The following detailed analysis of the dispute has been circulated to members of the St Ann’s Well inquiry committee to consider before the inquiry:
Inquiry into St Ann’s Well Litigation 15 August 2011 PDF
Overview (please see detailed analysis above for more information):
Malvern Hills Conservators have spent the last two years and about £120,000 of public money trying, and failing, to terminate John Redman’s business tenancy of St Ann’s Well Cafe. There is now to be an Inquiry into how they came to waste so much public money on litigation which they could not win.
The Inquiry must examine the motives for the litigation and why MHC seemed to disregard legal advice in November 2009 that they should stop the litigation and negotiate; they could not show that the tenant was in breach of his lease nor did they have the power to run the cafe themselves. They also knew by that date that the Cafe would at best be barely profitable under their management and so running it would not be an appropriate use of charitable assets.
Once they had decided to drop the allegations of breaches, because they had no evidence (ie objectively the tenant was not a bad tenant), was there any justification for continuing the litigation at all? What was the motive for continuing?
St Ann’s Well Cafe is owned by the Malvern Hills Conservators, a publicly funded charity, who have leased it to John Redman for the last 20 years. John Redman runs the cafe and lives in the small flat above it. He paid £35,000 to buy the lease 20 years ago (which equates to £61,500 in today’s terms).
The Malvern Hills Conservators are a body corporate responsible for the care and management of the Malvern Hills and Commons. They are governed by five Acts of Parliament, the Malvern Hills Acts 1884, 1909, 1924, 1930 and 1995. They became a registered charity in 1984.
They are a voluntary body of twenty-nine members. Eleven are directly elected under the Local Elections (Principal areas) Rules by the residents of the wards who contribute to the Conservators’ funds through a levy in their Council Tax, seventeen are appointed by local authorities and one by the Church Commissioners.
The lease is a business tenancy protected by the Landlord and Tenant Act 1954. This means that when the lease term comes to an end, John, as tenant, is entitled to be granted a new lease unless the Conservators, as landlord, can prove one of several reasons to require him to leave.
In September 2009 the Conservators gave John a Notice asking him to leave at the end of his current lease (March 2010) and indicated that they would oppose the renewal of his lease on two grounds: –
(i) they said he had been seriously in breach of the lease
(ii) they said they wanted to take over the Cafe and have an Information Centre in the upstairs Octagon Room.
The Conservators failed in all their attempts and have had to renew Mr Redman’s lease and pay all the costs of the litigation.
They lost because their case failed on all counts -
They could not prove any breaches by Mr Redman.
They were not legally allowed to run a cafe.
They were not legally allowed to run the proposed information centre.
If they had run the cafe it would have made a huge loss so their plan was not viable.
As a charity they would not have been allowed to run a cafe at a loss except through a separate company and they are not allowed to own a separate company.
They have spent a total of around £120,000 on this. They have not admitted the full cost yet. Their own legal costs were about £52,000, Mr Redman’s legal costs which they had to pay were £28,000. Their internal staffing and other management costs have been estimated (based on information on costs of answering public questions and Mr Rowat’s remarks that he has spent 25-30% of his time on the litigation) at £40-50,000. All the costs will be met by Malvern ratepayers.
There was a great deal of support for Mr Redman, including some very high profile supporters such as Benjamin Zephaniah, Martin Shaw, Jenny Seagrove, Mary McCartney and Virginia McKenna. Despite that, and petitions signed by about 6,000 customers of the Cafe, the Conservators ignored the public. Their reputation has suffered over it for the last 18 months and that damage is still ongoing.
More detail on why MHC lost -
1. Alleged breaches of the lease. MHC could not substantiate the alleged breaches. Mr Rowat referred to only 4 complaints (which did not constitute breaches) over the 5 years of the lease. They related to lack of soap in a dispenser, a blown light bulb and a broken hand-dryer (these last two being the responsibility of MHC in fact). The 4th complaint related to some recycling rubbish accumulating when snow made it impossible to take it down the hill. The EHO had inspected and confirmed that there was no issue. – See tenant’s Witness Statement which includes copy EHO report.
Mr Rowat’s June 2009 Paper to the Board lied about the Cafe not opening when it should. Opening times can be evidenced by the Tenant’s till receipts and staff records.
2. Intention of MHC to run the Cafe. MHC has only the powers granted to it in the Malvern Hills Acts. It did not have the power to run a cafe.
3. Intention to run an information centre. Similarly it did not have the statutory power to do this. MHC had specifically been told that any information centre should be sited in a place that people could visit before they set out onto the Hills and could not be on any land owned by MHC as at 1995 including the Cafe. Several current Conservators had been on the Board at the time.
4. Commercial viability of the Cafe. As part of the case MHC had to have a business plan showing that they had a genuine intention to run the Cafe and a reasonable prospect of achieving that. This they failed to do, quite possibly because their motive was primarily to remove Mr Redman rather that to run the Cafe themselves. They simply had to maintain that they wanted to run the Cafe themselves in order to fit within the Landlord and Tenant Act. In order to try to do this they used 3 separate consultants and still did not end up with a viable business plan.
Claire Dolan prepared a Business Plan for MHC. Her Plan (August 2009) suggested that MHC might make a marginal profit of £2,380 pa , but even a cursory look at the figures shows that that modest figure was unrealistic. Mr Redman’s Witness Statement of July 2010 exposed the detailed flaws in the figures. Rubus’ Feasibility Report of 27.09.10 demonstrated that the Business Plan prepared by Rubus themselves only days earlier was based on hopelessly over-ambitious figures and that “the potential risk to the charity is high”. Finally Turpin Smale (MHC’s cafe expert) said that it would “incur significant losses if [MHC] were to run it themselves”.
5. Need for a trading subsidiary. MHC is a registered charity. Under the Charity Commission’s rules a charity may not directly operate a loss-making business (as the Cafe would surely be if run by MHC). A charity has to keep such a business at arm’s length by setting up a separate subsidiary company to run the business. This was pointed out repeatedly to MHC by Mr Redman and members of the public asking formal questions but it was not seriously addressed until 1 December 2010 when Harrison Clark advised that a subsidiary would be required – and that was fatal to the case because the MHC had no power to own or finance a subsidiary.
MHC never had any real prospect of success in this litigation. It was inappropriate for a charity to act in this way and to persist with the litigation after their barrister’s advice in November 2009. Their motives must be examined.
The current position is that John has established his right to a new lease and the Conservators have granted him a further five-year term at the cafe.
The Conservators A&R committee have agreed to recommend to the board that a new committee is set up and empowered to carry out an inquiry into the dispute during the lifetime of the current board, that is by October 2011.
The following analysis of the dispute has been circulated to members of the inquiry committee to consider before the inquiry:
Inquiry into St Ann’s Well Litigation 15 August 2011 PDF
Note – this summary is based on papers available to the SSAW group as at 5 August 2011 which do not include general correspondence between MHC and Harrison Clark.
UPDATE: The Malvern Hills Conservators Inquiry Committee now has a dedicated page where minutes of meetings can be viewed:
www.malvernhills.org.uk/conservators/inquiry-committee.aspx
See also: Save St Ann’s Well Facebook Group.
