Strand, London, WC2A 2LL
B e f o r e :
| GEOFFREY RUTHERFORD WEIR and Others
|- and -
|(1) THE SECRETARY OF STATE FOR TRANSPORT
(2) THE DEPARTMENT FOR TRANSPORT
Mr Jonathan Sumption Q.C. and Mr Pushpinder Saini (instructed by Clyde & Co.) for the Defendants
Hearing dates: 27th June 2005 - 1st July 2005, 4th July 2005 8th July 2005, 11th July 2005 15th July 2005, 20th July 2005 and 21st July 2005
Crown Copyright ©
Mr Justice Lindsay :
No one but Mr Byers is accused of the misfeasance alleged. This claim in tort thus needs to be chiefly concerned with why Mr Byers acted as he did, with particular regard to his state of mind in that regard between July 2001 and 7th October 2001 when Railtrack was, by Order of the Court, put into administration.
B. The Scheme of this Judgment
Mr Sumption Q.C. and Mr Saini, who appear for the Defendants, say that Mr Rowley's careful analysis of the unfolding chronology (with which, in any event, they disagree) all goes to the irrelevant question (they say) of when Mr Byers acted as he did rather than why. There is a good deal of force in that objection but Mr Rowley says in answer that a detailed look at the chronology will disclose firstly, as he puts it, that Mr Byers had something to hide and, secondly, that what it was that he was hiding can be inferred to be the very targeted malice which Mr Rowley accepts he has to prove. Out of respect for Mr Rowley's and Mr West's argument, based on an exemplary command of the massive paperwork (a command all the more praiseworthy given that they were not the original pleaders of the Claimants' case but came in to the matter relatively late) and out of respect also for the huge number of individual Claimants wanting to see how their claim has fared, I see no alternative but to go through the chronology at length, though I fear it will prove a wearisome read for many. Even at such length I shall leave out many meetings and papers but will attempt to cover the more relevant or disputed ones.
Group and Railtrack
" .. does not receive direct revenue subsidy from H.M. Government but is indirectly dependent on the significant amounts of public sector financial support received by its principal customers, the TOCs."
The prospectus added that the Labour Party and the Liberal Democrat Party had each expressed both opposition to the privatisation of Railtrack and a commitment to a railway which was owned by and accountable to the public. The party political risk that lay behind the flotation was described in the prospectus by reference to the then Conservative Government's narrow overall majority of 1 in what was then the next preceding General Election and to the fact that the next General Election would have to be held not later than May 1997. The prospectus included passages as to the then-published policies of both the Labour Party and the Liberal Democrat Party. The Labour Party's approach had included that:-
"Dependent upon the availability of resources, and as priorities allow, [a Labour Government] would seek, by appropriate means, to extend public ownership and control over Railtrack."
In May 1997 the General Election returned a Labour Government.
Ministers, Civil Servants and Special Advisers
D. The alleged tort; misfeasance in public office
The Administration Plan the alleged facts
E. The Chronology
The Government's 10 year plan
The System of the Public Financing of the Railways in 2000 and 2001
" . The Rail Regulator determines what is the net overall income required of Railtrack, i.e. how much money it needs for the competent and efficient operation, maintenance and renewal of the network. The income the company receives from Access Charges and Network Grants has to add up to that figure. If Network Grants paid direct by the SRA are higher, Access Charges can be lower and vice versa. The important thing is that the company is certain of receiving that total amount as long as it meets its legal obligations to its customers (the Train Operators) and under its Network Licence (enforceable by the Rail Regulator)."
Consideration of radical changes February 2001
Concern in March 2001 in the Department at Railtrack's finances
Railtrack's business plan
The "April Agreement" and "Renewco"
"1. The Government stands behind the rail system but not behind individual rail companies and their shareholders, who need to be full aware of the projected liabilities of the companies in which they invest and the performance risks they face.
2. [Group] recognises that it must intensify its efforts and raise the performance of its core business in the safer operation, maintenance and renewal of the existing railway.
3. [Group] needs to raise funds from the financial markets in order to meet its obligations to customers and stakeholders. The company also needs to receive sufficient government funding as determined by the Regulator."
The principles reiterated that Group had accepted that the immediate consequence of Hatfield must fall to Group's shareholders.
Mr Robinson is appointed
Railtrack's audited results for the year end 31st March 2001
"We believe there is a realistic possibility that the equity could be wiped out. Based on our expectations of performance, we value the shares at only 58p."
That figure, of course, was barely different from the 60p which Group itself, by its Mr J.W. Smith, had indicated to the Department in March 2001.
The 6th June 2001
Mr Byers becomes Secretary of State
Mr Byers is briefed
"Even if he does agree, the full cost will pass through to increased SRA support payments, for which there is at present no budget cover."
Renewco, said Mr Rowlands, (though not calling it that) would require both Treasury and ONS approval; "the omens at present are not good". Without Renewco, Railtrack's new debts would rise "to a probably insurmountable £5.4bn". The efficiency savings required of Railtrack would be a major challenge. There was a risk that the Department could have to find an additional £1.4bn over the next 2 years.
Mr Coulshed's Options paper
The Regulator's "begging bowl" speech
15th June Meeting
Mr Byers meets the Rail Regulator
19th June 2001
A second Departmental meeting: 20th June 2001
"We were looking at what might be the options should the Government ever want to do something different in relation to the industry. It is what governments do. It is what departments do."
Miss Vadera's E-mail
22nd June 2001
Mr Byers and Mr Robinson meet: 27th June 2001
CSFB report to members of the Railtrack board
Mr Harding's concerns
The first Renewco deadline is passed
The Transport "stocktake" of 5th July 2001
The Scoping Group
Railtrack's board meeting: 12th July
Group's AGM: 24th July 2001
Mr Byers meets the SRA Chairman
Mr Byers again meets Mr Robinson: 25th July
Mr Robinson's assessment of Railtrack's position
Mr Rowlands meets CSFB
Miss Vadera's Scoping Group paper
Mr Rowlands reports to Mr Byers
1st August 2001
Mr Byers' submission to the Prime Minister
"It is clear that we ought not to contemplate taking Railtrack into administration, which we could achieve by withdrawing government support, without being equally clear about how we would like it to come out of administration and therefore which option we want to pursue."
Mr Byers was cross-examined on the basis that the objection to renationalisation or the use of a not-for-profit trust was one of cost; shareholders would, at great expense, have to be bought out but that, by contrast, administration then followed by a not-for-profit trust offered a cheap route to the same end. I accept Mr Rowlands' evidence that there had been no discussion on the lines that administration should be used because it represented a cheaper way. Indeed, there was no basis in fact for the suggestion, put to Mr Byers, that he had realised that he could arrive at a not-for-profit trust solution "at no cost" via administration. Not only would the administration need to be funded whilst the administrator considered the commercial alternatives open to him but the government, were it to try to purchase Railtrack assets so as to emerge with a not-for-profit trust solution, would have to ensure it was, in effect, the highest bidder so that the Administrator could properly accept its offer. That this would all be "at no cost" would have been grossly improbable.
CSFB's further Rainbow proposals
10th August 2001
Meetings in mid-August
Further Rainbow developments
Mr Corry's e-mail
No. 10's understanding
Takeover as an option
Ernst & Young enter
Mr Marshall's presentation
The Government takes Counsels' advice
A paper for Mr Byers on his return from holiday
"It is essential that you do not close your mind or take decisions on any options for Railtrack at this stage. Each of the options still needs careful analysis with a view to determining the most appropriate solution. Any decision would need to be communicated to the company and then by the company to the Stock Exchange, probably precipitating a crisis which we are not ready to handle."
In his opening Mr Rowley, in response to a question of mine, described this as "window dressing" meaning, as I took it, that the Claimants' case was that a decision had in truth already been made, be it either to withdraw further funding, to reject Rainbow and any other equity solution or to manipulate Railtrack towards administration. However, when Mr Rowlands came to be cross-examined none of those possibilities was put to him in relation to this paper. I have no reason, therefore, not to regard this heavy-type advice as genuine bona fide advice intending to convey and convey only what its words made plain. So far, at least, as Mr Rowlands was concerned, none of the possibilities had yet been a matter of decision by the Department or by Mr Byers; the options still required careful analysis.
" it would have had to have the approval of both the House of Commons and the House of Lords. It would have required primary legislation, but you are right to say that the reason why consideration was being given to a bill was because, if an elected Secretary of State on behalf of the Government takes a major public policy decision, he would not want that to be undermined by the Rail Regulator . If I arrived at a decision not to provide more money to Railtrack [still meeting our legal obligations to pay any money over to Railtrack that we were obliged to do] then we would not want that decision undermined by the Rail Regulator . [it] would be subject to full democratic debate in the House of Commons and the House of Lords .."
It is to be remembered that I am not here concerned with whether that approach would have been adequate against attack by way of Judicial Review or under the HRA (which I shall come on to). But, for the purposes of the tort I am considering, that, as it seems to me, was a perfectly acceptable line for Mr Byers to take; I do not see that he or the Department can be fairly criticised for anticipating that if there was to be no funding beyond Railtrack's present legal entitlement then legislation might be needed to be sure that that important policy decision could not be undermined. I see no ground for any material inference against Mr Byers.
A 4th September meeting and "Grannies"
The "Trilateral": 5th September
Another Corry e-mail
SSSB has met CSFB
Mr Harding meets Department officials
10th-11th September 2001
A meeting is cancelled
A third Corry e-mail
The Paddington Survivors Group meet Mr Byers
"Mr Byers and Mr Hill sat back, exchanged a glance and smiled. Mr Byers said, again to the best of my recollection, that Railtrack would not be a problem for much longer and that we should watch out for around the early part of October 2001 when we would have some news that would be "very pleasing to us". While I cannot recall the precise words he used, I am very clear that he was suggesting to us that decisions had already been made and Railtrack would cease to exist as a viable entity in October 2001. I made this assumption on the basis that, having run a business myself (as others in the PSG had done) there was no other explanation for Mr Byers' statement as far as I could see and as was subsequently proved."
A Departmental Meeting
Both sides' advisers meet
Mr Linnard's Memorandum
Renewco as the kiss of death
A meeting between the Department and No. 10 Officials
Mr Robinson: kept at bay?
CSFB's proposals on the 18th September
The bottom line is reported to Mr Byers: 18th September
A "muddle through" option
The Prime Minister and the Chancellor are briefed by their officials
The Second Trilateral
Arthur Andersen report
SSSB report: 26th September
A submission to Mr Byers
An inter-departmental meeting
Railtrack and CSFB meet the Department
That meeting is reported to Mr Byers
Miss MacKenzie's evidence
A meeting is arranged
Mr Byers speaks to the Prime Minister
A decision is made
"I decided against supporting the "Rainbow" option favoured by Railtrack and pouring more public money into the company. We had funded Railtrack in the past and made it clear we did not stand behind individual companies. I had to consider how many more times they would come back for a further handout. There had to be a time to say no. Railtrack had not controlled its costs there were many deep-seated problems. It would not be right, I felt, to provide further funds for it. I did wonder whether it was worth the pain as, politically, more funding had an attraction. However, it could not have solved the problem. If we had given increased funding to Railtrack at this stage (i.e. used the muddle through option to get through the interim result stage) Railtrack's funding difficulties with the West Coast Main Line (and, indeed, every major project it was involved in) would have been the cause of further concern."
Mr Byers tells the Regulator
Mr Byers gives the news to Mr Robinson
Renewco "scores" public
Railtrack takes advice
Railtrack speaks to the Regulator
A Press Release in draft
"Railtrack plc was not in a position to oppose this petition given the Government's decision to provide no further direct financial support beyond that in the regulatory settlement. Railtrack plc therefore reluctantly accepted there was no credible alternative to administration,"
Mr Robinson's letter
The Petition is presented and an Order is made
A Railtrack Plan B?
"857. Was there any discussion, theoretical or otherwise, in your Department before 25th July about the possibility of a future change in status for Railtrack, whether nationalisation, the move into a company limited by guarantee, or whatever?
(Mr Byers) Not that I am aware of."
"Q. Do you see that question?
A. I do.
Q. You see your answer; "Not that I am aware of."
Q. That answer was untrue, was it not, Mr Byers?
A. It is true to say there was work going on, so, yes, that was untrue.
Q. That was untrue?
A. It was."
"Q. Amidst that welter of documentation you could not possibly have believed that the answer you gave to Mr Grayling was true, could you?
A. I accept this is not an accurate statement.
Q. It was deliberately not an accurate statement, was it not, Mr Byers?
A. It was such a long time ago, I cannot remember, but it is not a truthful statement and I apologise for that. I cannot remember the motives behind it.
Q. Let me suggest the motive, Mr Byers: you did not want to know, you did not want the sub-committee to know that options for Railtrack, including renationalisation and changes in its status, was something that you had asked your officials to examine within three days of your taking office. That is why you deliberately made that untrue statement in response to Mr Grayling's question?
A. I am sure that was not the reason.
Q. There is no other possible reason, is there, Mr Byers?
A. In the context of a select committee hearing, there are other reasons but they are none of them are acceptable, I would accept that.
Q. You knew that if you told the truth, far from this being put to bed, there would be further investigations, further questions and further statements, did you not?
A. No, I was I would be very happy to debate the pros and cons of the various options that were available to us and I am very clear in my own mind about the reasons for my decision on October 5th.
Q. Not the pros and cons, Mr Byers, an investigation into your conduct. You knew that if you told the truth, there would be more questions, more investigations and more statements about your conduct.
A. No, I do not accept that.
Q. The truth would have been revealed that you had planned from July that if you could achieve it, you would put Railtrack into administration?
A. That was not the case."
"Q. You said in giving that answer that there were other reasons why one might be tempted to say that sort of thing in answer to that question. They were not reasons [which you said would excuse you] but there were others. I know that this is a difficult matter for you, Mr Byers, but can you please tell us what those other reasons were?
A. They might be in a Select Committee under pressure, not wanting to having thought actually that most people would regard those issues as having been considered, but replying in a way which would allow the question to move on to other issues but not to conceal any conspiracy or plot.
Q. Yes. Is there anything else you want to add on that question?
A. Simply I think, looking back at the question, which is the one about a range of options, I think most people would have I cannot understand why I gave the reply I did really but most people would have expected that those options would be under consideration and .. ."
Mr Byers continued by referring to an article in the Guardian which he thought had made it clear that the issue of possible nationalisation would be looked at.
"My learned friend suggested to Mr Byers that he had deliberately lied to the House of Commons sub-committee in answer to Mr Grayling's question about the period before the 25th July in order, he said my learned friend's suggestion to conceal the fact that he had already by then decided upon what the Claimants call "the Administration Plan". What Mr Byers said to the sub-committee was factually incorrect, that is beyond question, and he candidly admitted that the moment the point was raised, which in my submission does credit to his evidence here, the only question with which the present trial is concerned.
Mr Byers did not accept that he intended to mislead the Transport sub-Committee. That depends on how much he recalled about the precise sequence of events at the stage when he had to answer on-the-hoof Mr Grayling's question. But he did not accept that. That is a distinct question which is a matter for the House of Commons in due course and may not, in our submission, be debated here.
Your Lordship ought to be aware of the case law about the limits of the Court's function in this exceptionally delicate area. I should make it clear that the Secretary of State for whom I appear has absolutely no desire to inhibit Your Lordship's consideration of any matters that Your Lordship may consider relevant, but he is not in a position, particularly in the office that he occupies, to waive the privileges of the House of Commons which are part of the general law, and the authorities are absolutely clear that this is not a matter which may be relied upon by my learned friend, suggested to a witness or the subject of a finding by Your Lordship."
" . in the light of the Parliamentary privilege points that my learned friend raised with Your Lordship yesterday afternoon, and having considered the authorities on that overnight, because I saw them for the first time shortly before Your Lordship sat yesterday morning, having considered the position overnight, it does seem that Your Lordship is left with what on the face of it appears to be an unsatisfactory position, but a position [in which] Your Lordship can and should heed the fact that Mr Byers did make a factually incorrect statement to the Transport Committee on the 14th November 2001, but in the light of the authorities that is as far as I can properly invite Your Lordship to go, and as far as Your Lordship can properly go in relation to that particular point when Your Lordship is considering Your Lordship's judgment."
I then raised a possibility with Mr Rowley and the transcript continues as follows:-
"Mr Justice Lindsay: I suppose there is nothing to prohibit me from assuming the worst from Mr Byers' point of view.
Mr Rowley: I think that might ...
Mr Justice Lindsay: Even that might fall foul
Mr Rowley: To the extent Your Lordship is now offering me a gift-horse, I am equally reluctant to spurn it. But if I am not permitted to probe with Mr Byers the reasons for that incorrect statement, and it is not a matter on which Your Lordship should be deliberating in the course of Your Lordship's judgment .
Mr Justice Lindsay: Anyhow, you do not invite me to make that assumption.
Mr Rowley: I do not think I can on the authorities, my Lord, much as I would like to and it also follows that in respect of the other answers that Mr Byers gave to the sub-committee and also the House to which I drew his attention, equally I cannot invite Your Lordship to make adverse findings against him in respect of those answers, because of the Parliamentary privilege point. So that is where one is. So the position is that the statement was untrue. It clearly puts his reliability as a witness in these proceedings squarely in play, but I am not permitted to address Your Lordship on the basis that it enables Your Lordship to draw an adverse inference as to his integrity."
Dinner at the House of Commons
Network Rail and the Network Rail Agreement
The Administration ends.
Group is "delisted"
Proceedings are launched
Distributions to Group and to Group's shareholders
F. The remaining witnesses
H. A conclusion on the Claimants' claim in tort
I. Human Rights
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions."