[2025] UKUT 00138 (LC)

As we noted above, pricing is complicated because there are so many different types of sleeper; supply contracts listed up to about a dozen different sleepers and prices. In addition there were banding provisions which varied the price depending upon the quantity ordered. In considering the possibilities for pricing in the P3 contract in the no scheme world we have to look at pricing in the real world and decide which of a number of different sets of prices would most likely have been replicated in the no scheme world; it is not practicable to adopt a more fine-grained approach by looking at specific types of sleepers, and no witness has constructed a set of prices specifically for the no scheme world.

No-one suggests that the prices charged by the claimant in the real world between 2017 and 2020 would have been replicated in the P3 contract in the no scheme world; they were inflated by the unusual circumstances caused by the scheme. Ms Fowler, the claimant’s forensic accountancy expert, in her witness statements has expressed the view that the pricing would have been calculated on the basis of what was charged in the last year of the fixed-term of the 2012 contract, further adjusted for inflation. We have not heard her evidence but, as we said above, pricing is for the sleepers experts, and neither of them espoused this view. The claimant’s case at the outset of the hearing appeared to be as set out in Mr Jarvis’ witness statement, namely that the P3 prices would have been the prices offered in the claimant’s non-compliant P2 bid for production at WWH (see paragraph 26 above), adjusted for inflation. They were lower than the claimant was charging under the 2012 contract at the time, and lower than those in the claimant’s compliant P2 bid for supply from Bescot (which were not low enough to win the contract); we do not know how the prices in the non-compliant bid compared with those offered by the successful bidder, RailOne.

In the real world the claimant did submit a bid for a P3 contract at WWH, as we saw above (paragraph 33) in a short letter setting out prices for three types of sleeper only, at what was clearly intended to be an attractively low level. It said:

“This assumes that HS2 does not serve a CPO order on Cemex to vacate [its] existing site at Washwood Heath and Cemex can continue to manufacture and supply sleepers to Network Rail from it.”

The compensating authority characterised this as a no scheme world bid because it is made on the assumption that the scheme is cancelled; Mr Heubeck expressed “a great deal of confidence” that this would have been the pricing agreed in the P3 contract at WWH in the no scheme world.

At the hearing the claimant’s position appeared to change. Mr Neil, as a witness of fact, did not express any opinion in his witness statements about what would have been the pricing in the P3 contract in the no scheme world, although he provided some information about the P2 WWH bid prices. In re-examination Mr Humphries KC asked Mr Neil whether he would have offered those P2 prices for the P3 contract in the no scheme world, given that in that world WWH was not under threat of compulsory acquisition, and he said he would not. Mr Jarvis a week later, giving evidence in chief, said that in light of Mr Neil’s evidence the P2 bid pricing was “perhaps not the right place to start in terms of pricing”. In cross examination on that point he said “I've kind of only changed my view based on what Stuart said last week.”

That left the claimant’s position on pricing rather uncertain; Mr Jarvis had withdrawn his view, while Mr Neil’s view was given in re-examination and could not therefore be challenged. Moreover it was a negative view, rejecting the P2 pricing but leaving open the question what the price would actually be. The only positive evidence at that point was Mr Heubeck’s opinion that the prices in the P3 contract in the no scheme world would replicate those offered in the one-page letter bid for the P3 contract at WWH in the real world.

We have confidence in Mr Neil’s evidence of fact, but he did not give evidence as an expert witness. In his second witness statement he said that the P2 price offered by the claimant in its non-compliant bid for supply from WWH was influenced by the scheme, and that it offered discounted rates in the hope that it would “commence a dialogue” with NR in the hope of fending off the compulsory purchase. He did not say in so many words that he would not have offered that price in the P3 process in the no scheme world; but when asked a direct question about that in re-examination he said he would not.

That question did not relate to a matter that had been the subject of cross-examination. If the strict rules of evidence applied in the Tribunal Mr Neil’s answer would be inadmissible but those rules do not apply (rule 16(2) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010). Nevertheless we have decided to disregard it because it would be unfair to rely on it. Had he been an expert witness he would have given his views on the P3 contract as evidence in chief and could have been cross-examined about it; to place any weight on what he said about the P2 prices would be unfair to the compensating authority.

We also disregard Mr Jarvis’ change of mind. It was prompted, on his own account, not by Mr Neil’s witness statement but by what Mr Neil said at the hearing; if it is unfair for us to have regard to one it is equally unfair to have regard to the other.

Accordingly we cannot disregard what Mr Jarvis said in his witness statement about the P2 pricing. In any event, pricing at that level makes sense. It was a bid designed to be attractive, albeit not as dramatically discounted as the P3 letter. It was a set of prices offered for production at WWH and therefore at a level at which the claimant must have expected to make a profit. It was lower than the prices then being charged under the 2012 contract, and much lower than the inflated prices charged during 2017-2020. And while the claimant in 2019, bidding for the P3 contract in the no scheme world, was “the only ticket in town” as Ms Clutten put it (because WWH was the obvious and the only way to bridge the gap that NR could see coming up) the claimant still had to be competitive. Its competitor was TWM, not for the contract but for orders, since orders of sleepers were dictated (as we have seen) by pricing and price banding.

The P3 letter, by contrast, can hardly be described as a bid. It was a last-ditch attempt to fend off closure, made by a committed employee of the company doing his best but without board approval; its pricing was so low that it smacked of desperation; it omitted all the detail that would be required in a bid. It could certainly not be characterised as a bid made on the assumption of a no-scheme world; it assumed that WWH could remain in operation but there is no assumption that HS2 itself was cancelled.

Accordingly we reject Mr Heubeck’s view that the prices in the P3 letter would have been replicated in the P3 contract in the no scheme world.

The only other candidate for pricing in the P3 contract in the no scheme world is the rates charged under the 2012 contract, as updated under that contract until 2016/17 and then further updated for inflation. Neither of the sleepers experts supported it and in our view those prices would have been too high to give the claimant the substantial market share that it no doubt hoped for.

Bearing all the above in mind we find that the prices in the P3 contract in the no scheme world would have been the prices offered in the non-compliant P2 bid for a contract at WWH, adjusted for inflation.