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S&D Railway Trust

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

  1. Big Al

    Big Al Nat Pres stalwart Staff Member Moderator

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    So that clarification makes the situation clear.

    The WSR is promising nothing about when the overhaul will be undertaken and the absence of earmarked funding suggests that whether the PLC will do it at all must be in serious doubt. Under normal circumstances with a normal heritage railway such uncertainty would probably be ok but, and sorry to say this, we are talking about the WSR where little ever seems to be clear including the timing of work on its own railway.

    The links between the S&DRT and the WSR are now tenuous. Logic suggests that even a commitment to carry out work at some point in the future cannot be the basis for any planning. And the fact that people with allegiance to the WSR would dearly like to see the 7F back on the WSR is now in the WIBN category.

    I'm sure the S&DRT will make the right decision for their loco and their members. I really can't see it including anything that involves the WSR and that includes the expectation that any compensation will be forthcoming.
     
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  2. jma1009

    jma1009 Well-Known Member

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    @Lineisclear John, I can go along with much of this, except that surely "specific performance" of the contract by the WSR PLC cannot be ruled out as you suggest, and to my mind the consequences for the WSR PLC of say a court judgement of an award of a substantial sum as damages against it will be terminal.
     
  3. Snifter

    Snifter Part of the furniture

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    The S&D have played this very well e.g. there have been no inflammatory reactions, just measured and considered responses. Should this become a legal issue (which I hope does not happen) then the plc have made several errors including one that may have serious consequences. The demise of the WSR at the end of a legal process will not affect the S&D one jot, which has clearly been missed by whoever is guiding the strategy.
     
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  4. Miff

    Miff Well-Known Member Friend

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    But what does 'specific performance' mean? I wonder what standard of 'ten year overhaul' is specified in the run & repair agreement. Quoting from another thread (about 6201 Princess Elizabeth's recent withdrawal):
    What if the Plc felt they were only obliged to do (or pay for) the bare minimum and then terminate the agreement, with delivery or payment due only on the last day of the existing agreement with no work done in the intervening time. Would the S&D Trust be able to contest this?

    (edited)
     
    Last edited: Sep 29, 2021
  5. simon

    simon Part of the furniture

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    unfortunately, that is why you should never treat contracts such as this as 'deals between friends' when drawing them up and should always 'plan for the divorce' is the contract should deal with in some detail what happens when you are no longer friends. Too late now, in this case of course.
     
  6. Miff

    Miff Well-Known Member Friend

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    I agree. S&D Trust effectively gave the Plc, at a time when there was trust on both sides, an unsecured loan which now not only has no security but might also (unless it's very clearly defined in the agreement) be very difficult to agree the repayment value.

    Whilst the relationship was good it was in the interest of the Plc to deliver a high standard of overhaul in order to have another 10-years use. But if either side now wants to terminate the relationship I cannot imagine the Plc wanting to do, or accept liability for, anything more than the bare minimum.
     
    Last edited: Sep 29, 2021
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  7. Lineisclear

    Lineisclear Member

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    I'm happy to agree but, as has already been pointed out, specific performance implies some objective test of what an overhaul comprises and the standard to which it is to be carried out. If those are unspecified or vague the likelihood of securing such an order seems to diminish.
    I also agree that an unsatisfied judgement might trigger insolvency but that would not necessarily be terminal.
    The positive option that I hope could be explored is that there may be mutual benefit in coming to an arrangement. However those that want to punish the PLC might have to accept that doing so is not necessarily in the Trust's best interests.
     
  8. 35B

    35B Nat Pres stalwart

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    While I agree that an "arrangement" might be the lesser evil outcome in this (legal process being both expensive, protracted, and uncertain of outcome), I would be curious as to what leeway the plc might have to agree an enforceable such arrangement given the charges secured on the plc's assets. Without wishing to "punish" the plc, the combination of it's prior conduct and financial constraints may limit the possibility of coming to such an arrangement, even presuming the will on the part of the plc to negotiate one.
     
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  9. Jamessquared

    Jamessquared Nat Pres stalwart

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    That's not really true. As things stand, the S&DRT are essentially an unsecured creditor to the plc - i.e. the plc owes them an overhaul, likely running to six figures. If the WSR plc collapses, then the S&DRT lose any hope of ever recovering that. So a collapse of the plc has a considerable impact on the S&DRT.

    I get the sense all those advocating that the S&DRT just walk away are missing what the legal responsibilities of the Trustees are in respect of using the Trust's assets in a prudent fashion. Any action which causes the S&DRT not to get their loco overhauled at the WSR plc expense is in effect giving away a six figure sum. If the direct cause of that outcome were the S&DRT Trustees (either by a unilateral decision to get the loco overhauled elsewhere at their own expense; or in instigating some course of action that caused the financial collapse of the WSR plc) it would have to be balanced against their other responsibilities: maybe you could justify it in the interests of their core educational role of returning the loco to traffic, accessible to the public, much earlier, but that would be a big call - and assuming there was some body / organisation in the wings with the capability to fast track the overhaul.

    My hunch is that there should be discussions between all parties going on in the background, out of sight of those of us on various fora. Those advocating seizing the moral high ground (as they see it) and trying to punish the plc in some way for past behaviours may find that that leads to a somewhat Pyrrhic victory. A compromise deal in which, say, the work is carried out at Minehead, with an agreement for future running on the WSR, and funding coming from both the support charities, accrued running fees on the MHR and the S&DRT themselves all helping to bridge a shortfall in funds provided by the plc may seem a bit grubby and "insufficiently punitive towards the plc" but could nonetheless be the best deal in terms of prudent stewardship of S&DRT finances and seeing the loco back in operation quickly.

    Of course, another alternative might be for everyone to congratulate themselves on how justice has been done, while cyclists enjoy their new cycle track from Taunton to Minehead and No. 88 slowly rusts away in a siding somewhere.

    Tom
     
    Last edited: Sep 29, 2021
  10. Monkey Magic

    Monkey Magic Part of the furniture

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    That is misrepresenting the arguments. I think everyone simply wants the WSR to fulfil its contractual obligations as per the existing contract and as promptly as possible and not parking it up in a siding until 2030 to rust away.

    The problem is getting the WSR to do this and considering what is plan B if they don't. Now, if the WSR were a well run, financially stable railway then none of this would be of concern. However, it isn't. And all the Plan Bs are lose-lose.

    Yes there should be negotiations, but the evidence from the S&DRT regarding communication with the PLC suggests that the PLC frequently fails to communicate. If the PLC can not agree to a temporary extension of the lease, or raise the money to purchase the assets on the site, it seems frankly delusional to expect the PLC to suddenly start behaving in a normal way over 53808.

    Your proposal of a new deal in which for fulfilling the contract the WSR gets to run 53808 seems to be advocating rewarding bad behaviour and green lighting bad management practices, this sets a worrying precedent and sends a very clear message to other railway managers that this kind of behaviour has minimal costs and plenty of rewards.

    Finally, even without taking the moral high ground or trying to punish the WSR, the outcome of 53808 rusting away and the WSR becoming a cycle path is still a more than less likely outcome.
     
    Last edited: Sep 29, 2021
  11. Jamessquared

    Jamessquared Nat Pres stalwart

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    I'm not advocating rewarding bad behaviour. I'm suggesting that the S&DRT Trustees have to look at what is the least worst outcome for their assets.

    Two points seem obvious to me: (1) A deal in which the WSR plc pay some of what they owe (either in cash or kind, for example access to a workshop and paid staff engaged on the overhaul) is better than an outcome in which they pay none of what they owe (which anyone advocating having the loco overhauled elsewhere seem to be suggesting) and (2) having the loco running is better than having it stored out of use.

    If you accept those two premises, then that leads to the sort of deal I suggested. It isn't altogether favourable to the plc, since I'd envisage that you'd also want to lock in some form of steaming fees in the future, i.e. the loco is overhauled this time with the plc paying some of the costs, but at that point the current agreement is discharged and future usage is dependent on paying a usage fee. But access to any funding from e.g. the WSRA seems to be dependent (rightly, in my view) on the loco being used on the WSR.

    The bottom line is that there is currently insufficient money in anyone's pot to complete the next overhaul. You can bleat all you like about how that shows bad management or bad faith from the plc, but that doesn't solve the core issue. So the options are basically find the money from somewhere; or see the loco out of traffic.

    Incidentally, as an aside for anyone suggesting it gets overhauled elsewhere - you still have to answer how that would be paid for. Unless there is a white knight willing to fund it, or a specific bequest / legacy, that is likely to involve any hard-headed workshop on a different heritage line wanting to secure another "overhaul and run" type agreement: no-one would sign up for an "overhaul and also pay daily". So taking the loco to another line likely leads to a similar deal to the current one, just with a different set of management. That hardly sounds ideal.

    Tom
     
  12. 35B

    35B Nat Pres stalwart

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    You still take a moral view. I've had experience of a few commercial disputes (and, let's be clear, that's what this is). Successful resolution of those disputes is not about winning them, but about getting to the best possible outcome in the circumstances. The "plan B" options discussed may well be unpalatable, but the trust need to consider what courses of action deliver the best outcomes in terms of their charitable objectives. In this case, I suggest that is about ensuring both that 53808 is able to run again as quickly as possible, and that the S&DRT is able, as an organisation, to deliver its non-53808 objectives. It would be dangerously easy to get into a position where focus on 53808 would distract from those wider objectives, and where decisions would be made emotionally; I am impressed with how well S&DRT have handled themselves over these last 18 months and avoided falling into those traps.

    The problem we're wrestling with, from a very similar perspective in terms of our opinion of WSR plc's behaviour regarding the S&DRT, is of predicting the consequences of any particular outcome. If winning pushes it into a bankruptcy process, then the victory becomes an expensive adornment of zero practical use. And at that point, we have to remember that there is a difference between the financial value to S&DRT of what WSR plc may do, and what it costs WSR plc to provide that.
     
  13. jnc

    jnc Part of the furniture

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    As a general proposition, while I agree that 'accumulating cash in a drawer to pay for an eventual overhaul' means that said cash is sitting there, not doing anything useful, prior to said overhaul, the fact remains that to do the eventual overhaul, real cash will be required - and if it's not retrieved from the drawer, then where's it coming from? There are a number of possibilities, of course: donations; income from operations; etc. However, none of these have the certainty that 'actual cash in a drawer' does; so if one elects not to put the cash away, one is trading the ability to utilize that cash for other goals, for the certainty of being able to fund the later overhaul. This is a complex tradeoff, involving a certain amount of crystal ball usage (inherently uncertain), which will depend on the fine details of the specific case (e.g. can the people who one expects to be the source of donations be absolutely relied upon to come through, when later called upon). Owning groups may prefer the certainty of 'cash in a drawer' (and might well sleep better, knowing that it's there). YMMV.

    Noel
     
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  14. 30854

    30854 Resident of Nat Pres

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    Much in a very sound post to chew on, not least what constitutes such 'ringfenced fund' arrangements. With virtually all interest bearing savings accounts (probably the most secure repository) returning precious little since the 2008 kerfuffle, real world inflation (as opposed to official figures!) obviously erode totals in the bank over time.

    A couple of questions, if I may, concerns the UK Gift Aid scheme, more precisely at what point HMRC's contribution is counted into the mix? And where a registered charitable organisation has made a commitment to fund, say, a 10 year overhaul, can they then set up a ringfenced contributions fund under their 'charitable umbrella'? If so, it has to be assumed the subject of such a fund would be at considerable financial advantage when compared with an unregistered owner or owners' group, appealing for funds for exactly the same purpose.
     
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  15. Jamessquared

    Jamessquared Nat Pres stalwart

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    I think the distinction is between a railway owning and operating its own locomotives (where I feel in general you are better running the maintenance function as a steady-state revenue cost each year, rather than accruing individual pots of money earmarked for each loco); and using a loco owned by an owning group (where the security of the owning group is to build up a "war chest" over each operating period to pay for the next overhaul).

    In the latter case (independently-owned loco), the security of having the real cash banked outweighs the cost of that cash gradually declining in value while it sits in the bank. In the former case (railway company-owned loco) the depreciation in value of the cash is more valid, and you are - in my view - better spending the money productively now rather than in ten years when it is worth less.

    Tom
     
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  16. Jamessquared

    Jamessquared Nat Pres stalwart

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    On Gift Aid: you can only claim Gift Aid on donations made by individual taxpayers (since you are reclaiming tax that the taxpayer has paid). So in a hypothetical situation where a charity owned a loco and accrued steaming fees from an operating company, those steaming fees aren't eligible for Gift Aid. If Joe taxpayer gave you a donation, potentially you could reclaim GA on that donation, subject to (1) Joe Taxpayer agreeing and filling in the necessary paperwork and (2) not reclaiming more in Gift Aid than Joe Taxpayer had themselves paid in income tax in the year in question.

    In the current case though it is all a bit moot, since people are suggesting that the plc (who have the overhaul commitment) should have created a ring-fenced fund: but the plc isn't a charity. The S&DRT could absolutely create a ring-fenced fund that could only be spent on that loco, or indeed on anything else within its overall charitable purpose.

    Tom
     
  17. Big Al

    Big Al Nat Pres stalwart Staff Member Moderator

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    You still seem to be clinging on to the idea that the WSR will overhaul 53808. I fancy that nearly everyone else has moved on from that.
     
  18. Monkey Magic

    Monkey Magic Part of the furniture

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    The second part of your post contradicts your first.

    If the PLC doesn't have the money to overhaul the engine then it doesn't have the money. No amount of new deals and offers of running for 'x' years is suddenly going to result in the money being found. Moreover, the competing demands on money from supporters of the WSR make it unlikely that it would be a funding priority 'help pay for an overhaul for an engine we will have for 5 years vs help pay for infrastructure so we can run or overhauling 7821'.

    If the PLC doesn't have the money then the engine isn't going to be overhauled unless it is overhauled elsewhere. (ie overhaul and run deal on a.n.other line) Which does not seem to be as unrealistic idea as you are suggesting it is as there is probably a better opportunity for fund raising on a.n.other line which will get the engine for however many years of the deal).

    Of course, one of the issues is that we don't actually know the financial situation of the PLC which seems to veer between impending poverty and coining it. We are assuming that they don't have the money as opposed to them saying that they don't have the money when they do have the money (to do things like buy the freehold).

    Finally, my understanding of the issue (and I am happy to be corrected) is about when the overhaul has to be done and so it is possible for the WSR PLC to say one day 'yes we will do it' and then say 'sorry no we have no money' nearer the date when the overhaul is expected to be completed leaving the S&DRT back at square one with several years lost in overhaul and revenue earning. (I may have misunderstood this dimension and so happy to be corrected) which would be the worst outcome for the S&DRT and the situation that the S&DRT should try to avoid pre-emptively which is why people are advocating moving the engine away as being a better option than ending up in 2030 with an engine that has been out of use for eight years and with no prospect of being overhauled anytime soon.

    No that is @Jamessquared not me.
     
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  19. 35B

    35B Nat Pres stalwart

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    Please see also the excellent post #3956 by @Jamessquared; this post is intended to complement what he has posted and hopefully not duplicate it.

    I administer Gift Aid for a charity. We claim Gift Aid at the point at which the money is donated by the donor, and then allocate that Gift Aid to the relevant restricted fund(s) where the donor has indicated that this is required. Subject to our charitable purposes, it is irrelevant to HMRC how we then put that donation to use, and there is no value in the donation remaining unclaimed with HMRC. Indeed, on the timescales of many railway projects, the 4 tax year limit on when a claim can be made would result in that money being lost to the charity.

    As regards the wider question of the fundraising advantages to a registered charity as opposed to any other structure, your observation is entirely right - which is what underpins many of the views expressed in the "main" WSR thread.
     
  20. RailWest

    RailWest Part of the furniture

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    As an erstwhile S&DRT member, I would suggest that exactly that sort of situation existed some 20-odd years ago when I - and a number of fellow members - felt that Trust energy and resources were being devoted towards '88' almost to the exclusion of anything else. Fortunately that situation has improved since then.

    It may be pertinent to look well back in history to the start of this WSR/S&DRT 'locomotive contract'. My memory is not entirely clear here on everything, so I stand to be corrected, but.... The Trust acquired the loco back in the days when it was still at Radstock, so initial restoration took place in the old S&DJR loco shed there. When the Trust had to vacate that site, and ended up at Washford, almost all the initial effort went into getting the WD site into some sort of useable form (sidings, workshops etc), so '88' sat outside (albeit under covers) for several years.

    Eventually it became obvious that the loco was deteriorating faster than it could be restored, but the Trust had insufficient resources to speed up the work in-house and insufficient funds to have it done commercially, hence eventually the 'agreement' with the WSR. AIUI the basic principle was that the Plc took the loco 'as seen', restored it working order, then effectively got 'free' use of it (subject to a fee for use over and and above a certain miles-per-year limit?) until eventually its ticket expired, at which point the Plc would overhaul it again. The agreement could then be repeated - or not - as both parties decided.

    Whether or not the current agreement is similar, I don't know. However I do recall there being some discussion - when there were 'difficulties' with a previous overhaul - as to exactly the condition in which the loco should be returned to the Trust if the agreement was not renewed, as there were differing views/interpretations as to whether the Plc was required to give it back in full working order or simply the 'unrestored' state in which it was first loaned to them. I hope that is not the case now :)
     
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