Leeds issues winding-up proceedings against developer following procurement dispute

The Royal Bank of Scotland has appointed receivers over the building portfolio of developer Montpellier Estates following the issue of a winding up petition by Leeds City Council.

The council issued the petition to recover the costs owed by the company resulting from Montpellier's unsuccessful claim against council earlier in the year. In April, the High Court awarded Leeds City Council £2m in interim costs after its successful defence of a claim that it had breached procurement rules over plans to build the Leeds Arena.

In February, Mr Justice Supperstone ruled against Montpellier’s £43.5m claim that the council had “deceived” the developer over its plans for the arena and other alleged procurement breaches when the local authority ended a competition to build the Leeds Arena and chose to develop a separate site it owned instead. Montpellier, which had taken part in the original competition, claimed to have received assurances from the council that it did not intend to build the arena itself.

In a statement, the company's financial adviser BTG said that it was “surprised” at the council's action when Montpellier was still in discussions with the council about meeting the costs order.

Mark Fry, partner at BTG said: “Following the presentation of a winding up petition by Leeds City Council, the bank, who are the company's largest creditor, has appointed LPA Receivers to protect its position.  It's an unfortunate outcome. Montpellier was in discussion with both the bank and the Council in relation to a financial restructuring which aimed at paying the Council in full, the costs ultimately awarded.

“The presentation by LCC of a winding up petition brought an end to these discussions and left the bank with little option. It is not expected that there will be any return to unsecured creditors which includes the Council.”

He added:  “Mel had appealed against the Court judgment, but had agreed to 'stay' that whilst in settlement discussions with the council. By issuing a winding up order the Council have ensured the company cannot now appeal or get the justice they still believe is due.”

When awarding Leeds £2m in interim costs, Mr Justice Supperstone said that the claim for deceit should never have been brought. The judge refused Montpellier permission to take the procurement element of its case to appeal. He also rejected the company’s request for a stay on payment of part of the costs pending an appeal to the Court of Appeal.

Both Leeds City Council and Montpellier said that they were unable to comment at the time of writing.

In February, Mr Justice Supperstone dismissed Montpellier’s £43.5m claim in which the company alleged procurement breaches and, initially, deceit when the local authority ended a competition to build the Leeds Arena and chose to develop a separate site it owned.

Montpellier, which had taken part in the original competition, claimed to have received assurances from the council that it did not intend to build the arena itself.

Awarding Leeds £2m in interim costs, Mr Justice Supperstone said that the claim for deceit should never have been brought.

The judge refused Montpellier permission to take the procurement element of its case to appeal. He also rejected the company’s request for a stay on payment of part of the costs pending an appeal to the Court of Appeal.

Leeds City Council leader Councillor Keith Wakefield said: “We welcome the judge’s decision and council taxpayers will be pleased to hear that we are well on the way to recovering £2m of public money and will now be looking towards further recovery of our costs, which were well in excess of £4m.”

Malcolm Simpson, a partner at Montpellier’s law firm Walker Morris, said: “This was the first stage of an appeal process and we anticipated that Mr Justice Supperstone – who gave the original judgment – would refuse our right to appeal.

“Montpellier Estates will now be taking this through the normal appeal process, which is to the Court of Appeal.”

Earlier this month Leeds handed over the completed arena building to SMG Europe, who will operate the venue.