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 circumstances 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 circumstances 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 circumstances 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 Mr Irwin, 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 Mr Irwin 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 27 July 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 28 November 2000 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 28 November the board, by itself, agreed heads of terms with Harland and Wolff. On 20 December 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 20 December. 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 14 December, I had no knowledge that we should even have had a transaction completed on 20 December. 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 20 December. 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 20 December 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 6 months, 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, Mr Irwin 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 14 December. I have a recollection that at 6·00 pm on the evening of the 19 December, 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 20 December, 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 circumstances.

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 Mr McFarland, 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 Mr Irwin 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 -

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 circumstances.

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 circumstances 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 Mr McFarland. 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 Northern Ireland. 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 Mr McMinnis 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.

Friday 11 May 2001

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