S&D Railway Trust

I'm not so sure. I understood @Jamessquared's post #3951 to be advocating some form of compromise agreement under which the overhaul was still to be carried out by the plc with the assistance of a subsidy from the WSRA.

I disagree with his notion that such a compromise is not “altogether favourable to the plc” simply because steaming fees are to be paid by the plc for any new agreement formed when the present one expires. Qualitatively that is an arrangement no more disadvantageous to the plc than the one currently in place, but it is one apparently to be had only at the additional expense to the Trust of the WSRA's stipulation that the minimum condition precedent of such a subsidy is a fresh agreement for the 2-8-0 to remain on the West Somerset Railway after expiry of the current agreement.

I remind myself that this is the same WSRA as endorsed in May 2020 the plc's reasons for evicting the S&D Trust from Washford without enquiry into the accuracy of those reasons, so I'm damned if I can see the attractions of a course that exposes the Trust to repetitions of that kind of behaviour on the part of multiple organisations associated with the West Somerset Railway.

Certainly I can agree that the S&D Trust Board will have to predict the consequences of the various possible outcomes to the present dispute. However, any such prediction about the consequences of entering into a fresh agreement in 2030 for hire of the 2-8-0 to the plc in return for WSRA subsidy of the overhaul will have to take account of the risk that thereafter the Trust will suffer further maltreatment at the hands of the plc. The Trust has already suffered the consequences of a breach by the plc of the 2018 contract to extend the Washford lease and now faces the threatened breach of the agreement for the locomotive's overhaul. This suggests that the forging of further contractual relationships with the plc carries a high risk that they too will be dishonoured, so perhaps commentators would do better to suggest solutions to the Trust's predicament that do not prolong its attachment to the West Somerset tar baby.

I too have heard so many conflicting statements about the condition of the plc's finances as to be left with no way of gauging whether discharge of its overhaul obligation would tip it into insolvency or not, but if it is truly the case that “there is currently insufficient money in anyone's pot to complete the next overhaul” then it is pointless to speculate about alternative arrangements. If the plc doesn't have the funds to perform the overhaul when it falls due then that would seem to satisfy the test of insolvency – and that before consideration of any award of damages the S&D Trust might seek for the plc's breach of the 2018 agreement to extend the Washford lease.

 

Two points here. First, the test of insolvency would not arise unless the trust chose to enforce the agreement as a debt falling due immediately, and the plc could not meet that debt at that time. As it is not difficult to imagine how "can't afford" could involve a lesser impact upon WSR plc (e.g. disruption to their other maintenance and overhaul requirements), and S&DRT would be one of a number of creditors involved at that point who would stand to lose from bankruptcy proceedings, I'd hesitate to use the language of insolvency here. Second, as comments on the Llangollen thread show, pursuing debts to the point that a preserved railway goes into administration or liquidation can affect the reputation of the organisations owed money, however unfairly. Given the vituperative nature of many social media postings on matters WSR, that's not something to ignore.

 

But how do you come to an arrangement that is of any value when one party speaks with forked tongue?

 

If the PLC does not have the money, does it matter who is liable, the legal eagles can fight over that later,
the fact is that Moving the engine will cost money,
it makes more sence to, If the host railway wants the engine to stay, become part of the home fleet, and a deal can be done to take up that deal, A clean break, I feel would be in the interests of everyone, As i said, i think a triparty deal, with several groups might be a way foreward, as it provides shared income, and a workforce, that could do much of the mechanical work, on the MHR, Theres the Eastleigh group, 828, who appear to make very slow progress, Theres the Urie group, who have just completed an overhaul of 506, and 499 should be ready fairly soon, it makes sence for the three groups to work together, share fund raising and find a way to help each other, for instance, once 499 is running, then they could take on the 7f, the boiler could be a mix of paid staff,and voluenteer input, both groups are a good match to each other, both doing the same job, heavy freight, and passenger work in the peak summer season.

 

I hope everyone will come over the weekend to enjoy a fabulous gala with the strongest S and D lineup in quite a while. Tickets available in advance or on the day.

Let's all hope this isn't the last time that 53808 can star at such a gala.

Just to end some speculation, new tyres will be needed at overhaul. I don't think another turning will be possible.

 

It matters to the extent that if the WSR plc are liable and don’t pay, it could push them further towards bankruptcy. The SDRT then becoming a creditor in the winding up of the PLC.

 

I would like to clear up one point that you have got wrong. The W.S.R. took on the restoration of 53808 back in the 1980s and the S&DRT paid the railway to do so . I know this is correct as I was the person who costed up what the S&DRT should pay the W.S.R. for restoring the locomotive to working condition.

 

I agree there is really little morality where contracts are concerned. I have experience of suppliers who have openly signed contracts knowing they had no chance of meeting their obligations. Whilst accepting that this is more complex due to charitable status etc any contractual document is always open to interpretation unless VERY well drafted, hence there are so many well off legal professionals.
We rightly have little (or no) idea what the written words actually say, but just because the outcome may seem right and just, there is no guarantee that it is the one that will be judged to be the solution if it does go to court or some other form of arbitration if that is what the contract says.
I hope that both parties can come to some sort of settlement that leaves them both in operation, without having to revert to legal action, but having read pages on both threads I would not be putting any money on it.

 

It was the WSR plc itself that initiated concerns about its solvency by the issue publicly of statements such as that to the effect that, so far as “looking after” the locomotive was concerned, “we cannot fund this alone.” It is difficult to see how such a financial predicament can be addressed without acknowledgment of its overtones of insolvency. Regardless of whether I or any other contributor treat this as a condition that dare not speak its name, the time will come when the 2-8-0 has to come out of revenue earning service for want of a boiler certificate and the means for changing that state of affairs will have to be discussed. So far, the only means for doing so that I have seen canvassed involve the S&D Trust:

• hoping for the best that the plc will find some way of performing the overhaul as per contract;
• passively accepting the losses consequent upon a failure on the plc's part to do so; or
• forming some modified agreement with the plc that will prolong a hazardous connection with the West Somerset Railway.

None of those outcomes look attractive to me, so I am interested to discover whether you or anyone else can suggest some better alternative.

 

I can’t see any good options. My observation is in the context of the best having to be made of a bad job, and how choices could make things better or worse.

Given the mess of the last 18 months, I have every confidence in the ability of the Trust’s management to develop and implement an effective negotiating strategy.


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Elaborating on that a little, Mike Palmer's account of the locomotive's restoration records that at the Trust's 1985 AGM the membership sanctioned the award of a restoration contract to the WSR, initially for a contract price of £22,500, although this figure had to be enlarged by a further sum of £12,500 to meet additional work found to be necessary to the cylinders and valve chests. This followed an unsuccessful attempt by Trust members themselves to complete the restoration, sub-contracting work outwith their competence. I played a very small part in such work myself, and recall the delights of pummelling the mud and oil encrustation of the frames with a needle gun, or pad welding to make good damage to the frames where sideplay in the trailing driving wheelset had evidently caused it to cut into them.

 

To follow up on your point, were the trust to want 88 away it is how they go about it that is important if they were to seek financial compensation. Unless they offer their part of the contract - returning it to the WSR for overhaul and running it on the WSR until the agreement expires - the PLC can just say 'you broke the contract and so we've no liability': the trust gets nothing and the PLC transfers the £240k reserve back into their accounts (which would count as profit, heralding a great turnaround!). And so full circle, that's one of the reasons that the 'discussions at the appropriate time' could be complicated and a principal reason why I think the trust might seek to follow through on 88's return to the WSR for overhaul

Patrick

 

I honestly am surprised by your opening sentence as I thought it was clear that this was the major issue. The WSR is running on empty and all the assets are in hoc to the bank. It needs millions to replacements track and carry out other repairs. It's basically playing chicken over the overhaul of this loco, hoping to escape the liability and has it's fingers crossed that 'something will turn up' to bail it out.

 

Affirming the point made by Jamessquared that 'restricted funds' are not part of the accounting of plcs (they are a specific feature of charity accounts), Lineisclear
s summary seems quite accurate and apposite. Throughout the period of use WSRplc has been acquiring a liability to undertake the full overhaul when due. Whilst this should have been recorded at a realistic value in the accounts (and will therefore affect the assessment of whether they remain a 'going concern'), the question of whether this liability has taken them to the point of insolvency will only clearly crystalise when the liability falls due. (It is possible that the liability has already reached this quantum, but that this has not been recognised in the accounts - in which case the directors of WSRplc are at significant personal risk, if the company is trading insolvent).

However, there is a point not highlighted by 'Lineisclear'. When the liability does fall due the situation will become clear - either WSRplc will overhaul the locomotive (or pay for it to be overhauled), or they will default on their obligation and the asset (88) will return to SDRT. It would then be relatively simple for SDRT to let the contract on an altogether more comfortable 'overhaul and use' agreement (rather than 'use and overhaul') with another railway, whilst recording the costs of this overhaul which will then give them clear information as a starting point to quantify the amount they might seek to recover from WSRplc (or its administrators/receivers).

This outcome would recover the asset (88) for use by SDRT (or a railway they are happy to have 88 on a running agreement with), see the loco overhauled and in use at no (or significantly less) cost to SDRT, and provide the basis for them to recover funds for the previous period of use from WSRplc. It would seem that SDRT have played their hand rather well, and WSRplc probably has some issues to address before a liability of at least six figures crystalises in the near future.

 

I am not sure that the statement that 'insolvency would not arise unless the trust chose to enforce the agreement' is correct. The simple test for insolvency is whether the assets of a company at a particular point cover its liabilities as they fall due (not as they are enforced). I think that, if I were a WSRplc director, I would want very thorough legal advice before being bold enough to say that the company was not insolvent solely on the basis that a liability that was due was being avoided (whether with the agreement of the creditor or not). I think that for this to be effective at avoiding insolvency, it would be necessary to renegotiate the liability so that it was formally written away or suspended for a period. This would obviously require the agreement of SDRT - and some very clear and expert legal advice.

 

The trust would effectively lose control of their loco for perhaps 10 years in return for the overhaul, at the end of which who would fund the overhaul then due ?

 

Is (2) correct? My understanding for announcements made at the time the loco went to the MHR was that is was going there to earn steaming fees. The cost of these may be offset by any work done by the MHR but that is not a run and repair arrangement.

 

BR had documentation on repair limits and scrapping sizes for mechanical equipment and what standard repairs should be carried out to so that is fairly quantifiable. The argument comes when something is currently within limits but is unlikely to be so in (say) 10 years time. What is even harder to quantify is boiler work because that is largely subjective and no boiler inspector would ever give a 'ticket' for more than 12 months so, other than sticking a new set of tubes in it and any other work required by the inspector to make it safe, you wouldn't have to do much to get that ticket.

 

It is in the public domain that when 53808 left the WSR last year there was an agreement for this. You would not expect that to be verbal or a hand shake.

Without breaching any confidentiality that quite a few of us agreed to, I think it is correct to suggest that the SDRT board were fully aware of lots of the controversial contractual issues discussed recently on here such as quantification of the impending overhaul costs and their crystallisation. In effect, to avoid some if not all of the potential problems discussed here the last few days.

I suppose on one simplistic approach the last WSR plc accounts show cash in hand or in the bank at some £400,000.