Stagecoach East Midlands Trains Ltd and Others v The Secretary of State for Transport

JurisdictionEngland & Wales
JudgeMr Justice Stuart-Smith
Judgment Date31 July 2019
Neutral Citation[2019] EWHC 2047 (TCC)
CourtQueen's Bench Division (Technology and Construction Court)
Docket NumberCase No: HT-2019-000158 HT-2019-000173 HT-2019-000187
Date31 July 2019

[2019] EWHC 2047 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

The Rolls Building, 7 Rolls Building

Fetter Lane, London, EC4A 1NL

Before:

THE HONOURABLE Mr Justice Stuart-Smith

Case No: HT-2019-000158

HT-2019-000160

HT-2019-000173

HT-2019-000187

2019 Rail Franchising Litigation

Between:
Stagecoach East Midlands Trains Limited and Others.
Claimants
and
The Secretary of State for Transport
Defendant

and

Abellio East Midlands Limited
Interested Party
And Between:
Arriva Rail East Midlands Limited
Claimant
and
The Secretary of State for Transport
Defendant

and

Abellio East Midlands Limited
Interested Party
And Between:
West Coast Trains Partnership Limited and Others
Claimants
and
Department for Transport
Defendant

and

(1) Mtr West Coast Partnership Limited
(2) First Trenitalia West Coast Limited
Interested Parties
And Between:
Stagecoach South Eastern Trains Limited and Others
Claimants
and
Secretary of State for Transport
Defendant

and

(1) South Eastern Railways Limited
(2) London and South East Passenger Rail Services Limited
Interested Parties

Mr Philip Moser QC, Mr Joseph Barrett and Mr Jack Williams ( instructed by Stephenson Harwood LLP) for the Arriva Claimants

Mr Tim Ward QC (instructed by Herbert Smith Freehills LLP) for the Stagecoach Claimants

Mr Jason Coppel QC and Mr Patrick Halliday (instructed by Ashurst LLP) for the West Coast Claimants

Mr Rhodri Thompson QC, Ms Fionnuala McCredie QC, Ms Anneli Howard and Ms Fiona Banks (instructed by Eversheds Sutherland (International) LLP [East Midlands], Addleshaw Goddard LLP [West Coast] and DLA Piper UK LLP [South Eastern]) for the Defendant

Hearing dates: 18th/19th July 2019

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Stuart-Smith

Introduction

1

The Claimants are train operating and associated companies that have brought four sets of judicial review and Part 7 proceedings arising out of the Defendant's conduct of procurement exercises for three separate rail franchises. I shall refer to the Claimants collectively as the TOCs (i.e. Train Operating Companies) and individually as Arriva, SEMTL, SSETL and WCTP. From time to time I shall refer to SEMTL and SSETL collectively as Stagecoach.

2

Only a minimalist introduction to the facts is necessary by way of introduction to the litigation. It should be emphasised that at this stage I am making no findings of fact; I merely provide the lightest of sketches to outline the circumstances that have given rise to this litigation.

3

The Defendant, acting through the Department for Transport, is responsible for running competitions for rail franchises, including those for the East Midlands, South Eastern and West Coast Franchises. The TOCs are all substantial and experienced operators. Arriva and SEMTL participated in the competition for the East Midlands Franchise; SSETL participated in the competition for the South Eastern Franchise; and WCTP participated in the competition for the West Coast Partnership Franchise. Without making any specific findings, it is clear that these competitions have been run during a period of regulatory uncertainty about the correct approach that should be taken by the trustees of the privatised Railways Pension Scheme. In the past, actuarial valuations of the scheme have been carried out assuming the highest security of covenant. In and since about 2016 the Pensions Regulator has called that assumption into question, the suggestion being that a lower level of security should be assumed. This change of assumption has the effect of increasing the level of assessed pensions liabilities. The question then arises: how should those increased liabilities be funded? The Court was told at the hearing leading to this judgment that the period of regulatory uncertainty continues because the Regulator has not reached a final conclusion on the assumptions to be made or their consequences.

4

Although the precise dates differ, the underlying structure in each case is the same in broad outline. The Defendant published the original invitation to tender (“ITT”) for each competition less than 6 years but more than 3 months before proceedings were issued. In one case the original ITT provided standard form instructions and terms on pensions which did not refer to the Pensions Regulator's investigation or reflect its possible impact. The original ITT in the other cases did not require bidders to address the question of pension liabilities but provided that they would be addressed by further drafting later. The ITTs also made provision for requiring a re-bid in specified circumstances; and stated the requirement that bids should be compliant in following the instructions in the ITT and should contain no qualifications – including, specifically, any proposals for amendments which would seek to transfer risk from the franchisee to the Secretary of State. At later dates, also less than 6 years but more than three months before proceedings were issued, the Defendant issued further drafting for the ITT and re-bid instructions which required bidders to address and accept the pension risk sharing mechanism that the Defendant had developed. Each Claimant submitted bids in response to the re-bid instructions, this also happening less than 6 years but more than 3 months before proceedings were issued. On 9 April 2019, less than three months before proceedings were issued, the Defendant wrote to each of the Claimants notifying them that they had been disqualified from the competition. The central reason for disqualification was the non-compliance of their bids in relation to the issue of pensions and the allocation of risk; where there were other stated reasons, they do not affect the matters of principle that fall to be decided. It is now accepted that each of the Claimants' bids was non-compliant in relation to pensions.

5

There is a considerable but varying degree of overlap between the way in which each Claimant has pleaded its Part 7 claim and its judicial review proceedings. At an initial hearing on 20 June 2019 I directed that the judicial review proceedings should be stayed and that the Part 7 claims should act as the vehicle for the resolution of all issues. On that occasion the Defendant indicated his intention to bring applications to strike out all or parts of the claims being brought by each Claimant. It followed from my direction staying the judicial review proceedings that any strikeout application, whether directed at the public law or private law aspects of the claims, would be brought by reference to the Part 7 claims. This pragmatic solution may not be conceptually pure, but it does not prevent the determination of all necessary issues. As a guiding principle and in the light of my earlier directions, matters of form should not get in the way of matters of substance without the most compelling or binding reason.

6

The Defendant's skeleton argument provides a convenient categorisation of the complaints raised by the Part 7 claims. It summarises the targets of his strikeout application as being the following three categories:

i) The introduction of the pension requirements as part of the rebidding process after the date of the original ITT;

ii) The substance of the pension requirements that were introduced by the additional drafting after the issuing of the original ITT; and

iii) The extent of the Defendant's discretion as set out in the original ITT.

7

There are essentially two limbs to the Defendant's applications, which are for orders striking out or giving summary judgment on those parts of the Claimants' claims. Although made in the context of the judicial review proceedings having been stayed, the first is directed at the Claimants' public law challenges to the Defendant's acts or decisions while the second is directed at claims for private law remedies. First, it is submitted that some of the claims that would normally fall to be brought by judicial review are out of time because they rely upon events happening more than three months before proceedings were issued. Second, it is submitted that any claims for damages (or other private law remedies) for breach of duty owed to the individual TOCs cannot be brought unless founded upon a successful public law challenge to the decisions of the Defendant, because they are otherwise time barred. This means that any claim for damages would have to be brought within the time allowed for bringing judicial review proceedings to mount a public law challenge to an act or decision of which a Claimant complains. The Defendant submits that any private law claim that seeks to “bypass” the procedural protections afforded by the procedure laid down for judicial review challenges is an abuse of process.

8

In substance therefore, the Defendant's applications rest upon the proposition that the parts of the Part 7 pleadings that they identify are time-barred. In submissions (but not in his notices of application) the Defendant has argued that the parts of the claims that he seeks to eliminate are an abuse of process. This submission is separate and discrete, but it is closely allied to the proposition that the private law pleadings are, or should be, time-barred.

The Notices of Application

9

The Defendant's Notice of Application in each case identifies the order the Defendant seeks in the same terms, namely:

“The Defendant applies for an Order to strike out pursuant to CPR Parts 3.4(2)(a) and/or for summary judgment pursuant to CPR Part 24 in respect of those parts of the Claimants' Particulars of Claim and Claim Forms insofar as they seek to challenge, quash and/or seek declaratory/injunctive relief and/or damages in respect of:

(i) the design and requirements of the...

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