It will now be down to the courts to find a resolution to a five-year legal row that has left Scarborough Council unable to sign off its accounts and facing a potential bill running into the millions.
The council’s annual accounts since 2015 have been held up as the authority is locked in a legal battle with a group of residents over how it classifies income and expenditure from Whitby Harbour.
Councillors today met socially distanced at Scarborough Spa for an Extraordinary Council Meeting where they voted to proceed to court to finalise what, if any income, it may have to divert back to the harbour.
The move follows a ruling from the authority’s auditors Mazars, which after five years has concluded that only a court can make a final determination on the issue.
The challenge has come from the Fight4Whitby pressure group which launched legal action in 2016 citing the 1905 Whitby Urban District Council Act, which stated that income from Whitby harbour must be ring-fenced for use within the harbour.
The group maintains that more income has been taken out of the harbour by the council than has been spent on it and hopes that the courts could direct the authority to reallocate funds exclusively for use in the area.
At today’s meeting the councillors voted to begin legal proceedings. The council’s motion originally referenced four car parks by name as land in dispute but this was amended to ask the court to make a determination on all harbour land.
The motion was proposed by Conservative Cllr David Chance, the last person to sign off the authority’s accounts in 2015 when he was chairman of the Audit Committee.
Cllr Chance told the meeting:
“I contend that by accepting the recommendation [as written] leaves this and any future council open to possible future legal challenge on the extent of harbour lands.”
He explained the reasons for his amendment at today's meeting.
The motion was carried and approved.
A report prepared for councillors ahead of the meeting warned that the potential outcome of the legal challenge could see up to £4.36 million have to be directed back into the harbour.
The report adds:
“Clearly this is one of many possible outcomes and the council will robustly defend its treatment of the income that has been received in line with its legal advice.
“Members should note however that the position is uncertain and the court’s decision could be very unfavourable to the council.
“Conversely the court may determine that the council has acted reasonably and determine that the current treatment is lawful and appropriate. Over the illustrative six year period, the maximum income that the court could determine has not been allocated correctly would be £4.36 million with the minimum being nil.”
However, the report goes on to say that if the courts decide to go back further than the six years in dispute the risk to the council could be “significantly higher”. Money could have to be diverted from other projects to make-up any shortfall.
The initial cost of the legal action for the council is estimated at between £50,000 and £100,000.
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