[2025] UKUT 00138 (LC)

This is a claim for compensation by Cemex UK Operations Limited following the compulsory purchase of its factory and land at Washwood Heath in Birmingham in 2020 pursuant to the High Speed Rail (London to West Midlands) Act 2017. The land was required as an operational hub for the new HS2 rail link; it is perhaps ironic that the claimant’s business was, among other things, the production of concrete railway sleepers, albeit of a kind not used in the construction of HS2.

The claimant was represented by Mr Michael Humphries KC, Ms Rebecca Clutten and Ms Daisy Noble, and the Secretary of State for Transport as the compensating authority by Mr Richard Glover KC, Mr Cain Ormondroyd and Mr Brendan Brett. We offer our grateful thanks to them all; their succinct and focussed oral and written submissions were of great assistance to us in this complex and lengthy claim.

The claimant held land at Washwood Heath (“WWH”) on a number of long leases, and conducted three businesses: a factory for the manufacture of railway sleepers, an asphalt plant, and an aggregate supply business. It was not possible to find a site to which all three businesses could move and so the claimant had to move to three different sites. It is entitled to compensation not only for the value of the land taken from it but also for relocation costs, lost profits for all three businesses, professional fees and other miscellaneous costs. Many of the elements of the compensation have now been agreed. The main outstanding issue is the loss of profits of the sleeper business. The parties’ positions can be summarised as follows.

The claimant says that it had a very successful business at WWH, selling a high volume of sleepers, and had a favoured position in the market because of its efficiency, flexibility, and expertise, operating from an ideal location close to the West Coast Main Line (“WCML”). It has lost its premises, was unable to produce sleepers at all for two years, and has now resumed production, using a less profitable method, at an inferior location in Rochester, Kent. The claimant seeks compensation for loss of profits of just over £59 million.

The compensating authority says that the years from 2002 to 2016 saw a very high demand for sleepers, for a number of reasons including the renewal of the WCML, but after that the demand for sleepers dropped considerably and is now at an all-time low. The claimant’s only competitor is operating efficiently and is now the majority supplier. The claimant’s move to a smaller and more efficient factory has protected it from the down-turn in the market, and as a result it has enjoyed a financial gain of nearly £4.5 million.

The most important evidence in this reference is therefore the expert evidence called by both parties relating to the market in sleepers, Mr Paul Jarvis for the claimant and Mr Peter Heubeck for the authority. We have to assess what has happened and, as best we can, what will happen to that market, and compare that to what would have happened, to date and in the future, in the imaginary “no-scheme world” where HS2 was cancelled. We have to make factual findings on the basis of the evidence of the witnesses of fact and of the experts on sleepers, but those findings cannot dispose of the case; it will be for the forensic accountants called by each party to compute the claimant’s loss (or gain) on the basis of our factual findings.

The hearing was listed for three weeks from 27 January 2025, but had to be adjourned for unavoidable reasons after we had heard evidence from all the witnesses except the forensic accountants. It has therefore been agreed that we will issue this interim decision on the basis of the evidence we have heard; a hearing has been listed at which the forensic accountants will give their evidence about the claimant’s loss (or gain) on the basis of the Tribunal’s findings. This has the advantage of making it possible for the accountants to carry out their analysis on the facts that the Tribunal has found, rather than having to work on the basis of multiple possible scenarios. The expert reports already made by the forensic accountants will inevitably be superseded by our findings and we have given directions for them to exchange and file further reports. The issues on which we make determination in this decision are matters that fall not within the accountants’ expertise but within that of the sleepers experts.