England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		12 September 2011

 


Mr Justice Akenhead:

1. In these proceedings, the Claimant, Community Gateway Association Ltd ("CGA") seeks damages from the Defendant, Beha Williams Norman Ltd ("BWNL"), for what it says was negligent advice provided by BWNL in 2004 and 2005 in relation to the transfer of council housing stock of Preston City Council ("the Council") to CGA in November 2005. This is one of the first claims which the TCC has had to deal with in which negligent advice is said to have been given by a lead consultant in these circumstances.
2. By about 2003 or 2004, there were a number of local authorities which were unable adequately and within the available funding to maintain and run what was often a substantial amount of council or social housing. The Council in this case was identified as one of the most badly affected councils in the country in this regard. The Government decided that something had to be done about this and at least one of the things resolved upon was to facilitate the transfer of the housing stock to another organisation. This in effect had the advantage of taking off the councils' "books" what was often in revenue and expenditure terms a loss making problem. To enable these transfers to take place, the Government, through the office of the Deputy Prime Minister ("ODPM"), was prepared to make available "gap funding", which was in effect a grant to the acquiring organisations to enable them to improve the housing stock. This gap funding was to fund the "gap" between the funds otherwise available to the new landlord (comprising mainly income from rents, any loans provided and any funding provided by the transferring local authority) and the funds required by that new landlord to repair, improve and maintain the housing transferred to it in accordance with the promises made to the tenants and the terms obviously of any legal transfer. In broad terms this is what happened in this case.
3. In this case, as in others, the Council had to secure the agreement of the often numerous tenants and there had to be a vote by the tenants as to whether to accept the "Offer" put forward by the Council. The Offer contained what could properly be described as promises to the tenants amongst other things substantially to improve their dwellings in certain general and specific ways. Indeed in this case, the Council offered to the tenants that some £80 million would be spent on repair and improvement work within the first five years following the transfer. There were some 6,500 dwellings which ultimately were to be transferred. The Offer document indicated that the dwellings would be improved to what was called the Gateway Homes Standard which had been developed by the Council, tenants and tenant representatives over the months leading up to the Offer in November 2004. Although some specific promises were made in this document, such as the replacement of an identified number of bathrooms and kitchens, the Gateway Homes Standard, as specifically set out, was a more high-level list of 11 types of improvement aims which were to be applied.
4. In broad terms, it is said by CGA that behind and underlying the Gateway Homes Standard was a list of more detailed works contained in a document formulated probably in early July 2004 by Mr Graham, a Council employee, which was entitled "Draft 1 Preston Homes Standard" ("Draft 1") and contained a much more detailed list of work to be done under each of the high-level list points of improvement which were ultimately to be formulated in the Offer document as the Gateway Homes Standard. It is said by CGA that this more detailed list represented work which was promised to tenants or represented work which was otherwise intended to be done.
5. BWNL provides specialist housing consultancy and advisory services to housing associations and local government entities as regards public housing projects, amongst others in relation to the transfer of housing stock. It was retained initially by the Council and later by CGA as their lead consultant to advise upon and facilitate the transfer and the securing of gap and other funding. The functions to be undertaken by BWNL included preparing and advising on a business plan for CGA which would cover details of the stock to be transferred, as well as on cash flow and other financial matters, advising on the Offer document which was to be presented to the tenants and also advising on the valuation of the housing stock.
6. Generally, it is said that BWNL was negligent in the provision of these services in effect for failing to appreciate that the proposed budget of about £80 million for works in the first five years (used in the Business Plan for securing the gap funding from the OPDM) was or could be inadequate because it did not take into account some £16 million's worth of work which was identified in 22 specific items of work set out within the Draft 1 document, albeit not or not necessarily specifically identified in the Offer document for the tenants. Consequently, it is said that CGA has lost, or has lost the opportunity of securing, funding equivalent to that £16 million from the OPDM before the housing stock was transferred to it in November 2005. There are additionally several other related complaints.

The Transfer Mechanism

7. Since 1988, local authorities have been able to apply for a place on the annual Disposals Programme to transfer their housing stock, subject to the Secretary of State's consent. There could be up to 30 stock transfers in an annual Programme.
8. In 2000, the Government set the target that all social housing had to meet set standards of decency by 2010, the Decent Homes Standard ("DHS"). A decent home was one that met the current statutory minimum for housing, was in a reasonable state of repair, and provided reasonably modern facilities and services and a reasonable degree of thermal comfort. I deal with this in more detail below.
9. In the publication "Sustainable Communities: Building for the future" (February 2003), the Government stated that where local authorities needed additional funding to improve their housing stock, there were three options to achieve this: an Arm's Length Management Organisation (a local authority controlled company), by way of Private Finance Initiative or through transferring their housing stock to a Registered Social Landlord ("RSL"). The transfer of the housing stock to an RSL would enable the raising of external and private finance to support housing investment. Stock transfer was therefore seen as one of the routes by which the local authorities could bring their council housing up to the DHS by 2010.
10. Initially, transfers were of positive value stock. However, over time, as stock in need of greater investment to deliver the DHS came forward to transfer, an issue arose in respect of the Housing Revenue Account ("HRA") debt or overhanging debt. This occurred where the net capital receipt from the sale of the housing stock would not be sufficient to repay the debt attributable to the local authority's Housing Revenue Account. In such a case, as part of the application for a place on the transfer programme, an application could be made to the ODPM for that debt to be repaid by the Government in order that the stock transfer could proceed. Overhanging debt payments were within Departmental Annually Managed Expenditure. The housing attributable debt position for each local authority would be unique, reflecting its pattern of housing expenditure to date. The amount of overhanging debt would change as the transfer date approached, according to the need of the local authority. The final attributable debt would be dependent on the final number of transferring dwellings and the final debt reconciliation through the Housing Revenue Account. In the case of stock in a poor condition with a negative value it was recognised that a 'dowry' or 'gap funding' would be required in order for the transfer to proceed.
11. The Housing Transfer Manual, published in different editions over the years set out the key processes involved in the transfer of housing stock. Once an application was accepted on the Disposals Programme, it would be governed by the manual in force at that time. The ODPM would generally expect the RSL and local authority to be guided by any subsequent changes in the requirements in the Manual. The Housing Transfer Manual Programme 2003 and the Supplement to the Housing Transfer Manual 2003: 2004 Programme were in force at the time of the Preston stock transfer.
12. The key stages of the transfer process were:

(a) The Options Appraisal. The local housing authority had to conduct an Options Appraisal to determine the appropriate and affordable option to deliver decent homes. This was conducted in consultation with the tenants. Where housing stock transfer was identified as the preferred route to deliver decent homes investment, the exercise would also involve the identification and selection of an appropriate RSL to take ownership of the housing and undertake an investment or regeneration programme. Options Appraisals were signed off by the Government Office for the Regions. Local authorities and their tenants could call on the Community Housing Task Force advisers, employed by the Department to provide support to authorities and tenants. Where transfer was the preferred option the Task Force subsequently worked with authorities, tenants and RSLs to support the development of good quality transfer proposals that would meet the national programme criteria and ultimately, after tenant consultation by the local housing authority and where the majority of tenants were in favour, would merit a recommendation to the Secretary of State that consent be granted. Often, as here, Stock Condition Surveys ("SCS") would be carried out to check on the quality of the housing stock, to recommend repairs and improvements and to provide costings therefor.

(b) Application for a place on the Department's Housing Transfer Disposals Programme. A transfer involving more than 499 properties would be considered a Large Scale Voluntary Transfer ("LSVT"). In the case of an LSVT, the local housing authority would have to obtain a place on the Department's Programme before it could proceed. As part of the process the Department would be required to assess the proposed transfer against all its published criteria. As part of the assessment the Department would also take into account the views of the Housing Corporation's Stock Transfer Registration Unit "STRU", the Government Office in the relevant region and the Task Force. A full application from the local authority would have comprised a transfer proposal summary sheet, other information and a completed Single Transfer Model ("STM"). This information included details of the condition of the stock to be transferred, the repairs and improvements work the new landlord would carry out, as well as an estimate of its costs over 30 years. The STM had to be based on an independent stock condition survey carried out by a surveyor and was described as:

"…an Excel spreadsheet which comprises two models the ODPM uses to assess transfer proposal:

? The Cost Generation Model (CGM);

? The Pricing, Rents and Public Sector Net Borrowing (PSNB) Effects Model.

The CGM provides a means of bringing together information, drawn from a recent stock condition survey on the housing an authority is proposing to transfer. This includes the repair and improvement work that needs to be carried out and the estimated cost over 30 years. As well as helping the authority and the prospective new landlord put together a proposed repair and improvement programme, the CGM generates the expenditure figures that feed into the Pricing Model to calculate the value of the housing. …

The PSNB effects model calculates the long-term public expenditure effect of a proposed transfer in terms of its impact on the public sector borrowing requirement. The analysis compares the impact on the PSNB of retention by the authority with that of the transfer".

Following the ODPM assessment of the application and supporting documentation, it would make recommendations to the Secretary of State as to whether the local authority should be given a place on the Disposals Programme, or have a place held open whilst it carried out more work. Once the Secretary of State had made his decision, the Department informed the local housing authority and, where the decision was positive, issued a Direction placing them on the Disposals Programme. A place on the LSVT Disposals Programme signified the Department's agreement for the local housing authority and its tenants to develop the transfer proposal further, and to proceed to formal consultation. It did not at this stage confer the Secretary of State's consent to the transfer itself (which still had to be obtained).

(c) A formal and statutory consultation process. The local housing authority was then required to consult formally with the tenants and make them an offer in respect of the transfer ("the offer document"). A local housing authority was required under Section 106A of and Schedule 3A to the Housing Act 1985, and as covered in Section 11 of the Housing Transfer Manual, to consult all tenants whose homes would be transferred. An authority would be obliged to follow the ODPM good practice guidance in drawing up its consultation material and share drafts of the consultation document with others. Whilst not a legal requirement, it was usual for a ballot of tenants to be undertaken based on the offer document. Transfer would not be permitted to go ahead if the majority of tenants who voted were opposed to it.

(d) Transfer. Provided the majority of tenants were not opposed, the local authority could proceed to transfer. The transfer would be to a housing association, which would need to be registered with the Housing Corporation as an RSL. A transfer contract governing the sale of the stock and the relationship between the local housing authority and the RSL would also need to be drawn up. This would be a legally binding record of all agreements entered into between the local authority and the RSL. It would include an obligation on the RSL to abide by the promises made to the tenants in the offer document. The local housing authority would be obliged to submit a formal application (together with supporting information) to obtain the Secretary of State's Consent to transfer, before the contract could be completed and signed. Approval would only be given if the criteria at paragraph 17.2 of the Housing Transfer Manual 2003 had been met; these included the local housing authority's consultation exercise being adequate, that the majority of secure tenants affected by the proposed transfer were not opposed to it, that all houses transferred would meet the decent homes target by 31 December 2010 and that he estimated Exchequer and public expenditure costs represented value for money.

13. In relation to "Gap funding", the "Sustainable Communities" publication in 2003 confirmed that the ODPM would consider options for providing "gap funding" for transfers where the stock could not meet its business needs to the transfer business plan from rental income alone and lenders required "gap funding" to support the business plan. The gap was determined by the negative value of the stock. The stock was valued by way of the STM. The gap funding resource was intended as a fund of last resort and it was recognised that it was open to both the local authority and the new landlord to contribute towards closing any gap. This could include the local housing authority providing a dowry or ensuring there were additional assets, such as land, included in the transfer agreement which could subsequently be sold by the new landlord to realise funds. The amount of gap funding was determined before a place on the Disposals Programme could be confirmed and the local housing authority could proceed to Formal Consultation. The Department needed to set gap funding parameters before the promises were made to the tenants, so that the local housing authority and new landlord knew their budget. The requirement was that the authority should only make promises that it could keep within the budget assumptions fixed in advance. In terms of managing public resources the ODPM was unable to offer an unlimited commitment to fund a transfer. Therefore the gap funding had to be agreed at that stage. A minimum valuation of the stock was agreed with the local housing authority to set the ceiling of the gap funding.
14. As gap funding was the funding of last resort, local housing authorities were expected to work closely with the Community Housing Task Force and the Government Office to "review all aspects of the transfer proposals, minimise the need for gap funding and develop the case for any gap funding application to the Regional Housing Board". The Regional Housing Board in each region offered advice to ODPM Ministers on the annual allocation of the Housing Investment Programme to local housing authorities for decent homes. This programme could be used to provide a dowry for transfers rather than the authority seeking housing transfer gap funding. It was expected that local housing authorities would explore with the new landlord private funding options and other means (such as the VAT shelter) to reduce the gap funding needed. The Council's application for gap funding was one of the first by a local housing authority.

The Witnesses and the Documents

15. It is an odd feature of this particular case that only a relatively few witnesses of fact were called or proffered compared with the number whose statements were exchanged. In some cases, it could be said that some statements added little which would affect the outcome but for others it is surprising that they were not called. For instance, not one tenant witness was called by CGA whilst Mr Johnson and Mr Deacon (who played key parts in the transfer process) were not called by BWNL. No explanations have been given, let alone verified as to why these witnesses were not called.
16. My views of the CGA factual witnesses are as follows:

(a) Diane Bellinger: she has been the Chief Executive of the CGA since July 2005, albeit between then and late November 2005 she was employed by the Council. She was Chief Executive Designate from March 2005 to July 2005, albeit that she was still employed by her previous employers at East Manchester Housing Association. She has been in social housing since 1991. I formed the view that she was open, honest, enthusiastic and dedicated to what CGA stands for, in particular its commitment to tenant involvement. Some parts of her witness statement related to the period before she became involved and some relate to matters which are not the subject matter of complaint in these proceedings; for instance, she could give no useful evidence about what was promised to the tenants. It was surprising (albeit not her fault) that she seems to have been wholly unaware of the contents or even existence of Draft 1; she insisted, commendably, that promises to the tenants made in the period up to the Transfer should be honoured and, yet, she did not know and no-one within CGA told her that there was a list of detailed promises outside of the Offer. Either no-one within CGA knew of this list or they did know but did not tell her this or the list was not intended to record promises or work which was always intended to be carried out. Much of her witness statement broadly corroborates contemporaneous documents. However, her evidence, such as it was, about promises made to tenants not being kept is inconsistent with what was reported to the Board; she emphasised how important it was that promises to tenants were honoured and, yet, there is no minute in any Board Meeting or in any report to the Board that promises were not kept. It may of course be that this litigation is driven by other factors or indeed people.

(b) Paul Roberts: he is currently the Head of Business Improvement at CGA but had worked at the Council since 1990 primarily in the housing department in a management capacity. He was put in charge of a housing maintenance task force in early 2003 as Head of Corporate Performance. In December 2003 he was seconded onto the Council's Gateway team led by Mr Deacon whose job was to manage the transfer. Much of his written evidence was given by reference to contemporaneous documents and was in that context unexceptionable. Again, I found this witness to be broadly honest. However, there appeared to be a concerted effort by him to row away from the ramifications of his written evidence (Paragraph 71 of his statement) in effect that the improvements programme (which he had been involved with producing in 2005) reflected the consultation with CGA members and tenants since 2003 and had been "prioritised to what the tenants wanted where and when". This occurred because he seemed to be unable to remember in cross-examination what was involved in the programming work. It seemed clear to me that he had begun to appreciate that the way in which the programmes had been prepared and costed bore no relationship to the basis of the claim now advanced by CGA which is that no allowances were made in the budgets or indeed programmes for what CGA now say was promised to the tenants.

(c) Dennis Graham: he had worked for the Council from 1990 onwards and by 2003 was the Central Maintenance Unit Manager in relation to housing. He was, so the documents reveal, closely involved with maintenance programmes for the Council's housing stock before the Transfer to CGA as well as the creation and costing of programmes for the first five years and beyond in relation to CGA in the period leading up to the Transfer. He produced Draft 1 and was involved in regular meetings with tenant representatives before and after. I formed a somewhat poor impression of Mr Graham; although I do not consider that he was dishonest, I very strongly felt from the way that he gave his evidence that his memory was selective and there was some unreliable and after the event subconscious reconstruction of events. Some of his oral evidence bore little logical relationship with his witness statements. For instance, his first statement (Paragraph 21) suggests that he produced only one draft, Draft 1; there was no hint that there were other drafts or that Draft 1 represented some sort of final draft. In evidence, he suggested (Day 4, page 25) that Draft 1 was a first draft and there were a number of other drafts, the final one of which would have been saved by Karen Perry. It was slightly unclear from this exchange whether he was saying that all the versions of the draft were named as Draft 1 with the final one also called Draft 1 being the one saved by Karen Perry. He also said unconvincingly that Draft 1 was agreed by the Preston Homes Standard Group and the Capital Working Group, although there is not one verbal hint in any of the minutes or in any document that this occurred; if anything the minutes record that Mr Graham had not yet produced any draft before July 2004. He suggested that Draft 1 was a result of four months work with numerous tenants, Council employees, contracted staff and external agencies; that is belied by the minutes which, although they do record consultations and meetings, record no or virtually no agreements or promises at least in relation to the items of work which CGA now says were promised to the tenants or otherwise intended to be done. His oral evidence, not mentioned in his three witness statements, that he circulated Draft 1 to tenants, Council personnel, committee members or anyone else other than Ms Perry, and that he had "handed over" Draft 1 to the Gateway Team was not credible and was seriously undermined by the absence of any documentary record of it and the absence of any supportive evidence on this point from Mr Roberts and Ms Perry. His evidence that Draft 1 was "a collation of the work of others" (Day 3 Page 94) was belied and undermined by the absence of any supportive documentation and by the fact that he alone was tasked by the relevant committee with producing the document. His evidence both in writing and orally in relation to his involvement in 2005 up to the transfer in the programming and costing of the first five years post-transfer work was unconvincing. In spite of his written evidence that the programming work was to "cover a 5 year period post-transfer to meet the promises which had been made to tenants", he said, for instance, orally that he programmed and costed only the work required for the Decent Homes Standard; that is simply not credible as it would have been a complete waste of time, as he must have known. He had been the author of Draft 1 and therefore can not have believed that it necessarily or at all set out what might be described as work promised to the tenants. Irrespective of Draft 1, it would have been pointless programming and costing work to the Decent Homes Standard because he must have known, due to his earlier involvement, that the SCS surveys provided for works above the Decent Homes Standard, at least to the so-called industry standard. I can only and do assume that at least subconsciously Mr Graham had begun to appreciate before and when giving evidence that the minutes and other records in 2004 and the programmes and costings in 2005 with which he was associated were wholly inconsistent with Draft 1 recording promises made to tenants. Even Counsel for CGA had to accept that he was muddled and confused and, by way of masterly understatement, that he "was not the most impressive witness".

(d) Bill Shannon: he is a Liberal Democrat nominee on the CGA Board and a Council member for one of the wards in which some of the worst affected housing was located. He spent many years working for the Cooperative Group until retirement in 2002. Through his interest in the Community Gateway approach, he became a member of the CGA Shadow Board in mid-2004. I found him to be a particularly good witness, straightforward and honest. He clearly knew nothing about Draft 1 and he made clear that the tenants in his ward were very content with the work that had been done by CGA to the houses.

(e) Nigel Wilson: he is an independent non-executive Board director of CGA and has been from the Transfer; he was an independent member of the Shadow Board of CGA between mid-2004 and November 2005. He gave the impression that he was pragmatic, for instance in saying that one had to balance the demands of tenants against the available resources. He is clearly a decent and committed person and was an honest witness. Apart from what was in the Offer document, he clearly did not know about any or much of the detail of the work which was to be required to be done. I say that not in any way as a criticism.

(f) Andrew Upton: he is a non-executive director of CGA, having previously been appointed as an independent member of the Shadow Board in July 2004. He underlined that tenant involvement "was the vein running through the Transfer". He gave his evidence in an honest and straightforward way.

(g) Karen Perry: her witness statement went in as evidence because she was not required for cross-examination. It is difficult to form any view in her absence as to her competence and abilities. Most of her witness statement contains either general observations or evidence based on contemporaneous documents. Surprisingly, given her extensive housing experience with the Council, her detailed involvement with the Council's Gateway Transfer Team and her continued employment after the Transfer with CGA (she is now the Head of Community Empowerment), she says nothing about Draft 1 or indeed anything of relevance about any of the works which are the subject matter of these proceedings.

17. The only witness of fact actually called by the Defendant was Sally Turner who was a civil servant at Senior Executive Officer level working in the ODPM and she had a close involvement with the provision of funding for the Transfer. She was called in effect to demonstrate possible difficulties that might have existed if the Council had had to apply for yet further funding prior to the Transfer in relation to the works which were not covered by the Business Plan. I felt that she was a decent witness who was honest. However ultimately she accepted that any further application to ODPM would have been considered on its merits even if earlier there had been fault on the part of the Council or its advisers in omitting to mention works which had been promised to the tenants. In addition to her, the witness statement of Mr Geoffrey Brooks was accepted in evidence, he not being required to attend for cross-examination. He was employed as a part time project coordinator by the Council for the CGA project team. He did not know anything about the detail of the standard of improvements promised to the tenants. He effectively was a "progress chaser". He gives some evidence about the detailed involvement of Mr Graham and that person's knowledge of the SCS and its relevance. He does not add an enormous amount to the evidence discernible from the contemporaneous documentation.
18. CGA did not call Mr Bliss, Ms Kinsella or Ms Lawson or indeed any tenant witness. BWNL did not call Messrs Johnson, Porter, Hackett and Williams of BWNL or Mr Deacon. I attach little or no importance to the fact that Messrs Porter, Hackett and Williams were not called because they had little to add. Inevitably, I had read the witness statements of Mr Johnson and Mr Deacon but, necessarily, the later decision having been made not to call them, I disregard entirely the contents of their statements.
19. Mr Johnson was not called as a witness and it is therefore difficult to form a firm view about his ability, competence or thoroughness. Mr Wilson gave some unchallenged evidence about Mr Johnson giving a presentation to the Shadow Board on 8 September 2005 about the increased gap funding required; he stated that "there was a bit of a fluster" from Mr Johnson "as he was trying to scramble through the numbers; he was struggling with it, would be the kindest way of putting it." Mr Johnson repeated at meetings and in reports often that the figures in the Business Plan for repairs and improvements were based on the SCS reports, almost it seems as a mantra. Although he appears to have attended numerous meetings and prepared a number of reports for such meetings, I have formed the impression that he did not wholly get on top of the detail and ramifications relating to the Council and CGA securing an effective transfer. Partly this view is based on the events of July 2004 and partly on the events of June to October 2005 when CGA and the Council had to apply for additional gap funding for reasons which it is at least surprising (if not a matter of negligence) that Mr Johnson did not pick up before, like historical inflation and management costs, the last of which he accepted some responsibility for, albeit that it does not directly impact on the matters in issue in these proceedings.
20. Almost inevitably, each party has asked me to draw adverse inferences from the fact that CGA did not call any tenant witnesses, Mr McCabe or Mr Bliss and that Mr Deacon and Mr Johnson were not called by BWNL. I do not consider that it is necessary or indeed desirable to do so. There is always a danger in drawing adverse inferences in a vacuum and a tribunal will find itself drawn into speculation as to what the witness would have said if carefully cross-examined. However, neither party has the benefit of evidence from those people and I must therefore, and can, decide this case on the basis both of the evidence of witnesses who were called or made available for cross-examination and of the extensive documentary evidence running to scores of lever arch files which collectively gives a reasonably clear picture of what did and did not happen, so far as is material. For instance, so far as Mr Johnson is concerned, his absence means that, for instance, there is no evidence from him as to what he said at the key meeting of 15 July 2004 or to contradict what Ms Perry and Mr Roberts said that he said; unless I find that their evidence is inherently unbelievable, I will, and as can be seen below do, accept their evidence in that context. By way of further example, the absence of Mr McCabe as a witness does not itself advance CGA's or BWNL's case or defence; however, the documented involvement of Mr McCabe in the costing and programming exercises which took place from late 2004 until the transfer strongly suggests that neither he nor Mr Graham working with him on those exercises either knew or had in mind the contents of Draft 1 as representing promises to tenants or work which in some way CGA would be committed to do. That itself is background evidence which I can and do take into account.
21. In so far as the experts were concerned, I found both experts on liability Dr Moody and Mr Tolson helpful and open with the Court, although the former clearly had more experience in giving evidence. I felt that Dr Moody was perhaps too keen to infer things, for instance that the tenants must have had access to Draft 1; there is simply no real evidence to support this. As will be seen below, on the key issue of whether there was a falling below the relevant standards, the experts were not far apart. As to the quantum experts, Mr Stebbing was sensible, decent and open whilst Mr Whitehead who, although able and open with the Court, was unnecessarily defensive and indeed occasionally somewhat peppery under cross-examination; ultimately, the quantum issues fall largely to be resolved as a matter of logic and in the light of the evidence of fact. The funding experts, Mr Finch for CGA and Ms Osborn, for CGA and BWNL respectively, were both decent experts although I felt that Mr Finch was just the less strong of the two at least in this case.
22. The parties properly accepted that the contents of the trial bundle were admissible in evidence. A very substantial number of documents were incorporated in those bundles, with almost 60 files of contemporaneous documents included. CGA disclosed some 5,000 of its own documents following searches and reviews of its electronic documents. Additionally, substantial documentation was provided from the Council's files, albeit little by way of e-mail traffic due to its replacement of its email network server and network in 2006. It is thus possible at least that some relevant documents have been missed in the period up to the transfer of the housing stock to CGA. There has been no suggestion by either side that documents have been deliberately or carelessly withheld from disclosure by the other. It is the case that Ms Perry, Mr McCabe and Mr Roberts transferred to CGA's files some documents from the Council's server and I assume that they transferred any documents which would have contained anything which summarised or recorded what they considered important.

The Detailed History

23. In about 2000 a Mr Nic Baylis (known more commonly as Nic Bliss) with a colleague developed what was called the Community Gateway Model ("CGM") in relation to housing stock transfers. A primary feature of the CGM was the detailed involvement of the tenants both prior to any offer or transfer as well as after. It was designed to "empower" the tenants at all stages of the process so that they would be supportive participators in the transaction and would then play a significant part in the management of the housing after the transfer. It was in a sense a co-operative model.
24. Savills, the well-known estate agents and surveyors, were retained by the Council between 2001 and 2003 to produce what were called Stock Condition Survey ("SCS") Reports. So far as is material they produced an initial SCS report in February 2002, a further SCS report in March 2003 and a final SCS report in November 2003. These SCS reports are important in the context of this case because not only did they survey a large representative sample of the dwellings owned by the Council but they also identified what remedial and improvement works were required, as well as providing some relatively high-level costings for such works. These costings were to be used as the basis for the business plans later prepared. These reports identified the need for these works to achieve as a minimum what was called the Decent Homes Standard, promulgated by the Government, and indeed substantially above that standard to what was referred to by Savills as the "industry standard".
25. The first SCS report dated 21 February 2002 was based on a sample survey of 19% of the entire housing stock (then comprising 7,277 rented units). One of its objectives was to provide reliable information relating to repair, maintenance and improvement costs over a 30 year term as well as to provide information in relation to a potential housing stock transfer. Savills conducted a Decent Homes Assessment for each of the surveyed properties. Key findings included that 74% of the surveyed stock failed to meet the Decent Homes standard, 15% of it required less than £2000 of work to meet the standard, 40% of it required between £2,000's and £5000's worth of work to meet the standard and only 2% of properties required in excess of £10,000 to meet the standard. It identified work to be done on the main roofs, rainwater goods, external walls, windows, fencing and paths externally and on the kitchens, bathrooms, electrical wiring and heating. Savills for instance identified that 4000 properties were provided with single glazed windows but they allowed for the upgrading of them to double glazing. One of its conclusions was that a "significant financial projection" was required to bring the properties up to modern standards with work focusing on the replacement of single glazed windows, older roof coverings and associated rainwater goods, the replacement or upgrading of electrical wiring, central heating and hot water systems and the replacement and re-planning of the older kitchens and bathrooms. The report identified over 30 years a total cost of some £345 million broken down into various heads such as "catch up repairs, future major works, estate works, preliminaries, contingent major repairs, cyclical maintenance, responsive and void property repairs and exceptional extensive works".
26. There is no doubt that many of the dwellings within the Council's housing stock were in extremely poor condition. Ms Bellinger, the Chief Executive of CGA was later to describe housing conditions as "disgusting". The Council was seriously criticised by the Audit Commission in relation to its social housing performance, albeit that there were some mitigating circumstances; the report stated amongst other things that the Council was providing a "'poor', 0 star service that has uncertain prospects for improvement". By early 2002, if not before, the Council was actively considering transferring its housing stock, in simple terms because it could not afford properly to maintain or improve the housing stock even to the basic Decent Homes Standard. For instance, a Briefing for an Informal Cabinet meeting dated 21 May 2002 recorded that Price Waterhouse Coopers had advised about two years before that "a wholesale stock transfer is the only feasible mechanism…to provide a major programme of catch-up repairs and improvements".
27. The Decent Homes Standard was a fairly basic standard for a local authority to seek to achieve. The revised definition issued by the Department for Transport, Local Government and Regions in 2002 summarised a decent home as being "one which is wind and weather tight, warm and has modern facilities". It had to meet four criteria:

(a) It had to meet the current statutory minimum standard for housing; this was effectively a negative standard.

(b) It had to be in "a reasonable state of repair". Dwellings which did not meet this criterion were those in which either "one or more key building components were old and, because of their condition needed replacing or major repair or two or more of other building components were old and because of their condition needed replacement or major repair.

(c) It had to have "reasonably modern facilities and services". Dwellings which failed to meet the criterion were those which lacked three or more of the following:

"- a reasonably modern kitchen (20 years old or less);

- a kitchen with adequate space layout;

- a reasonably modern bathroom (30 years old or less);

- an appropriately located bathroom and WC;

- adequate insulation against external noise (where external noise problem);

- adequate size and layout of common areas for blocks of flats."

(d) Finally it had to provide "a reasonable degree of thermal comfort"

The Decent Homes Standard was expressed to be a minimum standard but it was a standard that triggered action rather than set a standard to which work was to be carried out.

28. In mid-2002 two local presentations were made in relation to the Community Gateway Model. It is not clear who attended these presentations but certainly some representatives of the Council did so. By this stage, there was in place something called the Preston Tenants Liaison Forum. There was to be a series of meetings in August 2002 involving this group as well as various Council groups and a report to those groups prepared at that time recommended agreement in principle "to the development of proposals for a stock transfer funding using the CGM".
29. It is clear that Mr Graham was fully aware about the various Savills SCS reports. For instance, Savills wrote to him on 8 October 2002 about a commentary on their first report. He was asked by Mr Deacon of the Council to help commission a further report from Savills.
30. In January 2003, the Chartered Institute of Housing and the Housing Corporation issued a lengthy report entitled "Empowering Communities - The Community Gateway Model", the advisory group for which included Mr Bliss as well as Mr Deacon of the Council. It explained and recommended the CGM as a way of empowering and involving tenants.
31. In March 2003, Savills produced an SCS "Updated Final Report". For this, they surveyed an additional 1203 units bringing the sample rate up to 37% of the entire stock, by then down to 7,236 units. The key aims and objectives were similar but included the provision of "adequate comfort and information for the recipients of the housing stock transfer and their funders". In addition to conducting the 37% sample internally and externally, Savills did some external surveys. They found that 59% of the stock failed to meet the Decent Homes Standard, 26% required less than £2000 to meet the standard and 54% required between £2000 and £5000 of work. Many of the recommendations for work were similar to the earlier report. They identified that nearly 3000 kitchens needed replacement over the first five years and just over 4000 bathrooms needed replacement. They identified some £335m for total maintenance expenditure over 30 years and some £86 million over the first five years including "improvement expenditure" of just over £14 million. In the first five years, they indicated major expenditure for windows, kitchens, sanitary ware, central heating, electrics wiring, rainwater goods, wall finishes, main roof, hot water and external entrance doors. Some "improvements" were listed with cost estimates. For instance there was identified the renewal of all single glazed windows with double glazed PVCU window, against the heading "security" the provision of a mortice deadlock to the front door, a spy hole to the front door and locks to all ground floor windows and mechanical extractor fans to kitchens and bathrooms. A health and safety rating was done for all the properties internally surveyed and, for instance, carbon monoxide was identified as a slight risk for most of the properties in question where there was a gas appliance but no carbon monoxide detectors were provided for. They made use of the Council's database which identified a substantial number of dwellings as having been constructed prior to 1974.
32. By this time, the Council had made a decision in principle following consultation with tenant representatives to pursue a stock transfer using the CGM for its social housing. A brief was prepared for the appointment of a lead housing consultant to assist with the transfer process. This brief prepared in about February 2003 highlighted the work to which this consultant (ultimately BWNL) would broadly have regard. The nature of the work included formulating a detailed action plan and timetable, confirming the work on the initial valuation of stock, advice on the preparation of the other documents and on other tenant liaison and providing other ad hoc advice on any related issues. A Community Gateway Working Party was formed which included Messrs Deacon and McCabe and Ms Perry; this group held its first meeting on 6 March 2003 and meetings monthly thereafter. The Preston Tenants Liaison Forum held its first meeting on 22 May 2003 and a monthly Gateway News was sent out to councillors, staff and tenant representatives. Broadly, the tenant representatives were kept informed as to what was going on; they were consulted and indeed they were involved in the process which led up to the Offer being made to the tenants in the autumn of 2004 and the transfer to CGA at the end of 2005. For instance it is clear that throughout July and September 2003 there were detailed consultations between Mr Deacon and many of the tenant organisations.
33. Mr Graham was by 2003 involved in detail as part of his existing job in the repair and improvement programmes which the Council was providing and indeed was required to continue with pending the transfer of the housing stock. Thus, for example a Repair and Improvements Programme meeting was held on 24 June 2003 at which there were detailed discussions about work that was being done and was planned to be done.
34. On 7 July 2003 BWNL submitted its tender to the Council. Mr Johnson was identified as the director having overall project responsibility. 49 working days were indicated as an assessment of what would be required to be provided in relation to the support required to the Council. BWNL described itself as having a wide range of experience in relation to local authorities and indeed to Registered Social Landlords in relation to stock transfers. Mr Johnson was held out as a leading practitioner in the analysis and development of housing strategy and business planning and with a particular expertise in advice on all aspects of transfer of local authority housing to independent landlords, having been involved in over 40 such transfers. Appendix B to the tender indicated that the detailed tasks would include first under the heading "Action Plan and Project Management" establishing arrangements with the new landlord and "liaison with and advice to the recognised tenants' groups as necessary on all aspects of the process". Secondly, under the heading "Valuation of the Stock", it was said that it would work closely with the relevant officers to review all assumptions used in the valuation calculations, measure their sensitivity and incorporate the agreed offer to the tenants. Under the heading "The Offer to Tenants" there was reference to the likelihood of there being "guaranteed repair and improvement programmes". In Appendix C there was reference to the "business plan" and the need for a "sophisticated valuation" to incorporate "the implications of the offer to tenants". By 17 July 2003, the Council indicated to BWNL that it was being shortlisted. On 4 August 2003, the Council indicated that, subject to contract, it would award to BWNL the contract for the lead consultancy work. The formal agreement was to be signed and dated 29 October 2003.
35. In August 2003, HACAS Chapman Hendy produced a report for the Council which identified broadly that its housing stock had a negative valuation of just over £34 million. This made certain assumptions including the need for some £327 million of expenditure on repair, maintenance and improvement work over the following 30 years.
36. By August 2003 Mr Bliss had been retained by the Council and he promoted the sending to all tenants in early September 2003 of a brochure and a survey form for the tenants to complete. By 29 September 2003, 387 survey forms had been received with a small majority being dissatisfied with the condition of their homes; a large majority, over 80%, wanted improvement and modernisation of the homes.
37. By October 2003, Mr Johnson was becoming involved in detail on the moves which were being taken incipiently to progress matters towards a stock transfer. For instance he attended the Community Gateway Working Party meeting No 9 on 13 October 2003 and the minutes record that he gave an update on the "valuation situation and potential gap funding issues". By this stage, the Council was recognising that £55 million was needed to be spent to reach the Decent Homes Standard but even this would not address tenants' wishes in terms of what they expected; this was spelt out in a report prepared by the Council's Interim Director of Housing, Marlene Bailey, circulated in October 2003; it was indicated that more than £55m should be spent to bring the dwellings up above the Decent Homes Standard. At about this time, at least as far as the available documents indicate, "business plan cash flow projections" were being produced. That dated 30 October 2003 showed negative cash flows for the following 10 years. The Gateway News letter of November 2003 talked about there being a "major increase in investment in the homes" with the draft business plan containing "£80 million of investment in the first 5 years in new kitchens, bathrooms, central heating, major repairs and environmental works". It was explained that, without the transfer, the Council would only have £22 million available for such works.
38. Savills produced their final SCS report in November 2003. By this stage the current property count was 6,946 units of which they had surveyed 38%. The total forecast expenditure to improve and maintain the stock over 30 years was £296.5 million equating to £42,686 per dwelling, excluding professional fees, management costs and VAT. Within the figures was £22.7 million for improvement to "provide new or improved amenities to dwellings that currently do not exist". This typically was to comprise items "such as the new installation/upgrade of central heating systems, smoke detectors, security lighting and installation". They found that 63% of the stock did not meet the Decent Homes Standard. At Paragraph 8.3.1 they set out a list of improvements for which they were costing as part of the survey:

"Install double glazing windows

Install full gas central heating

Upgrade partial heating to full

Upgrade roof insulation

Install smoke detectors

Kitchen re-planning

Bathroom re-planning

Install mechanical extract fans

Security

Installation of entry phone systems for flats

Car parking

Solid wall Insulation

Environmental Improvements"

39. It is common ground that this report identified in effect and on analysis that some £56m to £57m would need to be spent over the first five years on bringing those dwellings which needed it up to the Decent Homes Standard and some £22m to £23m would be spent on improvements over and above that standard. The total amounts for improvements were broken down against about 60 different elements, including kitchens, sanitary ware, central heating items, electrical wiring, extract fans, smoke detectors, double glazing, security and the like.
40. In December 2003, the Council applied to the ODPM for a place on its 2004 Housing Transfer Programme. The housing stock was identified as totalling 6835 dwellings in nine separate areas of Preston. It should be borne in mind that much of the housing stock was old, with over 1900 dwellings being built before 1945 and at least 1500 built between 1945 and 1964. The application referred to the latest SCS report. It was said that nearly £23 million would be spent on improvements over the first five years with about half of this relating to double glazing installation. The Council indicated that its proposal had been drawn up after an investment appraisal in which the tenants were instrumentally involved and that the Community Gateway Model was proposed. At the same time, the Council submitted what was called a "Housing Option Appraisal" to the Government Office for the North West which amongst other things emphasised the extensive and intensive work done with tenants and tenant representatives via the Preston Tenants Liaison Forum and the Gateway Tenant Steering Group more recently set up.
41. By the end of December 2003, there had been set up by the Council the Community Gateway Team, comprising Mr Deacon, Ms Perry and Mr Roberts, all Council employees, assisted by an administrative assistant. What was envisaged (and occurred in the result) was that, if the Transfer went ahead, these three would go and work for CGA which would give housing continuity.
42. In mid-January 2004 an all day tenant conference was set up having been publicised to all the Council tenants. 92 tenants and three councillors attended as well as members of the Tenant Steering Group and Mr Bliss, one of whose jobs was to work with that Group. Key issues that tenants wished to see were recorded as being "central heating, double glazing, modern kitchens, modern bathrooms" and an "ability to have their say". The discussions continued in January and over the following weeks as to the constitutional make up of the proposed CGA along the lines of how many tenant, independent and Council board members there should be. By about February 2004, the Council had appointed as solicitors in relation to the proposed stock transfer Wright Hassall.
43. On 2 February 2004, Mr Johnson of BWNL set up a Business Planning seminar attended by representatives of the Council in which he sought to explain what the stock valuation meant and that it took account of "guarantees to tenants". He explained that there was a negative stock valuation but that the government would write off existing Council debt and consider providing gap funding of about £30 million. He explained what a business plan was for the purposes of the transfer and went on to suggest that major repairs and improvements would be assumed to cost £83 million in the first five years. He identified that a common or "persistent" question often asked was whether promises were being delivered.
44. The Community Gateway Working party met for the 13th time on 12 February 2004, there being no tenant representatives present but Mr Johnson and Mr Bliss were present. There was discussion about a "shadow board" being appointed which would need to include tenants and independent as well as Council members. This recognised the fact that CGA would not be legally set up for some time.
45. From about this time there started to be set up a plethora of groups. The Tenants' Umbrella Group meeting on 2 February 2004 decided that it would be sensible to set up a working group of tenants and Council housing staff to look at drawing up what came to be known as the "Preston Homes Standard" which was to be the standard of repair and improvement that was wanted for all homes in Preston to reach. Ms Bailey wrote to the tenants' groups to seek volunteers to sit on this working group.
46. The Audit Commission produced a "Comprehensive performance assessment" of the Council in March 2004 and recorded in Appendix 1 that tenants were closely involved in shaping the works programmes for housing and that the Council was trying to achieve its Preston Housing standard which "goes well beyond the minimum criteria for" the Decent Homes Standard.
47. The first meeting of the Preston Homes Standard Group took place on 9 March 2004; this was attended by seven tenant representatives and six Council representatives including Ms Perry and Mr Graham. The objectives were listed as being:

"(a) To produce the Preston Homes Standard that should apply to all properties and to

(b) Develop that standard to more detailed proposals about standards of fitments and design features taking into account costs and future repair."

This strongly suggests that, as happened, the intention was to produce a high level Standard and also to develop more detailed proposals about standards.

48. Whilst there was a detailed discussion as to what was expected from windows and doors, the following was minuted in relation to the Preston Homes Standard:

"The Group discussed what the standard should include (see notes attached) and Marlene is to produce a more concise version of the standard (see attached) in a draft format, to be circulated with the minutes. All Members agreed to check this for omissions and to respond to Marlene with amendments by 18th March 2004."

The attached notes summarise briefly the headings of the Decent Homes Standard, adding: "But we want better!" The notes went on setting out some general heads like "Structurally Safe-Smoke Alarms", "Insulation/Energy Efficient-Ventilation", "reasonably aesthetically pleasing to tenants", "Wiring-Sufficient to meet 21^st Century Standards", "Bathrooms…Includes security aspects as appropriate-window locks, lighting, door alarms, identislot, magic eye…" and "Safety-exit in case of fire". There were two lists of "what do we want from" windows and doors. Windows would be required to be PVCU, double glazed, to be lockable and provide a fire exit as well as adequate vents. For the doors security was to be by "5 lever locks etc" and "identislots". An identislot is a domestic security device that allows householders to check callers' identification with an electronic card, before letting them in. Neither the minutes nor the evidence reveal the basis upon which the contents of these notes emerged other than they were discussed. For instance it is not minuted that these items of work were all agreed to or that the Council representatives in any way promised that these works would be done. It is also not clear whether the tenant representatives or others were simply tabling possible ideas or were in any way, representatively on behalf of other tenants or not, insisting on all or any of the items of work. The minutes record that there were detailed discussions about windows and doors.

49. At a staff conference held on 11 March 2004 Mr Deacon made a presentation as to what broadly was involved in the Community Gateway approach followed by Mr Bliss who promoted the Community Gateway approach and highlighted the need for improvements to the homes. Mr Johnson on behalf of BWNL gave a presentation on what was required from the business plan. Others also spoke such as Mr Roberts.
50. A new group called the Capital Partnership-Contract Group was formed, meeting for the first time on 12 March 2004. There was a tenant representative but it mostly involved Council representatives such as Mr Graham, Ms Bailey and Mr McCabe. There was discussion about the forms of contract for the various construction works and there was broad agreement that a partnering form would suffice. There was a meeting of a new Gateway sub-committee on 18 March 2004 whose terms of reference seemed to have included facilitating the transfer. Mr Johnson attended the first meeting on 18 March 2004 and made a presentation about the business planning; that presentation assumed that "repairs, maintenance and improvements" were "based on stock condition survey" and major repairs and improvements for the first five years would cost about £83 million. Mr Johnson also apparently attended another meeting on that day with tenant representatives and Mr Bliss to discuss the business plan. Notes of the meeting do not suggest that individual types of work were discussed, although there was some discussion about the stock condition survey carried out by Savills.
51. The second meeting of the Capital Partnership-Steering Group took place on 18 March 2004 and it appears that representatives from Emcor Drake & Scull, who were electrical and mechanical contractors, and who were to work in partnership with a building company, Bramalls, on the future construction work, attended. Mr Graham as the Capital Programme Manager clearly took a major part in these meetings. Minute 2.1(a) states:

"Preston Homes Standard Group. Scoped what tenants wanted for a standard which will be higher than [Decent Homes Standard] for [Community Gateway Model] proposals. [Preston Homes Standard] went to Task force on 18/3/4 and was accepted in principle. [D Graham] to expand on the 12 issues in the PHS. The group looked at standard of fittings eg doors, windows, boilers and the group will also need to consider future maintenance requirements."

It is reasonably inferable that the 12 bullet point standard document (see below) had been drafted by this stage.

52. By early April 2004 the Preston Community Gateway Association was broadly in place although it was not yet incorporated. A Strategy document was produced which set up what its aims were and what its organisation was likely to be. 10 Local Community Areas in which there was Council housing stock to be transferred were identified. A specification was prepared. A tenants' conference was held on 1 April 2004 with a view, amongst other things, to encouraging tenants to have a greater involvement in the proposed housing stock transfer.
53. By 19 April 2004, BWNL had produced a computer-generated document headed "Business plan and assumptions" which identified stock numbers, rents, target rents and rent increases possible, allowances for bad debts and other income. It also identified projected costs of "Repairs" for Years 1-5, 5-10 and 11-30 with "all the figures… based on the stock condition survey figures (industry standard)". The reference to the "industry standard" was and was intended to reflect the fact that the latest SCS report identified repair and improvement works would take the dwellings above the Decent Homes Standard to a higher standard.
54. A second Preston Homes Standard Group meeting was held on 20 April 2004 but no minutes have been disclosed; the agenda talks about "Agreement of the Preston Homes Standard (attached)", "Consideration of Door Types (costs benefits)" and "Ways forward on window types". There was little if any reliable evidence as to what was discussed or agreed at this meeting, although the agenda suggests a concentration on windows and doors. The third meeting of the Capital Partnership-Steering Group took place on 29 April 2004; the minutes record that the Preston Homes Standard Group had finalised the Preston Homes Standard which was to be attached to the minutes, although it is not attached to the minutes in the agreed court bundles. The meeting was told that there would be a further meeting of that Group "to look into more detail at external doors, PVCU windows and heating systems".
55. Behind the minutes in the agreed Court bundles but not referred to in them or obviously physically attached to them were documents entitled Appendix 3 entitled "Heating, Insulation and Ventilation General Requirements of Specification" and "Windows Specification" both also entitled Preston Homes Standard. So far as is material to the case, the Heating document clearly envisages new boilers and radiators and that each radiator would be "fitted with a thermostatic radiator valve (TRV)". The Window Specification does not obviously identify them as double-glazed and does indicate that there would be "trickle ventilation" with "gas vents to be provided through the wall subject to survey". It seems probable that these Appendices are misplaced in the Court bundles because there were Appendices each numbered Appendix 3 to the Partnering Agreements eventually entered into between the Council and the various specialist contractors.
56. On 5 May 2004 the ODPM informed the Council that it had provisionally been given a place on the ODPM's stock transfer programme and that it would process and consider requests for gap funding.
57. The third and apparently last (certainly last minuted) Preston Homes Standard Group meeting took place on 11 May 2004. In the context of this case, it is an important meeting. It was attended by amongst others Marlene Bailey and Mr Graham for the Council, seven tenant representatives, a Fire Safety Officer and representatives of Bramalls, Sovereign Group, Emcor Drake and Scull and Nu-Aire Ventilation. At Paragraph 2 of the minutes, it was recorded that Mr Graham "stated that he had not yet translated the standard to actual details". This suggests that the Preston Homes Standard remained in its 12 bullet point form (see below). A number of the recorded discussions are illuminating:

(a) Paragraph 3 records that there was a fire safety presentation and concludes:

"All window designs for the PHS will comply with the standard determined by BS7950 as a minimum and will incorporate any requirements were possible for Secured By Design.

3.1 TC outlined the agreement:-

All downstairs windows are able to have key operated window locks provided not an inner room situation.

All 1^st floor rooms should have at least 1 window that is a fire escape window and not obstructed with locks. These windows may have laminated glass fitted. If more than 1 window in a room then one of those windows can be fitted with a lock…"

Paragraph 4 records a Question and Answer session on fire safety.

(b) There was a discussion of "PHS Doors" recorded at Paragraph 5. It seems that nine door types were displayed with a range of door patterns said to be available made in a variety of different materials. There was a discussion and question and answer session, at the end of which the group voted for their top three choices.

(c) Paragraph 6 refers to a display of windows, currently in use or which had been used on recent housing schemes to designs and specifications previously agreed. It appears that there was a discussion but there was no final agreement. There was to be a discussion later about costs and specifications.

(d) Paragraph 7 records a discussion on heating and ventilation. Two gas condensing boiler types were discussed and Mr Fullalove of Nu-Aire said that with a "Nu-Aire drymaster there would be no need to open windows/fit trickle vents". Typical costs were identified ranging between £2600 for a flat on a first or ground floor to £3000 for a house. Although Mr Daynes of Emcor Drake and Scull strongly recommended a particular boiler, no agreement was recorded. It was said however that the next meeting would be arranged "once the heating & Window specifications have been confirmed".

58. Behind the minutes was a copy of the Preston Homes Standard which, as it features so prominently in this case, is set out verbatim:

"Dwellings and communal areas (when appropriate) should

1) Be free from structural defects that affect the soundness, safety and stability of the dwelling

2) Provide an effective barrier to the elements and normal patterns of weather with no penetrating or rising dampness

3) Provide affordable warmth through programmable, efficient heating and hot water systems, together with adequate ventilation.

4) Have a safe electrical installation conforming to the current IEE requirements with adequate provision of power outlets and lighting points

5) Provide an effective means of escape in case of fire and be resistant to the spread of fire, have appropriate fire detection and alarm systems fitted

6) Provide sanitary fittings with bathing and/or shower facilities together with hygienic services, a clean supply of drinking water and a satisfactory drainage system

7) Provide security measures to deter crime, both in the fabric of the property and in the surrounding environment

8) Provide an aesthetic appearance and design features to satisfy Tenants requirements

9) Provide rooms for sleeping that is separate from other habitable rooms to fulfil current and new Tenants' aspirations

10) Take into account people's disabilities in terms of design and access

11) Provide modern kitchen with satisfactory cupboard/storage space, worktop areas and hygienic services, with accommodation for a range of white goods wherever possible.

12) Wherever reasonable to provide in-curtilage garden areas with approach paths, parking, clothes drying, fencing and gates appropriate to the dwelling types"

This represents the high-level document which appears to have been drafted at some stage in April 2004 and been discussed. There is no suggestion that this was ever altered.

59. At a Community Gateway Working Party meeting on 20 May 2004, attended by the Council Gateway team of Messrs Deacon and Roberts, Mr Johnson of BWNL, Mr Bliss and other consultants, there was a detailed discussion about the project plan which seems to have had a large number of entries on, all of which were programmed to take place on or by certain dates. The following was minuted at Paragraph 2:

"…debate about the level of detail which should go in the offer document re improvement work. [Mr Deacon] suggested that it should be basic info plus details of the process of how tenants can be involved in making local decisions. Agreed [Mr Roberts] to ask Savills to look at the stock condition survey & break down work needed into the 10 [Local Community Areas]. PJD/NB/AJ/PR to discuss further."

There is an e-mail dated 14 June 2004 from Savills to Mr Johnson that the breakdown into Local Community Areas was underway.

60. Mr Bliss prepared a report headed "Stock Condition Surveys-an' all that…" dated 23 June 2004; from its chatty title, it may have been intended for consideration by the tenant representatives. It referred to the fact that the SCS identified specific categories of repair and went on:

"It is currently intended that all of these works (in homes that need them) would be carried out within the first five years of the Gateway…

It is currently anticipated that current work being done by [the Council] to examine tenant requirements for improvements will not significantly change the improvements required, but it may clarify the order in which improvements are carried out."

61. In late June or early July 2004, Mr Bliss produced for the Council a glossy brochure entitled "Empowering communities in Preston" which explained "the development of the proposed Preston Community Gateway Association's Community Empowerment Strategy". This promoted the Community Gateway Model. It contained quotations from various tenant representatives on several of the committees. It was more concerned with the governance by and involvement of tenants in the process.
62. On 2 July 2004, there was the first meeting of yet another group, the Offer Document Working Group, which comprised Messrs Roberts, Deacon, Bliss, Johnson, Heath, Ms Perry and several tenant representatives. Relevant notes of the meeting were as follows:

"1. AJ [Mr Johnson] set out the remit for the Group. Looking at specifics within the offer document. Need to ensure that document is 'Gatewayised'.

2. PH [Mr Heath, the Wright Hassall solicitor] advised not to go into great detail within the document. Advice notes & information material should underpin the document but not form part of the formal offer.

3. NB [Mr Bliss] advised the offer document is legally binding on the new landlord and contents feed into business plan.

4. AJ important to focus in the document on what is important to tenants…

6. NB concerned that content of document should reflect Community Gateway…

7. PH said it was important for Communications consultant [N Winn of Bridge & Co] to be involved in leading in writing the document.

11. GG advised that tenants needed to be involved via workshops.

12. GG said it was important that offer document is simple for all to understand. Also it shouldn't constrain future local decisions on how money should be spent.

13. AJ advised offer should have some specifics to make it attractive but not enough to tie up all the funding.

14. GG advised it should say in the offer that there is money for local choice…

16. Re improvement group AJ to take info from stock condition survey and produce discussion document re work needed at City wide level…

19. KP [Karen Perry] said important to link work with tenants on improvements to work already done with tenant reps on Preston Homes Standard (PHS)/partnering etc. KP to send list of names to NB and copy of PHS to all…

21. AJ to lead the improvement working group. First meeting to be arranged for PM on 15/7/04. AJ to produce short pre meeting discussion note…"

63. There were a number of meetings on 8 July 2004. One of these was a reasonably well attended joint tenant and staff meeting in the early evening. Attendees were asked to identify five of 32 policy areas which tenants might want to be involved in. 72 wanted to be involved in "Repairs", 67 in "Anti-social behaviour" and 30 in "Improvements". The fifth meeting of the Capital Partnership-Steering Group also took place with Mr Graham minuting it. There was further discussion about the partnering agreement relating to the construction works. There was some discussion about the Preston Homes Standard PVCU Windows and the group "confirmed acceptance of the revised window specification which would now be the standard for all PVCU windows".
64. So far as this case is concerned, a key meeting took place on 15 July 2004. The minutes are headed "Community Gateway Offer Document Improvements Working Group". 16 people attended of whom 12 were tenants, three of whom were on the Preston Homes Standard Group. Mr Johnson of BWNL, Mr Bliss, Mr Roberts and Ms Perry also attended. Of the 16 attendees, only one physically gave evidence (Mr Roberts), whilst the statement of one other, Ms Perry, was treated as evidence although she was not required to attend cross-examination. CGA declined to call Mr Bliss and Ms Kinsella (a tenant representative). BWNL decided not to call Mr Johnson, who, although said initially to have been reluctant through supposed ill-health to attend to give evidence, had been prepared, the Court was told, to come to London to do so.
65. The relevant parts of the minutes of this meeting (which it does not appear were challenged as incorrect at the time) are as follows:

"1. Introduction

1.1 PR explained that the group had been set up to look at the content of the improvements section of the offer document.

1.2 KP outlined the work already done by several members of the group in putting partnering arrangements into place and drawing up the Preston Homes Standard.

1.3 CW [a tenant] explained more about partnering and gave an update on progress.

2. Offer Document

2.1 AJ explained what an offer document is & showed the group some examples of offer documents from other stock transfers.

2.2 AJ outlined that this group would be looking at what specific guarantees should be given to tenants in respect of investment in the condition of the stock.

3. Development of the Offer to Tenants

3.1 AJ presented a paper giving background material for discussion.

3.2 KS [a tenant] asked if there was enough money in the business plan to deliver Preston Homes Standard & not just Decent Homes Standard (DHS). AJ said the stock survey had been done to an aspirational standard & there was more money in the plan than needed to deliver DHS.

3.3 KS asked is there also money to pay for upgrades to previous improvements. CW thought surveyor had said this was covered by the AJ will check.

3.4 Discussion followed re level of detail needed in the offer document. AJ said offer document would need to give 'headline' information. NB agreed - too much detail at this stage would tie the Gateway Association to the figures & reduce future local flexibility. CW said promise should be that each area would get something at the start of the works programme.

4. Priority of Work

4.1 Discussion followed re priority of work.

4.2 P H-S [a tenant] said it was also important to have guarantees re quality. CW said some people at this meeting had already looked at this when drawing up the Preston Homes Standard & selecting good quality standards for doors and windows. PR said plan was to have a show trailer so people can see examples of the quality of e.g. doors/windows/[kitchen] units etc that Gateway could afford to fit.

4.3 BS [a tenant] said that re priorities it was important to concentrate on doing work to make properties wind & watertight first plus central heating should be fitted. There was general agreement to this…

4.5 NB said it was important to remember that everything couldn't be done in year 1…

7…AJ to produce a draft for offer document."

66. The paper presented by Mr Johnson (Minute 3.1) was entitled "Development of the Offer to Tenants". It reported that the "Results of the Stock Condition Survey" were that there was a full investment of £78 million for the first five years of which £57 million related to attaining the Decent Homes Standard. Other relevant parts were:

"Given the huge shortfall in resources it is difficult to be precise on exactly which parts of the investment programme would actually be carried out.

The offer document could however guarantee that the full investment programme of £… million would be carried out by the new landlord and that this is approximately £50 million more than the Council could afford.

Specific Guarantees

It is usual for the offer document to include specific guarantees in respect of individual components within the programme. The attached spreadsheet shows the number of replacement components for key elements covered by the survey, (e.g. the offer could gurantee that 5100 kitchens and 5100 bathrooms would be replaced in the first five years) In other areas it would be possible to gurantee a specified level of expenditure over the first 5 years (e.g. £3.6 million would be allocated to local communities for expenditure on environmental improvements of their own choosing).

Options for the Offer

Whilst the stock condition survey is based on a number of key assumptions there would be some flexibility to vary priorities if this would best meet tenant aspirations. For example it would be possible to bring forward some elements of expenditure provided that it would be acceptable to defer other elements of expenditure.

Therefore a key role of the Working Group will be to establish what are the most important elements of the investment programme from the tenants' perspective and how these can be addressed in the formal offer."

The attached spreadsheet identified that the analysis of the SCS showed that, in relation to "catch up/major repairs", £13.4 million could be spent on 5,100 replacement kitchens, £7.7 million on 5,100 replacement bathrooms, £4.7 million spent on heating works, £3.4 million on electrics for 2,500 properties, £2.2 million on external doors for 4400 properties and £11.2 million on double glazing to 3,500 properties amongst other expenditure. For improvements, for instance £11.2 million could be spent on double glazing to 3,500 properties, £1.9 million for providing full central heating to 1,000 properties and £4.5 million on upgrading central heating in 2,500 properties; £1.3 million could be spent on extractor fans for all properties.

67. Ms Perry in her witness statement gives no material evidence about what if anything in detail lay behind the Preston Homes Standard document (the 12 headline points) but she says that her understanding of what Mr Johnson is minuted as saying in Paragraph 3.2 was that he was confirming "that there was enough money to deliver the Preston Homes Standard". She does not condescend to explain whether the Preston Homes Standard document was in some way underpinned or explained by greater detail culled from meetings or consultations with tenants. She gives no evidence at all as to whether she had any knowledge of the Draft 1 document (prepared by Mr Graham), referred to below. If she believed and understood that Mr Johnson was doing anything other than referring to the general Preston Homes Standard, I would have expected her to have said so.
68. Mr Roberts, who did give oral evidence, gave no material evidence about the or any detail which may or may not have been agreed or discussed with tenants in relation to what major repair or improvement works would be done. He confirmed in his witness statement and indeed orally that Mr Johnson confirmed at the meeting that the improvements costs in the business plan and SCS were sufficient to meet the Preston Homes Standard. He must have been referring to the 12 high level points document.
69. I therefore conclude, in accepting their evidence, that the minute is not complete under Paragraph 3.2. The minute records Ms Sarratt's question accurately enough; it was a sensible question to ask whether there was enough money in the business plan to deliver the Preston Homes Standard as opposed to simply the Decent Homes Standard. Mr Johnson's minuted answer is not strictly an answer to that question: "the stock survey had been done to an aspirational standard and there was more money in the plan than needed to deliver DHS". I accept that essentially he said that there was sufficient money, effectively within the approximate £80 million in the proposed business plan, to deliver the Preston Homes Standard. However, in spite of the familiarity with which some of those at the meeting were discussing the Preston Homes Standard and the fact that the 12 headline point document had been in existence for about three months, I can not infer that Mr Johnson had the headline document, largely because he was not presented as a witness to explain whether he had the document or not and also because there is no documentary hint that he had it before the end of July 2004. He obviously knew that there was a Preston Homes Standard but clearly was not interested in determining what it was because his line was that there was £80m available and the SCS broadly defined the work which would or could be done.
70. I turn at this point to what I have called the Draft 1 document. I have to say that this document, its provenance and what happened to it after it was drafted represent something of a mystery. The Court was told, although there is little evidence to support this, that it was "found" within Ms Perry's e-mail, albeit that she gives no evidence about it at all. There is certainly some confusion as to its date. Mr Graham said in his first witness statement (at Paragraph 21) that he produced Draft 1 on or around 7 July 2004, although, in his later third statement, he says that he cannot be certain as to the date but he created the document, he says, after the meeting of the Preston Homes Standard Group on 20 April 2004 and before 7 July 2004 "when it would appear from the metadata that Karen Perry saved a version of it in electronic form." It is clear however that he had not started the production of a detailed document which set out the detail of what had been agreed with or promised to the tenants (if anything) before 11 May 2004 because he recorded in the minutes of the Capital Partnership group meeting on that day that he had not yet translated the headline standard "to actual details".
71. There is literally nothing in the disclosed documents which shows that it was prepared much before 7 July 2004 or that it was circulated to anyone else at any time. Mr Graham says that he "took direction from and was supported by Marlene Bailey", he looked "at existing Council standards detailed in the various tender documentation", he liaised "with the contractor partners' quantity surveyors regarding appropriate British Standards" and made "sure those standards were aligned with what had been agreed by the Preston Homes Standard Group"; there is no documentary support that any of this was actually done, which I consider surprising. The content of Draft 1 suggests that he had not actually or definitively looked at Council or British Standards; for instance, against the item for separate sleeping rooms, he wrote: "Building control/fire regulations to consider". Mr Roberts and Ms Perry, as important members of the Council's Gateway transfer team, who were to go on to be employed by CGA, gave no hint or suggestion in their evidence that they were aware of Draft 1 or about any particular detail "behind" the 12 headline points Preston Homes Standard document.
72. What is extraordinary is that Draft 1 did not apparently again see the light of day until 2009. No one, including Mr Graham, seems to have paid it any regard or attached any importance to it from July 2004 to 2009. Although this is dealt with later in the judgement, Mr Graham, albeit charged with preparing programmes and costings for the work to be done in the first five years, said in evidence effectively that he had no regard to the Draft 1 document or its contents, which is surprising, to say the least, if it was intended to represent either what was understood to be promised to the tenants or reflected in some way what the tenants were entitled to expect. It does not appear that anyone involved in preparing the Offer document (see later in this judgement) was aware of Draft 1 or that there was any material detail in the Draft 1 document which needed to be mentioned in the Offer to the tenants.
73. I deal with the status of the Draft 1 document later in this judgement but in summary I am satisfied and find that it was not ever intended to reflect or represent work promised by anyone to Council tenants, let alone a list of work as such which it was intended would be required to be done by CGA when it came into existence. I found Mr Graham, although I hasten to say not dishonest, an unreliable witness and one whose evidence on key issues I found very difficult to accept. He was particularly vague about what actually happened to Draft 1; he said in evidence that it "would have been circulated to everybody…I cannot comment on who the final document went to because I don't know, once I completed my work and put it together, where it went to after that."
74. The Draft 1 document itself has all the hallmarks of an initial draft. It is headed "Draft 1" which itself suggests that it was the first draft (although, surprisingly and unbelievably Mr Graham suggested that it was the final draft). It was clearly intended as an informal and early draft because it is headed also "Not the 12 disciples BUT the 12 disciplines!!" Leaving aside whether this might be thought to be amusing, it does not suggest that it was to be a final document of any importance at least at that stage in its drafting. There are a number of entries which also suggest it was a first draft. For instance, an item against the heading "Provide an effective means of escape in case of fire" has a question mark against it and another item under the "safe electrical installation" heading also has question marks. Other items suggest that building control and fire regulations authorities need to consider certain items or that the occupational therapist service needed to fast track assessments for disabled applicants. Another item in the "safe electrical installation" heading has something which is merely "suggested".
75. I set out below relevant parts of Draft 1:

"PRESTON HOMES STANDARD

Dwellings and communal areas (when appropriate) should be:-

Not the 12 disciples BUT the 12 disciplines!!

All the standards will comply with the appropriate BSI

Component/Location	Standard
Free from structural defect that affects the soundness safety and stability of the dwelling	Exterior walls of the dwelling must be in good condition to withstand the effects of weather. Air bricks for the purposes of ventilation to be clear to allow for flow of air… All curtain wall tiles to be securely fixed. All windows to be PVCU double glazed kite marked to secured by design standard… Windows to be lockable/push button operated… Identified escape in the event of fire. External doors (front/side/rear) to be PVCU/GRP secured by design with requirement for lock replacements if keys lost/stolen. Porches/canopies to shield visitors from weather etc.
Provide an effective barrier to the elements and normal patterns of weather with no penetrating or rising dampness	All Damp Proof Courses (DPCs) are in good condition at ground floor levels and cavity walls are insulated. Where DPCs are not in situ to be installed. All internal floors are level and free from heave…
Provide affordable warmth through programmable, efficient heating and hot water systems	All properties to have full house/flat heating with either gas/electric heating All gas heating installations to have a gas condensing boiler installed supplying heat to radiators in every habitable room, and a hot water supply. All radiators to be fitted with TRVs and heating controls/timers that are easy to use and maintain… All gas appliances to be serviced at least once a year or whenever the tenancy changes. Carbon monoxide detectors to be fitted where appropriate (i.e. medical need). Choice of gas fire with matching hearth and timber surround.
Have a safe electrical installation conforming to BS7671 requirements with adequate provision of power outlets and lighting points.	All electrical work must conform to BS7671 and all materials should conform to BS. Provision for all installations to include the provision for (at a date in the future) wiring for an electrical shower, intruder alarm, security lighting, cooker extractor hood and smoke alarms. All rooms (except bathroom) to have adequate number of wall sockets and lighting switches. Suggested -… Lighting for kitchens? Fluorescent? ... Extractor fans and ventilation systems
Provide effective means of escape in the case of fire and be resistant to the spread of fire, have fire detection and alarm systems fitted.	Internal doors to be at least half hour fire check, kitchen doors to be fitted with closers? ... Flashing alarms to be fitted for the elderly/disabled Identified windows for fire escape route
Provide adequate sanitary fittings with bathing and/or shower facilities together with hygienic surfaces, a clean supply of drinking water and a satisfactory drainage system	…A minimum of one separate w/c and combined where space permits… All properties to have a limited choice of colour and matching wall/floor finishes for sanitary fittings. Thermostatically controlled overbath showers to be provided… Towel/drying rail Extractor fan
Provide security measures to deter crime	Identislot 5 lever mortice locks to front/external doors 3 lever mortice locks to shed/outhouse doors. Chubb bolts to front door All external doors to comply with secured by design specification and incorporate police recommendations where required for the more vulnerable (i.e. recently burgled). Spy holes/view finders. Sliding bolts to doors… Intruder alarms - PIN numbers amended when tenancies change. PIR security lights. CCTV where required eg sheltered schemes.
Provide an aesthetic appearance and design features that satisfy tenant requirements	Incorporate provision of disabled adaptations during the course of works A recognised programme of external painting and maintenance… Internal doors which can be stained/varnished.
To provide rooms for sleeping that are separate from other habitable rooms to fulfil current and new tenant requirements	Legislative guidance for children Separate bedrooms where a child under 10 shares a room with someone over 16, increasing problem for ethnic minority families. Building control/fire regulations to consider
Take into account peoples disabilities in terms of design and access	Adaptations to consider progressive nature of disability ie. ramp not required now but may be required at a later date. Adaptations built into overall scheme of works. Occupational Therapy service to fast track assessments for disabled applicants and incorporate into capital schemes of work
Provide modern kitchens with satisfactory cupboard/storage space, worktop areas and hygienic surfaces with accommodation for a range of white goods wherever possible	Kitchens to be designed in consultation with occupiers using Auto-cad taking into account occupiers white goods… Work surfaces to be continuous and sufficient for use Adequate ventilation to avoid condensation from cooking Extractor hoods above cookers…
Wherever reasonable to provide in-curtilage garden areas with approach paths, parking, clothes drying, fencing and gates appropriate to the dwelling type	Secure fencing to perimeter of properties with lockable side/front gates… Rotary clothes driers for all properties… Storage sheds for garden tools. Tenant choice improvements e.g. levelling of gardens, infilling of ponds, turfing of gardens, removal of debris.

76. By 13 July 2004 the CGA Shadow Board was in place because there was a meeting between it and the Tenant Steering Group Committee on that date. It was attended by some 11 tenant representatives and Messrs Bliss, Deacon and Roberts. By this stage four of the five independent board members had been selected as had all the seven tenant members and the three Council members, including Mr Shannon who attended. The CGA Shadow Board had its first formal meeting on 15 July 2004. Mr Johnson attended and, the minutes reveal, he presented several papers on training, staff support and on a committee and working group structure. The key tasks for the proposed Operations Working Group included "tenant involvement and participation" and "planning the initial programme of major works", this being set out in Mr Johnson's report to the meeting. Are you
77. On 16 July 2004, there was an all-day conference set up by the Tenant Steering Group with talks given by amongst others, Mr Deacon and Mr Bliss, with Mr Johnson involved at least in one of the workshops. An e-mail suggests that 111 delegates were expected.
78. Mr Roberts had produced a first draft of the proposed Offer document circulating it by e-mail dated 19 July 2004. It referred specifically to the Preston Homes Standard, explaining that this was above the Decent Homes Standard. It indicated that actual improvements to be done included, for instance, that 5,100 homes would have replacement kitchens and replacement bathrooms and "all homes would have an extractor fan".
79. On 21 July 2004 Ms Perry circulated that to Mr Johnson and Mr Deacon and attached information produced by Mr Graham and his team "from the stock condition database". It needs to be borne in mind that the Council still retained repairing and maintenance obligations in respect of the social housing which it owned. The attached information was a five-year plan which showed £16,187,043 being spent in each of the five years (totalling £80,935,261) against different improvement headings: "Windows & doors, Kitchens Bathrooms, Heating, Rewires, Roofing, Replaced fascias, soffits, barges & rainwater goods with PVC, Fencing & paths, Off street parking, Curtain walls, Asbestos removal, Security, burglar alarms & identislots [and] External painting, pointing & repairs". This document is not wholly consistent with Draft 1 as, for instance, asbestos removal did not feature in Draft 1 and the ninth item ("provide rooms for sleeping that are separate") does not appear.
80. Apart from funding from the Government, the Council was seeking to secure private funding following the Transfer. To that end on 21 and 23 July 2004 Mr Deacon received funding proposals from the Royal Bank of Scotland and Nationwide.
81. On 29 July 2004, the Offer Document Working Group met; those attending included Mr Deacon, Mr Bliss, Mr Heath, Mr Johnson and at least one tenant representative. There was a discussion about the first draft and comments received would result in re-drafting and amendments. It is clear that at the very latest Mr Johnson then had a copy of the Preston Homes Standard 12 high-level points document. On the same day there was another Tenant Steering Group Committee attended by eight tenant representatives, Mr Deacon, Mr Bliss, Mr Green and Mr Johnson. There was a discussion about improvements and as to how they should be represented in the offer document. The minutes record that there was agreement that the offer document should make the point that promises should be kept and in the improvements section of the document, these points should be raised:

"Items needed to make wind and water tight-e.g. external doors double glazing, central heating, insulation…

extractor fans, specifically mentioning condensation issues

improvements relating to security

environmental works

that all homes should have some works done in year one and subsequently on a gradual basis…

the Preston Homes Standard-there was a discussion about inclusion of PHS clauses-translated into better English-it was mooted that there is a particular difficulty about including clauses relating to removal of bedsits. GG suggested the CGA Board could adopt a Gateway Homes Standard with the relevant clause removed. PD to give this further consideration…"

Tenant representation on the Tenant Steering Group had by August 2004 grown to 28 people.

82. There was a Preston Gateway Committee Meeting on 3 August 2004 for which a report relating to the Valuation of Housing Stock from Mr Johnson was presented Appendix A to which was a document entitled "Valuation/Business plan assumptions" which identified against the total repair costs that "all the figures…are based on the stock condition survey figures (industry-standard) based on November 2003 stock numbers and prices." This was repeated in the body of the report:

"The costs of repairing, maintaining and improving the housing stock are based on the results of the stock condition survey carried out by, and subsequently updated by, FPD Savills in November 2003"

This was subject to some adjustments such as inflation, an allowance for fees and a reflection of the reduction in the number of properties being transferred.

83. At a Community Gateway Team Meeting also on that day, attended by Mr Deacon and Mr Roberts, there was discussion about a further draft of the Offer document from Mr Deacon. That draft set out the "Gateway Homes Standard" with only 11 headline points (excluding the "provide rooms for sleeping that are separate" item). This was effectively the Preston Homes Standard less the item about bedsit rooms. Under the heading about what improvements would actually be done, there was reference to the number of homes that would have new external doors, windows, central heating, upgrading of central heating, new kitchens, bathrooms and electrics and together with various other items including:

"extractor fans would be provided to those homes that need them to tackle condensation"

This represents a change from the earlier suggestion that all properties should have an extractor fan.

84. There was a well attended Shadow Board meeting on 5 August 2004 attended by numerous tenants, Mr Deacon, Mr Roberts, Marlene Bailey and representatives of BWNL. Ms Bailey made a PowerPoint presentation which said in relation to Repairs:

"£80m in repairs and improvements in the first 5 years with enough £'s in the Business Plan to keep properties at this standard for next 30 years"

A Tenant Steering Group meeting attended by 14 tenants and Mr Bliss took place on 9 August 2004 at which there was a detailed discussion of the Offer document in its then current draft.

85. The Offer document went through a large number of changes. For instance a version produced on or about 13 August 2004 dropped the reference in the actual improvements section to extractor fans but added "improved ventilation would be provided to those homes that need them to tackle condensation". It is reasonably clear that these changed versions were submitted to the various different committees, including committees on which tenants sat. For instance, there was a Shadow Board Meeting on 26 August 2004 at which, amongst other things, Mr Deacon presented a report on the current draft of the offer; he explained that this was a fast developing document and Board members would be sent the final draft in early September; the Shadow Board accepted the recommendations contained in this report and noted the current draft of the offer document. The draft Offer document was very close to the version produced on about 13 August 2004.
86. By early September 2004 the Council Gateway team was producing a newssheet called the Gate which kept tenants informed as to the generality of what was going on. Issue 3 dated 3 September 2004 referred to the fact that new kitchens and bathrooms would be fitted in 5,100 homes and other numbers of homes would have other work. £80 million would be spent over the first five years. The Gateway Homes Standard was set out; this was essentially the Preston Homes Standard less one point.
87. A further draft Offer was produced in early September and, again, it attracted suggested amendments. For instance, Wright Hassall e-mailed Mr Roberts on 6 September 2004 stating:

"I have made one further amendment to the Offer Document. I have added the words "when needed" in the first bullet point after the title "The Key Benefits of Transfer" (Section 1). It is essential that the document does not offer new kitchens/bathrooms/windows to all tenants as some tenants may recently have had such work carried out and as such these facilities are already 'new'. Without such wording, the RSL may potentially be promising to replace all windows etc where in some cases it may not be needed."

88. The Gateway Group met on 9 September 2004 to review progress and it was confirmed that the text of the Offer was now complete and "ready to go for design input". On the same day the ODPM wrote to the Council confirming that it had accepted the application of the Council for a place on the 2004 Disposals Programme, with a provisional figure of £31,291,882 as representing a minimum valuation; this was to be accepted by the Council several weeks later. At a Gateway Committee Meeting on 13 September 2004 attended by various councillors, Marlene Bailey, Ms Perry, and Messrs Deacon and McCabe, the Offer Document in its then form was approved and was to be recommended to the Council for adoption. This was to be, so far as can be ascertained, identical to the Offer Document which eventually did go out to the tenants. A Community Gateway Working Party meeting took place on 16 September 2004, attended amongst others by Mr Johnson, Ms Perry, Ms Bailey, Mr Deacon, Mr Roberts and Mr Bliss, at which attendees were fully briefed on what was going on, including the fact that there was to be circulated to tenants a video and a "door knocking" campaign to publicise the transfer. There was a Shadow Board Meeting which took place on 16 September 2004 attended by numerous tenants and board members at which the Shadow Board had the opportunity to see the Offer Document as it had been approved by that stage by the Council. A tenant representative said this:

"George congratulated everyone who had been involved in developing a good document. It contains a lot of commitments that are appropriate to set high standards in improvements and tenant involvement…"

89. A display of kitchens and bathrooms was arranged to take place at the Preston North End football stadium on 23 September 2004 in order to give tenants "an idea of the type of kitchens/bathrooms and the quality of products that may be available under the stock transfer". Mr Graham stated at the time:

"The final selection of the type of kitchens/bathrooms which will be installed by the Gateway Housing Association will be determined by a group of tenants who would like to get involved in the selection process.

Also on display will be a selection of doors and windows which are being fitted on some capital schemes this year."

That event took place and there are some photographs in the Court bundles which show what was displayed. So far as is material to this case, the kitchens did not show extractor fans or extractor hoods and the bathrooms did not show overhead showers. Approximately 300 tenants attended and some of them filled out a survey form which indicated preferences for particular design ranges. There was later to be arranged a smaller mobile exhibition on the back of a lorry which showed a bathroom and kitchen and which toured the areas where the housing to be transferred was located; the lorry trailer went out and about in the week commencing 11 October 2004.

90. The CGA Shadow board met again on 14 October 2004. There was a presentation by a representative of the Housing Corporation on its role, particularly in the context of CGA becoming a Registered Social Landlord. There were discussions about recruitment and the future senior staffing structure and also about what was to happen after the tenants' ballot was completed. Working groups were set up for Human Resources, Finance and Operations. Mr Shannon, who gave evidence, was on the Finance Group. Mr Johnson presented his Business Plan update; this, as before, said:

"The cost of repairing, maintaining and improving the housing stock [is] based on the results of the stock condition survey carried out by, and subsequently updated by FPD Savills in November 2003"

The Board was given an update on the door to door consultation: of 1498 completed questionnaires, 1043 tenants were in favour of the transfer proposals. Mr Johnson was to repeat the above in a report to the Community Gateway Subcommittee on 11 November 2004.

91. On 19 October 2004, there was another Tenant Steering Group meeting attended by 27 of the tenant members, Mr Roberts, Mr Deacon, Mr Graham and Mr Bliss amongst others. There was a detailed discussion about what tenants and the landlord would want from the repairs service but in relation to the improvements programme, Mr Bliss referred to this:

"…indicating that the basis for the improvements programme was the stock condition survey that had been carried out, and what had been included in the offer document."

Various issues were raised that bore upon the prioritisation of the works and the minimisation of disruption to tenants. The view was expressed that the work on "wind & water tight issues" should come first.

92. On 28 October 2004 there was a Tenant Steering Group committee meeting attended by Ms Bailey, Mr Bliss and Mr Graham along with various tenant representatives. The minutes of this meeting demonstrate that Mr Graham had a good working knowledge of what improvements were being discussed and considered:

"3.1 MB introduced a discussion on the improvements programme by suggesting that the overall aim of the programme was to "get the best out of the money that is available, delivering high quality improvements and involving tenants in the decisions about what is to be done and how these improvements should be carried out". The meeting agreed that this was a good definition of the aim of the improvements programme.

3.2 MB went on to discuss information available to inform the programme:

the stock condition survey (SCS)-DG discussed the SCS. It was carried out on approx 3000 homes out of 6607 homes-a comparatively high percentage of homes surveyed. The SCS has informed the business plan in terms of how much money is needed to improve their homes. About £15 million is needed to bring the approx. 50% of homes that currently failed the Govt's Decent Homes Standard (DHS); and about £15 m is needed to ensure the other homes do not fail DHS in the future. The SCS also carried out an energy efficiency survey. PHS [a tenant] pointed out that there are some cases where previous improvements have not been done satisfactorily, but that the surveyors may not have picked this up.

the asset management plan…

the Offer Document-a "contract" with the tenants. The programme has to deliver what the offer document says about improvements

the Preston Homes Standards Group-a group (that included tenants) that has defined some standards of improvements-most notably on doors and windows.

DG outlined that key issues regarding windows had been security, fire safety, lockability (using pushbuttons), being police approved….

consultation at PNE [Preston North End] event-September 2004-where tenants were invited to view various potential improvements (kitchens, bathrooms, doors, windows etc). MB indicated that most people had been reasonably happy with the proposed level of improvements, but there had been some concerns on windows…PHS indicated that people have been particularly happy with the quality of door on offer…"

The meeting went on to discuss the programming of the improvements work. It would be fair to say that what was broadly resolved was that tenants would be involved and that the homes would be divided into their local community areas.

93. Towards the end of October 2004 the Offer document was sent out to the tenants. Relevant parts of the document are as follows:

"The Preston Community Gateway Tenant Steering Group was formed to represent the views of Preston tenants on the proposals to transfer their homes to the new Community Gateway Association…

The Tenant Steering Group committee has been a leading player in the development of the offer document…

Having reviewed this offer, we believe that it is a good one… (page 2)

The housing transfer proposals

Key points:

The Council cannot afford the amount of money that it needs to spend on tenants' homes

The new Association would be able to spend £80 million on tenants' homes over the first five years but the Council can only afford to spend £22 million

The Council believes that the only way to proceed is to transfer the homes to a new organisation-the new Community Gateway Association

The new Association would make a firm promise to involve tenants in the running of the new organisation

The improvement programme will only go ahead if tenants vote yes to transfer. (page 7)

4. Improvements and repairs

Key points:

The Community Gateway Association would be able to spend £80 million on improvement work across the first five years; this compares to £22 million if the homes stay with the Council

Homes will be brought up to the new 'Gateway Standard', making sure that all homes were fit for modern day living

There would be massive programme of works including new kitchens, bathrooms, central heating and double glazing

There would be a new role for tenants in influencing the improvement programme and making choices... (page 21)

1. How much work needs to be done?

Over the past five years the Council has carried out stock condition surveys, using independent qualified surveyors, to see what state of repair the homes are in and what work needs to be done. Almost five out of every 10 homes has been surveyed…

The stock condition surveys have shown that much more money needs to be spent to bring the homes up to modern day standards. The money required is far more than the Council is able to spend on the homes, as shown in the table below:

Time	Community Gateway	Preston City Council
Years 1-5	£80 million	£22 million
Years 1-10	£106 million	information not available
30 years	£296 million	information not available

Under the Council, it is not possible to say how much would be available to spend on the homes after the first five years. The amount the Community Gateway Association would have available is based on how much money the stock condition surveys have said is needed to bring the homes and environment up to a modern day standard.

2. What standards would apply under the Community Gateway Association?

The Government has said that all homes in the country should reach what it has called the 'Decent Homes Standard' by 2010. However, this is a minimum standard. The Community Gateway Association and tenant representatives have therefore worked together to define a higher 'Gateway Homes Standard' that fully reflects what most people would think should be in a 21st century home. The 'Gateway Homes Standard' is the equivalent to a modern day standard and is the standard to be pursued by the new Community Gateway Association.

The Gateway Homes Standard

Homes should:

1. Not have structural defects that affect their soundness, safety and stability.

2. Be wind and water tight, with no damp problems

3. Be easy and affordable to heat, with programmable and efficient heating and hot water systems, and be adequately ventilated to prevent condensation

4. Have electrical systems that conform to current accepted safety standards with adequate provision of plug sockets and light fittings

5. Have an effective means of escape in case of fire and be resistant to the spread of fire, with appropriate fire detection and alarm systems fitted

6. Have adequate sanitary fittings with bathing and/or shower facilities together with hygienic services, a clean supply of drinking water and a satisfactory drainage system

7. Have security measures to deter crime, both in the home and in the surrounding area

8. Look pleasing to the eye and have design features that satisfy tenants requirements

9. Take into account people's disabilities in terms of design and access

10. Have a modern kitchen with satisfactory cupboard/storage space, worktop areas and hygienic surfaces, with space for a range of white goods (eg. washing machine, fridge and freezer, cooker) wherever possible

11. Have garden areas appropriate to the type of home, with satisfactory approach paths, parking, clothes drying areas, fencing and gates.

The Community Gateway Association would aim to ensure that all homes reached the 'Gateway Homes Standard' if tenants vote for the transfer. This would also mean that all the homes would have reached and surpassed the Government's 'Decent Homes Standard' by 2010.

The stock condition survey has shown that £80 million would need to be spent over the first five years to bring their homes up to the 'Gateway Homes Standard' and at £57 million of this would be needed to reach the Government's 'Decent Homes Standard'..

3. What improvements would actually be done?

The following work would be done during the first five years after transfer:

All homes would be made wind and watertight, with cost effective heating and insulation:

4,400 homes would have new external doors

2,000 homes would have new double glazed windows

500 homes would have new full central heating

1,500 homes would be upgraded to full central heating

£5 million will be spent on roof repairs and replacements

Roofing and the other installation would be provided and upgraded in many homes

Improved ventilation would be provided to those homes that need it to tackle condensation

The BISF steelhouses would be cladded to increase their warmth and installation.

5,100 homes would have replacement kitchens

5,100 homes would have replacement bathrooms

2,500 homes would have new electrics

Various security improvements would be carried out (including £2 million to be spent on fences, walls and paths)

£3.5 million would be spent on improvements to the environment around the homes.

Over the course of the 30 year business plan, all homes would have the above improvements, where needed. Funds will also be available for adaptations for people with disabilities.

4. When would improvements be carried out?

The Community Gateway Association would aim to ensure that all homes would have some work done in the first two years after transfer to ensure that everyone would share in the benefits of the transfer. Subsequently, the works would be carried out on a gradual basis, until all of the above commitments were met. The Community Gateway Association would particularly prioritise works needed to make homes wind and watertight… (pages 22-24)

11. Housing services for older people

Key points:

Covers sheltered housing services which are provided to about 500 tenants and another 500 tenants linked to mobile wardens…

Annual budget of £250,000 for adaptation work to homes occupied by people with disabilities…

What is the Community Gateway Association's commitment to people who live in sheltered housing?

…the Community Gateway Association would:

…..

Set aside a budget of £250,000 each year to ensure that adaptations are completed for people with disabilities…" (pages 52-3)

It was a substantial document running to 87 pages.

94. It appears to be the case that Mr Bliss throughout the process regarded himself, with some justification as primarily being involved to protect the interests of the tenants. For instance, during an e-mail exchange in early November 2004 with Mr Deacon and Mr Johnson, he wrote on 4 November without false modesty:

"In fact, I have never known the ODPM to be so hands off in the transfer process-I am used to the [Task Force] trawling through every single piece of literature and changing words line by line-I think this is in no small part due to my involvement-I think they know that I won't let anything past that the tenants would be unhappy with."

95. Only 15 November 2004, BWNL sent to Mr Deacon as the Community Gateway Consultant, CGA having been incorporated on 4 October 2004, its proposals for acting as lead consultant and funding adviser to CGA in the post-ballot period.
96. Following an extensive exercise involving knocking on virtually every tenant's door, the ballot for the transfer was formally opened on 18 November 2004.
97. In late November 2004, Mr Graham or the unit which he was leading produced a five-year "Improvement Programme including VAT but excluding fees and inflation", which detailed elements of work on an area and cost base. There were 10 community areas and the works were broadly split into different headings: windows, central heating boiler, roofs, rainwater goods, kitchen, sanitary ware, estate works, sheltered accommodation, BISF, cladding, security and curtain walls. Thus, against each area, costs were provided against each head of work, indicating what was programmed to be spent in each year. In each year costs were projected against what was said to be budgeted. This demonstrated that, against a budget of £79,196,079, costs of £76,217,339 were estimated, over the five-year period. He produced notes to support these figures which were, it was accepted, over the following months amended either in red or manually. There is no real hint in these notes or in the evidence that any of the items of work said to have been identified in Draft 1, but not referred to in the SCS reports, were being costed or programmed for. For instance, there are no references to cooker extractor hoods or extractor fans in the notes. Over the months that followed some of the estimates were increased or reduced as the case may be to reflect further work being done by Mr Graham and his team.
98. The Shadow Board continued to meet with Mr Graham attending one such meeting on 9 December 2004 to explain some aspects of the partnership agreements which the Council was then entering into in relation to the proposed repair and improvement works. Marlene Bailey reported also on partnership working at this meeting and her report gave brief details of progress made since 2004 which included the following:

"Established the Preston Homes Standard Group whose membership included tenants, partners, officers (Housing and Community Safety), Police and Fire Safety Service. This Group has established the overall standard of the homes in Preston, and also developed a new specification for PVCU windows and doors."

99. By 16 December 2004, the results of the transfer ballot were available. At a Gateway Sub-committee meeting held on that date, the Leader of the Council announced that there had been a 56.9% response to the ballot, of which 81.39% had voted in favour of the stock transfer with the balance against.
100. Mr Deacon provided a report dated 13 January 2005 to the Shadow Board meeting held on that date. He emphasised that the development of detailed programmes for repairs and improvements were essential issues because amongst other things they were a key part of the Offer commitment. He referred to there having been "tenant involvement in developing agreed specifications for doors, window and potentially other fittings"; there is no mention of the types of work which are the subject matter of CGA's claim in these proceedings. That meeting as usual was attended by a large number of tenant members as well as Mr Deacon, Mr Roberts, Ms Perry and Mr Johnson. The object of the programmes was to reflect the need to do at least some work in each area in the first two years and to complete the major improvements programme in the first five years. He explained that currently officers were working on "dummy" programmes for sample areas to test out the various implications in practice and further tenant consultation was suggested.
101. On 25 January 2005, CGA signed a contract with Countrywide Surveyors ("Countrywide") for Countrywide to carry out a loan security valuation in respect of the proposed stock transfer. This was largely if not exclusively for the purposes of securing bank loans. These proceedings were initially brought also against Countrywide but there was a settlement between CGA and Countrywide several months before the trial. The CGA met Countrywide on 26 January 2005 partly at least to brief it. The minutes suggest that Mr Graham advised that, in relation to the SCS reports, prices had been "updated".
102. A seminar was arranged for 2 February 2005 which was to consider "CGA Repairs and Improvements Programme-Funding Provision and Issues" at which Mr Johnson was to speak. Mr Deacon, Mr Roberts and Mr Graham amongst others attended. It is likely that Mr Johnson made a PowerPoint presentation, the slides for which are in the Court bundles. Those slides suggest that reference was made in some detail to the SCS. "Catch-up" and future major works were identified of which the main elements were kitchens, bathrooms, central heating and electrics. £22.7 million was identified as to be spent in Years 1 to 5 on "improving properties (as compared to repairing)" with the main elements being identified as double glazing, upgrading central heating, installing central heating and extractor fans. The latter were identified as estimated to cost £1.3 million. In relation to cyclical maintenance, £1.2 million was identified as to be spent on "disabled adaptations" over Years 1 to 5. One slide was headed "Interpretation into Business Plan (3)":

"How business plan numbers are derived

Figures from stock survey

Plus fees allowance (8%)

Plus VAT (17.5%)

Above adjusted for VAT shelter (-4.5%)

Adjusted for actual stock numbers

Adjusted for inflation and growth in prices"

Under another heading "Other Issues", the following appeared:

"SCS set parameters

Programmes to be prepared within parameters…"

103. By early February 2005, negotiations between CGA and Barclays Bank were well advanced with a view to the provision of a £50 million term loan facility. By the end of February 2005 CGA had appointed Countrywide to carry out a validation of the Stock Condition Surveys.
104. Mr McCabe of the Council sent to Mr Graham on 7 March 2005 proposed expenditure figures for 5½ years starting from October 2005. The following day Mr Deacon sent to Mr Johnson and Mr McCabe "Business Plan Cash Flow Projections" as at 7 March 2005 which showed income and expenditure from 2005/6 for 35 years.
105. By 11 March 2005, Weedon Grant had been appointed as lead adviser to the Council with responsibility amongst other things to review BWNL's valuation work and they presented a report to the Gateway Committee on 11 March 2005.
106. A Gateway working group prepared some comments on policies and procedures on 16 March 2005. The following was stated in relation to the marketing strategy:

"…The CGA considered that burglar alarms should only be provided to vulnerable people, or to all the homes in particular area [sic] that have been identified as having particular problems. They should not be provided as a matter of course to anyone accepting a new home…"

The marketing strategy being commented on was dated 3 March 2005 and referred to there being "welcome packs for" the new tenants:

"A welcome pack, consisting of kitchen cleaning items, is given to all new tenants from Smart Move. The CGA would consider giving items such as white goods or burglar alarms as an incentive for people to accept properties in areas of low demand."

This was all considered at a Community Gateway Association Operations Working Group meeting on 17 March 2005, with a number of tenant members present.

107. On 29 March 2005, BWNL sent to Mr McCabe a report entitled "Business Plan Cash Flow Projections" in similar form to those reports submitted to the Council earlier. Thus, it is said:

"The costs of repairing, maintaining and improving the housing stock are based on the results of the stock condition survey carried out by, and subsequently updated by, FPD Savills in November 2003."

The attached "Valuation/Business plan assumptions" document identifies similar figures for repairs, improvements and maintenance as previously put forward, explaining them with a note:

"These figures are based on the stock condition survey figures (industry-standard) based on November 2003 stock numbers and prices."

At Paragraph 10 of the report, BWNL wrote:

"It is essential that the Association adopts a business plan that is based on realistic assumptions and demonstrates that the Association can operate viably while providing high quality services and honouring the promises that have been made to tenants."

This report was submitted on 15 April 2005 to the Community Gateway Shadow Board.

108. By mid-April 2005 Diane Bellinger had been recruited as the Chief Executive of CGA, albeit at this stage she was merely the CEO Designate and not to take up her post for several months. She attended a Community Gateway Association Project Team meeting on 14 April 2005 which was attended by Mr Deacon, Ms Perry, Mr Roberts, Mr McCabe, Mr Johnson and Mr Bliss amongst others. Mr Johnson is listed as having enquired in relation to the process of determining the capital programme and was told that Mr Roberts was working with Mr Graham and consultants and that tenants would be involved.
109. On 22 April 2005, there was a "tenants' conference" which was chaired by Rose Kinsella, who had been an active tenant representative on a number of committees and Mr Graham was a facilitator. A note prepared probably by Mr Roberts reported on the key issues raised at this meeting, one of which was the major works programme. Part of the exercise was to work out what those attending (73 tenants and residents attending the day session and 9 the evening session, together with staff) considered work priorities. This was expressed to be by reference to "elements of the home which needed to be upgraded "as identified in the stock condition survey)". It is not clear when this note was prepared although there is a date of 27 May 2005 on the version in the Court bundles. Relevant parts of this document are:

"Priority1-external features to buildings that would make homes wind and water tight was seen by all groups to be the most important priority. In particular, the following was seen as high priority by most groups:

windows

external doors

external communal doors

rainwater goods (e.g. guttering, fascias, soffits)

roofs and chimneys

roof and cavity wall insulation

damp proofing

External wall finishes, external wooden items, balconies and soil vent pipes were also seen as important priorities probably because they could be done alongside some of the other works listed above. Health and safety items such as security lighting, smoke detectors and carbon monoxide detectors were seen by some groups as high priority

Other elements suggested as high priority by only some groups included:

internal communal doors…

central heating and partial central heating

kitchens and bathrooms…

re-wiring

extractor fans…"

110. Mr Roberts seems to have made a PowerPoint presentation entitled "Major Improvements Programme where we are now" in which under a heading "what have we done so far", the slide states:

"stock condition survey

partnering with construction firms

set up local scheme panels

an asset management plan

tenant involvement in setting priorities

tenant involvement in specifying doors & windows

tenant consultation on kitchens & bathrooms

training sessions & site visits by Tenant Steering Group"

111. Mr Johnson presented an update on gap funding to the CGA Finance Working group on 27 April 2005. He explained that this funding would be paid over a period of 3 to 5 years and would be based "on specific capital investment deliverables (e.g. the number of new kitchens and bathrooms provided during a specific year)."
112. In late April or early May 2005 Mr Graham produced what was intended to be a "dummy" report relating to major repairs and improvements which was designed to show the sort of thing which would be shown in such reports in the future. The figures were imaginary rather than assumed ones and the listed items of work were those specific works set out in the Offer such as replacement of the doors.
113. On 10 May 2005, there was a meeting between Mr Deacon and Mr Roberts with representatives from an organisation called Arcus which was brought in to develop the five-year programme and help in the documentation for and appointment of contractors. Mr Graham was supposed to attend but sent his apologies. On 12 May 2005, Arcus' involvement was discussed at a CGA Project Team meeting at which it was reported that Mr Graham had "worked up the improvement programme based on feedback re priorities from tenants' conference"; the minutes record that Mr Johnson was "to work on the Business plan so that it mirrors the improvement programme."
114. On the same day, Mr Roberts reported to the Shadow Board in relation to improvement programme issues, saying that work had "continued on "dummy" programmes and aligning it with the financial plans to test the impact that 'real' prices would have on the Business Plan". This reflected work that Mr Graham and his team were doing by crosschecking against allowances which had gone into the Business Plan costings for repair and improvement works by reference to prices obtained by the Council for work which was going on in relation to various housing projects before the transfer was to take place. On 18 May 2005 Mr McCabe sent to Mr Roberts and Mr Graham "Repairs Programme Assumptions" one of which was:

"Although the total provision in the Business Plan will be sufficient to carry out all the promised improvement work the cost of the actual work for individual improvements carried out may differ from that currently estimated (some may be higher and some lower)."

115. On 23 May 2005 Mr Roberts sent to Mr Deacon, Mr Graham and Mr McCabe edited programme notes for a meeting on 25 May 2005. It was headed "CGA 5 Year Improvement Programme" and material parts are as follows:

"STOCK SURVEY

three separate surveys by FPD Savills…

total numbers of stock surveyed now over 50%

from the merged results of all surveys, whole stock reports can be produced…

costs in the database are current actual costs

THE PROGRAMME

The programme covers the first 5 years after transfer of October 2005-October 2010…

It reflects members' priorities agreed in September 2003 and reconfirmed and further elaborated on at the Member Event on 22 April 2005

All properties to have some work carried out to them within 2 years of transfer…

BUSINESS PLAN

The programme is based on the latest version of the BP and cash flow projections. The total provision in the BP will be sufficient to carry out all the promised improvement work

The money available to spend on improvements each year is limited to the total amount included in the BP for improvements for that year…

PROMISES

Totals of improvements equal those in the offer document…

ELEMENTS OF WORK

The programme groups improvements under headings that contain the detailed elements reported in the stock condition survey database

Windows & doors-installation of PVCU double glazed windows and replacement of at least one external door

External Doors-installation of one or more external doors (for properties that do not require new PVCU windows)

Gas central heating-replacement of existing heating systems for Health & safety reasons, installing heating for the first time, upgrading partial heating to full or replacement of a gas heating boiler. Insulation and ventilation works are also included where required

Roofs…

Rainwater goods…

Kitchens-replacement of kitchens to the Gateway Homes Standard (not like for like), incorporating…smoke alarms

Bathrooms-replacement of existing sanitary fittings, improved layout, wiring for showers, ventilation and wall/floor finishes.

Estate works…

Sheltered accommodation Communal areas…

BISF houses…

Security works- e.g. security lights, fencing/gates, burglar alarms etc. to improve security/safety of properties/occupiers

Curtain walls…"

This was a document which was intended to be looked at again because in his covering e-mail Mr Roberts said that it probably needed "another coat of looking at". There were some supporting notes which emphasised amongst other things that the costs in the database were "current actual costs for works being carried out and not Schedule costs used in the initial surveys in 2001 etc." These notes were prepared by Mr Graham.

116. On 1 June 2005 Weedon Grant Ltd prepared a report for the Council on the valuation submitted by BWNL originally to the ODPM which identified that it was the SCS prepared by Savills which had been used as the basis for the figures in the valuation.
117. There was a CGA Finance Working Group meeting on 1 June 2005 at which Mr Johnson presented a number of reports. One of these was entitled "Financial and Performance Monitoring" and it provided various pro-forma documents one of which would detail the expenditure that the CGA would make on its repairs and improvements programme by category of work and this would "allow Board members to monitor the progress made on the promises made to tenants for the amounts to be spent in this area and the number of replacements (such as kitchens and bathrooms) which have been made…" The monitoring of progress in this regard was something, amongst many others, which was called for by the Housing Corporation which required regular updates from CGA as to whether paperwork and procedures were and were going to be in place before the transfer.
118. On 9 June 2005, at a meeting of the CGA Project Team, attended by Ms Bellinger, Mr Johnson, Mr Deacon, Mr Roberts, Mr McCabe and others, various matters were discussed including an issue as to whether CGA should seek charitable status. Also discussed was the asbestos survey and the minutes revealed:

"Difficulties on this and other unknowns, like IT and accommodation fit, making completion of financial projections a moving target. VAT shelter and additional gap funding looking increasingly necessary to deliver all the planned benefits of transfer."

Mr Johnson was charged with using his "best endeavours to get a credible Business Plan ready for Housing Corp." A Shadow Board meeting was held on the same date attended by the same people together with a number of tenant and independent board members which discussed these matters also. It seems likely that they had a report entitled "Organisational Assessment of Preston City Works" dated May 2005 which indicated on its ninth page that the forecasted year end total turnover on housing maintenance included the sum of £360,000 for "disabled adaptations". Mr Bliss also submitted a report entitled "Community Empowerment Strategy Progress" which incorporated as an appendix Mr Robert's Note of the CGA membership meeting held on 22 April 2005, originally dated 23 May 2005 (see above); he said that "the output from the meeting showed few surprises".

119. The "Organisational Assessment of Preston City Works" report was presented by a firm called HQN which was primarily to make an assessment on the Council's in-house maintenance contractor, PCW. It mentioned on the ninth page that the forecasted year end total turnover for 2004/5 included £360,000 for "disabled adaptations". The minutes do not suggest that there was any material discussion about this report.
120. On 13 June 2005, Mr Graham and others working with him issued draft "Improvement Programmes" which demonstrated against proposed heads of work for each local community area the numbers of dwellings which would be the subject matter of repair. These works were windows and doors, external doors, gas central heating, roofs, rainwater goods, kitchens, bathrooms, estate works, sheltered accommodation, BISF houses, cladding and curtain walls. These programmes were also produced to show against these works and the different local community areas how much money would be spent over the first five years assuming a transfer on 10 October 2005. They demonstrated overall that the total cost was likely to be £75,918,594 against a "budget" of £79,336,079. Attached to this was a list of particular costs used in this calculation. Thus, the figure used for external doors for all properties was £550 inclusive of VAT. Other documents demonstrate a repairs and improvements programme over 32 years. A time related programme was approved on 23 June 2005 by the Gateway Operations Working Group, attended by Ms Perry, Messrs Roberts, McCabe and Graham and various tenants. Mr Roberts presented an Improvement Programme report at this meeting which was proffered on the basis that there had been dummy programmes but this was now a programme to be approved.
121. All the work being done by Mr Graham and his colleagues was based on a budget derived from the SCS reports and indeed they were doing what Mr Johnson had advised them to do; they used real prices where available. What they never did was to programme or cost for any of the items which are the subject matter of CGA's claim in these proceedings.
122. At the Shadow Board meeting of 7 July 2005 attended by tenant representatives, Ms Bellinger, Mr Roberts and others, the board resolved to proceed with conversion to charitable status. The Shadow Board also on 14 July 2005 approved the draft Improvement Programme approved by the Operations Working Group.
123. By 18 July 2005, Savills were suggesting that an uplift of 8% be applied to the Community Gateway Model cost estimates to reflect inflation between June 2004 and October 2005. There was a growing realisation that additional gap funding might be required. For instance Mr Johnson sent an e-mail to Ms Bellinger on 14 July 2005 saying that additional gap funding was required, albeit that he said that the charitable status would reduce VAT and thus reduce the amount of additional funding required. Mr McCabe e-mailed Mr Johnson and Ms Bellinger on 22 July 2005 with information required to update the Business Plan; this included matters such as there having been a reduction in the housing stock figures, current shop rental income as well as certain potential contingent liabilities including what was said to be a "Backlog of Disabled adaptations at Stock Transfer (estimated at approx £150,000)" and "DDA Work required on Sheltered Schemes estimated at £250,000".
124. Mr Graham was clearly involved in some detail in the decisions being made as to what work was to be done. For instance on 26 July 2005 he sent an e-mail confirming that the doors for the first year of operation would be supplied from a particular manufacturer.
125. The discussions continued about the need for additional gap funding. Mr Johnson submitted a note on 1 August 2005 which indicated that:

"…we were guilty of underestimating the CGA's management costs. This is linked with the number of changes that are outside the control of the CGA has resulted in a need for a very large increase in the need for Gap funding."

BWNL submitted a report dated 9 August 2005 to the Finance Working Group which indicated that the additional gap funding required was over £25 million. This was discussed at the group meeting on that date and it was confirmed that there would be a meeting with the ODPM.

126. The Shadow Board met again on 11 August 2005, the meeting being attended by tenant and independent board members as well as Ms Bellinger, Ms Perry and Messsrs Deacon, McCabe and Johnson amongst others. Mr Lucas the Director of Property Services designate presented a report on the improvements programme and procurement and reported on two public meetings at which over 100 tenants attended with the programme being well-received. The adoption of charitable status was confirmed following a consultation exercise. There was no minuted discussion about the need for additional gap funding.
127. By 18 August 2005, the Council had decided to make a further application for additional funding from the OPDM; this would have the effect of deferring the transfer from October to late November 2005. It issued a News Release to that effect on that date. The press document did not indicate why additional funding was required but Ms Bellinger was quoted as saying:

"Our primary duty must be to keep the promises made to tenants and on which they base their decision to support transfer. That means that, from Day One, the Association's business plan needs to be robust and capable of delivering all of those promises."

On the same day, Council staff were briefed that the reasons were the need to allow for inflation, additional staffing, IT costs and allowances for voids and bad debt levels.

128. Over the next few weeks there were discussions between the Council and CGA and indeed with the OPDM. Ms Bellinger received advice for instance from Mr Johnson. Mr Roberts in a note dated 1 September 2005 about the risks associated with changes being made to the business plan. He placed the risk likelihood and severity as high in relation to inflation exceeding the RPI over Years 2-5. In relation to what were called "Contingent/Unquantified liabilities", he suggested that she lists them in detail particularly those where the Council "was failing in its responsibilities." On 2 September 2005, the Council submitted a report to the OPDM requesting additional gap funding and identifying a number of areas where there had been changes which justified additional funding. These included stock numbers and rents, cost inflation, and management costs, IT and pension problems. There had had to be in effect negotiations between the Council and CGA and it is clear from some of the documentation that some heat was generated. On 6 September 2005 the Council wrote to the OPDM in the following terms:

"I thank you for spending time with colleagues last month …when they came to see you, Sally and John about the financial difficulties that we were and still are, unfortunately, facing in relation to our stock transfer here in Preston.

…we have very reluctantly delayed the date of transfer from 10^th October to 28^th of November 2005. None-the-less, we are still committed to ensuring that this stock transfer goes ahead…

I can confirm that following a consultation with Tenants, the Board of Community Gateway Association have agreed to seek charitable status and arrangements are now well in hand to achieve this. On the other financial projection issues, over the last four weeks we have been assembling information regarding the items that we discussed. Our discussions with Community Gateway Association have been robust and searching…We believe that we have reached a "bottom line position" that will ensure that Community Gateway Association is able to run its business and deliver the promises made and we feel that the proposal that we are presenting to you represents the most realistic, economical and balanced way forward.

However, we do require further assistance from you, the Government and, in particular, the Housing Minister, if we are to realise our ambitions for the future. To ensure that Community Gateway Association is a financially viable organisation we would request that the amount of Gap Funding be increased from £31,291,882 by an additional amount of £16,706,874. We (the Council) and our Advisers are satisfied that this amount is needed and the justification is contained within the attached report.

We have also submitted a new Single Transfer Model and Cost Generation Model and would very much appreciate your assistance and advice…"

129. Mr Johnson made a presentation to the Shadow Board at its meeting on 8 September 2005 which sought to explain why the figure being sought for additional gap funding was now down to about £16 million from the previous figure of about £35 million. There was agreement by CGA with the Council as to the level of the additional gap funding that was to be sought.
130. Mr Graham produced a report for the Shadow Board meeting on 6 October 2005 which was an "Update on Procurement Process & Year 1 Improvement Programme". This identified that a number of contractors had pre-qualified for various types of work and indicated broadly what work was to be done in two local community areas in the first year after transfer; for instance, in a paragraph dealing with what were called "No Fine" properties, the report stated:

"There may also be replacement of some porches or canopies…"

131. Also at this meeting, Beever & Struthers, an independent firm retained by CGA, presented a review of the latest Business Plan and the Board was satisfied with the report received from it. Paragraph 9 of the minutes records:

"Ian [Lucas] introduced his report…He explained that in constructing the five-year programme he had looked to make it streamlined so as to achieve greater value for money. In this way the CGA would be able to carry out more and better improvements to the properties, with less disruption to tenants. However, he was keen to point out to the Board that such a streamlined programme would mean that he would not be able to guarantee that the CGA would be able to comply with the promise in the offer document that every tenant would have something in the investment programme done within two years…

John [Baptiste a tenant member] said that tenant Board Members will be the ones who will feel the effect of not fulfilling the promise in the offer document. Ian said he had spent a great amount of time on the programme and it would be possible to construct so that the promise was fulfilled but there is not enough in the budget to enable it. It might be possible to put a new door on all properties throughout the city but this would not be value for money and would be a severe disruption to the construction partners. He estimated that through the combined programmes CGA will hit over 90% of all properties within the two years.

Diane said that she and Ian had decided to put this in front of the Board now so that they were aware of the situation. What Ian was proposing in the programme is actually better than the promise in the offer document in that all properties will have benefited from a proper improvement within 2½ years rather than pepper-potted minor improvements within 2 years."

132. On 14 October 2005, Ms Turner of the ODPM wrote to Marlene Bailey at the Council, saying that costs in the Council's revised gap funding proposals were "still too high". She went on to say:

"As you will see we can live with most of the changes but are concerned with the increase in the management costs…"

On 21 October 2005, the Council prepared a Response seeking to justify its application sent it to the OPDM who responded on 28 October 2005 determining that subject to the issue of the formal gap funding agreement the ODPM was prepared to provide gap funding for a total of £47.9 million, reflecting an increase in the gap funding previously promised of £16.7 million sought.

133. In late October 2005, BWNL re-assessed the Business Plan, adding to the repairs, improvements and maintenance allowances of 8% for inflation. The figures were still explained on the basis that they were "based on the stock condition survey figures (industry-standard) based on November 2003 stock numbers and prices."
134. Perhaps unsurprisingly, there was relatively frenetic activity between then and when the transfer actually took place. For instance, the CGA had to continue negotiations with Barclays in relation to the final terms of the funding arrangements for CGA post-transfer. On 3 November 2005, Beever & Struthers issued a report to CGA entitled "Review of Business Plan" and referred to the fact that the majority of the maintenance costs in the business plan were based upon the information contained in the SCS reports. In a paragraph entitled "Transfer Promises" they considered the Offer document and the promises therein contained and added:

"We have reviewed the stock condition survey to confirm that the promises as identified above have been incorporated within the survey and are scheduled to be carried out by the decent homes deadline of 2010. In carrying through the transfer promises the Board should be aware of the specification to which the stock condition survey has been costed in assessing the delivery of those promises at no greater than the costs projected within the Business Plan."

There is nothing in the disclosed documentation which suggests that this was challenged or came as any surprise to anyone involved on the CGA side.

135. A well attended meeting of the Shadow Board took place on 24 November 2005. Almost all the relevant work had been done in relation to the transfer and it was noted that this would be the last meeting of the "Shadow" Board. On 25 November 2005, the OPDM confirmed to the Council that the Secretary of State consented to the disposal of the Council's housing stock. On the same day as it wrote to CGA the Secretary of State's formal decision to offer gap funding was dispatched. This document was to be and was signed by CGA and OPDM as a binding agreement. Material paragraphs are:

"4. The letter we sent to the Council of 9 September 2004 indicated that the project had gained a place on the Disposals Programme 2004 and that ODPM intended to pay gap funding grant…up to a maximum of £31,291,883 for the grant recipient on the basis of a minimum valuation of £31,291,883. Since then the agreed minimum valuation has been revised to £47,998,756. As a result ODPM now intends to pay gap funding grant to the grant recipient as a contribution to eligible expenditure on the project up to a maximum of £47,998,756 over a period of ten years from 2005/06 to 2015/16 inclusive. Equal payments covering £31,291,883 will be made over the first five years and the remaining £16,706,874 will be made over the next five years. This is subject to the grant recipient meeting the agreed milestones set out in the attached Schedule A…

8. Eligible expenditure consists of payments made by the grant recipient to achieve the transfer and thereafter which contribute towards the costs of meeting milestones for the project…"

Schedule A sets out sums and the number of units projected to be spent and completed over the following five years against different heads of work: external doors, double glazed windows, full central heating, roof repairs, external insulation, new kitchens, new bathrooms, new electrics, partial central heating, cladding to BISFs, non traditional properties, environmental improvements, replacement central heating, new windows, sheltered improvements, conversions/structural works, garages, structural works and rendering/re-pointing.

136. The actual transfer from the Council to CGA took place on 28 November 2005 and it was set out in a detailed contractual document. From that date on, CGA has been in charge of the transferred housing stock with its own staff, a number of whom, such as Mr Roberts, Ms Perry and Mr Graham transferred from the Council over to CGA. CGA was subject to monitoring and regulation from the Housing Corporation and there is no suggestion that CGA was not operated efficiently and well.
137. Mr Upton, Mr Wilson and Ms Bellinger all gave evidence, which I accept, that from time to time throughout the period up to the Transfer Mr Johnson had assured the Shadow Board that the Business Plan contained sufficient funding to achieve the Gateway Homes Standard. Equally, it is clear that they and the Shadow Board were focusing on the Gateway Homes Standard as spelt out in the Offer. They all were unaware until 2009 at the earliest that there were or might be additional works which might be suggested as having been promised to the tenants or were otherwise intended to be done but which were not obvious from the wording in the Offer.
138. Little of note happened in early 2006, although by July 2006, Ms Berry, the head of Asset Management at CGA, reported to the Board that ongoing surveys were "identifying property defects which have not been identified by the stock condition survey [and] not budgeted for as part of the investment programme". Some of these surveys were called "bus trips" and revealed that sums allocated for the external fabric and roofs had been seriously underestimated; it was also believed that full electrical wiring was required in more dwellings than previously anticipated. Early in 2007 a related problem emerged. Ms Berry reported to the Board on 11 January 2007 as follows:

"1. As identified by the framework and action plan of the asset management strategy… the lack of a comprehensive planned maintenance programme for many years, and the more recent replacement of key components only (e.g. Windows and doors), has left homes in a poor state of repair, with outstanding works in areas of wind and weather tight and structural defects. However, these areas have been prioritised by our tenants as very important to them. The existing gap funding targets do not acknowledge these areas of external wall remedial works, structural works, health and safety issues of balconies, staircases and railings, and it is the gap funding targets which have driven the first year (November 05 to March 06) of the investment programme, not sound asset management."

Essentially, the problem identified was in effect that the SCS reports did not identify a number of defects which then had to be addressed or that they contained inadequate allowances for work identified as being necessary. These do not now form part of any complaint against BWNL.

139. At the Board meeting of 23 February 2007, a shortfall of £17 million was identified "due to the inaccuracy of the stock condition survey". It seems from the next Board meeting minutes that Ms Bellinger met the Chief Executive of the Council in relation to this problem in the hope of both parties that the matter could be resolved without the need for legal action. The following Board minutes refer to this problem as "responsive repairs". It seems also from a letter dated 28 March 2007 from Ms Berry to the Department for Communities and local Government that CGA had sought legal advice to establish whether it had any legal redress against the Council, BWNL, Savills, Steven Scanlon and Beever & Struthers.
140. By the time of the Board meeting of 12 April 2007, the shortfall had been increased to £18.3 million in relation to this problem; Mr Upton said in evidence that this sum was eventually expended. The Business Plan updated the SCS figures by 14.8% to reflect the increase in prices from November 2003 as well as by the £18.3 million shortfall. By mid July 2007 the Board was being told that seven companies had been shortlisted for a responsive repairs contract. By the Board meeting of 12 July 2007, it was reported that £28 million had been spent on "our promises" with 20% of homes brought up to the Gateway Homes Standard. Other figures were given such as there having been 2,462 homes fitted with new doors, 874 homes with new kitchens and 812 with new bathrooms. It was also reported in the asset management report for the meeting that a substantial number of properties had problems relating to the structures and "substrates" of balconies and stairwells. By the Board meeting of 13 September 2007 it was reported that the new Responsive Repairs contractor had been appointed.
141. A number of the Board meeting minutes throughout 2007 are redacted, presumably because they record legal advice being given in relation to the responsive repairs problem. Savills were called in by CGA to assess the extent of work required in order to meet the Gateway Homes Standard over the following five years; they produced an initial report in September 2007 which identified that the proposed programme of works went "beyond the minimum requirement in order to achieve the Gateway Homes Standard" but concluded that there might be scope to reduce the shortfall which they identified as being £17 million. In their second report dated May 2008, they identified some savings possibly of £7 million. These recommendations were not accepted by the Board. It appears from these reports that they were not provided with Draft 1 as representing what had been promised to the tenants. The Board, as Ms Bellinger said in evidence, took the view with regard to these responsive repairs that they arose because the need for them was not or not fully identified in the SCS.
142. The new Business Plan prepared in 2007 was underpinned by a new fully costed programme produced within CGA. It is clear from these documents that no provision was made obviously or at all to carry out the works which are the subject matter of this litigation, that is those items in Draft 1 which were not obviously or expressly the subject matter of the express promises made in the Offer document.
143. On 7 December 2007, CGA's solicitors wrote a Pre-Action Protocol Letter of Claim to Countrywide, broadly complaining that Countrywide had not carefully validated the Savills SCS reports; they later identified the shortfall at £17 million. In effect they were criticised for failing to pick up the fact that some £13 million additionally was required to achieve effective external refurbishment to make the properties and wind and watertight and structurally sound, some £3.8 million because full electrical rewiring was found to be required as opposed to mere rewiring works, up to £1 million by reason of the presence of structural defects and £1.4 million in respect of structural problems in communal areas (for example, balconies, walkways and staircases). A similar letter, albeit in somewhat different terms was sent by those solicitors on 4 January 2008 to BWNL. None of these complaints are pursued in the current proceedings. BWNL's solicitors provided their detailed reply on 18 July 2008 effectively denying liability and causation, with CGA's solicitors responding in some detail on 22 December 2008. By this time CGA's solicitors had added complaints about security, fire safety and disability works.
144. By March 2008 the Board was being told by Mr Atkinson that some savings could be made in certain areas, up to £2 million in relation to external doors, up to £3 million in relation to wiring and up to £4 million in relation to kitchens and bathrooms.
145. It seems that at some stage in early 2009 CGA decided not to pursue BWNL in relation to the failures alleged in the 2008 Letter of Claim and response. This correspondence continued in a relatively desultory way up until mid-2009.
146. It was in November 2009 that these proceedings were issued and it is clear that they relate to substantively different complaints than had been the subject matter of the Pre-Action Protocol process instituted in 2008.
147. CGA in seeking to comply with Housing Corporation requirements never reported any overspend or under-budgeting in relation to any of the items of work which are the subject matter of these proceedings or that it was unable to comply with promises to tenants, even after being expressly asked in April 2008 by the Housing Corporation to establish what had been promised through the offer or "pre-transfer material".
148. By the end of the third quarter of the tax year 2010/11, CGA had spent almost £113 million inclusive of VAT on the repair and improvement works. It is probable that this sum also included the sums spent on the responsive repairs which had surfaced in 2007 and were the subject matter of the initial Pre-Action Protocol correspondence in 2008.
149. There was and is no recorded or any other complaint by any tenant in any capacity at any time that promises were not kept by CGA. Indeed, there was evidence from Mr Shannon and Ms Bellinger that the tenants are broadly very satisfied with what they have been provided with in terms of repairs and improvements to their homes. It is a fair inference that no-one within CGA believed that there was anything to complain about as against BWNL in relation to what is complained about in the current proceedings until meetings took place with CGA's lawyers in 2009. Ms Bellinger said, and I accept, that CGA has by March 2011 achieved what she called the Gateway Home Standard in relation to the actual properties.
150. She said also that the CGA has spent about £114 million on improvements so far; given that her witness statement was dated March 2011 and about £113 million has been spent by the end of December 2010, that is approximately correct. However, that figure is clearly inclusive of VAT, some of which would have been at the rate of 20%, albeit the majority at 17.5%. The net sum spent on improvements is therefore approximately £97 million. A very substantial part of the difference between this figure and the £80 million which the tenants were told in the Offer document would be spent in the first five years must be the money expended on the responsive repairs work identified in 2007 and the subject matter of what turned out to be the first abortive Pre-Action Protocol process. Ms Bellinger said, and I accept, that some other works were done which fall into the category of works which were not covered by the express promises made in the Offer document; for instance some thermostatic showers have been put in. However, the cost and scope of what has been done in this context has not been established with any precision. It is clear at least that the vast bulk of the items of work which form the subject matter of this claim have not been done. It is also clear that CGA has done some work which was not in the Offer or in Draft 1. Whatever the position, Ms Bellinger accepted that there had been no relevant excess over budget since 2007 when the responsive repairs problem emerged.

The BWNL Agreements

151. There are two relevant agreements: the Initial Lead Consultant Appointment as between the Council and BWNL and the CGA Lead Consultant Appointment. CGA brings its claim against BWNL in contract and tort. There are two relevant contracts, the Initial Lead Consultant Appointment which covered the pre-ballot period and the CGA Lead Consultant Appointment which covered the post-ballot period up to and including completion of the Transfer.
152. The Initial Lead Consultant Appointment was entered into by BWNL and the Council. CGA contends that it nevertheless became a party to that contract by way of novation through an implied term thereunder. In any event, it says (and BWNL now accepts) that BWNL owed it a duty of care in tort as regards the advice and services it provided in the pre-ballot period.
153. The duties owed by BWNL to CGA in both contract and tort are shaped and defined by the terms of its retainers, namely the Initial Lead Consultant Appointment and the CGA Lead Consultant Appointment. Accordingly, the duty of care in tort owed in the pre-ballot period reflects the contractual duties owed by BWNL pursuant to the Initial Lead Consultant Appointment.
154. The terms of the Initial Lead Consultant Appointment are to be derived from the ITT and the Tender. The ITT was prepared by the Council in February 2003. It indicated that PCC considered that the work required from the lead consultant would be "extensive". It set out the work required from the lead consultant as including the following:

i) "formulating a detailed action plan and timetable to achieve" the Transfer;

ii) submitting an application in December 2003 for a place on the ODPM's list for 2004/2005 transfers;

iii) "confirming work on the initial valuation of the [Housing] [S]tock and subsequent amendments";

iv) providing "assistance in the appointment of other specialist consultants and advisers";

v) providing advice on the "preparation of the offer document";

vi) providing "ad hoc advice on any related issues which arise throughout the pre-ballot period"; and

vii) work in relation to the establishment of a new Registered Social Landlord if this option were chosen to facilitate the Transfer.

155. BWNL submitted its tender proposal in response to the ITT dated 7 July 2003 ("the Tender"). The Tender made it clear that, if appointed, BWNL would assist and advise in respect of each of the key components of the transfer process including, the preparation of the Offer Document, budgetary issues, business planning and negotiating with the ODPM. In addition, set out at Appendix B are the detailed tasks which BWNL offered to undertake. These included (at paragraph 6):

"Valuation of the Stock

The indicative valuation of the housing stock that has previously been produced will need to be refined in light of current circumstances to produce a Tenanted Market Value satisfies [sic] both parties, ODPM and funders.

Working closely with the relevant officers we will review all assumptions used in the valuation calculations, measure their sensitivity and incorporate the agreed offer to the tenants"

At paragraph 7(c) there appeared the statement that,

"the guarantees to tenants are likely to impact on the stock valuation and we therefore propose that we should demonstrate this effect to all parties before the formal offer design is finalised."

156. Further, at Appendix C the Tender set out the work that BWNL envisaged providing and offered to provide to, or at least on behalf of, the new landlord of the Housing Stock (in the event the CGA) in the pre-ballot period. This work included:

i) Using the "detailed financial assumptions" as a basis of "long term cash flow projections" which would form a key element of the new landlord's business plan (which BWNL would prepare).

ii) Advising on asset management and regeneration so as to improve the Housing Stock.

iii) Advising on and preparing a business plan for the new landlord which would cover "detail of the stock to be transferred", "cash flow and financial projections" and would be revised periodically to take account of, among other things, the stock valuation.

iv) Advising and assisting in relation to verifying the consultation material as the new landlord would need to be "satisfied" that commitments given to tenants were "both practical and reasonable".

157. These terms mirror the express terms pleaded in Paragraphs 52 and 53 of the Amended Particulars of Claim. Somewhat surprisingly, many of these are denied in the Re-Amended Defence. This is of little consequence given that it is effectively accepted that BWNL was under a duty to ensure that the costs of the promises made to tenants were covered by the business plan (and thus by the funding available in that business plan) which is the essence of the express terms upon which CGA relies.
158. The Council indicated (subject to contract) that it accepted the tender by letter dated 4 August 2003 and subsequently accepted BWNL's tender and appointed it as lead consultant pursuant to a written agreement dated 29 October 2003. In effect, the terms of the appointment were those set out in the ITT and the Tender.
159. The contents of Appendix C of the Tender and, in particular, the express references to advising and assisting the new landlord (i.e. CGA) are only consistent with there being an express recognition and agreement by BWNL that, if appointed, it would be providing services to and on behalf of the new landlord in the pre-ballot period. This supports the (now) admitted duty of care in tort owed by BWNL to CGA in relation to this period. I am unconvinced that there was some implied term of BWNL's retainer (by the Council) that, upon formation of CGA (on 4 October 2004), the original retainer as between the Council and BWNL would be novated and replaced by a tripartite retainer as between the Council and CGA on the one part and BWNL on the other on the same terms as the initial contract between the Council and BWNL alone. It is not necessary for such a term to be implied into a contract between the Council and BWNL and, even if there was, no such novation as such arose because BWNL and CGA went down the route of negotiating and entering into a contract between themselves. There was little if any serious argument put forward as to why there should be considered to be such a novation.
160. The express terms of the CGA Lead Consultant Appointment are, in large part, agreed. The following are accepted as being express terms of the CGA Lead Consultant Appointment, namely that BWNL would:

i) Prepare a detailed work programme and action plan covering the steps required to enable CGA to complete the Transfer.

ii) Prepare terms of reference and instructions for any other consultants or professional advisers required to advise CGA in relation to the Transfer.

iii) Advise CGA as and when the assistance of any other consultants or professional advisers was required in relation to the Transfer.

iv) Advise CGA as to the issues which any other consultants or professional advisers should be instructed to consider and as to the terms of their instructions.

v) Advise upon, and lead, negotiations with PCC and its advisers as to the valuation of the Housing Stock.

vi) Prepare long-term financial models to calculate the valuation of the Housing Stock based upon recognised tenanted market principles.

vii) Prepare and advise upon operating costs budgets and long-term cash flow projections and plans in respect of the Housing Stock.

viii) Prepare and advise upon the business plan for the Housing Stock.

ix) Ensure that the Business Plan included and budgeted for meeting the promises made to tenants in the Formal Consultation.

x) Exercise the reasonable standard of skill and care to be expected of an ordinarily competent housing consultant and adviser in and about the performance of the terms of the CGA Lead Consultant Appointment.

Even if there was not an express term that BWNL should exercise reasonable care and skill, such a term would fall to be implied in any event

161. These terms pleaded reflect the express wording of BWNL's tender dated 15 November 2004. This included (at Appendix A) a summary of the tasks that BWNL offered to perform if it was appointed as lead consultant to the Claimant. These included:

i) Preparing terms of reference for the appointment of any other consultants, including valuation surveyors.

ii) Advising on and leading negotiations with the Council on the valuation of the Housing Stock.

iii) Carrying out a critical review and then agreeing the base data and assumptions to be used and then preparing long term financial model to calculate the valuation of the Housing Stock based on the recognised tenanted market principles.

iv) Reviewing the stock condition survey and agreeing any adjustments as appropriate.

v) Assisting in preparing a stock investment programme.

vi) Preparing and reviewing a business plan, including long-term cash flow projections.

In addition, in its role as funding adviser it offered to assess the amount of funding required to support the business plan and test the sensitivity of the business plan.

162. Essentially, BWNL, in the context of this case, owed duties in contract and in tort to exercise reasonable care and skill with a view to ascertaining at least broadly whether sufficient was allowed within the Business Plan and thus the Gap Funding application to cover for works which were promised to tenants or which were otherwise intended to be done. It is accepted now, properly in my view, that BWNL owed the incipient CGA a duty of care which arose before its incorporation and carried on thereafter. Of course, for any cause of action to arise in negligence, there must additionally be a breach of duty causing damage; in this case this would be financial loss
163. Whilst BWNL's duties can not readily be categorised, they fall more into accounting and housing types of duty. They were not retained as architects, engineers or quantity surveyors and so it could not be criticised as such for failing to appreciate for instance that more or different work was required than Savills had suggested in their SCS reports or even that the approximate £80m allowed by Savills for those works was itself inadequate. What BWNL could appreciate however by the exercise of reasonable care was that, if obviously additional work was being promised to the tenants than had been allowed for by Savills, BWNL had to bring this to the attention of all concerned, which would be the Council and CGA, and make appropriate recommendations.

The Complaints in These Proceedings

164. Ultimately, a relatively simple summary of CGA's case will suffice to identify what the complaints are. Essentially, CGA says that a number (22) of the types of work identified in Draft 1 were not included within the financial allowances encompassed by the SCS reports or the Business Plan with the result that it lost the opportunity to or did not secure additional funding prior to the Transfer for such works. These works are said to have been works which were either promised to the tenants prior to the ballot in November 2004 or which in that period were mutually understood by the Council, the tenants and the incipient CGA to be required to be done. It is clear that, rightly, CGA does not put its case on the basis that "promises" to tenants were legally enforceable by tenants. However, CGA puts its case on the basis that CGA was committed politically and commercially to its tenants to fulfil such promises as were made to the tenants in the period leading up to the Offer being voted on and that the Housing Corporation and possibly the Council could have required it to comply with promises. CGA asserts that BWNL failed to identify what was intended to be promised or had been promised to tenants, namely what lay behind the Preston and Gateway Homes Standards and that materially differed from the SCS reports and that it failed to advise that the extra works needed to be costed to determine the Business Plan funding requirements.
165. These works are listed in the Amended Appendix 1 to the Particulars of Claim and comprise (with the agreed or not agreed figures as figures in brackets):

(a) Porches or canopies to shield visitors from weather (£276,250).

(b) Thermostatic radiator valves (£401,441).

(c) Carbon monoxide detectors to be fitted where appropriate (i.e. medical need) (Mr Stebbing's figure is £297,321 and Mr Whitehead's £35,612).

(d) Matching hearth and timber surround for gas fires (£586,864).

(e) Shower wiring (Mr Stebbing's figure is £513,490 and Mr Whitehead's £129,020).

(f) Extractor fans (Mr Stebbing's figure is £1,965,046 and Mr Whitehead's 0).

(g) Fire doors (Mr Stebbing's figure is £1,025,505 and Mr Whitehead's £64,107).

(h) Thermostatically controlled over bath showers to be provided (£2,420,913).

(i) Storage/wall cupboard (£312,992).

(j) Towel/drying rail (£210,105).

(k) 3 lever mortice locks to shed/outhouse doors (£120,298).

(l) Intruder alarms PIN numbers amended when tenancies change (£2,407,416).

(m) PIR (security) lights (£265,412).

(n) CCTV where required e.g. sheltered accommodation (£36,396).

(o) Kitchens to be designed in consultation with occupiers using Auto-cad taking into account occupiers of white goods (Mr Stebbing's figure is £158,700 and Mr Whitehead's 0).

(p) Extractor hoods above cookers (£1,622,549).

(q) Brick walls to front elevations where properties front a main bus route (£190,000).

(r) Rotary clothes dryers for all properties (£161,400).

(s) Storage sheds for garden tools (£300,000).

(t) Tenant choice improvements e.g. levelling of gardens, infilling of ponds, turfing of gardens, removal of debris (£750,000).

(u) Disabled adaptations (Mr Stebbing's figure is £2,250,000 and Mr Whitehead's 0).

There was one other item, flashing alarms, which I ignore as the experts agree that no quantum attaches to it.

166. The un-amended Particulars of Claim identified more items and much higher figures, the claim then being put on the basis that some £39 million's worth of work was not covered within the Business Plan; that has been amended down to just over £16 million. Thus, CGA asserts that it would have sought and secured additional gap funding from the ODPM if BWNL generally, and Mr Johnson in particular, had asked the right questions and raised as an issue whether and to what extent the sum of £80 million included in the Business Plan (which formed the basis for the gap funding application) was sufficient to cover those works identified in Draft 1 which were not encompassed within the SCS reports upon which the £80 million figure was based. The case is substantially predicated upon what would have happened if Mr Johnson in effect had asked the questions: what is the Preston Homes Standard and what works are encompassed within it? It is said that, if these questions or points had been raised, it is inevitable that the above-mentioned works would have been identified either through the production of Draft 1 or otherwise as works which were either promised to tenants or which were mutually understood or intended would be required to be done.
167. Included in CGA's claim is a separate claim relating to what has been called "disability adaptations" for which the case has been put on a rather different basis. The Offer expressly indicated that £250,000 a year would be expended in the future on disability adaptations which were also referred to in Draft 1. It is said that BWNL in general and Mr Johnson in particular should have appreciated in the months leading up to the Transfer that, based on what these works were costing the Council and would or might cost CGA, £250,000 per year would or could be an underestimate.

Liability-Breach of Contract and Breach of Duty

168. In my judgement, CGA has established that BWNL failed to act with reasonable care and skill at the meeting of 15 July 2004 and over the following weeks in blandly confirming that there was sufficient in money terms in the then Business Plan to cover the works within the Preston Homes Standard. In simple terms this was because Mr Johnson did not seek to ascertain or investigate the extent to which there was a correlation between the works envisaged by the SCS reports and the Preston Homes Standard; part of the carelessness was in not asking what the Preston Homes Standard actually was or what it represented. What can be said is that he made a careless assumption that the Preston Homes Standard, the existence of which he was undoubtedly made generally aware at the meeting, did reflect the contents of the SCS reports. The reality is that this Standard was something drawn up by the Preston Home Standard Group and it does seem that at least some of them specifically had the SCS reports in mind when doing so. It matters not for this purpose whether or not Mr Johnson had seen the 12 point Standard.
169. This carelessness or negligence continued until at least he saw the 11 or 12 high level points Preston Homes Standard document at the end of July 2004 and probably until he saw the Offer document, which he did as it developed from August to November 2004. There was however nothing in the Offer or in the events which occurred after mid-July 2004 which would have revealed that there was or would have been any exceptional work along the lines of the works which are the subject matter of these proceedings which had been promised to the tenants and which were not obviously budgeted for within the Business Plan as it then stood. There was nothing to alert Mr Johnson after the Offer had been finalised that works other than those referred to in the Offer had been promised or otherwise were understood by anyone would be required to be done. Indeed, after the Offer had been accepted, Mr Johnson did advise for instance in February 2005 that budgets were to be based on the SCS figures.
170. A separate "Disabled Adaptations" case was introduced by a late amendment made on 21 June 2011, albeit that it appeared as one of the original Appendix 1 items also. Nothing is said about it in any witness statement and no witness of fact said anything about it in oral evidence. No complaint was made contemporaneously about any failure to detect potential under-provision for works to cater for tenants' disabilities. No actual budgetary problem is said to have been reported within CGA or is identified in any document or other evidence before the Court. The only real evidential support for the case was provided by Dr Moody and Mr Stebbing and this was based on up to three documents.
171. CGA's case appears to be that it promised the tenants that it would carry out such disabled adaptations as were required either by means of Draft 1 or the Offer or that somehow it intended to put that promise into effect. It is argued that Mr Johnson ought to have spotted the reference to Preston City Works' £360,000 forecasted expenditure on disabled adaptations in 2004/05 in the HQN "Health Check" of PCW dated May 2005 presented to the Shadow Board on 9 June 2005 and that he should have noted a suggestion made by Mr McCabe in an email dated 5 August 2005 that there was a backlog of disabled adaptations of £175,000 that would potentially become a contingent liability at transfer. It is asserted that identifying both of these things ought to have put Mr Johnson on notice of a potential budgetary problem in relation to disabled adaptations for the future, because the sum allowed for disabled adaptations in the FSCS was £250,000 per annum and in the Offer and that he should have carried out investigations into the true or likely cost of funding disabled adaptation works following the transfer which it is said would have revealed that the existing £250,000 in the budget was in fact to be regarded as being too low. Having discovered this, Mr Johnson, it is said, would or should have advised CGA to make an application for additional gap funding in relation to disabled adaptations and, it is argued, CGA would have made the relevant application and secured the extra funding.
172. The Offer evidences however that the promise was limited and there was no promise of the sort asserted by CGA. The Offer contained a clear, limited, promise in relation to disabled adaptations: CGA would have an "Annual budget of £250,000 for adaptation work to homes occupied by people with disabilities". Even if Draft 1 contained promises or Point 9 of the Gateway Homes Standard set out in the Offer can be regarded as a promise, the Council was not promising tenants that more than £250,000 a year would be spent. There can not have been any room for doubt or misunderstandings about this.
173. Draft 1 stated:

"Adaptations to consider progressive nature of disability ie ramp not required now but may be required at a later date.

Adaptations built into overall scheme of works

Occupational Therapy service to fast track assessments for disabled applicants and incorporate into capital schemes of work."

This contained no indication of how much work of this sort would be done. Mr Stebbing, in his report, seems to have assumed that the work would be limited only by need, namely that CGA was promising to do all disabled adaptations that were required by tenants. Even without reference to the terms of the Offer Document, this text cannot be construed as making an open-ended promise in those terms.

174. Point 9 of the Gateway Homes Standard stated that:

"Homes should...Take into account people's disabilities in terms of design and access."

What ever this means, it is clear in context, even if one tries to avoid too legalistic an interpretation of the Offer, that the disability adaptation work was limited to £250,000's worth per year. I am by no means satisfied that this promised an open ended amount of disability adaptation work. These words are concerned simply with ensuring that such repair and improvement works as were carried out took into account the disabilities of the tenant. This might have involved, for example, ensuring that, where light switches were to be installed, they would be at a suitable height where the tenant was a wheelchair user. The words did not impose a wholesale promise upon CGA to fit disabled adaptations to all homes wherever they were required.

175. It is not enough for CGA to show that, contractually or otherwise, it had accepted an obligation to carry out disabled adaptations. It would also have to show that it was obliged to carry out those adaptations at its own expense. If it was not so obliged, there was no cause to increase the Business Plan provision. The extent of CGA's financial obligation is clear beyond any doubt. The Transfer Agreement contained an express provision limiting CGA's responsibility for disabled adaptations to £250,000 per year (plus inflationary uplift). This provided by Schedule 7 Part 2, Clause 20:

"20.1 The Council shall in accordance with the Chronically Sick and Disabled Persons Act 1970 and the Housing Grants Construction and Regeneration Act 1996 remain responsible for applications for disabled adaptations by way of Disabled Facilities Grant (or any such replacement grant).

"20.2 The Association has provision within its business plan for the funding of certain disabled adaptations and agrees that where a tenant of the Association request an adaptation, then PROVIDED THAT such adaptation has:

(i) been recommended by the Welfare Authority's occupational therapist; and

(ii) falls within the categories of permitted adaptations in the Council's Disabled Adaptations Policy or such other adaptations as the parties may from time to time agree;

then the Association shall incorporate the adaptations into its programmed maintenance repair modernisation or improvement works for such Dwelling.

20.3 In each Financial Year up to and ending on 31 March 2021 the Association shall meet the first £250k of the costs of any such adaptations, such sum to be increased on the 1^st April of each year (the first increase to be on 1 April 2006) by the percentage increase in the RPI in the twelve months up to the September before the relevant 1 April date of increase. Any underspend in a Financial Year shall be carried forward and serve to increase the amount of the costs to be met by the Association in ensuing years.

20.4 The Association shall not be required to meet the costs of any disabled adaptations listed in paragraph 20.2 beyond the limit set out in paragraph 20.3."

176. This clause reflected the statutory framework in force in relation to disabled adaptations; this does not appear to have been appreciated by Mr Stebbing or Dr Moody. The Council had and retained a statutory duty to provide grant aid to disabled people for a range of adaptations to their homes, notwithstanding that CGA was to take over ownership of the housing. It also reflected the guidance in place at the relevant time, which was to the effect that, although an RSL such as CGA was under no obligation to fund disabled adaptation work, it might agree with the Council to make a contribution. Clause 20 is specific and deals in detailed terms with the arrangement between CGA and PCC for the funding of disabled adaptations. It could not have been reached without a clear intention and understanding on the part of CGA that it's annual liability to fund (as opposed to its liability to carry out) work on disabled adaptations would be limited to £250,000.
177. Mr Stebbing carried out his calculations for disabled adaptations on the basis of advice that he had received from CGA's solicitors to the effect that Clause 20 was overridden by Clause 10 of the Schedule 7, Part 2. It is very doubtful that that clause was intended to apply to the promises in respect of improvements, still less to say anything about who would pay for them. However, a construction by which a catch-all provision of this sort overrides the express agreement embodied in Clause 20 is not tenable.
178. The limit on CGA's liability for disabled adaptations within the Offer mirrors the relevant provision in its budget. That budget had been in place since 2004, and was expressly referred to in the Offer Document. It is clear, therefore, that CGA's intention during the entirety of this period was that its obligation would be limited in that way. CGA led no factual evidence to the contrary. None of the witnesses called by CGA gave evidence that CGA did not intend or believe that its liability was limited in the manner set out in Clause 20. There is really no hint in the documentary evidence that CGA was approaching matters on any basis other than with regard to disability adaptations it was promising to the tenants that it would spend £250,000 per year on them. CGA would not have to spend any more than that because the Council could be expected to pick up the bill for any necessary disability adaptations which cost more than that. This may well explain why no concern was particularly being expressed by anyone as to the possibility that the Council might have to spend more than £250,000 per annum.
179. The case on this issue seems to be based on two documents appended to experts' reports, and that Mr Johnson ought to have realised that CGA faced a financial obligation or risk in respect of disabled adaptations in excess of the amount allowed for in the Business Plan. I do not begin to see how this part of the case is proved without any factual witness evidence of any sort to support or to explain it. There was no reason for BWNL, CGA or anyone else to think that disabled adaptations work might cost CGA more than £250,000 a year (plus uplift). I find it impossible to accept that the two documents selected by CGA's experts show anything like the full picture. In fact, when the fuller documentary record is examined (to the extent available) it shows clearly that CGA's potential liability for the cost of disabled adaptations was one of a number of contingent liabilities which were under consideration as the potential subject of the application for additional gap funding. Some went forward, others did not. Either way, CGA was fully in the picture. There is no evidence that CGA did not understand the extent (or limit) of its liability in respect of disabled adaptations. Finally, there is not even any evidence that the figures in the two documents (£360,000 in May 2005 and a £175,000 backlog in August 2005) do in fact or necessarily represent any kind of actual or potential overspend or were actually correct.
180. In 2003-2004 the Council was anticipating an under-spend on its disabled adaptations budget, and in 2004 Mr Graham was predicting that a budget of £250,000 for the next three years would be sufficient; In March 2005, it appears that it is budget remained "£230k – 250k". There is no real indication in any of the documents that the amount spent was regarded by anyone either within PCC or CGA as a concern. This is not a question that only a lead consultant would understand; the significance of overspend, if it was significant, would have been readily apparent to anyone, including an accountant and the housing professionals at CGA who were present at the 9 June 2005 Shadow Board meeting, Ms Bellinger, Mr Deacon, Mr Roberts, Mr Brooks (who had introduced the report), and Mr McCabe. None of these people either noticed what is now said to have been a problem, or have even given evidence as to what they knew of the situation. No budgetary problem was identified when Weedon Grant prepared a completely new Business Plan in 2007.
181. In my judgement, there is simply no real evidence at all on the basis of which I could reasonably conclude either that there was any potential budgetary problem in relation to the cost of disabled adaptations, that there was anything to alert Mr Johnson to such a problem or to the possibility that CGA was unaware of it, that CGA did not fully understand the extent of its obligations and the extent of the provision made against them in the Business Plan, that CGA did not make a deliberate decision, likely to have been based on the recognition that its liabilities were limited in the manner already explained, that CGA actually faced any budgetary problem, that there was any cause to apply for further gap funding to meet it or that CGA has ever encountered any financial problem in relation to disabled adaptations at all. No breach of contract is established as against BWNL in this context.
182. With regard to the breach of duty established in the period up to the end of October 2004, this can only be a breach of the tortious duty because there was no contract in place until later and because the Initial Lead Consultant Appointment between the Council and BWNL was not novated to bring in CGA. There is no completed or concluded negligence however because, as appears below, no damage or loss has been caused.

The Status of the Draft 1 Document

183. I have formed the very clear view that this document (at least in so far as it set out work which was not reflected in the Offer document itself) as such was certainly not intended to represent or record promises made by anyone to the Council tenants or even to reflect work as listed in Draft 1 which the Council or any incipient CGA representative believed or intended should be implemented as such by CGA following any Transfer. My reasons are as follows:

(a) There is absolutely no and certainly no reliable evidence that prior to its production anyone from the Council or anyone else said anything to the tenants which was or could have been construed as a promise to them that the detailed list of work in Draft 1 represented what would be done by CGA. Indeed, Mr Graham accepted in evidence that the contents were not promised, albeit in the context that the promises could never be fulfilled "if the stock remained with" the Council. The evidence is that there was merely extensive consultation and discussion with some tenants. No-one from the Council or CGA was making what could be construed as promises prior to the Offer being made.

(b) The Draft 1 document itself was, as Mr Graham explicitly accepted, a list of the tenants' "aspirations"; put another way, it was a "wish-list" which had been culled from consultations with some tenants as to the sort of things which all or some of those consulted would liked to have seen done. There is no credible evidence that the detailed works in Draft 1 represented what the tenants as a whole wanted; put another way, that the detailed works were representative of what the tenants as a whole or their representatives wanted has not been established on a balance of probabilities. There is no reliable evidence that the majority of items which formed the subject matter of CGA's claims in these proceedings were in fact ever discussed in any detail or in some cases at all prior to Draft 1 being produced. Examples are overhead showers and clothes dryers. Even the list of items attached to the minutes of the first Preston Homes Standard Group meeting on 9 March 2004 are not set out as promises but as what those attending thought tenants might want.

(c) The fact that it was headed "Draft 1" suggests that it represented when drafted the first effort to list what might be thought to be tenants' aspirations. Mr Graham was particularly unbelievable in saying that this was the last of a number of drafts; that is contradicted by the fact that it was called "Draft 1" and was undermined by the fact that there were no copies retained by anyone apparently of any previous drafts. As the minutes of the earlier meetings suggest, there had been no drafting done by him before; no minutes or other documentation suggest that any draft had seen the light of day before 7 July 2004.

(d) The terms of Draft 1 are provisional and tentative. The whole draft list of components and standards is prefaced with the words "when appropriate". A number of items have question marks against them. At least one item ("providing rooms for sleeping that are separate") apparently is dependent upon "building control/fire regulations" considering the matter. The final item, which deals with garden areas is itself prefaced with the words "wherever reasonable". Draft 1 is therefore in a number of important respects provisional and that suggests that further work remained to be done on it and that the scope of the works remained to be finalised. The 12 point Preston Homes Standard, as apparently eventually agreed, was itself qualified by its opening words to the effect that dwellings and communal areas "when appropriate" should have the 12 points applied; this itself suggests a perfectly legitimate and comprehensible qualification and a standard which itself is not of unconditional applicability.

(e) The fact that Draft 1 was not circulated within the Council, to the CGA shadow representatives, other than apparently to Ms Perry, or to any of the professionals retained suggests that it was not intended to represent promises or indeed intended to be something which the Council or anyone else believed was being offered to the tenants or was intending to undertake; it is simply unbelievable that it would not have received wider circulation. There would be no reason at all for it not to be provided to and discussed with those persons and committees dealing with the Offer document. The fact that it remained in Ms Perry's email but she gives literally no evidence about it at all suggests that she at least attached no importance to it at the time or at all. This is underscored by the fact that, only a few days before Draft 1 was said to have been e-mailed to her, at the meeting of 2 July 2004 she is minuted as saying it was "important to link work with tenants on improvements to work already done with tenant reps on Preston Homes Standard". It was not even discussed on 29 July 2004 at the Tenant Steering Group Committee meeting which appears to have concentrated on the high level Preston Homes Standard document, and at which there was discussion about the improvement section of the Offer document. It is surprising that there is no evidence that anyone showed Draft 1 to Mr Bliss, as effectively an independent professional who had the tenant's interests at heart. If Draft 1 was drawn up as a list of what was promised to the tenants or otherwise intended to be done, it is amazing that it was not given to Mr Bliss. The fact that it was not circulated strongly suggests that it was not such a list.

(f) The fact is that, if anyone on the CGA board, which included conscientious tenant representatives, was aware that there was a detailed list of what were believed to be promises or otherwise of work intended to be done, the list would have surfaced much earlier than 2009 when the lawyers were first involved. It would for instance have emerged in the period in which the Offer was being drafted. It is not credible that, if Draft 1 was supposed to represent a list of detailed promises which would have cost millions of pounds to implement, someone within CGA would not have said something to its Chief Executive or other senior representatives about it. She knew nothing about it until about the time that CGA's lawyers first floated the possibility of mounting a claim based upon it. The documented history of events in 2004 and 2005 positively suggests that a number of the items set out in Draft 1, such as burglar alarms, were positively not considered as having been promised orally or represented as something that it was mutually intended that tenants should have or should necessarily have. An example of this is the discussion in March 2005 about whether burglar alarms should be offered as part of a welcome pack to new tenants: if burglar alarms were always promised and intended to be installed in all homes, there would be no point in even considering them as part of a welcome pack because sooner or later they would have been installed in all homes in any event.

(g) The whole history of events after the Transfer, at least until about the time when these proceedings were instituted, strongly suggests that there was literally no-one within CGA who believed that promises were not being kept which in turn suggests that, from the Chief Executive level downwards, all honestly believed that the actual promises made were being honoured. This is important because by then CGA was almost four years into a five year programme in which the vast bulk of the promised work was to be done. I can not and do not infer that this is a lawyer-led claim because rightly I am unaware what the legal advice given to CGA is or was. However, given the absence of any hint in the evidence that, up to shortly before these proceedings were issued, anyone within CGA believed that material promises were not being kept, a proper inference is that all promises which had been made were being or had been honoured by then and that none of the items now said by CGA to have been promised or mutually understood to have been required were prior to the transfer promised or intended to be done. In the contemporaneous documentary evidence after proceedings were issued, there is no hint that promises were not being kept; that is surprising even though some of the CGA Board meeting minutes are redacted, because CGA is run for and on behalf of its tenants and I am confident that Ms Bellinger would not countenance the concealment from tenants of something as basic as key promises not being kept.

(h) The fact that not one of out of some 6,500 tenants has so much as hinted let alone complained that promises were not kept suggests that, in so far as Draft 1 listed work which has not been done, that work neither had been promised nor was understood to have been intended to be carried out. By all accounts, the opposite is the case: the tenants are delighted and believe that the promises actually made have been kept.

(i) No-one within the Council, least of all Mr Graham, or the shadow group in 2004, thought of doing even a rough costing on the contents of the Draft 1 list, which is surprising if not unbelievable if they believed that the list contained promises, commitments or resolutions.

(j) Mr Graham was also particularly unbelievable in suggesting that he did not try to price or cost or programme either the detailed Draft 1 list or indeed anything other than the Decent Homes Standard in 2005. If he was aware or believed that Draft 1 listed promises of work which would have to be done (and he was the one who drafted it), he would have secured or at least recommended that it was costed and programmed. The fact that neither he nor anyone else did so in the period between late November 2004 and the Transfer suggests that there was no appreciation that anyone within the Council or within the incipient CGA board and staff believed that there was a detailed list such as Draft 1 which listed promises to tenants.

(k) The Offer document itself was obviously and consciously drafted and presented to the tenants on the basis of what the Gateway Standard was and was to be considered to be, which was a list of high level points which were by and large non-specific; they essentially represented aims and standards to be achieved. It is clear that BWNL advised (and this is not as such said to have been negligent advice) that the Offer should not be too specific so that CGA would be left with some flexibility. If there was any thought that underlying the Offer was a list of detailed promises not as such reflected in the Offer, it would have been politically and otherwise dishonest for the Council and the incipient CGA not at least to have hinted that there was such a list; it would not have been difficult to say something like: "a detailed list of specific works to be done is on a list which can be inspected". For no obvious good reason, the ninth item ("provide rooms for sleeping that are separate") was dropped; if this had been promised to the tenants or mutually intended to be carried out, there seems to have been no compunction against dropping it and, indeed, no complaint from a person, let alone any tenants, about its omission.

(l) The terms of the Offer itself suggest that the only promises being made were those set out in it. As far as one can tell from the contemporaneous documents, everyone including the tenants representatives were content with the terms of the Offer and it is unbelievable that, if the contents of Draft 1 (over and above what was expressly being offered in the Offer) had been promised or in some way acceded to by the Council or CGA, there would not have been some reflection of it in the Offer document itself or in the contemporaneous and circulated and discussed documentation leading up to its presentation to the tenants for balloting. The tone of that documentation is clearly that everyone was proceeding on the basis that it would be the Offer which would contain the promises to the tenants. Indeed, the post-Offer history is confirmatory of this.

(m) It is and remains a mystery as to how Draft 1 was eventually found. Ms Bellinger, who would be expected to know, had no idea who found it or indeed who first showed it to her or where it was found. She had certainly never seen the document until well into 2009 or possibly later.

(n) Draft 1 also has to be put in context of it having been the Preston Homes Standard Group's remit as set out in the minutes of its first meeting of being one of producing such a standard applicable to all properties and then develop that standard to more detailed proposals about standards of "fitment and design taking into account costs and future repair". This suggests that the standard was always to be a high level one, in fact of the type set out in first the 12 point Preston Homes Standard and later in the Offer in the Gateway Homes Standard, with the development of the standard being one which would fall short of commitment to the tenants, being subject to constraints of costs and other necessary repairs.

(o) It is clear that Draft 1 was not and was never intended by anyone to be the document which, as CGA asserts, "lay behind" the Preston Homes Standards, describing the work promised to tenants or otherwise intended to be done. If it was such a document, everyone who had any real responsibility for setting up and facilitating the Offer and transfer, including Ms Perry, Mr Roberts, Mr Bliss, the tenant representatives and later senior executives of CGA would have known and would have had to know about it; they clearly did not know about it at any relevant time. They would all have been in the position to remember this and none of them apparently did. It is argued that there were commitments made through the Preston Homes Standard Group but the minutes and the stated objectives do not suggest that "commitments" were or were intended to be made by this process.

184. It is true that Draft 1 does contain detail which in some limited but important respects was clearly intended to be the sort of thing which was likely to be offered to the tenants. There clearly had been discussions about kitchens, bathrooms, windows and doors prior to the formal Offer being presented to tenants. The exhibition at Preston North End Football Club and the travelling exhibition showed mock-ups of bathrooms and kitchens as well as double glazed windows and also doors. It could be said that representations were made by way of those exhibitions which were clearly intended to demonstrate the sort of kitchens, bathrooms, doors and windows which tenants could expect if the transfer went ahead. One has to bear in mind that "promises" in this regard are not directly equivalent to a legal representation or warranty. The Offer produced a vote, not some sort of contractual acceptance. Obviously, given that the Community Gateway Model upon which the Offer was predicated was one which "empowered" the tenants, in effect giving the tenants the largest single group on the CGA board, it was going to be almost inconceivable that the CGA board would not seek to implement those representations which could have been said to have been genuinely made. It might well have been difficult for CGA to escape at least political criticism if, for instance, the doors and windows eventually installed were completely different from and of a much lower quality than the types demonstrated by the Council before the Offer went to the vote. In this sense only, one could look behind the Offer.
185. It is also the case that much of the work set out in Draft 1 was and must have been culled from the SCS reports, to which Mr Graham clearly had access. A significant part of the works in Draft 1 (which are the subject matter of these proceedings) finds no expression in any of the recorded meetings with or documentation to and from the tenants.
186. A certain amount is made by CGA and its legal team about a number of recorded notes or the like in 2005, which refer, for instance, to extractor fans or burglar alarms, as providing some evidence that these items must in some way have been promised or that CGA or the Council felt that they were committed to providing them. However, as referred to in the history above, these were references in passing and the documentation which contains the references does not put them in terms of being promised or of CGA being committed to providing them. The reality is that there are more items, which are the subject matter of CGA's claim, that are not mentioned in this period than are mentioned. The high point is possibly the mention of burglar alarms mentioned in Mr Roberts' probably provisional notes of 23 May 2005 about the programme for work including "Security works- e.g. security lights, fencing/gates, burglar alarms etc. to improve security/safety of properties/occupiers". However, Mr Roberts did not in evidence identify this as something promised and in any event "burglar alarms" are given only as an example of what might be provided. It is inconceivable that, if these items were promised or that anyone within CGA felt that CGA was committed to providing them, they would just have been ignored, as they were, and neither programmed nor costed nor in many cases actually ever done.
187. Another document is the notes of the April 2005 meeting with tenants at which "priorities" were discussed but this does not mention the large majority of work items which are the subject matter of CGA's claim; in any event, this exercise was primarily concerned with giving Mr Graham and Mr Roberts some idea as to programming, rather than laying down some list of promises. Apart from the fact that only 73 tenants out of 6,500 attended, it was only some groups within this number who considered for instance carbon monoxide detectors, security lights and extractor fans as a priority and items which are within CGA's claim did not feature as a priority by "most groups"; porches and external stores (or tool sheds) were described as low priority items. This exercise was to sound out any tenants who were sufficiently interested to attend to see what that particular permutation of tenants thought should be prioritised. It was not done by reference to what had been promised but by reference to the SCS reports. It provides no useful support for what had been promised.
188. A number of the items in Draft 1 have all the hallmarks of being on a wish list. Clothes dryers for instance are metal poles with folding out arms upon which washing can be placed to dry; these might be useful for some people to have but there has been no hint of a complaint from any tenant that these have not yet been provided. Burglar alarms are a facet of home security but it could be said that the doors and windows which were being discussed with substantial mortice locks and the like contained inbuilt security. This is just the sort of item that someone like Mr Graham, knowing that security was a concern of tenants, might have thought it worthwhile putting in his Draft 1 for discussion, albeit that it was not ultimately circulated and even though it does not appear to have been discussed in any detail before he produced his draft.
189. A number of the other items in Draft 1 such as overhead or thermostatic showers and cooker extractor hoods did not feature and were not represented in the bathrooms or kitchens which were demonstrated at Preston North End Football Club or on the lorry trailer exhibition. Again, if these had been promised to the tenants or if it was seriously thought that they would have to be provided, it is surprising that the demonstrations did not demonstrate them; not only did this not occur, not one tenant then or since has complained about their absence.
190. It is argued by CGA that the 11 headline points which comprised the Gateway Homes Standard in the Offer were themselves a promise which would or must be taken to have incorporated whatever had been agreed or "promised" beforehand. This Standard was part of the promise made in the Offer but its terms are far more consistent with it setting a standard to which works were to be done. The 11 points are very high level; for instance the requirement for homes to "Look pleasing to the eye and have design features that satisfy tenants requirements", is very general and is obviously simply intended to mean that, when work is to be done, it is to be done so that objectively it is pleasing to the eye; it does not mean that each of the 6,500 tenants could have what each wants in terms of appearance or have a beautiful looking dwelling. Works were obviously not being promised for every dwelling; that is for instance why specific numbers of dwellings are mentioned for specific works. The 11 points are readily comprehensible in the context of what was being specifically promised. Thus, the new windows and doors should be aesthetically pleasing, be wind and weathertight and provide reasonable security and reflect what tenants had said that they required in the pre-Offer meetings and presentations; they also could provide safe means of escape in the case of fire and ventilation by way of "trickle ventilation" .
191. In my judgment, the Offer can and was intended to be read as a standalone document to which voting tenants could refer to see what they were being offered; it reads like that and it would be very odd indeed if there was something "behind" it, about which the overwhelming majority of tenants (not involved as representatives or who had actually not involved themselves in the consultations) had no idea. The very fact that the Offer went through many changes such as those relating to extractor fans (eventually becoming ventilation where necessary) suggests that what was being offered was being simply but comprehensively set out; extractor fans are not as such being offered but ventilation of one sort or another is being offered only where necessary.
192. Given my views as to what Draft 1 was not, it is strictly unnecessary to determine what it was. However, it was and remained unfinished work in progress. It remained in draft and was not circulated other than to Ms Perry who took it no further. It was no more than a draft wish list which was overtaken by the Offer document which everyone involved in its drafting agreed should be less rather than more specific, other than the specific promises set out in it. It was not a document of any importance in the scheme of the transfer of the housing stock and it was certainly not a document which in some way "lay behind" the Preston or Gateway Homes Standards.

What if Draft 1 Had Emerged-Causation

193. Although CGA's case or at least its emphasis has changed somewhat as the trial has gone on, essentially it argues that Mr Johnson should have raised the question as to what detail lay behind the Preston, later the Gateway, Homes Standard. If he had, it is argued, he and others would have been presented with the Draft 1 list of detailed works, he and the Council and the various tenant and CGA shadow organisations would by one means or another have realised that the works would have cost more than was then being budgeted (about £80m) and more in respect of these previously unbudgeted works would have been sought and obtained from the OPDM.
194. I am not satisfied on a balance of probabilities that, if Mr Johnson had raised that question, Draft 1 would have been produced or, even if it had, that anything would have been done to seek extra funding in respect of the additional work which it contained. My reasons are as follows:

(a) The negligence was Mr Johnson's failure initially at the meeting of 15 July 2004 and in the weeks which followed to ask what the Preston Homes Standard really was before saying that there was enough in the budget to fulfil it; the failure continued for several months thereafter until the Offer was finalised. If he had asked, it is obvious that he would have been provided with a copy of the Standard and it is equally clear that he would have said something to the effect that, unless the tenants were looking for something more than was in and budgeted within the SCS reports, the Standard was unexceptionable. What I can not say as a matter of probability is that at any stage Draft 1 would have emerged or the 22 items which are now the subject matter of CGA's claim would have been identified.

(b) As set out above, Draft 1 did not contain any promises as such at all. It was not and was not apparently intended to be circulated to anyone other than Ms Perry who did nothing with it. Mr Graham certainly seems to have forgotten it and done nothing with it after 7 July 2004.

(c) Draft 1 was at best work in progress and it is not possible to say what if any of the detailed work in Draft 1 would have been analysed and accepted as having been promised to or agreed with the tenants or otherwise thought necessary or desirable to be done.

(d) The Council, tenant representatives and Shadow CGA board had been advised by Mr Johnson and others that the Offer, in terms of offering to do work, should not be too specific, albeit that some specific promises could be made. They accepted this advice and were happy with the content of the Offer on which the tenants voted. This was sound and certainly not negligent advice because, with building works in ageing housing stock, it would be very difficult to predict the full scope of the work with any certainty or precision, let alone the cost. Any number of unforeseen contingencies might arise. For instance, because the SCS reports were prepared by surveying only a proportion of the dwellings and the number of dwellings needing specific types of work was extrapolated from that, it might be found that more dwellings than anticipated might need works carried out to them.

(e) There is no reason to assume or infer that any different decision would have been made than was made with regard to the Offer or the funding being sought from the OPDM. It is arguably an extraordinary and certainly an unfortunate fact that there is no evidence from anyone from CGA or the Council who actually has given evidence as to what would have been done if Draft 1 had emerged before funding was obtained. In my judgment, it would be wrong for the Court, in this case at least, to infer that further funding would have been sought or that particular items would have been accepted as necessary or desirable to be done. If neither Council nor CGA witnesses are produced to say what either would have done in these circumstances, then one can not readily find that either would have sought extra funding prior to the Transfer or have insisted that funding for any of the 22 items which are the subject matter for CGA's claim in these proceedings should be sought.

(f) The first questions which would in all probability have been asked (if Draft 1 had been produced in answer to Mr Johnson's presumed question) would have been (although not in these terms): what is the provenance of each of these items of work? Do they represent what the tenants as a whole wanted or just a few wanted? Have Council or incipient CGA staff agreed that the tenants should have them? Is it realistic just because the answer to these last two questions is "Yes", to put them forward to be costed and form the subject matter of the gap funding application? In my view the likely answers to these questions would have been that Mr Graham had simply listed what he thought the tenants might want; secondly, apart from the doors and windows and possibly heating, it could not be said that the tenants as a whole necessarily or at all wanted them and at best it could be said that some tenants might want them; thirdly neither Council nor CGA staff had agreed that the tenants should have them or had in any way promised them to the tenants. In those circumstances in relation to the answers to the final question, in the absence of any clear evidence from relevant people at the Council or CGA, I could not and would not find on a balance of probabilities that the Council or the incipient CGA would have required any work not covered by the SCS reports to be costed and the additional cost added to the gap funding application.

(g) I do give some weight to the contents of the Offer document itself which was clearly considered in detail by the Tenant Steering Group, together with the process by which the Offer document was debated and finalised. I have absolutely no reason to believe that the tenant representatives were anything other than sensible, decent and astute, certainly judging from the comments attributed to them in numerous meetings which they attended. For instance, Page 22 makes it absolutely clear that the £80 million, to be spent in the first five years, is derived from the stock condition surveys. I have no reason to assume that the tenants who contributed to the drafting of the Offer and the tenants who considered the Offer when they were balloted had any reason to believe other than that the primary source for describing the improvements was the SCS reports; indeed the offer expressly says this at Page 22. Additionally, without being too legalistic about the Offer, it is absolutely clear that the Offer document described the Gateway Homes Standard as the 11 high-level points set out on Page 23. I do not consider that anyone truly believed that the Gateway Homes Standard was anything other than those high-level points. This leads me to believe that, if the Draft 1 document had emerged, it would have led to nothing different than the Offer Document and its reference back to the SCS reports and the improvements which are there set out.

(h) A good example of this is the extractor fans which are one of the 22 items which are the subject matter of CGA's claim. As can be seen from the history of events above, the initial draft of the Offer called for extractor fans in all dwellings and this, with the full agreement of tenant representatives, went through a series of changes to end up in the Offer as "Improved ventilation would be provided to those homes that need it to tackle condensation." So, it is a fair inference that, if the universal installation of extractor fans was identified from Draft 1, the end result would have been the same as appeared in the Offer. Ventilation could be achieved by way of extractor fans and other means such as built-in ventilation within new windows but only on an "as necessary basis".

(i) The tenor of the advice recorded as given by Mr Johnson at the meeting on 15 July 2004 was to bring the parties back to the SCS. This reflects his advice over the next 12 months as well. His report to the meeting certainly identifies this as his advice and there is no particular reason to think that his advice would not have been followed even if Draft 1 had emerged. His advice, probably mirrored by that of Mr Bliss, was that the Offer could include specific guarantees in respect of individual components of work and indeed he identified in his report to the meeting exactly the sort of improvements that were ultimately contained in the Offer. For instance, Mr Bliss later advised on 19 October 2004 "that the basis for the improvements programme was the stock condition survey that had been carried out, and [which] had been included in the offer document"; there is no hint that this advice was considered unpalatable or wrong by the tenants or anyone else. There would possibly have been a debate if Draft 1 had emerged and if it seemed that tenants might want additional improvements such as burglar alarms and clothes dryers. There is no telling, at least on a balance of probabilities, where this debate would have got to. I can not be confident to the requisite degree of proof that such a debate would have led to additional items of work being identified as necessary and to an increased gap funding application being made.

(j) It is argued that several of the high level points in the Preston (and later Gateway) Homes Standard might or should have alerted BWNL to a probability that it encompassed more than may have been covered by the SCS reports, in particular "pleasing to the eye" (point 8) and "effective means of escape in case of fire and be resistant to the spread of fire" (point 5). It was argued for instance that porches or canopies might have made the dwellings more "pleasing to the eye"; that however would be subjectively contentious and there has been no evidence that the work done over the past 5-6 years has not provided something which is pleasing to the eye or at least more so than what was there before. Porches and canopies are more often provided to give added protection against water penetration in and around the doors in question and there has been no suggestion that the new external doors do not provide adequate protection in that regard. As for the fire protection, there really has not been any real evidence that Building and safety regulations have not been complied with following the provision of the measures actually implemented. There clearly was detailed consideration given to the windows on the ground floor being capable of being used as a means of escape in case of fire. In addition, it is clear that the SCS reports did consider and allow for fire safety issues. It is not in my judgment established on a balance of probabilities that, even if BWNL had been alerted to the possibility that the high level points in the Standard might have been underlain by something more, that it would have led to any conclusion other than the SCS made sufficient provision in any event.

195. It follows from the above that, although Mr Johnson and BWNL were in breach of contract between about July and October 2004 for failing to enquire what was, and if anything specifically lay behind, the Preston Homes Standard, there can be no loss caused by this breach. If the matter had been raised, all that might have emerged, at best, is Draft 1 and for the reasons given above that would not, and it is not proved on a balance of probabilities that it would, have made any difference at all to what happened in fact. I am in any event not satisfied that Draft 1 would have emerged.
196. Although it is unnecessary to deal with causation in relation to the disabled adaptations, even if I had found that there had been some fault on the part of BWNL in this regard, I would not have been satisfied on a balance of probabilities that there was any established link between any such fault and any loss claimed. The reality is that CGA was aware prior to the Transfer that there was a risk or possibility that what the Council had been spending on disability adaptations was greater than the £250,000 per year indicated in the Offer and, yet, CGA who were fully and properly advised by an array of intelligent and professional people in addition to BWNL did not do anything about it. In the absence of any evidence from anyone within CGA or the Council as to what either would have done if BWNL had pointed out the risk, it is not possible or fair for me to conclude on a balance of probabilities that further gap funding would have been applied for in relation to disabled adaptations.

Quantum

197. As CGA's case fails in effect on causation in relation to Draft 1 and on liability and causation in relation to the disability adaptations, it is unnecessary to consider quantum in any detail. Substantial elements of the quantum were in fact agreed on a figures as figures basis. In the interest of proportionality, I will not set out in detail what I would have decided and why in the circumstances but I will summarise what I would have decided:

(a) I would broadly have accepted CGA's case that, if works promises had legitimately been made to tenants, which fell within a reasonably desirable or necessary category, it would have been more probable than not that the ODPM would have entertained and seriously considered further funding, either in an original or indeed pre-transfer later funding application; in that context I would have accepted the evidence of Ms Turner to that effect and indeed the expert funding evidence.

(b) As to carbon monoxide detectors, it is wholly unclear what Mr Graham meant or thought he meant in Draft 1 in this context (i.e. medical need"). I preferred Mr Whitehead's evidence on this that, if anything was intended, a universal installation of such detectors was not envisaged and that something significantly less than universal application was envisaged. I would have accepted his allowance of some £35,000.

(c) In relation to shower wiring, I very much doubt that anyone seriously expected electric shower wiring to be installed in every property including those where there was or was going to be a gas-fired shower; whilst I can see that having the facility of wiring for electrical showers in an ideal world, if money was no object, could be justified, I do not see that this would have been considered as necessary or even desirable. I would have preferred Mr Whitehead's view and quantum approach on this.

(d) In relation to extractor fans, there is no doubt that the SCS and indeed therefore the £80 million in the Business Plan allowed for a not inconsiderable amount of extractor fans and related work. I would not have been satisfied that it was necessary or desirable that extractor fans were put in every bathroom and every kitchen. The very fact that the need for extractor fans was very much reduced within the Offer from what was first drafted suggests that the considered view was that it was broadly accepted that such a universal installation was unnecessary. I would again have preferred Mr Whitehead on this aspect of the matter.

(e) For fire doors, I can not see that this would have been considered to be essential for all internal doors because the Building Regulations did not require this. However, Mr Whitehead convincingly said that, even under the relevant regulations, fire doors or closers would be required only in flats above two storeys. The Preston Homes Standard was prefaced with the words "when appropriate" and I do not see that the universal provision of 30 minute fire check internal doors with closers is or has been established to be appropriate. I would have preferred Mr Whitehead's views on this and allowed his figure of just under £75,000.

(f) If I had found liability and causation in relation to disability adaptations, I would have preferred the evidence of Mr Stebbing and allowed the sum of £2.25 million subject to net present value factoring.

(g) So far as kitchen design is concerned, I would have preferred the approach and logic of Mr Whitehead. I can not see that what might really have been promised was that each of the thousands of kitchens that were to be renovated would each need its own individual computer automated design process, although of course each would have to be fitted individually; the evidence strongly suggests that there were a large numbers of dwellings which were the same as each other and an Auto CAD approach for each kitchen would have been unnecessary and a waste of money. It is certainly wholly inappropriate for CAD designs to be provided for each individual kitchen.

(h) I would thus have preferred the evidence of Mr Whitehead on the six disputed items, which would have had the effect of reducing the quantum from £16.039m as pleaded to no more than £ 10,057,677.

(i) I would have upheld CGA's argument that loss based on what additional funding would have been obtained, as opposed to some valuation or capital diminution basis, was the proper measure of damages. This loss would have been foreseeable and of the type which the contract and relationship between CGA and BWNL was at least in part seeking to avoid; put another way, BWNL's job included giving sensible and careful advice to ensure that grant funding would be obtained in an appropriate amount and that the loss of grant funding represented the correct measure of recoverable loss.

(j) If I had found that probably the Council would have sought additional funding (and I have not so found), I would have classified this as a loss of opportunity case which would have been dependant primarily on the act of a third party, namely the OPDM. I would have found that, if additional funding was sought, there was a substantially better chance than evens of securing funding but I would have been unable to fix that at 100% due to the vagaries of Government and what was available and more importantly an element of likely cynicism within ODPM as to whether all the items were necessary and desirable, the main objects of such cynicism being clothes dryers, tool sheds, overhead showers and burglar alarms. Thus, whilst some items would attract a less than 50% chance of being funded, others would attract a much higher chance such as porches, radiator valves, cooker hoods, garden improvements and security lights. I would broadly have found there to be a weighted 66.67% (two thirds) chance of securing the overall funding. I would have had regard to the fact that OPDM's own guidance called for "a realistic and cost effective programme of works which will deliver the reasonable aspirations of tenants" and also talked about "value for money". Funding was also finite and subject to competing priorities from other organisations seeking funding. I would have found that there was no realistic chance of obtaining any additional funding from the Council.

(k) I would not have found any contributory negligence on the part of CGA. The active contributory negligence would primarily have had to have been in the July to October 2004 period which was a time when the incipient CGA was being guided by BWNL, which was in effect "holding their hands". I do not see that CGA can be criticised for failing to pick up something which Mr Johnson had not but should have addressed because the relevant personnel would not have known that there was anything amiss.

(l) The net figure would need to have been reduced to reflect the fact that CGA would have been receiving the damages as a sum now rather than staggered over a period.

(m) I would have withheld any judgement on a fixed sum for damages until I was satisfied that there was no duplication between the sum allowable and any sum secured by CGA from Countrywide by way of settlement, the contents of which the Court was not informed.

Conclusion

198. CGA's claim substantively fails, primarily on the basis of causation although also on liability in relation to the disabled adaptations case. The claim in tort fails because there is no damage in any event. There has been raised in written argument, following the submission to the parties of the draft judgment an argument as to whether there should be judgment for CGA for nominal damages. I can not resolve this without oral argument and will deal with this when issues such as costs are to be raised at a later stage