Fresh legal threat for Railtrack

PRIVATE investors in Railtrack are prepared to fund a £1m legal action against Transport Secretary Stephen Byers - even though institutional investors look likely to accept a deal to buy back their shares.

The Railtrack Private Shareholders Action Group, representing 20,000 small investors, is likely to reject the Government's £500m offer of compensation for the company's assets.

Lawyers for the private shareholders have been asked whether the group has a chance of a successful legal action against Byers, who last October put Railtrack into administration.

A decision to continue legal action would be a blow to the beleaguered Byers. He assumed it would be halted after institutional shareholders, who hold the majority of shares, appeared to be in favour of the deal.

Andrew Chalklen, who heads the private shareholders group, said: 'It is far too early to say that legal action against Byers is over. The shareholders we represent are not at all happy at the offer, which compensates shareholders at about £2.50 a share.

'We have asked our lawyers to look into the chances of a successful action against Railtrack. If they advise 'yes', our first step will be to demand to see the documents which led Byers to put Railtrack into administration.

'We have £400,000 which could cover this action. If we then think we have a further case against Byers we are prepared to raise £1m to pay the legal fees for action against him.'

The private shareholders plan to use recently adopted human rights legislation to claim that Byers deprived shareholders of their property when he forced Railtrack plc into administration in October.

Railtrack Group - the parent company of Railtrack plc - will use Article 1 of the Human Rights Act, a European law now adopted by Britain, to challenge Byers for depriving them of the 'quiet enjoyment of their property'.

They will also accuse him of 'misfeasance', a legal term for abuse of power by someone in public office. Byers will face separate charges that he abused his power for political ends by pulling the plug on a solvent company.