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The High Court has ordered Welwyn Hatfield DC to pay£48 million in damages to property developer Slough Estates. ...
The High Court has ordered Welwyn Hatfield DC to pay £48 million in damages to property developer Slough Estates.

The council, which has only £2m in reserves and a capped budget of £9m, said it would not be able to meet the claim without help from the DoE. But the DoE said it was a 'matter between Welwyn Hatfield and the development company'.

If the DoE does not give approval for borrowing and increase the authority's capping limit the council will have to limit service provision to statutory functions and might have to sell off assets.

Welwyn Hatfield has debt-free status so it can spend all its capital receipts. But it would need special permission to use receipts to meet a damages claim.

The court ordered the council to pay the damages because it decided not to tell Slough Estates about a relaxation in the planning permission for the type of shops that could occupy a rival shopping centre.

'From July 1987 onwards Welwyn Hatfield DC were nursing a lie and had set themselves a timebomb,' said Mr Justice May in the High Court last Thursday.

The court heard that the full council resolved to follow advice from senior officers to agree to relax the restrictions. It decided 'to keep this relaxation secret and pretend to all other interested parties that the restrictions were still in force'.

Slough Estates claimed it would not have gone ahead with its development if it had known about the change.

The case has raised speculation over whether councillors and officers could be surcharged. Welwyn Hatfield said it was unlikely. The Audit Commission said it did not think there was a case for surcharge but the district auditor was awaiting the final outcome before deciding on action.

None of the chief officers are still at the council and only 10 of the councillors are still in post. The chief executive at the time of the decision was Leslie Asquith, who died in 1988.

The council accepted that it should have made known details of a change in planning permission. But it claimed it did not set out to defraud the company and the damages were excessive.

The damages have been calculated as the difference between what the company has spent on building and running the centre to date - estimated at £75m - and the current market value of £27m.

The council believes it should only pay damages resulting directly from its action, around £10m. It claims a recent House of Lords ruling backs this stance.

A special meeting will be held later this month to consider costs, at which the council will seek a stay of execution of last week's order pending an appeal. 'We will be fighting the appeal with all our energy,' said chief executive David Riddle.

Slough Estates chairman Sir Nigel Mobbs said the case was a 'warning to all local authorities', which were supposed to act in the open. 'This is the first time I have ever come across this sort of behaviour by a local authority. I hope it is a unique case and that other local authorities do not behave like this.'

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