Wednesday, 11 February 2015

Gain share and a £4.5 million law suit

This week's alarming revelation that Scottish Borders Council has been involved in a £4.5 million law suit since August 2013 once again emphasises the value of an inquisitive local press.

Borders council taxpayers should be grateful for the investigative journalism of the Border Telegraph which broke the story on its front page today (Wednesday), and left many of us wondering how the council managed to get itself into such a difficult and potentially costly situation.

One thing's for sure...the great Borders public would never have been told of the Court of Session action by management consultant Barry Phelps had the newspaper not stuck its nose into the local authority's private business. Yet surely the sheer scale of the litigation - and the council's decision to defend the claim - must have been debated and approved by a committee of elected members, and duly minuted. Or was it?

That is the first question requiring an answer in a saga which should also warrant a full investigation once the parties have their day(s) in court and the judge delivers his decision.

For those of you who haven't read the Telegraph article a brief resume of the case might be of assistance. It appears Mr Phelps and his company D & P Management Enterprises was hired by the council between 2008 and 2011 to help procure the £65 million integrated waste management facility at Easter Langlee on the outskirts of Galashiels.

The legal action centres on a so-called gain share agreement between SBC and Mr Phelps under which he was to receive a percentage return based on the savings he achieved on behalf of the council. Mr Phelps obviously claims to have cut the bill for the Easter Langlee project by many millions of pounds, but SBC say they owe him nothing.

Mr Phelps says he's already handed over £300,000 in fees to his legal team while the council has engaged hot-shot law firm Brechin Tindal Oatts (BTO) to fight their corner. SBC confirmed to the Telegraph that they had (so far) spent just over £30,000 on the case, but all fees would be recouped in the event of a win in court.

It was BTO which successfully beat off an attempt by the Information Commissioner to impose a £250,000 penalty on SBC for multiple data protection breaches in 2013. It's not clear whether the local authority managed to claw back the hefty six-figure legal bill which they ran up during those proceedings.

Following the Border Telegraph's expose of this disturbing story the council issued a statement in the following terms: “There is currently an ongoing action in the Court of Session raised by D&P Management Enterprises Limited against Scottish Borders Council.

“A director of D&P Management Enterprises, Barry Phelps, was engaged as a consultant to assist SBC in connection with the procurement of the integrated waste management facility at Easter Langlee near Galashiels.

“Mr Phelps is representing D&P Management in the claim which was first raised in August 2013 and relates to the recovery of allegedly outstanding payments arising out of gain share provision.  SBC disputes the claim in its entirety and is defending the action on the basis that no sum is due to the company.

“In terms of legal fees, the Council has thus far spent £30,316 but if the Council successfully defends the claim it will recover its costs. If the claim was successful, the Council would put appropriate plans in place.

“The matter called in court on Friday 6 February to deal with technical issues, with a full hearing of the case to take place in the Court of Session in March and April. As this is a live matter before the Court, sub-judice rule is in force, and as a result, the Council cannot comment any further on the case.”

A future investigation into the episode might reveal to the public just what is involved in a gain share provision. Which members of SBC were told about this arrangement, who exactly signed off the deal with D & P Management Enterprises and Mr Phelps, and how common is this practice within the realms of Scottish local government procurement. 

No comments:

Post a Comment