Judgment

Judgment of the Tribunal on the Appellant’s application for review, under section 70(1) of the Subsidy Control Act 2022 (the “Act”), of the Respondent’s decision to grant alleged subsidies, as defined in section 2(1) of the Act, comprising: (i) a loan in the sum of £70.8 million to Trinity Developments (Manchester) Limited (“Trinity”), and (ii) a loan in the sum of £69.2 million to New Jackson (Contour) Investments Limited (“Contour” or “Jackson”) (together, the “2024 Renaker Loans”). The Appellant argued that the loans would not have been granted by a commercial operator and that the loans have been concluded on non-market terms and have distorted the proper and fair operation of the relevant market in and around Manchester.

Trinity and Jackson (together, “Renaker”) are each private limited companies and special purpose corporate vehicles. Trinity is engaged in the development of four high-rise residential tower blocks on two parcels of land known as “Trinity Islands” located by The River Irwell and Trinity Way. Jackson is engaged in a development of two high-rise residential tower blocks known as “Contour” in the Great Jackson Street area.

The loans were made under the Greater Manchester Housing Investment Loans Fund (“GMHILF”) by the Greater Manchester Combined Authority (“GMCA”), that is the mayoral combined authority in Greater Manchester and the Respondent to these proceedings. The GMCA is made up of representatives from the ten Greater Manchester councils and the Greater Manchester Mayor. It carries out various statutory functions, including relating to economic redevelopment and regeneration in Greater Manchester. 

The issues that fell to be determined by the Tribunal were as follows:

- Had a subsidy decision been made by the Respondent within the meaning of section 70 of the Act? If so, when was the decision taken? (Issue (1)).

- Would the 2024 Renaker Loans have been approved by a commercial market operator and did the rates of interest and other charges applied reflect the market rate? (Issue (2)).

- In relation to the appeal, had the Respondent breached its duty of candour and, if so, in what respects and what are the consequences? (Issue (3)).

In relation to Issue 1, the Tribunal explained that, in determining the key issue in the case as to whether or not the 2024 Renaker Loans amount to financial assistance which confers an economic advantage, the Tribunal will not simply look at the terms of the decision of the GMCA Committee on 22 March 2024 to approve the loans: the Tribunal will need to consider the whole process including the various stages leading up to that decision as well as the due diligence and final terms of the 2024 Renaker Loans; it will also consider the internal records on the setting of the interest and other terms. 

As regards Issue 2, the Tribunal held that the process followed by the Respondent in reaching the subsidy decision and thereafter entering into the 2024 Renaker Loans was perfectly rational and not inherently defective.  It provided for decisions to be made in the light of input and consideration by officers experienced in making lending decision and recommendations, as well as those on the various panels and committees. 

The Respondent (like any commercial lender) would regard the 2024 Renaker Loans as relatively low risk where there was only a minimal risk of loss even in the event of a default. There were a number of risks inherent in such lending: the special purpose vehicles going out of business, lower than expected sales, increased costs beyond budget.  However, even if such risks materialised, the structure of the 2024 Renaker Loans, including covenants and security, and the low loan to value meant that in the event of a default it was most probable that the Respondent would recover the full amount of the loans plus interest. The Tribunal found that the GMCA was entitled to consider that in entering into the 2024 Renaker Loans they were on terms that other lenders would enter into in terms of rates.

Finally, as regards Issue 3, the Tribunal concluded that the Respondent had discharged its duty of candour before the Tribunal. The Tribunal annexed to its judgment a table submitted by the parties in relation to the specific paragraphs of Ms Blakey’s first and fifth witness statements challenged by the Appellant (Ms Blakey is the Director of Strategic Finance & Investment of GMCA with operational responsibility for the GMHILF).  The Tribunal considered each of the criticisms and the GMCA’s response but was satisfied that there was no breach of the duty of candour.