Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 100 - 119)

MONDAY 13 MAY 2002



100.  We have been told that from the beginning to this point in the saga. Every time we have asked about this during the several inquiries we have had into Wembley we have been told with utmost confidence what you have just been telling us. I am not in any way impugning your own good faith, but why should we accept it now when it turned out not to be so on the occasion of all the other assurances we have had?

  (Mr Cunnah) Mr Chairman, I can only say to you that when we have had experts such as Cyril Sweett on the construction side, the Office of Government Commerce and the various levels of due diligence that the banks have put forward, then there are a number of tests there. The National Audit Office has also looked at our corporate governance procedures and our new procurement procedures so you can have their reassurance rather than the likes of mine.

101.  You are now Project Director but you were a member of the board in whom you found considerable inadequacies. When we did our inquiry into the Royal Opera House we found two members of the Royal Opera House board who could be absolved from being implicated in that scandal and all of the rest of them were implicated. I am not using the word "implication" in your case, but when you were a member of this board in whom all of these inadequacies were found which you have now told us have been put right or are being put right, were you aware of them then or did you just go along with them?

  (Mr Cunnah) The history in terms of the procurement process is fairly long. What I would have to say is that we were advised by Masons, the law firm, that this business did not need to conform to the European procurement rules and therefore our understanding at that time was that we were following commercial practices rather than the more stringent requirements of public sector procurement. Therefore in that context the progress of the procurement process that was reviewed by the board was deemed to be appropriate and indeed the Lottery funding grant document also requires that we have competitive tendering but not necessarily public sector tendering. So at that time the board was reviewing progress on the procurement that it felt was appropriate. As it has turned out and as was highlighted by Mr James, there were deficiencies and we believe we have acted on those very swiftly as soon as those have come to light and we have put those right.

102.  You have brought into discussion the question of the Lottery Funding Agreement. If you look at paragraph 4.3 on page 9 of the Tropus report you will see that the report says: "Sport England and their advisers consider that they have not been kept adequately informed and consulted on the project issues . . . Sport England may be entitled to require WNSL to repay the Lottery grant due to the unresolved breaches already committed." That is not some biased Tropus report which you contest. It is what we have been hearing about in the House of Commons and before this Committee almost ad infinitum, namely that the Government would take a view that if there were not a stadium which included provision for athletics then it might be that Lottery money would be required to be repaid. Here we have got what Sport England may say are "unresolved breaches" of the Lottery Funding Agreement already committed. On what possible basis, therefore, do you hang on to that Lottery money when Sport England, which gave you the money, say that you breached the agreement. I can tell you here and now that when we have Sport England before us I am going to give them a very hard time on what seems to me their breach of fiduciary duty in dealing with this matter. I would like your comment on that. This is not Tropus (and in a minute we will come to Tropus), this is Sport England—lax, slack, slovenly—saying that you have breached the Lottery Funding Agreement even though they have not done anything about it.

  (Mr Cunnah) You would have to ask Sport England if they think we have breached the Lottery Funding Agreement. It is technically correct if we did breach it that we and WNSL might be required to repay that money. There have been five members of the board who through the English National Stadium Trust did represent Sport England, and indeed Sport England would have an observer at each board meeting. So we feel that we have kept Sport England constantly informed so it would be appropriate if you asked them the question. However, the one condition within the Lottery Funding Agreement that of course we have breached is that there were certain milestones that were set down for the funding to be achieved. We have worked closely with Sport England who on a monthly basis now review the project to decide whether to request the return of the Lottery grant or for us to carry on if they believe that the chances of the project being concluded are good.

Derek Wyatt

103.  Masons have nothing to do with Chelsea Village? They are not the same lawyers, are they?

  (Mr Cunnah) I am sorry, I do not know.[16]

104.  If you have to give the £120 million will West LB make sure that you can borrow the equivalent if you need it? Is that part of the agreement?

  (Mr Cunnah) Part of the banking agreement would be that the £120 million stays in place.

  Mr Doran: Stays in place?


105.  I want to ask two questions before we put some questions to Mr James—and I am very grateful to you, Mr James, for having waited so patiently. The first is I would like absolute clarification as to whether your lenders, the bank with whom you are negotiating, have now been shown this Tropus report?

  (Mr Cunnah) They know of its existence; they have not read it.

106.  Have they seen it? Have they read it?

  (Mr Cunnah) No, they have not.

107.  ***.

  (Mr Cunnah) ***.

108.  ***.

  (Mr Cunnah) ***.

109.  ***.

  (Mr Cunnah) ***.

110.  ***.

  (Mr Cunnah) ***.

111.  ***.

  (Mr Cunnah) ***.

John Thurso

112.  Mr Cunnah, could I understand the corporate structure. WNSL is a limited company, not a Plc?

  (Mr Cunnah) Correct.

113.  And who are the shareholders?

  (Mr Cunnah) The Football Association.

114.  And the FA is what sort of corporate body, a Plc or a limited company?

  (Mr Cunnah) It is a limited company.

115.  It is a limited company as well, and who are the shareholders in that?

  (Mr Cunnah) The Football Association has a fixed number of shareholders which are the various clubs and leagues up and down the country. The shares are obviously not traded.

116.  So there is no Plc involved at all, it is all limited companies?

  (Mr Cunnah) Can I correct that. The English National Stadium Trust has a golden share in WNSL.

Derek Wyatt

117.  Is it your concern if we push to have this in the public domain that West LB will get sight of Tropus and that will disturb the contractual obligations and bring this to a halt?

  (Mr Cunnah) Can I, first of all, correct something I said. West LB's lawyers have seen the report by Berwin Leighton Paisner. They have not seen the Tropus report. To answer your question, I think the history of this project has shown that there has been a lot of adverse publicity and every time there is adverse publicity it does potentially damage the project. That has led to some of our problems in the past.

118.  That is a "yes" then?

  (Mr Cunnah) Absolutely.

119.  Is that your feeling, Mr James?

  (Mr James) Not really, no. I have no connection with the banking perceptions at this time, I am completely insulated from the banking dialogues. My view of this only goes back to the time when I became involved in September and I have not had a chance to follow what happened in the media before that.

16   Note by WNSL: Masons have informed WNSL that the only involvement they have had in relation to the construction work at Chelsea has been advising, since January 2002, on a claim by a sub-contractor. Back

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