Council accused of deceit

Posted: 5th October 2012

Leeds City Council is being accused of deceit in relation to the award of a contract to develop the Leeds Arena following a competitive tendering exercise. Montpellier Estates Limited (MEL) claims that it was used as a ‘stalking horse’ and deceived into bidding for the £70 million contract at a time when the council had already decided to carry out the project itself on land that it partially owned. The council vehemently denies the accusations and is defending its reputation at the High Court in London.

flatsThe dispute revolves around a 2007 procurement tendering process in which MEL put forward its 10-acre ‘City One’ site, in Holbeck, Leeds, as a potential location for the arena. MEL entered the competition in August 2007 and had already prepared and put in its bid when, in November 2008, the council terminated the process and instead decided to build the venue on a site off Claypit Lane, on the outskirts of the city, which it owned along with Leeds Metropolitan University.

MEL is now claiming around £30 million in damages from the council, accusing it of deceit, fraudulent misrepresentation and breaching its duties under public contract tendering regulations. The company argues that the procurement exercise was ‘a sham’ and that, from not later than October 2007, the council planned to develop the arena itself on the Claypit Lane site.

The company claims that, from March 2007 until April 2008, the council induced it to participate in the procurement exercise by fraudulent misrepresentations. It argues that, whilst ostensibly conducting the procurement competition in accordance with the rules, the council was ‘working up its own plan’.

MEL alleges that, had it not taken part in the procurement competition, it would have sold its land at the top of the market rather than being left with it after the property bubble burst. The company says its land-holding was worth £38 million in May 2007, but may now be worth as little as £9.25 million.

The company is also claiming back the millions it spent on professional fees and other costs whilst preparing its failed bid and almost £2 million in corporation tax it says it would have saved had its land been sold in 2007.

The council denies all MEL’s claims. It maintains that its only interest in developing the arena was as a fall-back if the procurement exercise failed. As property prices collapsed during 2008, the council says that it became apparent that there was a real risk that the bids which had come forward might either not be 'value for money' or not be viable. It maintains that it was only at that stage that it began considering undertaking the development itself on the Claypit Lane site.