Caledonian MacBrayne – CalMac – was the operator of the ferry service between Ballycastle and Rathlin Island when the contract came up for renewal and retendering in 2008.
In circumstances generally regarded as unable to bear much investigation - and to the substantial concerns of the ferry route’s users, the contract was awarded to a newstart, Rathlin Island Ferry Company Limited.
CalMac staff were transferred under TUPE arrangements to Rathlin Island Ferry Company.
One member of staff, who had worked for CalMac for 12 years and was in the CalMac pension fund, was amongst the staff transferred to the incoming operator’s responsibility.
Sadly, he died nineteen days later.
For the past four years, Rathlin Island Ferry Company has refused to accept any liability to pay his widow the normal lump sum in relation to the death of her husband under the pension arrangements they were legally obliged to have in place at the point of the transfer of staff under TUPE.
The case eventually went to the Ombudsman who came to his determination at the beginning of August 2012: Ombudsman’s determination on McCurdy v Rathlin Island Ferry Ltd 1 August 2012.
During the hearing, it emerged that Rathlin Island Ferry Company had failed to honour its legal obligations under the staff transfer arrangements and that there was no financial provision in place to cover the death of the member of staff in question.
The Ombudsman found unequivocally in favour of the widow, saying: ‘The complaint should be upheld against Rathlin Island Ferry Ltd because they failed to make appropriate arrangements when Mr McCurdy’s employment was TUPE transferred from Caledonian MacBrayne (Calmac) to Rathlin Island Ferry Ltd.’
The determination notes that ‘Some months after Mr McCurdy’s death, Rathlin Island Ferry Ltd established a scheme for the provision of lump sums on death, insured with AVIVA.’
In contrast, by December 2008, CalMac had honoured all of the residual financial obligations of their pension fund to the widow of their former member of staff.
The Ombudsman ordered that Rathlin Island Ferry Ltd should:
’16: Within 21 days of this determination Rathlin Island Ferry Ltd are to pay Mrs McCurdy £101,668 plus simple interest at the rate for the time being declared by the reference banks from 17 July 2008 to the date of payment.
’17: In the event that any tax is payable on that sum, Rathlin Island Ferry are to pay such sum that ensures that the net amount is equal to the sum calculated under the previous paragraph.
”18: Also within 21 days of this determination Rathlin Island Ferry Ltd are to pay Mrs McCurdy £750 as compensation for the significant distress and inconvenience caused.’
The determination was published on 1st August, meaning that the ferry company was legally obliged to fulfil these financial obligations to Mr McCurdy’s widow by 21st August.
Given the plea to the Ombudsman of inability to pay, it is unlikely that this obligation has been met. If it has not been, the problem is that the law is not equipped or interested to pursue the implementation of such judgments.
It will be left to the widow, yet again, to take action through the courts to try to secure the payment she is due. And this is over four years already after the sudden death of her husband. Evidence – given below, indicates that the company has been in financial trouble from the start of the operation, has a pedigree of reneging on such contracts. The likelihood is that it will either not be around to pay the widow or be put into administration when payment is pursued.
Bringing this home to the west coast
The RMT union has recently balloted its members on CalMac’s staff on their attitude to strike action in relation to the less-than-uncertain intentions of the Scottish Government in the coming tendering of the Clyde and Hebridean routes – recent developments in which we will be publishing on tomorrow.
We understand that of the 292 CalMac staff balloted by RMT, 260 [89%] voted for strike action.
The experience of the Rathlin-Ballycastle ferry service in the change of contract from a public sector operator to a private sector one, with staff transferred under the supposed protection of TUPE, could hardly demonstrate more clearly the range of things that can go wrong.
No one oversees whether commitments made by a successful bidder are put in place and put in place in due time.
Over ambitious entrepreneurs are often competing for tenders scored heavily in favour of price and – as is currently alleged in the case of the UK Government’s award of the west coast rail contract to First, government ministers and civil servants do not necessarily have the skills nor often the interest to interrogate a financially attractive bid to establish its achievability. That said, the difference in price between the CalMac and the Rathlin Island Ferry Company bids was a mere £5,125. Was this seriously ‘best value’?
In the case of the Rathlin ferry contract it has been alleged and not refuted that Northern Ireland’s Department for Regional Development and Department for Finance and Personnel did not first carry out the proper checks on the financial status of the Rathlin Island Ferry Company nor ask to see fully audited accounts before they awarded the contract and let them loose.
The company’s [Small] accounts filed for 2009-10 showed that it had lost money in its first year of operation and in this, its second year, had lost very substantially more. By the end of March 2010 its liabilities exceeded its assets, which with other matters produced a quite likely scenario that it would cease to be a going concern.
This situation led its auditor to add a fairly extraordinary ‘Expression of Matter’ to the accounts:
‘In forming our opinion we have considered the adequacy of the disclosures made in the financial statements concerning the company’s ability to continue as a going concern The company incurred a net loss during the period ended 31 March 2010 and as of that date the company’s current liabilities exceeded its total assets. These conditions along with other matters as set forth in Note 11 to the financial statements indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern The financial statements do not include any adjustments that would result from a failure to continue as a going concern. Details of the circumstances relating to this emphasis of matter are described in Note 11. Our opinion is not qualified in this respect.’
This last sentence means – even more extraordinarily, that in spite of the seriousness of the situation described by the auditor in his ‘Expression of Matter’, he has chosen not to qualify the accounts.
Any auditor would only arrive at such a decision if there were guarantees of which he was aware but which would not show in the ‘Small’ accounts the company had opted to submit.
The mystery is that two years on from these accounts the company is still in operation. Its solvency appears more than questionable. It told the Ombudsman it could not afford to pay the widow of its former member of staff what, during his hearing , it finally admitted it was liable to pay.
The route it could not make pay in the first two years, even with a NI government subsidy declared to be £650,000 per annum, is unlikely, out of the blue, to have become roaringly profitable to the extent that it has lifted the company out of danger.
It is not impossible – theoretically – that having pinned its reputation to a dud bet on no secure evidence, the NI government has, under some pretext, come to a new arrangement on the subsidy for the route.
Interestingly, the NI government does not appear to be making any contingency arrangements to cover the continuing provision of this lifeline service, should this operator turn in the contract. What could be the basis for such confidence?
Ciaran O’Driscoll, owner of Rathlin Island Ferry Company has form in this respect, In 2007, the year before he was awarded the Rathlin-Ballycastle contract. He won a five year contract under another company from the government of the Republic of Ireland. This was for the route from Baltimore to Cape Clear Island, where he and his family members live.
This company reneged on the Cape Clear contract in February 2010, towards the end of the period of the worrying Rathlin Island Ferry Company accounts referred to above. The Irish government had to contract another operator for a nine month intermediate term while they let a new contract for the route.
In the absence of contingency arrangements to cover any early termination of the existing contract – which runs to 2014, the Northern Ireland government must know something no one else does or is optimistic beyond reason,
The company office in Ballycastle is left unmanned when the Directors – who live on the most southerly island in Ireland in any case – are on holiday. When CalMac ran this route, locals attest to the fact that they were required by the NI government to keep the office manned.
RMT members currently employed by CalMac on any of the Clyde and Hebridean ferry services and having voted in at 89% majority to take strike action as and when advised by their union, should, with the RMT, look long and hard at this example of just what can go wrong.
They should consider just how insecure can be the foundation of governmental decision taking in the award of contracts. They should also reflect on the absence of any real protection for the vulnerable – including as with Mrs McCurdy above, the bereaved – should kite flying contracts unravel.
Evidence of potential failure ignored
The Rathlin Island Ferry Company’s registered office was – and is – c/o their Independent Auditor’s office in Ballycastle, with its Company Secretary and all its directors extra-territorials, living on Cape Clear Island in County Cork in the Republic of Ireland, offshore the opposite end of the island of Ireland.
The due start of its operation was on 1st June 2008 but the company:
- had no boat at the time of the award of the contract;
- nor, by the due operational handover date, did it have an International Safety Management [ISM] System, without which they could not legally operate;
- nor did it have a ticketing system;
- nor did it have an implementation plan, indemnity bond, payroll set up, health and safety policies/manuals or risk assessments for vessels to be used;
- nor did it have Personal Protection Equipment for its staff;
- nor – in a situation painfully similar to the recent SPT contracting of the Kilcreggan-Gourock ferry, did it have the other passenger boat promised in its bid.
CalMac had to carry the service for a further month. In the meantime, the new company leased the MV Canna from Caledonian Maritime Assets Limited [CMAL] and CalMac were asked by the Northern Ireland Department of Regional Development to copy all their stuff and hand it over, including their trading name of Rathlin Ferries Ltd.
It’s interesting to note that, in the case of the coming tendering of Scotland’s west coast Clyde and Hebridean Ferry Services, CMAL, as we have already reported, has spent the last year or so having a menu of separate contracts drawn up for the unbundled services it will then supply to allcomers winning ferry route contracts – including, as a separate matter, the Caledonian MacBrayne branding, This leave open the adoption of this branding as optional.
A curious little insight into the initial substance of the company is a first hand report that it recovered from skips the staff Personal Protection Equipment discarded by the departing CalMac.
A footnote for Argyll
A surprise coincidence brings this story home to Argyll in another connection to Clydelink’s bid for the Kilcreggan to Gourock service.
The back up boat Clydelink have bought, which may well come into service for the winter season, is the doughty if short-of-enough-winter-inside-seating Cailin Oir, often seen on a mooring in the Gare Loch. We know that the Cailin Oir came to the Clyde from running the testing Baltimore to Cape Clear Island route on the south coast of Ireland. It was the Cailin Oir who took on the nine month interim service after the Rathlin Island Ferry Company’s owner, Ciaran O’Driscoll’s took his other company into defaulting on the Cape Clear Island contract in February 2010.