[2025] UKUT 00138 (LC)

The 2012 contract included provisions for the prices to be indexed. Those provisions did not carry over into the extensions in the real world; instead, prices under the extensions and the following short-term contracts were significantly higher than they would have been under the 2012 contract formula. The claimant had to maintain profitability in a very uncertain period and the higher prices enabled it to do so; we imagine that for NR a short period of high prices was acceptable if it meant that the supply was secure – particularly in view of the need to build up a stockpile.

In the no scheme world that latter motivation was absent, so NR was in a stronger position. Moreover, NR was buying only its requirement for track because it was not stockpiling, so overall sales would have been considerably lower (by 820,000 sleepers or so, see paragraph 79 above) than it was in the real world. In those circumstances the claimant had to bear in mind the competition from TWM, which in the no scheme world could in fact have provided most of NR’s requirement – an outcome the claimant would have been keen to avoid. Accordingly we find that the prices in the short-term contracts in the no scheme world would not have been the inflated prices charged in the real world. Nor would they have been as low as they were in the claimant’s P2 bids for supply from WWH, because the claimant was not in competition with a range of international bidders as it was in the P2 procurement exercise.

Pricing was complicated because there were so many different types of sleeper and we have insufficient information to construct a set of prices higher than the P2 bid price and lower than the prices in the short-term contracts in the real world. But in between those two sets of prices lie the prices the claimant was charging under the 2012 contract at the end of its fixed term in March 2017. They could be further updated by means of the formula set out in the contract, which depended upon the price of raw materials as well as inflation. We find that that is what would have been done; the 2016 prices would have been further updated in each contract until the P3 contract began. We expect the accountants to be able to agree the updating in order to produce the necessary range of prices for their calculations.