Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 300-319)

SIR RICHARD MOTTRAM KCB AND MR DUNCAN HALL

MONDAY 4 MARCH 2002

  300. I am not going to pursue the issue of mortgages and the Development Corporation's Guidebook, but can I just ask, are you aware of the types of agreement contained in and permitted by the Development Corporation Guidebook?
  (Mr Hall) Generally, yes.

  301. Why do you say "generally yes"?
  (Mr Hall) Because that is my understanding of the situation.

  302. So you are aware of the types of agreement contained in and permitted by it?
  (Mr Hall) Yes.

  303. A simple yes would have been sufficient. Do you accept that forward funding agreements were not mentioned in the Guidebook?
  (Mr Hall) Yes.

  304. Do you accept that you entered into forward funding agreements which resulted in an additional cost of £1.6 million?
  (Mr Hall) Yes.

  305. Do you accept that such agreements required early advice from the Department as to whether they were permissible or not? If you look at paragraph 2.14, "However, it required the Corporation to seek early advice from the Department in cases of uncertainty, particularly concerning `novel or contentious' proposals."
  (Mr Hall) Yes.

  306. So you would agree with that?
  (Mr Hall) Yes.

  307. Why then in Cases A and B contained in the Report did you not seek that early advice from the Department?
  (Mr Hall) Because I took them to be a fairly standard form of commercial arrangement, and given the legal advice I have received they were therefore joint ventures and from that premise I did not seek further advice.

  308. I am sorry, Mr Hall, you have just advised me that you are aware of the sorts of agreements which are contained in and permitted by the Development Corporation Guidebook. You have accepted that forward funding agreements were not any of those contained in and permitted by the Guidebook, you accept you entered into them and you accept that those sorts of agreements did require early advice, but now you tell me that you did not see that you needed to apply for early advice. That is contradictory, is it not?
  (Mr Hall) I did not intend it to be contradictory, I was merely making the point that I considered the advice we received from our legal advisers to be sufficient. If it is seen now that is incorrect—

  309. I am sorry, I did not catch the last half of the sentence.
  (Mr Hall) I was explaining to you first of all that I had taken legal advice in relation to the documentation, the fact it was in accordance with the requirements of the Corporation, but equally I was making the point I think that the position now, looking back at it, is that we could have taken further advice, or I could have taken further advice than I did.

  310. Let me quote to you the legal advice that you did take. If you look at the very next paragraph it says, "The Chief Executive told us that he had not consulted the Department or the Treasury about these agreements. Instead, he had consulted the Corporation's legal advisers, who had taken the view that these agreements were not loans but `forward funding arrangements'." You have just told this Committee that you accept and that you knew that forward funding arrangements were not such as were authorised by the Guidebook without prior agreement.
  (Mr Hall) I am taking the view in relation to the comments made in relation to the guidelines of the Corporation sat here now that the Corporation, or myself or both, would have taken further advice than we took at the time.

  311. So you accept you were wrong not to do that at the time?
  (Mr Hall) I should have relied on more than the advice of our lawyers.

  312. In response to Mr Steinberg earlier when he was asking you about Case C, you said—and I tried to write it down as accurately as I could but I am not a stenographer—"Now I am looking at this four years on with the benefit of hindsight. At that time I thought it a right and proper decision for the Corporation." Does that mean, as would be the normal interpretation of those words, you no longer consider it a right and proper decision?
  (Mr Hall) You are referring to Case C on page—?

  313. You were speaking to Mr Steinberg at the time and you said you thought it a right and proper decision for the Corporation at that time.
  (Mr Hall) I am sorry, I do not wish to cause any confusion but there is more than one Case C. Which page are you referring to please?

  Mr Gardiner: I am sure that the record will be able to display that and then I will ask you to provide a written response because I cannot waste my time now cross-referencing you.

  Mr Steinberg: Page 25.

Mr Gardiner

  314. Thank you. Page 25 is the one I understand Mr Steinberg was dealing with, Haverton Hill Shipyard.
  (Mr Hall) I am sorry, I have been looking at the document. What was the question?

  315. The same one as it was before. You said, responding to Mr Steinberg, that now you were looking at this four years on with the benefit of hindsight, but at the time you had thought it a right and proper decision of the Corporation.
  (Mr Hall) That is correct.

  316. Do you agree now it was not a right and proper decision of the Corporation?
  (Mr Hall) At this stage I would say it was not the best commercial decision of the Corporation in view of the outcome.

  317. Mr Hall, you said you were aware of the regulations concerning the deferred payments of £34 million of commitments outside of the delegated authority. You were asked at that stage by Mr Williams why you had acted in a manner which was ultra vires. At that point you said, "The Department were aware of all that we were doing", and you spoke of the transparency there had been with the Department.
  (Mr Hall) Yes.

  318. But that does not answer the question, does it, that Mr Williams asked? What he asked of you was, why did you act ultra vires. To simply say, "They knew we were acting ultra vires" or, "We had given them the information which, if they had bothered to read it, would have shown we acted ultra vires", is totally different from answering the question as to why you did act ultra vires.
  (Mr Hall) The situation in relation to that—as I said earlier in a slightly different context, but still applies—is this becomes a very vexed question in relation to the question of commitment and approval. As can be seen in the large cases here it was plainly apparent to the people we were negotiating with that these schemes were subject to the approval of the Department. We were in the process of negotiating. The commitment was not a formal, legal commitment but part of the negotiations we were having. The Department were aware of those negotiations because the upshot of it was, when do you reach the point of seeking an approval?

  319. My question is, why did you act in a manner was that ultra vires? You keep on giving me the answer you gave earlier, but it is not the answer to the question, Mr Hall, you have to appreciate that.
  (Mr Hall) What I am doing is repeating the comments I made before.


 
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