When are vehicles regarded as being used for Operator’s Licence purposes?

Is your operator’s licence large enough to cover all the vehicles in possession in use?

These issues have been visited in the recent case of Connor Construction, an appeal against a Traffic Commissioner decision. Here, the Upper Tribunal has said:

“A vehicle which is utilised as a commercial vehicle for the purposes of a business which an Operator runs under a Licence, is being used for the carriage of goods for hire or reward or in connection with any trade or business carried on by the Operator even if that vehicle is not actually being physically driven for such purposes at any specific point in time”.

The question is an important one. An Operator must have a sufficiently large Operator’s Licence for its fleet and sufficient financial standing to satisfy the Traffic Commissioner’s finance requirements based on the vehicles it has. Operator centre parking capacity must be sufficient for lorries and trailers.

The case has examined the issue of what is meant by “in possession” and vehicles “in use” or being ‘utilised’ – and hence what vehicles are to be taken into account to ensure the operator’s licence is large enough.

In turn, this has prompted the Senior Traffic Commissioner to issue proposed guidance on the interpretation of this area of law, set out further below. Whilst much is clear, there may still be some lack of clarity in some instances as to when vehicles do and do not count for operator’s licence purposes.

Background to the case

The operator held an Operator’s Licence for nine vehicles and three trailers. It made an application to vary it. It asked the Traffic Commissioner to grant an increase in its licence, because:

“At present, vehicles are being swopped on/off the licence daily to meet business needs”.

It was alleged by DVSA that, amongst other things, the operator had more vehicles ‘in possession’ than authorised under the Operator’s Licence.

A Traffic Commissioner Public Inquiry was called to consider this and other issues (including Transport Manager good repute).

DVSA gave evidence that the Operator had more vehicles “in possession” than the licence authorised was used on the road. The Traffic Commissioner held that the Operator had in possession a greater number of goods vehicles than the Licence authorised, notwithstanding the absence of any evidence that more than nine vehicles were actually ever driven on a road at the same time.

The operator’s lawyer argued that a vehicle was only ‘in use’ when it was being driven. Therefore, it was possible (and entirely legal) to swap vehicles onto and off the licence, so long as the vehicles used on the road did not exceed the licence size. (It was admitted this was being done.)

This was because the law said:

“no person shall use a goods vehicle on a road for the carriage of goods for hire or reward or for or in connection with any trade or business carried on by him, except under a licence…”.

The West of England Traffic Commissioner, Kevin Rooney, totally rejected that legal argument and noted the significance of operating centre capacity and the financial standing rules. The basis of the financial standing regime was the ability to maintain the vehicles in possession being operated under the operator’s licence. If the only vehicles that counted were the ones ‘in use’ on the road then an operator could have a larger fleet but a lower financial standing requirement than was intended.

The Traffic Commissioner curtailed the Licence to eight vehicles and three trailers for a one-month period. A period of grace was granted for the addition of a different or additional Transport Manager.

The Appeal

The Operator appealed against the Traffic Commissioner’s decision on a number of grounds.

The important part of the case was the operator having more vehicles “in possession than authorised” and the significance of swapping vehicles on and off the licence.

The Upper Tribunal said that the Operator was:

“using more vehicles in the operation of its business than it was seemingly authorised to do under the licence but was using the VOL system* to swap vehicles on and off the Licence so that, at any given time, no more than 9 (the number authorised for use under the terms of the Licence) were actually on the Licence.”

(*VOL is the online system used by operators to manage their licence including fleet).

The Upper Tribunal rejected the submission that the Traffic Commissioner had been wrong:

“A vehicle has been removed from the licence temporarily but is still an integral part of the business, it does not cease to be used in the business”.

Further, the Upper Tribunal stated that licensing would be undermined if the law were interpreted in a different way. It pointed out that the number of vehicles authorised linked directly to the size of the financial standing requirement – that was there to ensure:

“an Operator has the financial wherewithal to effectively maintain and keep safe the vehicles which it is using in the business”.

The significance of the Operating Centre was also stressed – they said:

“if vehicles were only being used in the business in the narrow sense . . . then the assessment of suitability . . . would be based upon a significantly lower number of vehicles than are being realistically operated in the business and which would need to be parked at the Operating Centre. Again, that would undermine an aspect of the Regulatory Regime”.

The following observations were also made by the UT:

• “A vehicle which is utilised as a commercial vehicle for the purposes of a business which an Operator runs under a Licence, is being used for the carriage of goods for hire or reward or in connection with any trade or business carried on by the Operator even if that vehicle is not actually being physically driven for such purposes at any specific point in time”.
• “Being in possession of a fleet of vehicles considerably in excess of the Licence authorisation and then drawing down vehicles to use as and when required . . . undermines at least two of the core requirements to the Regulatory Regime . . . financial standing and Operating Centres.”

Where to now?

On 15 January 2023, a Senior Traffic Commissioner consultation ended seeking feedback about the Connor Construction case and proposing interpretation to be applied in this area following the Upper Tribunal hearing.

The intended amendments in the Senior Traffic Commissioner Guidance state the following:

• the number of vehicles applied for on an application should include the number required as well as any extra to cover an increase in business or emergencies such as breakdowns. A vehicle, which is utilised as a commercial vehicle for the carriage of goods for hire or reward or in connection with any trade or business, may require authority, even if it is not actually being physically driven at the time
• being in possession of a fleet of vehicles in excess of the Licence authorisation and then drawing down vehicles to use as and when required, may undermine at least two of the core requirements of the Regulatory Regime, . .. availability of finance required and to have an Operating Centre with the required capacity
• if a vehicle has only been removed from the licence temporarily and it remains an integral part of the business, it does not cease to be used and, therefore, must be specified
• Statutory Off Road Notification (SORN) is required when an operator takes a vehicle ‘off the road’ and thereby can avoid Vehicle Excise Duty (VED) and the need to insure it. It may also be exempt from the HGV road user levy (heavy goods vehicles of 12 tonnes or more). A SORN is required whenever a vehicle is not taxed, not insured or is to be broken down for parts before being scrapped…..the Senior Traffic Commissioner has concluded that a vehicle which is the subject of a SORN does not require authority on the operator’s licence, although it may still be relevant to the capacity of the operating centre if stored at those premises
• The position for PSV operators is slightly different from goods operators in that the legislation does not require them to specify vehicles, although some PSV operators are subject to conditions on their licences which require them to maintain and update a list of vehicles being used under a licence are met.

Interpretation

It is to be hoped this area of licensing will be interpreted sensibly and not inflexibly or too literally. The additional guidance does not cover at what point a vehicle will be regarded as being utilised.

Vehicles may require authority even if not being driven. But, does every goods vehicle in possession that is capable of being used on the public highway have to be counted for operator’s licence purposes? What about vehicles that are neither SORNd vehicles nor in what might be termed the ‘operational fleet’ i.e. the fleet intended to be capable of being used in service (however frequently or infrequently)? Are they or are they not ‘an integral part of the business? Examples of these are: new fleet to be put on the licence once brought into the operational fleet; retired fleet removed from the licence but stood up / off-road though not SORNd; or, goods vehicles whose use is o-licence-exempt but in theory could ‘flip’ i.e. be used in-scope of licensing at any time, if required.

The answer would seem to be that, in practice, operators will have to document very clearly what the fleet is and what is off-road (VOR), so there is no allegation made that a larger licence is needed. It is foreseeable that there may be a debate between DVSA and operators at fleet inspections about the vehicles in possession, and one hopes a sensible and pragmatic approach will be taken.

Moreover, of course, in no circumstances must any operator specify on and off the licence vehicles from a wider pool as a means of circumventing the need to have a larger licence, with greater financial standing and operating centre capacity requirements. That will be a path to a Traffic Commissioner public inquiry and possible regulatory action.

We will be updating this article when the final Senior Traffic Commissioner Guidance is published – but it is likely to be adopted in full. We will then see how this area of licensing develops and is visited in new cases, as it surely will be.

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If you require any advice with regard to Goods and Passenger Operator Licencing, including advice concerning DVSA Investigations, correspondence with the Office of The Traffic Commissioner or Traffic Commissioner Preliminary Hearing/Public Inquiry work, then please contact us using our online enquiry form or by calling 0330 404 7949.