming international carriage amounted to lawful cabotage operations.

The clear evidence must be kept in the vehicle and must be made available for inspection at any roadside check.

Any journey made after a third cabotage operation would be a “national road haulage service” unless it could be brought within the terms of an exemption other than cabotage, eg international carriage or combined transport. In regard to combined transport, the whole of the journey must be made within a radius not exceeding 150km from the port of loading or unloading. The use of a vehicle in the country concerned, in order to conduct combined transport operation, must be temporary. The haulier or carrier must prepare a document before the journey starts, setting out all the relevant information, which must be carried in the vehicle. As the journey progresses, the document must be confirmed by the addition of Port Stamps.

The movement of an unaccompanied trailer from one Member State to another could not amount to international carriage.

Further information

For further details on this case, go to feature article The Nolan case revisited, by Chris Hallsworth.

Full transcripts of the judgments NCF (Leicester) Ltd [2012] UKUT 271 (AAC) Appeal T/2012/17 and Nolan Transport Ltd [2012] UKUT 221 (AAC) Appeal T/2011/060 are available on the Upper Tribunal website.

Last reviewed 30 January 2013