Wednesday, 6 February 2013

Judge dismisses arena court case claims against Leeds City Council

Mr Justice Supperstone has now issued his ruling in the following case:

A High Court judge has rejected all claims against Leeds City Council over allegations of deceit and procurement breaches over the ending of the development competition to build Leeds Arena.

Mr Justice Supperstone today handed down a ruling dismissing entirely claims for more than £43.5 million in damages for alleged deceit and flawed procurement under European regulations brought by Montpellier Estates Ltd (MEL) against Leeds City Council (LCC).

He also rejected allegations of fraud and dishonesty against eight named individuals connected to LCC, including senior officers, a former council leader* and professional consultants.

In a hearing in London’s High Court lasting nine weeks towards the end of 2012 18 LCC witnesses were cross-examined over the allegations which have now been dismissed in their entirety under today’s judgment.

The judge, whose ruling can be read in full here High Court decision Montpellier Estates Ltd and Leeds City Council said that the council was perfectly entitled to bring the competitive tendering exercise to a close when other bids were found not to be good value for money and then to develop the arena itself.

He added that the authority acted both in good faith and lawfully and commented: “MEL were, in my view, provided with proper reasons to abandon the competition,”.

All of the individuals facing allegations of deceit were found not to have acted dishonestly.

Leeds City Council chief executive Tom Riordan welcomed the ruling and commented:“This is absolute vindication of the honesty and integrity of Leeds City Council, its members, officers and professional consultants. Our processes have been held up to the most intense scrutiny possible over two months in the High Court. Our witnesses were subject to long hours of evidence-giving and rigorous cross-examination and many thousands of documents and statements were dissected in the finest detail.

“Cancelling the competition to develop the arena and progress with the scheme at Clay Pit Lane was always a difficult decision to take, but was a correct one given the state of the economic crisis in November 2008. There was certainly never any deceit involved.

“This court case has proved beyond any doubt that Leeds City Council has the highest standard of integrity and its operations are conducted openly, honestly and with robust, fully-accountable procedures. We are a principled public authority which has strong values of trust and transparency running through what we do.

"The nature of this claim has caused a great deal of stress and anxiety for all of the council's witnesses. I would like to thank them for their dignified and professional approach, especially the project team, who have continued to ensure that the arena is still being built on time and budget despite the massive distractions caused by this case."

Councillor Keith Wakefield, leader of Leeds City Council, said:“I share all the chief executive’s sentiments and am delighted that after lengthy, exhaustive investigations one of the country’s most senior judges has decided that the council has acted entirely properly and with total integrity.

“It has cost the people of Leeds dearly at a time of unprecedented enormous cuts to our budgets to have to defend this entirely unnecessary action. We will be pursuing the recovery of our legal costs of more than £4m on their behalf. This would always be the appropriate course of action when public money is involved but it would be particularly irresponsible not to on the eve of this year’s annual budget.

“The council has been incredibly prudent in achieving massive reductions of £145m in its spending over the past two years due to government cuts while still protecting frontline services and this year we have to save a further £54.9m. This will impact massively on everything we do.

“However, while we contend with these unprecedented financial pressures we continue to do the very best we can to bring Leeds through the economic downturn and drive it towards thriving in the future. We are very much looking forward to getting on with opening the city’s incredible new arena.”

Leeds Arena is close to construction completion and will be handed over to operators SMG for their fit-out at the end of March before a star-studded opening fortnight in September, launched by Elton John on September 4.

Notes to editors:*Councillor Andrew Carter, former co-leader of Leeds City Council and executive member for development during the arena’s procurement, was one of the people subject to direct allegations of fraud and dishonesty by MEL. Those allegations were withdrawn by MEL’s counsel during the trial.
Cllr Carter is currently leader of the opposition for Leeds City Council and a full statement with his reaction to the outcome of the case is available from Rob Clayton at Robert.clayton@leeds.gov.uk or by calling (0113) 247 4549.

Case summary:The deceit case
MEL alleged that they were deceived into entering and remaining in the competition to develop Leeds Arena. It was claimed that Leeds City Council made false representations to MEL to keep them in the competition, even though they were intent on building the arena themselves and in addition used MEL as a "stalking horse". Leeds City Council strenuously denied the allegations and maintained that it considered proposals to build the arena at its eventual site at Clay Pit Lane as a public sector comparator to test whether the private sector bids provided value for money and as a potential fall-back if not. In its defence LCC maintained that it advised MEL during the summer of 2008 that it would build the arena itself if value for money proposals were not forthcoming. It was only after considering the bidders’ best commercial proposals in September 2008 that the council exercised its right to cancel the competition.
In a hearing in London’s High Court lasting nine weeks towards the end of 2012, eighteen LCC witnesses were cross examined over the allegations of fraud which have now been completely rejected in today’s judgment.
The judge accepted that the council was perfectly entitled to bring the competitive tendering exercise to a close and then to develop the arena itself when other bids were found not to be good value for money.
He added that the authority acted both in good faith and lawfully and commented: “MEL were, in my view, provided with proper reasons to abandon the competition,”.
All of the individuals facing allegations of deceit were found not to have acted dishonestly.

The procurement case:In the procurement case MEL made a series of allegations including that the council developed its own scheme as a rival bid, that it "gerrymandered" the assessment of the private sector proposals to favour its own development and that the council's scoring contained "manifest errors". In his judgement, Mr Justice Supperstone found that the council's evidence of how it assessed MEL's proposals was "never seriously challenged" and again all such claims were rejected.
At a time of cuts in public expenditure, defending the claims made against it has cost Leeds City Council more than £4m. To meet its disclosure obligations alone the council had to forensically search seven terabytes of data across its entire computer network- equivalent to physically searching 14,000 filing cabinets- which identified some 200,000 potential documents for search, of which 40,000 had to be disclosed.

Legal note:To succeed in a claim for deceit, a claimant must show that the defendant made a false representation, knowing it to be untrue, or being reckless as to whether it is true; the defendant intends that the claimant should act in reliance on the representation; and the claimant does in fact rely upon the same and suffer a loss as a consequence.

The regulations relevant to the procurement claim are the Public Contracts Regulations 2006. The legal framework of the statutory duties imposed by the regulations is set out at paragraphs 405 to 411 of the judgement.

Legal team:Leeds City Council was represented by Jon Hainey of Cobbetts LLP with Counsel Mark Cawson QC and David Mohyuddin of Exchange Chambers and Rhodri Williams QC of Henderson Chambers.




For media enquiries please contact:
Donna Cox, Leeds City Council press office (0113) 224 3335
email: donna.cox@leeds.gov.uk

ENDS

LCC v Montpellier Estates Ltd

Please be advised that the statement regarding the court case above will be issued around 11.30am after we were advised that the Judge's ruling has been delayed until then.