Decision

Decision for Fifth Zone Ltd

Published 17 June 2022

1. FIFTH ZONE LTD: OH2018829, OF2032937

2. PUBLIC INQUIRY IN BRISTOL

2.1 22 SEPTEMBER 2021

3. BACKGROUND

Fifth Zone Ltd holds two standard international goods vehicle operator’s licences. The licence in the West of England authorises the use of nine vehicles and five trailers from a site at Chipping Norton, OX7 4NP. The licence in the East of England also authorises the use of nine vehicles and five trailers, this time from a site in Brill, HP18 9UB. One vehicle was in possession on each licence when my brief was compiled.

There have been two adverse reports from DVSA. A Traffic Examiner visited on 11 May 2021 following a driver having been found at the roadside to be routinely pulling his card (that is, withdrawn his digital tachograph driver card and continued to drive with no card in the digital tachograph vehicle unit head). The evidence is that the driver, Peter Timothy Chapman, had pulled his card on forty-nine occasions between 7 July 2020 and 21 January 2021. Whilst I noted that the Traffic Examiner found the systems to be “mostly satisfactory”, I took a different view based on the scale of falsifications that had appeared to go unchecked.

On 29 April 2021, a Vehicle Examiner visited the operating centre and found, quite frankly, a dire state of affairs. One vehicle had exceeded the 10-week inspection frequency by 101 days, being 171 days between inspections. Most inspections were conducted by a “man with a van” without any reasonable facilities. Three immediate prohibitions had been issued for mechanical defects, one s-marked to highlight a failure in compliance systems (it was a fractured exhaust such that the gases were not making it as far as the silencer). Four load security prohibitions had been issued.

These reports caused me to call the operator to public inquiry.

4. THE PUBLIC INQUIRY

Mr Neil Lyon and Mr Paul Cookson attended the public inquiry represented by Carolyn Evans, solicitor. Compliance documents and written representations had been received in advance. Included within those were notification that the company had entered liquidation.

Proceedings were recorded and a transcript can be made available if required. I record here only the relevant parts of the evidence. In preparing this decision, I have taken as reference my public inquiry bundle, the operator’s submissions and supporting documents, my notes and I have listened to the electronic recording.

The operator’s bundle included a statement of affairs for the company showing a minimal amount owed to the Crown. In preparation for the hearing, I had accessed the Companies House records online and found a statement of affairs which showed a distinctly different position. A copy was passed to the operator and Mr Lyon was given the opportunity to talk to his book-keeper about the inconsistencies. Financial standing was clearly not met.

5. Opening submissions

Ms Evans opened by setting out the operator’s position in brief. Fifth Zone held two operator’s licences. The Western licence was live but the Eastern hadn’t been used recently. Neil Lyon was sole director. There were two DVSA investigations. Mr Lyon had provided to DVSA detailed responses to those investigations.

Mr Cookson was appointed as transport manager on 10 May 2021; he had also applied to be transport manager of EME Trading, a sister company.

The company had lost its main customer and entered liquidation as a result. The main creditors were Aldermore and Bibby, the factoring agents. The statement of affairs provided by the operator showed the debt to the Crown at REDACTED. A later, signed, statement of affairs produced by my office included the PAYE debt which was rather more substantial. Mr Lyon’s position was that the liquidators had not asked for the PAYE figure when the earlier document was completed.

The outcome of this inquiry could have an adverse effect on the sister company. Mr Lyon intended to set out his case that his repute was intact so that EME Trading Ltd might continue.

Fifth Zone had been bought as a going-concern business. The sale included the operator’s licence and a small Royal Mail contract working out of Croydon, then Weybridge. Mr Lyon’ background is in multi-drop deliveries. In addition to the Royal Mail work, he acquired some postcodes on the Fortec pallet network. That was only delivering pallets so not profitable on its own. Mr Lyon secured further work through Canon taking pallets into the Watford hub. When that Canon work was lost, the business was again not profitable.

The company applied for a Western licence in December 2018 with an operating centre in Abingdon. Nigel Rye was transport manager. The business was delivering pallets for XPO. In May 2020, the warehouse used by the company was flooded. Whilst vehicles were still kept there, there was nowhere to store the pallets. In June 2020, the company made an application for a licence for an Eastern licence authorising a site in Brill. The operator only traded there for 3 months when, despite earlier assurances to the contrary, the landlord sold the site for development. Although vehicle SM65HWB was specified on the Eastern licence until recently, all work had transferred to Chipping Norton in September 2020.

Cashflow became an issue in late 2020 and the operator moved to factoring. XPO did not like working through factoring companies so the contract terminated. That triggered the insolvency.

6. The evidence of Neil Lyon

I asked my first question to Mr Lyon about his response to the load security issue. At page 135 of my bundle was a warning letter to a driver Rafal Wiecaszek dated 1 April 2021. This formed part of Mr Lyon’s response to the Vehicle Examiner’s report following his visit on 29 April. It was supplied with a response letter dated 21 May 2021. It warned the driver in relation to two load security issues, one on 23 March 2021 and one on 30 March 2021. I then took Mr Lyon to the prohibition documents at pages 52 and 53 of the bundle and noted that, whilst the driver on 23 March was Mr Wiecaszek, the prohibition on 30 March was issued to a Mr Grigoras. I further pointed out that the same error had been made by the Vehicle Examiner at page 108, where he had attributed two prohibitions to Mr Wiecaszek. I asked Mr Lyon why the warning letter had attributed the two prohibitions to the same driver. Mr Lyon said this was just an error and he couldn’t remember why he had made it. I put it to Mr Lyon that the letter had been fabricated after he had seen the Examiner’s report as it seemed unlikely that both he and the Examiner would independently make the same mistake. Mr Lyon insisted it was a genuine mistake and the letter was genuine at its stated date.

I put Mr Lyon on notice that this discontinuity of evidence taken along with the discrepancy between the statements of affairs between the one he had submitted and the one at Companies House, dated the same day, meant that his credibility was strained. I would expect to see evidence to support future assertions.

Ms Evans took Mr Lyons to the two statements of affairs. The one submitted in the operator’s bundle showed a deficit to HMRC in terms of VAT of REDACTED. The document downloaded from Companies House showed a larger deficit to HMRC which included PAYE and was REDACTED. Both documents were dated 1 September 2021. Mr Lyon told me that he had called the book-keeper. The explanation he had been given was that the version put into evidence had been the one emailed to him early in the day. The book-keeper had gone back to the liquidators to tell them that the PAYE was missing but they hadn’t asked for it at that time. It was accurate at that time because that was all that had been asked for. He didn’t know why he had not provided the up-to-date version for the inquiry. He had not deliberately sought to conceal the PAYE debt.

I put to Mr Lyon that he seemed to be dismissing rather lightly a serious inconsistency in his evidence noting that the Statement of Affairs submitted by him showed a total deficiency of REDACTED whilst the signed version at Companies House showed the deficiency at REDACTED. I asked why he provided me with a Statement of Affairs that showed a deficiency of REDACTED when the company owed nearer a REDACTED. Mr Lyon told me that it wouldn’t have been beneficial to provide the wrong document.

I asked how such a large PAYE debt had been accrued. Mr Lyon told me that he had struggled to pay it since the start of lockdown. They had set up a payment deal with HMRC but couldn’t comply with it. I asked Mr Lyon why his pallet operation had struggled during Covid when all other pallet networks had been enormously busy and his own submissions were that he had been too. He told me that the drivers had been poor, failing deliveries, drivers brought back deliveries all the time. It had been extraordinarily difficult. It had come to a head because XPO wouldn’t deal with the factoring company. XPO’s work wasn’t as profitable as they had thought, the payment terms of 90 days didn’t help and they (XPO) didn’t like it when the factoring companies chased the debts.

I suggested that it was more likely that the operator had failed to deliver its commitments to XPO and the invoices weren’t getting paid for that reason. “That’s not the case” was the response. I asked for evidence that XPO had severed the contract simply because of the use of factoring. Mr Lyon told me that he didn’t have it today but there were email chains saying that XPO would not deal with a company that factored. They were about 2 or 3 months old. He didn’t have access to them at the moment. He could make a few calls and see what was available. I took a short break to allow that to happen.

After the break, Ms Evans told me that her instructions were that the final decision from XPO was delivered on the telephone. There was no email. Mr Lyon’s position now was that the company had been unable to deliver on its commitments to the franchise, pallets had increasingly built up at the warehouse. It wasn’t that drivers were poor; they simply didn’t have the resources to deliver as contracted. Factoring had been the final straw for XPO. A copy of the contract was being looked for.

Turning to the Traffic Examiner’s report in relation to driver Chapman, Mr Lyon had been interviewed. He had supplied data for the period July 2020 to January 2021. He would have used about twenty-five drivers during that period. All work was pallet delivery, multi-drop. All drivers were under the same pressure and only Mr Chapman had offences. There were five vehicles being used at the time. He hadn’t been analysing the data fast enough. Driver cards were downloaded monthly and vehicle units always within the ninety day limit but weren’t always being analysed. It was November when the issue was noticed. Their HR advisers told Mr Lyon that Mr Chapman could not be sacked as it was the first time it had been pointed out to him so he was given a warning. Mr Lyon assumed that the offending would then stop but, when he next analysed vehicle unit data in January, he realised that it hadn’t. Mr Chapman did not attend the disciplinary hearing and left employment. The former transport manager Nigel Rye had a vulnerable mother so did not attend the site. Mr Lyon did the downloading. Mr Lyon’s wife was also vulnerable so that meant Mr Lyon only attended the site when it was needed. It was a very busy time for the business. In hindsight, he would have analysed more frequently. Driver cards were now downloaded weekly and vehicle units on or close to the first of the month. Apart from Mr Chapman, there were only 3 or 4 incidents of missing mileage found by the Traffic Examiner.

Vehicle Examiner Kevin Simms had carried out a maintenance investigation on 29 April on a pre-arranged visit (having previously attended unannounced when Mr Lyon wasn’t there). Mr Simms found that the PMI reports were not good. Mr Lyon told me that MV Commercials who owned the vehicles could not get vehicles booked into a workshop. People who attended on site would not let him keep the original PMI as he wasn’t the owner of the vehicle. Similar shortcomings had been found by a DVSA Examiner in January 2020. They were just in the process of addressing those shortcomings when Covid hit.

The same shortcomings were evident when Mr Simms attended. He had been arguing with the hire company. The only brake tests were at MOT. Covid had got in the way. Wheel nut and torque setting procedures were in place. In between VE Simms making contact and the investigation, they had changed their tyre company and improved the tyre and wheel-torque log.

Every vehicle had been inspected and brake-tested properly by the time that Mr Simms attended. Since then, MV had agreed to use another supplier, ADR, who Mr Simms had said were good. But it had turned out that they didn’t complete the PMI at the time and it was two or three weeks before they got them back. Vehicles had been brake tested ever since. They bought two of the vehicles from MV last October. Through this year, the other three had been off-hired. All went back by May.

I referred to the compliance documents for a vehicle LT19EFM and could not find any reference to brake performance for either May or July. I passed the records to Mr Lyon and asked him to tell me what were the tyre pressures and brake performance. Mr Lyon told me that was why they left ADR Autos, they were not doing what they were meant to do. Mr Lyon told me he hadn’t intended to mislead me when he told me that the vehicles were being brake tested.

I referred Mr Lyon to a PMI for SM65HWB which had nineteen defects identified on a pre-MOT inspection. There was also an inconsistency between the brake figures on the printout and those on the sheet. Mr Lyon told me that was because the technician had copied the figures from the wrong printout. I asked why it was submitted for inspection on 25 June and signed off as roadworthy two weeks later, on 7 July. Mr Lyon told me they had it that long to get it ready for the MOT. The brake test had slipped through unladen but that had since been rectified. I noted that 21 months after the Vehicle Examiner had raised the issue in December 2019, laden brake tests were still not being undertaken. Mr Lyon initially told me that the last two had laden brake tests but it was then conceded that was not the case.

VE Simms noted that the broken exhaust had been noted on nine separate driver defect reports but none had been handed to him during his investigation. Mr Lyon told me that one would have been in there but he wouldn’t add them all for the same defect which was being dealt with. I noted this was a different explanation to that given to the Examiner which was that the defect reports were clipped to timesheets. I asked how a vehicle could be sent out in the condition in which LN64FYV was encountered on 30 March 2021 with the exhaust fractured in two, annotated “pipe fractured, gases not reaching silencer box”. Mr Lyon was at a loss to explain.

7. The evidence of Paul Cookson

Mr Cookson passed his transport manager CPC qualification in January 2016. He had worked for Bidfood. He had undertaken one day’s refresher training the week before the inquiry. He joined the company on 10 May, within two weeks of the maintenance investigation. His first priority was changing the defect reporting system so that the reports were not clipped to timesheets. He had delivered training to the drivers who had responded well.

He had identified on a PMI certain defects that should have been spotted on a pre-shift check. That driver had been disciplined. Load securing had been quite an issue. Missing mileage had been excessive. An audit would be done for EME, a review had been undertaken which gave some recommendations.

I noted the pictures (page 54 and 55) of a load which had shifted and asked whether the drivers had safe systems for working at height. There were some. He had written to and agreed with the maintenance provider for laden brake testing. It was non-negotiable.

8. Closing submissions

Ms Evans closed by confirming that significant regulatory action might be necessary but asked that not impact on Mr Lyon’s repute. I should find that the errors in relation to the warning letter and submitting the wrong Statement of Affairs were genuine. The false records were one rogue driver which was accepted by the Traffic Examiner.

9. CONSIDERATION AND FINDINGS OF FACT

The company is in liquidation and does not have financial standing. Section 27(1)(a) is made out in relation to finance. The Eastern licence does not have an operating centre. Neither has access to vehicles. Section 27(1)(a) is made out in relation to stable establishment.

Neither licence has a transport manager specified but each has one nominated. That nomination has been on hold pending the public inquiry. In the circumstances, it cannot be granted but it would be unreasonable to make an adverse finding in relation to professional competence when a nominee was put forward several months ago. Paul Cookson did not get the time needed to make any significant changes and less still time for those changes to become embedded. He struck me as a competent individual and nothing in this decision should delay his appointment as a transport manager elsewhere.

As Ms Evans rightly submits, the issue here is not the revocation of the licence which is mandatory on, at least, two grounds. The issue here is the repute of Neil Lyon as an individual, and that of the company, he being sole director. There are a number of factors which weigh in the balance.

In the positive, this is not an operator that did not have any systems at all. The Traffic Examiner scored the traffic management systems “mostly satisfactory”. Whilst I find that hard to reconcile with the persistent driving without a card by one driver, I do weigh it in the positive in that systems were in place, if far from fully effective.

The Vehicle Examiner found evidence of a planning system for 2021 and that the operator was aware to check for recalls. Positive comments were also made in relation to site and vehicle security with Mr Lyon apparently aware of the need to minimise the terrorist risk arising potentially arising from unsecured vehicles. Some action was taken between the Examiner making his appointment and the visit itself to ensure that vehicles underwent a reasonable inspection. Mr Cookson was put in the role of transport manager. Mr Lyon invested in professional legal support for the inquiry which is a clear indication that he understands the importance of the issues.

But it is not all a rosy picture. In November 2019, the operator received a prohibition for an insecure load. A DVSA investigation followed where the operator was given guidance on how to secure loads in the future. That appears to have fallen on deaf ears with further load security prohibitions issued on 16 December 2020, 23 March 2021 and 30 March 2021. The gap in prohibitions between November 2019 and December 2020 must be considered against the backdrop of DVSA conducting only very limited inspections during the various Covid lockdowns in 2020. This is a pallet, multi-drop delivery operation where there is a risk that a load which is secured at the start of the day is allowed to become insecure as the day progresses and some pallets are removed. That appears to be the case on 30 March 2021 where a pack of some form of board has been left completely without any load securing. The shrink wrap appears to have failed and the fallen stack of boards is clearly visible in the bulge in the curtains, curtains designed to keep the weather out, not the load in. For an operator running only five vehicles to receive four load security prohibitions in eighteen months over Covid is reflective of a serious loss of control and a palpable unwillingness to take DVSA advice.

A similar picture arises in relation to preventative maintenance inspections including brake testing and the inadequacy of PMI checks being conducted in a yard without proper inspection facilities. Advice was given on this by DVSA Vehicle Examiner Harold Cooper on 26 November 2019. As a result of the positive commitments made by the operator in response to his advice, VE Cooper recommended no further action. VE Cooper could not have envisaged eighteen months later that all the shortcomings he identified and which the operator promised to rectify were still in place for his colleague’s visit.

Neil Lyon blames this dire lack of action on his vehicle supplier. It is the operator’s job to manage the supplier and this argument further wanes when I take in to account the fact that Mr Lyon told me he had bought two vehicles in October 2020, six months before the visit of Vehicle Examiner Simms. He then blames the shortcomings on the lack of workshop availability during Covid. I have to declare an interest. From 17 March 2020 onwards, until about July, I was party to regular, at times more than weekly, industry discussions on how to maintain the fleet with reduced workshop capacity. Present at those discussions were operator representatives, and representatives of franchised and independent workshops. Specific guidance was published and maintained throughout the pandemic period and is available to view on the Traffic Commissioner page on gov.uk. Our page was used because an independent regulator is not subject to Whitehall scrutiny before publishing advice and time was critical. I refer to this not only to point out that clear guidance on the circumstances was available to Mr Lyon had he looked but to note that the workshops told us, that is TCs, DVSA and the Department for Transport, that, albeit very difficult, facilities were available to maintain the fleet at better than the relaxed level of inspection we had published. By autumn 2020, things were largely back to normal. Neil Lyon ought not to blame others without first confirming the facts and his responsibilities.

The records I saw still showed the same deficiencies as those identified by VE Cooper almost two years ago. In relation to the prohibition issued on 30 March 2021 for the fractured exhaust, Mr Lyon told me that the drivers clipped their defect reports to their timesheets and they went through the office and were filed. There is further evidence in the operator’s response to the Vehicle Examiner that the operator had been aware of the defect for thirteen days prior to the prohibition being issued but had not made firm arrangements for repair until the prohibition was issued.

Neil Lyon told me that digital tachograph vehicle units were downloaded every 90 days but not analysed that often. He told me that, in November 2020, he identified a driver routinely pulling his card. He was advised that he could not dismiss the driver on a first offence – it was not the driver’s fault after all that it had taken his employer four months to uncover the routine falsifications. But Mr Lyon then allowed the driver to continue with no heightened level of checking.

Mr Lyon refers to 90 days as the legal maximum for downloading. I will take this opportunity to explain why that is not really what the law says. The ninety days is a backstop for any transport undertaking. What the law requires of an operator is to be found in Section 13C(2) of the Goods Vehicles (Licensing of Operators) Act 1995 which states:

(2) There must be satisfactory arrangements for securing that the following are complied with in the case of vehicles used under the licence—

• Part 6 of the Transport Act 1968 (drivers’ hours);

(b) the applicable Community rules, within the meaning of that Part.

“Satisfactory arrangements” will depend on the nature of the operation. For example, for a builders merchants which is open 8 – 5 Monday to Friday and where the drivers have a 45 minute lunch at the operating centre each day, it may well be appropriate to take advantage of the 90 day backstop. But the operator needs first to determine whether or not such arrangements are satisfactory in those circumstances. In the circumstances of a high-pressure time-sensitive multi-drop operation, to conclude that 90 days is satisfactory is reckless in the extreme, especially when Mr Lyon told me that, in the focal period, approximately twenty-five different drivers had been used. It was the deeply-flawed decision to adopt the 90-day backstop that allowed the pattern of gross offending to develop. That the data was not even then promptly analysed and acted upon, and then arrangements tightened when offending was identified, displays a cavalier disregard for compliance.

So, Mr Lyon makes promises to DVSA Examiners that he does not keep. He blames others for his own deficiencies. He has patently failed to make proper arrangements to keep vehicles fit and serviceable. Section 26(1)(f) is made out in relation to drivers hours and maintenance. Section 26(1)(c) is made out through the copious prohibitions issued.

There is something far more serious about Mr Lyon that I need to consider now. He provided a bundle of evidence prior to the hearing. In that was a statement of affairs for the company dated - but not signed - 1 September 2021. It showed a deficit to HMRC of REDACTED and an overall deficiency of REDACTED. Prior to the hearing, I downloaded the signed version from Companies House. It showed a deficit to HMRC of REDACTED and overall deficiency of REDACTED. Mr Lyon told me that he had simply forwarded the wrong version to his solicitor. In the most positive light, that was a reckless act that put erroneous evidence before me. When set in the context of an individual, in effect, offering up a licence for revocation whilst seeking to maintain a linked licence, it was deeply in Mr Lyon’s interest for me to consider that the failure was relatively modest and there was no inappropriate Crown loss. I find at best Mr Lyon was delinquent in not checking his evidence with the greatest of care but I also find more likely than not that it was a deliberate act to throw me off the track of a director who has left the taxpayer over a REDACTED worse off at a time when national borrowing is at its highest level post-wartime.

At the very start of his evidence, I took Mr Lyon to the warning letter he claimed to have issued to driver Wiecaszek on 1 April citing that driver’s involvement in two load security prohibitions, on 23 and 30 March, just two days before the letter was written. Mr Wiecaszek was not involved in the prohibition on 30 March. VE Simms did mis-assign it to him in his report of 29 April. For two separate individuals independently to make precisely the same error is so extremely unlikely that I find that Mr Lyon fabricated the warning letter dated 1 April whilst creating his response to the Vehicle Examiner. There are further examples of Mr Lyon lying to me. He told me that XPO terminated the contract because they didn’t like the factoring company chasing debts. Only after a break did he accept, as I had already put to him and he had vehemently denied, that the reason the contract was terminated was the company’s failure to honour the terms and the factoring company, chasing debts that were not actually due, was the final straw. Separately, he told me that all vehicles since the Vehicle Examiner’s visit had received laden brake tests. They had not.

So I find that Neil Lyon will say what he thinks he needs to say. Whether or not that is true is a matter of inconvenience that does not trouble him. Can I trust him to comply in future? I absolutely cannot. I have no hesitation in finding his good repute to be lost. Section 27(1) is further made out.

The effect of disqualification was not explicitly put to Mr Lyon during the inquiry. I do not know the impact that might have on the sister company EME Trading Ltd, for example, whether it can survive without an in-house transport operation. I will call EME Trading to a public inquiry to consider its good repute and Mr Lyon separately to the same inquiry to consider his disqualification.

10. DECISION

Pursuant to each individual finding under Section 27(1)(a) of loss of good repute, financial standing and stable establishment, and under each finding under Sections 26(1)(c) and (f), the licences are revoked with immediate effect.

EME Trading Ltd is to be called to a public inquiry to consider its good repute, financial standing, stable establishment and professional competence.

Neil Lyon is called to a conjoined public inquiry to consider his disqualification.

Nothing in this decision should be considered as an adverse finding in relation to Paul Cookson and future applications involving him need not be referred for that reason alone.

Any application involving Nigel Rye is to be referred to a Traffic Commissioner.

Kevin Rooney

Traffic Commissioner

5 October 2021