Leeds council pursues property developer for £2m after procurement challenge fails

20 October 2013

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21 October 2013 | Gurjit Degun

The High Court has granted Leeds City Council permission to chase the former chairman of a property developer for legal costs after a failed procurement challenge.

In February the local authority won a court battle in which Montpellier Estates had alleged the council had broken rules, breached an implied contract and had deceived the company to keep it in a procurement competition.

The case relates to a procurement process to find land and a developer to build an arena in Leeds. Justice Michael Supperstone ordered Montpellier chairman Jan Fletcher to pay interim costs before 14 November, pending a final decision on the total due. This was after the judge allowed an application from the council at the High Court in Leeds to make Fletcher responsible for the costs of the case.

The council’s application was based on an earlier personal undertaking from Fletcher to cover the costs, should Montpellier be unable to do so. According to the authority, Fletcher gave the written undertaking to them in July 2012, guaranteeing payment in the event of Montpellier losing the case and not being able to pay.

This was more than three months before Montpellier’s claim for damages over not winning the contract to develop the Leeds arena was heard at the High Court. When the company lost the case, it failed to pay £2 million interim costs awarded to Leeds City Council.

A Leeds City Council spokeswoman said: “As we have stressed previously, we gave Montpellier Estates and Ms Fletcher every opportunity to meet the interim costs, including agreeing to extend the legal deadline for payment.

“This has left us with no choice but to take this action and we would be failing in our duty to the council tax payers of Leeds if we did not actively pursue these very large costs.”

Procurement law expert David Hansom, partner at Veale Wasbrough Vizards, said it was “relatively unusual” for someone to give a personal undertaking as Fletcher had done.

“If bidders do bring vexatious claims then it has always been open to authorities to seek to recover their costs if the challenge is unsuccessful,” he told SM. “I think few do and the costs are often lower than they are here.

“I don’t think the outcome of this case will put people off future challenges -it is a personal guarantee given by Jan Fletcher that I don’t think a lot of directors would give.

“If you look at a volume of case law coming in, we are seeing a 5 per cent year-on-year increase in reported High Court cases on procurement. That trend is going up anyway, so I don’t think this case will deter that.”

Paul Henty, partner at law firm Speechly Bircham, said that the case was a “stark reminder” for claimants to make sure that they gave full consideration to funding issues before taking legal action. “To avoid a potentially ruinous costs award, parties may wish to consider alternative funding arrangements,” he added.

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