Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Ceepee Pty Ltd v Roads and Maritime Services [2014] NSWCATAD 74 Hearing dates: 8, 9 August 2013 Decision date: 05 May 2014 Jurisdiction: Administrative and Equal Opportunity Division Before: S Montgomery, Senior Member Decision: 1. The decision under review is set aside. 2. The decision is made that the operator's accreditation held by the Applicant is suspended until such time as the Applicant is able to satisfy the Respondent that it is able to ensure compliance with all relevant legislative requirements. 3. This decision is to take effect 28 days from the date of these reasons. Catchwords: Hire car - operator's accreditation - cancellation - fit and proper - designated manager - suspension of accreditation Legislation Cited: Administrative Decisions Tribunal Act 1997 Civil and Administrative Tribunal Act 2013 Passenger Transport Act 1990 Cases Cited: Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321; 94 ALR 11; 64 ALJR 462; 21 ALD 1. Department of Transport and Infrastructure v Murray (GD) [2011] NSWADTAP 16 Hughes and Vale v State of New South Wales (No 2) [1955] HCA 28; (1955) 93 CLR 127 McDonald v Director-General of Social Security [1984] FCA 57; (1984) 1 FCR 354 Category: Principal judgment Parties: Ceepee Pty Ltd (Applicant) Roads and Maritime Services (Respondent) Representation: Counsel J Doyle (Applicant) K Eastman (Respondent) Searson Shannon & Co Pty Ltd (Applicant) Smythe Wozniak Legal (Respondent) File Number(s): 133174 reasons for decision 1This matter was commenced in the General Division of the Administrative Decisions Tribunal ("the ADT") pursuant to the Administrative Decision Tribunal Act 1997 ("the ADT Act"). On 1 January 2014, the ADT was abolished and its functions were taken over by the Civil and Administrative Tribunal of New South Wales ('NCAT'). The present decision is therefore a decision of NCAT. However, because the proceedings to which it relates are 'part heard proceedings' as defined in clause 6(1) of Schedule 1 of the Civil and Administrative Tribunal Act 2013, they are to be determined as if that Act had not been enacted (see clause 7(3)(b) of this Schedule). 2The Applicant has applied to the Tribunal for review of a decision of a delegate of the Respondent to cancel the operator's accreditation held by the Applicant under the Passenger Transport Act 1990 ("the Act"). The accreditation permits the Applicant to operate a private hire vehicle business ("the business") within the Port Macquarie local government area. 3The Applicant's directors and shareholders are Peter Cristoforo and Christie Cristoforo ("the directors"). The Applicant acquired the business from Bretabac Pty Ltd ("Bretabac") - a company controlled by Ms Cristoforo's parents, Mr Peter Williamson and Ms Cheryl Williamson. At all relevant times Ms Cristoforo's parents were directors of Bretabac. Ms Cristoforo served as a director of Bretabac from 2000 to 2008. In separate proceedings before the Tribunal, Bretabac had agreed to the cancellation of its Port Macquarie licences from February 2013 and consequently it could no longer operate the business. There was no requirement in the consent orders for Bretabac to close the business. Bretabac continues to hold an operator's accreditation in Taree and Forster. 4The Applicant contends that its acquisition of the business was the culmination of discussions between its directors and Mr Williamson, which had begun 3 years earlier. 5The Respondent gave the following reasons for its decision to cancel the Applicant's accreditation: Roads and Maritime Services (RMS) has a continuing obligation under the Passenger Transport Act 1990 (NSW) to ensure that the accredited person is (or, in the case of an accredited corporation, the designated directors and managers of the corporation are) considered to be of good repute and in all other respects fit and proper to be responsible for the operation of a public passenger service. To be of 'good repute and in all other aspects a fit and proper person' to operate a private hire vehicle the community must have confidence that the operator would conduct his business appropriately at all times, when operating the public passenger vehicles. The fact that the owners of Ceepee Pty Ltd are not directly involved in the day to day management or operation of the business. The evidence suggests that Ceepee being a mere shell and it is not an entity that 'carries on a private hire vehicle service' for the purposes of s.38 of the Passenger Transport Act 1990. The fact that when applying for accreditation Ceepee Pty Ltd failed to disclose that the business was transferred from Bretabac Pty Ltd under Deed of Gift on 27 February 2013. If this material had been provided to the RMS it would have been a material consideration in determining whether to accredit Ceepee Pty Ltd. The failure to disclose a material matter relevant to the proposed operation and the lack of candour shows that the directors of Ceepee Pty Ltd are not fit and proper to be responsible for the operation of a private hire vehicle service per section 38(2) of the Passenger Transport Act 1990. The fact that when applying for accreditation, Ceepee Pty Ltd failed to disclose that Bretabac Pty Ltd or its agents would be involved in significant way in the business of a private hire vehicle service utilising licences issued by RMS to Ceepee Pty Ltd. Therefore Ceepee Ptty Ltd is not an entity that 'carries on a private hire vehicle service' for the purposes of s.38 of the Passenger Transport Act 1990. 6The Applicant sought review in the Tribunal. The Tribunal granted a stay of the cancellation decision in May 2013. 7When conducting a review of an administrative decision, there is no onus of proof on either party: McDonald v Director-General of Social Security [1984] FCA 57; (1984) 1 FCR 354 (Woodward J). Rather, the Tribunal "stands in the shoes" of the decision maker. The Tribunal is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice: ADT Act, section 73(2). 8The Tribunal may affirm, vary or set aside the Respondent's decision: ADT Act, section 63(3). Applicable legislation 9"Public passenger service" is defined in section 3 of the Act to mean: "... the carriage of passengers for a fare or other consideration: (a) by motor vehicle (other than a light rail vehicle) along a road or road related area 10Section 7 of the Act provides: 7 Accreditation (1) A person who carries on a public passenger service by means of a bus or other vehicle (other than a vessel), being a service operating within, or partly within, New South Wales, is guilty of an offence unless the person is an accredited service operator for that service. Maximum penalty: 1,000 penalty units. (2) The purpose of accreditation under this Division is to attest: (a) that the accredited person is (or, in the case of an accredited corporation, the designated directors and managers of the corporation are) considered to be of good repute and in all other respects fit and proper to be responsible for the operation of a public passenger service, and (b) that the accredited person has demonstrated the capacity to meet the government's standards of: (i) financial viability, and (ii) safety of passengers and the public, and (iii) vehicle maintenance, to the degree and in the manner required in respect of services of the kind specified in the accreditation. (3) Standards for the purposes of subsection (2) (b): (a) may be prescribed by the regulations, or (b) to the extent that they are not so prescribed, may be determined and published by TfNSW and made available to interested persons. ... 11A "private hire vehicle service" is defined by Section 36A to mean: "... a public passenger service carried on by means of one or more private hire vehicles" 12An accreditation to "carry on private hire vehicle services" is granted under Section 38 of the Act. Section 38 provides: 38 Accreditation (1) RMS may accredit persons for the purpose of carrying on private hire vehicle services, subject to and in accordance with this Division. A person accredited under this Division is referred to in this Part as an "accredited private hire vehicle operator". (2) The purpose of accreditation under this Division is to attest: (a) that the accredited person is (or, in the case of an accredited person that is a corporation, the designated directors and managers of the corporation are) considered to be of good repute and in all other respects fit and proper to be responsible for the operation of a private hire vehicle service, and (b) that the accredited person has demonstrated the capacity to meet and continue to meet the appropriate requirements with respect to: (i) financial viability, and (ii) safety of drivers, passengers and the public, and (iii) vehicle maintenance, to the degree and in the manner required in respect of services of the kind specified in the accreditation. (3) The appropriate requirements are such requirements as may be prescribed by the regulations. 13Section 38A sets out the requirements of an application for accreditation: 38A Application for accreditation (1) A person may apply to RMS for accreditation under this Division. (2) An applicant is required to pay any fee fixed by the regulations for consideration of the application. (3) An application made by a corporation is not to be considered by RMS unless the corporation nominates designated directors or managers (as referred to in section 41). (4) For the purposes of subsection (3), RMS may, from time to time, determine the number of persons who are to be nominated as designated directors and the number of persons who are to be nominated as designated managers. Such a determination may be made generally or in any particular case or class of cases. (5) Procedures for making and dealing with applications may be settled by RMS, subject to any provisions of the regulations. 14Section 38D of the Act provides: 38D Conditions of accreditation (1) An accreditation under this Division is subject to: (a) the conditions prescribed by the regulations, and (b) such additional conditions as RMS, having regard to the purpose of accreditation under this Division, may impose on the accreditation. (2) Conditions imposed by RMS may be varied (whether by amendment, addition, revocation or suspension of one or more conditions) by RMS from time to time by notice served on the accredited person. (3) An accredited private hire vehicle operator who contravenes a condition of the operator's accreditation is guilty of an offence. Maximum penalty: 1,000 penalty units. (4) A variation of conditions imposed on an accreditation by RMS is, for the purposes of Division 3 of Part 5 (Administrative reviews by Civil and Administrative Tribunal), a variation of the accreditation. 15Section 38E of the Act provides: 38E Variation, suspension or cancellation of accreditation (1) Having regard to the purpose of accreditation under this Division, RMS may at any time vary, suspend or cancel any person's accreditation under this Division. (2) The accreditation of a corporation is automatically cancelled when there is no designated director or manager. 16Section 41 of the Act provides for the designation of directors and managers for an accredited operator: 41 Designated directors and managers of corporations For the purposes of this Part: (a) a corporation may nominate, and RMS may accept the nomination of, any number of its directors or managers as designated directors or managers, and (b) further nominations may be made and accepted from time to time, and (c) a person so nominated becomes a designated director or manager, but only when RMS certifies acceptance of the nomination. 17Part 2 of the Passenger Transport Regulation 2007 ("the Regulations") set out the criteria to be met by applicants for accreditation to carry on private hire vehicle services. Division 2 of Part 2 of the Regulations relevantly provides: 6 Standards to be met by applicants for accreditation to carry on public passenger services (1) An applicant for accreditation under any of the following Divisions of the Act must meet, to the satisfaction of RMS, the standards set forth in this Division: ... (c) Division 3 of Part 4A (concerning accreditation to carry on a private hire vehicle service). ... (2) If the applicant is a corporation, the directors or managers of the corporation who are nominated as designated directors or managers under section 7, 35 or 41 of the Act (as the case may require) must meet, to the satisfaction of RMS, the standards set forth in this Division (other than the standards specifically to be met by corporate applicants). 7 Applicant to be of good repute (1) The applicant must be of good repute. ... 8 Applicant to be fit and proper person to carry on relevant service (1) The applicant must be a fit and proper person to carry on the relevant service. ... 9 Applicant to be competent to carry on relevant service (1) The applicant must demonstrate that the applicant has the necessary knowledge and competence to carry on the relevant service. (2) In particular, the applicant must: (a)satisfy RMS as to the applicant's knowledge of the following: (i) the relevant provisions of the Act and this Regulation, (ii) other laws relating to traffic, (iii) the relevant provisions of the Work Health and Safety Act 2011, ... and (b) if required to do so by RMS, undertake and successfully complete (or pass an examination in respect of) such course relating to the operation of the relevant service ... 10 Applicant to be financially capable of carrying on relevant service (1) The applicant must be financially capable of carrying on the relevant service. (2) Evidence of the applicant's financial standing is to be provided in the form of a signed statement from a qualified accountant (other than an employee of the applicant), on the accountant's business letterhead, containing the following: (a) a report on the applicant's financial capacity to carry on the relevant service, with specific reference to the applicant's financial ability to meet the requirements of this Regulation and other relevant laws as to: (i) vehicle maintenance and roadworthiness, and (ii) the safety of drivers, passengers and the public, and (iii) the operation of a business, (b) a statement specifying the number of public passenger vehicles that, in the opinion of the accountant, can be accommodated by the service proposed to be carried on by the applicant, (c) if the applicant is a corporation--a statement of the accountant's opinion as to the solvency and general financial standing of the corporation. 11 Applicant to have access to maintenance facilities for vehicles (1) The applicant must have access to adequate maintenance facilities for the vehicles intended to be used to provide the relevant service. (2) The applicant must provide RMS with full details of the premises at which the vehicles will normally be kept when not in use. 18Division 4 of Part 2 of the Regulations provides for other obligations of accredited operators. Within that Division, Clause 23 states: 23 Evidence of accredited operator's continuing financial capacity (1) An accredited operator must, on written request by RMS and within the time specified in the request, provide evidence, in the form specified in clause 10 (2), of the operator's continuing financial capacity to carry on the relevant service. Note: RMS may, having regard to the purposes of accreditation, at any time vary, suspend or cancel a person's accreditation-see sections 10, 31F and 38E of the Act. (2) RMS is not to make a request under this clause unless RMS believes on reasonable grounds that the accredited operator may no longer be financially capable of carrying on the relevant service. Matters not in dispute 19It is also common ground that the directors are based in Melbourne and are not involved in the day to day running of the business. 20Neither Mr Williamson nor the Applicant intended the transfer to be an arm's length transaction. It is not in dispute that Mr Williamson agreed to 'stake' the directors in order that they could take over the business. Ms Cristoforo's parents financed the acquisition and provided the necessary support to facilitate it. Bretabac could no longer operate the Port Macquarie business because it had agreed to the cancellation of its licences from 28 February 2013. Mr Williamson's accountants and solicitors carried out the necessary arrangements so that the transfer could occur. The directors did not contribute their own funds to the business but relied on Ms Cristoforo's parents to provide the funds. Funding for the transfer was by way of a gift to Ms Cristoforo and a loan by Ms Cristoforo to the Applicant. 21Mr Glenn Marendaz was appointed as a designated employed manager of the business under section 41 of the Act. Mr Williamson arranged for Mr Marendaz to take up this position. Mr Marendez lives in Port Macquarie. He was previously employed by Bretabac as its operations manager. The directors had not met with Mr Marendez prior to his taking up the position. Mr Marendaz has also been the company secretary of the Applicant since 1 March 2013. The relevant certification has been issued in relation to the Applicant's operations. 22Mr Williamson has given advice to Ms Cristoforo and Mr Marendaz in regard to the Applicant's business. Mr Williamson has continued in a management role within Bretabac. Bretabac provides centre services and bookkeeping services to the Applicant in regard to the business. By her letter of 30 January 2013 Ms Cristoforo advised the Respondent of her relationship with and Mr Williamson. The Respondent was aware of that relationship when it granted the Applicant's accreditation. 23The Respondent has not identified any breach by the Applicant of the Act or its accreditation conditions. The Respondent's case 24The Respondent relies on a bundle of material filed pursuant to section 58 of the ADT Act. Contained within that material is the documentation relating to the accreditation and the determination to cancel that accreditation. The Respondent specifically points to material which it contends supports its allegations regarding the involvement of Bretabac and Mr Williamson in the conduct of the business. 25The Respondent contends that a person who has no intention of presently carrying on a service or who does not actually carry on such a service should not be accredited. It submits that the evidence shows that Bretabac's employees manage and administer the Applicant's business. The directors have no active role in the day to day management or operation of the business. Likewise, Mr Marendaz works a few hours a week as the designated manager and his responsibilities are limited. 26Ms Eastman, Counsel for the Respondent, provided written submissions in which she summarised the Respondent's case as follows: * The evidence shows that Ms Cristoforo considered her father's proposal to 'start up' a business as a future opportunity. She did not have any intention of playing any active role in the business for some period of time into the future. * Accordingly, the overwhelming evidence is that the Applicant's owners are not directly involved in the day to day management or operation of the business. * The directors have made no independent inquiries about their obligations. They relied and continue to rely completely on Mr Williamson with respect to their obligations under the Act. During her evidence Ms Cristoforo mentioned on a number of occasions that she relied on her father to 'know the rules'. * The evidence is clear that without Bretabac and Mr Williamson, the Applicant would not have a viable business: (a)the Applicant would have no source of funds; (b)the Applicant would have no persons with relevant experience in a management role to make relevant business or regulatory decisions; (c)the Applicant would have no premises for its administrative operation or its vehicles; (d)the Applicant would have no persons to attend to day to day administration; and (e)the Applicant would have no access to the work afforded by government agencies -such as the Department of Veterans' Affairs or Department of Health. * Given the extent of Bretabac's role in the conduct of the Applicant's business, it is surprising that there is a total absence of any documentation with respect to guaranteeing payments or the terms on which services critical to the operation of a hire care business are provided. There is nothing which documents the terms on which the call services, booking services, administrative services, employee management and financial affairs are to be managed. * The Respondent submits that the arrangement under which the hire car services in Port Macquarie operate is one where responsibility for key aspects of the services is distributed among different legal and natural persons, frustrating the intended scheme of operator accreditation. In the event of something going wrong, it would be very difficult to trace any actual responsibility to the directors of the Applicant, the actual accredited operator. The directors phone numbers do not appear in any of the relevant staff lists or telephone index. * In order to trace managerial responsibility in relation to the business and, therefore, be able to assess managerial competency one would need to deal with: 1. Mr Marendaz (designated manager) for vehicle maintenance, car washing and driver rosters; 2. A booking service operated by Bretabac for matters relating to hiring the cars; 3. A premises owned by Bretabac in which the cars are maintained; 4. Ms Haenschke (an employee of Bretabac) for financial matters, payment of drivers, liaison with third parties; 5. Bretabac for the Department of Veterans' Affairs contractual matters. * In this scheme of management, it is clear that the directors of the Applicant and actual accredited operator do nothing. The designated manager has limited authority and capacity to make decisions on behalf of the Applicant. * Given Ms Cristoforo's inexperience and deficiencies in her knowledge, the Tribunal should not accept that she was in a position to make any assessment of Mr Marendaz's ability to discharge his statutory role. * Accordingly, it is open to the Tribunal to find that the Applicant is not an entity that 'carries on a private hire vehicle service' for the purposes of section 38 of the Act * The Respondent submits that the evidence shows that the Applicant is a mere shell and it is not an entity that 'carries on a private hire vehicle service' in fact rather than in form for the purposes of section 38 of the Act. 27The Respondent submits that the Tribunal could not accept the Applicant's contention that it made full disclosure long before accreditation was granted. The Respondent submits that matters that were never disclosed as part of the accreditation application included: (a)the Deed of Gift; (b)the succession plan; (c)that Mr Williamson was staking the Applicant; (d)that the purchase was funded through an arrangement of adjusting the shareholder loans for both companies on the advice of the Applicant's accountant; (e)that Mr Williamson was taking a leading role in effecting the transfer and setting up systems during the transition; (f)Ms Cristoforo's inexperience; (g)that Mr Williamson would be heavily involved with setting up the business; (h)that the Applicant would utilise Bretabac for administrative and call centre support; (i)that Mr Marendaz would have limited managerial responsibilities for rosters and car maintenance and no responsibilities for the financial or administrative aspects of the business; (j)that the Applicant would utilise Bretabac for bookkeeping; (k)that through the transaction, funded by the deed of gift, Bretabac was divested of a right to future profits; (l)that the 'purchase' was to be funded by money lent to the Applicant by Ms Cristoforo, sourced from the Williamsons; (m)that the administrative assistance of Bretabac and the advice of Mr Williamson were taken into account by the Applicant and its directors when resolving to acquire the business. 28The Respondent submits that these disclosures were only been made during the course of the proceeding before the Tribunal. 29The Respondent submits that the Applicant's correspondence misled it to believe that the Applicant was starting a business which it purchased pursuant to a commercial arrangement. Ms Eastman submitted that it would have been a simple matter for the Applicant to advise the Respondent that: * Mr Williamson was proposing to operate the Port Macquarie hire car business in his daughter's name and he intended to operate that business in a caretaker mode, until Mr and Ms Cristoforo were ready to relocate from Melbourne and operate the business in their own right. * Mr Williamson wished to put the business in his daughter's name (or a company created for that purpose) but he and Bretabac would assume the day to day management of the business. * there was no 'sale' as such and no money changed hands. 30Ms Eastman further submitted that the Applicant was not forthcoming with such information and maintained a pretence that its interests were commercial and arm's length from Bretabac and Mr Williamson. The Applicant represented to the Respondent that it was buying the business and that its commercial interests could be adversely affected by any delay in the approval of its operator's accreditation. She argued that the only commercial interests that could have been affected were those of Bretabac and the loss of its contracts and good will. 31The Respondent submits that if this material had been provided to it, these matters would have been material considerations in determining whether to accredit the Applicant as an operator. It argues that the failure to disclose matters materially relevant to the proposed operation of the Applicant's business is a relevant factor in determining questions of good repute and fitness. It submits that there was a lack of candour about the true nature of the proposed operation. The directors of the Applicant sought to convey a very different picture to the reality of the proposed operation. 32Ms Eastman further submitted that the onus is on the Applicant to demonstrate that it should be accredited to operate the private hire vehicle business. The Applicant had and continues to have the onus of disclosing information relevant to its standing as a fit and proper person to operate a private hire vehicle business. Where facts and certain information is exclusively within the knowledge of the Applicant, it bears the onus of disclosure. 33The Respondent accepts that an allegation that the Applicant's operation is a sham is a serious allegation to make. However, it says that the evidence before the Tribunal allows it to be comfortably satisfied that the Applicant sought to convey to the Respondent a very different impression of its proposed business to the way the business was actually going to be conducted. It did not reveal the true nature of its proposed operations and the extent to which Mr Williamson and/or Bretabac would be involved. 34It says that it is clear from the evidence that the Applicant standing alone does not have the personnel, experience, resources or financial capacity to operate the private hire vehicle business in Port Macquarie, independently. It relies completely on Mr Williamson and Bretabac. It is in effect a subsidiary of the broader business conducted by Mr Williamson. 35The Respondent submits that the directors are not fit and proper to be responsible for the operation of a private hire vehicle service under the Act and, for the reasons identified, the decision should be affirmed. The Applicant's case 36The Applicant relies on the evidence of Mr Cristoforo and Mr Marendaz. Ms Cristoforo provided affidavit evidence, appeared at the hearing and was cross-examined. Mr Marendaz appeared by telephone, gave oral evidence and was cross-examined. Mr Doyle, Counsel for the Applicant, provided written submissions in support of its case. 37The Applicant contends that there is no requirement under the Act that shareholders of an accredited company be directly involved in the day to day management or operation of the business. It submits that the requirement under Section 38A is that a corporation designate directors or managers for that role. It submits that designated managers are expressly provided for in the Act and there is no requirement for 'owners' of a corporate accredited operator to be personally and directly involved in providing the accredited service. 38The Respondent accepted the designation of Mr Marendaz to manage the business. However, neither of the directors are accredited directors. 39The Applicant denies the Respondent's allegation that its operation is a sham. It does not dispute Mr Williamson's role in the acquisition of the business. It explains the role in relation to Mr Williamson's inability to find a purchaser who would pay what he thought the business was worth. Faced with the prospect of Bretabac selling the business to third parties for far less than he wanted, Mr Williamson approached his daughter Ms Cristoforo to explore whether she and Mr Cristoforo would be interested in taking over the business. Mr Williamson offered to stake Ms Cristoforo for the purchase and set up costs. 40The Applicant also denies the Respondent's allegation that Mr Williamson instructed his accountants and lawyers to establish a structure that would create the pretence that Bretabac was divesting itself of the business. The Applicant asserts that there is no basis whatsoever for that allegation or for any claim that ownership of the business did not pass to the Applicant and its shareholders. It says that Mr Williamson's continued involvement to further the prospects of his daughter's business could not possibly ground that allegation. 41In regard to the Respondent's allegation that the Applicant failed to disclose relevant information to the Respondent as part of the accreditation process, the Applicant points to Ms Cristoforo's letter of 30 January 2013 which the Respondent received four weeks before it granted the accreditation. In that letter Ms Cristoforo wrote: We have already notified the Department that Mr Glenn Marendaz has been engaged as its designated manager. We would have done so at any time the Department requested. Attachment 1 to this letter is the completed Nomination Form we have now received. The following application might allow you to better understand Ceepee's application, and the reasons why a final determination is urgent. My husband and I As you may be aware, I am the daughter of Mr Peter Williamson who until recently was a director of Bretabac Pty Ltd - the largest taxi and hire car operator on the mid north coast. I held a private hire vehicle driver authority and a taxi driver authority for around 7 years, expiring finally in 2007. ... From around 1998 to 2007 I worked during all of my holidays closely with my father's business. Starting with the administration side (bookings, rosters as well as car and driver management) I also worked the practical side driving passengers once I was authorised to do so. I principally drove Department of Veteran Affairs and NSW Health customers. I currently work as the Australia/New Zealand brands manager for a multinational sports apparel company with annual turnover exceeding $1 billion and I have obtained substantial commercial and staff management experience in that role. I also hold a bachelor of psychology from Sydney University. My husband is currently the ticketing co-ordinator for the Melbourne Olympic Park Trust, also a responsible executive position. With that background, my husband and I feel we are well placed to exercise our functions as directors of a corporate private hire vehicle operator. As we are based in Melbourne, we propose however at this stage to rely upon a designated manager to manage Ceepee's Port Macquarie operations. The sound qualifications of our nominee for that position are discussed below. We plan to move to Port Macquarie if the business transfer goes through as part of our longer term goals for our family. That move is one of the main reasons that we decided to take on the business. To ensure that there is no doubt that my husband and I understand what our role as directors entails, we have each completed written acknowledgements that we understand that we have a responsibility in relation to ensuring the conditions of the licences under Ceepee's accreditation are complied with ... Decision to purchase Bretabac's Port Macquarie business. You may be aware that Bretabac recently agreed to surrender its 5 private hire vehicle licences it held in Port Macquarie (without any admission of wrongdoing) in order to settle Administrative Decisions Tribunal proceedings which had been consuming significant resources and distracting my father from the remainder of Bretabac's operations. My father is after all 74 years of age. I am told that at the time he agreed to the cancellations my father told the Department and the Tribunal that he would need time to make arrangements for the divestment of his business in Port Macquarie and a 28 February 2013 deadline was agreed. While my father explored another potential buyer for the business, we quickly realised that my husband and I were an obvious choice. Firstly I have experience in the industry and secondly, the family has discussed how in the long run my sister and I will logically take over the family business. A company was incorporated to purchase Bretabac's Port Macquarie interests. My father's accountant has been helping the quick establishment of the company structure and the assignment of the leases and employment agreements etc. Obviously, having the necessary approval as an accredited operator well in advance of the 28 February 2013 deadline is of great importance. If we do not meet that deadline, the Port Macquarie business we are buying may suffer great damage. Designated manager Mr Glenn Marendaz should be easily accepted by the Department as an appropriate designated manager. Glenn has worked as the operations manager for Bretabac t/a Hastings Hire Cars for 5 months. Glenn will be the person with principal responsibility for ensuring the day to day operations of the business comply with the legislation, and that the business runs applying best practice standards. Before taking up a position with Bretabac, Glenn was the proprietor of a landscape and nursery in Geralton and has to my knowledge a flawless record and reputation. Importantly, Glenn some time ago made an application for a driver authority. He expects to receive the approval shortly. That means that he has already consented to a police and character check which he believes should already have been completed in relation to the driver authority application. That should cut down on the delay. Urgency The Department has now had our accreditation application for two months. An approval is needed urgently to allow us to complete the sale of the Port Macquarie business. If there is a delay in that settlement not only with we suffer commercial loss, the disabled persons and veterans that rely on the business will have their travel arrangements disrupted. 42The Applicant contends that by way of this letter Ms Cristoforo made a detailed disclosure of the circumstances of the business transfer, and her relationship with Mr Williamson. The Applicant contends that the letter discloses that: (a)the accreditation was applied for in order to enable the Applicant to take over Bretabac's business; (b)Mr Marendaz was proposed as a designated employed manager under Section 41 of the Act. He would be responsible for the day to day management of the service and compliance with the licence conditions; (c)the directors are Mr Williamson's daughter and son in law; (d)the transfer of the business is part of a general succession plan for the Bretabac businesses. As such it could not have been considered as an arm's length transaction; (e)the directors live in Melbourne but plan to move to Port Macquarie in the medium term to increase their role in the business. They would not have moved before the business commenced operation; (f)the directors understand that they have a responsibility as directors to ensure compliance with the requirements of the Act; (g)the Williamson family accountant had made the necessary arrangements for both parties; and (h)Ms Cristoforo intends in the future to take over the wider family business with her sister. 43Ms Cristoforo gave evidence of her management experience which was not questioned. She admitted not owning or being a director of a corporate business before the business. She conceded that she signed papers prepared by others. However, it is submitted for the Applicant that in the context of a corporate acquisition it is hardly a rare thing for a director to sign papers prepared by others. It is submitted that while Ms Cristoforo did not understand all of the legal or technical provisions in the business documents prepared by her accountant it does not follow that she did not understand, or believe that she understood, their substance. 44The Applicant denies the Respondent's assertion that Ms Cristoforo could not identify any loss that would be suffered if the purchase of the business did not occur by 28 February 2013. The Applicant says that Ms Cristoforo identified the loss as arising because of the damage to goodwill caused by the business closing before re-opening. Further, the Applicant says that the concern about that damage is obvious from the Applicant's correspondence. 45The Applicant also denies the Respondent's allegation that there has been a lack of candour. It submits that there is no basis for the submission that Ms Cristoforo thought that she had no obligation to volunteer information. Ms Cristoforo said clearly that her reason for preparing the letter of 30 January 2013 was her belief that the Respondent ought to be told about the circumstances of the Applicant's purchase of the business. It is further submitted that while Ms Cristoforo did not inform the Respondent that her parents provided the funds to allow the Applicant to buy the business, through adjustments in the companies' accounts, that fact was not hidden. Given her other disclosures, the source of the funds could hardly come as a surprise to the Respondent. Further, the Applicant asserts that it repeatedly offered to provide the Department with any information it reasonably seeks about the business and its origins. 46The Applicant submits that, provided that it does not generate a debt which might affect the viability of the business, the source of start-up investment capital to purchase a private hire vehicle business is not a matter ordinarily disclosed as part of an accreditation application. 47With respect to the management of the business, the Applicant argues that clause 25 of the Regulation provides that it is the designated director or manager that bears the responsibility for the specific passenger transport service. In this case the only relevant designated person is Mr Marendaz. 48The Applicant points to Mr Marendaz's evidence as to his involvement with the management of the service. The Applicant submits that Mr Marendaz demonstrated that he is responsible for the engagement of drivers and their induction into the processes and safety procedures of the business. He is responsible for ensuring the cars are serviced. He is the appropriate point of referral in the business hierarchy adopted by the business should a complaint be received by the call centre. 49The Applicant further submits that the Respondent has not alleged that the Applicant has breached any provision of the Act in its operation of the business, and that under the stewardship of Mr Marendaz the Applicant has been trading without incident. 50The Applicant contends that there is no question that Mr Marendaz has the control and management of the accredited service. He liaises with the drivers, organises the rosters, organises maintenance for the vehicles, works with the car detailer, inducts new staff and instructs them in compliance with licence conditions and safety and corresponds with the Respondent in relation to compliance issues. 51Mr Marendaz has been the company secretary of the Applicant since March 2013. Ms Cristoforo's evidence was that he was appointed to that position so that there was someone in Port Macquarie who could sign the documents necessary for registration of the vehicles on behalf of the Applicant. Ms Cristoforo's evidence was that Mr Marendaz has signed many documents as company secretary. 52The Applicant utilises Bretabac as its call centre and for its bookkeeping. The Applicant submits that there is no prohibition under the Act or the licence conditions against that arrangement and that it makes commercial sense. 53In regard to Ms Cristoforo's evidence that she has relied upon the advice and assistance of her father, the Applicant submits that there is no prohibition under the Act or the conditions of accreditation against that arrangement. It further submits that there are great advantages of Ms Cristoforo drawing upon that advice. Bretabac holds a network operator accreditation for taxis, and accreditation to operate 20 of its own private hire vehicles. 54Further, the Applicant submits that the Respondent has not explained why the assistance of Bretabac and Mr Williamson is in any way unwelcome. The Applicant contends that their assistance seems to be facilitative of the Applicant providing the best service it can as well as maintaining its financial viability. 55Mr Doyle submitted that the correct and preferable decision is to set aside the Respondent's determination. However, he submitted that if the Tribunal remains concerned about the Applicant's compliance with the Workplace Health and Safety legislation, or Mrs Cristoforols knowledge of her obligations in relation to her position as a company director, the Tribunal could fashion appropriate conditions to address those concerns. Consideration 56As noted above, the matter before the Tribunal arises as a result of the Respondent's decision to cancel the Applicant's accreditation. The allegations made against the Applicant are (a) that the Applicant's directors are not involved in the day to day running of the business; (b) that the Applicant does not carry on a private hire vehicle service at all because it is a shell i.e. that it is actually Bretabac's or Mr Williamson's business; (c) that the Applicant did not inform the Respondent that the purchase of the business was not an arm's length transaction; and (d) that the Applicant did not disclose that Mr Williamson would have an involvement in the business. 57Ms Eastman submitted that the onus is on the Applicant to demonstrate that it should be accredited to operate the private hire vehicle business. That would be correct if this were an application for accreditation. In this matter the Respondent is alleging that the accreditation which was granted should be cancelled. Where information is exclusively within the knowledge of the Applicant, it bears the burden of disclosure. However, where the Respondent alleges changed circumstances, it bears the burden of establishing those allegations. 58The Respondent asserted that the failure to disclose a material matter relevant to the proposed operation and the lack of candour shows that the Applicant's directors are not fit and proper to be responsible for the operation of a private hire vehicle service pursuant to section 38(2) of the Act. 59The Applicant's case is that those allegations are without basis. The directors' involvement in the day to day running of the business 60It is common ground that the directors are based in Melbourne and do not take an active role in the day to day operation of the business. The question arises as to the extent of the obligation on directors of an accredited corporation to be involved in the running of the business. 61Clause 25 of the Regulations provides that an accredited operator must not suffer or permit any person other than a designated director or manager, or another accredited operator to operate, manage, supervise or administer the relevant service. 62In my view this provision anticipates that, where the accredited operator is a corporation, a designated manager will operate, manage, supervise or administer the relevant service on a day to day basis. 63I do not agree that the Clause 25 requires the directors to have that same degree of involvement in the running of the business. 64Nevertheless, a person concerned in the management of a corporation has obligations arising from the operation of corporations law. A director's duties and obligations arise as a consequence of holding that position. The directors accepted those duties and obligations when they agreed to become directors of the Applicant and they have an obligation to understand those duties and responsibilities. There is a duty on all directors to make themselves aware of the company details and they have an obligation to satisfy themself of the company's financial affairs. They have duties of care and diligence and to not act for an improper purpose. 65In my view, the directors have the responsibility of ensuring that all legislative requirements and any conditions applicable to the accreditation are met. The directors are entitled to rely on the services of a designated manager. However, it is their responsibility to ensure that the designated manager performs that role. If the designated manager does not have sufficient expertise or delegated authority to allow them to do so, then the directors must take steps to ensure perform that the obligations are met. Whether the business is actually Bretabac's or Mr Williamson's business 66The evidence shows that Mr Williamson played an active role in the establishment of the Applicant and its acquisition of the business. He provided funding for the acquisition, arranged for professional advice to be obtained and the preparation of all necessary documentation, and he arranged for systems to be put in place to allow the business to operate. He continued to provide advice to Ms Cristoforo in regard to the business. 67Mr Marendaz gave evidence that, apart from handing on invoices, he has nothing to do with the financial administration of the Applicant. The directors do not consult him about any financial aspect of the business. He plays no role in the financial planning for the business and he does not authorise payment of accounts. He agreed that he is solely employed for the day to day running of the hire car rosters, and detailing, and organising the mechanical repairs when required, and liaising with the drivers. 68Ms Cristoforo gave evidence that she has limited involvement in running the business on a day to day basis. 69The evidence shows that the Applicant uses the services of Bretabac in relation to its call centre, payment of accounts and other administrative and operational functions. The role played by the directors and Mr Marendaz as the designated manager in relation to the use of Bretabac's services is not readily apparent. It appears that the business was acquired from Bretabac, with the assistance of Mr Williamson, with systems put in place to allow the business to operate. In my view, those systems have continued to operate successfully as a result of the competence of the Bretabac staff who provide the services and despite the lack of involvement from the directors and Mr Marendaz. 70The evidence shows that the Applicant conducts the business with the support of both Bretabac and Mr Williamson. The evidence also shows a lack of management supervision of the business by either the directors or the designated manager. However, in my view, the evidence does not support the Respondent's assertion that the business is conducted as a shell or that it is actually Bretabac's or Mr Williamson's business. 71The legislative scheme does not prevent the Applicant using the services of another organisation such as Bretabac. Given the limited size of the business operation it would not be feasible for the Applicant to operate its own call centre. Its use of an existing administrative arrangement is prudent from a financial perspective. Similarly, the legislative scheme does not prevent the Applicant obtaining advice from Mr Williamson. The evidence shows that Bretabac holds an accreditation and that Mr Williamson is involved in Bretabac's business operations. The Respondent has provided the Court attendance notices in relation to Bretabac which touch on compliance with applicable legislation. It appears that the Respondent has had concern in that regard, but the substance of those concerns has not been established. On the material before me it is difficult to understand why Mr Williamson would not be an appropriate person to provide advice to either his daughter, Ms Cristoforo, or to the Applicant. In the circumstances there does not appear to be any impediment to the arrangement that is in place between the Applicant and Bretabac. 72The difficult for the regulator, as I see it, is not the arrangement that is in place but rather the deficiency in the management of that arrangement. As the Respondent has identified, in order to trace managerial responsibility and, therefore, be able to assess managerial competency one would need to deal with a number of individuals. The legislative scheme anticipates that where a designated manager is in place that person will have managerial responsibility. That is clearly not the practice in regard to the Applicant and the business. Did the Applicant inform the Respondent that the purchase of the business was not an arm's length transaction? 73As has been noted above, Ms Cristoforo's letter of 30 January 2013 made several disclosures. I agree with the Applicant that Ms Cristoforo's letter disclosed that the accreditation was applied for in order to enable the Applicant to take over Bretabac's business; that the directors are Mr Williamson's daughter and son in law; and that the transfer of the business is part of a general succession plan for the Bretabac businesses. I agree that as such it could not have been considered as an arm's length transaction. 74I agree that the details of the acquisition were not disclosed to the Respondent. However, I do not agree that it would be fatal to the accreditation application. There is no suggestion that the source of the capital to purchase the business has affected the viability of the business. There is no basis for concluding that to be the case in this matter. 75In the circumstances I accept that it is not a matter that should concern the regulator. I agree with the Applicant that this assertion is not established. Did the Applicant disclose that Mr Williamson would have an involvement in the business? 76The Respondent submits that if the Applicant had disclosed the extent to which Bretabac and/or Mr Williamson were going to be involved in the operation of the business, then those are matters that would have been material to the decision to accredit the Applicant. 77I agree that Ms Cristoforo's letter of 30 January 2013 did not disclose that Mr Williamson would have ongoing involvement in the operation of the business. However, as I have noted above, I do not accept that Mr Williamson has continued the involvement as alleged. On the material before me it seems that Mr Williamson's ongoing role is that of mentor to Ms Cristoforo and the Applicant. 78I agree that Mr Williamson's ongoing mentor role was not disclosed to the Respondent. However, I do not agree that it would be fatal to the accreditation application. I do not consider that it discloses a lack of candour. I therefore make no negative finding in regard to the failure to disclose Mr Williamson's ongoing role. Are the directors fit and proper to be responsible for the operation of a private hire vehicle service? 79The Tribunal's Appeal Panel considered the expression 'fit and proper person' in Department of Transport and Infrastructure v Murray (GD) [2011] NSWADTAP 16. At paragraphs [16] - [20] the Appeal Panel stated: 16. The meaning of the phrase "fit and proper person" was the subject of consideration by the High Court in litigation between Alan Bond and the Australian Broadcasting Tribunal: Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321; 94 ALR 11; 64 ALJR 462; 21 ALD 1. The ABT was required to refuse a licence if it was not satisfied that the applicant or the holder of a licence was a "fit and proper person". Toohey and Gaudron JJ stated (at 380) that: The expression "fit and proper person", standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of "fit and proper" cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur. The list is not exhaustive but it does indicate that, in certain contexts, character (because it provides indication of likely future conduct) or reputation (because it provides indication of public perception as to likely future conduct) may be sufficient to ground a finding that a person is not fit and proper to undertake the activities in question. (our emphasis) 17. In the same case, Mason CJ stated at [63] that: The question whether a person is fit and proper is one of value judgment. In that process the seriousness or otherwise of particular conduct is a matter for evaluation by the decision maker. So too is the weight, if any, to be given to matters favouring the person whose fitness and propriety are under consideration. (our emphasis) 18. While the seriousness of the conduct is a matter for evaluation by the decision maker, the question of whether it can be assumed that the conduct will not recur is a matter which is to be viewed through the eyes of the general community. 19. The Federal Court applied the decision in Bond in relation to the meaning of 'fit and proper person' when it upheld a decision of the Administrative Appeals Tribunal relating to taxation agents: Toohey v Tax Agents' Board of Victoria (No 3) [2010] FCA 356 at [46-47]; Toohey and Tax Agents' Board [2008] AATA 262. Middleton J held at [37] that "determining whether a person is the prescribed fit and proper person involves an evaluation of character and reputation." At first instance the AAT decided that the public as a general body would not have confidence in the conduct not occurring again (at [156-160]). The Federal Court reiterated that the enquiry is directed not only to whether improper conduct has occurred, but whether it is likely to occur again, and whether the community will have confidence that it will not occur. Conclusion 20. When deciding whether a person is a 'fit and proper person', the question of whether the community would have confidence that any improper conduct will not re-occur is relevant: Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321; 94 ALR 11. Otherwise, the determination of fitness and propriety is a question of fact for the decision maker to determine objectively on the basis of the all evidence. 80In the case of Hughes and Vale v State of New South Wales (No 2) [1955] HCA 28; (1955) 93 CLR 127 the High Court emphasised that a person's knowledge or skill may be so lacking as to warrant the conclusion that he or she is not a fit and proper person to hold a particular type of licence. Dixon CJ, McTiernan and Webb JJ said at 156: 'The expression 'fit and proper person' is of course familiar enough as traditional words when used with reference to offices and perhaps vocations. But their very purpose is to give the widest scope for judgment and indeed for rejection. 'Fit' or ('idoneus') with respect to an office is said to involve three things, honesty knowledge and ability: 'honesty to execute it truly, without malice affection or partiality; knowledge to know what he ought duly to do; and ability as well in estate as in body, that he may intend and execute his office, when need is, diligently, and not for impotency or poverty neglect it' - Coke.' 81In the present matter the relevant context is that of the accreditation. The issue arises as to whether the directors are fit and proper to be responsible for the operation of a private hire vehicle service. As I understand it, there is no challenge to the general honesty and integrity of the Directors. There is no actual breach of the Act that is alleged. The Respondent's concerns relate to the directors' knowledge and ability, the way in which the business has been conducted and the issue regarding candour. 82As I see it, the issue of fitness centres on the directors' knowledge and ability. I have no concerns regarding the honesty of the directors not do I have concerns regarding the degree of candour. In my view, the issue of non-disclosure raised by the Respondent reflects more a lack of experience and business acumen then it does a lack of candour. 83I have not heard evidence from Mr Cristoforo. However, I do not understand the Applicant to be putting him forward as a person who has the knowledge and ability to be responsible for the operation of a private hire vehicle service. 84It is clear from Ms Cristoforo's evidence that she has general knowledge of the business and how it has been conducted and of the relevant legislative requirements. She clearly does not have detailed knowledge of the either. She gained some experience working in her parents' business and she worked as a hire car driver. Her knowledge of the process whereby the Applicant acquired the business from Bretabac is minimal. The directors relied heavily on Mr Williamson and professional advisors who he organised and instructed in relation to the acquisition. It seems that Ms Cristoforo signed documents prepared by the professional advisors or Mr Williamson but she did not have more than a rudimentary understanding of the contents of those documents. 85In my view, a person responsible for the operation of a private hire vehicle service must have a greater depth of understanding of the business and the relevant legislative requirements than that which Ms Cristoforo has at the moment. 86However, as I have indicated above, it is my view that the regulatory system is not dependent on the directors' level of knowledge and ability. Rather, it is concerned with ability of the designated manager to conduct the business in accordance with the relevant legislative requirements. 87Pursuant to section 9, the Applicant, or the designated manager, must be able to demonstrate the necessary knowledge and competence to carry on the relevant service. 88In my view, the Mr Marendaz, the designated manager, does not currently have the requisite knowledge and ability. Nor does he have sufficient delegated authority to ensure that the business is conducted in accordance with the relevant legislative requirements. 89It follows, in my view, that neither the Applicant's directors nor the designated manager are able to ensure that the business is conducted in accordance with the relevant legislative requirements. 90As I have also noted, there is no suggestion that there have been breaches of those requirements. However, it seems that the systems that Mr Williamson and the professional advisors put in place have continued to operate effectively more through good luck than good management. That situation should not be allowed to continue. 91The regulatory regime has a consumer protection component. The risk of detriment to the public is increased if the business is able to operate without sufficient management. 92It is a matter for the Applicant how that is achieved. However, it is my view that the accreditation should be suspended until such time as the Applicant is able to satisfy the Respondent that either a designated director or a designated manager is able to ensure that the business is conducted in accordance with the relevant legislative requirements. 93I appreciated that this decision will have significant implications for the Applicant, its drivers and its staff. In the circumstances it is appropriate that the order should not take effect immediately. 94In my view the correct and preferable decision is that the determination to cancel the operator's accreditation held by the Applicant should be set aside. In its place the decision should be made that the operator's accreditation be suspended until such time as the Applicant is able to satisfy the Respondent that it is able to ensure that the business is conducted in accordance with all relevant legislative requirements. The suspension should take effect 28 days from the date of this decision. Orders (1)The decision under review is set aside. (2)The decision is made that the operator's accreditation held by the Applicant is suspended until such time as the Applicant is able to satisfy the Respondent that it is able to ensure that the business is conducted in accordance with all relevant legislative requirements. (3)This decision is to take effect 28 days from the date of these reasons. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 June 2014