pounds 48m award for Slough Estates

High Court victory: Property company wins damages after judge decides local council lied about terms of a retail development

Slough Estates, the UK's largest industrial property company, was yesterday awarded pounds 48m in damages by the High Court against a local council after a judge found the authority had lied about the terms of a big retail development.

Mr Justice May upheld a claim by Slough Estates that Welwyn and Hatfield district council amended and then deliberately kept secret the new terms of an agreement to develop the Gallerias shopping mall in Hatfield.

The council did so knowing that Slough Estates was then in the process of developing the Howard Centre, a separate site in nearby Welwyn Garden City.

Had Slough Estates known that the Hertfordshire council's agreement with a rival developer, Carroll Group, would be relaxed, as it secretly was in 1987, it would not have continued with its own plans.

The judge said the council, which had a "strong financial interest" in the Gallerias, knew that if the information became public there would be "an uproar" and its intention was "to induce Slough to continue with the Howard Centre".

"From July 1987 onwards [the council] was nursing a lie and had set itself a time bomb," Mr Justice May added.

His decision was yesterday welcomed by Sir Nigel Mobbs, chairman of Slough Estates: "We should be able to rely on what a local authority says it will do and [we] did just that. On discovering that [the council] had secretly gone back on its word, the only course available has been to pursue [it] through the courts."

However, David Riddle, chief executive at Welwyn and Hatfield district council, said yesterday that the authority intended to appeal against the decision, adding that it had no money to pay Slough Estates.

"The situation we are faced with results from a very large property company, with profits of pounds 130m in the past two years, seeking money from the local community," Mr Riddle said.

The company's victory is the second in less than a year. In August 1995, Slough won more than pounds 7m in an out-of-court settlement from Senior Engineering, an industrial boiler-making company, which admitted faults to two giant boilers it fitted at a trading estate in Slough.

The latest battle began in the late 1980s, when Slough Estates began developing the Howard Centre, a 200,000 sq ft shopping mall, which included a multi-storey car park and a bus station. The developer claimed in the High Court that before going ahead with its building programme, it carefully considered all potential threats from rival developments in the area.

One was the Gallerias in Hatfield, planned over a tunnel spanning the A1 carriageway, on land owned by Welwyn and Hatfield district council. But Slough Estates was reassured by the council's publicly-stated policy on the "tenant mix agreement" (TMA) it had reached with the Galleria's developers.

This stated that the Gallerias would be developed primarily as an entertainment centre, allowing the Howard Centre to concentrate on more traditional shopping facilities.

Both centres were built and opened within a year in 1990-91. Even before the Howard Centre opened, the council officially agreed to relax its TMA for 85,000 sq ft of the Gallerias. Slough Estates won a judicial review in 1991 to set the council's decision aside.

It was then that Hatfield and Welwyn district council admitted that in 1987, a year before Slough agreed to build the Howard Centre, it had already secretly agreed a relaxation of the TMA for the same area of development at the Gallerias.

Slough then decided to sue, arguing that it was the victim of fraudulent misrepresentation. In his 86-page judgement yesterday, Mr Justice May agreed.

Mr Riddle said: "The council does not have pounds 48m. I doubt we ever will have pounds 48m and we can never satisfy this judgment." Although the Department of the Environment has said it is unwilling to help, the council cannot be made bankrupt. With an annual income of around pounds 10m, the council only has about pounds 2m in reserves and could not raise the full damages through council taxes or business rates.

A council spokeswoman said yesterday that the council had received more than pounds 11m from developers, paid in instalments, as a "capital sum" for the lease of land on which the Gallerias was built.

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