Stagecoach legal action over franchise awards: Judgement now available

[Tetchytyke]

reference to a Monopolies and Mergers Commission report that is now nearly a quarter of a century old

And like a Perthshire single malt, it stands the test of time.

 

[3141]

And like a Perthshire single malt, it stands the test of time.

Ha ha!

It's also said that wine mellows with age, unlike your hostility towards Stagecoach.

 

[Tetchytyke]

Ha ha!

It's also said that wine mellows with age, unlike your hostility towards Stagecoach.

I'll be hostile to a homophobic bigot- who professes to be a devout and caring Christian whilst disregarding His teachings in just about every single way- until the day I die.

I think this court action is symptomatic of everything that is wrong about how Brian goes about his business. The man is morally bankrupt. Fitting that he's in business with a tax dodger who sued the NHS when he didn't get his own way (I'm sensing a theme here).

 

[Robertj21a]

I'll be hostile to a homophobic bigot- who professes to be a devout and caring Christian whilst disregarding His teachings in just about every single way- until the day I die.

I think this court action is symptomatic of everything that is wrong about how Brian goes about his business. The man is morally bankrupt. Fitting that he's in business with a tax dodger who sued the NHS when he didn't get his own way (I'm sensing a theme here).

He's a very astute businessman, probably one of the best we've had in the UK. He has always been very open about his beliefs and views, when others who may feel the same way keep quiet and, to me, that's a positive mark in his favour. Unless he uses his personal views to affect Stagecoach in any way then I feel that he is entitled to believe whatever he wishes - just like everyone else.

 

[Tetchytyke]

He's a very astute businessman, probably one of the best we've had in the UK.

He is astute, there's no doubt about that, but astute in exactly the way the MMC said he was 25 years ago. His "astuteness"- corporate bullying- isn't something to be celebrated, and the fact this "astuteness" is celebrated is a large reason why the current and previous franchising models are such failures.

 

[Robertj21a]

He is astute, there's no doubt about that, but astute in exactly the way the MMC said he was 25 years ago. His "astuteness"- corporate bullying- isn't something to be celebrated, and the fact this "astuteness" is celebrated is a large reason why the current and previous franchising models are such failures.

Only in the UK would we see a highly successful businessman who helps create massive amounts of employment as someone excercising 'corporate bullying'.
I know you won't agree, and will want the last word, but I'm not commenting further as we're way off topic.

 

[ainsworth74]

I think we're done here. The substantive update has been discussed and we're now back into the usual cicular arguments along the lines of "Stagecoach are an evil blight on the face of the earth", "Nationalisation is the only answer", "Only the private sector can really deliver", etc etc etc. We've done them all to death on multiple different threads over the years. As such this thread is now locked.

When there are further updates regarding the pending legal case please feel free to either report this post and we can look at re-opening the thread. Or, alternatively, start a new thread with a link and quote regarding the update (and perhaps a link back to this thread).

 

[ainsworth74]

The judgement had now been published and can be found here (pdf). It's 193 pages and I've not found a neat bit to add as a quote so if anyone finds a helpful news article please feel free to link it and I'll add it into this post to bring it in line with the Forum Rules.

As a reminder this thread is about the outcome of the above legal case. Various off-topic factors were being discussed when this thread was locked and the re-opening of this thread is not an invitation to resume them.

 

[JonathanH]

The judge found in favour of the DfT.

Conclusion 601. For the reasons given in this judgment, the Claimants’ pension-based challenges fail.

Stagecoach have responded by saying:

Rail litigation judgement

Stagecoach Group plc ("the Group") notes the decision of the High Court today in respect of its claims against the Secretary of State for Transport regarding decisions to disqualify the Group from three rail franchise competitions. The Court ruled against the Group's claims.

We believe there were important issues which needed to be determined by the court to help secure the future of the country's rail system and our view remains that we were right not to accept the risks in these contracts.

Nevertheless, while we are disappointed at today's ruling, we accept the decision and move on. The country is facing a huge challenge in fighting the Covid-19 pandemic, and all of our energies are focused on ensuring our transport networks help the national effort at this critical time.

 

[Tetchytyke]

It's almost as though the challenge was a baseless fishing trip designed to persuade the DfT to roll over and have its tummy tickled, like it did in 2012.

The only shock for me is that the DfT stood their ground this time. I hope Stagecoach have to pay full costs.

I can understand why Stagecoach didn't want to take on pensions liability, but ultimately if you don't like the rules don't play the game. Other companies were happy to take the risk. Maybe they're wrong and it'll come tumbling down, but that's not the point.

Sadly there's no pithy summary, but Stagecoach brought nine main issues- each with several sub-issues- to Court and lost on every single one. It is clear from the judgement it was a baseless fishing trip. The legal equivalent of flinging enough mud in the hope some will stick.

The sections around the PwC analysis (para 314 onwards) are particularly interesting. DfT got experts in who proved that pensions-compliant bids were sustainable, and Stagecoach attempted to argue that, by getting PwC in, DfT were saying pensions-compliant bids were unfair. A bizarre argument to make; one you'd only make if you knew you were in the wrong but hoped a minor procedural error was made.

 

[LNW-GW Joint]

One morsel I have found is that the Stagecoach/Virgin/SNCF bid for WCP was disqualified for more reasons than the pensions issue.
Those reasons are not described, as it was not part of the trial.

It seems that minority shareholders Virgin and SNCF were unhappy with the Stagecoach position on pensions.

All rather irrelevant now.
Maybe Stagecoach are quite happy to be out of franchising now.

 

[infobleep]

It's almost as though the challenge was a baseless fishing trip designed to persuade the DfT to roll over and have its tummy tickled, like it did in 2012.

The only shock for me is that the DfT stood their ground this time. I hope Stagecoach have to pay full costs.

I can understand why Stagecoach didn't want to take on pensions liability, but ultimately if you don't like the rules don't play the game. Other companies were happy to take the risk. Maybe they're wrong and it'll come tumbling down, but that's not the point.

Sadly there's no pithy summary, but Stagecoach brought nine main issues- each with several sub-issues- to Court and lost on every single one. It is clear from the judgement it was a baseless fishing trip. The legal equivalent of flinging enough mud in the hope some will stick.

The sections around the PwC analysis (para 314 onwards) are particularly interesting. DfT got experts in who proved that pensions-compliant bids were sustainable, and Stagecoach attempted to argue that, by getting PwC in, DfT were saying pensions-compliant bids were unfair. A bizarre argument to make; one you'd only make if you knew you were in the wrong but hoped a minor procedural error was made.

I did think Stage Coach might win, given the issues South Western Railway have faced, pre COVID-19 and pre December strikes. However, maybe those were not relevant to pensions issue that Stagecoach raised.

I assume that this means the companies who took over would have been able to deal with the pensions. I appricate COVID-19 may have changed things but that isn't a discussion for here.

 

[Tetchytyke]

I assume that this means the companies who took over would have been able to deal with the pensions.

I suspect some franchisees have overbid. I suspect Stagecoach were right to be wary. But, as you say, it isn't really relevant to the legal issues Stagecoach brought up.

Stagecoach refused to put in a compliant bid. There was no reason to allow them to proceed having done this. Other companies put in compliant bids and PwC showed there was no reason why a compliant bid couldn't be sustainable. I suspect the whole argument started because Stagecoach knew that a compliant bid that they felt comfortable with would be such a lowball offer that they'd never win, so they tried to get the rules changed.

The judgement is as clear a dismissal of Stagecoach's arguments that you'll ever see.

As I said way back when, it was a clear fishing trip, hoping that either the DfT would crack first or that the DfT had made a procedural error they could use.

The SWR financial issues don't have anything to do with pensions. Just as Stagecoach did, they simply overbid.

 

[DavidGrain]

The pension problem as I see it was that the Pension Regulator was likely to impose a change in the valuation methods of the pension fund. I am not sure if this would apply to the 2019 valuation or the 2022 valuation as pension funds are revalued every three years. However they would not go back to previous valuations and revalue them so the TOCs in possession of the franchises at the time that the new revaluation takes effect have to take the hit. Now the revaluation requires a calculation of every member's pension pot and if that throws up a deficit in the total fund then the current TOCs have to take the hit. Now member includes not just the current members but also former employees who have left service but not transferred their pensions out and all those now drawing their pension. As the pension takes into account all past service back to BR days then this is potentially a heavy liability on the current TOCs as all employees would have been TUPEd on the transfer of a franchise. There is no way that any new deficit can be apportioned back to former franchisees or BR.

However, it all comes back to if you want to play the game then you have to play by the rules. Stagecoach knew the rules and should have priced their bid accordingly. They would probably have submitted a low bid and lost out as the underbidder but as they say that is the way the cookie crumbles. The TOCs I have sympathy for are those who got their franchises before all this came about but they got copies of the Trustees accounts and they should have been questioning whether proper provisions were being made taking independent actuarial advice.

 

[Gerald Fiennes]

As Tetchytyke here says, it seems that we are talking serious amounts of fishing. No reason for the judge to support this and the court hasn't.

 

[GRALISTAIR]

It's almost as though the challenge was a baseless fishing trip designed to persuade the DfT to roll over and have its tummy tickled, like it did in 2012.

The only shock for me is that the DfT stood their ground this time. I hope Stagecoach have to pay full costs.

I can understand why Stagecoach didn't want to take on pensions liability, but ultimately if you don't like the rules don't play the game. Other companies were happy to take the risk. Maybe they're wrong and it'll come tumbling down, but that's not the point.

Sadly there's no pithy summary, but Stagecoach brought nine main issues- each with several sub-issues- to Court and lost on every single one. It is clear from the judgement it was a baseless fishing trip. The legal equivalent of flinging enough mud in the hope some will stick.

I agree on all your points especially if you don’t like the rules don’t play the game.

 

[LNW-GW Joint]

It's a success for Peter Wilkinson, franchise director at DfT, on his handling of the bids.
The text describing the DfT's position in the final meetings with Stagecoach make it quite clear that disqualification was likely if the pensions issue was not addressed.
Arriva settled with DfT just before the trial - Stagecoach did not.
Meanwhile the Pensions Regulator has created an unforseen new risk for all rail franchisees going forward, which will make bids more expensive.
Anyway, it's all academic now as franchises as we know them are dead.
We'll have to see how it turns out for the winners (Abellio for EMR, First/Trenitalia for WCP).

 

[PG]

Arriva settled with DfT just before the trial - Stagecoach did not.

I'm puzzled If Stagecoach were on a fishing expedition then what were Arriva after that persuaded DfT to settle out-of-court with them? You wouldn't offer to settle if you didn't think that the opponent hadn't a hope in hell of winning would you!

 

[ForTheLoveOf]

I'm puzzled If Stagecoach were on a fishing expedition then what were Arriva after that persuaded DfT to settle out-of-court with them? You wouldn't offer to settle if you didn't think that the opponent hadn't a hope in hell of winning would you!

Clearly they weren't sure that they would win! One imagines the DfT would have settled with Stagecoach too if Stagecoach were amenable to reasonable settlements.

Perhaps the Arriva settlement also included a deal for the handback of Northern.

 

[LNW-GW Joint]

Clearly they weren't sure that they would win! One imagines the DfT would have settled with Stagecoach too if Stagecoach were amenable to reasonable settlements.
Perhaps the Arriva settlement also included a deal for the handback of Northern.

Arriva also had its XC and LO operations to consider, which were quite possibly profitable.
They were not facing the exit from UK rail that Stagecoach were.

 

[DavidGrain]

We don't know the details but it is possible that Arriva's bid had different terms from the West Coast franchise. Also Arriva is up for sale and any potential buyers would have to consider this when doing due diligence.

 

[Tetchytyke]

If Stagecoach were on a fishing expedition then what were Arriva after that persuaded DfT to settle out-of-court with them?

If you reject a reasonable settlement offer then your costs might not be recoverable, even if you win. Nowhere is there any information to suggest the settlement was in Arriva's favour. Arriva- hypothetically- agreeing to call it quits and pay all of DfT's costs would be an out of court settlement. In that situation, you'd agree to it- forcing the other party to go to court and lose there would just cost you more money, as you wouldn't get all of your costs back.