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Flightpath Aviation article: students lose prepayments

An article in May’s UK Pilot magazine, quickly summarised.

It’s an old story: students pay for a course in advance, then after delays ascribed to maintenance and weather, and demands for more money, the flying school disappears. Several LAPL students are claiming a total of £60k, and one FI £28k. A couple of quotations:

“…forced payments to be made in cash”.

“…worried because an aircraft that was supposedly in maintenance was suddenly made available for a flight after her son complained”

As a DTO, the school was overseen by the CAA, with a specific inspector assigned to them. Interestingly, the CAA response to student complaints admitted financial impropriety but judged they cannot intervene on a purely a financial matter if there are no safety considerations.
The point the article is making is that the CAA has a Fitness of Character policy which should have been followed as they had been informed of safety concerns.

My take:
Reading up on the character policy, it’s not supported by legislation and is therefore discretionary. I don’t think there’s any recourse under it.

A private individual can make a claim for monetary loss through the county court, but a Ltd (limited company) limits liability for its owners. Can malpractice type claims against an individual be made by private persons? I feel this is the point the character policy is intended to address.

I suspect it’s easier to use fitness of character to prevent an application than it is to disbar an existing licensee. Cynically, the CAA is mainly interested in the payment of fees and the avoidance of high-profile deaths.

I really feel for the students who have lost their money and their dreams. I’m torn whether the regulator should become involved because any action will probably only add more cost and restrictions to the law-abiding. UK GA really needs a strong advocacy group.

The obvious lesson: don’t pay up front, or at least use a credit card.

EGHO-LFQF-KCLW, United Kingdom

Agreed – NEVER EVER pay up in front other than by credit card and yet there are still schools asking for pre-payment. To be avoided like the plague.

EHLE / Lelystad, Netherlands, Netherlands

Peter_Mundy wrote:

Agreed – NEVER EVER pay up in front other than by credit card and yet there are still schools asking for pre-payment. To be avoided like the plague.

Agreed – I think this goes for almost everything in life!

Fly more.
LSGY, Switzerland

I thought the Pilot article totally missed the mark to be honest – the Fitness of character policy is for individuals that the CAA licences or approves as post holders in accordance with legislation. A DTO is a declaration, there is no approval and personnel are designated by the DTO not approved.

Posts are personal views only.
Oxfordshire, United Kingdom

It’s hard for CAA to regulate business and as far as everyone is concerned finances are not their business, they are only concerned about safety and licensing fees, they never stepped in even cases of DTO/ATO going into bankruptcy, let alone frauds or scams

For airlines or retail package holidays, the CAA have a financial mandate to protect “stuck travellers” (it’s a fund that everyone pay for in their tickets) ATOL.

I paid Airways College upfront for my ATPL theory course before they went bankrupt, many people were in the same bag, I have been in those mailing list of students who lost it (including those who paid 60k upfront for integrated training, some managed to get some % of money back in courts), for those doing theory, I think DGAC managed to get some of them to sit exams with partial course or recognise course transfer to another ATO, I assumed the money was gone…

Last Edited by Ibra at 11 May 21:14
Paris/Essex, France/UK, United Kingdom

The concept of a Limited Company is quite heavily protected in all civilised countries. Very little one can do about this sort of thing.

The reason so many people pay in advance is because the schools offer them a discount.

What you can get Directors for is trading while insolvent but the burden of proof is nontrivial and expensive, and anyway does not prevent customers losing all their money. And a disqualified Director can start up again the following day, with some friend or family member in his previous post.

Administrator
Shoreham EGKA, United Kingdom

The concept of a Limited Company is quite heavily protected in all civilised countries. Very little one can do about this sort of thing.

I believe this statement to be absolute.
The ‘corporate veil’ has NEVER, as far as I am aware, been pierced: Commerce in the free world would collapse if it was. [ ‘Insolvent trading’ , as Peter rightly says, Is another matter.]
Interestingly, when a plane which is part of a Ltd company is ever discussed among pilots, many claim it gives no extra protection whatever. But the same criteria surely applies: Has there ever been a single case where it’s corporate veil has been pierced?

Last Edited by Peter_G at 12 May 15:22
Rochester, UK, United Kingdom

I’m not sure what you mean by “insolvent trading” being another matter.

We certainly have a concept of reckless trading and fraudulent trading which both involve insolvency. There have been plenty of cases in Ireland where the corporate veil has been pierced as a result of such activities. Taking deposits from students when you knew you wouldn’t be able to provide the services, or should have known, could well be examples of such and if successfully pursued, could result in the corporate veil being pierced.

They are of course usually challenged and are expensive undertakings. The sums involved have to be worth fighting for, and you have to have some confidence that if you are successful that the person has the funds to pay the debt.

EIWT Weston, Ireland

I’m not sure what you mean by “insolvent trading” being another matter.

“ Trading whilst insolvent is a legal term used to describe a business which continues trading when it cannot pay its debts and its liabilities are greater than its assets. This action can lead to a breach of several provisions of the Insolvency Act 1986.”

Rochester, UK, United Kingdom

The practical problem with going after Directors of Ltd Companies, even where they did something pretty obvious, is that you can’t use the standard street corner solicitor for corporate litigation. A good lawyer will start at 10k, and as a result 5 digit amounts aren’t worth chasing.

One way to establish a personal liability for company debts would be if a personal warranty was made e.g. a Director of an FTO said to a customer “your money will be held in escrow”. This is pretty unlikely; the sort of people who run FTOs are old foxes and aren’t going to make a basic mistake like that.

Administrator
Shoreham EGKA, United Kingdom
11 Posts
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