Bad faith claim costs developer £440,000

Jun 19 2008 by Graeme King, The Journal

A TINY property developer has seen its £10m damages claim against development agencies thrown out of court and has been ordered to pay hundreds of thousands of pounds in costs.

Middlesbrough-based Chilli Developments claimed EP (English Partnerships) and TVR (Tees Valley Regeneration) acted in "bad faith" by negotiating to include Chilli in the 240 acre Middlehaven project when they had no intention of carrying the deal through.

The company also claimed EP and TVR had breached an exclusivity agreement to allow Chilli to develop a five acre section of land at the Middlesbrough project in a multi-million pound development.

But High Court judge Mr Justice Jack has ruled that the regeneration bodies acted in good faith throughout negotiations, and he added that Chilli’s allegations – which were “came close to an allegation of dishonesty” – should never have been made.

Chilli, headed by new media entrepreneur Simon Brown, must pay EP and TVR’s costs of some £440,000, with £180,000 due within 28 days.

The damages were awarded on a punitive “indemnity” basis, which means the judge sought to ensure Chilli pays the full costs incurred by EP and TVR, in recognition of the “thin” evidence presented in the case.

The judge said that, during cross-examination, it became clear that the allegation of bad faith wasn’t even “really believed” by Mr Brown.

In his conclusion, Mr Justice Jack said: “The main allegation made in this action against EP and TVR, and so also against their representatives, was of serious misconduct, namely that together they had led Chilli along to believe that it had a real chance of entering a development agreement with EP when there was no chance because the negotiations were a sham.

“That allegation was not supported by the documentary evidence. Nor apparently was it really believed by Mr Brown: I refer to his answers given in cross-examination. The allegations should not have been made.

“I am satisfied by the evidence I heard and the documents I have read that EP and TVR negotiated with Chilli in good faith, that is to say, provided Chilli could meet their requirements, they were willing that EP enter a development agreement with Chilli.”

He said Chilli Media Ltd’s background was in IT and it had “no assets of any substance and no track record” in developments.

Joe Docherty, Tees Valley Regeneration chief executive, said: “We always maintained there was no case to answer, as we always act in good faith and in the best interests of the Tees Valley, its residents and its future.”

John Walker, English Partnerships chief executive, said: “We are pleased we can put this behind us and concentrate on the exciting regeneration proposals put forward by BioRegional Quintain.”

Simon Brown of Chilli Developments declined to comment.