Examination of Witnesses (Questions 100
- 119)
MONDAY 13 MAY 2002
MR MICHAEL
CUNNAH AND
MR DAVID
JAMES
Chairman
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?
Chairman
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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