The Queen vs DfT: Questioning the East Anglia Franchise

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On the 10th December 2015 in Court Two at the Royal Courts of Justice a new case commenced. Its presence in Court Two may reflect more on the number of legal professionals present rather than its perceived importance, but one thing was true: a case that saw the Queen take on her own Secretary of State for Transport represented something very unusual indeed.

“The Queen”, of course, was not personally present. Civil cases involving civil matters relevant to The Queen (or, in practice, her representatives) end up in the Queen’s Bench Division of the High Court of Justice, which generally hears cases at the Royal Courts of Justice in The Strand. Harking back to an earlier era, it is, in some sense, an appeal to the monarch and the monarch takes the case on behalf of his/her subjects. In this case those subjects were the London Borough of Enfield and, in more modern parlance, they were seeking a judicial review of the actions of the Department for Transport (DfT).

Enfield’s complaint pertained to the East Anglia Franchise tender issued in September 2015. In particular, to the level of service stipulated for just one of the 131 stations covered by the Franchise – Angel Road. They had been promised 4 trains per hour (tph), the council insisted, and this was not reflected in the tender that had eventually been put out.

You could be forgiven for thinking this particular case seems incredibly banal and trivial. But dig beneath the surface a bit and you’ll find a surprising amount is at stake. Not only are there large financial decisions involved but it also has implications for what the Secretary of State is free to do in his decision making in future. For the DfT, still rebuilding confidence in its ability to award franchises after the West Coast Mainline Franchise fiasco in 2013, there is also reputation at stake.

The Background

The issues involved here are very much about principles rather than details of the scheme. No diagrams were referenced in court and likewise, so we don’t get distracted, we are not going to look at the scheme in much detail here. In short, Angel Road station is an area known as the Meridian Water development area. Meridian Water is a scheme in which Enfield have invested considerable time, money (approximately £70m so far) and effort for over two years. To quote the scheme’s website:

[I]s the key development opportunity in London. This £2.5billion redevelopment, on an 85ha site, is transformational and inspirational that will deliver approximately 8,000 new homes, the full range of neighbourhood facilities and 3,000 new jobs.

That the council is very serious indeed about Meridian Water can be seen from the work that has both been put in so far and which is planned. The full masterplan can be seen here but, again, the website lists a number of critical elements to the scheme that have either opened already or are planned soon – a new £3m public space (Angel Gardens), a new primary school opening in 2016 and…

…4 trains per hour (tph) to an improved Angel Road station by 2018.

It is perhaps fair to say that London’s Boroughs have an occasional tendency to assume that transport improvements can simply be willed into being, regardless of the long term plans of bodies such as the DfT, TfL or Network Rail. This certainly wasn’t the case with Enfield. Since the scheme had first been proposed the council had been in detailed discussions with the DfT and clearly believed that the department intended to provide the service level the council desired.

It came as a great shock then when the Invitation To Tender (ITT) for the future franchise was published and there was no such requirement. With so much at stake the council applied for, and was granted, an hearing for an application for judicial review over the decision. Because of the urgency of the situation the application for review and the review itself (presuming the application was not denied) were heard at the same time.

Pursuing the claim

A application for judicial review is not something one undertakes lightly. This is especially true if you are a cash-strapped council and could be landed with both a hefty legal bill and outraged council tax payers horrified at how their local taxes have been spent. In this case Enfield council had good reason to fight the case. The entire Meridian Water scheme is centred around a massive new housing development in the Lea Valley. Without decent transport links they cannot attract developers and the developers made it very clear that without a headline rail service of 4tph all day they were not prepared to go ahead.

Why trains matter

That transport is seen as critical to Meridian’s success by both council and developers is hardly surprising. In London, transport and housing are intertwined (something our recent look at the Bakerloo line extension also highlighted). What the required service level here emphasises once again is that today 4tph is seen as the absolute minimum one should expect from a suburban rail network.

In part the credit for this particular truism should go to TfL. During his time as the man in charge of London Overground, Howard Smith continuously banged the drum for 4tph as the minimum level of service for which any suburban railway should strive. You need a fifteen minute service, he would insist, for psychological reasons as much as transport ones, for that is the point at which the average traveller stops looking at timetables and starts treating the service as “turn up and go”. This has a profound effect on the railway line in question and on its users. The obvious benefit, of course, is that people get to where they want to go quicker, but it also brings with it a subconscious feeling that they the area is well served and well connected to the rest of the city. It makes people want to live near that line and, just as importantly, it makes people elsewhere more willing to travel out of town and sample the bars, restaurants and other entertainments that the newly connected locality has to offer.

Nothing demonstrated the efficacy of this principle quite so much as the success of London Overground – and no doubt the halls of Crossrail, Smith’s new domain as Head of Operations, resound to similar assertions on minimum service levels today.

What is perhaps different now, however, is that the importance of “turn up and go” is appreciated as much by developers as by railway planners – something that the DfT’s tender announcement meant Enfield felt the damage of very quickly.

Indeed in court, Enfield council claimed that over £2bn worth of development was at stake. They wanted the services they felt they had been promised.

The case for the defence

In court the claimant made it crystal clear why they were pursuing the claim but the defendant (or rather his barristers) did not make it clear as to why the Secretary of State for Transport was so determined to defend it. As we suggested at the beginning of this article, however, it isn’t hard to take a guess.

The most obvious reason is that the Secretary of State wants to be free to make the decisions that he feels are fit and proper. A principle is at stake and it is one worth defending (with taxpayers money) otherwise it is a bit like giving in to blackmail – as soon as you give in once you make yourself vulnerable to further action.

There is also the issue of face and blame. Reissuing the tender notice would make it at least seem like the DfT had made a major error. Furthermore doing so might attract claims not just from other councils but (as with the WCML) from potential train operating companies due to abortive money being spent on a tendering process only to have it revised. With the DfT still smarting over the letting of that franchise and the failure to account for their reasoning in specifying a particular technical bit of accounting (a subordinated loan facility) one could well believe they were anxious to avoid further headlines suggesting they cannot do their job properly.

Whatever the reasons, what is quite interesting is how the barrister for the government argued the case for the Secretary of State. Various arguments were presented as to the grounds on which the Secretary of State was entitled to make his decision. It is likely than none of them have been seriously challenged before, let alone tested in court.

The Secretary of State is the Secretary of State for… Transport

The defence argued that the Secretary of State was the Secretary of State for Transport and not Secretary of State for the Communities. In other words, that the Secretary of State could not, and indeed should not, take into account issues such as future housing or future employment policy.

The suggestion of such a siloed approach would seem to be extraordinary given that the current administration likes to talk about “joined up government” and one feels that, were ministers present, they would likely have been cringing at this point. From a legal perspective, however, it was clear that the defence felt this was a particularly strong point to make.

Indeed as an argument it does nicely highlight an interesting characteristic of the UK constitution – a lot of duties and responsibilities are not defined in a formal document and it is far from clear as to where the Secretary of State’s duty actually lies. To a certain extent this is perhaps a feature rather than a bug, at least from a ministerial perspective. In this instance, for example, this lack of a formal specification is probably helpful to those defending the case. It is almost impossible to claim that the Secretary of State did not take into account all the factors he should have considered when one doesn’t really know what those factors are.

The needs of existing passengers outweigh the possible need for future passengers

Another argument presented was one which will be familiar to those who regularly read our coverage of rail proposals. The defence argued that the Secretary of State was duty bound to consider the adverse effect on existing passengers and that this should be afforded a higher priority that the benefits to any future (as yet unknown) passengers who may not even materialise.

Those who have followed the Thameslink Wimbledon Loop issue will see a very similar theme being played out. The question would appear to be whether this consideration is a duty of the Secretary of State, or merely done expediently so as not to lose votes. Both here and on the Loop there is no danger of losing votes from those adversely affected in future. One simply can’t lose votes from a group of people who don’t yet exist.

Enfield Council should not get a “free ride”

Enfield Council propose to contribute a lot of money, probably much of it channelled through a section 106 grant, towards reinstating a third track to provide 2tph in the short term, which they had expected to be complemented by stopping 2tph on the other existing tracks to allow 4tph in total. The defence barrister argued that the council could quite reasonably be expected to contribute more money, reinstate the fourth track and run 4tph of additional trains on the two reinstated tracks. This would avoid the need for existing services to be altered. In essence, he argued that this was really about the council trying to get something for free when it was perfectly possible to achieve their objective by paying for it – which is what they should be doing.

It is at this point that the dangers of a legal argument without expert witnesses becomes apparent. Enfield Council could indeed have offered to pay for an extra track but that would achieve very little, because the real limitation to 4tph provided by additional trains is that there is insufficient terminal capacity at either Liverpool Street or Stratford for these extra trains. So Enfield Council could easily argue that they have contributed all they can that would make a difference and they need extra stops on existing services as this is the only way to provide the extra frequency.

Taking the argument further, one could argue that Enfield Council should pay to provide extra capacity at Liverpool Street (unbelievably expensive). An alternative would be to run a shuttle service from the new station just one stop to Tottenham Hale (or two if it calls additionally at Northumberland Park) where passengers could change for the Victoria Line – the ultimate in parasitic behaviour as it would deprive other people of a service further down the line. Nevertheless, conveniently for the defence, this would not be the Secretary of State’s problem.

Services should be provided where there is a known demand

A further assertion by the defence was that there is limited capacity on the line and that adding stops to existing services would mean removing them from elsewhere. It was quite wrong to take away proven demand, counsel argued, and instead prioritise demand that was not certain to exist and might not yet be there.

Again this was an interesting argument and probably a logical one to a barrister, but it was one quite at odds with the history of the railways. Beeching argued that long distance traffic should get priority because it was profitable and in the past the closure of a railway has been based on the level of hardship caused and not simply the number of passengers using it.

The railway has historically been willing to sacrifice passenger flows in order to handle or even encourage a preferable emerging market. The Bromley North branch was popular in peak hours but it lost its direct trains so that more trains could be run from the coast.

The Chesham v Watford problem

It is easy to see the dangers in relying too much on crude passenger numbers. Watford (Met) tube station has roughly twice as many passengers as Chesham Tube station. If the Metropolitan Line extension were to be built and Watford tube station kept open it could crudely expect to have roughly the same number of passengers as Chesham. But Chesham is at the end of a long branch whilst Watford is at the end of a short branch from Croxley. Relying on crude station passenger numbers, it would seem to make more sense to close the Chesham branch than the Watford branch. This would ignore the fact that Chesham commuters would be extremely inconvenienced whereas Watford commuters would have the slight inconvenience of an extra two minutes walk (on average) to Cassiobridge or Watford Vicarage Road station.

In the same way it could be argued that people on the new housing development would be extremely inconvenienced by only having 2tph whereas an inconvenience by others to make the 4tph would be minor. It is notable that neither side seemed to be prepared to suggest who would lose out if it were to be decided to provide 4tph. The nearest to anything definite was “other people further up the line” – of course barristers probably don’t understand the railway nicety of “up” and “down” and, in a sense, nor should they have to so long it is clear what is meant to the presiding judge.

An aspiration of 4tph was not related to passengers using it

One of the peculiarities of the case was that both sides seemed to accept that the point was that the 4tph “headline” was crucial to attract people to the new housing and this was not actually related to travel demand. Indeed neither side ventured to suggest how used the service, if it existed, would be. That is probably because neither side would dare hazard a guess for fear of it being mocked as a figure drawn out from the air.

Inevitably, it was pointed out that 4tph had nothing to do with actual usage. We touched on much of the general reasoning for this figure above, but it is also the classic economic problem of providing a service that people want but don’t necessarily want to use. This could be anything from a rural rail service in case the car won’t start one day to expecting phone boxes to be retained in case the battery is dead in one’s mobile phone. Many would argue these expectations are unreasonable, but this is clearly not wholly true. If you are boarding an ocean liner there is an expectation that the lifeboats would hold sufficient passengers in case the liner sank, but it does not mean that people expect to use the lifeboats or are unreasonable in expecting there to be sufficient numbers of them. So it is in London with stations.

The crux of the matter

It would seem that the issue for the judge is simply one of whether it is up to the Secretary of State to determine a minimum frequency for a particular station as he sees fit and, if so, what factors he has to consider when making this decision.

The subject not mentioned

Something that both sides appear to have chosen not to mention for fear of weakening their argument is Crossrail 2. Crossrail 2 is largely about housing regeneration and a lot of that is proposed to be along the Lea Valley where Enfield Council want these new houses to be built.

Clearly the full size of the huge development cannot be achieved without Crossrail 2, yet Enfield Council (and the Mayor) are keen to get the project going in advance of Crossrail 2 itself. Presumably the defence was anxious not to weaken its case by showing how vital the housing development was as part of the London plan. Likewise Enfield may have been anxious not to mention Crossrail 2 as this is a tentative scheme and the defence could present a strong argument about why the Secretary of State should not concern himself with something that hadn’t been approved by Parliament and in any case would not come into effect until a long time after the franchise in question had expired.

The person not mentioned

Another issue that did not appear to come up was to what extent the Secretary of State should be deciding local issues perhaps better determined by the Mayor of London. Certainly, to the current Mayor, the housing scheme is one of great importance. The Secretary of State could argue the policy could change with a future mayor but the reality is that the future mayor, regardless of political colour, would be equally enthusiastic about the housing scheme in question and the transport links that make it possible.

A gamut of issues

It should be clear that there are many fundamental issues which were raised. It is hard to know the full range of these for as well as the oral evidence there were also the written papers submitted by both sides for the judge to read to which we have no access. The fact that both sides are still arguing shows that these issues are not clear and this appears to be the first time they have been tested in a law court.

An unintended effect of privatisation?

In “the old days” British Rail was never taken to court in this way and an obvious thought is whether John Major’s government even considered that a franchising system could lead to expensive court battles, either because the complex system for awarding franchises was flawed (as in the West Coast case) or because local authorities would challenge the Secretary of State on what service the franchised specified. Even if they had considered the first possibility, one feels it is unlikely that the second possibility even occurred to them. Or, if it did, perhaps the determination to privatise outweighed the projected risk.

A dangerous suggestion

Whatever the reasons, the fact is that the case exists and that it – and its potential consequences – perhaps do not bode well for the DfT. For though we have concentrated so far on issues where Enfield Council have considered the process flawed, these were not the only issues raised. For lawyers love producing alternative arguments in case their primary argument fails, and in this case there is a real danger that one of those alternatives, deliberately or not, will have caused the blood of more than a few individuals at the DfT to run cold – that the DfT handled this particular franchising Invitation To Tender incompetently.

What does a word or phrase mean?

Many civil law cases turn on the words or phrases used and what both sides understood by them. This case is no exception and elements of the massive amounts of correspondence, generally by email between the two parties, were scrutinised. It does seem incredible, to a layman observing from the outside, the extent to which there was not a meeting of minds.

One of the simplest and most fundamental issues was what was meant by 4tph. Incredibly there seemed to be no arguments as to whether this implicitly meant every 15 minutes or, simply, literally 4 trains at some point during the day in one hour.

Rather dubiously the DfT argued that the specimen timetable (the minimum requirement for a future franchisee to run) did run 4tph for an hour in one direction in the evening peak and so the condition was satisfied. It must have been fairly obvious to anyone well versed in transport, and particularly in the context of a new service, that 4tph meant a 4tph “turn up and go” service all day and seven days a week as operated by London Overground.

Another word that clearly caused problems was “expected.” A DfT official wrote that he expected the ITT to have a requirement for 4tph at the station in question. Enfield Council clearly took that to mean that it was the current intention and that, given the detailed correspondence that had taken place, if this intention changed then they would be informed by the DfT.

Not surprisingly the DfT took a different view and argued that the person writing “expected” wouldn’t know for sure what was in the ITT, so was merely stating what he believed it would contain. Furthermore, the DfT argued that Enfield Council must have known this because they knew the individual concerned and his job function and would be aware that he would not be in a position to declare definitively what was and was not in the ITT.

Who was what, when and where

If that was not bad enough there were references to emails, when they were dated and meetings involved between the parties. At some of these there was some doubt as to who actually attended these meeting or was merely noted in the agenda as due to attend. Dangerously for the DfT, what Enfield Council was clearly trying to convey was an element of confusion within the DfT and that the Department on this occasion was dysfunctional.

Reliance

Another issue raised by the barrister representing Enfield Council were perceived assurances. Needless to say these were repudiated by the DfT. The legal issue will be whether Enfield could have reasonably believed various statements to be assurances and to what extent, if any, they could rely on them. Students of old school law will recognise this as a classic case of promissory estoppel – the principle that a promise is enforceable by law when the promisor makes a promise to the promisee who relies on it to his or her detriment. Those with a more modern knowledge of law would see this more accurately described as a case of the doctrine of legitimate expectation.

One of the DfT’s arguments was that as the ITT went out to consultation Enfield must have known that the Department could not give assurances in advance of this consultation. It was not made clear whether the 4tph in question was part of the consultation. Another argument centred on the fact that Enfield Council must again have known that an individual in question was not in a position to give any such assurances so they should not have perceived anything said by him as an assurance.

Judgment and Clarity

The judgment came on 21st December and was missed by those at LR towers who were clearly celebrating Christmas too early. The judge found in the DfT’s favour, but clearly the DfT did not handle this well. It has to be also said that Enfield were perhaps too optimistic in their interpretation of the contents of emails, notwithstanding that the position of the DfT could have been more clearly and more accurately described.

As judgments go it is a model of clarity and is actually, for the most part, quite readable if a bit long and stodgy. So we will avoid duplicating too much of it here and simply suggest that it is worth a read. A few extra nuggets of information help cast light on the judge’s decision. One of the critical emails that the claimant relied upon was not even sent to them, but to the GLA, and the defendant could not have even reasonably expected the claimant to have seen it.

These are the types of operational and technical judgments which Parliament, in enacting the statutory scheme, has entrusted to the Defendant.

More critically, one line in the judgment is extremely telling. It tells us what we already knew but gives it legitimacy. This is the extent to which it is the DfT who make operational judgments down to an extremely detailed technical level. This may not be what the DfT want said. Be in no doubt, if the Thameslink 2018 timetable is unworkable – or the East Anglia one coming to that – then, according to this judgment, the fault very definitely lies fairly and squarely with the Secretary of State at the DfT. This will probably not sit comfortably with Conservative MPs who want to blame the operator, Network Rail or anyone but themselves for the problems at London Bridge this time last year.

One can be in no doubt that the service provided on our railways is micro-managed by the DfT and it must be ironic that privatisation has led to government involved at a level that even the most extreme command economies of any political persuasion would not dream of getting involved in. Certainly in the past this would have been left to British Rail or the Strategic Rail Authority.

Ripples in the glass of water

A great irony of all this is that the final ruling in the case may ultimately not matter. Even if the franchise doesn’t specify 4tph at Angel Road, the winning operator may still decide it is still worthwhile to provide a 4tph service. It is also possible that the operator could come to some working financial agreement with the council that would satisfy both sides such as making up any shortfall in costs.

What matters though is that, potentially, from small issues bigger ones come. This may prove to be simply an obscure spat spilling over to the law courts, but by challenging the basis on which the Secretary of State’s decisions are made it may turn into a case as important as Bromley Council and Fare’s Fair. One that determines the shape of the relationship between London and the DfT.

There is also a third possibility, however, one which will not be welcomed by the DfT. For, regardless of how the ruling went, the fact that this case came to court at all seems to suggest that – as Enfield’s alternate incompetency argument posits – there are genuine questions waiting to be asked of the way the tender itself was put together.

Here at LR Towers, we suspect that as a result the parties who will ultimately have to put this franchise into being – Network Rail and the potential bidders – to take a very long, hard look at the tender as issued. For on the railways where small issues exist, larger ones often lurk just behind.

Should those investigations reveal anything, that could be very bad news indeed for the DfT.

Written by Pedantic of Purley