Report on the Inquiry into Titanic Quarter Leases (2024)

Report on the Inquiry into
Titanic Quarter Leases
Committee For Regional Development

Together with the Minutes of Proceedings of the Committee Relating to the Report and the Minutes of Evidence

Report: 1/01/R (Committee for Regional Development)

COMMITTEE FOR REGIONAL DEVELOPMENT

POWERS

The Committee for Regional Development is a Statutory Departmental Committee established in accordance with paragraphs 8 and 9 of the Belfast Agreement, Section 29 of the Northern Ireland Act 1998 and under Assembly Standing Order 46. The Committee has a scrutiny, policy development and consultation role with respect to the Department for Regional Development and has a role in the initiation of legislation.

The Committee has power to:

consider and advise on Departmental budgets and Annual Plans in the context of the overall budget allocation;
approve relevant secondary legislation and take the Committee stage of relevant primary legislation;
call for persons and papers;
initiate inquiries and make reports; and
consider and advise on matters brought to the Committee by the Minister for Regional Development.

MEMBERSHIP

The Committee was established on 29 November 1999 with 11 members, including a Chairperson and Deputy Chairperson and a quorum of five.

The membership of the Committee is as follows:

Mr Alban Maginness (Chairman)*
Mr Alan McFarland (Deputy Chairman)
Mr PJ Bradley (appointed on 26 January 2000 in replacement of Mr Alban Maginness who had become Chairman)
Mr Joe Byrne
Mr David Ervine
Mr William Hay
Mr Derek Hussey
Mr Roger Hutchinson
Mr Pat McNamee (appointed in replacement of Mr Conor Murphy on 18 September 2000)
Mr George Savage (appointed in replacement of Rt Hon John Taylor on 15 January 2001)
Mr Jim Wells

* Mr Denis Haughey was the Chairman of the Committee from 29 November to 16 December 1999.

TABLE OF CONTENTS

Executive Summary

Recommendations

Background of the Committee's Inquiry

Findings of the Committee

Conclusions

APPENDICES

Appendix 1.

Minutes of Proceedings of the Committee relating to the Report

Appendix 2.

Minutes of Evidence

Appendix 3.

List of Memoranda Submitted to the Committee (Unprinted)

EXECUTIVE SUMMARY

Background

For a number of years the Port of Belfast has been a widely debated issue. In 1997 the government floated the idea of privatising Belfast Port. In May 1998, the Chancellor, Gordon Brown stated that £70 million from proceeds raised from the sale of the port could be retained in Northern Ireland for improvements to the infrastructure.

After devolution on 29 November 1999, the Regional Development Committee was asked to investigate the various options for the development of Belfast Port, taking account of the Belfast Harbour Commissioners' proposals and the recommendations of the New Northern Ireland Assembly's Ad-hoc Committee findings, published on 22 July 1999. The Department for Regional Development (DRD) also produced an options paper to help the Committee in its deliberations. The Committee made its interim decision on the Department's options paper on 28 June 2000 and announced that it was looking favourably at Option D, i.e. the retention of the Port of Belfast as a restructured Trust Port with extended powers, subject to the undertaking of a full economic appraisal.

The Minister, Mr Gregory Campbell, subsequently presented the economic appraisal report to the Committee on 22 November 2000. On 28 February 2001 the Committee issued its response to the Minister. The Committee agreed to put down a Take Note Motion debate in the Assembly to discuss its findings into the Port of Belfast. Its main recommendations were:

the retention of Belfast Port as a Trust Port;
the restructuring of Belfast Port was considered inappropriate given the uncertainty surrounding the disposal of non-port lands;
the extension of powers of Belfast Port (as well as Londonderry and Warrenpoint) to bring it into line with other ports in Great Britain;
as an initial step, the signing of a Memorandum of Understanding (MOU) with Belfast Harbour Commissioners (BHC), followed by legislation to give the Department power of direction; and
the Department to bring forward enabling legislation to allow a re-examination of the options of restructuring Belfast Port at some future date and with final approval resting with the Assembly.

Three weeks prior to the Committee's announcement of its findings into the future of Belfast Port, Harland and Wolff announced on 7 February 2001 that Harland and Wolff Properties Ltd. and Titanic Quarter Ltd. had been purchased by Fred. Olsen Energy ASA. Following this announcement, the Committee wrote to BHC registering its concern about the lease arrangements and requesting additional information.

On 20 March 2001 a UTV "Insight" programme made a number of allegations in relation to the deal struck between BHC and Harland and Wolff. These allegations were strongly refuted by BHC in a press statement issued on 26March 2001.

Given the uncertainty surrounding this matter, the Committee decided not to proceed with its Take Note Motion and formally announced on 3 April 2001 the setting up of an Inquiry to investigate the circ*mstances surrounding the signing of the Titanic Quarter development agreement.

Public Availability of Titanic Quarter Development Plans

Evidence given by BHC claimed that DRD was fully informed about the planned development of Titanic Quarter. BHC provided comprehensive documentation to support their contention that all the key facts were in the public domain. DRD on the other hand stated that it was not aware of all the details, including the signing of the agreement on 20 December 2000, despite the fact that negotiations were ongoing at the time on the MOU. DRD claimed that it was not aware of the consolidation of a number of leases into one and the fact that leases would be allocated to developers on a site by site basis, for a period of 125 years or 250 years, depending on the type of development. DRD was aware that the Titanic Quarter agreement and the negotiations leading to the signing of the agreement had been classed as commercial in confidence. It was also noted that despite an approach from DRD on 7 February 2001 about the agreement, BHC were particularly slow in providing the Department with the details, taking approximately five weeks.

From the evidence available it appears BHC became more acutely aware of their public accountability responsibilities after the UTV "Insight" programme. They sought meetings with the Minister and the Committee, as well as providing a plethora of documentation to ensure that all relevant information was made available. One could conclude that without this UTV programme, BHC might not have been so forthcoming in informing public representatives of their activities.

Memorandum of Understanding

There was also a difference of opinion between DRD and BHC surrounding the exclusions of certain areas of Belfast Port lands from the MOU. At a Committee meeting on 2 May 2001 DRD officials stated that the lands excluded from the MOU were at the behest of BHC, as these areas were already covered by a legal agreement with leaseholders. During his evidence to the Committee, Mr. Irwin, Chief Executive of BHC, gave contrary evidence, stating that it was DRD who had requested the exclusions. Mr. Irwin added that BHC had no difficulty including Titanic Quarter and the other excluded areas in the MOU, provided recognition was given to the existing legal contract. In reply to a question from the Deputy Chairman, Mr. Irwin confirmed that there was absolutely no reason why these areas should not be included in the MOU.

After careful examination of the evidence available, the Committee concluded that it could not see any benefit to DRD in requesting exclusions from the MOU, when the whole purpose of the agreement was to facilitate the Department's monitoring of BHC activities, particularly in those areas of major public interest, such as the Titanic Quarter. The question remains as to why BHC might have wished to seek exclusions. Was it to protect a commercial or public interest and if so, who was most likely to gain from such exclusions?

10.

As a statutory body, a greater level of openness and accountability could have been expected with the prompt delivery of key facts to the Department on the Titanic Quarter deal. Indeed, BHC could easily have kept the Department informed through the informal lines of communication that existed. From the evidence provided it could be construed that BHC were over zealous in seeking to protect large areas of their commercial activity from outside influence.

Commercial Confidentiality

11.

In their evidence to the Committee BHC quoted commercial confidentiality as the reason for not informing the Department of the Titanic Quarter deal, stating that Harland and Wolff had requested confidentiality and ergo, this was a key factor in the amount of information which BHC made available. BHC confirmed Harland and Wolff's request for confidentiality in a letter, dated 26 March 2001 to the Chairman of the Committee, as well as at a meeting between BHC and the Minister on 22 March 2001.

12.

Harland and Wolff stated that they were not opposed to making a public statement after the signing of the deal on 20 December 2000. They explained that there had been no pre-determined or conscious effort by them to keep the detail of this deal secret. The Titanic Quarter deal was primarily about enabling Harland and Wolff to continue with its core business of shipbuilding. At the signing of the agreement, it was acknowledged that a Harland and Wolff representative had casually mentioned that he did not think there was a need for a press release to which BHC concurred. Harland and Wolff, as further evidence to support their claims of not being involved in a secret deal, highlighted the statement made by Fred. Olsen Energy ASA to the Oslo Stock Exchange on 31 January 2001, which openly referred to the Titanic Quarter deal.

13.

The Committee accepts that it is possible that BHC might have misconstrued the Harland and Wolff representative's comments at the meeting on 20 December 2000. However, irrespective of this, the Committee believes that BHC should have taken a pro-active approach in seeking to publicise the deal in the interests of public openness and accountability, as well as the significant potential benefits to the Northern Ireland economy.

RECOMMENDATIONS

14.

Some of the recommendations listed below reflect those contained in the Committee's response dated 28 February 2001, to the Minister on the future of Belfast Port. The Minister accepted the key recommendations and subsequently announced through a press release on 3 May 2001, a number of measures he proposed to introduce to improve the public accountability of Northern Ireland Trust Ports. The Committee endorses the actions proposed by the Minister and hopes that the Committee's recommendations can be progressed quickly. The Committee's recommendations are:

The Department for Regional Development should introduce fast track legislation to give the Department power of direction over the key business activities of Belfast Port. To ensure consistency, this legislation should extend to all Northern Ireland Trust Ports.
The Committee welcomes the the completion of a Memorandum of Understanding (MOU) between the Department and BHC. To ensure consistency, similar agreements should be put in place with all Northern Ireland Trust Ports.
On an annual basis the Department for Regional Development should update the Regional Development Committee on the key business activities and plans (including any planned developments, major new or renewed leases) of each of the Trust Ports for the forthcoming year.
Representation of locally elected representatives on each of the Trust Ports should be extended from the current levels to four on the BHC Board and three each on the other Trust Ports.
A representative from the Department for Regional Development should attend the Board meetings of the Trust Ports.
The Department for Regional Development should consider drawing up a "Guide to good governance" similar to the Guide issued by the Department of the Environment, Transport and the Regions (DETR) in GB. This would provide a framework clearly setting out standards of independence, openness and accountability. The guide should also specify clear procedures for ensuring that the Department for Regional Development and the Regional Development Committee are kept informed of all the key business activities of the Trust Ports.
BHC should revisit why they were set up, i.e. to serve the public interest. A clearer definition is needed of what is the public interest and the interest of stakeholders. Consultation with stakeholders should be a constant requirement.

BACKGROUND TO THE COMMITTEE'S INQUIRY

15.

For a number of years the Port of Belfast has been a widely debated issue within the public domain. Belfast Port encompasses an area of approximately 1,950 acres, of which 850 acres are used for operations directly related to the port. It has been widely recognised that much of this surplus land has significant development potential and given its central location, could play a major role in helping to regenerate Belfast. In seeking to unlock some of this potential, in 1997 the Government floated the idea of privatising Belfast Port. In May 1998, the Chancellor, Gordon Brown stated that £70 million from proceeds raised from the sale of the port could be retained in Northern Ireland for improvements to the infrastructure.

16.

During a plenary session of the New Northern Ireland Assembly on 1 February 1999 it was decided that an Ad-hoc Committee should be set up to consider the options under consideration and submit a report to the Assembly on its findings. In written evidence to the Ad-hoc Committee on 30 March 1999, BHC referred to the regeneration of the "2019" lands (those lands encompassing the Titanic Quarter area) on the same basis as other waterfront sites within the Laganside Development Corporation.

17.

After devolution on 29 November 1999 the matter was passed to the Regional Development Committee to investigate the issue further, taking account of the Belfast Harbour Commissioners' proposals and the recommendations of the Ad-hoc Committee. The Committee considered the issue and was unhappy with the key proposal of a Public Private Partnership. As a result, the Department for Regional Development produced an options paper on the future of the Port of Belfast in February 2000. After careful consideration the Committee decided to hold an Inquiry into Option D, i.e. a restructured port with extended powers.

18.

The Committee made its interim decision on the options paper on 28 June 2000 and announced that:

the retention of the Port of Belfast as a Trust Port was in the best interests of the people of Northern Ireland; and
the Committee was therefore looking favourably at Option D - the retention of the Port of Belfast as a restructured Trust Port with extended powers. This included inter alia, the undertaking of a full economic appraisal by the Department for Regional Development.

19.

The Minister subsequently presented the economic appraisal report to the Committee on 22 November 2000. The options were evaluated and the report concluded that the optimal public sector option involved forfeiture of all non-port lands and retention of reserves. This involved a Trust Port with extended commercial powers restructured through the forfeiture by Belfast Harbour Commissioners of approximately 570 acres of non-port lands to Government.

20.

On 28 February 2001 the Committee issued its response to the Minister on the economic appraisal. The Committee agreed to put down a Take Note Motion debate in the Assembly to discuss its findings into the Port of Belfast. Its main recommendations were:

the retention of Belfast Port as a Trust Port;
the restructuring of Belfast Port was considered inappropriate given the uncertainty surrounding the disposal of non-port lands;
the extension of powers of Belfast Port (as well as Londonderry and Warrenpoint) to bring it into line with other ports in Great Britain;
as an initial step, the signing of a Memorandum of Understanding with Belfast Harbour Commissioners, followed by legislation to give the Department power of direction; and
the Department to bring forward enabling legislation to allow a re-examination of the options of restructuring Belfast Port at some future date and with final approval resting with the Assembly.

21.

22.

There followed an exchange of letters as the Committee sought further clarification on a number of points surrounding the Titanic Quarter lease arrangements. During this period, a UTV "Insight" programme broadcast on 20 March 2001 made a number of allegations in relation to the deal struck between BHC and Harland and Wolff. These allegations were strongly refuted by BHC in a press statement issued on 26March 2001.

23.

On the same date, the Chairperson of the Committee issued a press statement, stating "The Committee has been seriously disturbed by the recent media disclosures relating to the Titanic Quarter."

24.

Given the uncertainty surrounding this matter, the Committee decided not to proceed with its Take Note Motion on the Port of Belfast, which was scheduled for debate on 27 March 2001. It subsequently formally announced on 3 April 2001 the setting up of an Inquiry to investigate the circ*mstances surrounding the signing of the Titanic Quarter development agreement.

Terms of Reference

25.

The Committee agreed the terms of reference at a Committee meeting on 2 April 2001. They were:

to investigate the recent lease and development agreement between Belfast Harbour Commissioners and Harland and Wolff Group plc., in relation to the Titanic Quarter and connected transactions;
to investigate the circ*mstances surrounding the allocation and variation of leases by Belfast Harbour Commissioners for both port and non-port land;
to investigate the extent to which their actions have served the public interest; and
having considered these matters, to report to the Assembly.

Structure of Inquiry

26.

The Regional Development Committee placed a public notice in all the main newspapers in Northern Ireland, advising of the Inquiry and offering interested parties an opportunity to submit evidence if they so wished. A number of possible key witnesses were also identified and asked to submit written evidence by 26 April 2001. Twenty-four written submissions were received. They are listed at Appendix 3. Representatives of DRD and BHC appeared before the Committee on Friday, 4 May 2001 to give evidence and answer Members' questions. On Friday, 11 May 2001 representatives from Harland and Wolff and Mr. Alan Reilly, legal adviser to BHC on property matters appeared before the Committee to give evidence and answer questions.

FINDINGS OF THE COMMITTEE

Introduction

27.

The Belfast Harbour Commissioners are a body corporate and were first constituted by the Belfast Harbour Act 1847. The legislation requires the Commissioners to promote the maintenance, improvement and efficient operation of the Port of Belfast. Belfast Port is a Trust Port and as such, it is autonomous and not accountable to Government. The trustees, i.e. the Belfast Harbour Commissioners, are appointed by Government and have a fiduciary responsibility to ensure that Belfast harbour is properly and effectively managed in the interests of all stakeholders, including the wider public.

Status of Belfast Harbour Commissioners

28.

Both DRD and BHC made it clear in their evidence that under the current legislation, BHC are an independent body and are under no obligation to consult DRD. DRD has no legal right to interfere or be advised of the management of the Belfast Harbour Estate or the allocation of leases. There exists, however, informal linkages which allows for an exchange of information. Indeed, BHC stated in their written evidence that they acted with total integrity, full accountability, openness and impartiality. They acknowledged that they had no obligation to consult with the Department but claimed that there have been significant ongoing discussions on issues relating to the Port of Belfast.

Public Availability of Titanic Quarter development plans

29.

BHC were able to provide evidence that the main elements of the Titanic Quarter lease arrangements between Harland and Wolff and BHC were in the public domain. During his evidence, Mr. Robin McMinnis, Director, Air and Seaports Division, Department for Regional Development confirmed that his Department was aware of the overall concept from the outset and that BHC and Harland and Wolff would be sharing investment and revenues on a fifty-fifty basis. It was known that development costs would be in the region of £30-35 million.

30.

Some elements of the new lease arrangements were not, however, in the public domain. Mr.McMinnis stated that DRD was not aware of the details of the agreement between BHC and Harland and Wolff in advance of it being concluded. DRD was not aware of the consolidation of a number of leases into one and the fact that leases would be allocated to developers on a site by site basis, for a period of 125 years or 250 years, depending on the type of development. DRD was aware that the Titanic Quarter agreement and the negotiations leading to the signing of the agreement had been classed as commercial in confidence. DRD did not express a view on the Titanic Quarter scheme, preferring to wait until the planning process begins to study what is being proposed.

Harland and Wolff's Plans for the development of Titanic Quarter

31.

After privatisation in 1989 until approximately 1995, there was no major plan to develop the area now known as Titanic Quarter. Harland and Wolff had been involved in looking at ways to develop lands not being used for shipbuilding since privatisation in 1989. Indeed, Harland and Wolff stated that they referred to the possibility of the development of the Titanic Quarter area in its annual reports from 1990 onwards. They had also discussions with Sir Richard Needham, Minister of Environment and the Economy, in the early 1990s and developed an idea, in response to a Government initiative, to establish an enterprise zone to be known as Canada Place. Planning permission was granted for the project and a lease for 125 years on the Titanic Quarter was drawn up. However the plan was shelved when the Government decided not to proceed with the enterprise zone initiative.

32.

The first concept for the Titanic Quarter area was publicly launched at the Washington Peace Conference in 1995. Proposals were developed and Harland and Wolff entered into negotiations with BHC at the end of 1998. It was at approximately this time, at an event in Queen's University organised by Harland and Wolff, that DRD first became aware of the Titanic Quarter proposal.

33.

Harland and Wolff stated that the slow progress in developing the Titanic Quarter was not related to the Government's claw-back provision included within the privatisation deal in 1989. This claw-back provision gave the Government a reducing share of any revenue generated over a 10-year period from the development of the area. Harland and Wolff entered into negotiations with BHC at the end of 1998 and concluded the agreement on 20 December 2000. Harland and Wolff argued that the terms of the claw-back provisions were that there would be a sharing of profit with Government if the land were disposed of within the ten years. They intended to develop the land, not dispose of it. Harland and Wolff subsequently provided an additional written response which accepts that the claw-back relates to development and not disposal. However, Harland and Wolff state that development during this period was not possible as the Titanic Quarter area was being used for shipbuilding and ship repair purposes up until a few months ago.

34.

Harland and Wolff explained that the urgency for completing a deal arose in the aftermath of the legal disputes with Global Marine Inc. and the subsequent financial implications. The consequences of the actions of Global Marine Inc. were that Harland and Wolff went from having a cash surplus of £60 million to debt of £90 million, putting the future of shipbuilding at Harland and Wolff in jeopardy. The agreement between Harland and Wolff and BHC allowed Fred. Olsen Energy ASA to acquire the lease of the lands of the Titanic Quarter from Harland and Wolff Group plc at a price of £46 million. This was used to clear debts and allowed Harland and Wolff to enter into negotiations for new shipbuilding contracts. Harland and Wolff stated that the shipbuilding industry in Belfast had been preserved as a result of the deal. Harland and Wolff confirmed that BHC would have had no idea of the planned restructuring in advance of the press statement from Fred. Olsen Energy ASA on 7 February 2001 announcing the details of the restructuring.

35.

With regards to the negotiations on the Titanic Quarter deal itself, Harland and Wolff stated that their aim was to obtain freehold of the Titanic Quarter land. Their fallback position was to negotiate 100% of the leasehold for an extended period of between 125 to 250 years. BHC rejected both options. The agreement concluded that the leases that Harland and Wolff held in respect of the land, some of which did not expire until 2114, should be consolidated into one lease, expiring in 2019. They also negotiated a development agreement, which would allow, subject to planning permission, the development of parts of the land. The developers would be given extended leases of between 125 and 250 years depending on the type of development. BHC and Harland and Wolff would share on a fifty-fifty basis the income deriving from the developments. It could be argued that the fact that Harland and Wolff did not achieve either of their preferred options is an indication that BHC were negotiating for the best deal in the public interest. Harland and Wolff took all of the financial risks. If planning permission is not granted they would suffer, not BHC.

Belfast Harbour Commissioners' Plans for the development of Titanic Quarter

36.

BHC have been involved in several projects relating to the development of the Harbour Estate since the publication of the Belfast Harbour Local Plan which covered the period 1990 to 2005. The plan resulted from a public consultation process. Land was set aside for conservation matters such as bird and nature reserves as well as helping BHC to identify lands available within the Harbour Estate for non-port use. In order to facilitate developments, new roads and a bridge were constructed allowing the Sydenham Business Park to be launched. Laganside Corporation was created and BHC worked closely with it. The Chief Executive of BHC is currently on the board of Laganside Corporation. Further projects were developed and completed including the construction of the weir and bridge and the Odyssey on lands which had previously been used for scrap and coal. The Clarendon development was also completed and buildings were refurbished and restored. The projects took account of the important industrial heritage of the area. These projects and others such as those developed by Laganside have completely transformed the area. The Titanic Quarter is the latest proposal. BHC argue that all of these projects demonstrate their commitment to serving the public interest although it is not conclusive from the evidence that BHC consulted widely in relation to the Titanic Quarter agreement.

37.

BHC believe that Titanic Quarter is an important development for Belfast. It had been a major objective of BHC for some time to play a leading role in the next phase of the regeneration of the waterfront lands through projects such as Titanic Quarter. They believe such projects are for the benefit of the people of Northern Ireland and their involvement in them demonstrates how they strive to best serve the public interest. BHC highlighted that the regeneration of Titanic Quarter had the potential to create 10,000 jobs and pointed to the favourable lease terms granted to the Northern Ireland Science Park Foundation to support the intellectual revolution and in turn, strengthen the Northern Ireland economy.

38.

BHC added that linkage with Laganside had been sought due mainly to the international marketability of the brand name. It was not an attempt to gain European funding, as EU grants were no longer available for projects of this nature. The linkage with Laganside could however, help attract further investment into Titanic Quarter. There was also the suggestion of extending a main feature of Laganside, i.e. a waterfront walkway to the Titanic Quarter area. Such a development could have positive benefits in helping to make the Titanic Quarter a major tourist attraction. However, the involvement of Laganside in future developments will be a matter for the Minister for Social Development to decide.

39.

BHC also made efforts to promote Titanic Quarter at an international property conference at Cannes. Belfast City Council had a stand at the conference with representatives from BHC, Laganside, Harland and Wolff and Dunloe Ewart in attendance. A brochure publicising and promoting Titanic Quarter was also produced for the conference. BHC stated that the brochure was simply a "concept brochure" to help give potential investors an idea of how the development might look. They added that no definite decisions as to what would be developed in the Titanic Quarter will be made until developers apply and planning decisions are made. BHC intend to work with Titanic Quarter Ltd. in deciding the best mix of commercial, business, residential and leisure developments for the land. Harland and Wolff have stated during their evidence, that although BHC will benefit from the development of the land, it is not a joint venture with them. They will be the tenants and BHC the landlords. Titanic Quarter Ltd. will be responsible for the development of the land.

40.

The signing of the agreement between BHC and Harland and Wolff on 20 December 2000 was the culmination of almost two years of negotiations. BHC were convinced that the Minister and the Regional Development Committee were fully aware of the proposals and that there was no need to inform them of the signing of the agreement, even though they were in negotiations with the Department in relation to the MOU. In hindsight they understand the concerns expressed and apologised to the Minister at a meeting on 22 March 2001.

41.

BHC stated they had made some projections as to the future value of the Titanic Quarter land and concluded that there was "no mountain of money to be made on the basis of those first projections". Harland and Wolff also confirmed that the land would have had little value until the lease expired in 2019. The new lease arrangement would increase potential value although they were not able to project a figure.

42.

Mr. Alan Reilly, BHC's legal adviser on property matters confirmed that the agreement consolidated a number of the Titanic Quarter leases into one, with an expiry date of 2019. It provided the opportunity for the implementation of the proposed master plan (subject to planning permission) for the development of the land, which would involve the granting of longer leases. It also provided the opportunity for a transformation of the value of the land. Mr. Reilly stated that no valuations had been carried out but agreed the value of the land had increased to the extent that valuers were able to advise Harland and Wolff to negotiate a price of £46 million with Fred. Olsen Energy ASA. Mr. Reilly said the agreement represented a tremendous step forward for BHC and Harland and Wolff.

43.

BHC said there has never been any secrecy about the Titanic Quarter proposals. They have been trying for several years to realise the significant potential of the derelict lands of the Titanic Quarter through negotiations with Harland and Wolff. The intentions and proposals in relation to Titanic Quarter were detailed in many documents and presentations produced by BHC over several years. BHC also claimed that a key factor in the amount of information that they made available was due mainly to Harland and Wolff's request for commercial confidentiality. This was stated in a letter, dated 26 March 2001 to the Chairman of the Committee, as well as at a meeting between BHC and the Minister on 22 March 2001. Harland and Wolff however, have stated that there had been no pre-determined or conscious effort by them to keep the detail of this deal secret. The Titanic Quarter deal was primarily about enabling Harland and Wolff to continue with its core business of shipbuilding. At the signing of the agreement, it was stated that a Harland and Wolff representative had casually mentioned that he did not think there was a need for a press release to which BHC concurred. Harland and Wolff, as further evidence to support their claims of not being involved in a secret deal, highlighted the statement made by Fred. Olsen Energy ASA to the Oslo Stock Exchange on 31 January 2001, which openly referred to the Titanic Quarter deal.

44.

Despite DRD's claim to the contrary, BHC are adamant that the Department was aware and accepted that leases of up to 250 years would be necessary for the development of the Titanic Quarter. Furthermore, BHC stated that they believed they had no need to inform the Minister or the Department about the detailed negotiations with Harland and Wolff for two main reasons. First, the negotiations were commercial in confidence and second, the Department was aware of the concept of the proposals being discussed including changes to leases. Indeed, BHC maintain that the leases have not changed and will not do so until developers have made their planning applications and have had them approved. As is common practice, these plans will be subject to public consultation. BHC believe that material changes to the leases at that time will be in the best interests of the public as developers will only be attracted to the area if long term leases are available. Harland and Wolff concurred with this statement although they will keep an open mind as to "cleverer" ways of maximising premiums.

Department for Regional Development's involvement in the Titanic Quarter Deal

45.

Shortly before Harland and Wolff and BHC agreed the Titanic Quarter deal, the Minister made an announcement on 21 November 2000 about land control legislation. This opened a new debate on how the public interest in non-port lands was to be served. Through a Memorandum of Understanding, to be agreed on a voluntary basis with BHC, the Department would approve decisions made by BHC on disposal of land and changes to leases. According to the Department, BHC have adopted a positive and co-operative approach to these proposals. However, in evidence to the Regional Development Committee, there has been a difference of opinion concerning the information contained within the MOU. Both BHC and DRD claimed that the exclusions listed in the MOU, including the Titanic Quarter area, were at the request of the other party. During their evidence BHC confirmed that they are content for no exclusions within the MOU.

46.

Despite this announcement on 21 November 2000 and the ongoing discussions with BHC about the MOU, the Department was unaware that the BHC board had agreed Heads of Terms for the Titanic Quarter on 28November 2000. It was also unaware that an agreement between BHC and Harland and Wolff had been signed on 20 December 2000. Indeed, the Committee was also not informed despite meetings and correspondence with BHC in the period immediately preceding the signing of the agreement.

47.

DRD was surprised to learn that the agreement had been signed but was not concerned because BHC are, as previously stated, an autonomous, statutory body, independent of government and were entitled to conduct their business without reference to the Department. DRD also believed the agreement to have been a "done deal" for some time.

48.

The Department began to be concerned, however, when details of the agreement began to emerge. The Department learned, in early January 2001, from the Industrial Development Board that an agreement had been reached between BHC and Harland and Wolff. It was not aware that the agreement involved the consolidation of all of the leases in the Titanic Quarter into one lease nor that the agreement contained options for providing developers with leases of up to 250 years.

49.

The Department became more concerned when Harland and Wolff made an announcement on 7 February 2001 that the leases of the lands in the Titanic Quarter were to transfer from Harland and Wolff to Fred. Olsen Energy ASA. Mr McMinnis, Director of Air and Sea Ports Division, contacted BHC who stated they had no knowledge of any internal restructuring of the Fred. Olsen Group and had no right or need to know.

50.

The Department did not inform the Regional Development Committee of the Titanic Quarter lease because it believed the information was in the public domain. The Department did not receive the information from BHC about the change to the leases until around 13 March 2001. There was no adequate explanation for the delay between 7 February to 13 March 2001 in receiving information from BHC. This occurred despite the fact that negotiations on the MOU were still ongoing.

51.

The "Insight" programme on 20 March 2001 raised public concern about the agreement between BHC and Harland and Wolff. The Minister met with BHC on 22 March 2001 and expressed his disappointment about the lack of information and consultation. At the meeting the Minister received an apology from BHC who said that commercial confidentiality was the reason for not giving the details of the agreement to the Department. After the meeting BHC sent the Minister a detailed submission of the events leading up to, and after, the signing of the agreement.

CONCLUSIONS

Public Availability of Titanic Quarter Development Plans

52.

The Committee acknowledges that devolution has afforded locally elected representatives increased opportunities to examine more carefully those tasked with safeguarding the public interest. In many ways this process is at an embryonic stage, whereby many are still adapting to the more direct involvement of the Government and the Assembly and the increased scrutiny and accountability which this inevitably brings to the decision making process. Indeed, this increased accountability goes to the heart of this Inquiry. There appears to still exist a perception among many within key public appointments that, given their breadth of experience, knowledge and expertise in a particular area, they are best placed to protect the public interest, without reference to the democratically elected representatives or institutions.

53.

The evidence presented to the Regional Development Committee supported BHC's contention that the main elements of the Titanic Quarter lease agreement were in the public domain. Indeed, DRD confirmed that it was aware of the overall concept from the outset and that BHC and Harland and Wolff would be sharing investment and revenues on a fifty-fifty basis. It was known that development costs would be in the region of £30-35 million. A key difficulty, however, was the fragmented and piecemeal manner in which this information was made available. It was difficult to get a complete picture as different pieces of information were being disseminated to a number of disparate groups. This remained the case, until BHC as part of its written evidence to the Regional Development Committee, provided a comprehensive list and copies of all relevant documentation relating to the development of the Titanic Quarter area.

54.

From the evidence available it appears BHC became more acutely aware of its public accountability after the UTV "Insight" programme. It sought meetings with the Minister and the Regional Development Committee, as well as providing a plethora of documentation to ensure that all relevant information was made available. Before the screening of the "Insight" programme BHC were less forthcoming in providing details of the Titanic Quarter deal, which was evident by the length of time it took them to provide DRD with details of the Titanic Quarter agreement after the Department contacted BHC on 7 February 2001. One could conclude that without this UTV programme, BHC may not have been so forthcoming in informing public representatives of its activities.

55.

A further factor contributing to the need for greater accountability is the acknowledged importance of the Titanic Quarter development to the whole of the Northern Ireland economy. The fact that the new lease arrangement represented a material change to the existing lease, with the consolidation of a number of leases into one, the possibility of long term leases to developers and the potential increase in value of the land were all key changes that would have generated considerable public interest.

Commercial Confidentiality

56.

From the evidence one could conclude that BHC went about the development and signing of this lease in a somewhat recondite manner, or at best, were supercilious in their approach towards those seeking to fully understand the implications of the Titanic Quarter development for the people of Northern Ireland. Given the informal arrangements which existed between BHC and DRD, BHC could have easily privately apprised the Minister of the key elements of the deal. This is recognised by BHC, as in their evidence they acknowledged that it was discourteous not to have informed the Minister. The Regional Development Committee believes, however, that this oversight goes beyond discourtesy and arrangements should be put in place to avoid similar repetitions in the future. As a consequence, BHC has stated that it has begun to examine how to reflect its public accountability more.

57.

There is no doubt that BHC sought to address its commercial responsibilities by ensuring that Belfast Harbour was economically viable and internationally competitive, as well as acting as an economic catalyst for Northern Ireland as a whole. To this end, BHC is to be commended for their success in making the Port of Belfast a profitable and commercially viable enterprise, contributing to the whole of the Northern Ireland economy.

58.

It could be argued however, that there appeared to be a lack of balance in the way BHC serves their public interest as opposed to their commercial interests. There is no doubt that BHC have been successful in helping to make Belfast Port a commercial success. In many ways it could be argued that this commercial interest serves the public interest. However, what is lacking in BHC's actions is the need for greater openness and transparency. It could be argued that BHC saw their sole raison d'être as seeking to serve the Port of Belfast's commercial interests. This may help explain BHC's willing acceptance of the Titanic Quarter deal being treated as commercial in confidence, apparently at the request of Harland and Wolff. Indeed, BHC have pointed this out in a letter dated 26 March 2001 to the Chairman of the Committee that this was the case and reaffirmed this position at a meeting with the Minister on 22 March 2001. However, there is some doubt as to who was advancing the need for commercial confidentiality, given that in their evidence to the Committee, Harland and Wolff were not overly concerned about confidentiality, once the lease was signed on 20 December 2000. Indeed, irrespective of whether this was the case or not, one would have assumed that BHC, in the interests of public openness and accountability, would have been pro-active in wishing to publicly announce the deal, given its potential benefits to the Northern Ireland economy.

Memorandum of Understanding

59.

Further doubts emerge about BHC's motivation when the evidence is examined in relation to the exclusions contained within the Memorandum of Understanding. DRD gave evidence in respect of the MOU to the Regional Development Committee on 2 May 2001. At that meeting DRD officials stated that the exclusions requested in the MOU were at the behest of BHC as these areas were already covered by a legal agreement with leaseholders. During his evidence to the Committee, Mr. Irwin gave contrary evidence, stating that it was DRD who had requested the exclusions. Mr. Irwin added that BHC had no difficulty including Titanic Quarter and the other excluded areas in the MOU, provided recognition was given to the existing legal contract. In reply to a question from the Deputy Chairman, Mr. Irwin confirmed that there was absolutely no reason why these areas should not be included in the MOU.

After careful examination of the evidence available, the Committee has concluded that it could not see any benefit to DRD in requesting exclusions from the MOU, when the whole purpose of the agreement was to facilitate the Department's monitoring of BHC activities, particularly in those areas of major public interest, such as the Titanic Quarter. The question remains as to why BHC might have wished to seek exclusions. Was it to protect a commercial or public interest and if so, who was most likely to gain from such exclusions?

60.

As a statutory body, a greater level of openness and accountability could have been expected with the prompt delivery of key facts to the Department for Regional Development on the Titanic Quarter deal. Indeed, BHC could easily have kept the Department informed through the informal lines of communication that existed. From the evidence provided it could be construed that BHC were over zealous in seeking to protect large areas of their commercial activity from outside influence.

Department for Regional Development's involvement in the Titanic Quarter Deal

61.

Although BHC may have fallen below expectations in its level of openness and public accountability, there may have been certain actions which could have been considered by the Department for Regional Development to obtain all the facts surrounding the Titanic Quarter deal. It has already been stated that DRD has no legal right to interfere with BHC's management of the Port of Belfast. Nevertheless, there did exist what appeared to be well tested, informal lines of communication. The evidence shows that DRD was aware of the Titanic Quarter deal in early January 2001. Given the significance of the deal and its implications to the ongoing discussions on the MOU, there may have been merit, at that time, in requesting BHC to attend a meeting with the Minister to apprise him of developments. When DRD became formally aware of the agreement on 7 February 2001, it approached BHC who appeared not to have been forthcoming with the details of the agreement, apparently with information only becoming available in piecemeal fashion. Indeed it took BHC five weeks to provide the details of the deal. In light of this, DRD would have had a strong case for requesting BHC to immediately apprise the Minister about developments.

62.

The Committee has concluded that the Department for Regional Development should have sought more details about the negotiations that were ongoing between BHC and Harland and Wolff, although it is acknowledged that the onus was on BHC to have been pro-active in ensuring that the Department was fully informed.

Appendix 1

MINUTES OF PROCEEDINGS
RELATING TO THE REPORT

WEDNESDAY 7 FEBRUARY 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A Mc Farland (Deputy Chairman)
Mr P J Bradley
Mr D Ervine
Mr W Hay
Mr P McNamee
Mr G Savage
Mr J Wells

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)

Mr McFarland took the Chair at 10.33 am.

Private Session

Inquiry into Titanic Quarter Leases

The Committee discussed recent reports that the lease of the Titanic Quarter was being sold.

Agreed:

That Belfast Harbour Commissioners be asked about the implications for Harland and Wolff core land of any sale of the lease.

[Extract]

WEDNESDAY 21 FEBRUARY 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A McFarland (Deputy Chairman)
Mr P J Bradley
Mr J Byrne
Mr D Ervine
Mr W Hay
Mr D Hussey
Mr R Hutchinson
Mr G Savage
Mr J Wells

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)

Mr Maginness took the chair at 10.37 am.

Private Session

Inquiry into Titanic Quarter Leases

The Committee discussed the reply from the Belfast Harbour Commissioners (BHC).

Agreed:

That BHC be asked to provide details of the length of the leases and how long they have to run.

[Extract]

WEDNESDAY 14 MARCH 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A McFarland (Deputy Chairman)
Mr P J Bradley
Mr J Byrne
Mr W Hay
Mr R Hutchinson
Mr G Savage

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)
Mr P Doran (Assembly Research Team)

Mr Maginness took the Chair at 10.44 am.

Private Session

Inquiry into Titanic Quarter Leases

The Committee noted the response from the Belfast Harbour Commissioners.

[Extract]

WEDNESDAY 21 MARCH 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A McFarland (Deputy Chairman)
Mr D Ervine
Mr W Hay
Mr R Hutchinson
Mr P McNamee
Mr G Savage

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)

Mr Maginness took the Chair at 10.36 am.

Private Session

Inquiry into Titanic Quarter Leases

The Committee reconsidered the reply from the Belfast Harbour Commissioners (BHC) which gave details of the leases.

Agreed:

That the Chairman will write to BHC asking for clarification on the matter.

That the Chairman will write to the Minister asking for more details about the matter.

[Extract]

MONDAY 26 MARCH 2001
ROOM 152, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A McFarland (Deputy Chairman)
Mr P J Bradley
Mr J Byrne
Mr D Ervine
Mr D Hussey
Mr G Savage

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)

Mr Maginness took the Chair at 1.56 pm.

Private Session

Inquiry into Titanic Quarter Leases

The Committee considered again the matter of the Titanic Quarter leases. They also considered correspondence received from Belfast Harbour Commissioners and the Department in relation to the matter.

Agreed:

That the Committee's Take Note motion scheduled to be debated in the Assembly on 27 March 2001 will be withdrawn.

That the Chairman will issue a press statement expressing the Committee's concerns on the matter.

That the Committee will give consideration to launching an Inquiry to establish if the public interest has been served in this instance.

[Extract]

WEDNESDAY 28 MARCH 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A McFarland (Deputy Chairman)
Mr P J Bradley
Mr J Byrne
Mr D Ervine
Mr R Hutchinson
Mr P McNamee
Mr G Savage
Mr J Wells

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)

Mr Maginness took the Chair at 10.47 am.

Private Session

Inquiry into Titanic Quarter Leases

The Committee considered further the matter of the Titanic Quarter leases.

Agreed:

That the Committee would hold an Inquiry into the matter.

[Extract]

MONDAY 2 APRIL 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A McFarland (Deputy Chairman)
Mr P J Bradley
Mr D Ervine
Mr W Hay
Mr R Hutchinson
Mr P McNamee
Mr G Savage
Mr J Wells

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)

Mr Maginness took the Chair at 4.10 pm.

Private Session

Inquiry into Titanic Quarter Leases

The Committee discussed the Inquiry into the Titanic Quarter leases.

Agreed:

1. The Terms of Reference for the Inquiry.

2. The press notice

3. The public notice

4. The list of interested groups

5. The proposed timetable including the first evidence session on Friday, 4 May 2001.

The Committee discussed the request for a meeting from Belfast Harbour Commissioners (BHC) about the matter.

Agreed:

That it would be inappropriate to meet with BHC at this time.

[Extract]

WEDNESDAY 25 APRIL 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A McFarland (Deputy Chairman)
Mr P J Bradley
Mr D Ervine
Mr P McNamee
Mr J Wells

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)

Mr Maginness took the Chair at 10.49 am.

Private Session

Inquiry into Titanic Quarter Leases

The Committee discussed the way forward with the Inquiry.

Agreed:

That Committee staff will prepare papers for discussion by the Committee at the next meeting in advance of the first evidence sessions on 4 May 2001.

[Extract]

WEDNESDAY 2 MAY 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A McFarland (Deputy Chairman)
Mr P J Bradley
Mr J Byrne
Mr D Ervine
Mr W Hay
Mr R Hutchinson
Mr G Savage

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)

Mr Maginness took the Chair at 10.40 am.

Private Session

Memorandum of Understanding

At 10.51 am the Committee received a briefing from:

Mr Robin McMinnis Air and Seaports Division
Mrs Barbara Faloona Air and Seaports Division

on the Committee's concerns about the draft Memorandum of Understanding (MOU) between the Department and Belfast Harbour Commissioners.

Agreed:

The officials will take on board the concerns in a revised draft of the MOU. The Department will send the revised text to the Committee as soon as possible.

The Chairman thanked the officials for their attendance and they left the meeting at 11.53 am.

Inquiry into Titanic Quarter Leases

The Committee discussed arrangements for the forthcoming evidence sessions. Members expressed gratitude for the work of the Committee staff in preparing the papers for the sessions.

Agreed:

The evidence sessions on 4 May 2001 will be held in the Senate Chamber.

Representatives of Harland and Wolff will be asked to attend an evidence session on 11 May 2001.

That the offer from Nicholas Rose, Chartered Surveyor and Property Consultant from Gerald Eve, to give advice will not be taken up at this time but may be considered in the future.

[Extract]

WEDNESDAY 9 MAY 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A McFarland (Deputy Chairman)
Mr J Byrne
Mr D Ervine
Mr W Hay
Mr D Hussey
Mr P McNamee
Mr J Wells

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)

Mr Maginness took the Chair at 10.42 am.

Private Session

Inquiry into Titanic Quarter Leases

The next evidence session will be held on Friday, 11 May 2001 when representatives of Harland and Wolff Group PLC and Fred. Olsen Energy ASA will give evidence.

Agreed:

That Mr Alan Reilly, Carson McDowell solicitors, who acts for Belfast Harbour Commissioners, will also be asked to give evidence on 11 May 2001.

[Extract]

WEDNESDAY 20 JUNE 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A McFarland (Deputy Chairman)
Mr PJ Bradley
Mr J Byrne
Mr W Hay
Mr D Hussey
Mr R Hutchinson
Mr P McNamee
Mr G Savage

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)

Mr Maginness took the chair at 10.45 am.

Private Session

Inquiry into Titanic Quarter Leases

The Committee considered a draft report of the Inquiry. It also considered correspondence from Belfast Harbour Commissioners relating to the Inquiry.

Agreed:

That the Members will consider amendments to the draft report and give them to the Clerk.

That the Clerk will check the procedures and timescales for printing, publishing and debating the report.

The Committee considered correspondence from Belfast Harbour Commissioners and from the Department in relation to amendments to the evidence that they had given as part of the Inquiry.

Agreed:

That the correspondence detailing the amendments will be included in the report.

[Extract]

WEDNESDAY 27 JUNE 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A McFarland (Deputy Chairman)
Mr PJ Bradley
Mr J Byrne
Mr D Ervine
Mr D Hussey
Mr R Hutchinson
Mr P McNamee
Mr J Wells

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)

Mr Maginness took the chair at 10.12 am.

Private Session

Inquiry into Titanic Quarter Leases

The Committee considered a revised draft report on the Inquiry. No further comments were received on the draft report.

Agreed:

That the report be sent to the Printed Paper Office. The Clerk will arrange for a proof copy of the report to be ready for the Committee to sign off at next week's meeting.

To publish the report at the earliest opportunity.

The debate on the report would be held after the summer recess.

The Committee considered correspondence from Belfast Harbour Commissioners wishing to clarify some of the evidence that they had given as part of the Inquiry.

Agreed:

That comments from Harland and Wolff and the Department on the correspondence should be sought.

The Committee considered whether the written submissions on the Inquiry should be included in the report.

Agreed:

That the submissions should be listed in the report, but not included in it. They will be placed in the Library.

[Extract]

WEDNESDAY 4 JULY 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A McFarland (Deputy Chairman)
Mr PJ Bradley
Mr J Byrne
Mr D Ervine
Mr W Hay
Mr D Hussey
Mr P McNamee
Mr G Savage

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)

Mr McFarland took the chair at 10.34 am.

Public Session

Inquiry into Titanic Quarter Leases

The Committee considered the draft report on the Inquiry.

Agreed:

That the Deputy Chairman would speak to the Clerk regarding some amendments to the report.

The contents of a press release to issue on publication of the report were discussed and agreed.

[Extract]

WEDNESDAY 5 SEPTEMBER 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr A Maginness (Chairman)
Mr A McFarland (Deputy Chairman)
Mr PJ Bradley
Mr J Byrne
Mr W Hay
Mr R Hutchinson
Mr G Savage

In Attendance: Mr L Barr (Committee Clerk)
Mr S Fay (Assistant Committee Clerk)
Mr N Currie (Executive Support)
Mrs S Young (Administrative Support)
Miss J Massey (Administrative Support)
Mr H Lowe (Assembly Research Team)

Mr McFarland took the chair at 10.33 am.

Private Session

Inquiry into Titanic Quarter Leases

The Committee considered a draft report.

Agreed:

The Committee agreed the contents of the report and the motion to be tabled in the Assembly.

The Committee thanked the Committee staff for their work in preparing the report.

[Extract]

MINUTES OF EVIDENCE

Friday 4 May 2001

Members present:Mr A Maginness (Chairperson)
Mr McFarland (Deputy Chairperson)
Mr Bradley
Mr Byrne
Mr Ervine
Mr Hay
Mr R Hutchinson
Mr McNamee
Mr Wells

Witnesses:Mr R McMinnis ) Department for Regional
Mrs B Faloona ) Development

The Chairperson:First, I will recap on the terms of reference of the inquiry, which are as follows: to investigate the recent lease and development agreement between the Belfast Harbour Commissioners (BHC) and Harland and Wolff Group plc in relation to Titanic Quarter and connected transactions; to investigate the circ*mstances surrounding the allocation and the variation of leases by BHC for both port and non-port land; and to investigate the extent to which their actions have served the public interest. Having considered those matters, the Committee is to report to the Assembly.

I stress that this is an inquiry, not a trial or a witch-hunt. Its aim is to establish the facts surrounding the recent lease and development agreement. We hope that we can, in a considered and reasonable fashion, elicit those facts and draw reasonable conclusions from them.

Our minds are open. We have not made any premature decisions. We want to hear the facts and we are pleased with the response that we have been given. We have received 23 submissions and are pleased with the co-operation given by BHC and Harland and Wolff. We look forward to a good working session this morning. There will be another session this afternoon, at which representatives of BHC will give evidence.

A lead witness will give evidence to the inquiry and will answer all the questions on behalf of the organisation. However, they can consult with their colleagues as appropriate. Flexibility will be applied during our hearing.

I am pleased that the Department officials, Mr Robin McMinnis and Mrs Barbara Faloona, are here. Do you wish to make opening remarks?

Mr McMinnis:Thank you for affording us the opportunity to participate in the inquiry. I hardly need to introduce you to Mrs Faloona, as we have already been here several times this week.

I note the terms of reference for the inquiry. As the Minister explained in a recent letter to the Committee, the Department's knowledge of the detail of the leases et cetera in the harbour estate is quite limited. With one or two exceptions, we do not have access to BHC's lease agreements nor would we expect to. However, we are keen to assist the Committee in any way that we can. Mr Campbell made that clear in his letter to you.

I would like to set the record straight on one or two points. First, contrary to some media reports, the Department has never indicated that it had no knowledge of the Titanic Quarter deal. We merely said that we were not aware of the details of the agreement in advance of its being concluded by BHC and Harland and Wolff on 20 December 2000. We were aware of the overall concept from the outset, and the fact that BHC and Harland and Wolff were, for example, sharing the cost of the investment and its potential financial benefits on a fifty-fifty basis. In support of that I would like to submit to the Committee a record of our press officer's conversation with the television reporter. That, in turn, records our press officer's conversation with me.

Secondly, the term "secret" has been used by some about this agreement. BHC have always indicated to us that the agreement with Harland and Wolff was "commercial in confidence".

10.

It was never classified as secret by anyone with whom I had any discussions.

11.

Third, since last year, BHC have been describing the Titanic Quarter agreement with Harland and Wolff as a "done deal" in their discussions with us - in much the same way as they would have talked about any of the existing agreements in other parts of the estate. That is reflected in the papers that you have seen.

12.

Finally, as the law stands, the Department has no locus in the matter of BHC's management of the harbour estate, the allocation of leases or anything else. The Department has never, at any stage, expressed a view on the Titanic Quarter scheme. We would prefer to wait until the development proposals have been published and the planning application processed by the Department of the Environment. That is all I wish to say at present, and I am grateful for the opportunity to do so.

13.

The Chairperson:How long have you held your current post in the Department, dealing with ports and airports?

14.

Mr McMinnis:I have been in the post about three years although I also served in the harbour area about 15 years ago.

15.

The Chairperson:Did you spend those three years in the Department for Regional Development or was some of it spent at its predecessor, the former Department of the Environment?

16.

Mr McMinnis:Yes.

17.

The Chairperson:Therefore, would you have dealt with ports during Lord Dubs's time and during the port's privatisation et cetera?

18.

Mr McMinnis:Yes.

19.

The Chairperson:So have you been working with the port for that period almost exclusively?

20.

Mr McMinnis:Yes.

21.

The Chairperson:This might not fall within your area of knowledge, but can you assist the inquiry on what happened prior to 1995? Perhaps I could preface that by saying that Harland and Wolff indicated that a proposal for the creation of the Science Park was internationally launched in May 1995 at the Washington Peace Conference. That was the first major proposal for the Titanic Quarter. Prior to that, is it correct to say that from privatisation in 1989 until 1995 there was no major plan to develop Titanic Quarter?

22.

Mr McMinnis:I am certainly not aware of any. I should make clear that I first became aware of the Titanic Quarter proposal when I attended an event at Queen's University, which was staged by Harland and Wolff sometime in late 1998.

23.

The Chairperson:You were not aware of the Washington Peace Conference?

24.

Mr McMinnis:No, I was not.

25.

The Chairperson:Is it fair to say that you did not know about any major proposal?

26.

Mr McMinnis:That is my understanding of the situation.

27.

The Chairperson:Is it fair to say that from the late 1990s onwards interest developed in plans for the Titanic Quarter?

28.

Mr McMinnis:Yes, that is fair to say.

29.

The Chairperson:As you have said before, you dealt with proposals for privatisation of the port. Therefore, you would have been aware of the general plans that BHC would have had for the development of both the port and non-port lands. Is that correct?

30.

Mr McMinnis:Yes.

31.

The Chairperson:Can you indicate to the Committee what BHC wanted to do with the non-port land?

32.

Mr McMinnis:I will preface that by saying that there is a convention within Government - as you may have heard before - that a civil servant is not at liberty to discuss the affairs of a former Administration, regardless of whether the Government are Conservative or Labour. We are not at liberty to discuss advice provided to the former Administration, and papers et cetera are not available to any subsequent Administration. However, I am aware that some of the papers are in the public domain in the sense that they are with the Committee. Therefore, I feel freer to discuss those papers than I might ordinarily.

33.

As regards the period that you are referring to, it is common knowledge that the Government of the time were extremely keen to progress with the privatisation of the Port of Belfast. You are aware that the Chancellor of the Exchequer came here and announced that Northern Ireland would benefit from the proceeds, by being allowed to retain at least £70 million pounds of them.

34.

Chairman, you were a member of the Ad Hoc Committee that looked into the proposed privatisation of the Port of Belfast. The early papers that I have seen in your folder were issued at a time when the Government were trying to advance privatisation. Having taken account of the Ad Hoc Committee's views, we were engaged in discussion with BHC. That would have entailed the transfer of the title of the entire harbour estate to Government so that we could satisfy one criterion that the Committee had identified - namely that ownership of those lands should remain in the public sector. Over several months, we explored with BHC the possibility of such a transfer being put into effect, with a number of leases being created to distinguish between the port lands and the non-port lands. The leases and so forth are explored in some of the papers that you have seen. However, nothing came of that because privatisation did not proceed.

35.

The Chairperson:Following the failure of the development of a public-private partnership (PPP) option - I am not quite sure when that was - and perhaps coterminous with that was the economic appraisal of the future of the port of Belfast. At that stage it was decided not to proceed with the PPP option, but with an option of extending powers and controlling to some extent the non-port land. Various ideas are floated in relation to that. Is that correct?

36.

Mr McMinnis:Yes. Our collective difficulty in saying when the decision was taken is because several announcements have been made over perhaps the last nine months, almost as far back as the Committee's own announcement, when it indicated a preference for a particular approach. If I remember correctly, BHC made a statement saying that they had decided not to proceed with the PPP and that they were taking it off the table. However, they said that their preferred approach was to continue as a trust port with extended powers. Since then statements have been made by my Minister in the Assembly and to the Committee. He has made other statements in the context of greater public accountability and the like.

37.

The Chairperson:On 28 September 2000, BHC withdrew the PPP as their preferred option for the future of the port. Following that, on 2 November, PricewaterhouseCooper's report was published and there were further discussions. Meetings took place throughout November between the Minister and BHC. On 21 November 2000, Minister Campbell announced proposed land control legislation in respect of the Northern Ireland trust ports, which included Belfast port. Is it correct that that represented a new debate on how the public interest was to be served over the non-port lands?

38.

Mr McMinnis:That is absolutely correct.

39.

The Chairperson:Did that represent a departure - a new turn - in Department policy?

40.

Mr McMinnis:That is correct. It was during that debate that the Minister first announced that he was minded to develop with BHC, on a voluntary basis, a memorandum of understanding. Thereafter that was pursued by us as officials.

41.

The Chairperson:Therefore, around late November 2000 the idea of land control and the memorandum of understanding began to develop. That would have been discussed with BHC, and would also have been made known to the Committee for Regional Development.

42.

Mr McMinnis:Yes.

43.

The Chairperson:What was BHC's response to that idea?

44.

Mr McMinnis:The response was both positive and co-operative. We recognised that it was in the interests of both organisations to work together to put such an agreement in place. It was new, novel and had not been attempted anywhere else before. They had the knowledge of the harbour estate; we had a duty to safeguard the public interest. Our task was to weld those two objectives together in a document that was manageable, readily understandable and would instil confidence.

45.

The Chairperson:There was an earlier idea of taking all or some land from BHC by way of forfeiture. To some extent, was the idea of a voluntary agreement with BHC a response by the commissioners to that forfeiture proposal?

46.

Mr McMinnis:Yes. I do not recall where the idea originally came from. It started in one parcel of land in the harbour estate - it might have even been in relation to D5 - but it rapidly developed, initially to non-port land and eventually, at our suggestion, to the whole of the harbour estate.

47.

The Chairperson:In any event we can be sure that in late November and early December 2000 that idea was being discussed for the voluntary agreement and that the idea of forfeiture was increasingly becoming less of a serious proposal.

48.

Mr McMinnis:At that stage we were in discussion with this Committee. Advice had been obtained by the Committee from an economist on the PricewaterhouseCooper report, and there was an element of discussion on the various parcels of land and the implications for BHC's revenues et cetera. That debate extended into 2001, and it was in February or thereabouts that we began to realise that it could go on even longer. I believe that the Minister came and explained to you the concern that if the debate ran on unduly it could damage the port, businesses in the port and port users. We concluded - and the Committee concurred - that it would be sensible to proceed on the basis that BHC would remain as a trust port, that we would try to extend their powers and at the same time try to improve public accountability. We recognised that we could review the PPP at some stage in the future, However, because we did not have all of the information, which this Committee tried very hard to obtain, we could not get complete clarity, for example, on the public expenditure and tax implications. We therefore decided not to push through any restructuring at that time, but to return to it later when we had all the information.

49.

The Chairperson:In late November and December, what was the Department's knowledge of the development plan for Titanic Quarter?

50.

Mr McMinnis:Our understanding of the Titanic Quarter arrangement was that it was "a done deal". The elements of the deal were that BHC and Harland and Wolff were to share the cost of the infrastructure, which we knew was roughly £30-35 million, and that they would share the benefits, which were not quantified. We knew that the development plan was to be devised by them jointly. That is about the extent of our knowledge at that stage. Any information we had was recorded in the economic appraisal report that we gave to the Committee.

51.

The Chairperson:Were you aware that on 28 November 2000 the BHC board agreed the final points of detail of Titanic Quarter heads of terms?

52.

Mr McMinnis:No, I was not and I would not expect to have been aware, because the Department is not entitled to receive minutes of any meeting or the agendas in advance.

53.

The Chairperson:I can understand that you are not entitled to receive those papers, but would the Department not have been interested in knowing that the board agreed the final detail on heads of terms?

54.

Mr McMinnis:We are interested in anything that happens in the harbour estate. As far as we were concerned that was the outline of the deal. We did not know anything about the timing or the authorisation of the signing of it.

55.

The Chairperson:You had no detailed information from the board to the Department in relation to that?

56.

Mr McMinnis:No, but the board was under no particular statutory obligation to share such information with us and we were under no statutory obligation to seek it.

57.

The Chairperson:The discussion on the memorandum of understanding and the voluntary agreement would have meant that any material change in leases or any major disposal of land had to serve the public interest - the whole purpose of the memorandum of understanding was to make sure of that. Given that fact, are you not slightly surprised that you were not aware of BHC's imminent agreement with Harland and Wolff?

58.

Mr McMinnis:I was surprised to learn that the formalities about leases had been finalised and signed on 20 December 2000. For some time prior to that I had believed that that was already the case. At that time, and in those circ*mstances, we were not as concerned about Titanic Quarter as we have been since. Since then there has been restructuring in Harland and Wolff, which has attracted a lot of public attention and has been the subject of a television programme. After the Assembly debate on 28 November, I met with the harbour commissioners and shared with them a framework for the memorandum of understanding. During December we developed a draft, and the record will show that I sent the first draft to them around Christmas for their consideration. They would not have received it until after Christmas or early January.

59.

291.

The Chairperson:Was that the sole explanation?

292.

Mr McMinnis:Yes. They were mindful of Harland and Wolff's concerns about commercially sensitive information.

293.

The Chairperson:Thank you.

MINUTES OF EVIDENCE

Friday 4 May 2001

Members present:Mr A Maginness (Chairperson)
Mr McFarland (Deputy Chairperson)
Mr R Hutchinson
Mr Byrne
Mr Bradley
Mr Hay
Mr McNamee
Mr Wells

Witnesses:Mr R McMaster )
Mr F Cushnahan ) BHC
Mr G Irwin )

294.

Mr Hay:For public interest and for this record I declare that I am a member of the board, and sit as a commissioner, of Londonderry Port and Harbour.

295.

The Chairperson:In any case, that information is in the official Assembly register of Members' interests and in the register attached to this Regional Development Committee.

296.

This inquiry was set up to investigate the recent lease and development agreement between Belfast Harbour Commissioners (BHC) and the Harland and Wolff Group plc in relation to Titanic Quarter and connected transactions; to investigate the circ*mstances surrounding the allocation and variation of leases by BHC for both port and non-port land; and to explore the extent to which their actions have served the public interest. Having considered these matters, the Committee will report to the Assembly.

297.

One lead witness should answer all the questions on behalf of the party giving evidence before the Committee. That lead witness can consult with colleagues either beside or behind him. Depending on the direction of questioning, the Chair has flexibility in letting other people contribute. If witnesses other than the lead witness are to come in, I prefer that to be done sequentially rather than simultaneously, because it leads to problems in recording and in following the flow of discussion.

298.

I welcome you to the meeting and thank you for the documentation that you have presented to us. It has been very useful, particularly the chronology. Obviously a lot of work went into preparing these submissions, and we are grateful for that.

299.

Mr Cushnahan:I am the lead witness. Thank you, Chairman, for those introductory remarks. Allow me to introduce Gordon Irwin, chief executive and Richard McMaster who is the estate manager. In addition we are accompanied by Gordon Mawhinney, the board's property advisor, and Alan Reilly who is the board's legal advisor on property matters. My fellow board members are also here today to view the proceedings.

300.

On behalf of my fellow commissioners and the management of the Port of Belfast, we welcome this opportunity to clarify any concerns that you may have and to talk about our stewardship of the port in the best interests of everyone in Northern Ireland.

301.

It is important to record that, as public appointees, we have been entrusted with the stewardship of a great asset and we take our responsibilities seriously. We each view our appointment as one of public service, and the make-up of the board reflects considerable experience from both the corporate and public sectors. We are all committed to using our expertise to ensure that Belfast Port is the best-run port in Northern Ireland, if not in the whole of Ireland.

302.

We were appointed to use our relevant expertise to deliver what we consider to be best value; to ensure best practice; to avail from the best advice and to maintain the best service. We are here today as stewards of a well-run, efficient and profitable port and port estate. The Port of Belfast can economically compete against the ports in the Republic of Ireland and the rest of the United Kingdom. We have secured our competitive advantage by being able to invest, particularly in our infrastructure. We have creatively facilitated the regeneration of the waterfront area, through careful management of the lands entrusted to us, by working with various partner organisations. These things could not have happened by accident. A combination of sound judgement, clear vision and first-class management has made the port and its environs what they are today.

303.

In all our dealings as commissioners we act with total integrity, full accountability, openness and impartiality. We are guided at all times by the overall best interest of our users and all of the stakeholders in Northern Ireland.

304.

We are acutely aware of why we are here today. The tenor and content of the recent Ulster Television 'Insight' programme offended and disappointed the board and management of the Port of Belfast. More importantly, it led to misunderstanding and misinformation. The public interest which you protect, and we serve, deserves factual and accurate information, and we shall provide that to appropriate sources such as the Members gathered here today.

305.

The commissioners are genuinely grateful for the opportunity to focus in greater detail on all of the key issues and challenges of managing a public asset today, and on the ways in which the stewardship of the resource can be improved. I shall begin by addressing the issues raised by the recent press speculation and put forward the facts to the Committee in a clear and concise way.

306.

Titanic Quarter is an important development for Belfast. For some time it has been a major objective of the BHC to play a lead role in the next phase of the regeneration of the waterfront lands. The economic, environmental and social success of the Odyssey and other Laganside initiatives increase the importance of maximising the potential of other surrounding waterfront lands. To that end, the BHC have worked diligently and openly to bring about the conditions whereby the Northern Ireland public can benefit from the next stage of Belfast regeneration, particularly through projects such as the Titanic Quarter and the Northern Ireland Science Park.

307.

I wish to emphasis that there has never been any secrecy about this. I hope that our objectives are shared by many of the people here today. For several years the BHC have been trying to decide how best to unlock the immense potential of those derelict lands by reviewing arrangements with their leaseholder - Harland and Wolff.

308.

I wish to dispel any misconceptions that material benefit or personal gain have arisen for individuals on the board or in the management team from any transaction initiated by the BHC. That suggestion is misleading and disingenuous to the integrity of all those concerned.

309.

We have provided you with a detailed and step-by-step guide to the chain of events that led to the development of the Titanic Quarter.

310.

The chronology submitted with regard to the Titanic Quarter is factual and complete. We are prepared to take questions on that process and on the decisions we made where the matters concerned are within our knowledge. We hope that you will recognise that decisions were made under the governance of all trust boards and for the greater good in the long term.

311.

We hope to account fully for our own stewardship and to demonstrate external validation of our decision- making by highlighting that the best professional advice has been available to us. We hope to show you that it is misleading and erroneous to conclude that the 2019 non-core leases have been directly transferred to Fred Olsen Energy with extended lease terms. Finally, although I am happy to field questions as the lead witness, I hope you will accept that the technical nature of certain aspects of the hearing means that I shall have to defer to my colleagues in order to make matters totally clear.

312.

Mr McFarland:I wish to explore the history and make-up of the board, and then to move on to the development of the harbour estate. This should set the scene; the issue might make more sense when put into context.

313.

I understand that the members of the BHC board are appointed by the Department for Regional Development. Do they have a responsibility to the Department? Does the remit of the board include keeping the Department informed? Do you have any formal links with the Department?

314.

This morning we heard that there is no such requirement. If you can, please speak about how things worked during the time of direct rule, before the formation of the new Departments, and how things work now because that will give Members a feel for how the situation has evolved.

315.

Mr Cushnahan:Mr McFarland is correct to say that the appointments to BHC board fall within the remit of the Government. The manner in which those appointments are made is probably well known to the Committee. It is done through an open, transparent mechanism. The people who believe that they can best serve the public interest may apply, and following an evaluation process and a Government interview, appointments are made. Before this open system was set up, I believe that the appointments were made by the Government.

316.

Each person is appointed in order to bring a certain skill to the board, and I made reference to that in my opening statement. There are people on the board who have very strong commercial and corporate skills, while others have a lot of experience of the public sector. The combination of those skills is applied to the fulfilment of the port's fiduciary obligations. Those obligations are critical to the sustainability and profitability of the port. The public interest is a significant, parallel issue. After all, we have been appointed by Government and it follows that we should apply our best endeavours to that end also.

317.

Allow me to move to the extent of dialogue, debate and consultation with Government. In my experience as a board member for eight years, the board, though appointed by Government, is not directly under obligation to engage with Government. Nevertheless, in practice there has been significant ongoing debate with the Government and its Ministers on the issues regarding the port. That has always been the case. In practice it does happen, and never more so than in the matters that we shall be discussing here today.

318.

Mr McFarland:Can you tell me when the system changed from direct appointment of board members by Government to the current mechanism? In what year did that change occur?

319.

How often does the board meet? Is it your opinion that this is a keen board where every member turns up for every meeting, such is their enthusiasm for looking after the harbour? How many members, on average, attend meetings? The reason I ask this is that one's experience of Committees is that you rarely get everyone fully committed.

320.

Mr Cushnahan:In answer to the first question, I cannot say with great certainty when the new process of transparency came in. At a guess, it has been in place for the last two years.

321.

Meetings of the board of the Port of Belfast have been very well attended. We keep records of attendance; it averages at least 90%. Indeed, in most meetings it would be 100%.

322.

The board meets a minimum of 12 times a year. As you would appreciate, other meetings are scheduled as required, and I pay compliment and testimony to my board. Since 1997, we have been engaged in deciding the future constitution of the port. This board has put a tremendous amount of work and effort into that process. The result has been that, on many occasions, we have had to convene the board at short notice for meetings which assist the process. The board has never failed in that duty. Board members have always acted with integrity in their work. They are cognisant of their fiduciary obligations and they always take the public interest into consideration.

323.

I can best demonstrate that by describing the issue of the future position of the port. The Committee may remember that we had originally decided it was to be a Public-Private Partnership (PPP). For example, when we discovered that golden shares were no longer the means by which the port could be best protected, we arrived at a decision which would be in the public interest. In other words we decided that this port could not survive in an environment where it could be open to a predator. That would not be in the best interests of Northern Ireland. That is only one small example of the board's evaluation and judgement.

324.

Mr McFarland:I should like to take a brief canter through the development of the Harbour Estate from the time it was privatised. My understanding is that it was Government-owned; by what was then the Department of Commerce. In about 1989 it was decided to privatise Harland and Wolff, and that went ahead. There then seemed to be a fallow period of development before the issue of privatisation - the PPP system - for the ports arose in about 1995 because of government policy.

325.

The estate development began about that time. I am not clear about this point and that is why I am asking you. How did D5, the Titanic Quarter and the science park come about? I am trying to get a feel about where those ideas came from in relation to the privatisation of Harland and Wolff. Was the initiative steered by BHC or did Belfast City Council have a part to play?

326.

I wish to know how the development of River Lagan and the Laganside concept came about. My central theme is the urban regeneration of Belfast and its importance to Northern Ireland. I should like you to give us some of the background to that.

327.

Mr Cushnahan:Board responsibility has always been to ensure that the port assets - including the human aspect and the balance sheet - are utilised as well as possible. The viability of the port impacts on the economy. If assets were under-utilised or were not being used in the best interests of the port and for the urban regeneration of the port environs, we should have asked our chief executive to initiate progress on each asset. I hasten to add that we did not have to do that.

328.

Each year, Mr Irwin presents a plan to the board, which demonstrates how far he is going to take each stage.

329.

Mr Irwin:The critical moment came with the Belfast urban area plan (BUAP), which had a daughter plan - the Belfast harbour local plan (BHLP). Both plans, and their adoption statements, derived from a public consultation process.

330.

All interested parties were involved in the creation of those plans and in the public debate. Within the BHLP was an accommodation of conservation, and this led to the bird and nature reserves on the County Down side. It was a big issue; it established which pieces of land would go to conservation, and what land would be reserved for port activities. By deduction we were left with the lands which would be available for non-port use. Those are now given the market names D5 and Sydenham Business Park.

331.

The BHLP stated that we could not do anything with those lands until a new bridge and road system were built. That system also had to go through the planning approval process. In 1994 the new bridge was constructed at Tillysburn, giving access to the lands and enabling them to be developed.

332.

Sydenham Business Park was launched and infrastructuring was carried out. It went on the market following a series of marketing campaigns.

333.

The initial view on D5 was that BHC should consult with the Industrial Development Board (IDB). Records from the Planning Appeals Commission and the public inquiry into D5 show that IDB did not have an interest in the D5 lands. Therefore the lead inward- investment agency was not going to play an active role. The BHC was left to carry out its fiduciary duties and find other ways and means of developing the land.

334.

Having spent considerable sums of money on creating access via Tillysburn Road and bridge the outcome is the protracted D5 experience which has gone through the public planning process, but remains unresolved five years after planning was sought. Therefore the land still lies fallow awaiting development.

335.

The other main initiative was the creation of the Laganside Corporation. In their capacity as main landowner in the designated area the BHC entered into full consultation with the Government, the city council and the DOE about a fully signed-up partnership agreement. BHC said that it would take on board the relocation of port activity because the asset in question was not, as has often been stated, derelict port land. It was active port land. There were ferry services, coal trades and scrap trades operating very close to the Queens Bridge.

336.

BHC recognised the vision of Laganside Corporation and embarked upon its projects, asking for a seat on its board to ensure integration and links between the two organisations. The first member to sit on the board of Laganside Corporation was the BHC chairman, Dawson Moreland, who passed the position on to me.

337.

From Laganside Corporation came the relocation of the scrap trade, enabling the weir and bridge to be built. In 1994 the BHC recognised the point of view of the Laganside Corporation that if anything was going to happen on the County Down side, the coal trade had to be removed. Nobody was going to come there if coal dust was going to permeate both their development and their buildings.

338.

We pushed that through. Then, in co-operation with Belfast City Council, Laganside, and us, the Laganside Landowners' Association was launched and we jointly marketed our land to attract a millennium landmark project. The end result is the Odyssey on the former coal trade lands.

339.

We have put it on record that the administration of 23 acres of valuable waterside land was transacted with a public interest aspect. It was also recognised by the harbour board that this should be a catalytic development for the rest of the waterfront land, given that since 1989 very little activity had taken place on the Harland and Wolff lands other than round the paint hall.

340.

When travelling from the County Antrim direction to the harbour office the Clarendon development is very obvious. The environs of the harbour office have changed completely. The first thing that BHC had to do was relocate some shipping services and port activities. More importantly, the harbour workshops were located adjacent to the Clarendon dry docks. Therefore, BHC had to relocate the harbour workshops to create the land for what is now the Clarendon development. In addition, we completely refurbished the building between the two dry docks. We have just completed the refurbishment of the dry docks to full working order. They were constructed in 1812 and have an important industrial heritage. The building in which Laganside Corporation resides was restored by BHC and Laganside is its first tenant. Therefore BHC attracted Laganside to the office that became its headquarters.

341.

I have described the land developments as best I can. I have tried to demonstrate the linkages with other parties. There has been a very strong linkage with Laganside through working with their executive, working together on the development areas and participation at board level.

342.

Mr McFarland:I shall move on to the science park and the Titanic Quarter, which is obviously our focus of interest. I shall leave the discussion of leases to my colleagues.

343.

I wish to discuss several aspects of the development of Titanic Quarter. It appears that Laganside Corporation has been invited to join the development group for it. It has been suggested that it bring access to European money that will build the infrastructure for Titanic Quarter at no cost to you or Harland and Wolff. Is that the case? I understand that the chief executive sits on both boards.

344.

The sale of the Titanic Quarter was important because of the revenue it generated, which is presumably the 50% that BHC will get out of the deal. It was also critical for onward revenue streams and development of the port. In the endless and detailed discussions on PPP between you and the Committee, the land bank was critical to your keeping the port running. At that stage, the revenue from Titanic Quarter was not included in the key revenue streams. However, in some of the documentation we have received recently, the revenue from Titanic Quarter is now earmarked as critical to the port's success.

345.

Officials from the Department gave evidence this morning to the effect that they knew nothing about the famous appearance at Cannes. We also knew nothing of it. I only found out when a copy of Harland and Wolff's extremely smart brochure was given to everyone. It stated in detail what was being put on the Titanic site; it invited speculators from the far side of the world, and made it clear that Belfast was the place to be for anyone who wished to make some money. That certainly came as a surprise to the Department and to the Committee. Can you explain how Dunloe Ewart happened to be marketing Titanic Quarter in Cannes with the City Council, Laganside Corporation, Harland and Wolff and you?

346.

Mr Cushnahan:I am happy to deal generally with the policy of the board on cross-subsidy matters. However, I shall defer to Mr Irwin, who can perhaps address the specific issues.

347.

Mr Irwin:The first question was about the extension of Laganside's designated area. It is fair to say that both BHC and Harland and Wolff considered that to be in the interests of Titanic Quarter. In arriving at that conclusion, we were aware that the name Laganside is a very well known brand name in Europe and further afield, particularly in America. Potential investors understand what Laganside means in Belfast. It stands for a very successful waterfront regeneration scheme in a major city.

348.

The second point was that over the past ten to twelve years, the staff of Laganside have built up an expertise that could facilitate any landowner. We have worked with them in this partnership as a landowner in other parts of Laganside, particularly Clarendon. They brought an added dimension and added skills to the process.

349.

Thirdly, given that they are set up to regenerate the waterfront associated with the river Lagan, it seemed a logical step to ask Laganside to join up now that this land was moving in to that development sphere.

350.

You asked whether the Titanic Quarter development would get grant. I believe that on that front, things have moved on. In the new EU programme, the concept of EU grant for what I call hard infrastructure is really in dream territory now. I believe that the only manner in which Laganside Corporation could possibly seek grant is for the public walkways. I doubt that they would get it, but they are entitled to seek it.

351.

One of the main features of Laganside has been the creation of very attractive public walkways along each side of the river. On the waterfront of Titanic Quarter, there is tremendous scope for an extension to the walkway that already comes down to the northern boundary of the Odyssey. I believe that Laganside has an ambition to continue those walkways for the population of the city of Belfast and those who come to visit, because Titanic Quarter should end up as a major tourist attraction. The idea of walking down the public walkway on the waterfront is clearly something to be encouraged.

352.

That was what was behind it. However, there is no question of any grant aid from any source being factored in to the thinking or planning of BHC or Harland and Wolff on the Titanic Quarter arrangements. We all wish to see a public walkway of a standard that the public purse can best provide. Those walkways are a credit to the work of Laganside Corporation over the last ten years.

353.

Mr Cushnahan:Mr McFarland raised a point on the Cannes exhibition which I know you attended, Mr Irwin. Please deal with that and with the reference to Dunloe Ewart.

354.

Mr Irwin:I do not know what it stands for, but MIPIM is the biggest property exhibition in the world, and it is held annually in Cannes. Every major city in the world has its own stall. Since 1993, we have been contributing financially and in person to promoting the city of Belfast at Cannes. We have had some commercial success from it. Inward investment has been made to Laganside as a result of that.

355.

Laganside has always attended, as has Belfast City Council; in fact, they are the prime organisers of the city's stand at Cannes.

356.

Other people will come along to that stand. For example, Harland and Wolff were there because they have a keen interest in Titanic Quarter, which is part of the property aspect of Belfast that is being marketed to potential developers. Dunloe Ewart (NI) plc are in the same position. They wish to develop the former Sirocco site, which is an attractive site for development. Other people join the Belfast stand at times depending on their interest at any given stage. Its main focus is to promote Belfast to the international property fraternity as a city for inward investment.

357.

In a concentrated three days, you can see what every other major city is doing. You can see their models. You meet the people behind the regeneration of other cities, and, on occasions, people from Northern Ireland have made their own presentations in the lecture theatre on how Belfast has been regenerated.

358.

The revenue streams from the Titanic Quarter development have only been factored in since about 1999, because prior to that there was no certainty. However, during that year we agreed heads of terms between two organisations. This set us on the path to proceed with the Titanic Quarter development. I sincerely hope this will happen. From that point on we have been factoring that in. I recall that it was factored into the PricewaterhouseCoopers (PWC) economic appraisal. It has been factored in and identified on a number of occasions when there was extensive focus in the debate on the way forward for non-port lands and their importance to the ongoing viability of the Port of Belfast.

359.

Mr McFarland:I have one final question. Mr Cushnahan, has been with the harbour commission for a number of years. Can he recall whether there are, or have been, members of the board who might be considered to have a conflict of interest because they also sit on the boards of companies that are involved in elements of the development of the Harbour Estate?

360.

Mr Cushnahan:Can I deal with the question generally? If it is helpful, I shall add to what Gordon Irwin said on the Titanic Quarter development, where the board policy and strategy is important. Mr McFarland asked whether we were anticipating Government grants in the evaluation of the project itself. From the board's perspective, when Gordon Irwin made the presentation to them on the way forward, it was not included.

361.

Secondly, from the board's policy point of view it is critical that each project that is presented for approval must demonstrate an adequate return for the port on a stand alone basis. From a policy perspective the Titanic Quarter development would have had to stand alone on that basis.

362.

I have sat on a number of boards and I chair a number of companies. I have found that when you seek to bring expertise and skills to the board there will always be people who might potentially have conflicts of interest. Like the Members of the Assembly, we are required to record any interests that may be perceived to be in conflict. The manner in which that is recorded is very open, just as it was today from Mr Hay.

363.

Over the years I have been in the port I have found that where a conflict of interest arises during the process of consideration of a project, the board member has stated at the outset that he or she will retire from the meeting whilst the matter is debated. One issue which has been under debate for some time is the representation of port users on the board. When I joined the board a number of members were port users. It is now Government policy - Mr Irwin may correct me if I am wrong - not to appoint port users to the board of ports. When the port users were representatives on the board, they brought commercial skills to its work. Having said that, I have never been aware of a situation where that conflict was actually manifested by a member. Again, in my experience I cannot think of any current board members who have a conflict of interest with property development in the port.

364.

Mr McFarland:You will be aware that, after many years of problems, Civil Service guidelines have now been laid down. For example, senior civil servants in the Ministry of Defence are prevented from joining the boards of armaments manufacturers for a period of time. Are there specific BHC regulations that prevent a player or decision-maker on the development of, for example, D5 from becoming chairman of a company involved in D5 after leaving the harbour board? Serious conflict of interest could arise in that situation. I am not saying this has happened. However, if you are the man who sets the thing up, and when you leave the harbour commissioners your company moves in because it knows all the ins and outs of it, you have a prime spot.

365.

Mr Cushnahan:That is a very good question, and, indeed, the D5 circ*mstances are a very good example. We had a board member who was associated with the development post during the successful allocation of that tender. I shall explain how that was dealt with. Basically, tenders were sought in a manner in which nobody in Northern Ireland could do the evaluation. The principals appointed were based in Scotland, and all tenders were received and considered by that entity. Twenty-nine tenders were evaluated by the third party and presented to the board for consideration in the absence of the individual who had an interest. Consequently the tender from the company he was involved with was dealt with in the same manner as all other tenders.

366.

Also, historically, board members who were in construction might have made tenders for construction work in the port. Again, when tenders come in, those board members would have retired from the meeting while the board considered and made their decision.

367.

There is established precedent to deal with those who had a conflict of interest and one had to be assured that the process was open, transparent and absolutely impartial.

368.

The issue that arises is one of perception. There may be circ*mstances where they have not effectively dealt with the matter. If a detailed investigation were to be conducted on the due diligence of our process, I am sure they would find it impeccable. We should be happy to stand over that.

369.

Mr R Hutchinson:What has happened with Belfast Port over the last few years is a credit to all those involved. We have, however, found us to be in a bit of a mess. There is a perception, rightly or wrongly, that some things that occurred have not been done in the proper manner and there are questions to be asked in relation to leases that have been signed. Take for example the transfer of leases from Harland and Wolff to Mr Olsen. A fortnight before the memorandum of understanding (MOU) was to be signed, you were in negotiation with the Department in regard to it. Certain leases were signed. In hindsight, do you feel that it was proper to sign those leases and hand them over before the MOU was signed? Could things have been handled differently, thus avoiding creating the perception that now prevails?

370.

My second question relates to your board meeting of November 2000, when the final details of the new arrangements for Titanic Quarter were agreed. Was there unanimous support from the board for the leasing of Titanic Quarter? Were all decisions regarding that lease agreed at board level?

371.

Mr Cushnahan:I shall take Mr Hutchinson's second question first because it addresses a board issue. I refer the Committee to section two of our executive submission: the summary of key dates. It is important to understand the background of the situation. In 1989 the privatisation of Harland and Wolff was being discussed and out of that arose the two elements of core and non-core land. We shall deal only with the non-core land which forms the "2019" acreage. Within the prospectus for privatisation in 1989 it was plainly stated that the non-core land would be the subject of new arrangements between the BHC and Harland and Wolff. To return to the board's remit, here was a dormant, unutilised asset in a dilapidated state. We wished to encourage the regeneration of that area, because of profit, which is not an unreasonable requirement, but also because regeneration could be for the good of the port. From 1989 Mr Irwin made us aware of his initiatives to encourage Harland and Wolff to bring this land into play.

372.

Effectively in 1998 the Odyssey project was the catalyst for the regeneration potential of the other side of the Abercorn basin, namely Titanic Quarter. With some pain and angst I can still recall MrIrwin, Anne McLaughlin and myself making 26 presentations of our proposals for the privatisation of the port to public representatives; the Institute of Directors (IoD); the Confederation of British Industry (CBI) and the Chamber of Commerce. In those presentations MrIrwin said that this was a catalyst which would regenerate the acreage across the Abercorn basin. Since this presentation was in the public domain in that form, it was obviously within the knowledge of our board.

373.

On 27July 1999 the board initially agreed the heads of terms between BHC and Harland and Wolff for the regeneration of Titanic Quarter. Page three of our submission states that on 28November2000 BHC agreed the final points of detail in respect of Titanic Quarter heads of terms. Those of us who have been in commercial life know that when you open the debate on heads of terms a lot of subsequent negotiation is involved to get to the end deal.

374.

On the basis of heads of terms previously presented to the board, Mr Irwin would then have the authority to apply his own fiduciary duties to complete a transaction based on those terms. In the event that he did not achieve the terms agreed by the board or that there was material adverse change, he would have had to come back to the board for further consideration.

375.

However, in the event that everything went according to plan he would have come back with the finalised transaction. Therefore, in its own way, the board was fully familiar with the terms and conditions which were being presented to us at that time.

376.

The Chairperson:Mr Hutchinson's question, which was explored quite carefully with the Department this morning, is very important. The fact is that on 28November the board, by itself, agreed heads of terms with Harland and Wolff. On 20December it then signed the agreement. During that time there was very close discussion with the Department on the MOU. The MOU was a mechanism introduced to prevent the disposal of land to protect the public interest. It was a voluntary agreement which BHC agreed to introduce and which the Department and this Committee was happy with. However, at the same time as the debate and discussion about this, BHC were completing an agreement with Harland and Wolff. How is that compatible with dealing with the Regional Development Committee or with negotiating an MOU in good faith with the Department? We have found great difficulty in understanding how BHC dealt with this in that way.

377.

Mr Cushnahan:In all sincerity, we believed that the fact that we were proceeding with Titanic Quarter had been made known to everyone in the public domain. There is a plethora of information which plainly sets out the stages.

378.

The Chairperson:The Committee accepts that there was information in the public domain about a partnership between Harland and Wolff and the BHC to develop the Titanic Quarter. That was known in generic terms, and there was no problem because people were aware of that partnership. However the detailed aspects of the agreement were not known, and materially that affected both the lease - or leases - at Titanic Quarter and the relationship between Harland and Wolff and the BHC.

379.

In other words the leases would be consolidated and variations of leases would be granted not only to Harland and Wolff. Rather, variations would be offered from time to time for 125 or 250 years for residential development. Those leases would then be sub-leased to individual developers. That represents a material change in the leasing arrangements between Harland and Wolff and BHC which was never disclosed to the Department or the Regional Development Committee. We find that difficult to understand.

380.

Mr Cushnahan:We can refer to correspondence that shows that the Department accepted that we should enter into arrangements for the Titanic Quarter with leases up to 250 years. That was agreed at the outset. If we enter into those agreements with the concurrence of the Department the only issue that remains is: to what extent does a transaction consummated between us and Harland and Wolff disadvantage either the port and/or the public interest?

381.

Our point is that at no time during the Titanic Quarter transaction and the subsequent acquisition by Fred Olsen Energy of two Harland and Wolff subsidiaries - Harland and Wolff Properties Ltd and Titanic Quarter - did the leases of 2019 change in any form. In that case, did we act in a manner that was disadvantageous to the Port of Belfast and, in particular, to the public interest?

382.

I refer the Committee to item six in the paper, which shows that there was no prospect of regenerating the Titanic Quarter unless agreement could be reached between the BHC and Harland and Wolff Properties Ltd. Elsewhere on that page advisors state clearly that the agreement was: "a very significant result for the Port Authority and the public interest".

383.

Therefore we believed, with all sincerity, that the discussions and previous correspondence with the Department allowed us to move the process forward.

384.

The Chairperson:In his evidence this morning the departmental representative, Mr McMinnis, said that he heard about this deal from the IDB in early January; he did not think much about it at that stage because he knew that there were ongoing negotiations between the BHC and Harland and Wolff. However, subsequent to that, on February 7, Fred Olsen Energy announced publicly that it was taking over Harland and Wolff. Mr McMinnis then learnt more about the nature of the agreement. It concerned him because it was materially different to the general development plan that he had understood would be part of the relationship between Harland and Wolff and the BHC. He became so concerned that he made further enquiries from the BHC, and it would not be incorrect to paraphrase him and say that he was taken aback when he realised the full nature of the agreement.

385.

Mr Cushnahan:Mr Irwin and I met with you and Mr McFarland on 14 December and we discussed the Harland and Wolff/Titanic Quarter transaction. At that stage it had not been consummated, and I shall come back to that in a moment as to the date of 20 December. We also met with the Committee on 15 December. My recollection is that you asked me what would happen if the capital spend itself - which was projected at £35 million to £40 million - could not be met by Harland and Wolff; if they had financial difficulties. The answer that we gave was that in the event of that happening, there would have to be a renegotiation of the relevant proportions of the equity.

386.

The Department gave permission for us to move ahead on this process as far back as the direct rule administration when the Minister was Lord Dubs. PWC's economic appraisal also made reference to that fact. Has BHC extracted best value for a piece of land? In regeneration terms it will create at least 10,000 jobs. We have also granted about 23-24 acres to the Northern Ireland Science Park, which is to support the intellectual revolution of Northern Ireland. Have we - the board and myself as chairman - acted with integrity in moving that forward as best we could, as fast as we could and in the best interests of the public and us? We believe that we have discharged our fiduciary obligations, and that our information indicates that the Department had all that knowledge.

387.

The Chairperson:It is on record that the Department disagrees with that. Mr Hutchinson's point was that during the time when you were negotiating the MOU in relation to the disposal of lands, it was a voluntary agreement to protect the public interest. During that crucial month an agreement was imminent, and to use your phrase, it would have been consummated on 20 December.

388.

The BHC did not tell the Department that they were negotiating the MOU and were about to sign an agreement with Harland and Wolff. The BHC did not say that it might embarrass the Minister or the Department; the BHC made no effort to let the Department know that it would not be part of any undertaking that they make because it will be a done deal on 20December. Why did you not even tell the Chairperson or the Deputy Chairperson of the Committee that this was imminent?

389.

Mr Cushnahan:I apologise if I have caused your integrity to be impugned, Mr Maginness, Mr McFarland and the Committee. However, Mr Hutchinson, when we met the Chairperson and Deputy Chairperson on 14December, I had no knowledge that we should even have had a transaction completed on 20December. Those of us in business know that when we enter into such negotiations it could take another three months. It is unfortunate that it happened on 20December. During those discussions, I had no idea that we should have completed the agreement that week but the fact that we were discussing it with you was to indicate the fact that we were close to a transaction, and the nature of it.

390.

Mr R Hutchinson:Why on earth did you not say that this was a possibility? You never mentioned it at all.

391.

Mr Wells:There has been a lot of talk here today about consummation. This is like getting married and not telling your father. You knew this was coming up when you met the Chairperson and the Deputy Chairperson but you never made any reference to it. Do you accept that it appears that something was going on that you did not want people to know about, and that it was all done behind closed doors and kept as quiet as possible? That is the public perception.

392.

Mr Cushnahan:I can understand the consternation. In all sincerity we had been advancing this transaction for two years and we published what we were going to do for public representatives. All that was going to happen on 20December was the signing. We did not know that it was to be signed on that day.

393.

I shall explain it in a different way. I come into the port several times during the week. On a Monday or Friday a lot of documentation will be sitting on my desk for signature. These documents will relate to transactions which the executives have consummated. They will be transactions agreed by the board as far back as 6months, and they have taken that time to complete because of the legal processing. In doing my duty I shall take the documentation and look for the board minute that authorised it. I then sign the document. However, I do not go back to my board to tell them that I have signed the agreement - because the board have approved it. I do not mean to be intimidating, I am simply trying to explain.

394.

Mr Irwin and I met the Minister who said that we should have done him the courtesy. The point I made to Minister Campbell was that, in all sincerity, we believed we were applying the best interests of the port to get the deal done and we had the approval, wrongly you might say, in the public interest to get it completed. Therefore, I told the Minister that I did not believe that I should have to come back to tell him that I had signed it. The Minister acknowledged that he knew what we were doing.

395.

Mr Wells:What I find so extraordinary about all this is that many months, if not years earlier, MrIrwin was given the consent to go off and do the negotiation but apparently the board was not consulted again, and all you did was to refer to the minute. Was the board actually told before you signed that the project would go ahead after 20 December?

396.

Mr Cushnahan:The board finally agreed on 28 November 2000. That of course, Mr Wells, was very close. If I could explain the process - to take Mr Wells's point - there would have been ongoing discussions with Harland and Wolff on the finer points of the transaction. Obviously there would have been changes to the previous board approval, which meant that Mr Irwin came back on 28 November for the final approval. That was presented to the board and the board agreed it. That was the final stage.

397.

Mr R Hutchinson:Was the board unanimous?

398.

Mr Cushnahan:Yes.

399.

The Chairperson:Could we move on a little? We could spend an awful lot of time with this -

400.

Mr McFarland:Before we move on - as I recall we met on the afternoon of the 14December. I have a recollection that at 6·00 pm on the evening of the 19December, we had an emergency meeting with you and the chief executive but without officials, at which the detailed memorandum -"enclosure x", as you described it -was shown to the Chairperson and to me. The reason I remember is that I was late for a European function because of that emergency meeting.

401.

I wonder whether you recall that, because if that is the case - and I stand to be corrected - at 6·00pm on the night before this was signed, you suddenly phoned up the Chairperson and said, "Can we see you urgently in two minutes?" The night before you signed this off on 20December, you came to us to discuss MOUs.

402.

The essence of that and of the MOU was that this was a new beginning. Initially there had been mistrust between you and the Committee and a degree of confusion between you and the Department. All that would now be solved, however, because from there on in we had transparency in everything that you did and we could all be confident that there were no underhand deals at all. As I recall we said "wonderful" and "how nice". There was great bonhomie; at last a new dawn had broken, because there was a logic in what was happening. That logic was that if you were going to do anything - change leases, change this, shift that - it called for a quick word to the Department, if necessary a quick word to us that it was happening, and then no one would be taken by surprise as to what was going on.

403.

I was certainly taken aback to discover that on the day after you had discussed this with us in this new climate, you were signing off things with a detail that was not available to us. The Chairman has covered this extensively. The detail in the lease you signed off was not in the public domain. It was certainly not with this Committee and not with the Department before you signed it. It is therefore confusing that we had this new dawn, the MOU, and the "all-will-be-well" statement but on the very next day, you were busy signing off things of which no one had knowledge.

404.

Mr Cushnahan:I agree with Mr McFarland's analysis of his recollection of events, and I shall confirm that. With great respect, however, I do not think it was on the night of 19 December. I am pretty sure it was on the night of the 14 December. We did write to you on 19 December. I stand to be corrected on this. If it is any comfort, Mr McFarland, on the night of 14 December we had not even got to a stage where we could believe in all sincerity - unless Mr Irwin can correct me - that we should have signed anything by 19 December.

405.

The Chairperson:In any event, we have laboured the point.

406.

Mr Cushnahan:I make another point to try and illustrate some of the problems. For example, Belfast City Airport is of course being developed with our approval, but the agreement has not been signed. With great respect, I am trying to make the point that it was approved in 1999, and we have not yet signed the agreement.

407.

The Chairperson:In Mr Irwin's letter of 26 March to me as Chairperson of the Regional Development Committee, paragraph 3 on page 2 states that, as far back as August 1999, BHC and Harland and Wolff were in discussion about regenerating the Titanic Quarter. Discussions on the detailed arrangements required to enable the project to proceed continued until the signing of the legal documentation at the end of 2000, at which time Harland and Wolff requested that the Harbour Commissioners maintained confidentiality. It goes on to say that Government was advised of those discussions in August 1999.

408.

Is it your understanding that Harland and Wolff insisted on this confidentiality so that no disclosure could be made either to the Department or the Committee for Regional Development?

409.

Mr Cushnahan:The first matter concerns problems in commercial arrangements between two principals where the parties do not wish to make the terms and conditions known to the public. That is not being in any way disrespectful to the Government or the Committee. For us to obtain information for release, we should first have to have the consent of the other party. If any of us were to enter into a disposal, we should certainly not want it known to others. As a general observation, one might say that it is traditional commercial practice.

410.

Mr Irwin:I shall go through the events. In July 1999 the two companies managed at long last to find a way forward, resulting in the agreement of heads of terms. That set the basis for both organisations to move ahead and commit resources with the intention of finishing with a definitive legal document at some imprecise date in the future. I can think of no better example than the Belfast City Airport. It was in April 1999 that the two companies agreed the basis on which the redevelopment of the City Airport should take place, and it will open before the legal documents are signed. In a process associated with such commercial projects, the signing of the legal document is the last piece of administration. It is not the kick-off point for the project to be carried through.

411.

Parallel with our moving Titanic Quarter forward was the port constitution exercise. Over that period, therefore, significant information on many aspects of the port was being made available - correspondence, meetings, tours of the harbour, and major articles in the press. In a sense, that amounted to the public's perception and knowledge of what was happening in the harbour.

412.

My belief - rightly or wrongly - is that certain core elements are well established, being in the public domain. Harland and Wolff and BHC were jointly to regenerate the area.

413.

That is reasonably well known. Groups such as the Committee had more knowledge. There was to be a 50/50 split of income and expenditure. Even on the day of the Regional Development Committee tour, there was also - in black and white in the briefing notes - mention of leases of up to 250 years. The Committee was certainly told - and it would be reasonable to assume that people would understand - that we are not developers of property. We have always told the Committee that we get our income from the ground rentals. I believe it was understood that we do not have the powers to develop office and apartment blocks or anything else.

414.

We have explained on a number of occasions - and it was not unreasonable to believe that people would understand - that the developers obviously required the normal, modern, commercial leases necessary to bring about commercial property development. As we said in our submission, standard practice in Northern Ireland is that leases are between 125 and 250 years, the latter being particularly relevant to residential accommodation. That is reasonable, and I believe everyone regarded it as public knowledge.

415.

At the level of the Department for Regional Development - and bearing in mind the second half of 1999 when you were not in business - there was certainly an almighty push for us to privatise as we went through the Titanic Quarter process. You can see that from the correspondence. We were instructed to produce a transfer scheme, which is the kick-off point in any privatisation process. It was to be submitted to the Minister of the Environment, and he was telling us to push on.

416.

In regard to our discussions at that time with the Department of the Environment, there was clearly another factor to be accommodated by the Minister and us. We were not allowed to play a part. Lord Dubs spoke to you on a number of occasions, Mr Chairperson - and to Sammy Wilson - seeking to accommodate what was in the Ad Hoc Committee's report on land and what he was trying to achieve in relation to a transfer-scheme accommodation with us. In a letter to Belfast Harbour on 1 September 1999 it is recorded that, as far as the Department was concerned, Titanic Quarter was an existing lease. You cannot be any more definitive than that. If I might use the colloquialism, it was a "done deal".

417.

The Chairperson:Mr McMinnis used the phrase "done deal" this morning. By that he understood the basic outline of a partnership between the Harbour Commissioners and Harland and Wolff - a joint development sharing burdens and profits on a roughly 50/50 basis. He would not, however, have regarded the new leasing arrangements as a "done deal", since they materially altered the relationship between Harland and Wolff and the BHC. Furthermore, in the context of an MOU intended to prevent such disposals being undertaken unilaterally by the Harbour Commissioners, it seems to the Committee - and certainly to Mr McMinnis - that it was a very strange way of doing business.

418.

Mr Irwin:I am trying to catch up on time. As we moved through that process in 2000, we moved into a situation where, following PWC's economic appraisal, there was clearly a major issue surrounding non-port lands. The issue of land control versus land forfeiture was emerging, and we had a series of discussions in that context. It is fair to say that, if you look at the documentation around that date, you will see we were talking about land coming to non-port uses which had not been agreed for lease. Belfast Harbour regarded the situation with Titanic Quarter and Harland and Wolff as stretching back to July 1999. We had no knowledge at that stage of when we would sign, for that is an administrative red herring - if you will excuse the expression - which I continually compare to the situation with Belfast City Airport. At that stage it would not have been in our interest to damage our argument for land controls by hiding something.

419.

The Chairperson:If that was your thinking at that stage, why did you not say to the Minister "We are about to complete a deal with Harland and Wolff for Titanic Quarter and feel you really ought to exempt the matter from the MOU"?

420.

Mr Irwin:I shall tell you my thinking. I was not aware there was to be an MOU. We were debating whether land forfeiture or land control was the way forward. I accept - and I believe that is what the Chairman referred to earlier - that it would have been courteous to have said to the Minister "By the way, we have signed the deal" - something which everyone knew was on the way.

421.

There is some confusion, and I hope we can try to explain to the Committee precisely what is in the deal and how much has changed.

422.

Mr Hay:I know that much was incapable of being done until pen was put to paper and things were signed. This morning a representative of the Department for Regional Development told us that - to his great surprise - he found out about the new lease arrangements from an IDB meeting.

423.

For commercial reasons, you may have found it difficult to inform the Department of the new arrangements. I am sure there would have been opportunities to speak privately to the Minister and say "Look, this is where we are at: we believe that within the next week or month we shall be putting pen to paper".

424.

The Minister called a meeting in Coleraine; both he and the Department were annoyed. He was having a meeting in Coleraine, and my understanding is that he called you there because he was so exasperated and concerned about exactly what was happening. The departmental representative, Robin McMinnis, told us this morning he was so concerned that he spoke to you as soon as he heard of the seriousness of the situation through IDB sources.

425.

I wonder to whom the Minister spoke and what your reaction was when someone from the Department, after hearing about the lease from another source, rang up and asked what was happening. The Committee - as individuals and as public representatives - has identified a problem with keeping people informed of what was happening. You need not say you were unsure when you would sign the lease. It was your duty as commissioners to have kept the Minister at least privately informed and allowed him to decide how much he would tell the Department.

426.

Mr Cushnahan:I shall defer to Mr Irwin on that question. I should like to clarify a point that Mr Hay made about a meeting with the Minister.

427.

Mr Irwin:I did not have the benefit of hearing Mr McMinnis this morning. I am trying to put two and two together, and there is some confusion. The IDB meeting to which Mr McMinnis referred was likely to have discussed the transaction that took place in February when Fred Olsen Energy acquired Harland and Wolff Properties Ltd and Titanic Quarter Ltd.

428.

The Chairperson:No, it was not. It was an IDB meeting at which Mr McMinnis was present in early January. He received information at it confirming that the agreement had been signed. When the statement emerged from Fred Olsen Energy on 7 February, Mr McMinnis explored the point further and was concerned about what was happening. He learned more about the agreement in dribs and drabs. He got a fuller picture of the detailed agreement reached between Harland and Wolff and the Harbour Commissioners, and that concerned him.

429.

Mr Hay:Mr McMinnis got the information he wanted on a drip-feed basis - he was not getting what he needed, a point which also annoys the Committee.

430.

Mr Irwin:We shall try to deal with that. Rightly or wrongly, we would not tell the Department when we signed a document. For example, if the lease on Belfast City Airport is concluded in four weeks or so, we shall not ring up the Department and say we have signed. We believe that the Department is fully aware that agreement has been reached between two bodies to facilitate the physical works you see rising from the ground. The signing of the document should not trigger the Department to think something is about to happen or that something different has happened; we do not inform the Department about such business. What would be the value to the Minister if I rang him up in four weeks and said we had signed the Belfast City Airport lease? The Minister would say that the airport had already been built, and I would repeat that the lease had been signed. I am replying to Mr Hay's point.

431.

The Chairperson:I must intervene. The confusion is in the context of negotiations and continuing debate about an MOU regarding the disposal of both non-port land and port land generally. Since the confusion is specifically in that context, I urge you to forget about the City Airport. That agreement gave rise to an important material change and concerned a departmental official when he learned of it. The information about the agreement was not given to him - in the context of the continuing debate about an MOU and a voluntary agreement.

432.

Mr Irwin:I disagree with Robin McMinnis. He was concerned when the press release came out about the transaction between Fred Olsen Energy and Harland and Wolff plc in Belfast and the acquisition of those two companies. Mr McMinnis rang me up and asked what was going on, and I told him that the first I had heard of the transaction was when I received a fax that morning.

433.

We had not been informed that such a transaction was taking place. At that stage Robin was beginning to think that what he understood was in place. He did understand the key points: that there was a development agreement and that there would be long leases. He was suddenly concerned that it had moved outside the parameters of his understanding. That understanding had been built up between us over many months of dialogue and correspondence, particularly in the latter part of 2000, in creating the information bank and a series of meetings with PWC.

434.

He may well have heard in the IDB meeting that the leases had been signed. I have tried to explain why we should not necessarily ring him to tell him that it was so. That did not register with him, for he never rang me about it - he rang me on 7 February or the day after. The defining moment was when Robin and others started to ask what had been going on.

435.

The Chairperson:People listening to that evidence would agree with you that he was concerned when the press statement was issued. He contacted the Harbour Commissioners, but his concern grew when it was said to him that there had been a major material change in the nature of the leasing arrangements between Harland and Wolff and the Harbour Commissioners. I shall try to paraphrase what he said, and if I am wrong the record will correct me.

436.

Mr Hay:That evidence this morning concerned us.

437.

Mr Irwin:The agreements are reached, as the Committee knows, between bodies corporate. The agreements reached between Harland and Wolff Properties Ltd and Titanic Quarter Ltd - with BHC as the other party - are still the same today as they were before 7 February. The only thing that changed was that the person or the body corporate owning those companies has changed - something over which we have no control.

438.

Someone acquired those companies, but there are no changes in the leases or the terms of the agreements we struck with those two companies when they were wholly owned subsidiaries of Harland and Wolff Group plc. Though they are now wholly owned subsidiaries of Fred Olsen Energy, there is no change in the agreements because of the change in ownership.

439.

Mr Cushnahan:Mr Hay questioned why we have acted in this manner. Mr Irwin has tried to explain our position and what we are trying to do. You can form the conclusion - as Mr Wells has done - that we have acted improperly. We have tried to do the best we could in the circ*mstances.

440.

The point is that the agreements have "materially changed". Mr McMinnis's use of those words concerned me. If they have materially changed, have they changed in such substance that it has been disadvantageous to the transaction for the Port of Belfast and its urban regeneration plan? A valued judgement from an external third party said it was in our best interest, something for the Committee to consider.

441.

I am not being disrespectful to the Minister, but he did not summon us. When the unfortunate UTV 'Insight' programme - the reason we are all here - was broadcast, we immediately sought to contact the Minister to ensure he was well informed before someone started to attack him for a lack of knowledge.

442.

We wished to see the Minister immediately, but unfortunately he was so heavily engaged that the earliest date he could see us was the Monday. We also sought to see you, Mr Maginness, and MrMcFarland, for we believed we had conducted open and transparent discussions with you. We owed it to you to ensure you were better informed before any further stories broke. The Minister, despite his heavy engagements in Coleraine, agreed to meet us, and MrIrwin and I met him there.

443.

Mr Hay:I was not privy to that meeting, but the Minister was not impressed. He was clear on the issues at it.

444.

Mr Cushnahan:The Minister was interviewed for some eight minutes by Ulster Television, and that was aired for 45 seconds. In that time the essence was that we had made an apology, but those 45 seconds did not give the Minister an adequate opportunity to explain the background. We had an open and frank discussion with him. The Chairman and Deputy Chairman of the Rural Development Council (RDC) had every right to be concerned about the situation. The problem was how we could explain that there was no truth whatsoever in the claims.

445.

The Chairperson:I refer to the letter of 9 April 2001, in which the Minister wrote in the penultimate paragraph -

"I appreciate the trouble that you have taken in providing this information, I do, however, stillthink that it is reasonable to have expected BHC to have informed me at the date of the signing of the lease."

446.

The Minister is not talking about a mere matter of courtesy; his view was that not telling him was unreasonable and did not have due regard to his position.

447.

Mr Cushnahan:That is what I apologised to the Minister for. He was still unhappy, and he put it to me again. Our failings as perceived by the Committee were committed innocently.

448.

The Chairperson:It appears there have been no substantial or material changes in the leases. In the BHC letter to the Committee dated 20 February 2001 it states that the leases were consolidated.

"In December 2000, a new lease was signed in respect of Titanic Quarter to consolidate all the Titanic Quarter lands under one lease with no change in the basic lease conditions".

449.

A development agreement setting out the basis under which the regeneration of the area was to be carried out was also signed in December 2000. There is a footnote on the BHC letter of 6 March 2001 to the Committee, which states:

"Harland and Wolff through their development company, Titanic Quarter Limited, will be responsible for the regeneration of this area under a legal agreement with BHC. This work will commence once all statutory approvals have been obtained and in due course normal commercial leases of up to 250 years will be granted in respect of individual sites."

450.

Those will of course be assigned or subleased to individual developers. That represents a material change in the relationship between the BHC and Harland and Wolff. That is the substance of the agreement reached between BHC and Harland and Wolff Group plc. It represents a very substantial departure from the status quo, does it not?

451.

Mr Irwin:It represents a big change from the position those lands were in before we made an agreement on the way forward in July 1999. At that stage, the lands were sitting with a 2019 lease, for which the user clause specified shipbuilding, ship repair and engineering. Provided Harland and Wolff paid its rent, it had every right to continue to occupy the lands. That was the position. We were the freeholders, and we established a way forward which would facilitate development without altering the status quo of those leases; we shall try to clarify that. I hope to be able to explain that, for it is a most important statement. The status quo of those 2019 leases for shipbuilding, ship repair and engineering will not change until a developer comes along. I shall explain that later.

452.

There is one point I should like to bring to the attention of the Committee regarding the voluntary agreement discussions and how we reacted in parallel with these and the Titanic Quarter arrangements. At the same time as dealing with Harland and Wolff, we were also dealing with Bombardier Shorts, at its request, to purchase the freehold of its leased lands. That was done with the knowledge of the Department and the then Minister for Regional Development. Our board terminated those discussions because we were involved in land control and non-port land discussions with the Department and the Committee. We terminated them because they were definitely going to lead somewhere; we were at the starting point of something. We apologised to Bombardier Shorts and said we should not proceed with the discussions until the way forward for the Port of Belfast was finally decided. That is an important point, for it demonstrated our mindset. I tried to demonstrate our mindset regarding the Titanic Quarter.

453.

I want to take you through something difficult, and I shall do my best. In section 6 of the executive summary, there is a map of the Titanic Quarter. It shows the outline of the land assembled, with a total of 105 acres for the area. Harland and Wolff Properties Ltd and Titanic Quarter Ltd agreed that, within those lines, Harland and Wolff had a number of different leased areas. Some of the leases expire in 2019 and some in 2114. It is a mixture of core and non-core land.

454.

For ease of administration, those lands were brought together under one lease, which will terminate in 2019. Harland and Wolff accepted that some lands they were putting in - and on which they enjoyed a 125-year lease - were going to be hauled back into a lease terminating in 2019. The period of the lease would be the same as in 1989, and there would be the same user clause: the land could only be used for shipbuilding, ship repair and engineering. That is the situation regarding the lease between Harland and Wolff Properties Ltd and BHC.

455.

Having assembled the land and put it into a lease package, the next step was to trigger regeneration. That did not require a lease, but it did need a development agreement. First, planning permission had to be achieved, and the process would have to include public consultation.

456.

Let us assume the planning permission is granted. That would give the signal to landowners - subject to commercial criteria - to begin investing in the land to attract developers under the uses permitted by planning permission. The developer, who usually comes through a process of selection so that open market value can be achieved, would get an agreement allowing him to proceed with the development. When that is completed, he would receive what he asked for - perhaps a 125-year lease. If he did not get what he required, he would either not undertake the development or not be able to finance it or sell it on. If the developer agreed terms and completed the development, the area of land involved would be de-leased from the 2019 lease and re-leased to him.

457.

As the process proceeds, we shall keep slicing off the 2019 lands into a myriad of developer leases. At that stage, the process will be as follows. Once development has been completed, the developer will deserve his lease. Belfast Harbour will issue a lease for 125 years to Titanic Quarter Ltd on condition that the five acres be immediately sub-leased to the developer. Titanic Quarter Ltd will act as a conduit between the developer and us to enable us to receive 50% of the income and put in 50% of the expenditure. They will not get a lease in the true sense of the word. Indeed, at the end of the 125 years, Titanic Quarter Ltd will have no rights under the Business Tenancies (Northern Ireland) Act 1964 to seek renewal. That recognises that it is a financial arrangement over that period which happens to have a lease involved. At the end of the period, the tenant will have a direct relationship with BHC.

458.

Mr Byrne:The problem for Assembly Members and the Minister is that we were aware of discussions with BHC regarding an MOU because there had been so much discussion prior to October 2000 regarding non-port land. I accept that there has been development at Belfast City Airport without a deal being signed. However, there seems to have been undue haste in completing the contract regarding Titanic Quarter on 20 December 2000, and that is where we feel there has not been open and frank disclosure of all of the factors and issues pertaining to the discussions. There is some residual doubt about the process of the negotiations.

459.

Mr Irwin:I understand the point. Parties we are dealing with operate at different speeds - dictated by their commercial demands. It would be fair to say that Harland and Wolff was pressing on with that agreement. There were many meetings trying to sort out every last clause in the legal documentation; they were moving on apace. There was therefore a clear objective to have that agreement put into its legal form. However, no indication was given to our board that it must be signed by a certain date. If we could not fully satisfy each other on every clause, the process could have gone on until we reached agreement.

460.

We have been debating three clauses with Belfast City Airport for about four weeks, and that might go on for another four. However, it would be correct to say that negotiations progressed at a steady pace.

461.

It is not for me to say why Harland and Wolff wished to push ahead apace. Incidentally, we were also very happy to get an agreement signed quickly. It is good practice to get agreements signed and put away; it is sometimes not easy to do so, but one likes to try.

462.

Mr Cushnahan:Mr Byrne is echoing the board's overall view. I should have liked that transaction sewn up at least a year earlier, as I should have done with any dormant asset. As you can see from the process, from 1989 until now is a very long period to sit on an asset yielding very little return, particularly if you look at it from the port's perspective. We cannot judge why Harland and Wolff moved so fast.

463.

Mr Byrne:I can understand the commercial nature of the dealings between BHC and Harland and Wolff Properties. Ultimately the land bank is in the public domain, and we have a legitimate interest in pursuing the process to ensure the wider public interest is protected.

464.

How do you envisage the development of Titanic Quarter in the public interest? How will you ensure a better process for liaising and negotiating with the Department, especially the Air and Seaports Division?

465.

Mr Irwin:I should not want the Committee to think that, in moving the agreements forward, anyone in BHC was aware of the contents of the press release of 7 February 2001 on the acquisition of Harland and Wolff Properties Ltd and Titanic Quarter Ltd. I wish to put that clearly on the public record.

466.

Mr Byrne:Are you saying they were not giving you open and full disclosure of the internal workings and relationships of Harland and Wolff's different associate companies?

467.

Mr Irwin:I was dealing with Harland and Wolff Properties Ltd and Titanic Quarter Ltd on behalf of Belfast Harbour. If Fred Olsen Energy in Oslo was negotiating with another company called Harland and Wolff Group plc, that is something no one in Belfast Harbour or myself was entitled to know, and I have no idea if that was the case. We were not dealing with a change of ownership in those companies. That does not alter the deal, which lies with the companies. Who the shareholder is does not alter the deal. We were not aware that such a transaction of acquisition was to take place.

468.

Mr R Hutchinson:Did you challenge them for the facts to let them know how you felt in relation to their press release?

469.

Mr Irwin:I do not have a problem with one company acquiring another. I take the view that it goes on all the time in the commercial world.

470.

Mr R Hutchinson:Come on. There were exceptional circ*mstances.

471.

Mr Irwin:In my heart of hearts I would have preferred that full knowledge be available, but we were not entitled to that.

472.

Mr R Hutchinson:I do not accept that.

473.

Mr Irwin:Mr Chairman, no one in Belfast Harbour could seriously get on the phone and cause a row with Fred Olsen Energy or Harland and Wolff to say they did not advise us of the situation. I do not know what commercial confidentiality was necessary for shareholders and stock exchange rules, of which there are many. Might I have been the beneficiary of insider knowledge? To answer that is beyond my knowledge and competency. Clearly, anyone operating in any commercial sphere would love to know the whole picture. How often do we know the whole picture when doing deals?

474.

Our chairman has endeavoured to make it clear in our dealings with those two companies that we did not change the 1989 position of the land. Harland and Wolff's position was worse, for it dropped some 125-year land back to 2019. In the context of the development agreement, we set out to establish the principle that there would be no lessors unless there were developers.

475.

Let us assume there was planning permission for Titanic Quarter and that, for whatever reason, no developer wanted to come near it. There would be no leases to those companies.

476.

Mr Maginness:Is it not correct that there is great potential for Harland and Wolff and the BHC as a result of this agreement?

477.

Mr Cushnahan:I take the point Mr Hutchinson made. If a company in which we have some interest makes an acquisition, nothing has changed in those lease arrangements. The public interest relates to the question of whether Harland and Wolff benefited. In our opinion, Titanic Quarter must stand alone. Mr Irwin made some projections - which is all they are - as to what our 50% might be. It is very subjective, and even if we secure the planning approvals and processes that might ensure best value, there will be no mountain of money to be made on the basis of those first projections.

478.

The following proves nothing will change: ultimately, in the event that arrangements between Titanic Quarter and Belfast Harbour do not come to fruition because the planning proposals do not represent best value for either party, conditions will revert back to what they were originally, and the leases will return to 2019. The contention in the UTV programme that Fred Olsen had 250-year leases is completely incorrect.

479.

BHC wished to get on with the regeneration - and I am looking at the matter from the public interest. I am also interested in the science park, and I wish to see our intellectual revolution move forward on that basis.

480.

Mr Irwin:Mr Byrne asked about future working relationships with the Department in the context of the wider public interest.

481.

Mr Byrne:Yes. I asked who would reflect the wider public interest in relation to developing Titanic Quarter given that the Commissioners have been acting in a primarily commercial fashion in dealing with Harland and Wolff Properties.

482.

Mr Irwin:In our agreement, Titanic Quarter Ltd is responsible for moving the planning application forward. Before that application is submitted, it will be subject to a serious consultation exercise by the planning consultant. The first consultation stage on industrial heritage has taken place with the Department of Culture, Arts and Leisure. Those parts of Titanic Quarter that need to be preserved as such have therefore been identified, for example the three dry docks.

483.

There will have to be some outreach to the local community. There is always the potential for a public inquiry into such a large tract of land, though that may not be the case. The planning process for Titanic Quarter must interface with the emergent Belfast metropolitan area plan and the declining BUAP before permission will be granted.

484.

Mr Byrne:Who will determine the mix of residential apartments, industrial sites and retail warehousing?

485.

Mr Irwin:The planning department will deal with that.

486.

Mr Byrne:Will BHC take the lead role in determining that in relation to the application?

487.

Mr Irwin:We would not be taking the lead role, but working with Titanic Quarter Ltd. One must think about how to secure a successful planning application. A great deal will have to be encompassed in the planning application to reflect many more strands than just "build them high, stack them up, and get the money". Titanic Quarter is the best waterfront site on the Lagan, not least because it faces south, the right direction. The Titanic and the Olympic were built there. We have dry docks and the Abercorn Basin. The area clearly starts off with an enormous amount of ingredients one can factor in from the public point of view.

488.

The first has already manifested itself in the Northern Ireland Science Park, which secured approximately 24 acres for £4 million. That was jointly agreed between BHC and Harland and Wolff. We decided to seek the project as a catalytic north-end development. We recognised there was no way we could quote the science park the market rate for land as the price it would have to pay, because we knew what the answer would have been. Titanic Quarter will result in a mix of commercial and public uses. Ultimately, unless there is public money, such developments must be backed up with private-sector money, and the mix must produce enough for those businesses to participate.

489.

Mr Bradley:I was a member of the Ad Hoc Committee, and the Committee and I still cannot put a figure on the value of the project to the nearest £50 million. In April 2000, the Valuation and Lands Agency undertook a public-interest evaluation exercise of Belfast Port, which included Titanic Quarter. What were its findings?

490.

Mr Irwin:The Department for Regional Development commissioned that evaluation, and we provided all the information required. We have been giving the Committee the facts on Titanic Quarter today. The Department put a value on the project, but it was not made known to us.

491.

Mr McFarland:We have had difficulties with whether we had total visibility about what was happening with the harbour estate - and there is still some confusion. We were surprised at the Department's leaflet at the Culture, Arts and Leisure Committee, for it produced a high level of detail, and I shall cover some of it. The leaflet says it represents the biggest development opportunity ever in the history of Belfast. It goes on to talk about a mixed development with a science park, commercial premises, residential units, a marina, socialising facilities, hotels and a heritage museum. We were aware of some of these, but not of others.

492.

That level of detail was not available to us, but was available around the world. It seems a bit strange that everyone knew about it except the Department and the Committee responsible. The concept of the Titanic Quarter was not presented to us. We have had the confusion that arose over our discussions on the MOU with its promise that all would be well followed by the signing on 20 December 2000. I hope we have cleared up some of that confusion today.

493.

There is continuing puzzlement over the airport. I believe part of the airport deal involved a substantial tract of land not mentioned to the Committee before. There is once again a worry that certain bits and pieces are not totally visible. We feel we are getting most of the information, but key pieces are being held back from us when we are briefed.

494.

Another worry is that parts of the area have been excluded at the end of the MOU. Despite the spirit of openness - and the statement that the way ahead is that "we shall tell you what is going on and keep you informed" - I understand three areas were excluded. They are the only areas where there is any commercial flexibility in the entire harbour estate, and yet they were excluded from the MOU. D5, the business park and the Titanic Quarter were excluded from the view of the Department and the Committee. The MOU was designed to help everyone understand what was going on. Things would be cleared if leases or understandings were being changed; it would float across the Department and Committee so that we should not be taken unawares by what is happening. Yet the three areas where there are any propensities for messing about are excluded from the MOU. It does not fill me with enormous trust that people are being straight with us; it worries me.

495.

Why can it not be done the other way? Why can we not say that there are problems with those three areas relating to legal issues? We are not trying to mess with you or interfere with your business. Why can it not be that the Department will be required to be told about these things, but will only interfere in exceptional circ*mstances with the legal issues you worry about. There is nothing to stop you from putting that in the MOU. Rather than excluding them, which may lead us to believe that there are shenanigans going on, why can we not include them with a caveat that, because these are legal issues, the Department will only interfere in the public interest when there is serious concern? Under the MOU, we are trying to meet the elected representatives' concerns that the public interest is being served.

496.

Mr Cushnahan:I wish to deal with the three questions Mr McFarland has raised. The first relates to a leaflet at Cannes. If it is any consolation, I have not seen the leaflet either. I am going to defer to Mr McMaster, who has been sitting patiently to earn some of his bread and corn this afternoon. He seems to know a little more than the rest of us.

497.

Mr McMaster:I saw the brochure, which was prepared specifically for Cannes so we should have something to hand out to those who expressed an interest in the development of the Titanic Quarter. It was quite difficult to put a brochure together because there are no details. There are concepts; there are ideals that we are working towards. We wish to see a mixed-use development. There would be hotels, apartments, high-tech businesses, businesses which will tie in with the science park centre, a museum which will integrate with the Titanic slipways, and so on. There are all those ideas, but nothing more definite than that. The planning consultants have been appointed to try to work out in more detail with the planners and so on what types of uses and what densities can be allowed.

498.

Rather than go with an empty brochure, all we could do was put a boundary around the area on a map. Extracts were taken from Harland and Wolff's Titanic Quarter brochure, which was prepared two or three years ago and was very conceptual in its outlook. Those extracts were put in along with simple concepts. I agree with you in that it reads very well. It remains to be seen whether the ideas become reality.

499.

The Chairperson:It was just advertisers' puff?

500.

Mr McMaster:Yes, it was. Anyone making enquiries cannot even be told about sites. It was simply to make the property public and public at large aware of its existence. You need to have a lead-in; people need to know about it. As Mr Irwin has explained, it is the biggest multinational property exhibition in the world. People come from everywhere - there were 16,000 attendees and around 80,000 people in town. They literally come from everywhere. All you need do is get a name into their heads - and the Titanic Quarter is a good one - so that they recall it.

501.

Mr Cushnahan:I wish to deal with the other questions raised, in particular the question -

502.

Mr Irwin:Mr McFarland raised the question of Belfast City Airport. We reported on that issue as far back as the Ad Hoc Committee. We wrote that Bombardier Shorts' current leased area of 460 acres could be subdivided into the runway, Shorts core activities and land to be returned for port operations - 52 acres based on Belfast City Airport's recently proposed airport development scheme. That information is publicly available and has been mentioned on one or two occasions in dialogue. It is not a secret that 52 acres have left Shorts.

503.

Mr McFarland:It is back to you for redevelopment.

504.

Mr Irwin:I can explain why.

505.

Mr McFarland:The difficulty was that we had been at that for over a year. It had to come from Shorts Bros plc that they had given you 50 acres back so that you could redevelop it. We may not have read the packages in detail, but we were not aware of it. It may have gone from the Ad Hoc Committee.

506.

Mr McMaster:It was not mentioned in any of the packages prepared for this inquiry. We were concentrating on Titanic Quarter.

507.

The Chairperson:I understand that.

508.

Mr McFarland:We have spent over a year with the Harbour Estate on the issue. I mention it in passing because it was confusing to me, but is clear now.

509.

Mr Irwin:I wish to confirm that Short Bros plc offered us that land, which was surplus to their core activities, rather than pay any more rent for increasing the Belfast City Airport terminal area from 11 to 70 acres. We pointed out at the time that it was a swap as opposed to an increased rent. I do not have the documentation, but it is on the record.

510.

The Chairperson:Point taken.

511.

Mr Irwin:The authors of the MOU are the Department for Regional Development and its legal advisers, and we have been looking at the construction of that document. We are continually reviewing it. We indicated within the last 72 hours that Sydenham Business Park should not be excluded, and they are removing it. Their lawyer explained that the MOU is for BHC to bring forward to the Government the intended use for a piece of land before it is committed to a process of development. If the land has reached the stage where there is a legally binding agreement regarding its use, what will the MOU do with the legally binding agreement? If it should say that we do not want that use, then who will tear up the legally binding contract between BHC and the incoming tenant? BHC would be sued immediately if it did so.

512.

Mr McFarland:I agree.

513.

Mr Irwin:I do not mind how it is phrased.

514.

Mr McFarland:The Department told us yesterday that it was the BHC who had included it. We were concerned as to why the BHC wanted it left out, rather than including it with the caveat that it must be left alone because of legal implications. If you are saying the Department put it there - and you are ambivalent as to whether it is in or out - then that is different evidence, and there is no problem. I understand that it is covered by the first part, but what happens if a developer in D5 has a problem?

515.

Mr Irwin:I shall try to clear up two points that have been raised. The reason it was excluded in the drafting was that the lawyer accepted that the status of those two developments - D5 and Titanic Quarter - was that of a legally binding contract regarding their use. It would therefore be wrong to say that a voluntary agreement process was applicable to those two areas. However, I have also pointed out that he has not drafted it correctly, for if the legally binding agreements fall - for example, if D5's planning does not come through - D5 is covered by the voluntary agreement, since we would be looking for a new use. The agreement is incorrectly worded, and we have pointed that out.

516.

Mr McFarland:There is no difference between Harland and Wolff buying the agreements and Shorts buying them. The legal position is that Shorts and Harland and Wolff are in the same position as D5 and the business park, yet they have been left out. There are two other binding legal agreements that are presumably the same.

517.

Mr Irwin:I agree with MrMcFarland. He asked why they should be identified. We were told that you were so concerned about those that you would have to be shown by singular identity what was happening to them in the context of the MOU. We did not ask for it that way.

518.

Mr McFarland:They are saying that it was you, but if that was not the case, that is fine. We are on the record now. Do you mind if they go in?

519.

Mr Irwin:They are in the same category as any other legally binding leases and contracts we have.

520.

Mr McFarland:As far as you are concerned, is there no reason why they should not be included in the MOU?

521.

Mr Irwin:Absolutely none. I should like to confirm that if the Titanic Quarter agreement does not secure planning permission, the legally binding agreement falls, and it returns to the negotiation process. We do not have a problem. That is how McGrigor Donald would wish to phrase that.

522.

The Chairperson:There is general agreement on that between the Committee and the commission. Finally, I know that you have been critical of the UTV programme, but if that had not been broadcast, when would the details surrounding the agreement that took place on 20 December 2000 have been disclosed to the Department or the Committee for Regional Development?

523.

Mr Cushnahan:I once again fall back on the same arguments on which you have "crucified" us. We honestly believed that we had done the best deal for NorthernIreland. I am sure that the Committee - outside of what you perceive are failings in how we kept people advised - will conclude that it was a very good deal for the Port of Belfast and the economy. Having said that, we should have informed MrMcMinnis and the Minister in due course about those agreements.

524.

The Chairperson:Is that in spite of the inhibition imposed upon the commission by Harland and Wolff asking for commercial confidentiality?

525.

Mr Cushnahan:Yes, in the sense of how much detail we could have provided. The degree of detail would have been required to ensure that Harland and Wolff permitted us to do that in some form. I am quite certain the company would have agreed to it. It is easy for me to make that point now after the event, but it is important to say that we should have made it available.

526.

Mr Hay:In hindsight, from our point of view as public representatives and that of the Minister and Department, there is no doubt that there is a need for you as a board and commission to do things differently in future. We are not perfect, and we all make mistakes, but there is still a suspicion on how the information was handled. You got a good deal, but the way the information was handled and the Minister and everyone else found out what was happening did not help. Perhaps the board should look into how it can do things differently.

527.

Mr Cushnahan:Mr Hay's points have been made honestly and fairly. As you have probably gathered, we have, through the Minister, sought to examine how to reflect our public accountability more. We trust that it will be applicable to all ports, for Belfast harbour has been singled out. Mr Hay, you deal with the port of Londonderry. There will be a representative from the Department for Regional Development, and a large number of people are saying that that is because we have failed in our statutory and fiduciary duties. It is very painful for us to hear that, but the BHC board and I shall take on board the points you have made today.

528.

I have no doubt that you will look as kindly upon us as you can in your final report. I should like to thank you for hearing us out. I sincerely hope we have answered all of the questions as best we can; we have honestly attempted to do so. The decision-making process concerning the port has been going on for a long time. I hope that members of the Committee can find it their hearts, despite the difficulties arising from the UTV programme, to recommend what they originally agreed with the Minister in February. The original agreement was for a trust port with extended powers with enabling legislation accompanied by a voluntary agreement, which will take account of all the issues we have discussed. The board, the executive and I shall attempt to learn every lesson we can from the process so we become better stewards in relation to our fiduciary duties.

529.

The Chairperson:I should like to thank Mr Cushnahan and his colleagues. The session has been very useful. We shall hear further evidence - probably next Friday - and attempt to conclude the proceedings as soon as possible thereafter.

MINUTES OF EVIDENCE

Friday 11 May 2001

Members present:Mr A Maginness (Chairperson)
Mr McFarland (Deputy Chairperson)
Mr Byrne
Mr Hay
Mr R Hutchinson

Witnesses:Sir David Fell )
Mr R McCullough ) Harland&Wolff Group plc
Mr J Wallace )
Mr T Armstrong )

530.

The Chairperson:Thank you for attending this morning. We found the documentation very helpful, and we look forward to hearing from you.

531.

The terms of reference which are: to investigate the recent lease and development agreement between BHC and Harland&Wolff in relation to Titanic Quarter and connected transactions; to investigate the circ*mstances surrounding the allocation and variation of leases by Belfast Harbour Commissioners for both port and non-port land; and to investigate the extent to which their actions have served the public interest and, having considered these matters, to report to the Assembly.

532.

SirDavid, you are the lead witness, although you may confer with your colleagues. If someone wants to make a contribution, at the discretion of the Chair, that can be done. It might be helpful for you to introduce your colleagues before making your statement.

533.

Sir David Fell:Thank you very much for seeing us this morning. Our team consists of myself in my role as non-executive director and chairman of Harland&Wolff Properties Ltd and Titanic Quarter Ltd. I took up that appointment on 12February this year. I am also non- executive director and chairman of Harland&Wolff Group plc, which is essentially the shipbuilding side of the business, and I took up that position only on 21March this year. I have also been non-executive director of FredOlsenEnergy ASA, the ultimate parent company of the Harland&Wolff Group plc since January1999.

534.

On my left is JohnWallace, who is a non-executive director of Harland&Wolff Holdings plc and of Harland&Wolff Group plc since the privatisation of the company. He is also a non-executive director of Harland&Wolff Properties Ltd and Titanic Quarter Limited and has been a non-executive director of FredOlsenEnergy ASA since its establishment.

535.

We are also supported by RodneyMcCullough who has been the Properties General Manager at Harland &Wolff and is now company secretary of the two property companies Harland&Wolff Properties Ltd and Titanic Quarter Ltd.

536.

Finally, MrTomArmstrong is a solicitor by profession and is now company secretary of the Harland&Wolff Group plc.

537.

I convey apologies from our colleague, MrBrynjulv Mugaas, the chief executive of the Harland&Wolff Group plc, whom you had called as a witness, and from MrRobertCooper, the finance director of Harland&Wolff, whom we had intended to accompany our group this morning. Both were called at short notice to an intensive series of meetings in London yesterday with overseas parties who may be interested in placing shipbuilding orders with Harland&Wolff. Those opportunities do not come along frequently, and we hope you will understand their decision to stay overnight in London to carry on their work, given the state of play in negotiations, which we hope will come to a fruitful conclusion.

538.

You will gather from my introductory remarks that I am relatively new to both the shipbuilding and property sides of the business, but the team around me have provided me with helpful and constructive briefing on the issues that the Committee is investigating. I hope that I will be able to deal with the majority of the questions. Given my relative newness, I hope the Committee will bear with me if I have to refer to my colleagues on points of detail.

539.

I am also conscious of the fact that much of the confusion surrounding the issues that the Committee is investigating was created by the Ulster Television programme's reference to the substantial restructuring of the Harland&Wolff organisation, which took place on 7 February this year. The complexities of the organisational structures are difficult, and it might be helpful to the Committee if I handed round an organisation chart, both pre-and post-restructuring. This will help you see where we all sit in the organisation chart. Also, if there are references to specific companies within the group as we go through our evidence, you will be able to refer to the chart.

540.

That concludes my opening statement, and I am happy to take questions.

541.

The Chairperson:In your submission you mentioned the privatisation of the company and, at the time of privatisation, the Titanic Quarter, although it was not called that then. Although the size of the area was variable, it was identified as an area of potential development, and it is now taking a crystalline form. It was always regarded as an area that could be developed for purposes other than shipbuilding - for industrial purposes.

542.

Sir David Fell:That is largely true. When the Olsen group of companies was negotiating with the Government in 1989 for the acquisition of the company, which was then held in public ownership, it wanted to do two things, apart from acquiring the company. First, it wanted to give the local workforce and some local investors the opportunity to buy into the ongoing business. Secondly, it wanted to ensure that there was a mechanism in place to help smooth out the peaks and troughs in the cyclical nature of shipbuilding.

543.

When the Olsen group of companies went to the potential minority shareholders in the company, that is to say the workforce and local investors, it had to do so on the back of a carefully constructed prospectus. That prospectus was constructed with both legal and merchant banking advice. The merchant bankers, Morgan Grenfell & Co Ltd, issued the prospectus on behalf of the Olsen group. In that prospectus it stated clearly that the new operation would have four primary objectives designed to focus the direction and future of the group.

544.

Those objectives were, first, to establish a cost- effective group of companies with growth potential around the core business of shipbuilding and, secondly, to maximise the assets employed and to utilise effectively the skills and experience of employees at all levels.

545.

The third objective - the one that you are most interested in - was to broaden the base of the business over time through joint ventures, acquisitions or organic growth, including the development of surplus land and buildings whenever justified in order to help counter the cyclical nature of the shipbuilding market.

546.

The fourth objective was to provide an adequate rate of return to the shareholders, fair remuneration and a good working environment for the employees. You have been focusing on the third objective that was recognised as part of the deal at the outset.

547.

The Chairperson:Is it not the case that the project was seen to be for industrial development?

548.

Sir David Fell:There is no reference in the document to industrial development. That is why I said at the outset that you were largely correct. The objectives are as I have read them - joint ventures and the development of surplus land whenever justified in order to help counter the cyclical nature of the shipbuilding market. Nothing specific was said about the type of development that would take place on the land other than that it would not be a shipbuilding development.

549.

The Chairperson:You mentioned in your submission that in 1995, at the conference in Washington, a proposal was launched for the creation of the Titanic Quarter. You said that the proposal followed several years of study and assessment and that it was produced and launched internationally. However, during the period from privatisation in 1989 to 1995 there seems to have been very little development of the land in the Titanic Quarter. Is it fair to say that?

550.

Sir David Fell:It is true that there was no physical development of the land during that time, but it is equally true that considerable attention was paid throughout that period to how the land might best be developed. I think that all of the Harland&Wolff Group plc annual reports from 1990 onwards are included in our statement of evidence in the appendices. Each one refers to the property and the expectation that the property would be developed in due course.

551.

The Chairperson:We have noted that fact, but can you give any explanation for why there was no physical development of the land during that time?

552.

Sir David Fell:My colleagues might wish to say something about this because I was not involved in the business at that stage. I understand that there were two things happening at once. First, at the time of privatisation, Harland&Wolff was not the most competitive shipbuilding company in the world. A huge amount of effort was devoted to bringing the shipbuilding side of the business up to the standard where it could compete with the rest of the world. The company, therefore, focused mainly on that aspect of the business rather than on property.

553.

Secondly, to the extent that attention was given to property, work was done in three phases. The first phase was the decision to use some of the disused buildings on Queen's Island and turn them into the Channel Commercial Park. Those buildings were adapted or, in some cases, rebuilt in order to provide space for all sorts of industries, and that was developed throughout the 1990s. That was the first element of the venture into property.

554.

I think that we said in our evidence that we currently have 18tenants in that part of Queen's Island who employ about 400people. The development is now in phase five, we are about to start phasesix, and phaseseven is at the planning stage. It is an ongoing business and it is providing a range of employment opportunities in everything from steel stockholding to engineering to dot-com companies.

555.

The second element of the property development was to consider the best way to take the development of the lands that were peripheral to shipbuilding forward. That went through a variety of manifestations, including one that was led by Sir Richard Needham when he was minister. It was based on a Canadian experience, and the land was christened Canada Place at that juncture.

556.

The plan was that Harland&Wolff might respond to an initiative announced by the then Government to establish four enterprise zones in Northern Ireland with grant and fiscal incentives attached to them. Canada Place was worked on with the help of Canadian consultants, and it was granted planning permission. However, the Government decided not to proceed with the enterprise zones, and that plan was shelved. The lease was drawn up but not concluded. That was a lease for 125 years on the Titanic Quarter.

557.

The third and final phase of the development was when Fred Olsen, who was then chairman of Harland &Wolff, and his colleagues began to develop some ideas as to how that land could best be developed for the benefit of Belfast and the employees of Harland &Wolff. Fred Olsen was not on the board of Fred Olsen Energy ASA, as has been reported, but he, with colleagues in his group of companies, had experience of property developments elsewhere in the world, most notably in Singapore, Norway and London. The first concept that was publicly launched at the Washington conference was Titanic Park.

558.

Titanic Park did not consist of much more than taking the old main office building of Harland&Wolff, which is extensive, as the core of the development. Any single building replicating the Singapore experiment would be devoted exclusively to hi-tech business. It then went out to public consultation with people with business, political and community interests, et cetera. The message that we got back was that it is not enough to develop a working space - one needed to think also of developing an inclusive space containing working, living, recreation, social and heritage facilities.

559.

The Titanic Quarter emerged from that process in 1998. At the end of that year, we entered into negotiation with BHC.

560.

The Chairperson:There was a claw-back provision in the privatisation of Harland&Wolff that related to land that is surplus to shipbuilding. Was that provision for nine years?

561.

Sir David Fell:It was for ten years.

562.

The Chairperson:Did that affect the company's view on the development of this area?

563.

Mr Wallace:No. The terms of that arrangement were that there would be a sharing of profit if the land were disposed of, and there was no intention of disposal of the land, so the views were not affected.

564.

The Chairperson:Therefore, would the claw-back only come into effect if the land were sold?

565.

Mr Wallace:Yes.

566.

The Chairperson:Did the claw-back mean that if the land were sold and a profit was realised, then profit would be shared with the Government?

567.

Mr Wallace:Yes.

568.

The Chairperson:Was that on a graduated scale up to 1998 or 1999?

569.

Mr Wallace:It was up to 1999.

570.

The Chairperson:Did that affect the company's thinking on the development of this area?

571.

Mr Wallace:No, it did not. The thinking was to have the land developed, not to sell it.

572.

The Chairperson:In July 1999, there were initial heads of agreement with BHC. In the annual report of 1999 it states that the negotiations after that proved to be more protracted than had been envisaged. Was there any reason for those negotiations to be protracted?

573.

Sir David Fell:Chairperson, you are a lawyer yourself, and you know that many of the issues that arise during negotiations are of a legal nature. That was one reason. Other issues arose because the two parties came to the negotiating table with different objectives, and that was not unexpected. We had higher expectations of what might be delivered from such an agreement than what was eventually agreed with BHC. For example, we had hoped to persuade BHC that the right way to deal with the situation where the land was going to lie sterile until 2019 and perhaps beyond that - which was neither in our nor their interest, nor even the public interest -was to recognise the Olsen group's experience in property development and pass the freehold of the land to Harland&Wolff. Not surprisingly, they rejected that.

574.

Our fallback position was to negotiate for 100% of the leasehold for an extended period of somewhere between 125 and 250 years. We got neither of those things. We eventually got the fifty-fifty sharing arrangement, of which you are aware. We got two documents. The first was merely a restatement of the lease that was already in place. It had some modernisation and tidying-up, but it was effectively a restatement of the lease of the land, which goes through until 2019.

575.

The second document was a development agreement, under which - if the planners agreed a master plan with outline planning permission - individual plots within the 105 acres of the Titanic Quarter would be developed parcel-by-parcel. When each site was sold to a developer the lease would then change from the remaining 18 or 19 years to whatever was the appropriate length of lease, given market conditions, for the final negotiation. For example, office or industrial development would have attracted a lease of 125 years, and residential development would have attracted a lease of 250 years. Those are the current norms in the property market for developments of that type.

576.

I repeat that the agreement with BHC does not extend Harland&Wolff's lease beyond 2019. The only circ*mstances in which the lease would be extended would be following outline planning permission for a master plan and the passing on of parcels of that land to a developer with a specific end use.

577.

Mr R Hutchinson:I have a supplementary question. Why did you want confidentiality during the negotiations on the lease? Was there an intention to keep a Committee or the Department in the dark about some deals that were going to take place in relation to these leases?

578.

Sir David Fell:Absolutely not. One of the issues that irritates us is the way things developed made us look as though we were promoting an attempt to deprive public representatives of knowledge. That was never our intention. During the negotiations we asked for confidentiality - as any commercial company would. It would not have been in our interests to do otherwise in the course of negotiations.

579.

In our evidence to the Committee, we have given examples of where we publicly referred to the deal before the Ulster Television programme was shown. For example, the Fred Olsen Energy ASA accounts for the year ended 2000 were published to the Oslo Stock Exchange on 31 January 2001. That statement to the Oslo Stock Exchange referred specifically to the arrangement. There was no attempt on our part to make the deal secret.

580.

Mr R Hutchinson:After 20 December, was there still need for confidentiality? When would you have told the Department about the deal? When would you have let the Committee know?

581.

Sir David Fell:Harland&Wolff is a commercial company. The Harbour Commissioners have a clear relationship with the Department, but we do not have that relationship. We are in the private sector, and I question whether it is right to believe that it was incumbent on Harland&Wolff to inform either the Department or the Committee. Harland&Wolff is a commercial partner in a particular arrangement.

582.

There are two separate issues to consider. One is whether the Committee should have been told about the matter before it became aware of it - I know that the Committee took evidence on that last week. The second issue is whether there should have been a press release to ensure that everybody, besides those in the Assembly and in Government, would know about the deal. Through no design of our own and almost by accident, Harland&Wolff would have been responsible for there not being a press release.

583.

I have spoken to the people who were present when the deal was done on 20 December. When the documents were signed, Robert Cooper, the finance director of Harland&Wolff who took part in the negotiations, said to one of the lead officials of the Harbour Commissioners that he did not think that a press release was necessary. The Harbour Commissioners official said that he was content with that.

584.

They may have had different motives. Mr Cooper's motive was that the arrangement was part of a much bigger deal on which he was working, which was the corporate restructuring of Harland&Wolff. That was bigger because if there were no restructuring of Harland &Wolff, there would be no more shipbuilding in Belfast. The deal was not about maximising profit from property - it was about saving shipbuilding.

585.

Mr R Hutchinson:Did the Commissioners not want to release details?

586.

Sir David Fell:No. I repeat that the finance director of Harland&Wolff, Robert Cooper, said - almost casually - to the Commissioners' representative that he did not think that there was any need for a press release. They concurred with that. I cannot tell you what was in their minds chapter and verse, as I have no right to cross-examine them.

587.

I have spoken to Robert Cooper, and he thought as finance director of Harland&Wolff that the signing of the agreement with the Harbour Commissioners on 20 December was an important step towards a bigger objective, which was to relieve the balance sheet of Harland&Wolff of its huge debt so that shipbuilding could have a chance to survive. That was his primary focus. For him, the signing of the agreement was not the big issue, and that is what motivated him to suggest that there was probably no need for a press release.

588.

I have got to believe that that was what Mr Cooper had in mind and that there was no sinister motive. The fact that within four or five weeks the deal was referred to in a Fred Olsen Energy ASA document demonstrates that we had no desire to keep it secret. Having no desire to keep the deal secret is perhaps different from saying "Let's issue a press release."

589.

The Chairperson:It seems to be almost casual to say that a press release on the matter was unnecessary. At that stage, was Harland&Wolff indifferent as to whether there should be a press release or publicity about the deal?

590.

Sir David Fell:That is my understanding. I suspect that if Mr Cooper had heard that the matter was important enough to issue a press release, Harland &Wolff would not have stood in the way.

591.

The Chairperson:Was Harland&Wolff persuadable?

592.

Sir David Fell:Yes. It was not a big issue, and you are right to refer to it as a casual remark. It was not planned in advance to say "Let's make sure nobody knows anything about this". That was not the issue at stake.

593.

The Chairperson:Section 3 of a letter dated 26 March from the Harbour Commissioners to myself as Chairperson says they were in discussions with Harland&Wolff to regenerate the Titantic Quarter as far back as August 1999. Discussions on the detailed arrangements required to enable the project to proceed continued until the signing of legal documentation at the end of 2000, at which time Harland&Wolff Properties Ltd requested that BHC maintain confidentiality. That seems a much stronger statement than a casual request to perhaps not publicise something.

594.

Sir David Fell:I am conscious of that letter, and I have told the chairman of the Harbour Commissioners that, in the event of our being asked if we agreed with it, I would say that we did not. Indeed, we wrote to BHC around that time confirming our recollection of the casual conversation to which we have been referring.

595.

In fairness to BHC, I am not here to interpret on their behalf, and it is not right that I should do so. However, as I now understand it, they over-interpreted that casual remark because they believed that, since Fred Olsen Energy ASA was a publicly quoted company, there could not be a press release made available to the general public about the deal until the stock exchange in Oslo was informed.

596.

The Fred Olsen Energy company did not take that view. It told the stock exchange in due course, but it did not feel the need to inform it before all others. My understanding is that the Harbour Commissioners believed that that was the motivation behind the remark and, therefore, honestly believed that we were asking them not to publicise the matter until the stock exchange had been informed.

597.

The Chairperson:At that time, 20 December, the Harbour Commissioners would have had no idea about the later transaction between Harland&Wolff and Fred Olsen Energy.

598.

Sir David Fell:That is correct. They were informed about half an hour before the press release went out on 7 February.

599.

The Chairperson:Does that mean it was not a factor the Harbour Commissioners would have taken into consideration when they were concerned about confidentiality?

600.

Sir David Fell:I should be surprised if they did, for they were not aware of the deal.

601.

The Chairperson:The Harbour Commissioners are talking about commercial confidentiality. Even accepting the argument of commercial confidentiality, would it not have been appropriate to tell the Department, at least confidentially, that a fairly significant agreement had been signed?

602.

Sir David Fell:If you are asking me whether I believe the Harbour Commissioners should have done that, I do not believe myself competent to answer.

603.

The Chairperson:The agreement was signed, and there was no substantive change in the leases, save for their being consolidated into one general lease agreed between BHC and Harland&Wolff.

604.

Sir David Fell:That is correct.

605.

The Chairperson:However, a very important development agreement was signed. Is that right?

606.

Sir David Fell:Yes.

607.

The Chairperson:You have characterised it as an enabling development agreement. In other words, it was opening up the prospect of the area being fully developed and also of the possibility - perhaps probability - of leases being altered and extended into long leases.

608.

Sir David Fell:That is correct.

609.

The Chairperson:Would it be done on a piecemeal basis?

610.

Sir David Fell:It would be done on a piecemeal basis within a master plan.

611.

The Chairperson:It would be done fairly systematically but on a piecemeal basis?

612.

Sir David Fell:Absolutely.

613.

The Chairperson:Therefore the agreement was radically important to the development of this area?

614.

Sir David Fell:It was radically important for the development of the area and equally important to ensuring that shipbuilding has a future in Belfast. I am happy to expand on that, because it is relevant to the motivation behind the objectives of the Harland&Wolff negotiators in the property deal. Harland&Wolff improved its competitiveness considerably during the 1990s before it took on the orders for Global Marine Inc. It was sitting on a wall of cash before the Global Marine Inc orders were placed and was in a comfortable financial position.

615.

The result of taking on the orders for Global Marine Inc and the actions that Global Marine Inc took on the contracts concerning who was responsible for elements in them and in towing away the second of the two vessels without making the £20 million plus final payment on it, left Harland&Wolff totally crippled. Harland&Wolff could have had no future as a shipbuilder had not the parent company stood behind it during that period.

616.

Harland&Wolff went from having a mountain of cash - about £60 million at the start of those orders - to being £90 million in debt. That was a £150 million swing. The first part of the swing consumed all of the cash, but there was still a £90 million gap. The parent company - Fred Olsen Energy - stood behind Harland&Wolff during that time and was the sole provider of funding through a combination of loans and guarantees for a bank loan from HSBC. There were those in the Norwegian stock market who expressed some surprise at the extent of the parent company's support for its subsidiary in Belfast through this piece. It supported Harland&Wolff to the massive total of £99 million.

617.

With £90 million of debt on the balance sheet, notwithstanding the fact that it is litigating against Global Marine Inc for the performance of the contracts, Harland&Wolff could not get any more orders. No shipowner would place an order with a company that was carrying that level of debt. When shipowners place orders with a shipbuilder they require performance guarantees, in other words that they will either get the ship or their money back. Harland&Wolff was not in the financial position to do that. Therefore, at the end of last year, no shipowners were willing to talk to Harland&Wolff; it could not even get a foot in the door because of the structure of the balance sheet. Harland&Wolff faced the real prospect that it was the end of nearly 150 years of shipbuilding in Belfast. The only solution was to take some debt off the balance sheet.

618.

Fred Olsen Energy ASA is a public company. It must act commercially in the interests of all of its shareholders - most of whom are Norwegian - so it looked for a commercial solution. That was to acquire the value of the property then held by the Harland &Wolff group for itself. It took that property from Harland&Wolff's balance sheet and acquired it for the Olsen companies along with some minority interests as well, about which I will come back to. That took £46 million debt off Harland&Wolff's balance sheet, and it also lost its property interests.

619.

Fred Olsen Energy ASA had £46 million of Harland&Wolff's loans and loan guarantees repaid, and at the same time it acquired the right to develop the property. That was the big game for Harland&Wolff, and the development contract with BHC was an enabling device to get to the point where the property change could take place between Harland&Wolff Group plc and Fred Olsen Energy ASA. I repeat that what was driving the Harland&Wolff negotiators in the property deal was to find a mechanism for ensuring that the property could be transferred cleanly to Fred Olsen Energy ASA in order to preserve shipbuilding. That was the primary objective.

620.

The Chairperson:I know that Harland&Wolff and Fred Olsen Energy ASA were acting in their own commercial interests but, given the future of the shipyard, were they acting in the public interest?

621.

Sir David Fell:I cannot answer for Fred Olsen Energy, but speaking for Harland&Wolff Group and Properties, I do believe that it was in the public interest because, first, it preserved shipbuilding and provided economic activity in Belfast through shipbuilding, and that is in the public interest.

622.

Secondly, it provided the opportunity to develop a significant tract of land close to Belfast city centre in a manner compatible with what our public consultation informed us that politicians and the public wanted. It provided an opportunity for living, working, recreation and heritage use, all of which is in the public interest.

623.

Thirdly, the contract which we signed with BHC was in the public interest in the sense that the risk with the project lies with Harland&Wolff and not with BHC. For example, if the planners in their wisdom choose not to give planning permission to this project, we have taken the risk and Fred Olsen Energy ASA has taken £46 million onto its balance sheet. That would revert to very little because if the planners do not give approval - outline planning permission for the master plan - the lands revert to their original state before the development agreement was signed. They would go back to lying sterile until at least 2019.

624.

We have taken all the risk over that period which, under the contract, is to 1 July 2005. Therefore, if by 2005 we do not have planning permission, none of this development, which I suggest is in the public interest, will take place, and the Olsen Group of Companies will have taken the financial hit - not BHC.

625.

The Chairperson:The agreement transformed the value of that land from a minimal value to what value?

626.

Sir David Fell:£46 million, less £5 million of debt - that is why you see £41 million.

627.

The Chairperson:It is possibly even more than £46 million because this is a shared agreement. I quote from Harland&Wolff's submission

"In an arm's length transaction, these assets were realised for a gross sum of £46 million, a price which fully reflects the value of Harland&Wolff's shared interest in Titanic Quarter and arrived at after obtaining a number of independent valuations."

628.

Would I be right in saying that that would represent half the value?

629.

Sir David Fell:As far as Titanic Quarter is concerned, yes. The figure we have quoted includes our half of the discounted cash flow back to present day of the expected premium that we will get on the land as we develop it over the next 15 years.

630.

The Chairperson:It has become a very valuable asset for both Harland&Wolff and BHC.

631.

Sir David Fell:We have released what otherwise would not have been released until at least 2019. Therefore, that land has been brought into accelerated use and is valuable now.

632.

The Chairperson:The overall value must be approximately £80 million because there are about 83 acres of land. Harland&Wolff would have received half of that amount of money, and BHC would have the received the other half. That is a substantial increase in the asset.

633.

Sir David Fell:That would be a substantial increase if your figures were correct. The matter is more complicated than that. The Northern Ireland Science Park has to be included, and some areas of the land are not land at all. I assume that you have seen figures from BHC that show the amount of land that they have put into the deal. They put about 20 acres into the deal, and roughly half of that is under water. That land needs to be infilled, which will involve considerable expenditure. The increase in valuation for the areas outside the Northern Ireland Science Park, which is the part that you are concerned about, is between £50 and £52 million. We would receive £26 million.

634.

Mr McFarland:I think that you said that the business plots of land were on a 125-year lease and that the residential plots were on a 250-year lease. It is a joint development. Are you familiar with the Boston Harbour MassPort experience? An area was developed in Boston that is similar to the area that we are developing in Belfast. A system was devised whereby the land was leased on a basic lease, but there was an agreement that there would be an additional sliding scale for companies that moved onto that land. Therefore, if a company did well, Boston took an increased share of the profits. If the company did well, then so did the city. That is a commercially interesting idea.

635.

You, as a company, are out to get the maximum benefit. You said that the project was driven by the need to preserve shipbuilding. Public interest might be one of your side interests, but if something is in your interest then that will take priority over something that might be in the public interest, except on a philanthropic level. A company will not make a loss because it is in the public interest.

636.

Sir David Fell:You are correct, but I would not describe the project as a philanthropic interest. I would describe it as a personal, altruistic interest on the part of Fred Olsen. I do not know if you have met him, but he is a man of real vision. He is in his 70s now, but he is a remarkable man. He is not just a businessman - he is something of a philosopher. It was left to Fred to envisage what could be done with the Titanic Quarter lands. He does have a vision, and he is very anxious to see the project taken to its conclusion. He is clearly a man who is driven by commercial considerations because he is a very successful businessman, but he is the most altruistic businessman that I have come across. It would be wrong to say that the project is wholly commercial, because there is a real element of altruism in it.

637.

Mr McFarland:I do not doubt that, but you were quite exercised when you explained that, from Harland &Wolff's point of view, the project was designed to save shipbuilding.

638.

Sir David Fell:When we entered our negotiations with BHC, that was not our driving force. Our aim was to bring the Olsen vision into play. Our objective changed during the negotiations because we were driven to change by the financial performance of the shipbuilding company.

639.

Mr McFarland:When did that change occur?

640.

Sir David Fell:The crisis occurred in November 1999.

641.

Mr McFarland:The other side of the coin is that BHC are joint developers with you.

642.

Sir David Fell:No, they are our landlords.

643.

Mr McFarland:Yes, but they are getting 50% of the profits and in theory 50% of the costs and 50% of the balance.

644.

Sir David Fell:That is correct.

645.

Mr McFarland:Therefore, as I understand it, you are jointly developing with them.

646.

Sir David Fell:No, that is not correct.

647.

Mr McFarland:They came to the Committee meeting last week and repeatedly explained that to us - and I think I am correct in saying this - they were up for 50% of the costs and 50% of the profits.

648.

Sir David Fell:You are absolutely right, but we are not in a joint venture with them. I must make that clear. They are our landlords - we are their tenants. However, we have a development agreement that governs the development of this particular land, and it provides for agreement between both parties as to how the land will be developed. When that agreement is reached, only Titanic Quarter Ltd will be responsible for the development of the land.

649.

We will incur the cost of the environmental works and the infrastructure up front, and we will bill BHC for 50% of those costs. We will then develop the plots, and we will either get a rent roll or a premium for the sale of the plot in question. We will share the premiums that we make on those with the BHC. You may say that I am being pedantic. However, the truth is that Titanic Quarter will do the development, but BHC will share the costs and share the profits. It is not a joint venture.

650.

Mr McFarland:I am concerned that BHC have a fiduciary duty to the people of Northern Ireland and Belfast. They talk about it constantly. Leaving aside altruism for the moment, if your interest is essentially commercial, their interest should be to do the best deal for Belfast. That is what they are tasked to do.

651.

Given the Boston experience, why did we hear the phrase "This is the Northern Ireland norm" trotted out time and again last week? We heard that it is normal to be given a 125-year lease if you are developing business, and if you are developing houses or hotels, as you are doing, you will be given a 250-year lease. Those are obviously the packeted leases that will eventually apply. Why? This is potentially prime Belfast development land and, given the way Belfast is going and the fortunes that have been made elsewhere in Belfast in development, it is potentially an enormous gold mine.

652.

Perhaps this is not a question for you directly, but have those people who have been tasked with the fiduciary duty of doing the best for Northern Ireland struck as good a deal as they could have? Perhaps they had the best interest of shipbuilding at heart. It would be interesting to ask them if that was the case. I am curious about that.

653.

Sir David Fell:The joint objective of the development agreement is for both sides to maximise the premiums. From the BHC perspective, it would involve maximising the premiums for the benefit of the people of Belfast. That can be done in a number of ways. You could have what you referred to as a ratchet agreement on the leases, similar to the Boston model. Alternatively, you could offer a fixed term lease and maximise the premium you get on the lease. You would get a bigger premium for a 125-year lease than you would for a 50-year lease. You will not get any premium with a 20-year lease, because no developer is going to build premises on a piece of ground with such a short lease. That is where we became involved in the first place. From that point of view there are different ways of maximising the premium from the land as it is developed. I take your point. It may be the case that when we reach that point there may be cleverer ways of maximising the premium - I thought that my legal colleague was going to contradict me, but he has confirmed that I was going to say the right thing - and that the option would still be available to us to do what you suggest under the development agreement.

654.

Mr McFarland:I understood from the evidence that we heard from BHC that it was - and I think that the lovely expression was used - "a done deal".

655.

The BHC have repeatedly told us that the whole business is a done deal. That means the signing in December and the arrangements for the project, including those leases. Harland&Wolff and the BHC have agreed what the project will be. Future flexibility, or the possibility that the venture might be open for playing with further down the line, has not been mentioned.

656.

Sir David Fell:I understand what BHC mean when they talk about a done deal. The deal is done in the sense that a legally binding contract is in place. There is scope for flexibility in the contract so that the primary objective can be achieved. That primary objective is to maximise the premiums. I can see the attraction of what you are suggesting. I was unsure whether the agreement provided for that flexibility, but Tom Armstrong assures me that it does, and it is therefore still an option that could be pursued.

657.

You earlier made a distinction between the Commissioners' having the primary public interest and Harland & Wolff's having none. Harland&Wolff does have an additional public interest - in the preservation of the Titanic slipways, for example. These are part of Belfast's and Northern Ireland's heritage, although part of the shipyard's heritage. It is important that we build on the heritage opportunity there. Had we been taking a purely commercial approach, we would have said that we would not have any museums, heritage sites, or anything similar. We would say that we are simply going to develop high-tech offices there, cram the people in and maximise our return.

658.

We are not saying that. We are saying that we recognise our need to serve the public interest, using heritage as an example. We want to serve the public interest in other ways, but those are less tangible in the sense that we want to make sure that there are adequate public grounds for such actions.

659.

Mr McFarland:We discussed that last week with BHC. I understand that the Laganside Corporation is being brought into this development consortium. A suggestion was made last week that was refuted, but not clearly. There is a suggestion that the Laganside Corporation has been brought into the consortium because it will allow access to European funding.

660.

European funding will build the infrastructure here for nothing. Therefore, the companies developing the project will have the infrastructure put in at no cost. Developers will then simply build the buildings and make lots of money. There was confusion about that last week, and I am interested in your views.

661.

Sir David Fell:The Laganside Corporation has not been brought into this consortium. At this juncture, there is no decision on whether the Titanic Quarter will be within the Laganside boundary.

662.

Mr McFarland:I understand that that is being seriously discussed.

663.

Sir David Fell:It is possible. I understand that the Department for Social Development is considering the matter, and that the Minister for Social Development is responsible for delineating the Laganside boundary.

664.

Mr McFarland:I understand that there have been discussions between those involved in the Titanic Quarter and this project, and that those are well advanced.

665.

Sir David Fell:It is irrelevant whether those discussions are well advanced, because the Minister for Social Development will make the decision. Whether the discussions are advanced, only starting or completed will not settle this issue. A political decision on the boundary of Laganside will be taken.

666.

That said, Harland&Wolff would be delighted to see the Laganside Corporation involved, but not for the reason that you gave. We do not have a dreamy view that Europe will pay for all of the infrastructure - we simply do not believe that that is on.

667.

We see attractions in the Laganside Corporation's being involved. We see attractions, for example, in providing continuity of experience round the entire Laganside area, which the Laganside Corporation could bring to bear. We would look at the financial aspect of a walkway if Laganside were to embrace this area. As you are aware, almost all of the Laganside area currently has a very pleasant walkway on the east bank of the river. The Laganside Corporation developed that walkway themselves.

668.

Our vision is of a walkway extending from the city centre right down through the Titanic Quarter to the Northern Ireland Science Park. If the Laganside Corporation were involved, the responsibility for that walkway would be a consideration for us. If it is not, we would have to consider whether we can afford a walkway. That decision would be made down the line.

669.

We see benefits in Laganside's involvement apart from that. In addition to continuity, there is marketing. The brand name of Laganside alongside the brand name of Titanic would be very good. Laganside has made a considerable impact at international property conferences and so forth, so we see benefit from having the Laganside brand name. We also see benefits from having access to Laganside's experience of the community interface. It has been very good at developing the community interface in all of its work, and we think that it would be beneficial to us. I can assure you, Mr McFarland, that we are not driven by a naked belief that this is access to a pot of gold. We do not believe that.

670.

Mr Hay:Do you, as a commercial company, have a good working relationship with BHC?

671.

Sir David Fell:It is a businesslike relationship.

672.

Mr Hay:Have they worked with you in a way that has not created a problem for the company?

673.

Sir David Fell:No.

674.

Mr Hay:Can you develop on that?

675.

Sir David Fell:It would be surprising, in a negotiation where different sides have different objectives, if we were always to see eye to eye. I gave a couple of examples earlier. We would have liked access to the freehold of the land, but they were not going to give us that; we wanted access to the leasehold, but we were not going to get that; and we wanted to have planning permission for 125 years from the outset, and we did not get that. That was businesslike, but it was not exactly helping the corporate objectives of Harland&Wolff.

676.

Another example, outside what we are talking about here, is that back in Richard Needham's time you will recall that the scrap metal quay was moved from the Queen's Bridge right down to the end of the Queen's Road. We believe that that is inimical to the development of that area - particularly to the people at the far end of the site - and we would like to see action taken to find another home for that. We have not seen eye to eye with BHC as to where that might be. That is another example of how we are businesslike, but we do not always see eye to eye. We do not see ourselves as being in business to massage each other's egos.

677.

Mr Hay:Was there discussion at any point between yourselves and the BHC on when they should, at least, be letting the Department or the Minister know about exactly the type of business deal that might be signed in the future.

678.

Sir David Fell:I cannot address that, Mr Hay. That is a matter between you and BHC. It would not be proper for me to address what they should or should not have done. They know, and you know better than I do, what their relationship is with the Department.

679.

Mr Hay:I declare an interest, Chairperson, because I am a member of the Londonderry Port and Harbour Commission.

680.

The Chairperson:That has already been publicly disclosed, but I welcome that reiteration. Sir David, were you aware of negotiations between the Department and BHC in relation to a memorandum of understanding on the disposal of land?

681.

Sir David Fell:I personally was not. Yesterday I asked all of those involved in the discussions, and they told me that they were not.

682.

The Chairperson:Thank you very much. I have one further question. If the project comes to fruition, this will be a mixed development, but the emphasis seems to be - and correct me if I am wrong - more on property development in the sense of real estate, rather than either commercial or industrial development. Can you comment on that?

683.

Sir David Fell:Yes. There is a long way to go before we have planning permission for this. At this stage all we have is the beginning of a vision in our minds as to what we would like to achieve. We have employed planning consultants, and we want to develop ideas to the point where we can offer those who are drafting the Belfast metropolitan area plan our ideas on how the area might be developed. They can discard them if they disagree with them, or they can incorporate them - or talk to us about them in the interim.

684.

At one end of the property we have the Northern Ireland Science Park, and at the other end we have the Odyssey development. We intend to have a series of linked proposals between those two developments. That will create a vibrant new Belfast city quarter for living, working and recreation. We plan to have some high-specification, high-tech business space to build on the catalyst of the NorthernIreland Science Park and business incubation. We intend to make imaginative use of the Titanic slipway and heritage features as a historic focus. We would like some high-density residential development, potentially in mixed-use buildings.

685.

There needs to be sufficient critical mass of business, leisure and support facilities. We need local support with retail and services - food, drink and restaurants - around a marina. That would create something like the StCatherine's Dock development in London. We plan to have boat moorings in the Abercorn Basin and potential new anchorage for cruise ships.

686.

We would like the walkway to be extended from the Odyssey to the end of the Titanic Quarter site. We envisage an environmental upgrade of the Queen's Road as the principal transport corridor. We are also aware of the need for sustainable integrated transport services, and providing parking and service access to the site. We even thought about discussing possible pedestrian bridge links with the planners. The city centre would become a continuum into the Titanic Quarter. That is our current vision. It would all be done in a way that would integrate the shipyard working alongside it.

687.

The Chairperson:I have one technical point. At the end of the business overview, 'Titanic Quarter', the company secretary stated that the group's property interests were sold to Ivy Woods Properties Limited in February 2001 and that Titanic Quarter Limited was included in the sale. What is Ivy Woods Properties Limited?

688.

Sir David Fell:It was an UK company created by Fred Olsen Energy ASA for the sole purpose of acquiring the property interests in Harland&Wolff. It wanted an UK company to conduct the deal. It is a one pound company created solely for the purpose of acquiring the property. It carries with it a promise from Fred Olsen Energy ASA that there will be an opportunity for the minority shareholders in the shipbuilding side of Harland&Wolff to buy into the property company so that their interests in the overall business of Harland&Wolff - shipbuilding on one side and property on the other - are not diluted by this deal. They will still have the opportunity to buy into the deal at the same price as Olsen bought into it.

689.

The Chairperson:Thank you very much.

MINUTES OF EVIDENCE

Friday 11 May 2001

Members present:Mr A Maginness (Chairperson)
Mr McFarland (Deputy Chairperson)
Mr Byrne
Mr Hay
Mr R Hutchinson

Witnesses:Mr A Reilly ) Carson McDowell Solicitors
Ms R Carson )

690.

The Chairperson:Thank you very much for attending this evidence session. I have a couple of questions about the agreement reached on 20 December 2000. We have a copy of the letter dated 30March to the Department for Regional Development from Carson McDowell Solicitors. Am I right that you are a partner in that company?

691.

Mr Reilly:Yes.

692.

The Chairperson:The letter is very helpful. It recounts the history of the land and explains how Carson McDowell Solicitors were instructed in mid-1999 to prepare a master agreement to facilitate the regeneration of Titanic Quarter, comprising 82 acres, and to ensure that the land interests of the Belfast Harbour Commissioners (BHC) were maximised. It emphasises that there is no change in the lease in relation to this area except that the various leases were consolidated into one lease. Was that done for the convenience of the future development of this land?

693.

Mr Reilly:It was to unify the leases - to put them on the same basis as the non-core lease, which expires in 2019.

694.

The Chairperson:It was to achieve uniformity - so that all the parcels of land contained in the 82 acres would be starting from the same baseline. The BHC are therefore correct in saying that there is no change in the length of the lease, and it would be wrong to say that Titanic Quarter Ltd was entitled to an unrestricted lease for the Titanic Quarter for 250 years.

695.

Mr Reilly:Yes.

696.

The Chairperson:However, there was an agreement which you helped to negotiate and draw up. That agreement radically altered, did it not, the position of those lands?

697.

Mr Reilly:It did not radically alter the position as at day one. If the master plan and conditions for planning permission were satisfied, the agreement provided that the development could take place, and that would, in due course, result in longer leases being granted.

698.

The Chairperson:The Committee and Sir David Fell talked about this being an enabling agreement. Do you think that is a good description?

699.

Mr Reilly:I do.

700.

The Chairperson:Do you agree that the agreement provided the potential for the leases to be extended to 125 years or 250 years?

701.

Mr Reilly:Yes.

702.

The Chairperson:Do you also agree that it transformed the value of that land from a fairly minimal value to a substantial value?

703.

Mr Reilly:It provided the opportunity for that, but I do think that anyone really knows the values. The separate interests of the BHC and Harland & Wolff Properties Ltd prior to the agreement were not separately valuable - neither was valuable. The agreement represents an opportunity for the increase of land value, but it is not a clear opportunity. It is not known what the real costs will be, what the infrastructure costs will be or whether planning permission will be granted. Therefore it is speculative to consider values at this stage.

704.

The Chairperson:But it did increase the value of the asset, even if we do not know by how much it is increased. It increased the value of the asset not only for Harland & Wolff but also for the BHC. Is that correct?

705.

Mr Reilly:Yes.

706.

The Chairperson:It increased the value of the asset to the point where Harland & Wolff was able to get a buyer for its interest in the land. That buyer was Fred Olsen Energy ASA, which gave £46 million for the land. Is that correct?

707.

Mr Reilly:Reportedly, yes.

708.

The Chairperson:I believe that it is fact. It was certainly a very valuable agreement for Harland & Wolff.

709.

Mr Reilly:Yes. Valuers were apparently able to give advice to Harland &Wolff, and that enabled a price of such magnitude to be negotiated with Fred Olsen Energy ASA.

710.

The Chairperson:You say that it opened up the potential of this land, but it also had an immediate consequence for Harland & Wolff insofar as it received £46 million.

711.

Mr Reilly:That is correct.

712.

The Chairperson:It also had immediate implications for the BHC. They saw their asset increasing substantially in value.

713.

Mr Reilly:Yes, but I cannot possibly say to what extent they would benefit.

714.

The Chairperson:It is a substantial increase in value - it is not minimal.

715.

Mr Reilly:I am sorry if I appear to be difficult, but I do not think that any value can be put on their interests at this stage, and, of course, I am not a valuer.

716.

The Chairperson:If one were to look at the agreement and the changes in the leases, would it not be pedantic to say that this was just a technical or nominal change in the relationship between Harland & Wolff and the BHC?

717.

Mr Reilly:It would be pedantic to say that; this agreement represents a tremendous step forward in the relationship between the parties.

718.

The Chairperson:It was a substantive agreement which materially changed the interest that the BHC had in that land. Is that not correct?

719.

Mr Reilly:It is an enabling agreement which allowed that to come about.

720.

The Chairperson:It had immediate not just potential effects.

721.

Mr Reilly:The immediate effect was that those valuers were prepared to advise Harland & Wolff companies, but that is as far as I can go.

722.

The Chairperson:To look at this agreement and to regard the change in the lease as simply being a few technical changes consolidating the lease would be a very limited interpretation of the significance of the agreement.

723.

Mr Reilly:The agreement is significant as an opportunity. It is not substantive, realised gain at this point.

724.

Mr McFarland:The Committee has been examining the future of the port of Belfast for about a year. We heard evidence from an expert witness from GB who works with port issues at an academic level. He made the point that an organisation that runs a port and is excellent at its job - £9 million profit a year and £20 million in the bank - is not necessarily best placed as a developer. It does not necessarily have the required development skills. That, therefore, raises the question of the skills that the BHC are developing.

725.

You have been mentioned previously by the BHC as being their outstanding wizard.Is it left to you to discuss terms in the property negotiations, or are you simply the legal expert ensuring that the i's are dotted and the t's are crossed? Do you have a role as an expert in negotiating property developments? I ask that because it seems odd to me that you have a slight disinterest in the value of the property. On several occasions you have said "Harland & Wolff valued it". Why were the BHC not interested in the size of the pile of money that was going to come out of this? We have had quoted to us that the Titanic Quarter development is very important in keeping the port running. We have been told that the revenue streams from the Titanic Quarter will be critical. Surely someone must have produced fairly detailed cash-flow figures to allow it to be said that this development is of such benefit that it will keep the port running.

726.

Mr Reilly:I do not negotiate deals in that sense. I am not a deal maker for the BHC. I translate their instructions into documentation, and in this case that was difficult. There was no off-the-peg precedent. I am aware of no agreement like this, because it is translated strictly in terms of the landlord and tenant relationship, given that the BHC do not have powers to develop or powers to enter into a joint venture arrangement. I had to produce a document that would record the parties' wishes in this case.

727.

I am not aware of any valuation having been carried out. I think that it would be very foolhardy for the BHC to carry out any valuation, because they do not know these lands. In particular, they do not know the state of contamination. They do not know the extent of remedial works or what the costs are likely to be. Obviously Harland & Wolff is in a better position to know that than the BHC. Also, because the planning process is so difficult at the moment, it is almost impossible to know precisely what land uses will be permitted.

728.

Mr McFarland:They have signed up to a deal - on which we have had a fair amount of detail at various stages - but you are saying that they are not exactly sure what the outcomes will be.

729.

Mr Reilly:That is absolutely correct.

730.

Mr Hay:Does your company advise the BHC on all legal matters concerning them?

731.

Mr Reilly:Not on all legal matters. We advise them on all property matters. I have to qualify that - we have not acted in relation to D5.

732.

The Chairperson:That brings our discussion to a conclusion. MrReilly and MsCarson, thank you very much indeed.

APPENDIX 3

LIST OF MEMORANDA SUBMITTED TO THE COMMITTEE (UNPRINTED)

John Simpson

Hamilton Osborne King

Belfast Harbour Users Group

East Belfast Business Initiative

Northern Ireland Federation of Clubs

School of the Built Environment

*Harland & Wolff Properties Ltd.

*Titanic Quarter Ltd.

*Harland and Wolff Group PLC

*Fred. Olsen Energy ASA

Royce Developments Ltd.

Lisney Property People

Belfast Industrial Heritage Ltd.

Museums & Galleries of Northern Ireland

Port of Belfast Trade Union Side

Belfast Harbour Commissioners

Laganside Corporation

Northern Ireland Science Park Foundation

Kearns Mancini Architects Inc.

Minister for Enterprise, Trade and Investment

East Belfast Enterprise Park

Sheridan Group

Northern Ireland Assembly Committee for Social Development

Northern Ireland Tourist Board

Belfast City Council

The Odyssey Trust Company Ltd.

Confederation of British Industry

* Composite submission

The papers listed above were submitted to the Committee but have not been printed. They may, however, be inspected by Members in the Assembly library and by the public in the Regional Development Committee office, by prior arrangement with the Committee Clerk, during normal working hours. (Tel: (028) 9052 1281).

Report on the Inquiry into Titanic Quarter Leases (2024)

References