Case No. UKUT-00320-(AAC)

39.Although Mr Clarke took things in a different order at the hearing, we have decided to consider ground 1 (the fairness ground) first of all. As to that, it is clear that the TC must have had in mind, when deciding to call the appellant company to a PI, that it might lack repute in consequence of the perceived “track record” of Mr Scott and Mr Lewis. We say that because of the TC’s own explanation as to why it was decided to hold a PI, which appears at paragraph 6 of the written reason of 7 January 2022 (see above). Although that paragraph does not use the word repute it is difficult to see what other statutory requirement the TC could possibly have had in mind and which would have triggered his observation that both had a record which was “littered with failed companies”. In any event, the TC did go on to refuse the application on the basis of lack of repute in light of the findings he made and the concerns he expressed with respect to Mr Scott and Mr Lewis. We have asked ourselves whether, in view of that, fairness demanded a signal as to those concerns to have been sent out to the appellant company and, if so, whether a sufficient one (to put the appellant company on notice and to give it a proper opportunity to meet the concerns) was sent.40.The decision to call a PI was, of course, communicated by the call up letter of 23 November 2021.41.One purpose, (perhaps the primary purpose) of a call up letter is to alert an operator to concerns which a TC may have, to alert the operator to the need to provide relevant evidence given the nature of the concerns, and to specify the areas which might be explored at the PI. But an omission in a call up letter will not, of itself, preclude subsequent reliance by a TC on new or overlooked material subject to the requirements of fairness (see 2001/72/ AR Brooks). A call up letter is not to be regarded as or be equated to a pleading (see 2006/313 D Lloyd). But the proceedings overall must be fair as indicated in2009/516 F Ahmed and H Ahmed in which it was said:“….. new points may arise during a hearing. It is not fatal that these have not been raised in the call up letter as long as those affected are given the opportunity, if present, of having time to consider them, with an adjournment if appropriate. But the situation must be viewed differently if those likely to be affected are not present. We do not say that an adjournment must be ordered in all such cases because it may be clear that those affected, be it operator, director or transport manager, have no intention of appearing or making representations in any event; but the need for notice of allegations to have been given must always be born in mind….”42.We have already referred to the content of the call up letter (see above) and we do not need to repeat that now. We agree with previous authorities that a call up letter is not to be regarded as or required to be a pleading. It is not, in our view, required to specify with precision each and every particular matter which is likely to arise, or which may arise at a PI. Further, we think it inevitable that, in certain cases, issues will arise for the first time at a PI or issues thought to be insignificant will justifiably assume greater significance as a result of what might emerge at a PI. But, nevertheless, there will be cases where what is said in a call up letter is insufficient to demonstrate what is already in a TC’s mind. Here, as we say, paragraph 6 of the written reasons makes it clear that repute, on the basis of the perceived conduct of Mr Scott and Mr Lewis, had been identified as an issue of importance and certainly one well worthy of exploration. Did the call up letter satisfactorily convey that? We do not think it did. Whilst it was indicated, in general terms, that the appellant would have to satisfy the good repute requirement, and whilst the source of the funds which had been used to demonstrate compliance with the financial standing requirement had been commented upon (with reference to both Mr Lewis and Mr Scott) nothing was directly said to indicate that there was any concern with respect to the repute of the appellant company stemming from the business practices or business history of either of those two individuals. Accordingly, we think there is something of a mismatch between what was said in the call up letter regarding the reason for the decision to hold a PI and what was said at paragraph 6 of the written reasons regarding that. Whilst, as we have said, a call up letter is not at all to be equated with a pleading, we think that in the circumstances of this particular case and given the concerns which had clearly been identified by the TC prior to the PI, a clearer signal of those concerns, sufficient to alert the appellant company to a possible need to provide further information regarding the business activities and history of Mr Lewis and Mr Scott, was, in all fairness, required.43.The above is not, at least as yet, sufficient to enable us to allow the appeal on the grounds of fairness. We have also considered whether, irrespective of the content of the call up letter, sufficient signal was sent in a document we shall refer to as the “case summary” and documents which accompanied it in what has been referred to as the “public inquiry brief”. Mr Clarke was astute to that and addressed the matter in his skeleton argument and oral submissions. 44.The PI brief was sent on 30 November 2021 and, therefore, less than two weeks before the date of the PI. The Case Summary contains some similar material to that which had been included in the call up letter. It did specifically state that “the traffic commissioner shall wish to be satisfied that Ian Allan Newman, as director named on Companies House, is the controlling factor of this company” and it expressed some uncertainty as to the source of the funds referred to above. It also set out the information regarding what was understood to be Mr Scott’s involvement with REL Capital Limited, REL Coffee Limited, Oxford Hotel Management Limited, Dover Interiors Limited, Woodcroft Hotel Bournemouth Limited, Woodcroft Tower Hotel Limited, and Jackson House Essex Limited, all of which it suggested had been dissolved or had gone into liquidation. The case summary did not explain the potential perceived relevance of that history to the application though we think it possible that an astute reader might have realised that there was an underlying concern regarding Mr Scott’s perceived business history and the way in which that was thought to impact upon the repute of the company in the event of its being concluded that Mr Scott was a controlling mind behind that company.45.We would accept that the concern regarding Mr Scott and indeed the concern regarding Mr Lewis, were not stated clearly in the case summary or elsewhere. We do think the nature of the concerns could possibly have been realised. But we have concluded that, in the circumstances of this case, an insufficient signal was sent within the case summary such that its content did not render immaterial, in this case, the concerns we have found regarding the lack of specificity contained within the call up letter. We accept Mr Clarke’s argument that there has been unfairness in the way this application has been dealt with.46.There is then the argument pursued by Mr Clarke regarding the nature of the comments made by the TC at the PI. Again, we repeat he was careful to make it plain that he was not seeking to allege bias on the part of the TC. Nonetheless he observed to us that the “transcript speaks for itself” and, as we understand it, argued that the comments of the TC suggested a pre-disposition towards the business model of the REL group of companies and, conceivably we suppose, to the way in which turnaround business practices are utilised at least within the transport industry. We agree that the transcript evidences a certain robustness in the way the TC chose to express his concerns. We suggested to Mr Clarke, at the hearing, that our focus should perhaps be upon the content of the written reasons rather than the content of the transcript. But Mr Clarke, as we understand it, contended that the two were to be taken together. Had Mr Clarke sought to argue bias it might have been necessary for us to consider whether certain of the comments recorded in the transcript might suggest perceived (though we absolutely stress not actual) bias. But such was not argued so we do not even need to ask ourselves about it. Indeed, we are not sure given that Mr Clarke did not argue any type of bias that this argument really had anywhere else to go. We do think that the way in which the TC expressed himself was a little unwise and, perhaps, somewhat unhelpful. We also think that whilst it is perfectly legitimate to raise concerns and ask questions of participants or attendees at a PI, significant caution ought to be exercised before making comments which might suggest some degree of pre-disposition. But since we have concluded, for other reasons, that there has been unfairness it is not necessary for us to say anything more about this aspect of the case. 47.Having decided that there has been unfairness it is necessary for us to consider whether such unfairness was material in the sense that it might have impacted upon the outcome. As part of that consideration, we have looked at the material which has been provided to us by way of fresh evidence. A key component of the package of fresh evidence is, in fact, the witness statement of Mr Scott. Of course, that evidence could have been received by the TC had a sufficient signal as to the TC’s concerns been sent in the pre-PI documentation or, indeed, if (assuming the gravity of the concerns had only been realised at the PI) an adjournment with a direction for the appellant company to consider producing evidence from or about Mr Scott, had been made. But none of that was done.48.We do not propose to set out, in full, Mr Scott’s witness statement. But we are going to set out certain parts of it insofar as it relates to the business model utilised by the REL group of companies. As to that Mr Scott says, amongst other things;“17.As investors we are approached by insolvency practitioners, business sale agents with businesses in distress with requests that we invest in those businesses if we believe they can be turned around, or elements turned around by way of a restructure. As part of our investment practice we seek to identify the reasons causing the difficulties and to provide some remedy. This process involves identifying the loss-making aspects of the business and asking the questions whether those aspects might be remedied. We also identify the more successful assets of the business and seek to preserve those assets. Once we have completed our review of the business we move the positive assets, and those loss making assets which may be saved, into a new business vehicle so as to provide the overall business with a future. The remainder of the business, that is, those parts which cannot be rescued, are disposed of by liquidation of the rump business. These companies would have otherwise gone into liquidation”.49.Mr Scott goes on to say:“19.A number of important points should be considered here:“i.Our investment model is one followed by many investors across the world, including in the United Kingdom. It is both lawful and beneficial to those business which can be saved. A large number of businesses now well known to the public have been saved by investment models not unlike our own. ii.Assets includes personnel- one of our primary aims is to preserve as much of a workforce as we are able, these almost always being the principle positive asset of a business. REL are very proud to have saved over 500 jobs over the last 3 years.iii.Loss of staff is sometimes inevitable. Distressed business are, in our experience, often overstaffed, or some personnel are underperforming and continue to do so. iv.Much good is achieved by the processes we adopt: businesses continue and prosper; jobs are retained; suppliers are retained; suppliers retain a customer; and the local community benefits from jobs, investment, and secondary expenditure.v.An investment model which involves the purchase and turnaround of distressed businesses is inevitably a high-risk enterprise. For these reasons failures occur.vi.We have been very successful in our turnaround projects, for example now investing in three of the larger London coach companies that suffered during the Covid pandemic.”50.Mr Scott then makes references to a number of the companies with which he had had involvement, and which were referred to by the TC in the pre-PI documentation and at paragraph 4 of the written reasons of 7 January 2022. He says that REL Capital Limited never traded and so left no debts. He says the same of REL Coffee Limited, Dover Interiors Limited and Woodcroft Tower Hotel Limited. He does acknowledge business failures with respect to what he describes as the “Hotel Group” though he says such “is my only failure”. He provides some additional information regarding his business interests, but it is not necessary to set out any of that for the purposes of this appeal.51.As indicated, we are not going to try to make some sort of judgement as to the rights and wrongs of the business model operated by Mr Scott and Mr Lewis and/or the REL Group of companies, but we would accept that both (in particular Mr Scott whose witness statement was significantly more lengthy than that of Mr Lewis) had something to say which might have, if it had been said to the TC, impacted upon certain of the conclusions and, perhaps in particular, the conclusion at paragraph 24(vi) to the effect that both were not of good repute and were not “people in whom I could have any trust”. The additional information provided about the history of the companies which the TC had mentioned and the circumstances surrounding the trading history (or otherwise of some of them) was of clear relevance. The points as to the perceived (by Mr Scott) benefits of the business model were also of potential relevance (depending on what was made of them) with respect to repute. 52.In light of the above we have concluded that not only was the PI hearing and the consideration of this appeal unfair, in consequence of a failure to spell out in advance what the issues to be considered were to be and a consequent failure to allow a proper opportunity for those concerns to be met, but that the unfairness was material in that it could (we do not say would – and we do not have to) have impacted the outcome. That is sufficient, of itself, for us to set aside the TC’s decision.53.Ground 2 was to the effect that incorrect factual findings have been made. We do not, in fact, now have to determine ground 2. But we have already made it clear that there was material which could have been before the TC had an appropriate opportunity been given, and which might have led to different findings. We do not need to go beyond that. Given the outcome we have reached on this appeal and the method of disposal we have chosen, findings may in due course be made in light of fuller and more complete evidence than that which was before the TC, at a reconvened PI. 54.That leaves us with ground 3. Again, strictly speaking, we do not now have to decide ground 3. But we have concluded that we should address it in order to assist at the reconvened PI. We remind ourselves that ground 3 asserts that the TC had erred through wrongly piercing the corporate veil. It is clear from Mr Clarke’s skeleton argument (see paragraph 28) that this ground is advanced by way of a challenge to the TC’s conclusion at paragraph 24 (vii) of the written reasons of 7 January 2022. By way of reminder, the TC decided, in that sub-paragraph, that “the people behind” the appellant company “are not of good repute and are not a business or people in whom I could have any trust” and that Mr Newman was simply “a front man”. The suggestion advanced on behalf of the appellant is that the TC was only entitled, as a matter of law, to assess the repute of the company and was not entitled to go beyond that into the question of which individuals controlled or might have controlled the company and whether those individuals were themselves of good repute.55.Mr Clarke commences his argument as to this by taking us to section 8 of the 1995 Act. As he points out, it relevantly provides:“8.