Liverpool City Council has threatened to apply for a developer to be placed in liquidation over a stalled £200m regeneration scheme.
Chinatown Development Company Ltd received planning permission to build 790 new homes and commercial space on a city-centre site in December 2015, with a 250-year lease granted by the council for phase one of the development last year.
According to a report that went before cabinet on Friday, the scheme relied on investors paying between 50-80% of unit value as a deposit to fund further phases of development.
However, the report states that “major” fraud cases in Hong Kong involving an agent used by CDC has had a “massive” impact on sales, resulting in the development stalling and the contractor for the site going into liquidation.
The council claims it is now owed £950,000 by CDC under the the lease agreement and last week said it was willing to use a compulsory purchase order to help secure a new developer.
But following the meeting the council said it had now “hardened” its position following unspecified legal advice and “financial information”.
The council said it has instructed solicitors to start legal proceedings against CDC in an attempt to secure payment of the outstanding amount and said it will apply for the company to be placed in liquidation if a deadline of 10 August is missed.
Liverpool deputy mayor Ann O’Byrne (Lab) said the council had “explored every avenue” with CDC in order to secure the transfer of the site but “insufficient progress had been made”.
She added: “We have sought reassurances from [CDC] but regrettably an agreement could not be reached and the council has been left with no choice but to take this new course of action.”
A statement on behalf of CDC’s directors said Liverpool’s actions amounted to a “witch-hunt” which had caused “significant harm” to the company and described the council’s criticisms as “motivated by malice or some other political agenda”.
It added that CDC had worked with the council on a sale of the site to housing association Your Housing Group, but no deal could be agreed. The statement said CDC had then incurred “substantial” costs for halting phase one of the development.
The statement added: “These proceedings will be vigorously defended.
“As Liverpool City Council are aware, CDC have been in negotiation for the sale of the whole site with various parties but Liverpool City Council seem determined to make this process as difficult as possible to progress.”
CDC said it had formally agreed terms for a sale of the site and contracts were currently being drawn up.
It added that the council “do not know what they are doing from one day to the next”.
The company also said it has “no interest” in the company being investigated in Hong Kong as it was “solely a commission based selling agent”.