Decision

Decision for DGS Distribution Ltd (OH2052445)

Published 1 June 2022

In the Western Traffic Area

Written Decision of the Traffic Commissioner

DGS DISTRIBUTION LTD OH2052445

1. BACKGROUND

This is an application for a standard national goods vehicles operator’s licence authorising the use of twenty vehicles and ten trailers from an operating centre in Ivybridge. The nominated operating centre was originally in South Brent. It was subsequently changed to that formerly of Langdon Transport in Ivybridge.

DGS Distribution Ltd was incorporated on 22 December 2022. The sole director at the time was Melanie Jennings and Ms Jennings was also the sole shareholder. The transport manager on this application is Derren Estall. Mr Estall was transport manager for Langdon Transport Ltd. This application was submitted on 11 January 2022.

The licensing caseworker wrote to the applicant on 17 January 2022 setting out further information that was needed:

• an advert
• financial evidence
• an explanation for Derren Estall not being declared as a director on the application when he was shown as such on Companies House
• why such a large authority was required for a new operation, whether it was taking over an existing operation and whether there were adequate systems in place for such an authorisation, and
• clarification on licence history

A response was received from Derren Estall that same evening. A new operating centre was proposed, that being the former Langdon site. Mr Estall completed a director questionnaire but did not say why he hadn’t been declared initially. In relation to the large authorisation he explained

“We are planning to take over some of the work previously carried out by Langdon Transport. The Langdon Transport name has been reputationally damaged by historic operator licence issues. We have experienced this firsthand with several of our customers moving away from us. Our plan is to start the new company DGS Distribution Ltd and break the connection with the Langdon name and previous directors.”

Mr Estall declared that he was transport manager for Langdon.

The caseworker wrote again on 2 February. Finances had not been submitted in line with STC guidance and the advert was still outstanding. Further explanation of the operation was requested along with further explanation of the links to Langdon. This was received on 7 February. Relevant extracts include:

“We are intending to take over several of the contracts that are current customers of Langdon Transport. The General haulage and walking floor sectors have been the core of the Langdon business and have been neglected to focus on the palletized side of the business. The palletized side has now been reappointed to another haulier, and our new company DGS will focus on general haulage and walking floor going forward.

I am one of the current Transport Managers at Langdon Transport. Graham Witts-Davies is the other. We are also directors. Along with Steven Jennings our managing director, we have actioned a management buyout of the current assets (vehicles) from the current owner of Langdon Transport. We have set up DGS Distribution LTD as a new company with new people that have no connection to the Langdon name. We believe that the previous directors of Langdon Transport have damaged the reputation of the current business and its name beyond repair and that we do not have a viable business going forward without a complete change of ownership and name. The new company will have no connection to Steven Langdon.”

Mr Estall wrote again on 8 February chasing the application. Within that email, he said

“I just wanted to email you regarding our application as time is unfortunately against us. I am a director of Langdon Transport along with Graham Witts-Davies and Stephen Jennings. We were asked to join Langdon Transport the latter part of last year as there was a serious problem and the Langdon Operators licence was to be revoked. We three attended a public inquiry at Bristol with Mr Rooney in November and were granted a new operator’s licence. Since then, we have been concerned that the business has been reputationally damaged due to the toxic nature of the way that it had been run by previous management team. Our fears were confirmed by several of our customers verbally.

In January we decided that to be able to continue trading. We would need a fresh approach, a rebrand and a complete removal of the Langdon name. We set up DGS distribution LTD and applied for an operator licence in that name. We have completed all of the requirements and have put the financial standing in place also. We have a funder in place to allow us to purchase the vehicles from Langdon Transport, but they will only lend once they see that an operator’s licence is in place. Timing is now critical for us so that we do not damage our customer base and more importantly our employees. We want to explain our plans to both but cannot until we secure the operator licence.”

Finances were provided in a large series of transfers from “Barleycombe Estates Ltd”. A statutory declaration was provided in support of them although that is not relevant to a limited company. Barleycombe Estates Ltd has two directors, Graham Witts-Davies and Anne-Marie Davies. Both are also listed at Companies House as owning between 50% and 75% of the shares.

Derren Estall signed a request for a time-limited interim on 10 February 2022. The caseworker submitted it to her line manager on 14 February and it was submitted to me on 21 February. Throughout this period, time was lost dealing with what appears to be a constant stream of requests and updates from the applicant, and others associated with the applicant. Without doubt, those caused delay rather than adding speed. I extract the following from comments made on the licence record:

17 January Mr Estall called to say changing o/c

27 January Mr Witts-Davies called advising finance on the way

3 February Mr Witts-Davies to say advert in the post

4 February Mr Witts-Davies called to ask if finances received

7 February Mr Witts-Davies rang

8 February Mr Estall

9 February Mr Guy Small called Caseworker records being “grilled” by Mr Small and concludes the casenote “I had to terminate the call as Mr Small harangued me”.

11 February Mr Witts-Davies called. Was told app could not be discussed with him as he was not a director

11 February Mr Estall called, said funder was pushing, funder was Honey Asset Finance Ltd, director was Guy Small

15 February Customer Service Centre received a call from Mr Estall chasing progress

18 February Team leader in Bristol records “Derren Estall has emailed myself on numerous occasions asking the same questions repeatedly. It seems he is fully aware of the situation and is simply trying to put as much pressure as possible on to force through the application.”

On 21 February, I concluded that the explanations for the new application did not appear to justify the time and effort involved in winding down a substantial existing business and starting a new company. Failing to be satisfied that the mandatory criterion of good repute was satisfied, I refused interim authority and called the application to a public inquiry.

2. THE HEARING

The hearing was attended by Derren Estall and Melanie Jennings who recorded their position as directors, by Graham Witts-Davies and Stephen Jennings who recorded their position as “shareholders” and by Guy Small, “financial advisor”. I was quickly told that the issue was not that the brand of Langdon was toxic but that it was insolvent, allegedly due to malpractice on the part of previous management (I was given names but do not record them here as I have seen no evidence of the malpractice alleged).

I concluded the hearing with an interim decision and an opportunity for the applicant to seek advice in the following terms:

This is an application to replace the majority of the operation of Langdon Transport Ltd. On application, the reason for the new operation was that the Langdon brand had become “toxic”. At the hearing, I was told that the primary issue was that Langdon was in financial distress as a result of fraudulent invoicing to fictitious companies. I do not know why that was not exposed in the original application or in response to requests for information from the caseworker. I do not know why the company has not involved the police.

DGS Distribution Ltd was incorporated on 22 December 2022. The sole director at the time was Melanie Jennings and Ms Jennings was and is the sole shareholder recorded at Companies House. Having met Ms Jennings today, she has no relevant history that would equip her to be the director of a 20-vehicle transport operation (which, for the avoidance of doubt, needs more than a one-day operator licence awareness course to remedy). It is clear that Ms Jennings was appointed as a clean face of the business. She did not know on what terms the applicant company was financed and told me that she was the majority, not sole, director. I am not convinced at all that she is or would be a controlling mind in the operation.

Derren Estall is nominated transport manager and became a director of the applicant company on 10 January 2022. He was not declared as a director when the application was made on 11 January. As such, his involvement as a director has not yet been published and that is being done now. I cannot grant the application until the objection period expires on 15 April. Mr Estall is a director of Langdon. He has chased the application extensively.

I have been provided with no evidence to support the assertions made. The story is unclear. On the one hand, Lloyds Bank is closing down the company’s banking facilities. On the other, Guy Small, a financial advisor, tells me that the former director of Langdons intends to reach an agreement with Lloyds and that he, perhaps with the previous accountant, are personally liable. This does not stack up and Lloyds holds debentures over the limited company.

I find it impossible to believe that the inevitable insolvency of Langdon was not known when the application was submitted on 10 January so the answers to question 11 are false.

The true ownership of the applicant operation is unclear. Companies House records Ms Jennings. On their attendance slip for today’s hearing, Mr Witts-Davies and Mr Steven Jennings record themselves as shareholders. Ms Jennings did not know the terms of the funds provided by Barleycombe, Mr Witts-Davies’ company.

The company has so far failed to establish its good repute. As currently presented, this appears to be an application for a phoenix to allow Langdon to write-off bad debt. I do not know whether money is owed by Langdon to the Crown in terms of PAYE, NI and VAT. I do not know why Langdon is still trading when apparently insolvent. The applicant company has not had the benefit of professional advice from a solicitor who specializes in operator licensing. Rather than refuse today, I adjourn the hearing and hold the application in abeyance until 16:00 hours on 20 April 2022.

3. POST-HEARING SUBMISSIONS

I received written submissions and a supporting bundle from Steve Roberts, solicitor at Richard Nelson LLP. I note from those submissions the following:

A letter from Mark Holt & Co, the applicant’s accountant and tax advisors, tells me that they had been involved from October 2021. I am told that, at that time, the intention was to continue to trade Langdons. At some pointing, “ghost invoicing” arose as a concern. Thie resulted in a meeting of the company with an insolvency specialist, Castle Hill Insolvency, at the Mark Holt & Co offices on 21 December 2021. At that point, it was possible that Mr Langdon would continue to provide funds personally. I then quote “It was at this meeting and based on factors outside of the newly appointed directors’ control that a new company was formed, DGS Distribution Ltd, on the basis that should Mr Langdon not be able to put the funds in place a new company would be required

To allow the existing directors to continue with Langdon Transport and avoid any conflict it was agreed that Mrs Jennings would be sole director and shareholder…this also simplified the set up and registrations with HMRC and the opening of a bank account.”

Guy Small provides a statement. He tells me that he became involved following a call from Mr Witts-Davies on 10 September 2021. He details his involvement in finding a suitable funding partner. He tells me that he was out of the country from 7 December to 21 December and took the rest of the month off. I take it from that statement that he did not attend the offices of Mark Holt & Co on 21 December but I do not know. Mr Small continues to tell me that he met with the directors of Langdon Transport on 5 January. From 10 January his company began the detailed process of checking, to paraphrase, that the debtors were genuine. The process took four days and, on 17 January, a list was produced of debtors of concern and was discussed with the accounts clerk. Mr Small then told Mr Witts-Davies, Mr Estall and Mr Jennings of his concern and estimated the missing debtors accounted for around £600,000. Mr Small concludes by telling me that the directors acted properly once they were made aware of the issue and at no time did they trade insolvently.

Mr Roberts concedes that the decision to exclude Mr Witts-Davies and Mr Jennings from the face of the new application was based on poor advice. Mrs Jennings was intended to have a director role. At the point that application was made, the directors believed the business to be solvent but also needed to be wound down. Mr Witts-Davies and Mr Jennings have now been added as directors to reflect the true intention.

Mr Roberts submits that the current management team are victims of their involvement with Langdon Transport. They had been honest at public inquiry. They have significant experience in business and transport. Whilst Mrs Jennings does not have a transport background, she does have experience of working within a finance and administrative capacity.

4. DETERMINATION AND DECISION

It is notable that the timeline described by Guy Small is significantly at odds with that described in the letter from Mark Holt & Co. The Holt letter says that “ghosting” was a concern in December, that led to the meeting of 21 December and the incorporation of DGS at that point. If that is the case, the applicant management team knew full well that Langdon was in financial peril prior to making the new application on 11 January. Mr Small contends that “ghosting” did not become apparent until 17 January, after the date of the application.

The timeline described by Mark Holt & Co is the more credible. The date of the meeting aligns with the incorporation of DGS and an explanation is also given for the named director and shareholder at that point. At the hearing, it was accepted that the application was made because of the concerns over the accounts. I must therefore discount Mr Small’s version of events.

I make the following findings of fact:

The directors were aware that Langdon Transport Ltd was in financial peril at some point before 21 December 2021

That was a matter that affected financial standing and should have been notified to my office within 28 days of the controlling minds of the business becoming aware. It was not.

DGS Distribution Ltd was incorporated as a safeguard to provide a potential “phoenix”. The application for an operator’s licence for DGS Distribution Ltd was made after the Christmas break, after Stephen Langdon had failed to provide further funding and so after the management team knew that Langdon Transport Ltd was doomed. This finding is further supported by the extensive chasing of the application noted at paragraph 9 above.

Mrs Melanie Jennings was put forward as sole director initially to provide a clean front for the new business. The Mark Holt & Co evidence suggests that this was done to simplify arrangements with banks and HMRC and I accept that may have been its primary motive. However, it also had the effect of hiding the true control of the business from me and from potential opposition – the application was published with just the sole director and with the South Brent operating centre so there were no apparent links to Langdon.

That Mrs Jennings was ever named as sole shareholder was a sham. A sole shareholder owns 100% of the company. There is no evidence that Mrs Jennings owned any of it. The Companies House record has now been corrected but, when the application was made, the Companies House stated position was false.

Derren Estall made false statements about the purpose of the new application, he did so on multiple occasions and he did so to hide the true position of Langdon Transport.

This licence application was based on a falsely stated company structure, and supported by multiple false statements about the purpose of the business.

In Aspey Trucks Ltd 2010 – 49, the Upper Tribunal comments on the difference between finding a loss of repute in an existing haulier and whether or not a new applicant to the industry met the standard to be of good repute:

“In a case such as this, the Deputy Traffic Commissioner was not looking at putting someone out of business. Rather, he was deciding whether or not to give his official seal of approval to a person seeking to join an industry where those licensed to operate on a Standard National or Standard International basis must, by virtue of S.13(3), prove upon entry to it that they are of good repute. In this respect, Traffic Commissioners are the gatekeepers to the industry - and the public, other operators, and customers and competitors alike, all expect that those permitted to join the industry will not blemish or undermine its good name, or abuse the privileges that it bestows. What does “Repute” mean if it does not refer to the reasonable opinions of other properly interested right-thinking people, be they members of the public or law-abiding participants in the industry?”

The position has now become apparent but that does not remedy for this application the harm done by the failure to be open and honest from the outset, to disclose the true financial position of Langdon Transport Ltd or the false positioning of Mrs Melanie Jennings as sole director and shareholder in a new business. The false explanations given by Derren Estall are also strongly negative features.

I have considered Mr Roberts request that I reconvene the inquiry prior to making a decision. I do not see what that would achieve. The applicant management team cannot turn back the clock; the damage was done once Mrs Melanie Jennings was put forward as the clean face and compounded by the statements of Mr Estall thereafter.

The applicant has failed to establish its good repute. The application is refused.

Kevin Rooney
Traffic Commissioner for the West of England

4 May 2022