Section 5 report details “fundamentally flawed” and “unlawful” building disposal decision

The report, issued under section 5A(3)(a) of the Local Government and Housing Act 1989 and section 114A(2)(a) of the Local Government Finance Act 1988, described the decision as “fundamentally flawed” and suggested Peterborough City Council is set to seek damages.

The report also found a series of rental payments and maintenance payments totalling more than £1m to be unlawful.

Graham Kitchen, Director of Legal and Governance and Monitoring Officer, and Christine Marshall, the council’s section 151 officer, jointly authored the report.

In 2020, the council transferred part of the freehold land, which included the John Mansfield Centre (JMC), to the City College Foundation for £1, despite the building's book value being £4.6m at the time.

Following the disposal, the council began making rent payments to the foundation, which have now totalled £790,000.

A further payment of £150,000 was made to the JMC for maintenance costs in 2020. An additional maintenance payment of £142,000 has also been made since the disposal.

Commenting on the legality of the disposal, the report said the decision was “made outside of delegated powers and in breach of the duty to obtain best consideration under section 123 of the Local Government Act 1972”.

It said that the disposal decision was "fundamentally flawed" for seven reasons, including that the transfer of the property for £1 was not at best consideration reasonably obtainable and would therefore have required the Secretary of State’s consent, given that the value of the property exceeded £2m.

The two statutory officers sought external legal advice from three leading counsel on rescission and/or damages under the law of mistake, and on whether the disposal decision and subsequent transfer may be reversed.

They also took advice on whether there are any other grounds upon which the council could seek to recover ownership of the JMC.

The confidential advice has not been made public.

Turning to the legality of the payments, the report noted that there is no evidence of any written lease or agreement for lease between the council and the foundation in respect of the college’s occupation of the JMC.

It added: “There does not appear to be any authority approved by the executive or any Officer of the Council under delegated power to approve the Rent Payments. In the absence of any proper authority to approve such payments, it is the view of the Statutory Officers that the Rent Payments were unlawful.”

The report also stated that there does not appear to be any authority approved by the executive or any Officer of the Council under delegated powers to approve the Sale Contract Payment or Maintenance Payments to the Foundation.

“In the absence of any proper delegation to approve such payments, the payments are considered unlawful,” it said.

The council’s cabinet is now set to consider the report at a meeting on Tuesday (16 December).

Cabinet members will consider a set of recommendations during the meeting, including a call for the Monitoring Officer to continue exploring "all feasible avenues of legal redress in relation to the unlawful disposal" of the building.

It also recommends allowing the monitoring officer to take steps to implement the following amendments to the constitution:

The inclusion of a specific provision relating to Community Asset Transfers with the direction that all disposals of such nature are by way of Cabinet approval only and that this cannot be delegated.
Officer delegations are amended to expressly bring them in line with Financial Regulations insofar as they relate to the disposal of property by Community Asset Transfer or at an undervalue.

In addition, the report recommends the council commission an external provider to train officers and members on the council’s statutory duty to achieve Best Consideration, and that the council adopt and adhere to a statutory officer and Monitoring Officer protocol largely in the form of the Lawyers in Local Government model protocol.

The findings come after Peterborough's chief executive, who joined the council in 2023, called for an investigation into the disposal following an external review by CIPFA.

An external investigation agency was also instructed to produce a report on the matter earlier this year, which was later passed to Cambridgeshire Police and led to a criminal investigation.

Tasha Dalton, Principal of City College Peterborough, said: “We are aware of the publication of the report which relates to a historical matter. Our priority is to ensure the college learners, supported people and staff are as least affected as possible."

Adam Carey