Sovereign Harbour Charge


Caroline writes;

I am continuing with efforts to support Sovereign Harbour residents with the yearly harbour charge.

I have had a series of meetings with the relevant authorities, as well as representatives from Sovereign Harbour.  Clearly this is a very frustrating time as the bills have come in again, but I want to reassure residents that I fully support them in their fight to rectify the unfairness of the Marina Rent Charge.

In the next few weeks I will be having a meeting with the new Chief Executive of the Environment Agency, and will be urging him to help find a resolution to this long running saga.

Although we all appreciate that this long-running conflict will be difficult to resolve, we have made, and continue to make, significant progress.

The SHRA and I have had some very productive meetings in recent months, including two with the Secretary of State for the Environment.  Obtaining a fair deal for harbour residents is one of my major objectives, and I will be doing everything in my power to bring this injustice to the attention of those in a position to resolve it.

Background to the Sovereign Harbour Rent Charge (provided by Sovereign Harbour Residents Association). 

Sovereign Harbour is the largest marina development in Northern Europe and is situated on the coast just outside Eastbourne in East Sussex. The marina business is surrounded by a large residential development of about 3,700 homes, a community of around 7,000 people. Also incorporated is a ‘waterfront area’, principally occupied by restaurants and shops, and finally a large retail park. In its entirety this is referred to as Sovereign Harbour Village. This was a massive project, which as a concept was started over 35 years ago by the Duke of Devonshire who had a dream of building a luxury marina with residential properties enjoying the marina facilities. The project finally moved ahead under the Eastbourne Harbour Act of 1980.

The development, which was to be situated on a flood plain, went ahead contrary to the recommendations of the Sussex River Authority and Southern Water Authority, who petitioned against it throughout the 1960’s and 70’s without success. Concerns centred on the potential affects of the Harbour breakwaters on littoral drift of shingle, and consequential depletion of shingle in some areas of the adjacent coast resulting in weakening of flood defences. A Bill in 1975 for the construction of the harbour was defeated, but a second bill promoting the Harbour was submitted in 1980 and subsequently enacted in the Eastbourne Harbour Act.

The passage of the 1980 Act was on the back of the agreement of the Duke of Devonshire to maintain shingle on the beaches along a 9 km stretch to the East of Sovereign Harbour and this was enshrined in the Eastbourne Harbour Act as the power of the Southern Water Authority to recover costs from the developing company for making good weaknesses along the ‘protected beach’. This left developers, either the Duke of Devonshire, or successor companies, with a legal obligation in perpetuity to remedy any depletion of shingle along the stretch of coast between Sovereign Harbour and Cooden Beach at their own cost. The ‘justice’ in this was that those organisations who would commercially benefit from the sale of the land and the development of the marina and surrounding residential properties would contribute to any additional maintenance of sea defences required to compensate for the effects of the Harbour.

The Duke of Devonshire, who had hoped to develop the harbour himself, became aware that his plan for a luxury marina was too expensive and he put forward a cheaper option with a less pronounced harbour wall. Concerns arose as to whether the Duke’s commitment and the safeguards in the Eastbourne Harbour Act would be affected by the new proposals. The Southern Water Authority gave assurances that the responsibility of the developing company to maintain flood defence provisions was protected. The new planning proposal was given permission in 1987. However, a year later the Duke decided that financial risks were too great and he sold the harbour site to Tarmac.

Even though responsibilities had been enshrined in law, in 1988 the Southern Water Authority and Tarmac signed an agreement and the responsibility to protect the 9 km of coast disappeared ‘overnight’.

Why, given the work the Southern Water Authority had done to prevent the development of the Harbour and then to secure that flood defence provisions would be the responsibility of the developer, did they feel the need to enter into a weaker agreement?

The agreement was called Southern Water Agreement, 1988 and amongst others Tarmac (later to become Carillion) and the Southern Water Authority (SWA) were key signatories, as was the Duke of Devonshire. Carillion developed the marina through a wholly owned subsidiary, Sovereign Harbour Ltd (SHL) and operated it through another company Sovereign Harbour Marina Ltd.  Amongst other things the Agreement committed the SWA to maintaining certain groynes to restrict shingle movement through littoral drift. It also committed the developers to set up a trust within 9 years (by 1997) of the Agreement that would provide the money for coastal defence work. The developers and the SWA agreed between themselves that a contribution to the trust funds would come from a rent charge levied on residential properties on the Harbour development. This was the first time the developers (Duke of Devonshire / Tarmac) had tried to avoid their responsibilities under the 1980 Act and place an ongoing burden for sea defence maintenance on residents, who enjoyed no commercial benefit from the project.

Why did the Southern Water Authority agree to this tactic, which was blatantly unfair to residents and contrary to the intentions of the 1980 Act?

However, all was not lost as far as future residents were concerned since, should the developers fail to set up the trust within the required 9 years, to the satisfaction of the SWA (now the EA), there was a provision that the developers would pay a bond of £2M, the income from which would fund the contribution. This would have released residents of Sovereign Harbour from any future responsibility for the maintenance costs and restore the intent of the Harbour Act. The SW Agreement was the sole foundation for residents being charged what is essentially a ‘second tax’ towards local flood defences. These flood defence provisions are part of an integrated scheme which protects not only the Harbour residences, but also more than 10,000 homes that share the surrounding flood plain, as well as numerous businesses. These properties and businesses do not pay the ‘second tax’.

Why didn’t the EA enforce the requirement on SHL to pay the £2M bond in 1997 when it ‘came due’?

Was the decision of the SWA to levy, what was essentially as an additional tax on residents, a matter of Government policy in 1988?

By 1997 the SW Agreement had been substantially breached by both the Environment Agency and the developers, SHL. The EA defaulted on the agreement by failing to carry out the work on groynes that they had committed to. Without the alleviation provided by these groynes there was an increased need to transport shingle to reverse littoral drift effects and consequently this would result in a higher annual maintenance charge on whoever accepted responsibility for it. SHL also defaulted on the Agreement because, having failed to set up the trust within 9 years, as required by the EA, they refrained from providing the £2M bond and the EA apparently made the decision not take action to insist on this condition. The EA also claimed that SHL had also defaulted on a commitment to move shingle.

Having been substantially breached by both key signatories, at this point the SW Agreement was null and void. It was no longer worth the paper it was printed on and no longer a legally credible basis for imposing obligations on residents for an additional coastal defence levy.

Between 1997–2000 the situation ‘went quiet’ as far as the general observer was concerned, but in 2000 an acrimonious and very public argument erupted. Given the history it might be speculated that SHL’s failure to establish a trust and unwillingness to contribute a £2M bond had made the EA concerned that they would lose the contribution towards coastal defence they had anticipated. Of course they were themselves exposed in the context of the 1988 Agreement since they hadn’t fulfilled their own obligation under this. The argument was essentially conducted in the local press and national television in a BBC programme called ‘Living in the Death Zone’.  The argument spawned press statements from both the EA and SHL with claims and counter claims of failures to honour the SW Agreement of 1988.

Not surprisingly this argument resulted in a loss of public confidence and house values on the Harbour fell. With SHL’s business interests threatened they sought Judicial Review of the EA’s decision. Following submission of the EA’s witness statements SHL agreed to postponement of the Judicial Review hearing, pending further negotiations with the EA.

We understand that the negotiations between the two parties were not carried out ‘face-to-face’, but each occupied separate rooms with solicitors shuttling backwards and forwards between them. This resulted in the EA signing onto a new agreement, the Sovereign Harbour Beaches Sea Defence Deed (24/8/2001). It is perhaps surprising that the signatories still claimed the 1988 Agreement as the legal basis for this, but it is of no surprise that both the EA and SHL absolved themselves of failing to meet their responsibilities under the SW Agreement. Sadly, neither was willing to pay towards resolving this fiasco, which after all was of their own making, so they needed a source of funds to pay for both critical design features such as rock revetments as well as ongoing maintenance of the sea defences. As a result the idea of a trust was once again introduced even though the legal foundation for this, the SW Agreement had been discredited 3 years previously. This is when the Sovereign Harbour Trust (SHT) was set up. The only source of income for the Trust would now be the residents of Sovereign Harbour through what was known as the SW Charge. SHL, the house builders and the businesses, who all benefitted from the construction of Sovereign Harbour contribute nothing towards maintenance of its sea defences through the Trust. In addition the SH Beaches Sea Defence Deed introduced another charge known as the Marina Maintenance Charge that committed residents to subsidising the marina business (dredging the access channel, maintaining lock gates, paths, etc.). This had nothing to do with the 1988 Agreement, which was targeted at flood defence. The EA were party to the Sea Defences Deed and all the arrangements arising from it. They were allocated 3 of the 6 seats on the Board of Trustees of SHT.

So, a ‘happy ending’ to this mess. All arguments forgotten, and both players having avoided any responsibility for paying for the maintenance of coastal defences, the EA and SHL issue a joint press statement and residents, just residents, pick up the bill.

It was not Government policy in 1988 that coastal communities should be charged for coastal defence maintenance. Why were the commercial properties in the area at risk (many of them owned by Carillion) excluded?

The evidence suggests that the EA had a very strong defence to SHL’s challenge, why didn’t it fight the action?

The sea defences at Sovereign Harbour do not just protect the Harbour community who pay for them. They are an integral part of the flood defence scheme that protects and extensive flood plain that surrounds the Harbour. A failure anywhere along this length of coast would potentially affect over 10,000 homes and yet it is only the 3700 homes on the Harbour who are essentially taxed twice.

Why are property owners at Sovereign Harbour paying for flood defences that benefit a much wider area?

The workings of SHT have not been transparent to residents over the years and detailed accounts have not been forthcoming. Sovereign Harbour Residents Association (SHRA) have made applications to get a resident, or residents on the Board of Trustees, but this has been rejected on the basis that there is no obligation on SHT to make provision for a resident Board member. We have been told that the only obligations with respect to SHT are that Harbour residents have to pay an annual amount to cover sea defence and marina maintenance, and the SHT distribute those amounts to the EA and the marina company. For 5 years the EA declined to nominate representatives for their three allocated seats on the Board of Trustees, which had comprised only three trustees, who were all previous employees of Carillion. As a result SHRA suggested that the Agency nominate Harbour residents to fill their seats. They declined to do this, but clearly felt pressure to fill the seats and nominated three alternative trustees.

The grievance felt by residents increased in what felt like a concerted policy by SHL and the EA to not only commit residents unfairly to a pay twice for flood defences, but to then exclude them from the process which collected and utilised their contributions. The SHRA asked questions under the Freedom of Information legislation that gave them a better insight into what was considered a potentially unsafe legal background to the charges and formation of SHT. The marina was being managed by Sovereign Harbour Marinas Ltd. (owned by Carillion), but was then bought out by Premier Marinas. At about this point SHRA was offered an opportunity to have an observer attend Board meetings. They took this offer up, but then found the observer was being excluded from some meetings on the basis that discussions commercially sensitive to SHL and Premier Marinas were taking place. It should be borne in mind that we are talking about a Trust, not a commercial company, and SHRA’s concerns grew.

SHRA then made a formal complaint to the Charity Commission. Ironically it investigated, but would not uphold the complaint because SHT should never have been a charity and didn’t act as one. The fact that the Charity Commission had registered it as a charity was glossed over. An odd position to take, but SHRA felt its concerns had been vindicated. In parallel with this it later became apparent that SHT realised their position was untenable and to avoid criticism after having run for about 8 years, the Trust, the EA and Premier Marinas decided to form a Community Interest Company (CIC) using the same board members as the SHT, which was still to be kept on in name, now as a non charitable trust. With the change of ownership in the marina business the 3 Carillion nominees resigned, leaving just the EA nominees who have moved across to the CIC.  Subsequently, two additional trustee/directors were appointed, both employees of Premier Marinas.

Why, for 8 years, was the EA party to a trust that did not meet its charitable objectives and acted contrary to its M&A’s?

Guidance on the formation of CIC’s, not unreasonably anticipates that the community involved with the CIC will be consulted as part of its formation. No community consultation took place. The Trust/CIC has recently appointed a resident (Rick Runalls) to the board.  However, as the company has just six board members, four of whom are appointed by the EA and Premier Marinas, there is little opportunity to effect change.

Why is the EA still willingly participating with SHL and Premier Marinas in what is a legally questionable strategy to allow the companies who have responsibility for flood defence to avoid those responsibilities, whilst supporting a ‘second tax’ on residents?

The CIC’s sole function is to collect the rent charge, which is does through a company of Tunbridge Wells solicitors, a partner in which is also the secretary of the CIC and its legal advisor.  Since the formation of the CIC, administration charges have risen substantially, to about £160K pa. These costs are taken from the fixed part of the Rent Charge, resulting in a loss of income to the EA of £125K per year.  This issue has been raised with local EA officers, but no action has been taken to reduce the cost.  Enquiries by the SHRA have shown that the collection could be managed by Eastbourne Borough Council for about £5K.  It would seem that the EA has been content just to take whatever income the SHT passes on, without question.

Why, has the EA never robustly audited the SHT accounts or demanded that it should provide “value for money”.

Why, when give evidence that “value for money” was not being provided, has the EA done nothing to remedy the shortfall?