Machrihanish airbase – minefield of nightmares: Part 3

We apologise that this episode of our investigations is a day late. Putting a shape on this story is like herding cats.

In our series of reports to date, we have looked at:

• in Part 1: the disturbing procedures around the issuing of a new and much more advantageous lease to HIAL – in advance of sale and seriously inhibiting the options open to a prospective buyer in the use of the site;
• in Part 2: some of the major issues affecting the valuation of the site – including the uncertain legality of the sale; unevaluated radioactive contamination; and the fact that any valuation cannot, with credibility, now be more than £1 (although it could be a negative value), given the MoD’s own effective valuation of the site at that level.

Today, in Part 3, we are looking at additional issues which will impact upon the valuation. The positives – in the site’s assets accruing, pale by comparison with the nature and scale of the liabilities attached to the site. A negative value is a very real possibility.

There are aspects of what we have to say today that, together with key issues raised in Parts 1 and 2, will link with tomorrow’s concluding piece in this initial series of articles, warning of some highly undesirable eventualities which, we understand are already waiting in the wings.

Water and sewage services on site

The Ministry of Defence (MoD), vendor of the Machrihanish airbase site, is the second largest estate owner in the UK, with over 4,000 sites in the Defence Property Register.

In the latter part of the 1990s, the MoD saw that its provision of water and sewage services to these sites was poorly managed and showing the effects of lack of investment.

Any attempt to seek effective investment would have brought these services into competition for funding with other defence needs. Beyond that, the MoD was becoming increasingly concerned that its poor record in sanitation services, in the context of a progressive loss of its Crown immunity and an increasing volume of legislation to protect the environment, left it open to an ever greater risk of litigation.

On the basis that the provision of such services was not a core business of the MoD, it decided not only to hive off the provision of water and sewage services but to do so at one degree removed.

It therefore established the literally named Project Aquatrine, an arms length company made possible by one of the largest Private Finance Initiatives ever undertaken by the UK Government.

External partners were brought in to the initiative, each contributing specific expertise. These were PricewaterhouseCoopers (project management and financial skills), Hyder Consulting (technical skills), and legal services businesses McGrigor Donald (Scotland) and Denton Wilde Sapte (England and Wales).

The country – with the exception of Northern Ireland, was then parcelled up into sections, with Scotland as Package B, to enable the management of service delivery for each area.

Introduced to the market in 1999, Project Aquatrine’s job was to identify a series of water and sewage service specialists and sub-contract such companies to deliver these services to the various defence estates in each of the ‘packaged’ areas. This responsibility for seeing to the delivery of the services described is for a period of 25 years from, in Scotland, its Go Live date of Spring 2005.

A core driver in the establishment of Project Aquatrine and its subcontracted service providers was the transfer to the service providers of compliance requirements and risks of litigation.

MoD-retained responsibilities relevant to the Machrihanish site

Crucially, in the case of the now admitted contamination at the Machrihanish site, in an MoD document of April 2005 it was stated that: ‘MOD retains responsibility where any deliberate act to contaminate water and waste water systems, water course or aquifers is caused by MOD personnel. Additionally MOD retains responsibility for contamination not associated with water and wastewater systems, and also for ‘Military’ contamination (i.e. Explosive Ordnance Device (EOD), biological and chemical weapons/agents and radioactive contamination)’.

Also relevant to the Machrihanish site, in a paper accounting for the need for Project Aquatrine, it was recognised that ‘MOD land that has been contaminated by historic land use has the potential to cause water pollution, particularly if disturbed, and this is considered further in separate sections. The storage, use and disposal of dangerous chemical substances (such as pesticides) on MOD sites, and the use of certain de-icing agents at airfields also present potential pollution problems. Also, fire-fighting activities can result in the discharge of polluted fire-fighting waters and foams to watercourses unless adequate containment measures are in place’.

Responsibilities of Aquatrine’s sub-contracted service providers

Service providers in this field, sub-contracted by Aquatrine, are responsible for:

• water supply and distribution, including both potable and non-potable water to relevant points of supply, along with water for fire fighting;
• wastewater and surface water collection and disposal allowing for ongoing receipt, collection and safe and hygienic removal from all points of receipt;
• water management services, including customer interface and help line, interruptions and emergencies, security and other related services.

At Machrihanish, the service provider sub-contracted by Project Aquatrine to deliver water and sewage services was Thames Water Nevis, now Veolia Water Nevis. In February 2009 Veolia Water Nevis signed a 3 year water and waste water supply contract with Business Stream, a company belonging to the nationally-owned Scottish Water, to continue to supply water and waste water service to Veolia Water Nevis assets across the majority of Ministry of Defence (MOD) sites in Scotland.

The nature of the services at the Machrihanish airbase site

The water supply to the site services the airport (with fire-fighting requirements); Skykon, the wind turbine manufacturer; the Machrihanish Dunes Golf Course, farms and other users on whose situation we will shortly focus.

This supply comes around 8 miles to the site, from Loch Killiepool, in the hills behind Machrihanish Village. It comes via asbestos pipes which Scottish Water are anxious to see replaced since, in vivid layman’s terms, this dangerous material is said to get like papier mache in the prevailing damp ground conditions.

The cost of replacing the entire system from Loch Killiepool has been estimated at around £8 million. Replacing the system within the site, from the point of take off from Scottish Water’s mains services on the A83, is estimated to cost around £500,000. Scottish Water has told some of the affected service users on site that it may be able to contribute between £150,000 and £200,000 to this particular scheme.

The sewage service on the site is local, in the form of a sewage treatment plant which is not working at the moment but which is said to be easily capable of effective reinstatement. It is currently being used as a straightforward repository of effluent which is tankered away Glasgow-wards from time to time.

Whoever buys the site will inherit the obligation to provide these services to the variety of resident tenants and lessees and possibly other service users.

The cost of bringing the current services up to the required standard – and the water supply has been tested as sub-standard – will be factored into the valuation of the site and, of course, already has been in the MoD’s own valuation of £1.

The Sound of Kintyre Homes situation

Yet another unpleasant narrative emerging from the primordial slime of the buccaneering interventions in the Machrihanish site and involving water and sewage services, relates to the predicament of the owners of the houses in the Sound of Kintyre development.

These former airmen’s houses on the site were sold by the MoD to Anglohouse Scotland Ltd around 2000-2001.

Anglohouse was owned by Peter Blacker, well known across Argyll from various business enterprises from the American Polaris submarine base at the Holy Loch near Dunoon where he bought 300 service houses from the Post Office Pension Fund, to the Glen Striven Estate in Cowal (Blacker is said to be an excellent shot), to Argyll Wind Farms and other interests.

Blacker converted the buildings, creating the development of what, with infill building, amounted to 137 houses, named ‘Sound of Kintyre Homes’. He sold them in three phases, starting in 2001. The agreements between the developer, Anglohouse Scotland Ltd and the homeowners at the development were enshrined if a Deed of Conditions dated 5th June 2001.

In connection with this purchase from the MoD Blacker also entered into an agreement on 17th May 2001 with the MoD, through the Secretary of State for Defence at the time (Geoff Hoon). This established that the MoD would provide water and sewage services to the houses in the Sound of Kintyre development, billing the Managing Agents or Factors appointed by Anglohouse Scotland for the development, Hacking Paterson of Glasgow. The factors would then pass on the charges to the homeowners in the usual way.

Project Aquatrine was, of course, responsible for executing this arrangement for the MoD and sub-contracted service delivery to the Sound of Kintyre homes to the company already servicing the rest of the site, Thames Water Nevis, later Veolia Water Nevis.

Blacker decamps

In the late Spring of 2009, the Residents Association for the Sound of Kintyre homes discovered online that Peter Blacker had dissolved Anglohouse Scotland Ltd on 20th January that year (2009).

The residents then, on 19th July 2009, contacted the factors, Hacking Paterson, anxious to discover where this situation left their Deed of Conditions and the contract with the MoD to supply their water and sewage services.

According to the factors this was the first they had heard  that Anglohouse Scotland Ltd had been dissolved.

Their advice to the residents was that the homeowners would, as collective owners of the development, take relevant decisions in line with Deed of Conditions; and that their interpretation was that the MoD would continue to be responsible for water and sewage service provision.

Just over a month later, when Hacking Paterson were contacted by the Residents Association for a second time, they said that, provided the homeowners continued to pay their charges, they would continue to administer the payment of water charges to (then) Veolia Water Nevis. The factors also suggested that the residents seek legal advice on their position in respcct of the Deed of Conditions.

A meeting with a solicitor on 3rd July 2009 produced the advice that the factors might have no legal authority to represent the residents. Anglohouse Scotland could – should – have assigned the Deed of Conditions to a responsible third party (such as Hacking Paterson) before dissolution but had not done so.

Ironically, had Anglohouse not been incorporated in London but in Scotland, Scots law allows for a company to be brought back from receivership where Deeds of Conditions have not been assigned prior to dissolution.

The solicitor, as the factors had done, felt that the agreement regarding the water and sewerage services with the MoD covered the eventuality of the developer’s company being dissolved.

The residents had written to Peter Blacker without response but the sending of a Recorded Delivery letter to the Glen Striven estate seemed to flush him out. A director of Hacking Paterson made contact with the Residents’ Association on 6th August to say that he had met with Mr Blacker and his solicitors on the previous day.

The news was that Blacker had indeed not assigned either the obligations in the Deed of Conditions or the water supply arrangements to any other company.

According to Hacking Paterson, Mr Blacker was supposed to be setting up another company to take over the MoD water contract and to look after the obligations in the Deed of Conditions.

Over two months later this had not been done and Veolia Water Nevis was saying that they had now no contractual obligations to deliver the water and sewage services to the Sound of Kintyre homes.

Local opinion is that British Ensign, a company owned by Mr Blacker, was destined to be such a vehicle. We can find no substantiation for such a view, although one of the considerable suite of British Ensign companies Mr Blacker owns (talk about wrapping yourself in the flag) – British Ensign Holdings, was incorporated as recently as December 2009 – an action that may well have been the source of this local intelligence.

The incorporation of the other members of the British Ensign family dates back to 1072. They include: British Ensign Estates, British Ensign Golf, British Ensign Investments, British Ensign Builders, British Ensign Interiors and, as above, British Ensign Holdings.

The get-out clause

The alleged negation of the 2001 agreement became the MoD line on the matter – that by dissolving Anglohouse Scotland Ltd, Blacker was in breach of the 2001 agreement with the Secretary of State for Defence that the MoD would supply water and sewage services to the sound of Kintyre homes.

While maintaining this line, the MoD nevertheless assured the homeowners through one of its local area representatives, that it would indeed continue to supply these services to the homes in question until the site was sold.

It has done this through the endless chain of hand-me-down sub-contracts which obtain. Currently this sees Scottish Water’s Business Stream provide water and sewage services, through the private supplies of both, described above, to all of the users on the site, including Sound of Kintyre Homes.

The homeowners predicament

When the site was set for disposal by the MoD, the predicament of the homeowners worsened. Some found it difficult to sell their homes, with no assured provision of essential services. The difficulty of getting a mortgage after the collapse of the banks was heightened here by this serious deficiency in the properties’ provenance.

Facing the sale of the property planned for 11th August – although this date will have to change given the legal and environmental issues we have raised and which will first have to be resolved – the Sound of Kintyre homeowners now have accelerated and reasonable fears.

Should a predatory developer buy the site, and there are some known to be circling – such an owner could offer a pittance to these homeowners for their homes, unsaleable without secure water and sewage services. What choice would they have?

Such a developer would then be free to resell the houses at market value, establishing a legal obligation for the delivery of the services in question which, as site owner, he or she would be in a position to do.

The role of Scottish Water

The Sound of Kintyre folk’s hope is that, somehow, Scottish Water will take over responsibility for the provision of these essential services to the entire site, that they will be included in this and that, in parity with Campbeltown residents, they will then be billed normally for these by Argyll and Bute Council, along with their Council Tax.

This preferred solution is shared by other players in what is not a game for the affected homeowners. The MoD has had discussions with Scottish Water to this effect but is no longer engaged, having found no mutually acceptable way forwards.

Discussions have also taken place with Scottish Water by politicians at various levels, including Argyll’s MSP, Jim Mather.

As we see it, Scottish Water is a nationally owned company. Should its adoption and upgrading of the services at the former airbase site be achievable, it is unthinkable that any financial cost should devolve upon the Scottish taxpayer.

This is a baby of the MoD’s fathering and it should accept the responsibility it has elsewhere neglected – as with failing to address the serious contamination issues at the site which we have highlighted.

The MoD’s moral obligation

In our view, evidenced below, the obligation to the residents of Sound of Kintyre Homes is a powerfully moral one that the MoD would be ill-advised to ignore.

It can observe this obligation in one of two ways:

• it can ensure that responsibility for providing water and sewage services to the residents of Sound of Kintyre Homes becomes a legal liability attached to the site on sale to a new owner. This would of course require to be factored into the valuation of the site.
• it can arrange with Scottish Water for the economically viable alternative of linking the entire site to the mains water supply available from the A83, replacing the onsite asbestos piping of the current supply from Loch Killiepool – before the site is sold.

Why do we see the MoD’s protection of the residents of the Sound of Kintyre development as a moral imperative?

Firstly, both the factors, Hacking Paterson and the solicitor who advised the affected homeowners, interpreted the agreement between the Secretary of State for Defence and Anglohouse Scotland Ltd, signed on 17th May 2001, as covering the eventuality of the dissolution of Anglohouse Scotland. Both read the situation as requiring the Mod to continue to provide the services described.

In relation to this first issue, we have discovered that there was a Freedom of Information request lodged on this matter on 8th February 2008 (Case No: 08-02-2008-160601-018), due to be responded to by 3rd March 2008 and asking: ‘Is there an existing contract between MOD and Anglohouse Scotland re water and sewage supply to PA28 6GA’. We do not know who had lodged this request but the matter has clearly been of key interest.

Secondly, the MoD is not at all put out by Blacker’s unconventional business behaviour. It is still actually dealing with him. Indeed it has given him reason to announce to Hacking Paterson, relayed by them to the officers of the Sound of Kintyre Resident’s Association, that he may be the ‘preferred bidder’ for the full Machrihanish airbase site, now for sale.

Mr Blacker is a self-expressed potential buyer of the site. Back in 2005, an interview with a clearly besotted journalist recorded: ‘Ever on the lookout for new ventures, as he drives away from the Machrahanish estate (Sound of Kintyre Homes) he points at 5,000 acres of redundant land still occupied by the Ministry of Defence. His eyes light up as he talks of the possibilities of creating a new complex on the site.

‘A maverick mind twinned with shrewd business instincts, Blacker looks beyond the razor wire and brick buildings. Today all you can see is an abandoned aerodrome, but if anyone can change that, Blacker hopes it will be him’.

It is unlikely that the owners of homes in the Sound of Kintyre decvelopment, whom he abandoned to their fate, will ‘hope it will be him’. That would be the final irony in the utterly unacceptable situation in which they have been left.

It is equally unlikely that another piece of the human collateral damage left beached and desperate by the dissolution of Anglohouse Scotland will hope that Blacker becomes the end owner of the former airbase site.

A local farmer who worked with Blacker on a planned housing scheme at his (the farmer’s) Bellfield farm, demolished his farmhouse and outbuildings as a necessary preparation for the planned development and now, close to destitution, is ironically working as a security guard at the airport.

The final chapter – for the moment

Tomorrow’s piece, concluding this series – but not our coverage of issues around this disposal – will look at some remaining liaiblities and assets of the site; some matters driven into daylight by our investigations – some serious; and additional information that has been forthcoming or discovered in transit, so to speak.

It will also summarise the position as we now see it; will come to some conclusions; and will address the consequences of some of the things that have happened and not happened during the work we have been doing.

It will come as no surprise if we say that fingers will be pointed.

Here are links to the previous parts of these investigations already published:

• Machrihanish airbase – minefield of nightmares: Part 1
• Machrihanish airbase – minefield of nightmares: Part 2
• Machrihanish airbase – minefield of nightmares: Part 4

The photograph above is by copyright holder Patrick Mackie and reproduced here under the Creative Commons licence.