In a previous article (Non-UK-based hauliers operating in the UK), Chris Hallsworth dealt with a number of important issues covered by the Transport Tribunal in the Nolan Transport case. This article is designed to complete an outline of the points the Tribunal ruled upon but also covers other aspects of cabotage arising from other cases.

The impounding regime

The impounding regime was brought in by the Goods Vehicles (Enforcement Powers) Regulations 2001, which were subsequently amended by further regulations in 2009. The UK haulage industry was widely consulted before the regulations were brought in and there was general and significant support from all quarters. The simple point is that unscrupulous operators who choose not to operate within UK law are unlikely to be deterred by prosecutions for using a vehicle without an Operator’s Licence, which carries a maximum fine of £5000. The current sentencing guidelines require Courts to give, in general, a one-third deduction for an early guilty plea from any fine likely to be imposed, even where there is no other mitigation. Thus, even if the Court considered imposing the maximum fine, it is likely that the actual penalty which would be imposed would be no more than £3500, although persistent offenders may find that no such discount is readily forthcoming. It was therefore felt that this level of punishment was simply not a deterrent.

Impounding takes place when an authorised enforcement officer has reason to believe that a vehicle is being, or has been, used in contravention of the 1995 Act, ie without a licence. The owner of the vehicle can apply for it to be returned on one of four grounds, which are that:

  1. when the vehicle was detained, the user of the vehicle held a valid licence (whether or not that authorised the use of the particular vehicle)

  2. when the vehicle was detained, the vehicle was not being, and had not been used, in contravention of s.2 of the 1995 Act

  3. although at the time the vehicle was detained it was being or had been used in contravention of the 1995 Act, the owner did not know that it was being, or had been, so used

  4. although knowing at the time the vehicle was detained that it was being, or had been, used in contravention of the 1995 Act, the owner:

    • had taken steps with a view to preventing that use, and

    • has taken steps with a view to preventing any further such use.

The question of what amounts to “knowledge” in such circumstances is considered below but it can be seen that most of the grounds require the owner to demonstrate that he was not aware of certain circumstances. Only the owner of the vehicle can make an application for its return and it is up to him to prove the lack of knowledge on a balance of probabilities, ie it is more probable than not that he did not have the required level of knowledge.

The Tribunal in the Nolan case considered the impounding regime carefully and noted with approval the evidence of a Senior Vehicle Examiner that VOSA would not impound a vehicle on the grounds that one or more of the requirements of Article 8.3 had not been met if the documentation as a whole showed that the vehicle was operating within the terms of an exemption. Thus, if the details of a trailer had not been properly recorded, that would not be fatal to satisfying the exemption if all other details were present in the “clear evidence” produced. The Tribunal stressed, however, that hauliers should not think that a lax approach to the requirements will either be encouraged or tolerated. An occasional omission, which does not prevent a picture of lawful operation from emerging, is unlikely to result in the impounding of a vehicle.

VOSA’s policy on unlawful operation

VOSA’s policy is to write a letter to all Operators in respect of those of whom they have suspicions of unlawful operation. Those Operators are then given 14 days to comply with the law or to provide answers to VOSA’s concerns, eg to explain why they are, in fact, operating lawfully. In the event of an unsatisfactory answer or a failure to respond, that letter makes clear that the vehicles being operated will be impounded without further notice. If the Operator does not desist (and the indications are that a fair proportion of such Operators actually do change their mode of operation to become lawful) then vehicles will be impounded. Those vehicles are then stored pending applications for the return of them under the impounding regulations and, if necessary, appeals from such decisions are then made to Traffic Commissioners. VOSA can initially return vehicles of its own accord if satisfied that, in all the circumstances, it will be right and proper to do so.

If the matter proceeds to an application before a Traffic Commissioner, then, subject to the applicant proving that he is the owner of the vehicle in question, evidence will then be heard from both sides and the Commissioner will make a decision accordingly. The vehicle, if not returned, will then be sold with the proceeds being returned to the Operator but only after the storage and any other costs have been deducted.

Those dissatisfied with a Traffic Commissioner’s decisions have the right to appeal to the Transport Tribunal and, if necessary, go even further. (Since the first article on the Nolan case, an appeal on certain limited grounds has been made to the Court of Appeal.)

In the Nolan case the proportionality of the impounding regime was considered, ie was the impounding system fair and reasonable? The Tribunal examined the extremely careful way the impounding provisions had originally been brought into force in 2001 and the subsequent amendment in 2009 of the regulations in the light of circumstances and experience. It felt that VOSA’s warning letter to those it believed were non-compliant was an important part of the fairness of the system.

Another aspect was that, even where a vehicle has been impounded, there is not necessarily a total loss to the Operator because the proceeds of any sale minus storage and other costs are then returned to him. The Tribunal stressed that an Operator would be well advised to concede early on that he may not have much of a case if he required the return of an impounded vehicle in order to keep storage charges to a minimum and so maximise the return to him when the vehicle is sold.

Having given the matter careful consideration and heard submissions on other enforcement regimes in other areas of the law, the Tribunal felt that the impounding regime was fair and proportionate in all the circumstances and refused to read into the relevant law a discretion exercisable by a Traffic Commissioner to allow the return of an impounded vehicle even if the owner had failed to satisfy him on one of the four grounds if he nevertheless felt that the return was justified. The Tribunal’s firm view was that there was no need to read into the provisions any element of discretion. They added that they would find it difficult to envisage any circumstances in which after the failure of a claim for the return of a vehicle it would, nevertheless, be appropriate to exercise discretion to return it.

Knowledge of the owner

As explained above, only the “owner” (as defined in the impounding regulations) can apply for the return of an impounded vehicle.

In Nolan, the Tribunal approved the statement of law set out in the case of Asset 2 Asset Limited 2001/25 and expressly distinguished it from an earlier decision of the Tribunal in Lombard North Central PLC 2011/21.

The five categories of knowledge relevant to impounding are set out below.

  1. Actual knowledge.

  2. Knowledge that the person would have acquired if he had not wilfully shut his eyes to the obvious.

  3. Knowledge that the person would have acquired if he had not wilfully and recklessly failed to make such enquiries as an honest and reasonable person would make.

  4. Knowledge of circumstances that would indicate the facts to an honest and reasonable person.

  5. Knowledge of circumstances that would put an honest and reasonable person on inquiry.

The distinction between Lombard and Asset 2 Asset was that the former suggested a finding of dishonesty over and above the findings necessary to bring a case within knowledge categories 2 and 3 above was required whereas the Asset 2 Asset case stated that it was implicit once the evidence came in to either of those categories that such conduct amounted to dishonesty. The Tribunal in the Nolan case considered that the Asset 2 Asset case was correctly decided so that no additional finding of dishonesty was required in knowledge categories 2 and 3.

However, if the evidence falls into knowledge categories 4 and 5 that could well amount to negligence, but may not necessarily amount to dishonest conduct. If the evidence shows that the person concerned was not merely negligent but that their motivation for not coming to an honest conclusion was itself dishonest, then it might well be appropriate to conclude that someone in that position did know of the contravention of the 1995 Act and should thus suffer the consequences of that knowledge, ie that the impounding of the vehicle would be upheld.

In deciding on an issue of knowledge, the Tribunal stated that a Traffic Commissioner should consider:

  • the circumstances in relation to each vehicle and then make separate findings in relation to them (in the Nolan case, two different exemptions were relied upon, ie one for each vehicle, as being reasons why an Operator’s licence was not required re the use of those vehicles)

  • all evidence relevant to the issues under consideration and as they relate to one or more of the vehicles, the return of which is sought

  • all material relevant to the issue of knowledge and which may include background information such as previous Public Inquiries, enforcement action, and advice sought and received from various agencies, etc.

It also stated that it was important that if an operator chooses to challenge an enforcement agency’s view of the relevant law then it is incumbent on that operator to disclose its reasons for challenging that position at an early stage. As the onus is on the operator to prove a lack of the relevant knowledge after use, then by not producing earlier an explanation for a particular belief, the Tribunal felt that Nolan Transport did not behave in the way expected if they believed their interpretation of the law was in fact correct.

Independence of Traffic Commissioners

An issue arose regarding the independence of Traffic Commissioners, which was considered at some length and with the benefit of evidence produced for the Tribunal to consider. After careful consideration, the Tribunal confirmed that Traffic Commissioners were indeed independent and reinforced that view with comments directed at those who have dealings with them.

Wider issues

There is a distinction to be drawn between those operators who have “flagged out” (became established in another EC Member State) because they wanted to take advantage of the better tax and enforcement regimes there (and for other reasons), and those who do so because they have either lost (had revoked) or were incapable of obtaining a UK Operator’s licence (because they had been disqualified from holding one or could not otherwise satisfy the criteria for holding one). There is nothing wrong with the former reason, but everything wrong with the latter.

Some foreign-based operators allow disgraced or failed UK operators to use their Community Authorisation as a flag of convenience. When the activities of such operators are considered, there are a number of relevant questions to be asked, including the following.

  • Are they genuinely based in that country or is it all a sham?

  • Are management fees paid to preserve what is effectively a fiction? This is always a matter of concern.

  • Where is the centre of control? If it is in fact in the UK then it is very likely it is a UK operation and should be licensed as such.

  • What are the nationalities of the operator’s employees and where do they live?

  • Where are the operator’s, and the employees’, bank accounts held?

Those foreign-based operators who allow their authorisations to be used as a “flag of convenience” invariably make a large amount of money at the expense of those who have little choice but to pay if they are to run any form of operation that works in the UK. Hauliers operating in the UK on that basis run the risk of their vehicles being impounded.

Foreign-based hauliers who choose to continue to breach cabotage rules often do so in the hope that they will make sufficient money to offset any impounding of their vehicles. When vehicles are impounded, a typical reaction is to claim (one or a combination of):

  • victimisation

  • a lack of understanding of the law

  • that the penalty is disproportionate in all the circumstances

  • that it is unfair because impounding is not a penalty used in their own country of origin

  • that they are being put in a position where they have to prove that they did not know something (known as the reverse burden of proof, because the burden of proof is on the prosecutor and not the operator).

Most of these arguments have been heard before and most have failed frequently.

Related issues

UK Operators abroad should make a point of finding out how the host Member State, ie the one in which they want to operate cabotage, interprets the regulations and what the pitfalls are. Despite all the efforts made by the European Commission, not all the interpretations match and the consequences of being found in breach of the cabotage rules are not always the same.

Paperwork is essential. If a vehicle is stopped it is all about context, chronology and evidence. No reasonable enforcement agency will detain a vehicle for being in breach of cabotage if the paperwork is all in order, except if the weight of the goods on one journey has been omitted. If, however, an operator has a track record of receiving fixed penalty notices for breaches of cabotage, has been told on a number of occasions that the paperwork being produced is inadequate, or has had a number of warnings from enforcement agencies, then they should not be at all surprised when their vehicles are subsequently impounded.

This subject is not dealt with in sufficient detail by the main trade associations in their handbooks. For example, one current edition does not refer to the fact that the documents in question should be with the driver, in accordance not only with the original regulation but also with the current views of various authorities, eg UK, Irish and French.

If the value of turnover generated in a host Member State by a foreign-based operator exceeds a certain sum, then that operator may well be required to be registered for taxation purposes in that host Member State.

Conclusion

The Nolan case, and cabotage in general, both deal with complicated and sometimes unusual issues. It is impossible to deal with all the relevant twists and turns in the scope of these two articles. The key points, however, are that the paperwork is essential, and it should be with the driver. It is down to the operator to justify what its vehicles are doing in a Member State in which it is not established.

Last reviewed 3 October 2012