WITHOUT PREJUDICE North Hertfordshire District Council Council Offices Gernon Road Letchworth Garden City Hertfordshire SG5 4RJ Attention of the Chief Executive 30 th January 2018 Dear David 14/15 Brand Street Settlement Agreement Much has transpired since my email to you on 14 th November 2017, see Appendix A. In that email I expressed my concerns about the draft you had returned and after discussions with our lawyer I responded stating: We are a little concerned at some of the proposed draft wording, some of which is unworkable and some does not adequately cover what we agreed. It is of course quite complicated to put matters into words but I think our lawyer has managed to do that. I further stated: I m afraid that a number of your proposed amendments have been rejected because they are plainly unfair or do not make any real sense. It was in that spirit that our lawyer who is experienced in Local Authority and Charity law, having many Local Authority clients, re-drafted the document. This was the document, that was sent to you being the latest version. David there is little point in instructing your Cabinet that you have been advised that HTH could sign the document you forwarded because this is blatantly NOT the case as evidenced above. We are talking legal issues here that will not work, commercial issues can be negotiated. I have made it very clear that we have gone out of our way to see if we can work a solution, I advised you of this at the scheduled meeting on 15 th December 2018, before you decided to leave. It is also worth repeating that our very experienced lawyers have confirmed that NHDC is permitted under Local Authority legislation to sign the latest version of the documentation as it stands without any alteration, in spite of your assertion that there are fundamental issues. At our forthcoming meeting on 2 nd February 2018 we propose to review with you the latest document and NOT earlier versions, particularly as you have referenced that in your response to me on 8 th December 2017 and raised fundamental issues. See Appendix B. Registered Office: 2 Croft Chambers, 11 Bancroft, Hitchin, Herts SG5 1JQ Page 1
In my email reply to you on 8 th December 2018 I stated: We are keen to tie up an agreement that represents that which we have forged together. The revised wording is proffered to correct, we are advised, poor drafting and to provide clarity and precision. Whilst your 10 issues will be discussed at our meeting, there are two points I would wish to dispense with now: 1. We are not concerned what a loan is called Formal or Informal. 2. As already advised to you Clause 2 needs modification as it refers, erroneously, to documents that are no longer. The other 8 issues we can discuss and resolve at our meeting. For clarification we are authorised to finalise the documentation this Friday and to agree any changes. We expect the NHDC representative(s) to be in a position to commit at that meeting. There is little point in having to report back to Cabinet or executive members in order to get sign-off or worse have to have further meetings. We wish to be in a position to produce a finalised agreement on Friday. You may have seen that on BBC Look East last week I mentioned public access over 14/15 Brand Street. For clarification, and as a gesture of goodwill, I and my Board would look very favourably for any request by NHDC should access be requested. You already have a key and I think this could be accomplished quite quickly. Finally, it is worth repeating your email comment to me on 20 th October 2017 when you said, It looks like we are on the same page regarding the 5 year commitment and review. Indeed we are, so let s make this happen for the benefit of all. Copied to: All Elected Members Registered Office: 2 Croft Chambers, 11 Bancroft, Hitchin, Herts SG5 1JQ Page 2
Appendix A From: Stephen Pike Sent: 14 November 2017 09:18 To: David Scholes Subject: RE: Follow up to meeting Hi David, As mentioned briefly on Friday I am emailing you directly with our concerns rather than spend more money with lawyer to lawyer discussions since I think we can resolve the majority. We are a little concerned at some of the proposed draft wording, some of which is unworkable and some does not adequately cover what we agreed. It is of course quite complicated to put matters into words but I think our lawyer has managed to do that. I will go through some of the key points as advised by our lawyer as follows: I m afraid that a number of your proposed amendments have been rejected because they are plainly unfair or do not make any real sense. You have partially attempted to amend the document so that completion would take place on a different day from completion of the agreement with a separate contract, we cannot see the point of this and in particular would wish to see the money paid over as soon as the legal obligation is completed. Community Purpose and Protected Period There are no actual restrictions preventing the Council from changing the use of the property, which I understood was our agreed position. The provision as originally drafted did not really make sense and certainly did not provide for a rolling five-year period. We have now provided that if the Council makes a decision to change the use of the property, this will not occur until five years after the decision has been made, which I think is the substance of our agreement. We have therefore had to change the definition for the use of the property within a Protected Period. This now relates to Community Purpose for the benefit of the community. With regard to planning the proposed drafting is exceedingly difficult for third parties to understand. In any event it does not make much sense if NHDC were to change the authorised planning use for any reason. In fact an innocuous change in authorised planning use could have taken the property out of this obligation entirely and permit further radical changes of use without the Council attending to this procedure. As drafted, no-one would get specifically notified of what the Council was doing (although details of decisions might be generally available online). I do not believe that this was what is intended? We have provided for notification of the other parties to the agreement of any decision but even this depends on those parties remaining in existence and maintaining an interest in the issue. It is therefore intended that HTH Finance Ltd will remain in existence. Registered Office: 2 Croft Chambers, 11 Bancroft, Hitchin, Herts SG5 1JQ Page 3
Related Parties There should be no liability for actions outside the control of HTH or HTHFin (which should have been the interpretation of the original drafting) and this has been made clear by stressing that the obligations are those of the companies who are parties to the deed or anyone else in so far as they are within the control of those parties. We are unable to agree to anything beyond this. Rates The rates aspect will need to be covered in the documentation. Value Added Tax clause 5 We have reinstated the provision albeit that we are not sure that there are any surrounding circumstances that would make VAT potentially payable but in so far as there is, the Council should be liable. Work on 14/15, whist owned by HTH might be challenged by the VAT authorities and we cannot be responsible for that since this was out of our control. The revised draft incorporating all of these provisions will be forwarded to you later today. Stephen Registered Office: 2 Croft Chambers, 11 Bancroft, Hitchin, Herts SG5 1JQ Page 4
Appendix B From: David Scholes Date: 08/12/2017 12:04 (GMT+00:00) To: Stephen Pike ;John Ray; Ian Couper Subject: RE: Follow up to meeting Stephen thank you for your e mail of the 28 th November attaching your proposals with further redrafted documents. We have now had the opportunity to review these and discuss the content with our relevant Executive Members. Whilst we were content to complete the transaction with the version that we sent to yourselves on the 20th October (which followed on from extensive discussions in September and October) there are a number of matters that your advisors have altered in your latest draft which fundamentally alters the position and our ability to proceed on the basis that you now propose. The following points are our fundamental concerns on the settlement agreement as redrafted by yourselves: 1. Community Purpose this is now imprecisely defined and is open to wide interpretation. Our approach to relate the use to the permitted use of the building is factually defined and can be regulated in that manner. The Council will not bind its existing assets other than in relation to existing planning uses. 2. Dispute definition the paramount principle of the Settlement Agreement as discussed thus far was to draw a line under all matters of dispute between HTHL and the Council. Re-introducing the proposed wording limits that definition and thus limits the scope of the agreement. This is wholly unacceptable to the Council as it potentially leaves matters of dispute outside the scope of the settlement, which we would assume cannot be what you intended. 3. Loan Agreement the Council cannot agree to this being defined as Informal. That word was never used in connection with the loan. 4. Notice of Material Breach the re-insertion of this section is unnecessary and does not reflect the Council s position on the matter nor the fact that HTHL have not fulfilled numerous requirements in the Development Agreement or funding agreements with SIB. This is wholly unacceptable to the Council. 5. Related parties the definition that the Council included is a standard clause and covers the point made by HTHL in previous drafts. The revised wording omits officers and includes imprecise wording such as from time to time. 6. Section 2 Effect of Agreement. Inclusion of other documents has been superseded and therefore reference to them is erroneous. 7. Section 3.5 the Council s position is that no such breach occurred and monies are not owed. Therefore we cannot agree to the inclusion of the section. 8. Section 3.6 the Council cannot indemnify such action nor can it waive Business rates. This has been explained on a number of occasions. 9. Section 5 VAT. This has been reintroduced and our understanding is that no VAT is payable in relation to the property transaction. The Council will not agree to the incorporation of section 5.2 the liability of which is unknown and unquantified. 10. Section 9 (Deleted) we cannot understand the rationale for this as it is the only mechanism for a remedy should the agreement be breached. Given the fundamental nature of the matters raised above (and a number of other less fundamental but important matters which I have not listed) I am no longer in a position to proceed with completing the transaction under delegated powers which were granted by the Council s Cabinet. In these circumstances and unless very rapid progress can be Registered Office: 2 Croft Chambers, 11 Bancroft, Hitchin, Herts SG5 1JQ Page 5
made next week to resolve these matters I will have no option but to refer this matter back to Executive Members at a meeting of Cabinet. Ian Couper and myself are happy to meet next week with yourself and John Ray if there is any reasonable prospect of resolving these points to the Council s satisfaction. In the event that this is not possible then I will have little alternative but to report this matter to Cabinet at its next meeting on the 19 th December. I know that you appreciate the progress that had been made to resolving this important issue however as a result of your latest proposals this appears now to be in jeopardy. David Registered Office: 2 Croft Chambers, 11 Bancroft, Hitchin, Herts SG5 1JQ Page 6
Appendix C From: Stephen Pike Sent: 08 December 2017 15:27 To: 'David Scholes' Subject: HTH/NHDC Agreement Hi David, I understand, on the grapevine, that there are some misunderstandings as to our agreement. Namely that we are moving the goal posts. This cannot be further from the truth. We are keen to tie up an agreement that represents that which we have forged together. The revised wording is proffered to correct, we are advised, poor drafting and to provide clarity and precision. We are happy to have a conference call or meeting with you next week to iron out and perception differences. I notice that clause 2 will need some modification. Stephen Sent from my mobile device Registered Office: 2 Croft Chambers, 11 Bancroft, Hitchin, Herts SG5 1JQ Page 7