Haringey threatened with legal action over ‘loss of profits and costs’ arising from HDV rejection

Haringey threatened with legal action over ‘loss of profits and costs’ arising from HDV rejection

Regeneration giant Lendlease has told Haringey’s new Labour council that abandoning the joint venture company it had been close to forming with the previous Labour administration would expose it to “a significant loss of profits claim” and a further one for the recovery of costs accrued for work already done on the proposal.

In a letter to the council’s leader Joseph Ejiofor and its chief executive Zina Etheridge, Dan Labbad, chief executive of Lendlease Europe, described as “fundamentally flawed” an officer’s report to Haringey’s cabinet, considered on 17 July, which set out the grounds for cancelling the procurement exercise which was set to result in the HDV being formed.

Accompanied by a legal opinion provided by James Goudie QC, Labbad’s letter says that two reasons for abandoning the HDV are put forward in the officers’ report and that neither of them “stands up to any scrutiny”.

One reason, that the new administration disagrees with the transfer of its assets from 100 per cent public ownership, is described as “a concern driven by political considerations” which “would amount to an illegitimate fetter on the council’s discretion” when making decisions.

A second, concerning the degree of financial risk the HDV project was considered to entail, is described as “not new” and as amenable to further consideration without cancelling the procurement, due to flexibilities within the arrangements already made.

Citing Goudie’s opinion, Labbad lists three variations on the HDV plan “formulated by Lendlease” which would “address, in particular, concerns in relation to control by the council of the delivery and ownership of affordable housing by the council.”

Dated 16 July, the day before the cabinet took its decision, the letter also reprises points made in previous correspondence about the council’s past recognition that it does not have the financial means to deliver its housing and estate renewal strategy its own, and challenges the figure of £520,275 given in the officers’ report as the sum the council would have to reimburse Lendlease for, stating that “our costs to date are in excess of £5m.”

In overview, Labbad’s letter asserts that “legally, it is not open to the cabinet to abandon the procurement,” because it would: “frustrate Lendlease’s legitimate expectation that the council had committed to conclude the contracts for the HDV, leaving it “susceptible to judicial review; “fail to take into account relevant considerations” and be “irrational” in law; expose the council to a damages claim by Lendlease for depriving it of the opportunity to make the money it had reasonably expected to make as the confirmed successful bidder for the contract; and create a “liability for costs far in excess of the amount referred to in in the [officers’] report.”

Unlike its predecessor Labour administration, Haringey’s current leadership is dominated by members of Momentum, the hard left campaign group formed to support the leadership of Labour by Jeremy Corbyn, and others who back the direction Corbyn has taking their party in. The previous leadership was effectively overthrow by a candidate reselection campaign in advance of May’s borough elections, which was centred centred on opposition to the HDV, led by momentum members with support from non-Labour activists and from the Guardian.

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