Common good reform kicked into long grass

EXCLUSIVE by DOUGLAS SHEPHERD

An initiative aimed at reforming laws governing Scotland's centuries old Common Good property and funds has been scuppered after the Scottish Law Commission (SLC) deemed the subject was not worthy of consideration.

It means work done by Holyrood's Local Government and Communities Committee, including evidence taking and a call for written submissions appears to have been rendered a complete waste of time with the controversial topic stamped 'completed'.

Committee convener Bob Doris MSP had written to Lord Pentland, the SLC chairman to include proposals for Common Good legislation in the next programme of law reform.

Mr Doris, whose request followed deliberations by his committee, told Lord Pentland: " Over a number of years the issue of modernising the statutory framework for common good property and funds has featured in the work of Scottish Parliament Committees. The Local Government and Communities Committee has sought written views and taken oral evidence on this issue".

The letter continued: " At the meeting on 20 December 2017 the Committee heard that whilst work is underway at the Scottish Government to provide for a register of common good other challenges remain. These challenges stem, in part, from the ancient patchwork of legislation and subsequent court rulings which have arisen in this area over time. It is fair to say that it is an area where legal expertise is particularly vital in understanding how those aspects work together.

"Work in this area is long overdue but we also recognise that as a Parliamentary Committee we could not do justice to this issue in the time we have available and given the specialist legal knowledge required to modernise legislation in this area."

Mr Doris invited Lord Pentland to consider a late request to include consideration of modernising the law in the area of common good property and funds as part of the SLC's agenda. 

In his response the SLC chairman said that In the course of last year "we consulted widely on topics for inclusion in our Tenth Programme of Law Reform.  I should say that one consultee did raise the issue of common land and common good as a potential law reform project.".

But Lord Pentland added: "We took the view that there was inadequate support for a project on the law of common good property and funds, and that other topics had to be given higher priority."

As Not Just Sheep & Rugby reported recently many local government lawyers are against reform of the common good legislation. One of them told the committee he would prefer to see all common good assets - across Scotland these value tens if not hundreds of millions of pounds - handed over to local authorities to "do with as they please".

But according to retired Selkirk GP Dr Lindsay Neil, a fierce campaigner in the defence of Selkirk's common good property and funds, such a proposal was likely to provoke a riot in Hawick.

Some of the strongest written submissions to Mr Doris's committee did in fact emanate from Hawick.

Former Hawick councillor Andrew Farquhar told the committee: " Common Good assets have not fared well under Council Stewardship due to councils having to do more with less.   Administering the Common Good is low down in their list of priorities.  E.g. Progress made with registers of assets! 

"In communities which still have Common Good assets their full potential is not being realised. The assets could do much more if properly managed under some form of local democratic control with good management."

Meanwhile Hawick businessman Derick Tait, who has served on a number of local civic committees wrote:"Sadly, as local government has become bigger (but not better), management of individual common goods has merged and passed into the trusteeship of those who neither appreciate their significance and importance to local communities, nor care particularly about their management.

"In recent years, I personally have been aware of instances of failure to manage common goods properly in three towns, principally because of lack of local knowledge.  There have also been recent instances in my home town Hawick, where public meetings have been convened to demand proper and dedicated management by trustees (councillors) from outwith the town.  Unfortunately, as the drive towards centralisation and city regions develops, remoteness of trustees from local knowledge will continue."

One advocate for change who observed the committee's discussions at close quarters told us: " You can tell there was a lack of interest by the fact that three members didn’t even ask any questions. Not sure many committee members even read the written evidence."

The decision to kick this issue into the long grass - possibly for decades - must be regarded as regrettable. It means past abuses of common good assets, and the mismanagement of land, property and cash may well continue into the future.

Coincidence or conflict of interest?

Research reveals Borders council auditors' links to offshore trusts registered at same British Virgin Islands address as managing shareholder of council's failed waste management investment fund.

SPECIAL REPORT by DOUG COLLIE and EWAN LAMB

The global accountancy firm KPMG which checked the books of Scottish Borders Council for five successive financial years, and gave the local authority 'a clean bill of health' following the New Earth Solutions waste management scandal, audits the accounts of more than a dozen offshore trusts registered in the British Virgin Islands (BVI).

Thousands of files made public following the "leak" known as the Paradise Papers contain information showing those trusts - audited by KPMG Glasgow - are based in the offices of Panamanian lawyers Mossack Fonseca at  24 De Castro Street, Wickham’s Cay, Road Town, Tortola, British Virgin Islands.

Not Just Sheep & Rugby has previously revealed that Premier Group Distribution Inc (PGDI), the managing shareholder of New Earth Solutions and New Earth Recycling & Renewables [Infrastructure] Inc (NERR) is also registered at 24 De Castro Street, Wickham’s Cay, Road Town, Tortola, British Virgin Islands.

So was this "coincidence" or potential conflict of interest declared when KPMG signed off SBC's accounts for 2014/15, including the loss of £2.4 million of taxpayers' money after NERR could not come up with the £23 million needed to provide a waste management solution for SBC? And how deeply did KPMG delve into the conduct of NERR and its controllers and promoters Premier Group Isle of Man?

The NERR fund, as we reported last week, continues to be the subject of detailed investigations by liquidators Deloitte who have managed to assemble 200,000 documents linked to the failed investment fund. How many of those papers were inspected by SBC's external auditors?

Unfortunately not a single politician has been prepared to raise the issue despite compelling evidence of council incompetence throughout the four-year contract with New Earth Solutions Group (NESG). Instead they have been content to accept KPMG's assurances that everything was handled properly while the accountancy firm acted on behalf of Audit Scotland between 2011 and 2016.

The auditing of public authority accounts in Scotland provides highly lucrative contracts for KPMG and other accountancy businesses as a result of out-sourcing by Audit Scotland, the country's public expenditure "watchdog".

.On June 27^th 2011 Audit Scotland published a contract award notice which revealed that 38% of the audit work for Scottish public bodies, including councils, government departments and further education colleges had been placed with various accountancy firms including KPMG, Ernst & Young, Deloitte’s and several others. The total value of these lucrative contracts came to £31.889 million, covering the financial years 2011/12 to 2015/16.

KPMG was successful in securing 28 separate accounting appointments across the three sectors after tenders were submitted by their Edinburgh office. The value of their share of the work was: Local authorities £4.204 million; Central government bodies £1.511 million; FE Colleges £500,000; a combined total of £6.215 million.

The tendering exercise was repeated in 2016. In March of that year Audit Scotland again published a contract award notice covering the financial years 2016/17 to 2020/21. This time the notice did not provide amounts won by individual firms from a pot worth £23.295 million representing 36% of Scotland’s public audit work. KPMG’s Glasgow office was among the successful bidders.

The external auditors’ report on the abandoned Borders/New Earth Solutions debacle dated September 2015 stated:

Termination of waste management contract In 2014-15, £2.2 million was written off as a result of the termination of a waste management contract. We have reviewed the Council’s decision making process in relation to the termination of the contract. Key points include:

■ These costs do not include any early termination fees or additional costs claimed by NES, as a “no fault” termination provision formed part of the contract;

■ The decision was considered and made by the Council in February 2015:

■ Information was provided by an internal project team, supported by appropriate external professional advisors; and

■ Appropriate options were considered and due diligence processes are evidenced as being followed. We are satisfied that the Council has followed appropriate procedures in relation to this decision. We have reviewed the business case relating to this decision, which was presented in February 2015 and set out the options available to the Council. 

The disclosure concerning PGDI's BVI connection came in April 2016 courtesy of another set of files known as the Panama Papers.

This aspect of the Scottish Borders project was not mentioned in any audit reports, and SBC has confirmed in a Freedom Of Information response they were unaware of these complex offshore “arrangements” even though the details were available in successive NERR annual reports from 2011.

In the Paradise Papers KPMG Glasgow,which houses the firm's "UK Tax Centre of Excellence", is identified as auditor for 15 offshore entities, most beginning with the name Windsor, and registered in Jersey and British Virgin Islands.

So KPMG Glasgow appears to work closely with Mossack Fonseca, registered intermediary for at least 14 of the offshore trusts, and who also happen to be the agent for PGDI, the managing shareholders of New Earth Solutions/NERR Fund.

 PGDI beneficiaries and shareholders included David Whitaker, a director of numerous NES Group companies, including (from April 2011 to November 2015) New Earth Solutions (Scottish Borders) Ltd, the special vehicle set up to deliver the £23 million waste management project at Easter Langlee, Galashiels.

 The so-called "Panama Papers”had come from Mossack Fonseca’s offices and revealed the law firm’s involvement in activities which brought allegations of corruption and money laundering. The contents of the leaked documents have been reported in media and newspapers around the world.

Mossack Fonseca’s BVI ‘branch’ where PGDI and those entities audited by KPMG are registered was hit with a $440,000 financial penalty in November 2016 by the British Virgin Islands Financial Services Commission for eight breaches of BVI’s anti-money laundering and terrorist financing codes. The penalty was the largest ever imposed by the BVI FSC. But anti-corruption activists claimed it was “too little, too late”.

It is perhaps somewhat surprising that none of the above factual information gleaned from detailed research requires neither an investigation nor a public explanation.

Liquidators locate 200,000 documents linked to failed council fund

EXCLUSIVE by DOUGLAS SHEPHERD

Liquidators of the failed offshore investment fund which was selected by councillors in the Scottish Borders to bankroll a planned £23 million waste treatment facility believe it may still be possible to salvage something from the wreckage for the benefit of thousands of shareholders and creditors.

Three years after the Borders local authority was forced to abandon their worthless waste management contract with insolvent New Earth Solutions Group at a cost of £2.5 million to local taxpayers, the intensive efforts to discover what led to the collapse of the firm's partnership fund may soon reach a conclusion.

Isle of Man-based New Earth Recycling & Renewables [Infrastructure] Fund (NERR) had 3,249 investors and a published value of $292 million when it collapsed in 2016. It was later discovered that £39 million of the NERR resources had been used to shore up the New Earth Solutions companies which were in serious financial trouble while their contract with Scottish Borders Council was 'live'.

NERR was managed and promoted by Premier Group (IOM) Ltd., another business which was liquidated shortly after the fund crashed, apparently leaving investors and creditors with little or no chance of seeing the return of their cash. Premier's bosses collected many millions of pounds in fees from NERR and a range of other 'high risk' funds.

And in the intervening period a number of disgruntled investors successfully took their grievances to the Financial Ombudsman Service who found they had been wrongly recommended to put money into the unregulated NERR fund by financial advisers.

The NERR fund's joint liquidators Alexander Adam and David Craine, of accountancy firm Deloitte's, have just published an update for the fund's shareholders...their first report since September last year.

In it they remind readers the Company’s [NERR] assets were principally investments by way of equity and unsecured loans in three companies which were located in the United Kingdom.

"The value of those investments at the date of winding up was close to nil. The role of the Joint Liquidators is therefore principally to: investigate the reasons for the failure of NERR; determine whether liability for the failure can be attributed to one or more parties; working alongside our legal advisers, establish whether there is any legal recourse against one or more of those parties; and to the extent that that those third parties are expected to have the resources to meet any successful claim, seek to recover value from them."

The report adds that investigations are focused on the matters which resulted in a direct loss to the Company (the value of investments made in the ultimately insolvent UK trading companies and the fees paid by the Company to the various service providers - many of which were based on the calculated NAV (Net Asset Value).

The sheer scale of the task facing the investigators can be gauged from the next section of the report which reveals: "We have secured in excess of 200,000 unique documents from the various advisers and service providers to the Company, many of which run to hundreds of pages.

"Our initial review of those documents identified a number of potential issues which we consider could lead to causes of action. These were passed to our legal advisers for further consideration. That review remains ongoing, as the review of such a volume of documentation is time consuming but essential to understanding the underlying business and transactions of the Fund and that process has inevitably identified areas where further investigation has been required to be undertaken."

"In the meantime we have also managed to secure access to the records of one service provider which had previously been unwilling to share their files with us and which have provided valuable insight into the Company’s affairs."

Mr Adam and Mr Craine say they are limited in what information they can share with shareholders and creditors on potential causes of action so that they do not prejudice any potential claims.

But they add: "However, we remain reasonably confident that our investigation will result in making claims for the benefit of creditors and shareholders in due course."

The joint liquidators expect to be in receipt of legal advice in respect of any possible causes of action by late April 2018. Following consideration of such advice they will write to update interested parties on how they intend to proceed.

Borders battle fails to make national inventory

by DOUG COLLIE

A research project centred on a 16th Century Borders battle between Scots and English armies has concluded that the conflict should not be included in Scotland's national inventory of historic battlefields even though it resulted in a crushing defeat for Henry VIII's troops.

Historic Environment Scotland's assessment of the Battle of Haddon Rig, which took place near Kelso some 29 years after Flodden in August 1542, involved detailed studies of The Hamilton Papers, formerly in the possession of the Duke of Hamilton, and now held by the British Museum.

The collection of letters and papers illustrate the political relations of England and Scotland in the 16th Century.

An 11-page report covering the research findings tells how an English army led by Sir Robert Bowes was encamped near the town of Kelso, and had dispatched raiding parties to ransack nearby settlements. 

Meanwhile, a Scottish force under the Earl of Huntly, advancing to engage the English, encountered the raiding parties and pursued them back to the main English army, who in turn had advanced to meet them. Although the two parts of the English army did converge before the Scots reached them, the subsequent battle was still a heavy defeat for them. 

Many of the English army fled before the fighting, and Bowes himself was captured along with hundreds of his men. However, fears in England of an immediate Scottish invasion following the victory proved unfounded.

In a section setting out the reasons for excluding the battle from the inventory, the report points out that The Battle of Haddon Rig does not feature highly in the national consciousness but is of some interest on grounds of association with historical events or figures of national importance. 

No artefacts from the battle have been recorded but there is some potential that future investigations of the relatively undeveloped land south east of Kelso in the area around Haddon Rig may identify archaeological evidence for a chase and skirmish in August 1542. 

"Although the high ground known as Haddon Rig remains a likely site for the English camp, the primary sources considered by this assessment provide insufficient detail to enable secure identification of the camp’s location, or of other landscape features associated with the battle, with the exception of some named settlements raided by the English forces.

"The degree of interest on these grounds is unlikely to make a significant contribution to our understanding at a national level. Furthermore, while certain named places in the accounts of the battle can still be identified today, these are spread across a substantial area along the River Tweed and the River Teviot. There is also uncertainty about the precise location of the English camp, from which Bowes advanced with the main force, and it is unclear exactly where the raiding party rejoined the main English force and where it is likely the main fighting took place. 

"Without more certainty about the approximate locations of key elements of the battle, it is currently not possible to define an area of interest for the battlefield with a reasonable degree of certainty. As such the battlefield does not currently meet the criteria for inclusion in the Inventory as a battlefield of national importance."

Nevertheless, this particular encounter is said to be of considerable interest so far as Scottish Borders history is concerned.

The report describes how on the morning of St Bartholomew’s day (24 August) 1542, an English force under Bowes made a cross border raid into Scotland. Accompanying Bowes was Archibald Douglas, the Earl of Angus, who had been in exile in England since 1528, when James V had escaped from the Earl’s control and began ruling Scotland directly. Having entered Scotland in the vicinity of Kelso, two sorties of around 100 soldiers were despatched to raid in the area around the town, one led by the Redesdale and Tynedale families, the other by garrisons from Berwick and Norham. 

The Scots advanced from Kelso with Sir Walter Lindsay’s men at the vanguard, and with the Earl of Huntly and the main battle array at the rear. 

"Fearing the loss of the cattle and sheep they had seized in raiding, George Bowes and Brian Layton’s account states that the men of John Heron (all of Redesdale), Angus and Sir Cuthbert Radcliffe, scattered and fled. This appears to have left Sir Robert Bowes, his brother George Bowes, John Heron of Ford, Sir Cuthbert Radcliffe and around 40 other men (described in correspondence by George Bowes and Brian Layton as ‘household servants’) who dismounted from their horses around their standard.

"Of these, around only 20 stood their ground to face the Scots. The majority of the fighting appears to have taken place following this disintegration of Bowes’ forces, with the Scots easily overwhelming the small remaining English complement."

"The exact number of losses is not clear from the accounts. Angus claims that eight men (out of around only 20 who stood their ground to fight) died in the main engagement. A further 70 of their company are also described as either killed or taken prisoner, although their fate was clearly uncertain to Angus at the time of his correspondence with the Privy Council. Lindsay of Pitscottie estimates the English losses at 10 score (i.e. 200 men).

"In addition to the casualties from the small remaining force who engaged the Scots, further losses were suffered in the groups who fled the field, with at least 400-500 captured, although one source suggests almost a third of the English force was taken, meaning just under 1000 captives taken."

The research report says there is potential for survival of remains of Bowes’ short-lived encampment, potentially in the land around Haddon Rig, for example evidence for fortified banks and ditches, and also scattered artefacts including pottery, soldiers’ personal effects, and weaponry (e.g. musket balls). 

Among the archaeological evidence which might survive of the engagement is evidence of archers, cavalry and possibly even shot from matchlock guns, and grave pits for the dead. However, as Haddon Rig was not so much a pitched battle but perhaps more a chase and skirmish with relatively low loss of life, many of the raiding parties fled the battle and some were killed on retreat. 

This might suggest that the likely quantity of remains will be small, and potentially widely scattered. The potential areas within which physical remains may be identified are numerous and extensive, and also probably hard to locate beyond a general area between Heiton and Hadden, a distance of around 10km, extending even to the English border.