Examination of Witness (Questions 200
TUESDAY 18 MAY 1999
200. Have you got a copy of it with you?
(Mr Mandelson) Yes.
201. Can you look at the page where you
signed it at the back and read out section 14.
(Mr Mandelson) Section 14?
202. On the page on which you signed.
(Mr Mandelson) "I/We have not arranged any
other loan, second mortgage or improvement grant in connection
with the property."
203. Is it right to say that you knew at
the time you signed that that if your mother did not come across
with the money, whether as a loan or a gift, Geoffrey Robinson
would provide the money?
(Mr Mandelson) Assuming that I had proceeded with
a purchase of a house, and assuming I proceeded with the purchase
of this house in particular, yes, I did believe that Geoffrey
was available to help me finance the purchase but it was not agreed
or arranged at that time. Therefore, that declaration is not invalid.
That is terribly important.
204. I was asking a question, I was not
necessarily asking for an answer to a question I had not put.
Can I ask you do you think that the Britannia Building Society
would have given you a loan of £150,000 if they had known
that you were borrowing 80 per cent of the cost of the property
from somebody else?
(Mr Mandelson) Yes, of course they would, because
what they were lending to me was a fraction of the value of the
property. They were completely covered and secured at all times.
205. I was not asking whether they were
covered and secured, I was asking do you believe that the Britannia
Building Society would have lent you £150,000, that is to
say 32 per cent of the cost of the property, if they had known
that you were borrowing elsewhere 80 per cent of the cost of the
(Mr Mandelson) Yes, I do. Yes, I do. Partly because
that 80 per cent represented no charge on the property and partly
because they have intimated so to me since.
206. If they have I am not sure we have
seen that. In the mortgage application where you indicate the
size of the mortgage on Wilmington Square and the value of Wilmington
Square, do you believe that the Britannia Building Society knew
that a significant part of the difference would be used to reduce
or eliminate a loan somewhere else, or alternatively do you think
they had the impression the difference between the sale of Wilmington
Square and the repayment of the mortgage on Wilmington Square
would be available for buying Northumberland?
(Mr Mandelson) I cannot tell you what was in their
minds. You are asking me an entirely hypothetical question which
you are entirely entitled to ask. I would say that given that
my finances were pretty comprehensively covered I do not think
they would have had any problem at all in doing that. They understand
that when you buy property you are going to do something with
that property, you are going to change it, you are going to repair
it or do whatever it is, it is a very, very common practice for
people to do that.
207. When you say that your finances were
covered do you mean uncovered or what do you mean?
(Mr Mandelson) Supported I mean.
208. Do you think they knew that you were
going to be borrowing £373,000 from somewhere else?
(Mr Mandelson) Yes.
209. How would they have?
(Mr Mandelson) I am not saying £373,000 but
they knew that I was going to have to find the balance of the
purchase price and that I was going to do that from my own arrangements.
That was always understood between us.
210. By borrowing?
(Mr Mandelson) No, because if my mother had paid
it it would have been different, it would have been effectively
a gift. The key thing, if I could suggest, is what is important
to the building society is whether I am borrowing from a source
that is going to result in a prior charge being placed on that
property. So they tell me, and I have had many conversations with
them and Herbert Smith since, what concerns them is their financial
risk. They asked me, are they in jeopardy? Am I making an arrangement?
Am I extending myself? Am I making a commitment that is going
to jeopardise my ability to repay them their money? The answer
is no, I was not, but then even if I was, which I was not, they
could force a sale of my property and they would easily get their
£150,000 back because it is a relatively small fraction of
the value of the property. So if I had defaulted or if I had done
something wrong or, I do not know, just gone belly-up in some
way, what would they have done? They had a first charge on my
house. They would have said, "Sorry, we're calling this in.
You either give us the money or you sell the house, actually you
probably sell the house." £150,000 in the context of
a house of that value, even at its original price of 465, let
alone what was happening to the price as the market rose, that
£150,000 is not a risk for them; it is a small fraction of
the value of that house. This is how building societies work,
I get the impression, and I have learned much more about building
societies now than I knew at the time, but that is their consideration.
They come first. As long as they get their money back before anyone
else, as long as they are not at risk, they are not going to weep.
Yes, they want their application forms filled in accurately and,
yes, they want all their procedures to be followed, but when it
comes down to it what they care about is the ability of the borrower
to repay the lender, and at no stage in any circumstances was
that ever in jeopardy.
211. The question I was asking was not actually
about the first charge on the property. The first loan you had
in relation to that property was the £373,000 from Geoffrey
Robinson, was it not?
(Mr Mandelson) The first loan? How do you mean?
212. The mortgage loan came in at completion?
(Mr Mandelson) Yes.
213. A month before that you exchanged contracts?
(Mr Mandelson) Yes.
214. The first borrowings you had in relation
to that house
(Mr Mandelson) Were the deposit.
215. The deposit, and at the time the building
society provided £150,000 to your solicitor to add to the
rest of the money from Geoffrey, was a subsequent loan but a first
(Mr Mandelson) They would have come together on
the day of completion, yes.
216. So in effect, you had borrowed the
money from Geoffrey for the deposit and the rest and you had also
got the money from the building society which became the first
charge on the property?
(Mr Mandelson) But the point is that
217. I am just trying to establish the facts
before we get to the point.
(Mr Mandelson) They came together with my solicitor
at the point of completion.
218. But the first loan you had had was
from Geoffrey Robinson?
(Mr Mandelson) No, the first agreement of a loan
came from the building society.
219. The money coming is a loan. The money
for the deposit was a loan. It was in relation to that house,
was it not?
(Mr Mandelson) The first agreement