'Policy to tell lies' costs local council £48million in damages

The case of Slough Estates & ors v Welwyn Hatfield District Council & anr is one for the legal record books.

Slough Estates, developer of a home counties retail complex, took the local authority for the area to court with the accusation that the authority lied to it over provisions for the retail mix to be imposed on a rival complex.

The outcome of the case, a warning to local authorities that honesty is the only policy, was an order from Mr Justice May that the council pay the developer it misled £48 million in damages.

In his judgment Mr Justice May bluntly called the council liars. "From July 1987 onwards Welwyn & Hatfield District Council were nursing a lie and had set themselves a time bomb," said the judge.

He said a nucleus of councillors had steered the rest in what happened and went on: "There was a policy to tell lies about the tenant mix agreement if it was necessary to do so. The lies were watered down wherever possible, but they were conscious lies."

The award in itself poses problems. Council officials left court and declared there was no way they could either contemplate meeting the award or be forced to meet it.

As a statutory body the council cannot be subjected to insolvency laws like other organisations, and David Riddle, chief executive of the council, said: "The council does not have £50 million. I doubt we ever will have £50 million. Satisfying this judgment will present the council with some real challenges."

Any order to pay is currently on hold pending a further hearing on 29 July when costs and a permanent stay pending appeal, which the council says it is confident of winning, will be considered. But in the Property Litigation Group at Lovell White Durrant, which has charted the course of the litigation, the mood is not one of having victory turned into defeat because of the local authority's problems in raising the cash to pay.

Lovells' Martyn Herbert-Smith said that as far as it was concerned all methods to recover the judgment debt, short of insolvency procedures, would be available to Slough Estates.

The litigation itself, which resulted in an 86-page judgment by Mr Justice May in only a week and a half, has had a long history. Before the condemnation of the council, the massive damages order and an estimated £1 million-plus legal bill, it had begun life as a judicial review. That ended in 1990 with victory for Slough Estates. Then the Lovells team, headed by partner Michael Seymour, set about converting it into the damages claim.

Herbert-Smith says that once the problems of the conversion had been overcome the team was then faced with a damages action based on facts stretching back 10 years, huge amounts of paperwork, many witnesses and a complex mix of public and private law.

He also says that the case had to be treated on its own merits because no similar cases could be found.

But the end result was a resounding victory, hailed by chair of Slough Estates Sir Nigel Mobbs as a "warning to all local authorities".