A regular issue that arises with commercial vehicle operators (both PSV and HGV) that we represent at Public Inquiry before the Traffic Commissioner, is the legal entity of the “person” or business that holds the operators licence.
Often the decision of a Traffic Commissioner to hold a Public Inquiry is due to other reasons, the main one being unsatisfactory maintenance. But when operators arrive for the hearing it quickly becomes apparent that the licence is in the name of the wrong legal entity and they have been operating vehicles without a valid licence. This is a problem that is often lost on operators until it’s pointed out to them by a lawyer or, even worse, the Traffic Commissioners themselves.
The most common examples of when this problem arises are:
- Where an operator begins in business trading as a sole trader but later involves another partner in the business (thereby becoming a partnership)
- Where a sole trader or partnership later incorporates the business into a limited company. Accountants will often advise sole traders that there are advantages to operating as a limited company due to legal protection this affords (and this is often true). However, accountants often fail to advise about the impact this has on the operators licence.
- When a child takes over the running of a family business from a parent but continues using their parent’s operators’ licence.
- Where an operators licence is held by only one of a group of linked businesses but other businesses in the group are operating vehicles.
There are a number of factors that will help a Traffic Commissioner decide who is really operating or “using” the vehicles. They include who is paying for the fuel, driver’s wages, maintenance and other costs linked to the vehicles? Who do drivers report to for instructions? Who is entering the contract and invoicing the customers? Who is the customer actually paying?
Often the truth unravels when operators produce their finances in the form of statements for the business bank account. Three months (sometimes six months) of bank statements must be produced by every operator attending a Public Inquiry as a matter of routine, but in fact can be requested by the Traffic Commissioner at any time as operators must demonstrate financial standing throughout the life time of the licence, not just when they first apply for one or are called to Public Inquiry.
An operator’s licence is not transferrable from one business entity or “person” to another. When the legal entity of a business changes then an application for a new operators licence must be made immediately.
It is not uncommon for commercial vehicle operators to continue operating vehicles on licences in the wrong name, sometimes for several years, ignorant of the fact they are breaking the law by operating vehicles without a valid licence. Operators often only become aware of the issue when it’s pointed out by VOSA or when taking advice from a specialist transport lawyer in preparation for a Public Inquiry.
At Public Inquiry the whole transport operation is placed under the microscope, not just the isolated issues that led to the Public Inquiry being called in the first place.
Operating vehicles without a valid licence in the correct name is both a serious criminal offence (for which you could face a criminal prosecution) and something which can affect repute as an operator. At Public Inquiry, the “old” licence will usually be revoked but it can also affect the Traffic Commissioner’s decision to grant you a new licence in the name of the correct legal entity.
Dealing with this issue is far more problematic after you have been called to a Public Inquiry, not least of all because there may not be enough time to apply for a new licence before the old one gets revoked. This could leave the operator without a licence at all in the meantime, leading to loss of customers, loss of employees and the end of the business.
Stephensons’ road transport team deals with this issue on a regular basis and advises operators on operator licence compliance, provides representation at Public Inquiry and in connection with criminal investigations and prosecutions for transport offences by the police, VOSA and CPS. We operate a 24 hour advice line for transport companies requiring specialist advice. If you are an operator and in any doubt about the whether your licence is in the correct name or not, have had an unsatisfactory maintenance investigation or incident involving the police or VOSA or are expecting to be called to a Public Inquiry then call our road transport law team for advice straight away on 01616 966 229.
By Sean Joyce, partner and head of the road transport law team