PUBLIC SESSION

MINUTES OF ORAL EVIDENCE

taken before

HIGH SPEED RAIL COMMITTEE

On the

HIGH SPEED RAIL (LONDON – WEST MIDLANDS) BILL

Wednesday 10 September 2014 (Afternoon)

In Committee Room 5

PRESENT:

Mr Robert Syms (In the Chair)

Mr Henry Bellingham Sir Peter Bottomley

Ian Mearns Yasmin Qureshi

Mr Michael Thornton

_____________

IN ATTENDANCE

Mr Timothy Mould QC, Lead Counsel, Department for Transport Mr James Strachan QC, Counsel, Department for Transport

Mr Peter Village QC

Witnesses: Dean O’Reilly

Colin Smith, property consultant _____________

IN PUBLIC SESSION

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INDEX

Subject Page

Hansteen UK Industrial Property Ltd

Remarks from Mr Mould 3

Mr Village’s closing submissions 4

Dean O’Reilly

Mr Strachan’s summary 9

Mr O’Reilly’s introduction 12

Mr Smith, examined by Mr Strachan 18

My Strachan’s closing submissions 28

Mr O’Reilly’s closing submissions 29

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(At 14.00)

1. CHAIR: Order, order. Welcome back this afternoon. Before we do your

summations, I believe you want to make a couple of brief comments?

Hansteen UK Industrial Property Ltd

2. MR MOULD QC (DfT): I do, sir, yes, before Mr Village starts swinging his

wrecking ball. The first one relates to Washwood Heath. It was simply this: I’m sure

the Committee had this in mind – forgive me if I’m raising an unnecessary point – but

you did mention today, “Give us an indication of where you were – of the process that

you had in mind, in terms of giving an indication of your view on Washwood Heath.”

Can I just ask – because I know a number of petitioners are just concerned to make sure

we’re clear – there are, of course, a number of petitioners who will wish to address you

in due course about the right solution for Birmingham Interchange station, and I have no

doubt, I dare say, there may be some who are interested in Chelmsley Wood as well.

There are also one or two petitioners who are interested in Washwood Heath, who also

may come back into your programme in due course. Just a concern that obviously any

decision, whatever it may be – I’m sure the Committee has in mind that it may wish to

hear from those petitioners before it reaches a final view on those matters.

3. CHAIR: Okay. I think at this moment, we’re just waiting for the additional letters

and information and figures which were mentioned, but we will reflect on that, Mr

Mould.

4. MR MOULD QC (DfT): Thank you very much. Then the next thing is relating to

this petition, I just wanted to say this, because there are one or two points outstanding.

We are looking very carefully indeed at two matters. The first is whether we should go

forward with Mr Village’s proposal in relation to extending the bill limits to embrace

number one Dorset Road.

5. SIR PETER BOTTOMLEY: That’s the entrance?

6. MR MOULD QC (DfT): That is that unit, which loses its –

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7. SIR PETER BOTTOMLEY: Car parking.

8. MR MOULD QC (DfT): That’s the one. Looking at that, and you have seen the

assurance Mr Village has put forward in relation to that. The second thing we are

looking carefully at is whether we can go further than, say, simply real prospects in

relation to offering that to the then-estate owner, whether it be Hansteen or another

body; offering back such surplus land as there is following completion of construction.

Remember, I showed you that earlier – whether we can actually make a commitment

about that, to offer it back at full open market value following completion of the works.

Both of those matters require, to use the current jargon, us to consider the numbers, and

I cannot get to the end of that process during the course of today, so what I would hope

is that I can give you an answer on that, and indeed in advance give the petitioners an

answer on that, during the course of the next seven days.

9. The other thing I had in mind is that, as you know, we have made progress on

other assurances. The points between us on that, I think I’m right to say, are much more

limited, and we should be able to close those off or have a good stab at it over the same

time. So the upshot is, if you’ll bear with us, I’d like to be able to try and reach an

agreed position with the petitioners, and in any event report back to the Committee in

advance of the hearing of the West Midlands Fire and Rescue service petition, which is

programmed for next Wednesday at two p.m. And I hope that, insofar as there’s any

opportunities, it may help to focus down even more closely the key issue that Mr

Village wants you to decide: should it be partial or total acquisition. So if that’s

agreeable to you?

10. CHAIR: Okay. Thank you, Mr Mould. Mr Village?

11. MR VILLAGE QC: Thank you, sir. I’ll address the points that Mr Mould’s just

raised in a moment, if I may, but could I just start by making a preliminary and very

short procedural point, and that is simply this: that my clients wish to nod assent to the

petition made by Axa, which you heard, I think, earlier this week – or was it last week?

– and I need say no more about that. As to the closing submissions which I make now

on behalf of Mr Thornton and I, on behalf of our clients, they are necessarily

preliminary, because we must reserve the right to add to anything arising from the

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acceptance or otherwise of the undertakings which are in discussion, and we would do

so shortly after agreement on those points. And I hope the Committee would accept that

such submissions we make, if any, in writing.

12. CHAIR: Okay. Thank you.

13. MR VILLAGE QC: To start with the submissions, I dealt with the principal point

of Mr Mould’s closing submissions, which was frankly a huge dolly to knock it down.

It’s a submission which demonstrates unusual confusion by Mr Mould, because, of

course, there have been discussions between my clients, Hansteen, in persuading HS2 to

take the estate now and save itself a whole lot of money in due course. That is not to

say, of course, that we suggest that the Committee’s got power to require that, and the

way we put it is in our skeleton argument, that we ask that an undertaking is sought

from HS2 to acquire the whole estate within 12 months of royal assent being granted in

due course. Of course, HS2 have declined to even discuss acquiring any land now,

because they say that no-one’s given them a chequebook, which is a surprising state of

affairs and can only add to the eventual Bill in due course. But so far as this Committee

is concerned, and what we can ask of it, we do ask that in relation to the Bill, it requires

of HS2 that it acquire the estate in its entirety, and this is for reasons of fairness, and in

an effort to avert the death by a thousand cuts to which we averted in our skeleton

argument, which you’ve read.

14. What’s the evidence before the Committee today? Well, it is all one way, given

Mr Mould and/or his witnesses appear, to use the vogue expression, “frit” to subject

themselves to the rigours of cross-examination. It was, with respect, a wise move. HS2

knows full well, and has for a long time known, the nature of my clients’ case: that they

will leave us with a pig in a poke; that the consequence is to cause material detriment,

and that it is better, we say, for them to recognise that now. There is thus, so far as Mr

Mould is concerned, several advantages in the tactic of not calling any evidence to

support his position. There’s no need to deal with the awkward question about the loss

of real jobs. There’s no explanation that has to be given that they don’t have a Gantt

chart identifying what works are required and how long they’ll take. I mean, all of this,

of course, is primary school stuff. And it would be an absurd proposition that they

haven’t identified through a Gantt chart what the requirement of the works are, and how

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long they will take. Mr Mould is able to sidestep an explanation as to HS2’s failure to

seek or obtain market advice. Admittedly, they couldn’t better the advice that the

Committee’s heard from Mr Lloyd of DTZ and his 35 years’ experience in Birmingham,

and Mr Mould can hardly say that HS2 hasn’t the resources, when they employ a cab

rank of barristers, two firms of solicitors, and a mountain of other people. But he’s able

to avoid all that; his witnesses aren’t exposed to questions as to whether HS2 knows its

elbow from other parts of its anatomy.

15. What, in fact, though, can be distilled from the evidence and the established facts

are as follows: first, that this is an existing, outstanding industrial estate that relies on,

firstly, excellent accessibility serving a local market; that it employs state-of-the-art

security; secondly, the HS2 proposals will remove on any basis 30% of the existing

floor space, plus other floor space, like parking yards and so on; third, the result will be

to seriously jeopardise the continued viable provision of that security, and tellingly, in

answer to Sir Peter Bottomley’s question, HS2 do not accept that such a loss is

compensatable; fourth, the works will leave the principal access off Saltley Viaduct

closed for six months; fifth, the access via Saltley Viaduct will be closed for up to two

years; six, the combination of those last two points, four and five, mean that access will

be via the Dorset Road entrance, which is an entirely unsatisfactory and unprepossessing

entrance. In market terms, Mr Lloyd says that you have lost any prospective tenant

before you even get to the estate, as you take them in a convoluted route, either along

the entirely unsatisfactory Arley Road or in the Washwood Road route, which is itself

congested. So what you have is the key attributes of presence, good accessibility, and

excellent security are all lost. At best, Dorset Road is a shared access with construction

traffic through a residential area, conflicting with residents, worshippers at the mosque,

and other HGVs. And Mr Axon – again, of course, no evidence from my learned

friend’s clients – describes the independent safety audit, with which he concurs, and the

response to what is proposed as high risk of serious accidents.

16. Now, this is not just an indictment of the serious environmental harm which will

flow from the scheme; it’s an indictment of the ill-conceived nature of the proposals,

and it also has a serious effect on the attractiveness of this site from the point of view of

a potential occupier, because a potential occupier will be looking for easy access.

Washwood Heath Road is the paradigm of the congested local road, and there has been

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no assessment, in answer to Mr Thornton’s question, of the inevitable greater use of the

highly unsuitable Arley Road. And what does this, therefore, all add up to? It adds up

to incontrovertible – and I underline that word, “incontrovertible” – evidence, not

rebutted with a jot of expert evidence from my learned friend, that on a balance of

probability, this is an estate – a jewel in the crown in Birmingham, but an estate – that

will fall into a spiral of decline, to take its chance in the swirling pool of the other 22

million square feet of floor space available.

17. And it is remarkable, I hope the Committee think, that HS2 call no evidence from

a market perspective on this point, and one has to ask whether they ever even thought

this point before this engineering-led design carved its way and wreaked such damage

through the estate. I have to say that had I been given the opportunity to cross-examine,

I would have focused the minds of whoever I was cross-examining on behalf of HS2 on

the frankly absurd proposition – page 14, paragraph 10, of the promoter’s response

document – that somehow, it just involves a rearrangement of access and circulation,

and no more, and that the proposal will be a viable and attractive commercial entity. I

mean, this is typical of the sort of assertion that the promoters are fond of making

without backing it up with any material facts and evidence. It therefore makes, in our

submission, no sense to defer compensation until the damage is done, and if the earliest

position is 12 months from royal assent, then so be it, but it will certainly, in our

submission, reduce the burden on the taxpayer. And certainly we hope this Committee

will take the importance of that very seriously, because if the compensation package that

is eventually paid is lessened by timeous and appropriate compensation with

landowners, then that can only be a good thing.

18. Far fairer, we say it is, and more sensible, for the uncertainty which this

ill-thought-through scheme presents the petitioners be transferred – the risk be removed

and transferred to those that have it in their gift to remove the uncertainty, or reduce the

uncertainty: obviously, HS2. They should acquire the whole site as soon as possible,

and frankly, face up to their responsibilities and understand that when we get to the

Lands Chamber, they are bound to fail the material detriment test. But you have heard

that the promoter isn’t even prepared to undertake to give us back the land which they

have taken, and which they do not need to use. Now, I shall just say this in conclusion:

what I have said, of course, assumes in any event that all the undertakings which we

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have discussed and set out in document A138 and HS2’s recent letters are provided.

These submissions and this hearing would have taken longer had we had to discuss all

these matters, but can I just ask one thing of the Committee now? Mr Mould says he

has got to go back to the Treasury and discuss with government as to whether or not

they can include the building, unit one of Dorset Road. They need, sir, with respect –

well, I might say a nudge, but I’m going to say a push. They need a push from this

Committee, and I do ask the Committee to consider that point today. There is absolutely

no basis at all for their preposterous suggestion that unit one, Dorset Road, is a building

which by itself – no service yard, no HGVs, no parking – can survive. What good is it

to us? Absolutely nothing. So we do ask today that a decision is made, and the

Committee makes its position clear in relation to that.

19. MR MOULD QC (DfT): I wouldn’t have thought it worth asking Mr Osborne to

consider it if I hadn’t thought that the idea had some merit.

20. MR VILLAGE QC: Well, I think you’re even being encouraged by Mr Mould to

give him a little push.

21. MR MOULD QC (DfT): I am just giving you the comfort you need on that point.

22. MR VILLAGE QC: Well, thank you very much, then. But those are the

submissions of Ms Thornton and I. Thank you.

23. CHAIR: Thank you very much, Mr Village, and thank you for being briefer than

you otherwise would have been, and I hope that if there are further discussions, they are

fruitful. And we will reflect on what you have said to us today, and come to a

conclusion at some point. Peter?

24. SIR PETER BOTTOMLEY: Can I ask one question, just outside the site? Which

is the approach from the eastern side, which is generally agreed to be unsatisfactory.

Would it be possible to say to the promoters that we would be interested in hearing what

proposals they have to make that better, whatever the outcome of this petition?

25. MR MOULD QC (DfT): The Arley Road, Aston Villa – I’ve got the note of that,

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certainly. Yes.

26. MR VILLAGE QC: And, of course, you were told that they did have some

proposals. We have not seen them, but it would be interesting to.

27. MR MOULD QC (DfT): I think your witness said he had, but anyway.

Dean O’Reilly

28. CHAIR: Thank you very much indeed. Thank you. Right, we now move onto Mr

Dean O’Reilly. Thank you very much. Are you presenting your own case, Mr

O’Reilly?

29. MR O’REILLY: I am, sir.

30. CHAIR: And you’re happy to sit there? You can sit back there if you want.

31. MR O’REILLY: No, no, I’m fine here. It’s fine

32. CHAIR: You’re fine there? Okay, thank you very much indeed. Mr O’Reilly, we

normally ask promoters to sort of set the scene, and then we will come back to you for

your points. Mr Strachan?

33. MR STRACHAN QC (DfT): Thank you, sir. Mr O’Reilly is the owner of

Heartlands House, and the managing director of Cargo Express which operates out of

Heartlands House. There’s a regional plan coming up on our screens now, showing the

broad context of his premises. And if we go to P262, his land is hatched in green, and it

is to the north of Saltley Business Park that you’ve just been hearing about, and just to

the south of Aston Church Road, so the general location will be familiar to the

Committee. Cargo Express is a distribution centre, and Heartlands House is its main

depot. There are two other properties in the vicinity, and Heartlands House itself is a

building of approximately – if I’m allowed to use square feet – 60,000 square feet. And

if I could just show you P263, the construction plan – I’m afraid north is now orientated

the other way, to the right – but you can see Aston Church Road. Yellow marks the

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route. The blue building within the red line is Heartlands House, and I imagine that

there is no dispute that, in relation to the scheme, Heartlands House is required and the

site is required for the scheme to proceed.

34. The issue that’s before the Committee, raised by Mr O’Reilly, essentially concerns

compensation for the taking of his property, and the promoter has offered a number of

assurances in respect of the acquisition of his property. Can I just show you P302(1)?

And the Committee will be familiar with the general principles of compensation, but to

deal specifically with Mr O’Reilly’s concerns and Cargo Express, it was the promoter’s

offer by way of assurance in 1(i): first of all, the provision of a minimum nine months’

notice period of notice of entry onto his property. The Committee will be familiar that

the Bill provides for a minimum three months period, but in the circumstances of

Mr O’Reilly’s case the promoter, bearing in mind the construction plan, is willing to

provide the minimum period of nine months. I do emphasise it’s a minimum, because,

of course, under the business relocation policies, everything will be done as reasonably

practicable to give earlier notice on that if it’s possible, but that’s a minimum period.

The second assurance to Mr O’Reilly is that his building will not be required before the

first quarter of 2017, and that provides some degree of certainty as to the intervening

years that the property will not be required before that date.

35. MR BELLINGHAM: Mr Strachan, can we go back to the map?

36. MR STRACHAN QC (DfT): Yes, certainly.

37. MR BELLINGHAM: It’s just really helpful to be able to see what you’re talking

about. Thank you. And just remind me, Mr O’Reilly: what’s your business called

again?

38. MR O’REILLY: Cargo Express.

39. MR BELLINGHAM: Cargo Express. Thank you.

40. MR STRACHAN QC (DfT): The current access is taken off Aston Church Road

to his property. There is a photograph in the pack; it doesn’t show much beyond the

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frontage of Cargo Express as a warehouse, so I haven’t shown it, but we can go to it if

necessary. So if I could go back to the assurance, just to run through the nature of the

assurances to see where the dispute lies, further assurances have been given in relation

to the valuation of the property, and I am afraid that it crosses over into two pages, but if

we go over to the next page, in accordance with the request, what the promoter has done

is agree or given an assurance that we will seek to agree now the method of calculation

for compensation on acquisition, an estimate of the current open market value of the

property. I emphasise it’s current, because of course in compensation terms, one

assesses compensation relative to the relevant time. It may go up; it may go down; the

property market may move, but the reason for doing it now is to give Mr O’Reilly,

again, some degree of comfort as to the value of his property upon acquisition. And the

third is to agree an indicative list of likely heads of claim in respect of a disturbance

claim. That’s the legal terminology for the disturbance elements of the compensation:

what sorts of things he’ll be able to claim for in consequence of relocation of his

business. So those are all assurances in relation to calculation of compensation.

41. In addition, we’ve referred to the business relocation policy. There’s an

information paper, C7, which provides some further detail of what the promoter intends

to do by way of assistance on business relocation. There’s some general points, from

one to five, about keeping the owners updated on progress of the Bill; encouraging the

use of an agency service, which has been set up; and I should mention that as we’ve

identified in the letter, that agency service has already been set up, and the intention is

that an effective land owner and occupier such as Mr O’Reilly can already make known

the sorts of requirements he would have on relocation, to facilitate the relocation as and

when it’s required. And in addition, you can see that point four was the point I made

earlier – he has a minimum nine months’ notice period – but there’s also provision to try

and give notice as soon as reasonably practicable, and that supersedes the point five in

the letter.

42. So those are assurances the promoter’s been able to offer to Mr O’Reilly. Of

course, as I understand it, that doesn’t cure Mr O’Reilly’s petition and his appearing

here today, and I believe that what he would still want is further certainty as to

compensation: either payment of compensation now, or some sort of indemnity in

respect of him spending money now, looking for relocation; some sort of indemnity if

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the scheme doesn’t proceed. That, I understand, is essentially the issue that he’s

bringing in front of the Committee; he may correct me if I’m wrong. But on that, the

promoter, for the reasons that we can no doubt explore, considers that it’s gone as far as

it can in terms of giving him as much certainty as possible, but without there being royal

assent for this Bill as yet, and in circumstances where the nine-month notice period

gives him a considerable amount of time to look for and move into new premises, even

when his property’s required, which would not be before 2017. So that’s where the

dispute lies, and I hope that assists.

43. CHAIR: Thank you, Mr Strachan. Mr O’Reilly?

44. MR O’REILLY: Thank you. I am the owner principal of Cargo Express; it’s a

company I started in 1984. I’m a local employer. I’m also a local man to the area: I

was born and raised on Aston Church Road, just 400 metres from the premises we now

occupy, so I know the area very well. I went to school at Duddeston Manor, which is

just off Curzon Street, an area I think you know very well now, and that’s relevant,

because it’s about the people I employ. I know these people; I’m a local person. I

employ 130 people. 84 of those are employed at Aston Church Road; 73 of those are

drivers based at Aston Church Road, and over 50% of those employees live within six

miles of our operating centre. I think you’ve already heard about Washwood Heath and

the employment prospects there, and what a difficult environment it is to find

employment, and really, what I’m trying to do is to protect those jobs. Although I know

that the premises that we occupy very well, if HS2 put their carriage right in the middle

of it, which I think they propose to do, that really does not matter to me; I am not

bothered about bricks and mortar any more than I am about the types of trucks what we

operate.

45. Really, what I want to do is to protect my local workforce, which is probably my

biggest asset. There are a lot of people who have worked for me now for many years,

some in excess of 20 years. To tell you a little bit about Cargo Express, as I say, I

founded it in 1984 as an express delivery service, with one van. I’d left school, sorry, in

1979; I think it was four million people unemployed, and most of the country was on

strike, it seemed, so it was quite a difficult time to try and find employment myself. In

1984, I purchased a van, along with another gentleman who has since retired, and we

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started an express delivery service. We worked really hard over the years. We had no

funding or borrowing from the banks, which was probably a good thing, really, because

that enabled us to grow in the later years. All our profits were put back into the business

to enable that growth, and we also funded our pension schemes very well, which in the

later years enabled us to purchase Aston Church Road, which is 70% owned by my

pension fund.

46. Today, Cargo Express operates 80 trucks and 40 trailers. We have annual sales of

in excess of £8.5 million a year. As I said earlier, we employ 130 people, so there’s

contractors; we serve many sectors in the Midlands, including the automotive sector,

and we are actively involved in the supply chains of Jaguar Land Rover and JCB, and

that involvement results in significant storage requirements as well, either holding

security stock or stock at Aston Church Road. Our largest customer accounts for 35%

of our business; it’s a company called Link51. I think they’re Europe’s largest

manufacturer of retail and warehouse storage equipment. They do pallet racking,

shelving systems; supply the likes of Amazon, B&Q, Ads, and the like. Our business is

a 24/7 operation, and it’s a complex operation, and a lot of the sectors that we’re

engaged with support other sectors. For example, we might have a vehicle delivering

into one area, which might be an automotive job, and that would enable us to re-load,

perhaps, for another client in a different sector. So to lose any part of that business

would have a detrimental effect on the other.

47. MR BELLINGHAM: Can I ask: what sort of products, parts, are you delivering

most of the time?

48. MR O’REILLY: Well, in the automotive sector, typically, we deliver fuel tanks.

If you’re lucky enough to have a new Range Rover, or a Land Rover Discovery, then

it’s highly likely that we delivered the dashboard assembly, the console, the doors; a

whole sequence of parts which are made locally, which are then sent into the Solihull

site.

49. MR BELLINGHAM: Thank you.

50. MR O’REILLY: We also transport newspapers – a local print centre for the Daily

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Mirror, Mirror Group newspapers, at the Fort in Birmingham. We deliver all of those to

the wholesalers in the Midlands. That’s all done during the night, obviously, and as I

say, there’s lots of shelving and storage systems. Now, coming to the concerns we have

about HS2, I suppose what I’m talking about, really, is the uncertainty that this Bill is

causing for our employees. Staff are concerned about their future place of work. Many

of them want to move house themselves, and they want to know where they should be

relocating to. Will it be detrimental to their future job prospects? Is there job security?

Will they have to travel further, etc, etc? And that is causing not only difficulty with me

maintaining staff; it’s also not helping at all when I’ m trying to recruit staff, because we

do not know where we will be in two or three years’ time. Our customers are now

getting very concerned about their supply chains, and where we’re going to be relocated.

If I could ask Liz to bring up A135? There’s some correspondence off a company

called Faurecia, and they’re the manufacturers of these cockpit systems for Jaguar Land

Rover that I spoke to you about. And we had a significant storage of stock in our

warehouses, and as you can see from that correspondence, they’ve started withdrawing

that stock already, and the only stock we hold for them now is short-term stock, which is

turned around very quickly.

51. MS QURESHI: Mr O’Reilly, can I just ask you a clarification? Has HS2 told you

approximately how much time you would have to sort of relocate, approximately?

52. MR O’REILLY: That’s been a moving number. Initially, we were told that the

Bill provided for three months; then we were told that they expect it to get royal assent

in the second or third quarter of 2016, but they certainly want our premises as one of the

earliest sites for their construction in quarter two of 2017. I believe, yesterday, they

gave an assurance – or were prepared to give an assurance – which Mr Strachan has

confirmed will be a minimum nine months, but as I say, that was only given to us

yesterday.

53. CHAIR: Is that welcome?

54. MR O’REILLY: I’ll take any time at all that you can give me. To protect these

jobs, I need as much time as possible. I’d rather be looking for premises right now, and

have three years to relocate.

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55. CHAIR: I presume there are alternative premises near? I mean, there seem to be

quite a lot of industrial estates here in this sort of area.

56. MR O’REILLY: Well, as you’ve heard, there is a shortage of properties in the

Birmingham area. HS2 themselves have ring-fenced 55 hectares, I believe, on the

Washwood Heath site, so that hardly helps us at all.

57. CHAIR: And you want warehousing, as well as a premise to maintain vehicles?

58. MR O’REILLY: Yes. We want 30,000 square feet of warehousing; another

10,000 square feet for workshops and maintenance. We’d need a minimum of 60 car

parking spaces for drivers and staff, and a substantial yard area for parking of trucks and

trailers. In terms of our operation as a transport company, 30% of our operating cost is

fuel, and 30% of our operating cost is labour, so we’re talking about time and distance.

Those are our real cost drivers, so we need to be located close to the motorway. We are

at the moment within two miles of Spaghetti Junction at Salford Park, and that affords

us very good communication links: M6 North, M6 South, on to the M42, down to the

M40, down to London, etc. So to find a property, we’d want to be equally well-placed

for the motorway network. It’s difficult being a transport operator, because we have

environmental issues. We can’t be located too close to residential areas. We are a 24-

hour business.

59. MS QURESHI: Can I just ask: realistically, given all of the environmental

concerns, which is the location that you could conceivably move to? And how much

additional cost would that be on your business, to move to that possible location?

60. MR O’REILLY: We haven’t identified an alternate site yet. We’ve given a target

area of two miles radius of junction 6, which is Spaghetti Junction; junction 5, which is

the next junction along; junction 4 at Coleshill; junction 9 at Curdworth and Hams Hall;

and the M42 near Birmingham Airport, near the Birmingham Interchange. So it’s quite

a wide area, which is a corridor. We want to be close to the motorways. How much it

would cost us to move, I don’t know. In round terms, for every extra five minutes to or

from a motorway, we believe that would cost us about £80,000 a year.

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61. CHAIR: Okay. And you need decent premises to maintain your operator’s license

as well.

62. MR O’REILLY: Yes, of course.

63. CHAIR: They’d have to inspect that and make sure it’s sufficient.

64. MR O’REILLY: They do. It has to be a sufficient size and not cause a nuisance to

any residents in the area.

65. MS QURESHI: Mr Strachan mentioned about there’d been some discussion about

compensation being discussed. I’m not going to ask you for the figures, but are you sort

of – on the whole – in agreement with the level of compensation being suggested?

66. MR O’REILLY: There’s no figures being discussed. On the whole, I’m happy

with the Compensation Code that HS2 have issued. I think what we’re looking for is for

HS2 to pay compensation at a time when we can locate to what we consider to be

suitable premises, minimising the risk to our employees and without adding cost to our

customers.

67. CHAIR: Presumably, you want to buy alternative premises. You wouldn’t want to

go into rented premises temporarily while they were looking for anything else.

68. MR O’REILLY: Well, I enjoy freehold premises at the moment, so I’d wish to

maintain that if possible. But obviously, my employees are my main concern and if we

had to lease, then I would do that. But I would prefer to have a freehold property.

69. CHAIR: Okay, right. Have you got anything much more to add? We’ve got a

very comprehensive view of your business and its success.

70. MR O’REILLY: I think the questions you’ve been asking, we have more or less

touched on most items. I’d just like to bring up slide A134, please. Link 51, this is my

largest customer – as I say, 35% of our business – and they have taken a great interest in

17

what we are doing in our discussions with HS2. With Link 51, we go a little bit further

into their logistics. We have employees embedded in their factories throughout the

three sites in the West Midlands. And they have a site up in Yorkshire as well. We

have forklift drivers; we have planners; we have customer service people; and our

planners coordinate the deliveries. They liaise with their production controllers, give

them the most cost-effective delivery schedule, and their production planners will base

their production around that plan. So the tail is wagging the dog, but the dog quite likes

it because it’s got a cost-effective distribution service.

71. Now, what Link 51 recognise is that we are integral to their supply chain and, in

essence, they’re not prepared to wait to 2016 to find whether or not we can find

alternative premises that won’t be detrimental to their operations, to their costs. So

there has been quite a serious letter there, stating their intentions. And if that was to be

borne out, that they did find another logistics partner, in conjunction with smaller

amounts of business that we’re losing in the supply chain – you know, if we lost 50% of

our business, for example, that would be really difficult to manage. And I don’t want to

talk about extinguishment, but we would look very different then than what we do

today. On the other hand, of course, we’d be much smaller and would be able to move a

lot quicker for HS2.

72. CHAIR: Can I ask, are all your staff directly employed or are they self-employed?

73. MR O’REILLY: We have very few self-employed.

74. CHAIR: Right. Is that…?

75. MR O’REILLY: Yes, I think I have covered all the points, other than just to

confirm what we’re looking for, really, which is for HS2 to agree an amount of

compensation for the property, enable us to go and identify suitable properties over a

longer period of time, so we’re not rushed into taking a site which isn’t wholly suitable

for us. And at that time, when we’ve located alternative premises, for HS2 to forward

that compensation to us to buy that property and to protect those jobs.

76. CHAIR: Okay. Thank you very much, Mr O’Reilly. Mr Strachan.

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77. MR STRACHAN QC (DfT): I don’t have any questions for Mr O’Reilly. What I

thought I’d do is ask Mr Smith very briefly to address you on what’s in place by way of

compensation and to deal with the specific topics that Mr O’Reilly has raised.

78. CHAIR: Mr Smith can step from the back, presumably. Mr Strachan, could you

in a minute just walk us through, as the years go by, what the impact would be, with

Mr O’Reilly? In other words, you’ve given an assurance about giving some notice.

79. MR STRACHAN QC (DfT): Yes.

80. CHAIR: There’s a scheme, which we’re going to hear about in a moment, to

relocate businesses.

81. MR STRACHAN QC (DfT): Yes.

82. CHAIR: And there’s a point at which compensation is paid. Clearly Mr O’Reilly

has a problem. What we need to understand is why is your scheme, which is clearly

thought out by experts, a problem for Mr O’Reilly?

83. MR STRACHAN QC (DfT): Certainly, Sir. Well, I hope I may be able to do that

through Mr Smith, but I can explain as we go along. Mr Smith’s obviously familiar to

the Committee, but what I’d like to ask Mr Smith, by reference to the plans – first of all,

if we go to P263, the plans show Mr O’Reilly’s property at Heartlands House. This is

during construction and we can see during construction, the buildings to be demolished.

What is the position in relation to the need for his property and when it’s acquired, when

it’s needed in the construction of the scheme?

84. MR SMITH: Yes. Mr O’Reilly’s property is required for, essentially, works

connected with the railway and the access through into Washwood Heath depot. This

falls within the first phase of works, as it would happen, which is what gives

Mr O’Reilly and ourselves a problem.

85. MR STRACHAN QC (DfT): Okay, thank you. Mr Smith, can I just ask you to

19

explain – a lot of this will be familiar, but specifically in relation to relocation issues –

can I just ask you to explain what, in general terms, is available to Mr O’Reilly by way

of compensation as a result of the scheme taking his property? And then I want to just

deal with the specific assurance, additional assurances, that have been offered.

86. MR SMITH: Yes.

87. MR STRACHAN QC (DfT): But we could start, first of all, in general terms: what

will be available to Mr O’Reilly by way of compensation?

88. MR SMITH: Mr O’Reilly will obviously have the full unblighted market value of

his freehold property. And as a business owner, he will also be able to claim the full

costs of relocation, whatever they may be. The law basically is if you can show a causal

connection between the loss and the scheme, then Mr O’Reilly can claim. So things like

removal costs, refitting new premises – we’ve agreed to agree a list with Mr O’Reilly of

the sorts of things that are available, but he will get compensated for the move, for the

sake of this Committee.

89. MR STRACHAN QC (DfT): One of the things I think Mr O’Reilly may be

alluding to, or may be of concern, is if he suffers losses now as a result of the prospect

of HS2 when it’s constructed – sometimes I think referred to as ‘shadow losses’, but in

effect losses that may happen to him now, even before his property has actually been

acquired. Can you explain what the position in relation to that is? Will his losses in

principle be capable of being paid to him?

90. MR SMITH: Yes, they can. The law has been clarified in this area in the last few

years, or in recent times, and if Mr O’Reilly suffers losses that are clearly caused by

HS2 – people saying, well, for some reason they’re not going to do business because of

the problems that HS2 gives Mr O’Reilly, then those losses can be claimed in

compensation, even if they arise before we have acquired the property.

91. CHAIR: Can I just push you a little bit on that? Does he just turn up and you give

him a cheque, or does he have to employ expensive lawyers to get money out of you?

20

92. MR SMITH: No, Mr O’Reilly will be paid. He can appoint his own advisors,

surveyors and lawyers, and they will be paid by the promoter.

93. CHAIR: Okay.

94. MR SMITH: So he doesn’t have to pay out of his own pocket.

95. CHAIR: Okay.

96. MR BELLINGHAM: Can I just ask: will that money be paid over reasonably

quickly? Because you heard Mr O’Reilly earlier, saying that he was concerned about

the cash flow situation. He mentioned that if he moves to new premises, how quickly

will he get the payment? He really should not be inconvenienced in any way in terms of

the timing of the payment.

97. MR SMITH: No. The payment of compensation – and I am talking about now,

we have a scheme going through this House that will gain Royal Assent. When we

come to serve notice and acquire the property, after Royal Assent, Mr O’Reilly will be

paid. He can also ask for a 90% advance – we may agree it anyway between us – of the

compensation.

98. MR STRACHAN QC (DfT): Perhaps we can just show the relocation policy? If

we can get up information paper C7?

99. CHAIR: So we have Royal Assent –

100. MR SMITH: Yes.

101. CHAIR: Because this is very early in the scheme.

102. MR SMITH: Yes.

103. CHAIR: You’re going to require the premises quite early, but you’ve given the

assurance about nine months. So at that point, he would be told roughly when you’re

21

going to need the property and therefore you could advance 90% of the compensation.

104. MR SMITH: Yes.

105. MR STRACHAN QC (DfT): Could I just check – you can confirm this, Mr Smith

– it is a minimum nine-month period that we’re offering him?

106. MR SMITH: It is.

107. MR STRACHAN QC (DfT): In practice, although you can’t give an assurance

that it’s a longer period, in practice what do you anticipate, whether it would be nine

months or something longer?

108. MR SMITH: Well, let me make it clear: the promoter wants exactly the same as

Mr O’Reilly. We want him and his business and his people to be successfully relocated.

We want that because (a) we have given assurances, but the other reason – and it’s a

selfish reason of the promoter to this Committee – is that it costs less generally, in a

wide sense, in a social sense, in an economic sense. It costs less to keep a business

going than it does to close it down, so we’re on exactly the same page. That’s point

number one.

109. The nine months’ notice, unfortunately, at this stage I’m under no instruction to

give more than nine months, because it’s in the first phase of work for this project, but

there are ways we can hopefully increase that. Firstly, as the programme emerges, if we

get more time, that’s great. The other thing is we can give an assurance to Mr O’Reilly

to work closely with him, so that he doesn’t have to wait for a notice from us to start his

looking for alternative premises. The way I would think, the practical way, and the

promoters will give an assurance on this, that they will work with Mr O’Reilly and, for

example, when Royal Assent looks as if it’s getting close and when the Chancellor is

making the finance available for the scheme – hopefully the two are going to be pretty

close together – we can know in advance. We can’t say to Mr O’Reilly, ‘This won’t be

the start of the nine months’ notice,’ but we can say, ‘Look, it looks sensible now for

you to have a word with our agency service and your surveyors, and start looking and

seeing what is available,’ so that in practice, we can start the process well in advance of

22

the formal period, even though at this stage I can’t give more than nine months.

110. CHAIR: And talking about the point Mr Strachan made about shadow losses,

clearly nothing can be paid out before Royal Assent, but if you have undertakings to the

business and he can therefore show those undertakings to his clients to say, ‘Don’t

worry, it’s going to be sorted,’ then that would help.

111. MR SMITH: Yes, I think that would help. We want to give Mr O’Reilly as much

certainty. We’re trying to say, ‘You can stay there, in any case, until quarter one, 2017.’

We’re not going to touch it before then, so we’re hoping to assure people of that. And

then we’re hoping to work with him and give him advance notice of things happening.

And then the formal nine months’ notice is itself a minimum notice, so we hope we can

extend it.

112. MR STRACHAN QC (DfT): Can I, if it’s convenient, just go into information

paper C7? Because we were also looking advance payments, which I think was the

question from Mr Bellingham or perhaps from the Chair about advance payment to

assist Mr O’Reilly. If we can look at section six, the information paper refers to a

discretionary measure not required by the compensation case, so this is over and above

the position that would normally apply under the law, but financial support may be

offered in advance of taking possession to enable the business’s relocation. And then

you have payment of up to 90% of the nominated undertaker’s estimate of the

compensation, to support cash flow, interim professional fees. And then a potential, for

example, of early acquisition and lease-back, so that one acquires the property

immediately but allows Mr O’Reilly to continue there on a lease arrangement whilst

he’s looking, if that’s something that he requires at the time. Is that how it works,

Mr Smith?

113. MR SMITH: Yes. We would want to work with Mr O’Reilly a sensible

arrangement so that he can hopefully fund his move from those proceeds, from selling it

to us.

114. MR O’REILLY: But that wouldn’t be before Royal Assent. It would have to be

after Royal Assent.

23

115. MR SMITH: That would be after Royal Assent.

116. MR O’REILLY: So given Royal Assent is mid-2016 and you require the property

in early 2017.

117. MR SMITH: Not before.

118. MR O’REILLY: Not before early 2017.

119. CHAIR: It might be 2018 though. It just depends on how the project goes. But

what you need is some assurances in advance to show your clients and to have a plan –

120. MR O’REILLY: And my employees.

121. CHAIR: And your employees. And to have a plan for how we get through this.

122. MR O’REILLY: Yes.

123. MR STRACHAN QC (DfT): Can I just then ask Mr Smith about the key

assurance, about the minimum nine-month notice period which has been offered to Mr

O’Reilly? That’s obviously nine months, where the minimum period in the bill is three

months. I just want to get your assistance, Mr Smith, on whether you consider, in light

of your experience, that nine-month period is going to be one which is sufficient for

Mr O’Reilly to relocate, with the other assurances that have been provided.

124. MR SMITH: Well, what I can say is on the Crossrail project, we did work in a

similar way to this, in trying to give people a minimum notice, extended knowledge of

when things were going to happen, in advance. We found that we could relocate most

of the businesses within that sort of period, within a period of six to nine months. Now,

Mr O’Reilly has particular requirements for his business, but I would hope that if we

can work to nine months plus the extended period, that we may be able to give him –

through giving advance notice and anything else at the end of the period – if we could

extend that say to 12 to 15 months, in practice, I would hope that would be easily

24

sufficient for Mr O’Reilly to find another property and move. But I do realise that he’s

got a 24/7 business, so he needs to have his new property absolutely there, ready up and

running to go, because he has customers to serve. We do appreciate this.

125. CHAIR: Okay. Peter.

126. SIR PETER BOTTOMLEY: Can I first of all say that I am – I think I speak for all

of us – very impressed by what you and your team have achieved with your customers.

I think it’s impressive. The issue that has been put to us is that Mr O’Reilly will want to

have freehold or near-freehold property. He won’t want to go from, in effect, having his

pension fund and his business in good premises, well fitted out, to anything that is

leasehold or less well fitted out. I don’t think we have been told how long it would take

if he found a cleared site or existing buildings, how long it would take to adapt or to

build the sort of building he needs. I don’t know if you’re able to tell us that, or whether

you can, Mr O’Reilly?

127. MR O’REILLY: For a new build, I believe it can take six months following

planning permission, etc. The indications that I have – because property prices or land

prices in the Birmingham area have been created because of this shortage. There is a

development site near to Spaghetti Junction, close to the Aston Villa football ground,

owned by IM Properties, I believe. And the indication to build a 30,000 square foot

warehouse – which, bearing in mind, I have a 60,000 square foot warehouse at the

moment and offices – to build a 30,000 square foot property and offices on a plot of

land slightly smaller than I have would be approximately twice as much as our valuation

of our current property.

128. SIR PETER BOTTOMLEY: I think at some stage, it might be useful to have a

note from the promoters about their discussions with Mr O’Reilly. There would be

some kind of agreement on roughly what replacement cost might be, were it to be able

to be done now. A major difference in valuation is an issue that could be fought out in

the property chamber if necessary, but I think to have an indication of what the apparent

difference is, as a note to the Committee, I think might be a helpful thing to focus on.

129. MR SMITH: I don’t think we have a difference of value or cost at this stage.

25

130. SIR PETER BOTTOMLEY: I think what we heard is that to have premises of a

smaller size on a similar-sized plot –

131. MR O’REILLY: Design and build.

132. SIR PETER BOTTOMLEY: Design and build, might cost twice as much as his

present premises of 60,000 square feet on a well-located site. Is that a fair description?

133. MR O’REILLY: Yes.

134. MR SMITH: We can certainly give a note, but I would just say that the

Compensation Code is such that Mr O’Reilly is compensated for his existing premises.

135. SIR PETER BOTTOMLEY: I am aware of that. I think my words are on the

record, so if it’s possible for our discussion to say what the difference apparently is, if

there is a difference, would be helpful thing. Then, if we accept that it’s not possible for

promoters to make a definite agreement with you in advance of the bill becoming law,

which I think is a fact, then it’s a question of what assurances they might think of giving

you, saying – on the presumption the bill does become law – that they would be

prepared, if you needed it and wanted it, to actually acquire your premises, or at least the

90% on the acquisition. You can fight out the rest in the procedure after that. It does

seem to me that you need to be able to say to your customers not, ‘We’ve got nine

months’ notice of whether we’re going to be all right or not,’ but actually, you can say,

‘We’ve got – ’

136. MR O’REILLY: Three years at least.

137. SIR PETER BOTTOMLEY: Well, you can’t say three years at least, because you

don’t know how quite fast it’s going to happen. But it at least gives you a greater degree

of certainty in saying to your customers – instead of us reading their letters to you, they

can read letters to you from the promoters saying, ‘If the bill goes through, this is what

we would expect to achieve with you,’ so that you can go out and find… Is that the sort

of thing which –

26

138. MR O’REILLY: I can only present it to my customers and give them my own

assurances that we’ll do, between us, all we can to protect their supply chains. But it’s a

very competitive business and at the end of the day, he might say, ‘Well, why would

they?’ But I don’t know. Something I have considered doing is to look for alternative

premises and if I found some that ticked as many boxes as I’m looking to tick, to

acquire that property through a bridging loan, if you like.

139. SIR PETER BOTTOMLEY: Mortgaging left, right and centre.

140. MR O’REILLY: Yeah. And on the basis that I’m compensated when it does get

Royal Assent, then that solves that. But obviously I’ll have costs incurred, with interest

payments. And I’d also need some assurance that if the bill didn’t get Royal Assent and

you were unable to purchase the property, that I could be compensated, if you like, for

my losses in disposal of that property.

141. SIR PETER BOTTOMLEY: That’s something that we may or may not be

addressed on at some stage. I had one last question, but you might want to come back.

142. CHAIR: Michael, do you –

143. MR THORNTON: I’m just wondering if your relationship with your banking

sector is strong enough that they would not have a problem looking after you in these

circumstances, when they see your business changing locations. It would be interesting

to know their feelings on this, wouldn’t it, because you would be reliant on them.

144. MR O’REILLY: It’s only something that’s been discussed over this weekend, so

I’m not certain what their position would be. I’d have to talk to them.

145. CHAIR: Okay. Mr Strachan, have you finished your questions of Mr Smith?

146. MR STRACHAN QC (DfT): I was just going to ask Mr Smith, just picking up on

Sir Peter’s question about what sort of assurances can be provided. The assurance in

terms of what happens after Royal Assent and if notice is served is one that I think

27

Mr Smith was alluding to earlier, but if I could just – by reference to the screen – there

is provision as a policy to have this discretionary arrangement of providing up to 90% of

estimated compensation to support cash flow prior to taking acquisition of the property.

Is that something that the promoter is prepared to offer to Mr O’Reilly post Royal

Assent?

147. MR SMITH: Yes. We’d obviously need to agree this with Mr O’Reilly, but yes.

148. SIR PETER BOTTOMLEY: Take the stand.

149. MR SMITH: Yes, we would. We would obviously offer that to Mr O’Reilly. But

we would want to reach agreement with him, obviously. Either on this or on taking a

purchase and a purchase and a lease-back, we would need to talk and discuss terms but I

think there is a willingness there, on both sides, to try and come to a solution here. We

do appreciate his problem. We need to give as much time as possible.

150. CHAIR: You alluded to that in your first comments that there was a problem.

151. MR SMITH: Yes.

152. CHAIR: Okay. Any final questions, or –

153. MR STRACHAN QC (DfT): I don’t think so. I can briefly address the contained

assurances in a moment.

154. CHAIR: Mr O’Reilly, have you any questions or Mr Smith? Or indeed, after that,

Mr Strachan?

155. MR O’REILLY: I don’t.

156. CHAIR: You don’t. Okay.

157. SIR PETER BOTTOMLEY: Is it absolutely clear that his main customers need

assurance that he’s going to be able to provide the warehousing and the delivery service

28

uninterrupted?

158. MR SMITH: Yes. That’s what he requires.

159. SIR PETER BOTTOMLEY: That’s what they require. It’s not what he requires;

it’s what they are requiring of him. And he’s at risk of losing a significant part of his

turnover between now and expected Royal Assent.

160. MR SMITH: Absolutely.

161. SIR PETER BOTTOMLEY: You can challenge it if you like. Otherwise, you can

just say ‘yes’.

162. MR SMITH: Yes, we are concerned about that; hence we’ve given the assurance

we won’t enter into those properties until a particular date, to hopefully give assurance –

163. SIR PETER BOTTOMLEY: Which means he can then go to the customers and

say, ‘Look, the promoters are saying there will be enough time for me to acquire

premises for a seamless transfer.’

164. MR SMITH: Yes. Well, the first assurance is, ‘We won’t touch it until that date.’

After that, we are going to work hard to give Mr O’Reilly enough time to relocate. The

nine months is a minimum; we hope to give more.

165. CHAIR: Okay, thank you. Mr Strachan.

166. MR STRACHAN QC (DfT): Yes. Can I just, by way of conclusion of what I

want to say on the topic, before Mr O’Reilly has anything further to say, just to go back

to the assurance letter that’s been offered, contained assurances. It’s really to pick up on

what Mr Smith has just said. The assurance which has been offered to Mr O’Reilly

about not touching the property before the first quarter of 2017 is in 1(ii). The assurance

of minimum nine months’ notice is in assurance 1(i). And over the page, there is the

assurance to work with him now to work out the methodology of compensation, value of

the property, and the business relocation policy, all of which we have referred to very

29

briefly in the course of the session. The business relocation policy, with the agency

service, will provide a means to ensure that, working with Mr O’Reilly, there is

incentive on both parties to relocate his business as effectively as possible.

167. Could I just draw the Committee’s attention to paragraphs four and five, where

that business relocation policy is reflected? Part of the policy is to identify those

businesses which are required in the early phases of construction. We have done that in

respect of Mr O’Reilly’s property, but we have identified the date before which we

won’t require it. So we’ve done that. The second part of it, paragraph five, is to give

him as much notice as is reasonably practicable, in addition to the minimum nine

months’ notice period. Put those things together, as Mr Smith has explained, we

consider – and I hope Mr O’Reilly may share that view – that level of assurance will

provide to his customers, as well as to Mr O’Reilly, sufficient certainty to be satisfied

that they can continue to use his business, both in the short term and as a result of any

relocation.

168. In addition, you’ve heard Mr Smith today, in relation to the further part of the

assurance, offer the 90% advance payment after Royal Assent, subject to the criteria that

are identified: the ability to forward fund, effectively, any relocation up to 90% prior to

taking acquisition. All of those things, taken together with the important point that

Mr Smith said, that it is actually in the promoter’s interests to ensure the smooth

relocation of Mr O’Reilly’s property; it’s in everyone’s interests. The position is we

consider we have given those sufficient assurances, recognising the situation

Mr O’Reilly is in; recognising that we’re taking his property; we’ve given him as

sufficient assurances as we can to allow his business to continue successfully in the

future.

169. CHAIR: Thank you, Mr Strachan. Mr O’Reilly, any final comments?

170. MR O’REILLY: I’d just like to – for the record, I disagree. Nine months is just

not enough to relocate a business of the complexities, of the size of my operation. It just

is not enough time. It’s not giving me a fighting chance and I believe there should be

some facility where businesses affected in phase one, such as my own, can come to

some arrangement prior to Royal Assent to enable us to have the same sort of notice

30

periods that businesses that are in later phases will obviously enjoy. It’s going to be

difficult to convince my customers. Already, I’m losing business. They’re already

coming to their own conclusions. It’s difficult to convince my staff, because even

following a successful relocation during that nine-month period, we still don’t know

where that will be. Will it be near to where we are? Will I have to go out of the area?

It just seems I am on my own here, fighting HS2 and getting very alone.

171. CHAIR: Okay. Well, thank you very much. And thank you for your contribution.

172. MR STRACHAN QC (DfT): Sir Peter has asked for a further note, which we’ll

endeavour to provide as quickly as possible. It’s information as to the –

173. SIR PETER BOTTOMLEY: What I’d really like to do is for the promoters and

the petitioner to talk together and to see if there is actually a serious gap in the possible

– not precisely what the valuation is, but whether the order of difference is very

significant or just something which can be sorted out later on.

174. MR STRACHAN QC (DfT): I understand.

175. CHAIR: Thank you very much. I think we’re next meeting on Monday, aren’t

we? Order, order. Thank you.