Humberside CC has agreed to pay £3m 'on account' to a catering company which was 'misled' into under-bidding by millions for the county's school dinners contract.
Judge Geoffrey Rivlin QC was told that the county council had 'consented to judgement' in favour of BET Catering Services Ltd who say they were given 'inaccurate and misleading' information by the council before putting in a disastrously low tender for the contract last year.
Outside court BET's solicitor said that the council had agreed to pay the caterers £3m as a first instalment on the full damages, which have yet to be assessed at a further court hearing.
Earlier the court heard how BET had battled it out with three other tenderers to win the four-year contract which involves providing about 74,000 school meals daily from more than 400 kitchens, as well as thousands of meals on wheels.
But, since commencing its duties under the contract in January this year, the company had been making losses 'of perhaps as much as £3m-a-year', said Jonathan Harvie QC, for BET Catering.
All the other tenderers had 'fallen into the same error' as BET, putting in bids at far below economic levels, but Mr Harvie told the court: 'BET Catering were unfortunately the winners'.
BET, which provides catering services to many other local authorities, now found itself locked into a financially crippling contract which threatened to turn the whole group into a loss-maker, he added.
BET claimed the reason why it had tendered was so low was because of 'misleading and inaccurate' information provided by the council as to the contractual obligations on staff pay, hours and conditions which the company would inherit if it won the contract from the council's DSO.