Decision

Written decision for Domain Transport Ltd (OC2012726) and Michael Fredrick Harry Swain – transport manager

Published 9 October 2020

In the North Western Traffic Area.

Redacted decision of the Traffic Commissioner for the North West of England.

In the matter of the Goods Vehicles (Licensing of Operators) Act 1995 (‘The Act’).

Public Inquiry held at Golborne on 27 August 2020.

1. Decision

On findings under S.26 (1) (b), (f) and (h) of the Act, I make the following direction in respect of this operator’s licence.

I find that the operator lacks financial standing. I grant a period of grace to 30 November 2020 to allow the operator to demonstrate that the required level of financial standing can be continuously met.

The licence is curtailed from 20 vehicles and 25 trailers to 17 vehicles and 25 trailers. This direction will take effect from 23:45 hours on Friday 11 September 2020 and will last until 23:45 hours on Friday 25 September 2020.

I direct that operator to inform the Office of the Traffic Commissioner in writing by 11 September 2020 of the registration number of the vehicles to be removed from operations as a result of the curtailment of its authority to 17 vehicles. I also direct in accordance with the provisions of section 26(6) of the Act that the vehicles in question should not be used under any other operator licence during the period the curtailment is in force.

There will be undertakings set down as agreed by the operator and as follows:

1. The operator will provide financial evidence in the name of the operator for the period from 1 September 2020 to 30 November 2020 to the Office of the Traffic Commissioner before 15 December 2020. This must show that the operator has met the required level of available finance throughout the period by reference to an average balance, dependant on the rates applicable at that time.

2. The operator will arrange for maintenance and drivers’ hours compliance systems to be audited by an independent third party in July 2021. Audit reports will be prepared, acted upon and retained for at least 2 years. A copy of the report will be forwarded to the Office of the Traffic Commissioner before 15 August 2021 together with the Operator’s proposals for implementing its recommendations. The audit report should expressly comment on progress against the recommendations in the Fosters Tachograph audit report dated 20 August 2020.

3. By 30 November 2020, Michael Swain will attend an operator licence awareness training course run by a trade association (Logistics UK or RHA) or by another accredited training provider. Attendance may be in person or by participating in a virtual online course run by a training provider whose virtual course satisfies the criteria for such courses established by the traffic commissioners. A copy of the certificate of attendance will be forwarded to the Office of the Traffic Commissioner before 15 December 2020.

There will be one recorded Statement of Intent:

1. The operator will fully implement all the recommendations contained in the audit reports of Foster Tachographs dated 20 August 2020 by no later than 30 June 2021.

1.1 Michael Fredrick Harry Swain – Transport Manager

I find his repute is not lost.

2. Background

Domain Transport Ltd is the holder of a Standard National Goods Vehicle operator’s licence OC2012726 authorising the use of 20 vehicles and 25 trailers (with 19 vehicles currently in possession). The licence was granted on 7 June 2018.

The company has 3 directors one of whom, Michael Fredrick John Swain, is the appointed Transport Manager (TM).

This operator has no previous regulatory history.

On 24 October 2019 one of the operator’s vehicles collided with a railway bridge near Lancaster prompting an investigation. The bridge strike came to the Traffic Commissioner’s attention following a notification by Network Rail; the event was not reported by the operator itself. During the investigation, it became apparent that changes to the company’s directorship involving Mr Swain had not been notified to the Office of the Traffic Commissioner (OTC).

The calling-in letter referred to failures to comply with the licence condition to notify of events which affect good repute and to notify material changes in the circumstances of the licence holder namely the bridge strike and the change of director. In addition, the repute of Michael Swain as a TM was also set out as an issue for consideration.

3. The Hearing

The Public Inquiry was listed before me at Golborne on 27 August 2020. Michael Swain appeared and gave evidence on behalf of the operator as director and TM. The operator and Mr Swain were legally represented by Mr Scott Bell of Backhouse Jones solicitors.

Prior to the Hearing, I was served with bank statements for the operator covering the most recent 3-month period. I was also served with an audit report dated 20 August 2020 which the operator had commissioned of its own initiative from Foster’s Tachographs.

Michael Swain gave evidence that he held 50% of the shareholding in the operator with the remainder divided equally between the two other directors. Those other directors had a consultancy and advisory role, but Mr Swain confirmed he was the person with primary responsibility for the day to day management of the operator.

Mr Swain has been involved in the management of large standard operator’s licence holding companies for nearly 40 years. Mr Swain gained his Certificate of Professional Competence as a Transport Manager in 1984. Prior to the Public Inquiry, Mr Swain attended a two-day CPC refresher course in May 2020.

There does not appear to have been any adverse regulatory history in relation to the previous licences involving Mr Swain as a licence holder, director or TM.

The evidence I heard concerned the issues of financial standing, the changes in directorship and the circumstances of the bridge strike including the operator and TM’s approach to risk assessment and route planning responsibilities. I detail the evidence I heard in relation to each issue and my findings below.

4. Financial Standing

For a 20 vehicle licence the operator must show ready availability of £92,500.

The bank statements submitted for the operator’s NatWest business current account for the period 21 May 2020 to 19 August 2020 showed an average available balance of £[REDACTED]. This fell short of the level of financial standing required and was only sufficient for an authority for 17 vehicles.

I was not presented with any other financial evidence. Mr Swain confirmed that there was no overdraft facility on the account and the operator had chosen to avoid reliance on factoring or similar arrangements.

It was noted that the closing balance as at 19 August 2020 was well in excess of the required amount. This was as a result of loan payments made by [REDACTED] in the previous week totalling £[REDACTED]. This also had the effect of increasing the 3-month average balance.

Mr Swain explained that the operator’s cashflow had been impacted during the period of the pandemic with delayed payment of invoices from customers. The directors [REDACTED].

Mr Swain was confident that as the effects of the pandemic restrictions eased the operator’s financial standing would be restored going through the autumn. On that basis I was asked to consider granting a period of grace.

5. Notification of changes of directors

The operator was first incorporated in February 2016 and, according to the Companies House record, Mr Swain was appointed as director in August 2017. Mr Swain expressed some surprise when that was brought to his attention at the Hearing as he believed he had been a director from the outset, being the person instrumental in starting the company.

Mr Swain was the director who signed the company’s application for an operator’s licence in 2018. However, on 1 September 2018 he resigned as a director and this change was recorded at Companies House in October 2018. His resignation was not notified to the OTC.

On 28 September 2018 the operator submitted an application to increase its authority. This was signed by Mr Swain as director of the operator despite his resignation earlier that month. As the change had not been recorded by Companies House, the accuracy of this statement was not challenged at the time by those processing the application.

Mr Swain was reappointed as a director on 1 January 2019. This change was not reported to the OTC at the time and was also not recorded at Companies House until July 2019.

In March 2019 Mr Swain submitted a further application for a variation of the licence signed in his capacity as director. As he was not, at that time, recorded as director at Companies House, the OTC wrote to the other directors to query this declaration. A revised declaration was subsequently submitted by the director Pamela Hulme, but no action was taken to record Mr Swain’s appointment as director on the licence.

In February 2020, the two directors named on the licence at that time were sent a letter by OTC requesting information about the bridge strike incident. Mr Swain sent a letter in response on 3 March 2020 explaining he had been reappointed as director in January 2020. His letter offered no explanation for the failure to make that notification sooner.

In evidence, Mr Swain explained that he had been advised to remove himself as a director of the operator due to taxation reasons linked to his other business interests. That advice was reviewed subsequently, and Mr Swain was reappointed.

Mr Swain maintained he was unaware at the time of the need to notify such changes in directorship to the OTC. The signing of the variation in September 2018 was an error. Mr Swain also expressed surprise that his co-director Pamela Hulme had not pursued the matter of his recording as director in March 2019 when it was brought to her attention. Mr Swain maintained there was no other reason for the changes in directorship beyond the accountancy advice and that neither he nor the company had derived any improper advantage from those changes.

6. Bridge Strike

The bridge strike occurred on 24 October 2019. The operator’s driver was heading to Glasson Docks, Lancaster. This was not a regular route and it had been planned by the driver in consultation with the customer whose load was being carried.

It appears the driver encountered an unexpected road closure in Galgate and followed the diversion instructions along a single-track road north of the village towards Lancaster. The driver appears to have failed to take heed of signs warning that the road was not suitable for long vehicles. He did not seek guidance from the operator or TM before taking the diversion route.

At the end of the single-track road and just before the junction with the A6, the driver had to negotiate a narrow bridge over the West Coast mainline. As he did so, the trailer collided with the bridge structure causing the debris to fall onto the railway line area below. Fortunately a train was not passing under the bridge at the time and the incident was notified to the emergency services with sufficient time for the next service due to be halted. The collision caused significant disruption with the line closed for some time and then restricted speed services running for much of the day. Mr Swain confirmed in evidence that Network Rail were pursuing a claim for compensation in the region of £[REDACTED] which was being handled by the operator’s insurers.

The operator had investigated the incident and issued the driver with a written warning for his failure to seek instructions on encountering the diversion. The driver will be called to a Driver Conduct Hearing in due course to consider action on his vocational entitlement.

Mr Swain said that he had not reported the incident to OTC as he was not aware of a requirement to do so. He also claimed that he understood only the police and Network Rail were the relevant authorities and, once they had indicated that no further action would be taken, he did not consider it was necessary to report the matter to OTC.

Since the incident, the company had adopted a detailed policy on avoiding bridge strikes, a copy of which I have seen. Arrangements had been made for the company’s drivers to be given face-to-face training on the issue and safe route planning in general.

Mr Swain said that he ensured all the company’s vehicles were equipped with HGV specific satellite navigation systems. Mr Swain also insisted that the operator’s approach to route planning went beyond simply providing the drivers with a destination address. He gave an example of detailed planning if a driver were to undertake a long journey to an unfamiliar location. However he was less clear on how the operator and TM approached the issue of assessing the risk to more routine journeys.

During the Inquiry Mr Bell, on behalf of the operator, drew my attention to a more recent bridge strike incident which had occurred on 7 August 2020 in Wiltshire involving one of the operator’s vehicles and drivers. As I had no information about this incident beyond that presented to me by Mr Swain, I do not make any findings about that particular incident. I reserve the right to take action in relation to that incident if further investigation reveals that is justified.

7. Audit

In advance of the Public Inquiry, the operator had commissioned an audit of its maintenance and traffic systems by Fosters Tachographs.

I give the operator credit for acting on its own initiative to seek the audit and present it in evidence.

The finds of the audit were largely positive, but some issues were identified which resulted in recommendations. These were not so significant that they would have resulted in my considering immediate regulatory action was needed but they do nevertheless require attention.

I was reassured by the indication that a programme of frequent audits has been agreed with Fosters Tachographs to monitor progress on the recommendations.

Mr Swain accepted all the recommendations in the audit report and offered a Statement of Intent that they would be implemented in full.

The vehicle involved in the bridge strike was PL66 VVC. This vehicle was also one of those for which a sample of maintenance records had been supplied. The vehicle was not recorded on the operator’s licence. It was established during the Hearing that its details had been incorrectly recorded on the Vehicle Operator Licence system. Mr Swain explained that he was not the most literate of IT users and as with other aspects of his evidence made reference to the reliance he put on other persons to support him in this regard.

8. Consideration

I formally record a finding that the operator lacks financial standing as at the date of the Public Inquiry on 27 August 2020. This is based on the 3-month average available figure amount calculated from the financial evidence provided by the operator. However I am satisfied that it is appropriate to grant a period of grace so that the operator can demonstrate that financial standing can be met on a permanent basis. I have considered the guidance in 2014/008 Duncan McKee to consider whether, “granting a period of grace will be worthwhile, and that there are reasonable prospects for a good outcome.” Based on the evidence I have heard from Mr Swain, and the closing balance and other trends shown in the bank statements, I am content that the questions posed in McKee can be answered in the affirmative. I will grant the period of grace for an initial period of 4 months (rounded up for the ease of reference to 30 November 2020) to allow the operator to demonstrate that the required level of financial standing can be continuously met. This is to be supported by an undertaking to provide further evidence of financial standing.

I am content that no immediate action is required in relation to the matters referred to in the audit provided an undertaking is given for a follow up audit in 12 months’ time supported by the Statement of Intent that the recommendations of the August 2020 audit will be implemented.

I find that Mr Swain’s resignation as director and his re-appointment were both material changes to the licence which ought to have been notified.

In submissions prior to the Public Inquiry it was argued by Mr Bell that neither the legislation nor the licence contained any express requirement for changes in directorship to be notified to the Traffic Commissioner. That argument was not pursued in substance at the Public Inquiry.

Nevertheless, for the avoidance of doubt, I make it clear that I find the resignation and/or appointment of a director is a material change in the circumstances of the licence holder which is required to be notified regardless of the reasons for those changes. The general conditions of a Standard National Operator’s Licence attached under Section 22 of the Act include a requirement to notify the Traffic Commissioner within 28 days of any changes in the ownership of the business and events which affect the good repute of the licence holder and TM.

Whilst the general conditions do not seek to particularise the detail of every change or event that may require notification, further guidance is provided by the Senior Traffic Commissioner’s Statutory Document Number 1 “Good Repute and Fitness” which lists the changes that must be notified. This clearly states that any changes in director must be notified as soon as possible and in any event, within 28 days (see table at Para 68). This guidance is also repeated at para 97 of the Senior Traffic Commissioner’s Statutory Document Number 5 “Legal Entities”

Operators should also be aware of the requirement to notify any changes of directors as it is further set out in the DVSA Goods Vehicle Operators Licensing Guide document.

Whilst I find there was a failure to notify changes of directorship in this operator’s case, I accept that it was the result of oversight and not a deliberate attempt to mislead the Traffic Commissioner or conceal the true facts. I also accept that no advantage or benefit flowed to the operator from the failure to notify.

However the oversight to record the changes does suggest a significant lack of care by the operator to its approach to complying with all aspects of the licensing regime and ensuing the licence record was kept updated. There were two changes at different times which ought to have been notified. I also take into consideration the fact that the operator could have rectified the position much sooner in March 2019 when the variation application was rejected but failed to act at that point.

Similarly I find the bridge strike incident ought to have been notified by the operator to OTC as an event which could affect the good repute of the licence holder and transport manager. It was a significant incident involving one of the operator’s vehicles and employed drivers which could have had far more serious consequences and, as it was, caused extensive disruption to mainline rail services. I would have expected a conscientious operator and transport manager to have considered it would be good practice to inform my office of such an incident at the earliest opportunity.

Mr Swain’s evidence that he was not previously aware of the concern about the prevalence of bridge strikes within the industry was surprising given his experience within the industry. Nevertheless, I am reassured that he is now in no doubt about the gravity of such incidents and the expectations of operators and TMs to manage the risk of bridge strikes.

The incorrect recording of one vehicle on the licence is in itself a minor issue that would not normally warrant any further action beyond rectification. I do mention that issue here as it is consistent with the impression given that the operator and TM’s approach to maintaining the licence records is lacking in care and attention.

I do not make any adverse findings against the operator and Mr Swain as TM in relation to the cause of the bridge strike in October 2019. However, scrutiny of that incident has raised wider questions about the operator and TM’s approach to avoiding such incidents in future.

I take as a positive the evidence provided of the training for drivers on avoiding bridge strikes and the adoption of a detailed bridge strike policy. However, I remain concerned that much of the responsibility for safe route planning is placed on the drivers with insufficient information about the action that the operator and TM are taking to assess the risk in journeys undertaken by their drivers and vehicles.

I remind the operator and Mr Swain of the guidance provided by the Upper Tribunal in the recent decision of Bridgestep Limited and Tom Bridge T/2019/54 that, “it is incumbent upon the transport manager and the company to ensure that the company’s vehicles are operated without risk to road safety and in particular, that the risk of bridge strikes, which could have catastrophic consequences, should be assessed and routes planned in advance to eliminate that risk.”

I recommend that the operator reviews its policies on route planning and considers if its approach to risk assessment could be better documented.

In reaching my decision, in addition to the positive features discussed above, I have given due weight to the operator’s previous lack of an adverse history, the absence of evidence of road safety critical defects or significant prohibitions and the above average first time pass rate at MOT.

I have balanced this against the negative factors that the matters considered at the Public Inquiry revealed ineffective management control and carelessness in the approach to compliance with the operator’s licence.

I consider that ‘moderate to serious’ regulatory action against the licence is justified, having taken account of the Senior Traffic Commissioner’s Guidance Document No.10 “The Principles of Decision-Making and the Concept of Proportionality”. Curtailment of the licence that limits the size of the fleet that may be operated under the licence is appropriate here. The fleet capable of use at one time will be cut by 3 vehicles to 17 vehicles for a period of 2 weeks. This represents a reduction of 2 vehicles in practice as only 19 vehicles are currently in possession.

I find that Mr Swain’s good repute as TM is not lost. However, during his evidence, Mr Swain expressed that he was considering taking a step back from the business in around 18 months’ time and appointing another TM. Whilst I make no direction in this regard, I do record my concern that Mr Swain may be struggling to balance his role as the company’s figurehead with his duties as TM. There is also the factor of the challenge that he appears to find with the use of modern IT systems. I would encourage the operator to consider if it is prudent to make an earlier decision on the appointment of a replacement or additional TM.

Mr Swain to his credit has attended a CPC refresher course as TM in anticipation of the Public Inquiry. I also consider that, as director, he would benefit from an Operator Licence Awareness course and I seek an undertaking that Mr Swain attend such a course.

The licence is curtailed from 20 vehicles and 25 trailers to 17 vehicles and 25 trailers. This direction will take effect from 23:45 hours on Friday 11 September 2020 and will last until 23:45 hours on Friday 25 September 2020.

I further direct that the operator will inform the Office of the Traffic Commissioner, in writing by 11 September 2020, of the registration number of the vehicles to be removed from operations as a result of the curtailment of its authority to 17 vehicles. The vehicles in question should not be used under any other operator licence during the period the curtailment is in force.

There will be undertakings set down as agreed by Mr Swain on behalf of the operator at the Hearing and as follows:

1. The operator will provide financial evidence, in the name of the operator, for the period from 1 September 2020 to 30 November 2020 to the Office of the Traffic Commissioner before 15 December 2020. This must show that the operator has met the required level of available finance throughout the period by reference to an average balance, dependant on the rates applicable at that time;

2. The operator will arrange for maintenance and traffic systems, to be audited by an independent third party in July 2021. Audit reports will be prepared, acted upon, and retained for at least 2 years. A copy of the report will be forwarded to the Office of the Traffic Commissioner before 15 August 2021 together with the Operator’s proposals for implementing its recommendations. The audit report should expressly comment on progress against the recommendations in the Fosters Tachograph audit report dated 20 August 2020;

3. By 30 November 2020, Michael Swain will attend an Operator Licence Awareness Training course run by a trade association (Logistics UK or RHA) or by another accredited training provider. Attendance may be in person or by participating in a virtual online course run by a training provider whose virtual course satisfies the criteria for such courses established by the traffic commissioners. A copy of the certificate of attendance will be forwarded to the Office of the Traffic Commissioner before 15 December 2020.

There will be recorded one statement of intent:

1. The operator will fully implement all the recommendations contained in the audit reports of Foster Tachographs dated 20 August 2020 by no later than 30 June 2021.

I make these findings under S.26 (1)(b), (f) and (h) of the Act.

Gerallt Evans

Traffic Commissioner

for the North West of England

27 August 2020