Byers 'lied about Railtrack renationalisation'

The former transport secretary Stephen Byers unlawfully nationalised Railtrack and then lied about it, the High Court has heard.

The integrity of Mr Byers, the former cabinet minister, lies at the "heart" of a multimillion-pound claim for compensation by almost 50,000 shareholders in the now-defunct Railtrack. The case, which is believed to bring together the largest number of claimants in British legal history, will test whether Mr Byers and the Government told the truth when it took the decision to put Railtrack into administration in 2001.

Keith Rowley QC, the barrister representing the shareholders, told the court that a "secret" scheme was hatched by the Department of Transport, the Treasury and 10 Downing Street, who conspired for months to find a way to take the railways back into public control.

Mr Rowley told the court that Mr Byers' motives were unlawful and his actions led to "de facto" renationalisation of Railtrack, without compensating the shareholders. According to evidence from government memos of the time, to buy the company from the shareholders would have cost about £5bn, the court was told.

"Mr Byers was not willing, not able, because of cost, to achieve that [renationalisation] by the conventional route of purchasing Railtrack shares, so he devised a scheme to get them for nothing," Mr Rowley said as he opened the civil case yesterday.

The big City banks and pension funds that owned most of Railtrack are not party to the case - these institutional shareholders accepted a government offer of compensation of 250p a share. The Railtrack Private Shareholders Action Group, which has brought the case, believes that they are owned a lot more money. Financed by 48,000 ordinary shareholders, who raised £3m between them, the group represents many of the shareholders, a large number of whom were Railtrack employees. The shares, which were sold to the public at 380p each, rose as high as 1768p in 1998. One estimate has put the value of the shareholders' claim at £157m.

Their case depends on two points. First they will seek to prove that Mr Byers acted out of "targeted malice", that he was guilty of abusing his position - "misfeasance in public office". Second, the shareholders contend that by taking their property, without due recompense, the Government breached their rights under the European Convention on Human Rights.

The court will hear from Mr Byers himself, a man still highly rated in New Labour circles who left government in May 2002 but is still hoping for a political comeback.

"Mr Byers' integrity will be at the heart of this case. If, as we will submit, he has not told the truth, then why has he not done so?" Mr Rowley said.

According to Mr Byers, he only took the decision to put Railtrack into administration on 5 October 2001, 48 hours before applying for a court order to act, as a result of the company's unsustainable finances. Mr Rowley said that this account "defies belief and is simply not credible".

The court heard that officials and ministers started, as early as June that year, to develop a strategy "which concluded with the administration order".

Among the other witnesses to be called in the case will be Dan Corry, then special adviser to Mr Byers, and Sir Richard Mottram, who was at the time the permanent secretary at Department of Transport.

The case continues.