Southwark stands accused

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Two former nightclub owners blame Southwark council for forcing them out of business. Now the Fraud Squad is investigating.

southwark Council's planning department is at the centre of a Fraud Squad investigation over planning permission it granted for a Fairview Homes residential development in the borough.

Police have been called in following the publication in February of a damning auditor's report, which accused the council of 'serious deficiencies in the planning processes' and brought to light allegations of wrongdoing and corruption among council officials. Southwark Council has since suspended two planning officers and launched an internal inquiry.

A Metropolitan Police spokeswoman told Property Week: 'The report highlighted allegations that Southwark council officials and members have failed to deal properly with planning applications and that the alleged wrongdoing indicated that there may have been corruption, although there was no corroborative evidence.

'Fraud Squad officers are currently Investigating these allegations. The inquiry will focus on this application and the conduct of the local authority officials involved.'

Regeneration shadow

The investigation comes amid claims by Raymond Stevenson, a former nightclub owner, that he was forced out of business when in October 2001 Southwark granted Fairview New Homes (Camberwell) Ltd planning permission for its development at 295-297 Camberwell New Road, next to the Imperial Gardens nightclub, which is at 299.

He alleges the council did not fulfil its legal obligation to consult him before giving Fairview the go-ahead, and that the council is corrupt and its regeneration policy racist. Lawyers for Stevenson and his associates could sue for damages totalling £1m.

The affair threatens to cast a shadow over Southwark's regeneration projects, such as the £1bn scheme at the Elephant & Castle, after the auditor said his criticisms applied 'across the planning service as a whole'.

Stevenson and business partner, Lucia Hinton, ran Imperial Gardens from railway arches in a run-down part of Camberwell, south London, from 1995. They used money raised from club nights to run a record label, dance and theatre workshops.

Their club attracted bands such as Big Brovaz, the R'n'B act which had four top 10 hits last year, and in its heyday employed up to 70 people. But last October, Imperial Gardens closed down and the owners blame Southwark's planning department.

Two years ago signs were erected outside the club announcing the development by Fairview Homes of 57 flats just 3 metres away. Stevenson and Hinton were not consulted by local planners and attempts to contact the planning department received a slow response.

When the planners did reply, the owners claim, permission for the development had been granted and the club lost the opportunity to try to block the development by seeking a judicial review.

Cancelled bookings

Stevenson and Hinton say that club night promoters were put off by the signs for Fairview's development and began cancelling bookings they had made months in advance. Stevenson says this forced Imperial Gardens into liquidation in 2003.

Among Stevenson's grievances is that Imperial Gardens' application for permanent planning permission took four years to process and was only granted after a conflicting permission was given to Fairview, which applied on 14 May 2001 and was granted planning permission just six months later. Fairview managing director, Stephen Casey, declined to comment.

Stevenson enlisted the support of Harriet Harman, the local MP, who called on the council to launch an independent inquiry into the matter. The district auditor subsequently issued its report that confirmed the council had failed to consult Imperial Gardens about the development and presented a series of damaging findings.

It describes reports prepared by officers for the planning committee as 'inaccurate, inadequate and incomplete'. It dismisses evidence given by Mark Dennett, acting manager of the west area planning team, who claimed to have been unaware of the club's existence at the time the Fairview application was processed, as 'wholly unreliable'.

Fraud squad officers are currently investigating these allegations

Metropolitan Police

Stevenson claims there are racist and corrupt motives behind the planning department's behaviour and says that efforts to regenerate the area have forced out black businesses to make way for facilities likely to be of more benefit to whites. He has complained to the Commission for Racial Equality.

The district auditor's report does not support these claims, but warns that 'weaknesses in processes and procedures, combined with poor record-keeping, mean that members and officers are not in a position to rebut conclusively allegations of corrupt and improper practices'. Dennett and Andrew Cook, Southwark's development and building control manager, have been suspended while the internal inquiry takes place.

Nick Stanton, the council leader, said the police were brought in following the district auditor's report to clear up suspicions hanging over the planning department.

He added that the independent scrutiny committee would be checking the activities of the planning department. 'We're aiming to show very publicly how we're tightening up the procedures the district auditor criticised us for,' he said.

Many of Southwark's own councillors, however, are deeply troubled by the episode. Jonathan Hunt of the Liberal Democrats became vice-chairman of the planning committee after the Fairview decision and joined Harman in demanding an independent inquiry. Hunt said he believed a 'serious miscarriage of justice' had taken place and that Stevenson and Hinton should be compensated.

Stevenson and Hinton, however, are still a long way from any compensation. One obstacle is a second report, this time from the Local Government Ombudsman, also issued in February, which says that while it is true that the club's owners were denied the chance to oppose the residential development, permission is likely to have been granted in any case.

The ombudsman also rejects their claims that the council's actions are directly responsible for Imperial Gardens' financial losses and suggests compensation of just £500 each to Stevenson and Hinton.

Stevenson dismisses the ombudsman's report as a 'whitewash', but Stanton says he accepts its findings and challenges Stevenson to prove otherwise. 'There is still no indication from Mr Stevenson as to what the legal basis of his claim is,' says Stanton. 'I think he is going to have difficulty [bringing a legal case against the council].'

Rent dispute

In a further twist to the saga, the nightclub's former landlord, Railtrack – now Network Rail – is taking legal action against the club for rent arrears of £108,000.

On 20 April, Network Rail won the legal right to sell the house of one the club's directors, Michael Taylor, to recover the money it is owed. Stevenson says the club did not pay this money because it was in dispute with Railtrack over the security of its tenure.

Hunt believes the club could have paid off its debts to its landlord had permission not been granted for a residential development in such close proximity.

Stevenson's lawyer, Webster Dixon, says that over the next few months it is likely to issue a substantial claim for damages against the council.

Michael Webster, co-founder of Webster Dixon, dismisses the key finding of the ombudsman's report and says the club could have stopped the development if it had been consulted.

'As a result of the council's actions, one of the lease guarantors is facing ruinous consequences and the other two claimants have lost their livelihood,' he says.

What the district auditor said

  • ‘Serious deficiencies in the planning processes and procedures of the council … have not been satisfactorily explained’
  •  ‘Poor processes and procedures’ leave the council open to litigation, compensation payments and reduced public confidence
  • Evidence from senior planner Mark Dennett was ‘wholly unreliable’ while development and building control manager Andrew Cook ‘displayed very poor managerial skills and judgement’
  • Consultation over the Fairview residential department was ‘fundamentally flawed’
  • Imperial Gardens’ application for permanent planning permission was delayed for four years

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