Jim McColl looks at court action against Scottish Government over ferry fiasco

Jim McColl, the former owner of Ferguson Marine Engineering Ltd (FMEL), who says key ministers including the First Minister have not yet been properly held to account for Scotland's lifeline ferry building debacle, says he wants a judge to force an end to what he sees as an ongoing cover up.

Mr McColl, once a supporter of the Scottish Government's policy of independence for Scotland, but who now says he now has no political leanings said: "My view is you would not expect to see what happened in any other democratic western economy."

READ MORE: State-run 'ferry fiasco' Ferguson Marine shipyard firm makes £100m loss in four months

A member of of the First Minister's Council of Economic Advisers, he has questioned the legality of the actions of ministers who oversaw the waiving of £25m of taxpayers money to allow a controversial nationalisation of his financially troubled Ferguson Marine.

The 69-year-old engineering tycoon says the £25m lost through the foregoing of the ferry completion insurance as part of a secretly negotiated deal which formed the pathway to a state takeover should have gone towards completing the ferries. Behind the scenes the insurance - which meant an insurance company had a hold over FMEL's assets - was seen as a stumbling block over ministers' bid to nationalise his company.

At the centre of the debacle is MV Glen Sannox and Hull 802 which are still languishing in now state-owned Ferguson Marine's shipyard, with costs of their construction more than doubling from the original £97m contract.

Ferguson Marine's financial collapse in August, 2019 resulted in state takeover, while the delivery of the ferries which were due online in the first half of 2018 will be between four and five years late.

The ferries contract was plagued by design changes, delays and disputes over cost, with the yard’s management and Caledonian Maritime Assets Ltd (CMAL),  the Scottish Government-controlled taxpayer-funded company which owns and procures ferries for state-owned CalMac, and Mr McColl  blaming each other.

The Scottish Government is still owed over £40m from the collapse of FMEL having used £7.5m of what they were owed through loans to buy the business.

But Mr McColl, the founder and chief executive of private equity investment firm Clyde Blowers, says that the waiving of the £25m meant that the ministers' purchase of the business has effectively cost the taxpayer £32m.

READ MORE: Revealed: Execs extended working life of Scotland's beleaguered ferry fleet by 15 years in 'ruse'

The 'lost' £25m related to a bond from HCCI, a subsidiary of Texas-based insurance firm Tokio Marine which ensured that should FMEL enter into administration, meaning it was unable to deliver the two ferries, CMAL would receive the money to enable completion of the vessels.

But to cover themselves against a payout, HCCI had a security over the assets of FMEL, owners of the last civilian shipyard on the Clyde.

But HCCI's insurance against any potential payout ranked ahead of ministers as creditors if FMEL fell into administration - and stood in the way of nationalisation.

If FMEL became insolvent, there would have to be a payout of the performance bonds, and it would be HCCI, not the Scottish Government that would have control.

Documents show that talks took place between ministers and HCCI before FMEL fell into insolvency following concerns that the security would cause issues for any state takeover.

Two weeks before FMEL went into administration, directors thought ministers were still trying to pursue what they called 'the solvent solution' involving keeping it entact as a private business - while behind the scenes ministers were preparing to do a deal over a takeover.

Mr McColl, who rescued Ferguson from receivership in September, 2014, told the Herald on Sunday that those actions prevented any third party buyer coming in to buy FMEL - including himself.

He said: "CMAL had the bonds. They were there because when there was an administration, they can call on those. They could have had £25m. But they were obviously working with the government not to call those bonds.

"Any independent company that was buying a ship and there was a bond there they would have called on it in that situation.

"That would have meant HCCI would have control of the yard. The administrator would have sold the yard, or looked for buyers, and whatever money they got would have gone to HCCI, to recover the money.

"That is what should have happened.

"But you saw that [finance secretary] Derek MacKay was grandstanding saying that he was nationalising the yard before it had even formally gone through the process of administration. And that was then stopping anyone else bidding for it, including us perhaps in partnership with someone else. "They blocked any other commercial solution.

"The problem they had was if a third party buyer came in and bought it, they would be negotiating with CMAL on the price to finish those ferries. And CMAL would have had to pay for it. And that is who should be paying for it.

READ MORE: And the 'farce' goes on - Anger over more CalMac chaos as two island ferries are hit by 'issues

"The whole thing smells and what has been done is immoral. We have to find a legal approach to this and we are looking."

The executive would like to see a judge-led inquiry raised by MSPs but accepts that he may have to look at a judicial review through the Scottish courts.

"You would end up with the proper story if people had to give evidence under oath, and a judge insisted that documents were released, then I think you would see a very different picture here.

"It may be that you should have a judicial review.

"I think we would have to push for it. But what we are trying to do is get as much information about this as we can."

A damning report from MSPs in a Holyrood committee inquiry called for "root and branch" reform of the system for procuring ships for Scotland's publicly-owned ferry network.

But Mr McColl and his management team have been critical of MSPs for failing to call to account the First Minister and other senior players in the debacle including finance secretary Derek Mackay and Liz Ditchburn, the director general for the economy.

"I hope that MSPs shouldn't allow something that has a very bad smell about it to be allowed to hang about.

"Parliament, if they are doing their job properly should be getting to the bottom of this."

The Herald revealed that ministers had ensured there was a "right to buy" the shipyard when it provided a £30m loan four years ago knowing it was creating a path to nationalisation of Mr McColl's company.

While finance secretary Derek Mackay was telling the public in June, 2018 that the £30m loan was “to further diversify their business", internal documents revealed the real reason was that Ferguson was in financial trouble and at risk of falling into administration.

The former management team said in a new report: "The nationalisation of Ferguson Marine by the Scottish Government has been an unmitigated disaster.

"The evidence here and the evidence unfolding elsewhere strongly suggests that elements of the government’s actions and behaviour leading up to the nationalisation of the Ferguson Marine Shipyard were highly irregular and demand further investigation.

"Indeed, it is not clear that the government nationalisation of the yard was entirely legal."

Mr McColl said he was "extremely disappointed" with the First Minister and that there had been a failure to get an independent expert to mediate in what was a growing row between his firm and CMAL over the costs of the project He says the First Minister was made aware of the "serious issues" Ferguson was experiencing with CMAL in May 2017.

At a meeting in the Scottish Parliament on June 5, 2018, a direct appeal was made to the finance secretary to intervene and instruct CMAL to participate in an expert witness process to resolve the critical situation with the contract for the two ferries.

"Had either of them taken decisive action then to insist on a resolution between both parties, there is every likelihood that the Glen Sannox would now be sailing and ship 802 would be significantly closer to completion," according to the former FMEL management group.

Transport Scotland video celebrating an 'important milestone' in the creation of the two ferries - four-and-a-half years ago.

"The Government should have insisted on independent mediation, an independent expert or arbitration process. Ferguson were crying out for this action, to allow them to complete the vessels, grow the workforce, and ensure a very prosperous long-term future for the yard and the local Inverclyde community."

The Scottish Government has so far refused to divulge the full extent of the deal they did with HCCI.

In August, then islands minister Paul Wheelhouse told a parliamentary inquiry that the government would have far rather have seen it as a private business and that the state takeover was in the public interest.

A Scottish Government spokesman said: “The Scottish Government stands firm on its commitment to the vessels, the workforce and the yard. The delivery of the vessels is critical to supporting the lifeline ferry network by adding two new badly needed vessels to the CalMac fleet.

“The Rural Economy and Connectivity Committee has completed a detailed scrutiny of these issues and Ministers have considered and responded to the committee’s finding. Ministers remain committed to transparency and have cooperated at every stage of the parliamentary inquiry. We have proactively published large volumes of information on our website and evidence was provided to the inquiry as and when requested.

"As with every parliamentary inquiry, it is entirely up to Scottish Parliamentary committees who they choose to give evidence. The Scottish Government had no role in this whatsoever"

Timeline

March, 1903: Ferguson Shipbuilders lease the Newark Shipyard in Port Glasgow for £500 a year and secures its first order for two steam tugs.

August, 2014: Ferguson goes into receivership with the loss of up to 77 jobs.

September, 2014: Clyde Blowers Capital, an industrial company owned by tycoon Jim McColl, purchases the yard for £600,000 and renamed it Ferguson Marine Engineering Ltd (FMEL).

August 2015: Government-owned Caledonian Maritime Assets announced that an order for two ferries for publicly owned CalMac capable of operating on either marine diesel oil or liquefied natural gas, had been won by Ferguson.

August, 2019: The directors of FMEL gave notice that the company would be put into administration after a failure to resolove a dispute over increased costs and delays to the construction of the ferries.

December, 2019: The government takes over ownership of the shipyard, writing off about £50 million of previous loans.

January, 2020: A Scottish Parliament inquiry is told that the large ferries MV Glen Sannox and Hull 802 were "significantly less than half built".