North East England

Developer sues over project


Apr 29 2008 by Sandy McKenzie, Evening Gazette

A TEESSIDE company which missed out on taking part in a massive regeneration project is suing for around £10m at the High Court.

Chilli Developments Ltd is suing the Commission for New Towns - known as the English Partnerships (EP) - and Tees Valley Regeneration (TVR), over the high profile Middlehaven regeneration project.

Barrister, Philip Noble, for Chilli, said the company was lined up to develop around five acres of Middlehaven in Middlesbrough, and signed two "lock out" - or exclusivity - deals with EP.

EP owns the site and is the national regeneration agency, while Middlehaven is a key regeneration scheme for TVR.

It is Mr Noble's case that EP invited tenders from another bidder, Quintain, during the lock out period - which ran from October 26, 2004 until April 21, 2005 - and entered into negotiations for the sale of the property Chilli wanted to redevelop.

He also alleges a senior member of staff at TVR spoke to potential Chilli funder Allied Irish Bank (AIB) "behind Chilli's back" during the period.

He says at a meeting on June 30, 2005, EP and TVR “undermined, insulted and ridiculed” Chilli in the presence of the Esh Group, who were also being asked by Chilli to plough money into the scheme.

Such behaviour amounted to “malice and bad faith”, claimed Mr Noble, who said a draft information pack prepared by TVR gave the impression that land already promised to Chilli was available for development.

Mr Noble also says the second lock out period was extended beyond April 2005 to July of that year, which EP and TVR says is wrong.

Tom Leech, for EP and TVR, denied they did anything wrong, describing the allegations as “thin” with “next to no evidence to support them”.

Mr Leech said the first allegation was based on the fact Quintain had included land assigned to Chilli in an April 2005 presentation for a large-scale residential and commercial property development.

But he insisted that was a mistake on the part of Quintain. EP and TVR had always made it clear that they had a “previous commitment” to Chilli.

The complaint regarding AIB, added the barrister, was “unpromising” as Chilli were aware both EP and TVR were talking to AIB and “made no complaint”.

The final allegation about the Esh Group, said Mr Leech, was similarly ill-founded. Esh Group director, Michael Hogan, was coming to court to give evidence for EP and TVR.

Chilli, set up by local company Chilli Media, was interested in developing a small area at Middlehaven.

Although, according to Mr Leech, it had “no track record” in such projects, EP and TVR were keen to favour a local developer.

Mr Leech said EP and TVR continued to negotiate with Chilli until July 2005, “when they called off the negotiations because Chilli had missed a number of deadlines without being able to put the necessary funding in place”.

Chilli's total claim is for £9,656,119.

The case, being heard by Mr Justice Jack, continues, and is due to last seven days.