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Tuesday, 18 December, 2001, 13:05 GMT
Railtrack threatens legal action
Train on a railway line
Train services are worsening
Railtrack Group has stepped up its threat of legal action against the government, saying it will write to transport secretary Stephen Byers soon, telling him the company will go to court in an effort to win compensation.

"It's quite a long process but we expect to put the Secretary of State on notice that the legal action is commencing," group finance director David Harding said.

Mr Harding said Railtrack would send the letter this week or after the Christmas and New Year holidays.

The announcement came on the day Railtrack Group reported profits of 292m for the six months before Railtrack Plc - its operating arm - was put into administration.

Railtrack structure
Railtrack Group
parent firm with shareholders

Railtrack Plc
owns and operates rail lines, stations, signals

CTRL
owns Channel Tunnel high speed rail link concession, due to open 2003

Property interests

The group said its financial results proved it was performing well at the time the government decided to put the railway infrastructure firm into administration in early October.

Explaining his decision to put operating arm Railtrack Plc into administration, Mr Byers said it was "insolvent".

But Railtrack Group chief executive Steve Marshall has rejected this claim, and, on several occasions, threatened legal action against the government.

"As we have said consistently, Railtrack Plc was not insolvent until the Secretary of State chose to make it so. No financial meltdown was in sight," he said.

Legal action on the cards

Railtrack is drafting a letter to Mr Byers "putting him on notice that we are actively considering legal action and it's a route that we're likely to go down," a company spokesman told BBC News Online.

The letter will be sent "either this week or after the Christmas holiday," Railtrack spokesman Donal McCabe said.

One option the company is considering is to sue Mr Byers for misusing his powers.

"We believe we have a strong case of misfeasance, which is abuse of public office, and we believe that the results today will back that up," said Mr McCabe.

"Our preferred option would be to sort this out in negotiated discussion, but it's not something we'll shirk away from," he stressed.

'Simply aghast'

Railtrack's shareholders say the results prove it was not going bust and should have been given time to improve the state of the rail network.

Rail user groups have also questioned the decision to put Railtrack into administration.

Francis Stewart, chairman of the Rail Passengers Council, said passengers would be "simply aghast" if Railtrack turned out to be profitable.

The transport secretary had said the firm's balance sheet and "failure to deliver" desired results had left him with no option but to press for Railtrack to be put into administration.

'Very good reasons'

Cash projections at the time predicted a Railtrack deficit of 700m within a month, and 1.7bn by March, he said.

Railtrack's latest figures say the company has 2.9bn of net assets and over 1bn of bank credit lines.

"Railtrack went into liquidation because it was insolvent," Mr Byers said in October.

Mr Marshall, who stood down as boss of the operating arm but remains chief executive of Railtrack Group, told BBC Radio 4's Today programme he was "pleased" with the firm's latest figures.

Pre-tax profits for the six months to 30 September rose 67% to 292m compared to 175m in the same period of 2000.

"Our cash flow was negative by over 1bn and for very good reasons because we were spending it on the network which was absolutely the right thing to do," Mr Marshall told Today.

Transport Secretary Stephen Byers has ruled out a compensation package for Railtrack's 225,000 shareholders, which include many employees.

The financial results "confirm an injustice was done to our shareholders", Mr Marshall told the BBC.

The shares, which were worth 17 at one point, were trading at 280 pence when they were suspended.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Jeff Randall
"Sorting out the Railtrack mess is not getting any easier"
Steve Marshall, chief executive of Railtrack Group
"We have got a very powerful case"
Transport Minister John Spellar
"Railtrack were not focusing on the day job"
See also:

18 Dec 01 | Business
Q&A: Railtrack profits
07 Dec 01 | Business
New funds for rail services
29 Nov 01 | Business
Ford UK boss tipped for Railtrack
25 Nov 01 | Business
More delays at Railtrack
08 Dec 01 | Business
Railtrack bosses 'to step down'
13 Dec 01 | UK
Rail services worsening
14 Dec 01 | Business
Peace champion takes Railtrack job
14 Dec 01 | Business
Railtrack appoints new chief
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