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S&D Railway Trust

Discussion in 'Heritage Railways & Centres in the UK' started by Andy Norman, Feb 24, 2020.

  1. Bayard

    Bayard Well-Known Member

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    It seems to me that this is a fairly simple case of a creditor and debtor, where the debtor is unable to pay. The legal and contractual niceties are somewhat irrelevant. The debtor is obviously unable to pay the debt in one big lump, or even bit by bit over a reasonable period (in this case the time of a overhaul). What it boils down to for the creditor is an assessment as to what is the maximum amount of money or payment in kind they can expect to get out of the debtor and over what period, taking into account the current and likely future financial position of the debtor and the likelihood that they will actually carry out any agreement made. I think it can be fairly safely assumed that, if the Plc goes bust, no-one will get anything except the banks.
    Given the current financial situation of the Plc, it seems unlikely, even with the best will in the world, that they could carry out the overhaul of No 88 unless that overhaul was very protracted indeed, keeping the loco out of use until 2030 and beyond. Therefore it does look like the best option is for the S&D Trust to have the loco overhauled elsewhere than the WSR and see what they can get out of the Plc in the way of cash and workshop time working on specific items. It's worth bearing in mind that everyone concerned would be in more or less the same situation with regard to No 88, even there had no eviction and "cuckoo in the nest" remarks and the financial position of the Plc was still as it is today: the net result would still be that, if the Trust wanted its engine back in working order any time soon, it would have to fund a large proportion of the repair itself and, probably, have to have a large amount of the work done away from the WSR.
     
  2. jma1009

    jma1009 Well-Known Member

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    (I would suggest that the recent history of the WSR plc board with LMS 4F 0-6-0 44422 were rammed home to the SDRT board, and they have absolutely no intention of ending up in a similar situation, and if JJP thinks he can do a repeat with 53808 he is sadly mistaken).
     
    Last edited: Sep 29, 2021
  3. The Dainton Banker

    The Dainton Banker Well-Known Member

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    Since the WSR Plc stated some time ago that it will be unable to undertake the overhaul financially the contract is already effectively broken. How could they claim, as you suggest, that the Trust "broke the contract" by protecting its asset ??
     
  4. D1039

    D1039 Part of the furniture

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    Currently and with the consent of both parties the agreement is in force but suspended until the end of the ticket.

    There was a long discussion on here at the time about the difficulties proving ‘anticipatory breach’, and there’s lawyers on this thread who can give more detail. As I recall, their comments at the time weren’t that contract is already broken. The trust’s actions in agreeing to suspend it suggests to me they don’t think it’s yet broken either. Logically it follows that their next steps be careful not to breach it themselves.

    As Julian says above, the trust have all this in mind.

    I think I contributed to this sub-thread taking off with my inner Machiavellian thoughts. I think we’re now repeating ourselves?

    Patrick
     
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  5. Alan Kebby

    Alan Kebby Member

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    Things can get very complicated with the WSR, but I think that perfectly sums up the whole situation.
     
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  6. 35B

    35B Nat Pres stalwart

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    We agree; that is the test. My point, which could perhaps have been better expressed, was that the liability is to perform a project to overhaul the locomotive. That will incur a variety of costs over a period of time, and some of those costs will be attributions of existing staff and facilities costs. Depending on circumstances, it may even be that some never crystallise because volunteers do work that it has been assumed will be paid work.

    That is a fundamentally different dynamic in a trading company from settling a debt due as the result of a court order, or because an invoice has been presented.

    There are important questions that the plc board would have to consider in this situation, but also significant latitude for the exercise of judgment.

    Action by the Trust to treat the failure of the plc to deliver and enforcement of that as a debt would therefore incur a significantly increased risk of default by and insolvency of the plc than seeking performance of the overhaul.

    The plc board have given many reasons to doubt both their competence and benignity over the last few years. I am certain that their misjudgments have made the WSR less robust than it might have been. But I still hesitate to suggest that they have or would knowingly trade while insolvent.


    Sent from my iPhone using Tapatalk
     
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  7. MellishR

    MellishR Resident of Nat Pres Friend

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    The problem with that is that the liability only becomes unarguably due some years after the loco comes out of service, during which time the SDRT would be left twiddling their thumbs and waiting, and the loco would be stored somewhere and deteriorating. Post #3969 is spot on.

    The first and third of those would depend on some commitment from the PLC, and recent history shows what that would be worth.
     
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  8. jnc

    jnc Well-Known Member

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    Perhaps, but after thinking about it, I think the scale of the operation is more likely the key dividing line. An expansive loco group like Southern Locomotives is large enough, with a solid and diversified enough income stream, that they're probably willing to pass over the certainty of the 'cash in the drawer' approach and are willing to accept the risks associated the advantages of being able to utilize all their money all the time. (To put it another way, they're more like a regular business.) However, some small railway with a few hundred yards of track which operates sporadically may prefer to act like your hypothetical owning group, and go with the security of accumulating earnings. (In other words, they're more like a club.)

    Noel
     
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  9. jnc

    jnc Well-Known Member

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    I think it's fairly safe to assume that the SDRT are well aware of the risks of future involvement with the 'WSR tar baby' (if for no other reason, the WSR's questionable financial situation); but it should not be beyond the wit of man to include terms which will protect the SDRT in the event of various potential failings on the PLC's part. E.g. if the new agreement calls for steaming fees, then what happens if PLC should fail to make such payments; the agreement should explicitly consider and lay out a response to that eventuality.

    The real problem may turn out to be that the PLC will perhaps not ant to agree to robust protections for the SDRT, for whatever reason (e.g. perhaps they will feel that it ties their hands too tightly). But, as has been pointed out, the SDRT will have a certain amount of leverage (should the PLC not do the overhaul, they will lay themselves at risk of a potentially ruinous liability), and they should not hesitate to use it to ensure that they are protected in any future relationship with the PLC. I know these are 'big business rules', but the WSR is, after all, a fairly big business; and the SDRT cannot, for the reasons that have been adequately laid out, simply pull the rip cord on any relationship with the PLC, at this point in time. (Maybe at the end of the future term that will be something to consider, depending on how things have gone during that term.)

    Noel
     
  10. John Palmer

    John Palmer New Member

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    Noel,

    I too am sure that the S&D Trust Board is very well aware of the risks of a further association with the WSR plc. I'm also sure there would be no insuperable difficulty in drawing up a contract containing all sorts of terms calculated to protect the Trust against an unwillingness in the plc's part to abide by it. Unfortunately, even in the unlikely event of the plc agreeing to such protective terms, I fear this approach would not address the real problem, namely that the Trust can have no confidence that it would operate as a deterrent to a determination on the plc's part to disregard its contractual obligations.

    Why? Because one has only to look at how the plc has behaved in relation to the Trust's occupation of the Washford site. When the plc signed the 2018 agreement to extend the site lease, the Trust no doubt had confidence that it held a written assurance of its right to occupy the Washford site for a further fifty years. And yet, notwithstanding the fact that the 2018 Agreement in the Trust's hands satisfied all the statutory requirements of an enforceable contract for the disposition of an interest in land, the plc subsequently saw fit to serve a Notice to Quit the Washford site in complete disregard of the Trust's contractual right to do so. Bearing in mind that the 2018 agreement held out the prospect of being enforceable by order for specific performance (i.e. an order compelling the plc to perform the contract according to its terms), whereas breach of a contract for payment of steaming fees will only attract the lesser remedy of damages, I think you can see why the Trust Board might take a fairly jaundiced view of the value of terms supposed to protect it against depredations of the plc under any future contract for hire of the 2-8-0.

    Ultimately, legally protective terms incorporated into a contract are of less value than confidence that the other party is entering the contract in good faith and can be relied upon to perform its contractual obligations to the best of its ability. Recent experience of the plc's disdain for the Trust's rights under the 2018 agreement does not inspire such confidence and supplies a disincentive to reliance upon terms supposed to confer protection against breach of contract – why accept such a risk in the first place? Where the only remedy for breach of contract is payment of compensatory damages, any doubt about the defaulting party's capacity to pay such damages is apt to erode further the reliance that can be placed upon such protective terms, and on this score too the Trust has reason to be wary of a further contractual engagement with the plc. Better to contract with an organisation you are confident will abide by the bargain it has struck than with one you know from prior experience may well fail to do so.
     
  11. 35B

    35B Nat Pres stalwart

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    All true - contracts are after all about documenting agreement between two parties about whatever it is they've agreed upon.

    The problem is about the implication of breach of contract upon the S&DRT. I'd be reasonably confident that the WSR plc would have no claim against the trust if they breached the contract, but they would also have a robust defence against being made to perform that contract. The incentive to the WSR plc to play ball would be the opportunity of future value from 53808, and the challenge would be to weigh up the risk of further default against the much more certain loss of overhaul funding.

    I don't think @jnc or anyone else is pretending that this is anything other than Hobson's choice.
     
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  12. jnc

    jnc Well-Known Member

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    Oh, I was expecting that most of the protective clauses would simply immediately completely divorce the two organizations, so that the SDRT could get out of Dodge and get on with their life somewhere else, without being tied in any way to the WSR, as they apparently to some degree are now (by the run/repair agreement).

    Noel
     
  13. 62440

    62440 New Member

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    An excellent summation. Once bitten, twice shy.
     
  14. Sidmouth

    Sidmouth Resident of Nat Pres Staff Member Moderator

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    There is perhaps a broader point on this that has implications across preservation . There are other lines which have similar run and repair agreements in place on locomotives in the fleet . The liability that these create could conceivably make a railway technically insolvent if properly provided in the balance sheet. I also suspect that the value earned from operating the engine if accounted for via steaming fees and putting money aside significantly under covers the likely costs of the future overhaul

    Were a railway to unilaterally not fulfil its obligations other lines may follow suit
     
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  15. Piggy

    Piggy Member

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    Don't you think the situation is sufficiently dire without promoting it ?
     
  16. Jamessquared

    Jamessquared Nat Pres stalwart

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    We've been here before. Most railways do under-pay for their locos, particularly if they are getting them from loco owning groups. On the other hand, those loco owning groups get access to all the infrastructure and logistics of an operational railway - without which they couldn't see their loco in use. So it goes both ways.

    To my mind it is a bit naive to assume as a loco owner you will get overhauls and maintenance fully paid for, without accepting some measure of paying for access to the host railway. To me, the shortfall between the income a loco generates and the actual overhaul cost is essentially a measure of the value accrued by access to an operational railway: each loco owner would have to make their own decision about whether that is worth it, but if there is no differential, effectively loco owners are being subsidised by the host railway. Those carriages and p/way renewals and all the rest don't pay for themselves ...

    Tom
     
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  17. jma1009

    jma1009 Well-Known Member

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    Perhaps we can instead concentrate on the contents of SDRT Chairman Ian Young's letter to members of 24th September. That dealt with the difficulties of trying to get the WSR plc board to engage over the current issue of Washford.

    The issues surrounding 53808, and concern and support expressed on here for the SDRT will no doubt be appreciated by the SDRT board, and I would urge those of you who have not done so to sign up for membership of the SDRT. The last quarterly magazine was excellent and included a wonderful article (first part) by Bob Curtis on the S&D 7Fs of plus 4 pages.

    The current problem is Washford. And this weekend 53808 will take part in lots of special events on the MHR/Watercress Line and SDRT important events. So that once again the public can see some of the considerable artefacts representing the old S&D that the SDRT has.
     
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  18. Sidmouth

    Sidmouth Resident of Nat Pres Staff Member Moderator

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    it doesn't though answer the fundamental question . Who pays the shortfall that may be the difference between an engine returning to steam or mouldering in a siding while inflation merely erodes what money is sat in the bank ? Now of course when engines were mainly affiliated to the railways they ran on , your argument holds water as both were working towards the long term success of the railway . As more and more lines move to a commercial hire model then the loco owner is at liberty to offer their engine to the highest bidder
     
  19. jma1009

    jma1009 Well-Known Member

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    Can we please get away from a discussion about the future of 53808?

    The main issue currently is Washford.

    As an aside can anyone provide a list of preserved locos that worked over the S&D please? Obviously 53808 and 53809, and 44422. Any more?
     
  20. Jamessquared

    Jamessquared Nat Pres stalwart

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    Last edited: Sep 30, 2021

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