Auditors have cleared Thanet Council of acting unlawfully over a secret deal with the ferry company Transeuropa.

The company, which operated a passenger service out of Ramsgate port, collapsed last year.

It then emerged that the council had agreed to defer berthing fees paid by the operator while it sought new investors in the port.

At the time it went into administration, Thanet council was owed £3.4m – money it has had to write off.

The council’s actions were the subject of a series of complaints to its auditors, among them from the Green councillor Ian Driver.

A report into the affair did not uphold most of the complaints against the council, notably the claim it had acted unlawfully by agreeing the secret deal.

But auditors said the council should have been more open with councillors about what was going on and criticised the lack of record-keeping.

They also said the council should have taken outside legal advice

The report published last week said the council had not agreed to waive debts but deferred the timescale – which it described as an important distinction.

“Deferring the timescale for the repayment of debt is often used by both public and private sector bodies as a means of increasing the chances of repayment...in our view this was a reasonable approach for the council to take,” it said.

‘Key decision’

But the council was rapped for failing to keep a better record of discussions and told to improve its communications with members.

“Given the sensitivity of the issue, we would have expected a better record to be kept of these decisions.”

The report also says the deal amounted to a “key decision” because of the potential impact on the area and should have been reported to the council’s backbench watchdog committee.

At the same time, it accepted the council’s argument that had it gone public with details of the matter, it could have jeopardised the company’s future through negative publicity.

Cllr Driver, who blew the whistle on the secret Transeuropa debt said the report vindicated his view that the council was “grossly incompetent” and the deal was wrong.

“This secret gamble with taxpayers’ money should never have happened,” he said.

A spokesman for Thanet Council said: “The report in question remains confidential under Section 49 of the Audit Commission Act 1998 and therefore it would be inappropriate for the council to comment on a confidential document that appears to have been leaked in contravention of this legislation.

“The district auditor will present his report to the Governance and Audit Committee on March 20, and this document will be publicly available at that time.”