Official Report: Minutes of Evidence

The Chairperson (Ms Boyle): Mr McCaughley, you are very welcome to today's evidence session. I apologise on behalf of the Committee for the delay in calling you; our first session over-ran.

Mr Colm McCaughley: No problem, Chair.

The Chairperson (Ms Boyle): May I open with a question to you, Mr McCaughley? The Committee believes that you are a very experienced public official who would be familiar with the required high standards of probity that should apply and be seen to apply to the actions of all public servants. Can you outline to the Committee what you believe to be a conflict of interest for a public servant?

Mr McCaughley: I suppose any actions that would give benefit to a third party, directly or indirectly, that would be contrary to the public good. That is the closest that I can get without thinking about it for a long time.

The Chairperson (Ms Boyle): That is your assessment. Thank you.

Mr Wells: I am sorry if I mispronounced your name; I have never come across that spelling before. You accept that you had a very clear conflict of interest when it came to your liaison with Barry Gilligan and Big Picture Developments.

Mr McCaughley: I accept that there was a potential conflict of interest, which I declared.

Mr Wells: Can you explain in detail what the relationship with Mr Gilligan was?

Mr McCaughley: My son was a financial consultant to one of Mr Gilligan's companies.

Mr Wells: Mr Gilligan, as you know, was brought in by one of the local community groups —

Mr Poots: Before you go on, Mr Wells, is that a potential conflict of interest or is it a conflict of interest? There is a considerable difference. We are told, in this Building, that a close family member — I assume that a son would be regarded as a close family member — makes it a conflict of interest, not a potential conflict of interest.

Mr McCaughley: It is only a conflict of interest as and when you exercise the conflict; that is what I am saying. The question "Was there a conflict of interest?" implies that a conflict actually arose. I am saying that, potentially, it did arise. If you wish, I will address the issue of whether it was an actual conflict.

Mr Wells: Absolutely. Somebody looking down from above on this would consider that there could be. A local community group asked Mr Gilligan to give advice on the Nelson Street site. Did you know Mr Gilligan before that?

Mr McCaughley: Oh yes; he was very well known in the city as a —

Mr Wells: But you personally.

Mr McCaughley: In a business sense, yes.

Mr Wells: Did you know him through your son?

Mr McCaughley: No.

Mr Wells: But you knew Mr Gilligan. So Mr Gilligan comes along and provides advice. He then, surprisingly, buys the site for £3·5 million. Having been brought in to give advice, he buys the site, which seems —

Mr McCaughley: I have no knowledge of that at all. I have no involvement in anything that Mr Gilligan did or did not do around Nelson Street, either his intention to purchase or why or when he purchased.

Mr Wells: Was your son involved in that purchase?

Mr McCaughley: As far as I can recall, no. I do not think that my son joined until way after that, in 2006 or 2007 —

Mr Wells: That would be very important because, presumably, you would have registered that interest and declared that your son was working for Mr Gilligan.

Mr McCaughley: Yes. I made a point of registering it. I think that it was around 2007 or 2008.

Mr Wells: Given that, would it not have been wise for you to have detached yourself totally from anything to do with the Nelson Street site?

Mr McCaughley: Everything in this issue has been lobbed against Nelson Street. To me, Nelson Street per se is irrelevant. For me, the issue was a planning policy that was blatantly illegal and which was getting in the way of us developing legislation in parity with the rest of the UK, which would have been to the betterment of the planning system.

Mr Wells: Do you not see that, even if you had had no direct contact with Mr Gilligan on the site, the public would have a perception that if your son was working for that company and you occupied a very senior position with the Housing Executive, which had a significant say in the zoning of that land, that you would be best to keep well out of it?

Mr McCaughley: I think that the test is the man in the street. On that basis, you are right: the man in the street would have said that there was a conflict.

Mr Wells: So why did you not, at that stage, detach yourself completely from the situation?

Mr McCaughley: I tried on a number of occasions to detach myself totally. The issue for me was a policy one. It was never site-specific. It was purely coincidental that the first contest of the policy was Gilligan's site. It could just as easily have been a contest about car parking on a site three doors away that was owned by the university.

Mr Wells: You actually wrote in an email:

Mr McCaughley: Yes.

Mr Wells: You must have realised that there was a problem there, but you did not stand aside.

Mr McCaughley: Yes.

Mr Wells: You ended up writing to staff in the executive asking them to reconsider:

You wrote that.

Mr McCaughley: Yes.

Mr Wells: That was a piece of ground that was owned by a developer whom your son works for, and you were trying to get the zoning changed.

Mr McCaughley: No. I was trying to deal with the zoning policy issue. That did not just affect Nelson Street.

Mr Wells: I accept that.

Mr McCaughley: One hundred sites were involved.

Mr Wells: Yes, and if you had kept to the other 99 we would not be having this discussion.

Mr McCaughley: If the other 99 had come first, we would not be having this conversation. You are absolutely right: if I had backed off, it could just have run its course over years. Four years later, we would have been where we ended up and the proper policy that should have been adopted would have been totally lost as well.

I agree: there were opportunities for me to stand aside. Indeed, staff kept asking me whether I should stand aside. I said that I should but that they needed to do something for me that I had raised with my directorate twice: to tell them that the policy was blatantly illegal and that we had to deal with it now and move on to a proper policy that I set out to the Northern Ireland Affairs Committee in 2002, which was parity with the UK or betterment.

Mr Wells: Mr Gilligan had bought a site that had approval for 66 social dwellings and paid £53,000 per site for it. Any reasonable person would realise that that was not a profitable enterprise; you just could not make money on that from social housing. That is reflected by the fact that he then submitted an application for 238 apartments, which is on a totally different planet.

Mr McCaughley: He did not know that it was socially zoned; it was double zoned.

Mr Wells: Does it not strike you as odd that he bought that land, which had permission for 66 social housing units, and the father of someone who works for him then started to put pressure on people in the Housing Executive to have the social housing zoning removed? Can you not see how people see that?

Mr McCaughley: Absolutely. If you want to see it that way, I can see that the man in the street would definitely see it that way. What I am saying is that, in the broader picture, the issue was not about that specific site; it was about 100 sites.

Does the Committee realise what, in effect, the policy says? It says that the state shall determine the purpose for which you will use your land, the state shall determine the third party to which you will sell it, and the state shall determine the financial limits within which it would be sold. I do not think that you need huge intelligence to work out that, as my colleagues in England, Scotland and Wales said to me when they laughed at it, you would never get that to fly.

Mr Wells: You could simply have maintained your position on the generality of the policy. However, you intervened to get a specific site in Nelson Street rezoned that would have facilitated a developer.

Mr McCaughley: I was nudging staff to see what was wrong, and I advised the directorate what was wrong in the hope that someone would do something about it.

By the way, it actually says somewhere in the report or elsewhere that I instructed staff to lift the objection. I did not instruct staff to lift any objection; I instructed staff to advise the Planning Service of the legal obstruction that arose from EU procurement law. That was known to every other region, but, somehow, whenever it came to us, a blind eye was turned to it. I anticipated that the Planning Service would simply say that there was a policy issue and that it must review the policy. Instead, what happened was that conflict of interest over-rode everything, all hell broke loose, I was in the dock, and the legal and planning issue was set to one side. It was not seen again until 2013 when a planning appeals commissioner asked, "Why are you here? Do you not understand the law from 2007?".

Mr Wells: The implications of what you were doing, as far as Mr Gilligan was concerned, could have taken it from a site with 66 social housing units, with very limited profitability, to a site with 238 apartments approved for private purchase. The financial implications for Mr Gilligan, had he got that approval, were staggering, and yet, behind the scenes, you were trying to engineer a change in the zoning because you argued for a more general policy. The impact on him would have been enormous.

Mr McCaughley: No, we could never have got the site for 66 units. It was illegal.

Mr Wells: But the Housing Executive board had approved it for 66 social houses.

Mr McCaughley: It does not matter what the Housing Executive board or anybody else approved. I was in charge of the north Belfast strategy; I was the one getting the funds to drive the strategy. The issue was legality: it could not have built the 66 social houses. I will tell you what could have happened, though: Mr Gilligan could have turned round with his planning application and said, "You've been engaging in vesting by stealth here. Now, I will force you to buy my land at full market value. Then you can stick your 66 houses on it". You could not get more expensive housing than that in the social sector.

Mr Wells: Had you not had a son working for Mr Gilligan, it could have been seen that you were trying to argue for the greater good. You could have argued for another site, where your son had no contact whatsoever. The difficulty is that, had you achieved the change in the policy that you were campaigning for, your son's employer was going to make many millions of pounds out of the site.

Mr McCaughley: Well, potentially. In truth, I have no problem with Gilligan building hundreds of apartments. We would have got reasonably priced affordable housing in my strategy and a load of private rented as well. It would actually have serviced the strategy much better than the 66 social units. Mind you, the local community would have gone crazy on us.

Mr Wells: Yes, because of the density issue. The corollary of that is that your son would have clearly benefited had his company prospered as a result of getting that huge development.

Mr McCaughley: Yes, but I keep going back to the fact that it was double zoned. When they bought it, they bought on the basis of its being an open development site and that they could seek planning permission as they thought fit.

Mr Wells: Did you ever, in the whole process, step back and think to yourself, "How could this be perceived by the public and the taxpayer"? No matter how well intentioned you thought you were, your son was involved. If you were going to campaign on this issue, you should not have campaigned on Nelson Street; you should have campaigned on somewhere where there was no family connection whatsoever.

Mr McCaughley: That is probably true. My intervention was totally justified, but you are probably right: if I had to do it over again, I would choose a different course where that ogre — conflict of interest — did not arise.

Mr Wells: Yes, but you continued to criticise the Housing Executive's position regarding Nelson Street knowing full well that, if you were successful, the one person who was definitely going to benefit was your son.

Mr McCaughley: And everybody else. One hundred other schemes were going to benefit, too; there were one hundred other landowners.

Mr Wells: But you seem to have shown an unhealthy zeal in pursuing the Nelson Street issue.

Mr McCaughley: Nelson Street was the first contestable case; it was the first that got to the Planning Appeals Commission. I really wish that it had not; I wish that it had been the university six doors away.

Mr Wells: Was there not a member of staff in your directorate to whom you could have explained your position and said, "Look, I'm getting totally off stage here. You pursue this issue, and I will move onto the other 99 sites and leave this"?

Mr McCaughley: I did. I raised it twice at the directorate. I told the directorate that it was illegal.

Mr Wells: No. What I am getting at is that, when you realised the clear conflict of interest, it would have been wiser of you to have totally detached yourself from that site and pursued what you believed was the social good at 99 other sites. You seemed to show particular interest in that one.

Mr McCaughley: As a matter of retrospection, you are right: it would have been much better just to back off.

Mr Wells: Can you not see how the public will look at this? At best, it is a question of you zealously following a policy that you believe to be unjust, which, coincidentally, might have benefited your son. At worst, it looks as if you became directly involved in an application where your son had a pecuniary interest as he worked for the company and the outcome could have been a frightening increase in the value of that site for Mr Gilligan.

Mr McCaughley: I totally agree. In light of this being written as it is, you are proved right.

Mr Wells: Having agreed that I have been proved right, do you now regret what you did? Do you not see how there is a perception that you are the villain of the piece in this?

Mr McCaughley: Yes. I really wish I had not engaged the other staff in it in the way I did because it cast a shadow over their involvement, which was grossly unfair and unjust. I should have found a secondary route. The awful thing is that, had I gone for another route, I would probably have got there faster than the route through Nelson Street. I should have found a faster way to effect the same change in policy but without the conflict of interest.

Mr Wells: I think that you are basically saying that the report has it right.

Mr McCaughley: No. The report implies that there was a deliberate conflict of interest that set out, I think, to benefit my son. It is nudging that way.

The Chairperson (Ms Boyle): Mr McCaughley, you said on several occasions that you mentioned the potential conflict of interest to senior officers in the Housing Executive. Was that just verbally, or do you have any written evidence?

Mr McCaughley: No. I deliberately did not write it.

The Chairperson (Ms Boyle): You deliberately did not write it.

Mr McCaughley: I deliberately did not write anything. When I said it, I warned them that I could not go any further with it because of the potential conflict of interest. I then withdrew.

The Chairperson (Ms Boyle): Who did you say that to?

Mr McCaughley: The whole directorate.

Mr McCaughley: The whole directorate. And what was their response?

Mr McCaughley: "No, we are not going to seek legal advice in case it undermines the policy".

Mr Poots: You indicated that there were two zonings, one was open zoning and one was for 66 units. You also indicated that 66 units was never a sustainable number to develop on the site in the first instance.

Mr McCaughley: It was sustainable but not deliverable.

Mr Poots: Not deliverable.

Mr McCaughley: Legally it could not be delivered.

Mr Poots: So who decided to sell it, and who decided to put forward 66 units in the first place? Was it the board of the Housing Executive?

Mr McCaughley: Yes. We would have looked at the site and consulted the locals. The locals obviously wanted low-density housing, which is fair enough.

Mr Poots: And who recommended that to the board of the Housing Executive?

Mr McCaughley: The directorate would have produced a paper along those lines.

Mr Poots: Which team?

Mr McCaughley: The corporate services team would have put forward the needs statements on the zonings.

Mr Poots: Why was the directorate putting forward a recommendation to the board of the Housing Executive to develop 66 low-density housing units in an area of substantial housing need and then afterwards, someone was able to put in a successful planning application for 238 units? Why were you putting in a recommendation to the board for a quarter of the units that would actually be developed on the site?

Mr McCaughley: That is a really good question. If you had asked officers, we would have preferred 140. However, we could not have got local support. There were about six other high-density sites in the north Belfast sector that we were pursuing. In discussions that I had with locals, they said to me "We are not taking any more. You have to come up with family housing here of sufficient quality and standard." I think that we said that that was fair enough and that was what we would do with the next few sites. In truth, however, had we got the 200, it would have satisfied a proportion of the housing need, equally if not more —

Mr Poots: Why was it sold to a private developer as opposed to not being developed by a housing association with the Housing Executive?

Mr McCaughley: Good question. That was the land owner's decision; it was not an NIHE decision. I cannot remember who the land owner was.

Mr Wells: Mr McCaughley, in April 2009 a housing and regeneration division official wrote to the executive's legal people asking about the reasonableness of the zoning policy. Do you know who that official was?

Mr McCaughley: I think that it was the assistant director.

Mr Wells: That having been done, Mr Gilligan's reaction, in September 2009, was to resubmit his application for 238 apartments. That strikes me as odd because that is a very expensive thing that he did, and he took a huge risk. Could he have known that, internally in the executive, there were people lobbying to get the zoning changed?

Mr McCaughley: No. There was nothing written or said in conversation either with my son or Mr Gilligan that went into any depth as regards what could or could not be done on that site or what was happening —

Mr Wells: Could your son have known that this was going on in the Housing Executive?

Mr McCaughley: No, he did not. He could have, but he did not. He did not know it from me.

Mr Wells: Yet six months after this correspondence, Mr Gilligan is so confident that he comes back with a very expensive application for 230 units, when all he had up to that point was for 66 social housing units, at £53,000 a site.

Mr McCaughley: No, he was never going to have 66. The only reason he bought the site, surely, was to produce very high-density housing.

Mr Wells: If it had been re-zoned to enable him to do that. If the Housing Executive had withdrawn its objection, then, of course he had every chance of getting 230 units.

Mr McCaughley: You say re-zoned, but you have to go back to what the Planning Service did. He was going in with planning consultants, saying, "You zoned this as an open development site, and here is my application." It would have been a contest between that and the Housing Executive saying, "We zoned it for social housing." Who knows who would have won in that contest? I was not interested in that contest.

Mr Wells: It is understandable that he put it in once; but to put it in immediately after the final correspondence with the Housing Executive and ask for the policy to be re-examined strikes me as extremely suspicious.

Mr McCaughley: I can honestly say that there is no correlation, to the best of my knowledge, between any of those things. Developers — they would not do it cost-free; you are absolutely right — do things for many reasons.

Mr Wells: Meanwhile, in the middle of all this is your son.

Mr McCaughley: I would not say in the middle — certainly, to the side.

Mr Wells: Without going into the specifics, was your son in the area at the time? Was he living in Belfast?

Mr McCaughley: No. My son lived in Dublin and then moved to Carlingford. He never lived in Belfast.

Mr Wells: But he had direct, daily links with Mr Gilligan and you.

Mr McCaughley: I do not know whether they would have been daily. I would not have assumed daily. I think that he had other businesses as well in which he was a financial consultant.

Mr Wells: The public, looking at that — 99 people out of 100 — would say, "That does not look right", even if it was squeaky clean. It looks extremely unhealthy. Where you made the fundamental mistake was that, as the plot thickened, you should have walked away from it completely and left it to somebody else.

Mr McCaughley: By God, I wish that I had at that stage.

Mr Beggs: I turn now to Victoria Place, the way leave. It is in Glenalpin Street, Belfast — case example 2 in the Audit Office report. First, I note that you declared an interest with regard to your son and Big Picture Developments. This case involved Ravella Properties Limited. I noticed that Barry Gilligan was also a director.

Mr McCaughley: I am not sure of the relationships.

Mr Beggs: I am told that he was on them all; I am told that he was also a director. Both companies operated from the same address. According to the report, at paragraph 2.3, part b:

Had you declared an interest with regard to Ravella Properties Limited?

Mr McCaughley: No, I had never heard of it. I declared an interest in respect of who my son said he was working with, which was Big Picture. That is what I put on the annual disclosure statement.

Mr Beggs: With hindsight, given that your son was involved in property development in Belfast, should you have had a clearer understanding of where he was assisting? You were involved in this case, and yet your son is listed in the report as assisting the company?

Mr McCaughley: I said this to the people who drafted the other report. There is a major difference between the Glenalpin Street case and the case that the member is talking about. At the end of the day, Shakespeare wrote a play about this: 'Much Ado About Nothing'. The way leave was granted by my staff — by the way, it had already been given by DRD. Of course, the legal people — at the time, everyone was paranoid about contracts — thought that to be sure to be sure we should get a licence. This was like any of the thousands of cases that we have dealt with by way of way leaves. To me, it was a nothing. Mind you, it does not appear like that in there. However, I can assure you that my view was and remains that this does not match up with the other cases at all.

Mr Beggs: It appears that you had a conflict of interest again. I notice that the transaction was completed before a valuation was obtained. Is that not a rather dangerous process, given that you do not know the valuation?

Mr McCaughley: That is not very well explained in the report. The process that was followed was this: nearly everything had a valuation because we had identified the land, had it valued, scheduled it and got it ready for disposal. During the year, however, way leaves, easements, rights of way and extinguishments all came forward. All valuations had a limited life, so it was really important that Land and Property Services had the momentum so that we did not get into a cycle of valuing and revaluing because it had run out of time. It would have been earmarked as awaiting valuation but put through a stream that did not require my approval. It was put through a nil-value stream and awaiting valuation. The staff were absolutely right: it had no value. I do not recall a way leave ever having value. Some easements have value, and maybe rights of way, but never a way leave. That proved to be the case. The process sometimes got ahead of the valuation.

Mr Beggs: However, if you make a sale — a transaction — before the valuation —

Mr McCaughley: You could not complete the sale without the valuation.

Mr Beggs: The report states that the transaction was completed before the valuation.

Mr McCaughley: I do not think that it was completed.

Mr Beggs: The report states that the transaction was completed before the valuation was obtained. As I understand it, it was a retrospective valuation.

Mr McCaughley: No, I am sorry. I thought that it had been approved through the system but not finalised. It was effectively signed off.

Mr Beggs: This is a case of permission to have a balcony over a pavement owned by the Housing Executive. You were a very senior officer — a director — in the Housing Executive. What made this a priority case for you when there was nothing of value to be gained by the Housing Executive?

Mr McCaughley: No, it was not a priority. I was told that it was stuck in the system somewhere. All I did was to ask the head of Land and Property Services to look into it. He looked into it and said that there was no issue, and it could be signed off. End of story. That was the totality of my involvement in the whole case: to refer it to the head of Land and Property Services, who signed it off.

Mr Flanagan: What prompted you to refer it?

Mr McCaughley: It was the note from my son saying, "Can you help me here? This is stuck in the system somewhere". I referred the note to the head of Land and Property Services, who got it sorted out.

Mr Beggs: There is, however, the potential conflict of interest. Would anybody else have been dealt with in the same fashion?

Mr McCaughley: Yes. Why not?

Mr Beggs: The perception could be that someone else may not be treated in the same fashion. It is about perception, which is why you have a register of interests and try to avoid acting in a way that could be understood as acting in some form of self-interest. Do you not understand that?

Mr McCaughley: OK. I will accept that.

Mr Flanagan: Roy, can I ask a very short question? If the person who raised the matter had not been your son and was someone you did not know at all, would you have done the same thing? Would you have passed it on to the head of LPS?

Mr McCaughley: I have dealt with thousands of people, from politicians to community representatives, who would have had contact with me on hundreds of different things, and I always tried to respond in a positive way.

Mr Flanagan: Would you have taken the same course of action regardless of who had raised the issue?

Mr McCaughley: If it was something that clearly could have led to a complaint, I would have raised it. If it was something that could not, I would have passed it on.

Mr Flanagan: I am trying to establish whether you were affording your son special treatment, just because he was your son.

Mr McCaughley: No.

Mr Wells: You said that there had been no contact between you and your son regarding Nelson Street, yet you are telling us that, so far as Victoria Place is concerned, he had written you a note and that you had responded.

Mr McCaughley: Yes.

Mr Wells: Again, the public would perceive that there could have been correspondence or phone calls between you and your son about the Nelson Street application.

Mr McCaughley: They could perceive that, but it was not the case.

Mr Wells: When you got this note from your son — this other development was worth a considerable amount of money — surely that should have alerted you to the fact that you should have got off side from that application as well the Nelson Street one.

Mr McCaughley: I took the attitude on this one that it was a nothing: it was a way leave. We dealt with thousands of way leaves.

Mr Wells: You could have handed that query to another member of staff to deal with.

Mr McCaughley: I did; I handed it to the head of Land and Property Services. He was my next officer in line to deal with those things, so I handed it to him.

Mr Wells: Very few people in this situation would have the access to you that your son had. You were a director at that stage.

Mr McCaughley: A Member of Parliament, a member of a community group and so on had access; everyone had free access.

Mr Wells: Had it been my relative, I would have handed it to somebody else to deal with. There will no doubt be other examples of conflicts of interest later on, but that conflict of interest was showing that you had simply misread how these conflict-of-interest issues are perceived.

Mr Beggs: I have a final point on this area. The report states that the land valuation was obtained five months after the disposal. You do not know what might turn up in land valuations. I see that no solicitor was involved in the transaction. Is that normal practice?

Mr McCaughley: Yes — totally normal. There was no reason to involve a solicitor. The report seems to think that a solicitor should have been involved, but I fail to see why. Everybody was pursuing all sorts of spurious tactics to get out of contracts throughout Northern Ireland at the time, but there was no reason to believe that this was anything other than a very normal way leave, in the same way as DRD had already given the way leave.

Mr Beggs: You say that it had no value. If the Housing Executive had been a private company, do you think that it would have passed it over at no cost? Getting this way leave had a huge financial implication for the other company, because the ownership of those properties and the contracts could have failed if they did not get the way leave. This decision was very important, and it was maybe even more important that it went through quickly. Is that a reasonable assessment?

Mr McCaughley: I do not know the answer to that. It would be totally circumstantial. Any time that we pursued way leaves from others, it has been at nil cost to us. It is hard to answer that.

Mr Beggs: I think that the evidence is that it was vital to this company at that time that it went through.

Case example 4 is on other land at Glenalpin Street. For the benefit of those who are not aware, that is off Great Victoria Street — just off the Golden Mile — in Belfast city centre. It is not in some remote area. The first paragraph on case example 4 states that the land was wanted for car parking and garden decking. Did you not think it strange that somebody wanted land in the middle of Belfast for garden decking?

Mr McCaughley: I did not even think about it, to be honest; it did not cross my mind. The issue here is what value was attached to it. For me, it was the value rather than the purpose. The staff were processing it on the basis of low to nil value. That is the way it was going through the system.

Mr Beggs: I dare say that, if somebody wants it for garden decking or car parking, it may not be perceived to be of significant value, but what would you pay for a car parking space in the middle of Belfast? What would you pay for the annual rental of a car parking space in the middle of Belfast?

Mr McCaughley: This was very small; there was not a huge amount of land involved.

Mr Beggs: This was a street.

Mr McCaughley: Yes, it was a street. What is that? Three metres?

Mr Beggs: I had a look at it. Would you get 10 cars parked on it? If cars parked on both sides, maybe 20?

Mr McCaughley: I honestly do not know.

Mr Beggs: How did you come to a nil value for a street?

Mr McCaughley: LPS agreed that it had no real development value.

Mr Beggs: Sorry, I have moved on to case example 4, which is not about the way leave. This is Glenalpin Street.

Mr McCaughley: In the report, LPS agrees that, in that state, it had no development value. It says, "Here's a fanciful scheme for you. If you were to abandon the road, you might get marriage value through adjacent lands. We will value them at £8 million". That was a totally different disposal strategy that took a totally different route — a route through the board.

Mr Beggs: However, a developer could take that route for the property that he might have acquired at nil value. Is that not correct? A developer could take that route. Is it not a reasonable way to protect the public asset?

Mr McCaughley: No, no, no. It would have been sold on the basis of what he had initially presented to us. LPS was now saying that we needed to discuss with the developer what his intentions would be if he bought a car park site. That was the key to it: the marriage value with the car park site. It was not the value for his existing development. One had aesthetic value. A car parking space might have been £1,000 or whatever, but it would certainly not have been £8 million. The other issue was: could we not marry this to the car park? Given the building lines around there, I do not know where the £8 million came from. However, it was not our job to contest the value, so we just got on with it. We told the developer, "If you want a deal here, LPS says that the starting price is £8 million". LPS said, "We would need to talk to Gilligan about the value of the abandoned road if he were to buy the car park". Meanwhile, we went ahead and did what LPS told us to do.

Mr Beggs: Yes, but can you see the public's concern? Here is a matter involving Barry Gilligan, and you have declared an interest. It was being valued to the Housing Executive at nil value when it obviously had some value. Land and Property Services came up with the issue that, if it were married to other lands, it could have a value of £8 million.

Mr McCaughley: It did not even need my authorisation, and neither did the way leave. I am being put behind the black ball on the basis that I was authorising these things. The report continually says that. It did not need my authorisation. It did need to go through my office and be presented to the committee, as all land issues had to. However, what I object to is the fact that the report says that I signed off on an £8 million sale. It is perverse in the way that it reads. I did not sign off on anything. I could not sign off on that. It goes on to say, at paragraph 2.28, that I failed to present it to the board. Since there was no agreement to purchase, would somebody kindly tell me what I was supposed to present to the board? What could I tell the board? There was no agreement to purchase this land, yet it says here that I failed to tell the board. Somebody here does not understand the process.

Mr Beggs: Why did you and the Housing Executive, in looking at how best to manage its asset and the system regeneration, not look at the potential of the land if it were linked with adjoining land? Why did you not look at that scenario: not at what value it would be to anybody but at what value it would be to some of the developers immediately adjacent?

Mr McCaughley: We referred it to LPS in order to get that sort of view. We do not scan every strip of land. We look for ransom strips wherever we can find them in our own land holdings, but you just deal with it as it arises. This arose, and LPS came up with an ingenious methodology that we followed. Of course, it is still sitting there empty today, unfortunately.

Mr Beggs: I will go back to the nil valuation. It could have been offloaded without anybody being made aware of it, if you had not followed the process of going through Land and Property Services.

Mr McCaughley: No. For those transactions, you needed to go through Land and Property Services. For normal extinguishments and so on, you did not have to but, for that, you did. It was a disposal as such and would have had to go through LPS, which, as you see, it did.

Mr Beggs: Do you accept that going through Land and Property Services provides a safeguard for the public?

Mr McCaughley: Oh my goodness, yes. That is why, in 2008, I got fed up with the idea of the process running ahead of the valuation. On the back of an internal audit report, we stopped it. However, we did not stop it because of this type of case. What was starting to happen was that values were changing so fast that cases were drifting beyond my authority into the committee's authority and drifting slightly beyond the committee's authority because of the timing. So we just locked it down and said that no more cases were to be allowed through the process until the valuation from LPS is sitting on the table. That slowed everything down, but that was the simple price that had to be paid to get the system into order.

Mr Beggs: Do you have any concern about the independent judgement of your staff that they valued that land at zero when Land and Property Services indicates £8 million. Had it been somewhere in between, I could have understood, but there is such a difference between zero and £8 million.

Mr McCaughley: There is, but it is sitting there empty today, and the £8 million has never been realised. I very much doubt whether it will ever be realised, but that is for another day.

Mr Beggs: Yes, but what is wrong with your staff that they did not see that the street had some value, and, at the very least, you could park a number of vehicles on it if you do not build a skyscraper on top of it?

Mr McCaughley: They probably saw that it had some value but that it was a very low value on the basis of what was proposed.

Mr Beggs: Yes, but what was proposed was garden decking. As we all know, what is frequently proposed is to give the appearance of something of not much worth, but fresh planning applications can come in. Were the staff naive not to have thought about what could happen to the land?

Mr McCaughley: They would and they would not, on the basis that they were relying on LPS to be the adjudicator on it at the end of the day. They should know, but are they obliged to know? No, but LPS is obliged to protect us in such circumstances.

Mr Beggs: Do you have any idea how many square metres the land in the middle of Belfast was?

Mr McCaughley: What size is the average road? Three metres?

Mr Poots: For a two-lane road, it is usually 6 metres to 6 and a half metres.

Mr McCaughley: I am not sure what it was. It was narrow.

Mr Beggs: Common sense would have told me that it was worth something. That is all that I am saying. I would have thought that your staff would have put some value on it.

Mr McCaughley: It depends on the building line, and the building around there is really tight. I would say that you would never have got £8 million for it, but I am not from LPS. I am just trying to express a view.

Mr Beggs: You had approved the sale prior to receiving a valuation, in contravention of Housing Executive policy. Is that not the case?

Mr McCaughley: It was being authorised through the system as nil low cost. It did not actually require my authorisation. It would have gone through my office, as would have all sales, to the committee.

Mr Beggs: So your staff misvalue property near the Golden Mile at nil when it clearly has some value. We are talking about a street that has a sizeable bit of space that could go under the radar and be sold off at nil value.

Mr McCaughley: It should not go under the radar because LPS should be asked for the valuation.

Mr Beggs: Yes, but the point is that it was approved for sale at nil value prior to receiving a valuation.

Mr McCaughley: It had been approved subject to or awaiting valuation.

The Chairperson (Ms Boyle): I will let Conor in.

Mr Murphy: I am interested in exploring the relationship with LPS a bit further. You said that it seems to be the case that your office was prepared to take action without valuation having come through at that stage or to embark on a course of action. You also said that you did not do anything without LPS. Its advice is sacrosanct. May I take you back to Millmount House? LPS issued advice that Millmount House and lands should be sold as a single package, and you, according to the evidence that we heard in the first session, countermanded that advice by saying that that would confuse the sale. On what basis did you come to that conclusion?

Mr McCaughley: I did not do that personally; it was a committee decision.

Mr Murphy: No, but the people who gave evidence before you came in — I am not sure whether it was the DSD official, Mr Hamilton, or —

The Chairperson (Ms Boyle): Mr Bailie.

Mr Murphy: — from the Housing Executive — named you and said that you issued a note saying that to follow LPS's advice would confuse the sale and that your view — I am interesting to know where your view came from — was then accepted ahead of LPS's advice. You have given evidence to us that LPS ultimately made the call on disposals. Where did you form the opinion that to follow LPS's direction to sell the land as an entire package confused the potential of selling it?

Mr McCaughley: It would have been done in discussion with Land and Property Services staff at the time. Around that time, we were having serious problems with Millmount House and with that segment of the Millmount lands. There was a listed building that was subject to serious vandalism, and we had to secure the site at high cost and dispose of the SPED house. It was a balancing act at the time.

Mr Murphy: LPS issued advice to the Housing Executive that, in its view, having looked at the property — I accept that it was bought under SPED and that there were issues in securing the house, which I think cost something like £76,000 a year — the best way to approach a resale, rather than simply going through the SPED process of buying and reselling the same property, was to sell the entire package, which included the property and 156 acres. You countermanded that view. On what basis did you do that? Was that you own professional opinion, or did you seek other professional advice to lead you to the conclusion that LPS's approach was incorrect?

Mr McCaughley: That is a good question. I do not honestly recall who the discussions were with, but LPS's view was based on a judgement around a land sale. We had to impose another angle or view — you would probably call it a housing management angle — which was that a SPED house and its lands were a serious problem for us and that the best thing to do with that serious problem was to remove it.

Mr Murphy: LPS was taking a global view. The SPED house and its property was a small portion of the site. LPS was taking a global view that the best return for money for a public body such as yours, which is publicly funded, would come from selling the entire land package together.

Mr McCaughley: I do not honestly recall who the discussions were with, but they were detailed discussions. It would have been presented —

Mr Murphy: Do you accept that it was your advice that made the committee decide to go with the sale of the house and small parts of land around it?

Mr McCaughley: It would have been my recommendation because I, effectively, was head of land and property.

Mr Murphy: That countermanded, disagreed with or contradicted the advice from LPS.

Mr McCaughley: Disagreed with, yes.

Mr Murphy: So LPS's advice was not ultimately accepted in every circumstance.

Mr McCaughley: This was beyond a simple land disposal. It was an issue of a SPED house.

Mr Murphy: Yes, it was, but LPS recognised that it was not just the issue of a SPED house but the issue of the entire package of land and the value that could be got for the entire plot other than the land and a couple of acres.

Mr McCaughley: Our preference, without the Millmount House issue, would have been a package disposal and to follow LPS's advice. The issue around the house became paramount, and we acted accordingly.

Mr Murphy: It was paramount to those who bought it as well. You also say that you spent your time looking for ransom strips.

Mr McCaughley: Part of our land terrier was to go through all the portfolio of deeds and systematically assess all our land holdings that were undeveloped. We continually watched out for bits that may appear of nominal value but, in fact, because of the location, have high value. Staff were becoming quite knowledgeable in what to watch out for. There were loads of locations where we identified bits and pieces that could —

Mr Murphy: How did you manage to give away a ransom strip in this case?

Mr McCaughley: With ease.

Mr Murphy: Not only did you not identify it but you gave it away. You sold it.

Mr McCaughley: A ransom strip means that whatever you did impacted on the price.

Mr Murphy: You had a ransom strip that you managed to hand over as part of a sale.

Mr McCaughley: It did not impact on the price.

Mr Murphy: It may not have impacted on the price of that property —

Mr McCaughley: But —

Mr Murphy: Sorry, just let me finish. LPS had advised you that the best outcome for the Housing Executive was to sell the entire package. You disregarded its advice and went with your advice. The board, the committee or whoever was taking the decision sold that with a ransom strip that may not have materially affected the money that you got for that property but that was going to materially affect your ability to sell the rest of the property.

Mr McCaughley: It did not.

Mr Murphy: The person who then bought that ended up having the right to sell it all. That person bought it for £36 million and flipped it within 10 months for £96 million.

Mr Poots: May I come in on that one?

Mr McCaughley: That is totally unrelated to the ransom strip.

Mr Poots: Madam Chair —

Mr Murphy: Sorry, Edwin, I will just finish. How did the property increase by over £1 million a week in the space of 10 months?

Mr McCaughley: Because crazy people entered the arena and paid crazy prices. If you want proof of that, I can tell you that I had meetings with the top bidder — they were not with the person who eventually bought it but with the top bidder — who came in to see whether we could find a way around that.

Mr Murphy: Is this the top bidder for Millmount House?

Mr McCaughley: No, for the lands. Be aware that, before that, we had invested a quarter of a million pounds in planning consultancy fees to make damn sure that this was well and truly done. In my 30-plus years, there was no more preparation done on any site in Northern Ireland than on Millmount lands, I assure you. We tied down a planning brief, the likes of which has never been written here, including everything on the planning agreement, who pays for the school, who pays for the traffic lights, who pays for the community centre, who pays for the hedges, for goodness' sake, and so on and so forth.

He put in that bid unencumbered — totally unencumbered. We got the best price we could for that land at exactly the right point in time. What crazy people did later with it was up to those crazy people. They all paid the price for it, because they all went to the wall. But we could not write in clauses or pay up premiums up front for something that crazy people were going to do, because we had tied down the whole planning issue as best anybody could.

If you want to discuss with the top bidder whether that is true or untrue, by all means, you can dig it out and he will confirm that, as will the second, third and fourth bidder. They were all bidding unencumbered. Only afterwards did the issue about the right of way, etc, come to the fore, and everybody just bit their lips.

Mr Murphy: Why was it not recognised as an issue before the sale?

Mr McCaughley: I have no idea — no idea.

Mr Murphy: But your people were looking out for ransom strips.

Mr McCaughley: No, I am talking about the sale. It came to light only after the sale of the adjoining lands — only then. I am talking about the bidders not taking that into account when bidding. We then got the very best price. When you think about it, at £36 million, you will find that we were getting premium plus for that sale. No land had gone at that price in the history of Northern Ireland. I thought we had killed it with Annadale three years earlier with the highest-price sale, but this just blew it out of the water.

Then some crazy guy comes along 18 months later —

Mr Murphy: With £60 million to spare.

Mr McCaughley: With £60 million to spare and decides, "This market's on the up." They paid the price for it; they went to the wall shortly afterwards.

Mr Poots: A quarter of a million pounds an acre would not have been crazy money in 2010. You are saying that you got the highest market price.

Mr McCaughley: At the time, yes.

Mr Poots: There was plenty of land making a quarter of a million pounds an acre before 2010. You talked about the highest bidder. Did the highest bidder not withdraw after his bank intervened because of the ransom strip issue?

Mr McCaughley: Yes, he withdrew.

Mr Poots: So, you did not get the highest price because the highest bidder withdrew.

Mr McCaughley: Yes, but then the other guy came in with a bid above that. We got £36 million-plus, which was even higher than the top bidder.

Mr Poots: Originally, Patton was the highest bidder.

Mr McCaughley: Correct. As I said, I had two meetings with him, and the answer was, "We couldn't". He had put in top dollar for a fairly high-density scheme. He knew exactly what he wanted to do. He saw no encumbrances whatsoever, and nor did any of the others, so —

Mr Poots: But he could not proceed with it —

Mr McCaughley: He could not proceed, which is —

Mr Poots: — because the land had that ransom strip.

Mr McCaughley: Yes, and to come back to the starting point, that is correct: it should have been picked up. That is a matter of deep regret to me because of what it did to the top bidder, who was in there. He was a very honest, well-known developer who would have done a good job. We would have got top dollar off him, but he was pushed out because of the —

Mr Murphy: With hindsight, should LPS's original advice have been followed?

Mr McCaughley: With hindsight, yes, it would have been a better outcome in getting that developer in there at a reasonable, good price, and he would have gone on to develop the land.

Mr Murphy: You seem to have a fairly dismissive view of LPS at times. At other stages, you say that LPS's advice was almost sacrosanct. Was it the case that you always followed its advice? Was this the only instance when you disregarded LPS's advice?

Mr McCaughley: It was certainly the one that I think of, but it is a question that I have never asked myself until you asked it. I really do not know of an honest answer, other than to say that, to the best of my knowledge, I do not think that we ever really overruled LPS. It would have to be something like a housing management issue. We were lumbered with a listed house. It was going to get destroyed eventually; mind you, with hindsight, it might have been better to let it get destroyed. It was that secondary, non-LPS issue that swung it, but, with hindsight, yes, it could have been sold as a package.

Mr Murphy: LPS saw the big picture, and you did not.

Mr McCaughley: Perhaps.

Mr Beggs: Glenalpin Street is case example 4 in the report. It was a proposed off-market sale, so it was a private sale that was not on the market. The sale to Mr Gilligan was approved by you in October 2007. The internal assessment was that the sale was deemed to be nil cost. Literally across the road, where the footpath was, the transaction was not only approved but completed before there was a valuation by LPS. In this case, you sought a valuation from LPS. I notice in the Audit Office report that, in April 2008, in response to an internal audit recommendation — this was not something that you or somebody else decided — the Housing Executive required valuations to be obtained prior to seeking approval for disposal. Do you accept that it was the internal audit that brought about that change, rather than you?

Mr McCaughley: No. It was a combination, because it identified cases and I identified cases. There were two cases that had been authorised at £99,000, and they drifted in price. There were some individual cases involved, and we had no problem agreeing with internal audit.

Mr Beggs: The request for valuation on the way leave went to the LPS late. One transaction was completed, but this one was not completed and was in danger of being completed. If it had followed the other process, it could have been completed before it went to LPS. Why were there two different processes?

Mr McCaughley: I have no idea why. I still struggle with the idea that the other way leave had been completed before the receipt of the valuation. If that actually happened, that was wrong. It should not have been completed. It could have been authorised without completion, subject to the valuation. It should not have been completed prior to the receipt of the valuation.

Mr Beggs: The Audit Office report, to which nobody has presented any evidence to the contrary to contest, says that the Housing Executive received the valuation from Land and Property Services:

That is for the other way leave.

Mr McCaughley: I must admit that I read that as coming after the authorisation, but you may be right.

Mr Flanagan: I want to take you back to paragraph 2.28, which mentions that there was no board approval for the sale of the property. You asserted that whoever wrote the report does not understand the process. I do not think that colleagues in the Audit Office would accept that. I do not understand the process, so perhaps you can talk me through how you would have gone through the stages of getting board approval. Would getting board approval for the sale or disposal of a piece of land of this nature have been the last piece of the jigsaw you would have been involved in, or would getting board approval have happened early in the process?

Mr McCaughley: The last piece.

Mr Flanagan: It is the very last piece. Is that always the case?

Mr McCaughley: I do not know whether it always is, but it is the rule. There is no point in going to the board to say, "We might be able to strike a deal with someone at a price we are not too sure about". The board would laugh at such a paper being put in front of it.

The issue is that LPS would have had the opportunity to go ahead and negotiate, and then we would have had to decide whether it was OK to proceed to the board. The board would then have to decide whether it was OK to sell it.

Mr Flanagan: You are saying that it is quite normal that proposed transactions of that nature would not ever reach the board.

Mr McCaughley: All transactions above the value set out in the delegated limit should go to the board. By the way, you would not have been able to sell that land just at the £8 million if Gilligan had agreed something unless he was the contiguous land developer. Otherwise, I would have put it on the open market. If they were saying to me, "No, it is the marriage value; he does not own the land", the answer is that it is the owner of the land who would be paying £8 million. He would have needed to have bought the land and then come to us and said, "I want this as contiguous development. Will you sell it to me at x pounds agreed with LPS?" We would have gone to the board, which may or may not have approved it. The key issue here is not Gilligan's request, but ownership of the adjacent land.

Mr Flanagan: Have you any idea what his intention for the land was?

Mr McCaughley: No. It was specified as decking and car parking.

Mr Flanagan: And do you find that credible?

Mr McCaughley: Absolutely.

The Chairperson (Ms Boyle): To go back to an earlier point, Mr McCaughley, did you say in your opening speech that you did not advise lifting the planning objection?

Mr McCaughley: Yes.

The Chairperson (Ms Boyle): I refer you to page 32 of the report and to paragraph 4. It states that you emailed the Belfast area office raising the objection in September 2008.

Mr McCaughley: What I told my planning officer was that they should make sure that Planning Service was aware that, under EU procurement laws, NIHE/housing associations would not be able to contract for social housing on this site, insofar as the developer would not be permitted to provide it. Planning Service took that as meaning, "They want to remove the planning objection". I wanted it to be, "That means that no social zoning can be put into effect". So, as I said —

The Chairperson (Ms Boyle): Did you put your concerns on this zoning in writing also?

Mr McCaughley: To?

The Chairperson (Ms Boyle): To planning or officials?

Mr McCaughley: No one did, except my officer. No one. Despite me raising it on various occasions, no one told Planning Service until my officer told it on my instruction.

Mr Dallat: Colm, you are coming across as somebody who has been hard done by.

Mr McCaughley: I do not feel bitter about it, you know, but —

Mr Dallat: No, I am sure not. In the introduction from the officials at the very beginning of the session, several hours ago, their hands were up. Lots of mistakes had been made. But I have been sitting here, listening to you for a long time now. You made no mistakes; you were right.

Mr McCaughley: No, I have acknowledged that —

Mr Wells: To be fair, he said on the conflict of interest point that —

Mr McCaughley: I said that Millmount could have been handled better.

Mr Dallat: Yes, there was the conflict of interest. Your son just was not somebody who did the odd wee job for Barry Gilligan, who is the director of Big Picture Developments. He was also heavily involved with another property company called Ravella Properties Limited, which is Barry Gilligan's as well. So, the impression I got was, "This was some chap based in Dublin who comes up North the odd time to do the odd wee job". He was very much in the middle of this whole thing. I just wonder about this. You got this letter — I was trying to get in earlier — and you wrote in response. I am just trying to visualise what the wording of it. Was it, "Dear Daddy. I need a good turn done"? Was this not all highly irregular?

Mr McCaughley: It depends what way one phrases it. I mean, with hindsight, I acknowledge that there were conflicts of interest.

Mr Dallat: Do you also acknowledge that land was not advertised on the open market and that there was use of undocumented, unapproved policy, known as enabling, to justify dealing with developers?

Mr McCaughley: No, I will not accept that.

Mr Dallat: So, you are actually dismissing the report as wrong. The report was signed off by the Department. It is approved.

Mr McCaughley: I have provided evidence to the auditors twice.

Mr Dallat: Do you also dispute that there was a failure to obtain valuations for land being disposed of prior to sale where, for instance, outdated valuations were used? Do you deny that? Were there breaches of delegated approval limits for land disposals? Was there a lack of business cases to justify disposal decisions? Was there poor planning and contract management? Was misleading or limited information presented to the board? Is that all wrong?

Mr McCaughley: I have provided views on every single one of those, most of which I contest to either a small or a great degree.

Mr Dallat: But you were in a very senior position within the Housing Executive. You were very influential, and it seems rather strange that we are in this situation now, where you are in complete denial that any of that is right, apart from the conflict of interest, which I thought you did a good job of trying to minimise.

Mr McCaughley: I have made my views known on all those points. You mentioned the point about enabling. I am a graduate in history. I have never seen history rewritten like that report rewrites enabling. Ask anybody who is an expert in the UK what the three biggest policies ever introduced in housing are. After house sales and care in the community is enabling. It has been written out of history here. It actually says that it was never documented. In 1996 a government Department in Northern Ireland issued a report that states:

Clearly, government policy was undocumented in this case.

Mr Dallat: I have nothing more to say.

Mr Flanagan: Colm, I take it that you do not accept the findings of the report.

Mr McCaughley: I accept the findings but with heavy qualifications.

Mr Dallat: You just dismissed them when I asked the same question.

Mr McCaughley: I dismissed that one, because there is plenty of evidence to the contrary.

Mr Dallat: The document we are discussing, Colm, is this one.

Mr McCaughley: This document contradicts what is in that report.

Mr Flanagan: How does it? Is that a Housing Executive document?

Mr McCaughley: It is a DOE document.

Mr Flanagan: I think the report talks about a Housing Executive policy, not a government policy.

Mr McCaughley: The report is wrong. I provided this evidence. I told them where to look. I told them every board paper to look in.

Mr Dallat: This is a highly irregular situation that we are in now.

Mr Kieran Donnelly (Northern Ireland Audit Office): The report is not wrong, Chair. The board of the Housing Executive actually explicitly asked for a policy to be drawn up on enabling. That did not happen. It came out very clearly in the previous session.

There are also points being made about valuations and all that stuff. It is very clear that what we were worried about was delegation limits being circumvented. Mr McCaughley had a delegation limit of £50,000. If something was done for nil value, it did not have to go to the board. Let us say we had a nil value or an £8 million value; if it was £70,000 it had to go to the board. So, there was an issue of the board being unsighted on things and a danger that the delegation rules were being circumvented. I am very clear on that.

Mr Flanagan: I want to discuss the enabling concept or policy in the round. You are telling us that there was an enabling policy in the Housing Executive.

Mr McCaughley: Absolutely. There was an enabling policy throughout the whole of the United Kingdom. Indeed, the Audit Commission wrote a report on the strategic role of housing authorities. Is it not amazing that, only last week, the Prime Minister talked about enabling local authorities to increase private sector provision? This was the best known policy in the UK. It moved us away from being a housing provider to facilitating and enabling not just private sector development but voluntary sector and community sector.

Mr Flanagan: Colm, will I take you to paragraph 2.12 of the report. It says that in February 2007 you presented a paper and that the outcome was that:

Prior to that, was there a written policy?

Mr McCaughley: There was not. On the back of that government policy, papers were presented to the board. I am not going to spend the rest of my life doing FOIs with the Housing Executive. I gave them some clues, like the Belfast housing strategy of 1996. All the sector studies carried out in Belfast relate to the exercise of the enabling policy.

The Chairperson (Ms Boyle): Could I have the name of that document, Mr McCaughley, so that we can get a copy?

Mr McCaughley: 'Building on Success'. It is from the Department of the Environment in 1996.

The Chairperson (Ms Boyle): Thank you.

Mr Flanagan: In February 2007, the board requested a formal written enabling policy. To the best of your knowledge, was such a policy ever brought to the board?

Mr McCaughley: I think what happened was that shortly afterwards the market collapsed and enabling therefore virtually collapsed with it. We shifted our attention elsewhere. I think that is what basically happened. We got preoccupied with the market crash. There was no market to enable.

Mr Flanagan: We have been told by the Department and the current chief executive of the Housing Executive that there was no formal enabling policy in the Housing Executive. That is what they advised us just before you came in. How are we expected to square that circle?

Mr McCaughley: I honestly do not know. I really do not know. I can tell you this: I was party to writing a book on the future of housing in the United Kingdom a few years ago, and I made special mention of enabling and the contribution that it made in the context of Belfast. I feel like going back now and doing an addendum to say, "No, enabling has been airbrushed out of history; it never existed." But who am I to contest that there are people now in the Housing Executive who say, "No, it never happened"?

Mr Flanagan: If there was a written enabling policy in the Housing Executive, why did the board agree in February 2007 that one needed to be put in place?

Mr McCaughley: Because we needed to restate it. It was 11 years old.

Mr Flanagan: The phrase the Audit Office used in the report is:

To me that indicates that no policy existed.

Mr McCaughley: It was 11 years old; that is all I can say. We thought it fit to restate what had already been done back in 1996 with the Department on exercising a whole range of powers.

Mr Flanagan: Michaela, if anybody else wants to ask any questions on enabling, I can come back to something else.

The Chairperson (Ms Boyle): Roy is looking to come in.

Mr Beggs: Just very briefly, the board wanted a formal policy to be developed and adopted. There needed to be one developed. I am still trying to understand why it was not developed.

Mr McCaughley: As far as I am concerned, it existed.

Mr Beggs: No, the board agreed that a formal policy would be developed. Whose job was it to develop the formal written policy?

Mr McCaughley: It would have been housing and regeneration's job. I think it was more about the processes than the policy per se.

Mr Beggs: The board directed that it wanted the formal written policy. You were the director of housing and regeneration. It would have been your responsibility to draft something and take it back to the board. Why was that not done?

Mr McCaughley: I think that something did go to the board at the time, but we did not finalise all the policies and procedures, because, as I said, the market crashed.

Mr Beggs: That is not what the board asked. The board asked for the policy to be defined formally and presented back to it so that it could formally adopt it. It did not say, "Do it when there is a market boom". What I am reading is that there was a request to you, with your responsibility, to develop a formal policy that ultimately could be followed, avoiding difficulties. I am still trying to understand why one was not developed and taken back to the board.

Mr McCaughley: I do not know whether I can answer the question why precisely it did not go back in a detailed form to the board and why it was never fully prepared, addressed and sent back. I really do not know the answer to that.

Mr Beggs: Had you greater flexibility when there was not anything written down?

Mr McCaughley: It was a very open policy as well. It was called an exercise in innovation and imagination, to some extent, by some people, although the auditors once said to us, "We do not do innovation and imagination. Just make sure it is within the rules".

Mr Dallat: Who was in charge? Who was running the Housing Executive when you were at all this stuff? Who controlled you?

Mr McCaughley: The chair. The whole enabling thing went away back from 1996 onwards.

Mr Dallat: I just wondered, that is all.

Mr Flanagan: The chief executive tells us that there is still no formal enabling policy within the Housing Executive. Is he wrong?

Mr McCaughley: I have absolutely no idea, though I suspect if I read his annual report, I would see the word "enabling" maybe 50 times. I do not know. I do not read it any more, to be honest with you.

Mr Flanagan: Can I take you back to one point? This is not an issue that we have raised with you yet, but I think it is something that the Audit Office raised. It is to do with the three Assembly questions (AQs) about Nelson Street that were altered. You told the Audit Office that you were aware of the initial draft response, which was prepared by another division and sent to you but that you had no knowledge of the amended response and it was not approved by you. I have no problem accepting that, but I wonder whether you have any insight into why the answer was altered.

Mr McCaughley: No, I do not; I really do not. I think the real problem with the AQ was that it did not go through all the channels that it should have. It should have gone through not only my division but the corporate services division to get cleared, because it sent me a draft of what it thought was the answer. I handed it on to my staff, and they finalised it and brought it to the chief executive. They should have brought it back through the corporate services division. I think that is where the problem arose, but I cannot answer your question, as I was not party to the response after the initial draft.

Mr Flanagan: Was it human error, or was it an act of deceit, do you think?

Mr McCaughley: I would not put an act of deceit against any of my staff; I really would not. I could not see a reason why that would be the case.

Mr Murphy: Just as a matter of interest, what have you been doing since you left the Housing Executive?

Mr McCaughley: I have been holidaying, mostly.

Mr Murphy: Are you completely retired? Do you have any other sources of income?

Mr McCaughley: No, none.

Mr Murphy: Have you done any consultancy work?

Mr McCaughley: Absolutely, yes. I did consultancy work for a political party. Other than that, nothing.

Mr Murphy: Would you care to share, no? [Laughter.]

Mr Wells: It is not us.

Mr McCaughley: Other than that, no. That was years ago now. I have done nothing in the last three years.

Mr Dallat: Colm, I want to ask you a question that I put to other people. Given the proud record of the Housing Executive, do you not think it is an absolute crying shame that this happened?

Mr McCaughley: God, I wish it had not happened. I am so proud of the Housing Executive. I agree with you on that. Could the Housing Executive have survived better and be in a better position without this? Absolutely, yes. The current officers have my apologies, if that helps, for any part that I played in it, but at the same time I have to defend what I believed in and what I thought was the right thing to do at the time.

The Chairperson (Ms Boyle): OK, members. There are no other questions to Mr McCaughley. Kieran, do you want to say anything more at this juncture?

Mr Donnelly: No.

The Chairperson (Ms Boyle): Thank you, Mr McCaughley, for attending today. I again apologise for the delay in having you before us. If there are any outstanding issues from today's deliberations, we may write to you for a response in due course for further information. Thank you for coming today.