Montpellier Estates Ltd v Leeds City Council

This is the trial of two actions brought by Montpellier Estates Ltd (“MEL”) against Leeds City Council (“LCC”) concerning the competition held by LCC in 2007 and 2008 for the development of an arena in Leeds (“the Arena”). MEL entered the competition in 2007, which was terminated by LCC on 5 November 2008. The first claim (No. HQ09X00477) is for damages for breach of statutory duty pursuant to the Public Procurement Regulations 2006 (“the Regulations”) and breach of contract (“the procurement claim”). In the second claim (No. HQ10X04747) MEL alleges that LCC deceived MEL by making fraudulent misrepresentations upon which it relied in entering into and remaining in the competition for the procurement of a developer for the Arena (“the deceit claim”). The two claims were consolidated on 23 May 2011 by Order of Master Eastman, with the deceit claim as the lead action.

MEL is a company involved in property investment and development. Its sole shareholder and chairman is Ms Janis Fletcher OBE. MEL is the owner of the City One site, a ten acre site at Meadow Road in the Holbeck area of Leeds.

In the deceit claim MEL allege that LCC deceived it into entering and/or remaining in the procurement competition by false representations on the part of LCC to the effect that LCC had no preference for the Arena to be built on its own land at Elland Road, that MEL was not a “stalking horse” for LCC’s own development of the Arena, that LCC did not want to develop the Arena itself and that the competition would be fair and transparent. It is alleged by MEL that LCC did have a preference for Elland Road, that MEL was a stalking horse, that LCC did want to build the Arena itself and that the competition was not transparent and fair. This is said to be on the basis that LCC concealed from MEL its own “Plan B” to build the Arena on its own site, that MEL was essentially bidding against LCC’s public sector comparator (“PSC”) based on LCC’s own sites at Elmwood Road (sometimes referred to as Clay Pit Lane) and Elland Road, and that a flawed process was involved in comparing MEL’s submission as against the PSCs that included, amongst other things, the misuse by LCC of the processes of “normalisation” and “risk adjustment” so as falsely to show that MEL’s commercial submission made on 10 September 2008 did not represent value for money.

In the procurement claim, MEL contends that LCC conducted the procurement competition in breach of the Regulations and in breach of implied contractual obligations at common law.

In the deceit claim the main head of loss is said to be the diminution in value of MEL’s City One site, which land formed the basis of MEL’s submission. MEL contends that had it not been for the representations it would have sold the site and done so prior to the collapse of the property market, which MEL contends was in late 2008. Since the fall of the property market it has not been possible for MEL to dispose of City One. The calculation of damages is dependent on the date of the fraud and the date of the hypothetical sale of City One. The sum claimed in the re-re-amended Particulars of Claim (“RRAPC”) is in excess of £43.5million. The claim for loss of value of the City One site is a claim which can only be made in deceit and is therefore precluded in the procurement action. Apart from this difference, however, MEL contends that the other heads of loss, in particular wasted costs and holding costs, are equally recoverable in the procurement action.

MEL made allegations of fraud and dishonesty against eight individuals:

In February 2006 LCC placed a notice in the Official Journal for the European Union (“OJEU”) for the services of a consultant to advise on the procurement for the development of an arena in Leeds. PMP (a subsidiary of Donaldsons and special leisure consultants) was subsequently appointed as lead consultant. Donaldsons, (subsequently acquired by DTZ) were appointed as sub-contractor for property related issues and Arup for technical issues.

In August 2007 Cobbetts LLP (“Cobbetts”) were appointed LCC’s legal advisers in connection with the Arena project. The core members of the team included Mr Mark Fitzgibbon who specialises, in particular, in advising upon UK and EU public procurement law; and Ms Frances Anderson, who advises on operator agreements (and other ancillary commercial contracts). (D2/1589-1590).

Councillor Carter recalls that in the late 1990’s there was already “an appetite” for an arena to be built in Leeds (D2/1378). LCC has previously made attempts at delivering an Arena in Leeds. However despite LCC embarking on a competition offering land together with development funding, the competition failed. Thereafter in 2004 the LCC Executive Board instructed Council officers to procure a study into the need for music venues in Leeds. This led to PMP being instructed to conduct a feasibility study and they looked at different types of venues. On 16 November 2005 the Executive Board considered the findings of the feasibility study into the future provision of concert, arena and other music and related facilities in the City, and authorised the appointment of consultants to advise on the development and delivery of an Arena in Leeds (G2/169). Under the heading “The Way Forward” the report recommended, inter alia, the appointment via the Council’s Strategic Design Alliance, of specialist advisers whose skills were not available within the Council to progress proposals for the development of an arena and associated related facilities (para 4.1). The consultants would be commissioned to undertake a full site options appraisal and market assessment, hold detailed discussions with potential developers/operators of such facilities, consider and recommend funding models, and set out a process to enable the Council to select a preferred developer/operator, site location and funding mechanisms (para 4.6).

On 28 February 2006 LCC placed a notice in OJEU seeking a consultant to advise on the procurement of a consortium for the development of the Arena.

In October 2006 PMP, DTZ and Arup produced a draft report dated September 2006 (G7/33) entitled “Proposed Multi-Purpose Arena and Associated Conference/Exhibition Facilities in Leeds” (the “Procurement Study”) which considered the project for the delivery of the Arena. The final version of the report dated November 2006 (G11/34) contains a summary of the key findings and recommendations of the study process in Table 1.1 (G11/37-38). The summary findings in relation to site selection and assessment state:

“The site assessment exercise illustrates that there are a number of sites (detailed in section 2) that could potentially accommodate a new arena facility but all have complications in terms of scheme deliverability.

A city centre site would be preferred in terms of suitability, contribution to city centre vitality and regeneration. Of the four city-centre sites identified, two (New Holbeck and Kidacre) stand out in terms of their ability to support a viable arena development. These are very similar and in close proximity to one another, with the Holbeck site more advanced in terms of redevelopment planning. There are a number of significant issues still to be addressed at Kidacre.

None of the city centre sites are in public ownership and it would be difficult to satisfy the requirements necessary to pursue a compulsory purchase order. Accordingly, it will be essential to create a competitive situation in order to achieve value in negotiations with current landowners/developers. Given the present advantages of Holbeck over the other city centre locations, a suitable alternative must be found to create a competitive dynamic.

The edge of town/out of town sites at Elland Road and Stourton North are in public ownership, which is a significant advantage in terms of deliverability. In evaluating the suitability of site options there is a balance to be struck between town planning and regeneration benefits versus scheme deliverability. It is considered vital that at least one of these sites, and particularly Elland Road, is included in the procurement competition with the land in public ownership brought forward and given optimum chance to provide the preferred scheme. This will ensure at least one deliverable option, levering a competitive response from the market both in terms of:

•

offering developers without an existing land ownership the opportunity to participate

•

providing a meaningful alternative option against which owners/developers of city centre sites will need to compete.

A city centre site is considered the more desirable location and there are city centre sites that should be capable of delivering a scheme for the City. However, this is dependent upon third party participation. Elland Road should provide an acceptable solution and be more dependable in terms of delivery. This option needs to be included in the developer competition with the owner/developer responses then determining whether this or a city centre site will be favoured.”

Two recommendations were put forward:

In relation to “Procurement” the report contained two material recommendations:

On 13 December 2006 the Executive Board of LCC resolved (G12/132):

“(a)

That the findings and recommendations contained in the PMP consultants’ report on the proposed funding and procurement of a multi-purpose arena and associated facilities be supported.

(b)

That approval be given to the proposed delivery plan to be pursued by the City Council to select an operator and developer/funder for the development of a multi-purpose arena and associated facilities.

(c)

That the requirement for up to £20m as the public sector investment limit needed to facilitate the development of a multi-purpose arena in the City be acknowledged.

(d)

That authority be given for the ongoing appointment of PMP Consultants to project manage the implementation of the detailed delivery plan to select a preferred operator and developer/funder to develop a multi-purpose arena and associated facilities.

…

(f)

That the project governance arrangements to be established to guide, manage and control the successful delivery of the next phase of the project to procure an operator and developer/funder for the development of a multi-purpose arena be noted.”

Following this decision of the Executive Board, the Arena Project Board was set up. Ms Dent deals with this at paragraphs 55-71 of her second witness statement (D1/3/1153-160). She chaired the project board for this project. Due to the strategic importance of the Arena and the fact that it would have an impact or need the support and advice of a range of services she considered that other departments within LCC should be represented on the Project Board. The Board was subsequently made up of senior officers from LCC. Ms Dent chaired the Board as Director of City Development. The other members of the Arena Project Board were: (1) Mr Farrington; (2) Ms Blanshard, who was Chief Officer Libraries, Arts and Heritage with responsibility for delivery of major cultural services such as the theatres and the running of major events in the city; (3) Mr Turnock, who was Chief Officer Legal, Licensing and Registration and Corporate Governance; (4) Mr Gay, who was Director of Resources; (5) Ms Taylor, who was Chief Financial Officer of Mr Gay’s Resources Department, who was asked to attend Project Board meetings on his behalf; (6) from the middle of 2007 Ms Jan Anderson joined the Project Board. She was Executive Director (Environment) at Yorkshire Forward; (7) in addition, as and when considered necessary, other officers would also attend Project Boards, such as Mr Coulson in his capacity as project manager, Mr Turnbull, lawyer in LCC’s legal department and Mr McGill from LCC Learning and Leisure Directorate with responsibility for events and theatres. Ms Dent stated:

“The role of any Project Board is to offer challenge to the proposals and recommendations being put forward by the Project Team and ensure that the project is delivered on time and within the budget allocated and within the approvals given by the Executive Board. In the case of the Arena project board, our role was to challenge and scrutinise not only technically but also financially and legally: hence the presence of the Director of Resources and the Chief Legal Officer. The key provisional funding partner, Yorkshire Forward, was also represented by its Executive Director of Environment to ensure probity on its own behalf.” (Para 58).

In the event that a decision was required following on from a Project Board meeting, Mr Coulson would prepare a set of reports, including the Project Board’s recommendation, so that Ms Dent or Mr Brook, the Chief Asset Management Officer, who was based in Ms Dent’s directorate and was Mr Coulson’s line manager, could consider the recommendations and formally make the decision on behalf of LCC using delegated or sub-delegated authority. In the event that Ms Dent or Mr Brook considered that the matter was outside their powers or that it was appropriate for it to be referred to the Executive Board, the matter would go to the Executive Board for a decision (D1/1156).

External advisers were not members of the Project Board but were members of what was known as the Project Team. The Project Team were those personnel required by the Project Manager, Mr Coulson, to contribute to the delivery of the project. Some of LCC’s officers, in particular Mr Coulson, were also members of the Project Team. Some members of the external consultants would attend Project Board meetings for the purpose of consultation to present their proposals and to assist with enquiries. (D1/1157).

Ms Dent stated that she had limited connection with the external advisors and did not attend Project Team meetings.

The first meeting of the Project Board was on 26 January 2007. Mr Coulson presented to the Board a “Project Initiation Document” (“PID”) (G14/136). He reviewed the key points of the PID as follows (G14/132): establishes a “contract” between the Project Board and the Project Manager; provides clarity as to the project’s organisational structure, governance and reporting arrangements; summarises the aims and objectives of the project; provides details of the project’s organisational structure and the roles and responsibilities of those involved in both the management and delivery of the project; summarises the proposed means and frequency as to how participants on the project are to be advised as to progress; sets out the development programme (provisional at this time until confirmed with the appointed consultants) for the project; details budget arrangements and controls; and provides a risk register which will be regularly updated and reviewed by the Project Board.

The Project Board requested certain amendments/conditions be made to the PID which included the following:

“that the ‘decision maker’ for the project is the Director of the Development Department (the project sponsor [Ms Dent]) using her delegated powers and, that decisions to be made by the Project Board would be within the delegated powers granted by the Executive Board to the Project Board.” (Para 1.3 of Minutes at G14/133).

The team of advisers had their inaugural meeting on 8 March 2007 (G15/17). At this stage they were looking at setting up the project.

On 31 May 2007 a Prior Information Notice was issued in the OJEU for the operation of the Arena (G19/117).

On 11 June 2007 an “Open Day” was held by LCC, designed to foster interest among developers. Councillor Carter made a welcoming speech, and then Ms Dent, Mr Russell and Mr Smith spoke. (G19/170A1-A6). A Marketing Brief was provided by LCC in relation to the OJEU Notice “for the use of any parties who wish to be considered for inclusion on the Council’s long-list for the development and/or operation of the planned Leeds Arena” (G19/187). In relation to site availability and enabling development the brief contained the following:

“2.11

The council has identified a series of sites that would potentially be able to accommodate an arena for the city of the scale proposed. The council will consider the relative merits of both city centre and edge of city sites, and their implications for the overall project in commercial and deliverability terMs …

2.12

The Elland Road site adjacent to Leeds United FC’s ground has been made available by the council for inclusion in the site selection process. Importantly this offers developers without an existing land ownership the opportunity to participate. Developers are actively encouraged to come forward with their proposals based on this site or other sites in the city if preferred. In evaluating options a value adjustment will be made to reflect the use of this site or otherwise.

2.13

A major master planning exercise has been undertaken for Elland Road, which considers the suitability of the site for redevelopment incorporating an arena. This information will be made available to interested parties through the data room/council e-tender website.”

On 3 July 2007 there was a project update meeting held between the PMP team and LCC (G21/99-101), following the Open Day, at which the following is noted in the Meeting Notes:

“30.

[Mr Smith] is ringing round various developers who attended the Open Day to establish whether they propose to participate in the developer competition.

•

will continue to contact those have been unable to speak to.

31.

Conversation with Paul Caddick highlighted that Patrick Nally appeared to have some impact on developer concerns whether arena project is viable given LCC do not propose to take ownership and are simply forwarding a capital contribution. …

36.

Key issues – Elland Road

•

[Mr Smith] reported that he had some concerns on the level of interest the Elland Road site will generate as a result of the reduced area.”

That was a reference to a parcel of land (8.5 acres) around the site that had been sold off to West Yorkshire Police.

On 19 July 2007, by way of notice in the OJEU, LCC invited tenders for the procurement of the Arena in the Developer Competition.

On 22 August 2007 MEL indicated its wish to participate in the competitive dialogue and submitted to the pre-qualification questionnaire exercise (“PQQ”) conducted by LCC. Only three bidders entered the Development Competition.

On 11 September 2007 there was a meeting between PMP and Council representatives. The minutes of the meeting (G27/11-13) record the following under the heading AOB:

“28.

‘Plan B’ concept discussed.

•

LCC to keep this alive as an viable alternative proposal/option

•

PMP team will not do further work on Plan B at this stage, but will continue to bear it in mind

•

Relevant if have operator on board, but developer proposals are not matching LCC’s expectations.”

On 20 September 2007 the Project Board met. Appendix 1 to the Minutes states (G29/162):

“3.3

The Project Board were advised that expressions of interest had been received from three (3) companies and, that the low response to the development opportunity was explained primarily due to:

(i)

Potential developers pre-judging the outcome of the site/developer selection exercise i.e. determining that their respective sites would not be successful and, therefore deciding not to take part in the process and,

(ii)

that parties potentially interested in the Elland Road site had determined that there was insufficient development potential in the site to justify submitting a ‘bid’. …

3.6

The Project Board agreed on the basis of the evaluation of the developer submissions received that:

(i)

Bidders A and C [GMI and MEL respectively] be taken forward to the next stage of the developer competition, the Invitation to Participate in Dialogue (ITPD) Stage.

(ii)

Bidder B [National Grid] be rejected for inclusion in the ITPD Stage due to the failure on the part of the Bidder to submit a full and viable PQQ submission by the due date.

…

(iv)

An options paper be presented to the next meeting of the Project Board setting out alternative delivery options for the development of an arena should the current developer procurement process be adjudged not to provide value for money.”

On 1 October 2007 MEL, having passed the pre-qualification phase, was invited to enter the second stage of the competition, namely the invitation to participate in dialogue (“ITPD”). Two of the three bidders were invited to the ITPD. The other was GMI, whose business was both as construction company and a developer. Neither bidder was told the identity of the other.

The alternative development procurement proposal was considered further at the Project Board meeting on 10 October 2007. The Minutes record (G34/72):

“6.0

Alternative Development Procurement Proposal

6.1

A Smith advised that the alternative development option presented to the Board could be used as both a fall back position should the present development procurement process not offer value for money and/or act as a public sector comparator during the procurement process.

6.2

The public sector comparator could take the form of a Special Purpose Vehicle (SPV) wholly owned by the City Council. The Board were advised that the comparator option could be advised to potential bidders at any point during the procurement process if it were considered to be a serious alternative developer solution.

6.3

N Russell stressed that the report sought to set out the principles of an alternative approach, but that more work would be required when the position with the developer interest was clearer after the consultation meetings.

6.4

The Project Board agreed to review the position of an alternative developer procurement approach at a future meeting.”

MEL submitted its initial proposal to LCC prior to 9 January 2008 in accordance with the ITPD requirements; so did GMI.

During January 2008 the Project Team prepared papers for the Project Board meeting on 30 January 2008. The DTZ “Leeds Arena Developer ITPD Evaluation Report to Project Board” dated January 2008 (G41/133-142) in section 5 headed “Commentary” states:

“Bidder A in the overall score is ahead of Bidder B but they do have added risks in terms of delivering within the timetable they have recommended. This is particularly the case given the current state of the property market and the ‘credit crunch’.

…

For both bidders, the ability to achieve scheme viability will be challenging. Both are offering to further value engineer new schemes (whilst meeting Planning requirements) so that the expected gap funding needed can be within or close to the £20million limit set by the Council. However, at this time the level of gap funding indicated by the bidders is higher at £30million or more. …

Control of the capital cost of the arena is essential. …

With regard to developer enabling development, commercial and residential property development has seen a marked downturn in values during the period of this competition with significant risks to scheme viability …

…

In this context the recommendation is to allow both bidders to proceed to the ITCD stage in February 2008.

However, given the concerns highlighted above, the Council should also pursue a pro-active approach to protecting alternative options for delivery which might be pursued if the emerging bids through this OJEU process were adjudged not to provide value for money. This might include contractor based solutions pursued jointly with the preferred operator or alternative. Further consideration of commercial opportunities and legal constraints in this respect should be investigated. A paper on this issue appears elsewhere on the agenda of the meeting of the Project Board.”

A note from Mr Russell dated 25 January 2008 (G41/143-145), headed “Alternative procurement routes – ‘Plan B’” refers to there having been consideration of two Plan B approaches at previous Project Board meetings. First, funding through the use of the Council’s Prudential Borrowing capability; and second, a developer construction route. Under the heading “The proposed way forward” he writes:

“The Project Team would recommend a parallel investigation of both the finance and development/construction Plan B alternatives alongside the continuing negotiation with the selected operators and developers.

…

We would expect to report back within four weeks with recommendations on how or indeed whether to fully incorporate an alternative approach to either the funding or construction of the arena procurement.

In the interim it is important to ensure that both the operator and developer procurement processes are flexible enough to incorporate an alternative delivery method if required, therefore we would also recommend that:

(i)

The draft Operator Council Contract (provided to Operators at the Final Tender Stage) includes a clause stating that the operator would be willing to work with the Council to deliver an alternative solution if the developer competition proved unsuccessful.

(ii)

The Developer ITCD includes reference to the potential use of Prudential Borrowing, with further information to follow if appropriate.”

At the Project Board meeting on 30 January 2008 the Board agreed to invite both MEL and GMI to progress to the ITCD Stage of the development procurement process and required bidders to establish the deliverability/ viability of their respective scheme proposals (G45/282). The Project Board considered an alternative development procurement route. Section 7 of the minutes records:

“7.1

The Project Board considered a report providing further information on an alternative procurement route for the construction of the arena, incorporating public sector funding (via prudential borrowing) and increased development risk. The Board noted that under such an approach, the role of the public sector would change from one of facilitating the development to one of potential developer/owner.

7.2

The Board were advised that if the alternative development procurement route was worthy of consideration, that the concept would need to be introduced to potential operators early in the Final Tender Stage, as the preferred operator would ultimately have more of a direct relationship with the public sector than presently envisaged.

7.3

The Board requested confirmation that the existing procurement process for both the operator and the developer would not be prejudiced by the introduction into the process of the alternative development route.

7.4

The Project Board agreed:

(i)

to note the content of the report and requested a further report to the next meeting, identifying the proposed approach and an evaluation of the risks to the public bodies of pursuing the alternative development procurement route.

(ii)

to introduce the concept to the shortlisted operators invited to the Final Tender Stage.”

Following LCC’s evaluation of MEL’s initial proposals, by an e-mail dated 15 February 2008, MEL was invited to participate in the third stage of the Developer Competition, namely the invitation to continue in dialogue (“ITCD”). On 17 April 2008 the Project Board considered a report from the project team (PMP with DTZ, Arup and Cobbetts) on alternative financing and delivery solutions for the arena (G51/177). The Introduction to the paper (at pages 179-181) states:

“Project Board requested the investigation of alternative financing and delivery/contribution model for Leeds Arena in the light of:

•

Growing concern regarding the commercial development markets

…

•

The need for a public sector comparator to both assess the developer submission and create/maintain competitive tension within the developer competition.

Project Board instructed the PMP team (PMP, DTZ, Arup and Cobbetts) to:

1

Investigate both finance and development/contribution Plan B alternatives

2

Outcomes including alternative approaches highlighting timescales and financial implications for the Arena

3

Ensure both operator and developer procurement process and documentation allow flexibility for the future introduction of alternative approaches.

… Initial discussions regarding alternative financing option including Prudential Borrowing have taken place with the two developer bidders. …

•

The purpose of the study is to provide a desk-top study on the financial implication of progressing with a possible proposal for the Council to proceed as either developer/contractor for the development of a 12,500 seat arena in Leeds (Plan B). …

…

•

Both bidders have raised concerns regarding the level of grant funding available in the light of the worsening economic and financial climate. …

•

The consultant team are working hard to maintain the enthusiasm and commitment of the bidders whose own appraisals are indicating a gap funding requirement in excess of £20m

…

•

The developers recognise that an alternative route, with lower cost of finance (Prudential Borrowing) and optimised development scheme can still create deliverable solutions.”

Section 5 of the minutes of the Project Board meeting on 17 April 2008 records (G53/270-271):

“5.0

Alternative Development Proposal

5.1

The Project Board considered a report from the project team on alternative financing and delivery models for the arena against the background of increased concern as to the state of the commercial property market; weaker developer responses than originally anticipated; alternative delivery models may provide better value for money and will provide a public sector comparator to maintain the competitive tension within the developer competition.

5.2

The main issues highlighted in the report may be summarised as follows:

•

Both developer bidders have expressed concern that the arena can be delivered within the £20m public sector gap funding available for the project.

•

The strong operator response (guaranteed rental streams, good covenants and additional revenue opportunities) create the opportunity to deliver the arena regardless of prevailing commercial market conditions.

•

The developers recognise that an alternative development approach can still create a deliverable solution.

•

In view of the credit crunch, the potential use of finance raise by the Council from prudential borrowing becomes more economically attractive. It could be used to replace commercial borrowing by the developer bidders or could be used to finance the Plan B alternative procurement approach.

•

In recognising the Council’s role in facilitating the arena development, procuring the gap funding and possibly providing debt finance, it would be appropriate for the Council to take ownership of the arena.

•

With regard to legal/procurement issues associated with the alternative development proposals, it was noted that further detailed analysis of the legal implications of the specific route would be required, as the Council may be able to challenge if it was to fund the arena development through prudential borrowing.

•

If the Council were to halt the developer competition and procure the arena itself, it would be protected from challenge by the general conditions in the procurement process which allows the Council to withdraw at any time.

5.3

The Project Board agreed to:

(i)

Continue the developer procurement process, whilst at the same time investigating the contractor delivery model both for Elland Road and/or city centre site.

(ii)

Introduce hybrid funding approach to the developer competition.

(iii)

Identify the risks (legal and procurement) of the Council pursuing either the hybrid funding or contractor delivery approach.”

On 29 April 2008 MEL submitted its interim ITCD submission to LCC, together with a schedule and “Summary and Points for Clarification”.

On 14 May 2008 there was a meeting of the Executive Board. SMG were chosen as the Operator (G55/206).

Following that decision, on the same day, Ms du Preez, a Senior Consultant at PMP working with Mr Russell on the Arena project, wrote to Mr Sutherland, Managing Director/Senior Vice-President of SMG Europe and said (G55/222):

“Interaction with the developers

We would advise SMG that the Council does not wish for it to meet with either developer bidder without the presence of either me or Nick Russell. We consider this essential to preserve the appearance of fairness in the competition, and to ensure that the relationship is effectively managed.

…

‘Plan B’

As introduced to SMG at the ITCD stage of the operator competition, the Council is exploring alternative delivery methods should the developer competition not produce a deliverable arena project. Under this scheme, the Council would look to work with SMG to deliver a building of the specification set out in your Facilities Requirements document on Council-owned land. This could be cheaply financed and procured by the Council. Depending upon the site this may include a park and ride scheme.

We will wish to advance discussions with SMG around this delivery method, in parallel with the ongoing preferred delivery method that will see a developer ‘married’ with SMG through the competitive procurement exercise. Your views and input, as the selected preferred operating partner for the city and given your extensive experience, will be valuable in these discussions. We ask however that at this stage, the Plan B approach is not discussed with any parties outside the project team.”

On 29 May 2008 an addendum to the ITCD (the “Addendum”) was issued by LCC. The principal purpose of the Addendum was to introduce the concept of an “Optional Variant Bid” whereby the bidders (MEL and GMI) would have the option of presenting a bid that assumed the provision of publicly available finance known as “Prudential Borrowing”. The stated intention in the Addendum was to use a public finance option to “optimise value for money” (paragraphs 3.8 and 3.10). The Addendum also introduced certain adjustments to the content and timing of the previous ITCD steps and confirmed the specification of the arena (G57/1).

At a meeting on 20 June 2008 LCC issued to MEL “Leeds Arena Clarification Note – Bidder Presentation Requirements for 14 July 2008” (G62/145A2). Under the heading “Background” it is stated:

“It is expected that through the competition private sector developers will be able to demonstrate optimal value for the delivery of an arena within a wider scheme context. The Council has indicated a target level of up to c.£20m for public sector funding for the delivery of an arena.

The Council will compare the estimated shortfall with a public sector comparator (PSC) to establish that the gap funding achieves value for money for the public sector investment. In comparing the bidders’ current position with the PSC, the Council will be able to provide feedback.” (G62/145A2).

On 14 July 2008 MEL and GMI separately made a presentation of their bid to LCC and their advisers.

On 22 July 2008 at an ITCD feedback and briefing meeting, attended by MEL and representatives of LCC, MEL was informed of a revised programme. DTZ minutes of the meeting (G62/228F1-6) (as returned to DTZ by MEL having been amended and approved by Mr Williams and Mr Aspinall of MEL: see G62/222A1-6, especially A2 and G62/222E1-6, especially E2) stated:

“NR [Mr Russell] advised that the programme is now to proceed on a two phase basis. The first phase will concentrate on scheme design, arena design, costs and commercials. The second phase will follow with legal documentation.

The first stage will involve a formal written submission in early September 2008. It will be assessed on the basis of value for money and viability against proposals received and the PSC.

The second stage will only progress if the Council considers that there is a viable developer proposition.

Bidder enquired whether the PSC only included Elland Road?

Bidder was advised that the PSC was based on more than one site.

Bidder expressed concerns and felt that the recent introduction of an additional ‘city centre’ PSC comparison made the process flawed. NR confirmed that LCC did not start off with the intention of introducing one.

Bidder expressed concern that it had always been discussed in meetings and presentations by the council that Elland Rd was being put forwards as a ‘fall-back’ position and that the Council’s preference was always for an Arena in the City Centre subject to affordability; hence that Elland Road was indeed the ‘PSC’.

To introduce another City Centre site as a ‘PSC’ at this stage adds to the risk profile of the Bidder as there is a greater chance of not being selected. Had the bidder been informed of the Council’s intention to potentially deliver on other sites in addition to Elland Road at the start of the process, it may well have not entered the competition.

Bidder was advised that under Procurement Rules the Council would expect to consider a PSC to assess value for money.”

On 25 July 2008 MEL received a document entitled “Draft Leeds Arena Clarification Note – Revised ITCD Programme and Requirements” (the “Second Clarification Note”) dated 24 July 2008 (G63/60). The document was re-issued in its final form on 25 August 2008 (G63/73A1) and provided as follows:

“Revised ITCD Process and Next Steps

The Council believes it will be in the interest of all parties to continue to focus on scheme viability and to redesign the ITCD process to this effect.

The Council proposes a two stage approach whereby bidders will be invited to develop their scheme and commercial/ financial proposals in the first stage. Subject to Council approval, this will be followed by a second stage where the bidder will be required to agree legal documentation. The dialogue phase closes at the end of the second stage.

This paper details the first stage requirements and requires Bidders to submit their best commercial offer.

Bidders will need to work towards submitting the following terms:

•

Scheme Design and Arena Design

•

Arena Costs

•

Financial appraisals to support their base bid and their optional variant bid

•

Outline contract structure to deliver the arena and any associated scheme

•

Economic and Social Impact Information

The Bidder’s submission will then be compared with the Council’s evolving public sector comparators in order to help assess value for money. On the basis of that evaluation the Council will then consider:

•

Continuation to full tender with bidders.

•

Closing down the existing competition with no contract awarded.

The Council intends to report on the Bidders’ bid proposals and its own public sector comparators to Executive Board in November 2008.

…

Bidder Submission Requirements

…

Bidders are expected to submit their best commercial offer which must be supported by a robust arena scheme proposal, arena design and costings.”

On 10 September 2008 MEL submitted its interim proposal.

On 2 October 2008 the Project Board met to consider the interim proposals put forward by the Developers. Three reports were prepared by LCC’s advisers for the meeting: Leeds Arena Development Competition ITCD Commercial Submissions Evaluation Report; Leeds City Council Leeds Arena Development, Public Sector Comparator; and Leeds City Council Leeds Arena Developer Competition and Public Sector Comparator Summary. Ms Dent chaired the meeting. Mr Smith made a presentation which was followed by a debate by the attendees.

The material parts of the minutes of the Project Board meeting on 2 October 2008 (Appendix 1 at G72/6-11) state:

“3.0

ITCD Developer Competition Commercial Submissions, Evaluation Report

3.1

A Smith summarised the key aspects of the developer ITCD Commercial submissions as follows:-

(i)

Background

•

Bidders had been requested to submit their best commercial offer for developing the arena.

•

Bidders were requested to submit the following information:

– Scheme and Arena designs.

– Arena costs (based on Q1 2008 prices).

– Financial appraisals to support base and optional variant bid(s).

– Outline contract structure.

– Economic and social impact information.

•

Bidders were advised that their proposals would be compared with the Public Sector Comparators (PSC) in order to assess value for money and on the basis of the evaluation the Council would determine whether to continue the developer competition or to close down the existing competition with no contract awarded.

(ii)

Bidder A [MEL]

…

•

The bidder’s mandatory financial offer identified gap funding requirement of circa £67m, which when normalised was estimated at £69m. When risk adjusted, gap funding requirement increased to £80.4m.

•

The bidder’s optional variant financial offer identified a gap funding requirement of around £35m, which when normalised was estimated at £42.7m. When risk adjusted, the gap funding requirement increased to £64.4m.

…

3.2

The Project Board was advised that since the launch of the developer competition market conditions had significantly changed to such an extent that the developers’ mandatory bids did not represent value for money, whilst the optional variants had not demonstrated a sufficient appetite or ability for taking risks from the Council on a value for money basis.

3.3

The Project Board was informed that the option existed to either continue the developer competition with both bidders, or to close the competition without the award of a contract. It was also noted that it was not possible to continue the competition with only one developer bidder.

3.4

The Project Board agreed to recommend to the City Council’s Executive Board that the developer competition should be terminated without the award of a contract.

4.0

Leeds Arena Developer Competition, Public Sector Comparator

4.1

The Project Board was advised that feedback from the developer bidders during the ITCD phase of the developer procurement process had indicated that given the envisaged contribution from enabling development had virtually disappeared, that the developer proposals were likely to be at a level that would challenge the overall project viability. Accordingly, bidders had been requested to make an interim submission which should represent the best commercial bid.

4.2

It was noted that the developer submissions had been considered in relation to the Council’s Public Sector Comparators (PSC’s) namely, Elmwood Road and Elland Road, to enable the Council to determine whether the project developed via the developer competition would be both affordable and offer value for money to the Council.”

…

Clay Pit Lane/ Elmwood Road

…

4.8

The level of gap funding (assuming a deal with TCS is concluded) has been estimated at £29.3m, which when risk adjusted increases to £42.1m.

4.9

The key risks identified relate to the acquisition of the Brunswick Building from LMU and concluding an agreement with Town Centre Securities to capture car parking income from the Merrion Street car park to support prudential borrowing to generate a capital contribution to fund the arena.

4.10

The Project Board advised that the Elmwood Road TSC Public Sector Comparator produces the smallest gap funding requirement of all the comparable options and, that the base, none-TCS PSC option at Elmwood Road and the PSC at Elland Road both also produce lower gap funding requirements than the normalised developer bids. The consultant team advised that the preferred option that has the potential to be affordable and provide the best value for money would be for the public sector to lead delivery of the arena at Elmwood Road based on acquiring the balance of the site from LMU, that TCS provides a secure £20m of capital (or a rental equivalent) and that appropriate arrangements are established to manage project development and project risk.

…

4.12

The Project Board was informed that there was a risk that the Council could face a legal challenge from one or both of the unsuccessful developer bidders, if it were to choose to pursue the PSC route. The Board noted that whilst this risk could not be completely removed, the Council could bring to a close the developer competition at its own discretion. The competition documentation issued to bidders had referred to this option and all bidders had been consistently advised that all costs arising from their participation in the competition were incurred at their own risk.

…

4.14

The Project Board agreed to recommend to the City Council’s Executive Board that:

(i)

Elmwood Road be identified as the preferred site for the arena development subject to concluding satisfactory legal agreements with Leeds Metropolitan University and Town Centre Securities.

(ii)

The Elland Road PSC option is identified as the reserve site for the arena development if Elmwood Road cannot be satisfactorily progressed or if it ceases to be the most economically viable or no longer offers the best value for money solution to the Council.”

The Executive Board met on 5 November 2008. Mr Coulson prepared a detailed report for the Executive Board entitled “Proposed Leeds Arena, Selection of Preferred Developer/Site” (G74/15-36). Section 1 of the report summarises the background:

“1.1

The City Council commenced a competition to procure a developer/site for the arena in July 2007, assuming the following sources of funding, to be secured through a competitive, two stream procurement process.

•

capitalised operator rental stream (via operator guaranteed rental)

•

enabling development (brought forward through the developer competition)

•

public sector gap funding of up to circa £20m (based on feasibility estimates).

…

1.4.

However, as the developer competition has progressed, market conditions have worsened, creating a difficult environment to secure the amount of enabling development value required to make any scheme viable at the £20m gap funding level. Notable changes in the economy and development market include:-

•

the ‘Credit Crunch’, considerable tightening of the availability of debt, increased debt costs, tightening of bank lending criteria and more conservative attitude to risk.

•

falling property values (notably residential apartments in the city centre) and general negative movement in commercial property yields (in part in response to the low availability of debt).

•

much greater scrutiny of covenant strength and focus on vacant possession values in the event of a tenant default.

1.5

This difficulty was recognised by developer bidders, Council Officers and the Council’s retained consultants as the process progressed, and a number of actions have been taken in an attempt to improve the viability of the developer competition, including:

•

introduction of alternative financing solutions through Council Prudential Borrowing supported by the guaranteed rental from SMG

•

introduction of a variant bid for developers, reducing their risk/exposure to enabling development values.

1.6

Against this background and during the ITCD stage of the developer competition, the Council introduced an additional stage in the procurement process, requesting bidders to submit their best commercial offer for developing the arena…

1.7

In parallel with the actions outlined in paragraph 1.5 above to improve the viability of the developers’ proposals and in accordance with the action reported to the Executive Board in May 2008, Council officers have sought to develop a number of alternative development options (Public Sector Comparators), in order to gauge whether the developer competition provided value for money to the Council. In making their interim submission, the bidders were clearly advised that their proposals would be compared with the Public Sector Comparators and, that on the basis of the evaluation the Council would determine whether to continue the developer competition (i.e. invite full tenders) or to close down the existing competition with no contract awarded.

1.8

As this process has progressed, it has become apparent that a scheme developed as a Public Sector Comparator may represent the most cost effective method of project delivery and the best value for money solution.”

Section 2 of the report dealt with developer submissions and their evaluation. Section 3 is concerned with Public Sector Comparators. Paragraph 3.9 states:

“Members of Executive Board should note that the development of the PSC models are still at an early stage and, therefore, in calculating the potential level of gap funding required for the Public Sector Comparators, the funding requirement has been “risk adjusted” by 20% in an effort to quantify the potential level of financial exposure the City Council could be exposed to should none of the site specific risks and the general risks associated with the Council delivering the project be managed out effectively. Council officers consider it prudent to identify the potential costs risk at this stage of the PSC development that the Council could be exposed to if appropriate action is not taken to manage/control such risks both during the design and construction phases of the project.

…

(ii)

Clay Pit Lane Public Sector Comparator

3.14

The Clay Pit Lane PSC has been developed on the assumption that the City Council will be able to acquire the site of the Brunswick Building from Leeds Metropolitan University, which when combined with the adjacent site already in the ownership of the Council will accommodate the arena and a small amount of associated development. …

3.16

The Executive Board should note that a critical element of the Clay Pit Lane PSC proposal is the use of additional income generated from the Council owned multi-storey car park at Woodhouse Lane and the Merrion Street car park owned by Town Centre Securities.

3.17

If Executive Board determines to progress the development of the arena at Clay Pit Lane, members should note that the proposed development would add significant value to the Merrion Street car park arising from the additional car parking revenue on event nights. In recognition of this, it is important that a City Council-led scheme minimises the potential for car parking income leakage to other operators. Accordingly, discussions have been held with Town Centre Securities to secure from the company a capital equivalent contribution to the arena scheme, the value of which has been assessed at £20m. The precise mechanism for securing this £20m of funding from Town Centre Securities has yet to be finalised and, could be in the form of a legal agreement. Alternatively, in order to simplify car parking management for arena events, Town Centre Securities may lease from the Council the Woodhouse Lane MSCP for the open market value of the car park based on current operating arrangements. Under this option Town Centre Securities would also pay to the Council the £20m (capitalised rental) detailed above to reflect the benefit of enhanced car parking income from both the Woodhouse Lane MSCP and the Merrion Centre car parks…

3.18

The level of gap funding required based on Q1 2008 prices for the Clay Pit Lane PSC is estimated at £29.3m which when adjusted to reflect the risk associated with the project that would need to be managed by the Council in delivering the project and, which may or may [not] be incurred in full or part would increase the estimated gap funding requirement to £42.1m (rounded). It is assumed that some of the risk will be managed, and therefore, this is considered as a worst case scenario.

3.19

In terms of the economic benefit arising from an arena development at Clay Pit Lane, it has been estimated that the development would contribute £25.5m per annum to the City/Region economy and would create around 330 new full time equivalent jobs.

3.20

The major site specific risks associated with the delivery of the arena at Clay Pit Lane are the acquisition of the Brunswick Building from LMU and concluding an agreement with Town Centre Securities to capture additional car parking income, which could be used to support Prudential Borrowing to generate a capital contribution to projects costs”.

Section 4 of the report summarised “Proposals” and Table 1 (G74/25) provides a comparison between the developer bids and the PSCs in terms of both the base gap funding requirements and an appropriate risk adjustment to provide the Executive Board with the financial implications of developing the arena through either route. Paragraph 4.3 states:

“The proposed option that has the potential to be affordable, provide the best value for money and which would accord with both public and business aspirations i.e. Leeds Chamber Property Forum and Leeds Chamber of Commerce would be for the City Council to lead the delivery of the arena development at Clay Pitt Lane. Executive Board must, however, note that this proposed option has a number of contingent factors that need to be addressed:

(i)

That the City Council conclude an appropriate legal agreement with Town Centre Securities (which could include an agreement to lease the Woodhouse MSCP), in order to capture all Arena event car parking income in the vicinity of the Arena. Payments from Town Centre Securities to the Council will be used to support prudential borrowing to generate a contribution of £20m towards the arena project costs.

(ii)

The City Council secure the acquisition of the Brunswick Building from LMU.

(iii)

That an appropriate project delivery mechanism be developed, potentially using the Council’s existing framework agreement with the Strategic Design Alliance, with additional support particularly around design and cost challenge. ”

During the meeting Mr Farrington made a presentation to the Executive Board. The Executive Board approved the recommendations of the Project Board. The minutes of the Executive Board (G76/52) record that the Board resolved that the developer procurement competition for the arena be terminated without the award of a contract; that Clay Pit Lane be approved as the preferred site for the development of an arena; and that Elland Road be approved as the reserve site for the development of an arena.

Mr Russell informed MEL by telephone later in the day on 5 November 2008 of the decisions made by the Executive Board. On 7 November 2008 MEL received official confirmation of the outcome of the competition. On 17 November 2008 a debriefing meeting took place at Cobbetts’ offices.

The legal framework

Where a defendant makes a false representation, knowing it to be untrue, or being reckless as to whether it is true, and intends that the claimant should act in reliance on it, then in so far as the latter does so and suffers loss the defendant is liable (Clerk & Lindsell on Torts, 20^th Ed., para 18-01).

The essentials of the tort of deceit were set out in Derry v Peek [1889] 14 App. Cas. 337 at 374 by Lord Herschell:

“First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made (i) knowingly, (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth.”

It follows from this that a statement honestly believed to be true, however implausible it may be, is not capable of amounting to fraud (see Clerk & Lindsell on Torts, 20^th Ed., para 18-19).

An allegation of fraud is an allegation of serious wrongdoing, however it does not involve the application of a higher standard of proof. There is one standard of proof and that is the simple balance of probabilities (In re B [2009] AC 11, per Baroness Hale at para 70; and Dadourian Group International Inc v Simms [2009] EWCA Civ 169, per Arden LJ at paras 29-32).

In AIC Ltd v ITS Testing Services (UK) Ltd [2006] EWCA Civ 1601 at para 253 Rix LJ considered the position of an ambiguous statement. Such a statement, he said, may be fraudulent

“… but in such a case it is essential that the representor should have intended the statement to be understood in the sense in which it is understood by the claimant (and of course a sense in which it is untrue) or should have deliberately used the ambiguity for the purpose of deceiving him and succeeded in doing so. …”

The tort of deceit is complete only when the representation is acted upon. It follows that if, during the time between the making of the representation and the claimant acting upon it, the defendant discovers it to be false or circumstances change to his knowledge so that it is now untrue, liability may be incurred (Clerk & Lindsell at para 18-18). In Food Co UK LLP v Henry Boot Construction [2010] EWHC 358 (Ch) Lewison J at para 213 approved the following passage in Cartwright on Misrepresentation and Mistake and Non-Disclosure at section 5.17:

“In such cases the question is whether the representor can be shown to have become fraudulent by the time of the contract. For this to be established, the representee will have to show not only that the representor knew of the relevant change (he has discovered the change in the facts or he has discovered that he has already made a false statement) but also that his knowledge is sufficient to make him fraudulent: he must realise the significance of the change for the statement he has already made.”

An employer or principal is liable for torts committed by his employee or agent acting within his authority. Accordingly where an employee or agent makes a representation he knows to be false, and it was within his actual or ostensible authority to make that representation, the employer or principal will be liable even if personally entirely innocent. Conversely if the employer or principal expressly authorises his employee or agent to make a statement which he himself knows to be false, he is liable. However where a false representation has been made innocently by an agent acting within his authority, the mere fact that the principal knows the facts which render the representation false will not make the latter liable if he has not expressly authorised the representation or deliberately concealed facts from the agent with a view to the claimant being misled. In Armstrong v Strain [1951] 1 TLR 856 at 872 (affirmed [1952] 1 KB 232, CA), Devlin J stated:

“There is no way of combining an innocent principal and agent so as to produce dishonesty. You may add knowledge to knowledge, or … state of mind to state of mind. But you cannot add an innocent state of mind to an innocent state of mind and get as a result a dishonest state of mind.”

To entitle a claimant to succeed in an action in deceit, the claimant must show that he acted in reliance on the defendant’s misrepresentation. If he would have done the same thing even in the absence of it, he will fail (Clerk & Lindsell at para 18-34). In Dadourian v Simms and others [2009] EWCA Civ 169 at paras 99 and 101 the Court of Appeal confirmed the correct legal test of inducement, approving the approach of the trial judge Warren J:

“As to that, the judge directed himself in law, at J(1) 543-546, as follows: (1) it is a question of fact whether a representee has been induced to enter into a transaction by a material representation intended by the representor to be relied upon by the representee; (2) if the misrepresentation is of such a nature that it would be likely to play a part in the decision of the reasonable person to enter into a transaction it will be presumed that it did so unless the representor satisfies the court to the contrary (see Morritt LJ in Barton v County NatWest Ltd [1999] Lloyds Rep. Banking 408 at 421, paragraph 58); (3) the misrepresentation does not have to be the sole inducement for the representee to be able to rely on it: it is enough if the misrepresentation plays a real and substantial part, albeit not a decisive part, in inducing the representee to act; (4) the presumption of inducement is rebutted by the representor showing that the misrepresentation did not play a real and substantial part in the representee’s decision to enter into the transaction; the representor does not have to go so far as to show that the misrepresentation played no part at all; and (5) the issue is to be decided by the court on a balance of probabilities on the whole of the evidence before it…”

The claim as pleaded

Paragraph 95 of the Re-Re-Amended Particulars of Claim (“RRAPC”) sets out 32 representations of fact (the “Representations”) that MEL allege were made by LCC, its employees and/or agents in order to induce MEL to enter into and/or continue in the Developer Competition. The Representations are that:

Paragraph 96 of the RRAPC claims that, induced by and acting in reliance on the Representations, MEL entered into and/or continued in the Developer Competition in the (mistaken) belief that:

MEL claims in paragraph 97 of the RRAPC that each of the Representations was false. MEL’s case is that by no later than October 2007 LCC knew that the representations were false, or was reckless as to whether they were true or false.

Paragraph 98 of the RRAPC sets out particulars of deceit.

The evidence

For reasons that will become clear I consider each of the Representations relied upon in support of the claim in deceit at the start of the hearing on 4 October 2012.

Ms Fletcher states that at a meeting she had with Councillor Carter on 20 October 2005 he repeated what he had said to her at the Women in Property dinner on 16 September 2005. At the dinner she says Councillor Carter said MEL’s City One site was “the best site” for an Arena in Leeds. She says that he “urged” her to “get on with it” by which “he meant [the] planning of an Arena on my City One site and promoting it as the location for the Arena” (C/1/702/para 58).

Councillor Carter said that the dinner was held in honour of Ms Dent and was a social occasion rather than a business dinner. He was sitting at a table of ten guests which included Ms Fletcher. Much to his embarrassment Ms Fletcher tried to discuss the Arena. As far as he was concerned it was a casual conversation. He recalls Ms Fletcher asking questions such as “Did Leeds City Council have a preference for a site?” He cannot recall his exact response, but says he would have said that LCC did not have a preference for a site but would have probably acknowledged that his personal preference was for a city centre site such as City One. He did not consider that to be “urging”. He may have said something to the effect that the MEL site was a good site as it was in the city centre. It was not true that he advised Ms Fletcher to speak to Mr Sykes, who was a major landholder in Leeds City Centre, as she alleges. He said, “Given the context of the conversation at a social event during which I considered to be a casual conversation, surrounded by acquaintances, I did not for a minute believe that Ms Fletcher would base her future business plans on my comments”. (D2/7/1387-8/para 34). Councillor Carter says that he may well have told Ms Fletcher that the competition would be open and fair and that MEL should take part if it was interested in developing the Arena. He would have said words to the effect that he wanted to see as many developers coming forward as possible. There was no note made of this discussion which took place seven years ago and almost two years before the Developer Competition commenced.

Ms Fletcher produced a note of the meeting on 20 October 2005 (T1/6) which she said she made at the meeting. Councillor Carter says that he does not recall Ms Fletcher making a note or indeed ever writing notes during any meeting that they had together. He does not recall the meeting but he would have regarded it as being an informal meeting and if he had seen Ms Fletcher writing notes he would have asked her not to, as he would not have considered it appropriate. Had Ms Fletcher continued to take notes he would have then insisted upon an LCC officer being present to also take notes. Mr Cawson QC, for LCC, suggested to Ms Fletcher that phrases in the notes such as “As discussed at dinner AC thinks that …” suggests the notes were written after the meeting; Ms Fletcher did not accept that this was so (Day 5/33/17-23).

Councillor Carter does not accept that he would have used the word “best” to describe the City One site. He would however consider that site was a “good” site. He accepts that he may have commented upon the city centre being his preferred position for an Arena, which it was. He did not recall saying that LCC did not wish to build an Arena itself as they did not want the development risk. It was however the case that at the time that LCC did not wish to build the Arena themselves but preferred to have a private developer build the Arena. He said that he would not say the officers were not up to it but it was his view that the Council’s track record was not particularly good (Day 19/116/10-25).

Ms Fletcher says that Ms Dent referred to the need for regeneration and for a commercial developer to bear the development risk and the need for the Arena to be close to public transport links. She says that Ms Dent said that Holbeck and the City One site would be “perfect” in both of these respects. She says that Ms Dent assured her that Elland Road was not the best location and a city centre site (such as City One) would be better (C/1/705/para 68).

Ms Fletcher produced a note that she says she took at the meeting (T1/8). It records “If no supertram – closeness to existing pub transport more viable. Holbeck City One perfect. Link Holbeck and Beeston to city – deprived areas”. It also notes “Elland Road no – not best place. City best”.

Ms Dent says she does not recall this particular meeting. She was one of four people at the meeting and points out that the note does not indicate who made the statements relied upon. She does not believe that she would have described the City One site as “perfect”.

Ms Fletcher’s evidence is that she attended the annual MIPIM property conference in Cannes. On 15 March she noticed Mr Ken Bates (the Chairman of Leeds United FC) in discussion with Councillor Carter and Ms Dent on board the LCC boat. She says that given the PMP Feasibility Study had recommended Elland Road she was naturally concerned that LCC were discussing the possible development of an Arena at Elland Road with Mr Bates. The following day, 16 March, the Council was hosting a brunch for investors interested in the city, which she attended. She says she had a private discussion about her concerns regarding Elland Road with Councillor Carter. Councillor Carter told her that Mr Bates had made a special trip to see him from his home in Monaco and assured her that they did not intend to build an Arena or casino themselves at Elland Road and she should not be concerned. They were simply meeting Mr Bates to keep him “happy”. Councillor Carter assured her that he still thought Holbeck was “the best place” for the Arena and casino. (C/1/716/para 114).

Councillor Carter does not recall having this conversation with Ms Fletcher. He says he would not have gone into any detail with Ms Fletcher with regard to his meeting with another person as he would consider that to be unprofessional and he does not believe that he would have said that he met Mr Bates to “keep him happy”. He does not believe that he would have described Holbeck as the “best” site, rather that it was a “good” site.

Mr Bates had been extremely polite; they had had a very friendly chat; he certainly wasn’t bombastic. He did not say to Ms Fletcher that he was or that they were simply meeting Mr Bates to keep him happy.

Councillor Carter said that he would have told Ms Fletcher that the Council did not want to build an Arena or casino themselves at Elland Road.

Ms Fletcher said that the following day, 17 March, she and Mr Aspinall met Ms Dent for a pre-arranged meeting. During the conversation Ms Fletcher raised her concerns about seeing Councillor Carter and Ms Dent in discussion with Mr Bates two days earlier. Ms Fletcher said “We were assured by Jean that Elland Road was not the preferred choice for the Arena and casino location and that they did not want to build it themselves. She stated that they wanted a private developer to do this.” (C/1/716/para 115).

Ms Fletcher said the meeting was very important to her. She said that she may have had a note of the meeting; she had looked for it but could not find it (Day 5/51/4-8).

Ms Dent did not recall having any conversation with Ms Fletcher regarding Mr Bates. As for any intention to build the Arena themselves, her personal view because of previous experience was that the Council “would be better trying to risk transfer”. At this stage there was a preference not to build themselves, but until the procurement study was completed she could say no more than that (Day 15/105/11-17).

Ms Fletcher says that on 8 May 2006 she had a meeting with Councillor Carter to discuss a Consultants’ Brief that LCC had issued in relation to the Elland Road site. She was suspicious that any future competition for the development of an Arena would be “a sham” and that LCC seemed already to have made up its mind to develop an Arena on its own site at Elland Road. Councillor Carter “assured” her that her concerns were unfounded. He again expressed the view that personally he thought Holbeck was the “best” location for an Arena. He “urged” her not to sell City One, that she mentioned she was considering doing. (C/1/718-719/para 125).

Councillor Carter does not recall this meeting. He does not believe that he would have used the term “best” as this was not how he viewed City One.

On 25 May 2006 Ms Fletcher attended, together with Mr Aspinall, a meeting that she had requested with senior LCC officers to discuss her concerns in relation to LCC’s Elland Road Consultants’ Brief. She says she was told that LCC did not favour Elland Road as a site for a casino or Arena and that, ideally, they would prefer a city centre site. She asked whether LCC wanted to build the Arena itself and was “assured” by the LCC representatives present that they did not. Ms Dent told her that LCC did not want to own and operate an Arena itself (C/1/720-721/para 131). Councillor Carter stated that the Elland Road brief had been issued as “a sop” to Mr Bates. (Para 132).

Ms Dent described the meeting as a wide-ranging meeting. She did not understand it to be a meeting about the Leeds Arena. If she had understood prior to the meeting that there was to be a discussion regarding the Elland Road Consultants’ Brief and master plan, then she would have invited Mr Farrington and/or Mr Coulson to the meeting, but she did not. In this case she thought she was coming to a meeting about the New Holbeck Vision. She brought with her therefore Mr Thorpe, the civic architect, and Mr Mawhinney, the head of developments who was dealing with the Holbeck area. She could not recall the detail of the conversation but it would not surprise her if she had said the Council did not want to own or operate an Arena itself. She said that at that time “there was a preference within the Council that if we could achieve a development where we de-risked ourselves, that would be the best option for us. But until we had the procurement study, we really didn’t know”. (Day 15/20-118/7). Councillor Carter denied that he stated that the brief had been issued “as something of a sop” to Mr Bates. It was issued to begin safeguarding the Council’s position as the major landowner in the area so as “to put the Council in the driving seat as to any future development at Elland Road” (Day 19/157/14-18). He considered that Mr Aspinall was closer to grasping what it was all about than Ms Fletcher appears to be (Day 15/157/23-24; G5/185). Ms Dent did not recall encouraging Ms Fletcher to press on with plans for, in particular, the Arena and casino.

Ms Fletcher said that Councillor Carter had a word with her privately immediately following a Marketing Leeds meeting. She states that he repeated his previous assurances that he supported the New Holbeck vision and told her that LCC had no intention of building an Arena itself and that it wanted a private developer to do so. Once again, he told her that he was concerned that LCC’s officers were not up to managing a project of this scale (C/1/722/para 137).

Councillor Carter does not recall this conversation nor why he would have been attending a Marketing Leeds meeting as he was not a member. If he did provide an assurance regarding the New Holbeck Vision, this was entirely consistent with LCC’s Vision for Leeds. He does not recall stating that LCC wanted a private developer to develop the Arena, but if he did, it would have been true. He disagreed that he would have said that LCC’s officers were not capable of carrying out the Arena development (D2/1421-1422/para 21).

Ms Fletcher said she did make notes of the meeting, but unfortunately she cannot find them (Day 5/67/1-2).

Asked about Ms Fletcher’s evidence that he told her that LCC had no intention of building an Arena itself and wanted a private developer to do so, Councillor Carter said:

“It is once again the wording, that—Leeds did not want to build the Arena itself. That is true, we did not want to. So I suppose you could say ‘intention’, but I would say—my words would be: no, look, I have told you before, we don’t want to build it ourselves and we want a private developer to do so.”

However he said he had no recollection of the conversation. (Day 19/160/15-162/11).

He said he would not have used the words “not up to managing a project of this scale”. He said: “I didn’t want us to be managing a project of that scale, it is quite true, and I did have concerns, and that is the terminology I would have used”. (Day 19/163/1-7).

Ms Fletcher hosted a dinner on behalf of Marketing Leeds for the Lord Mayor of London at her home. Ms Dent attended. Ms Fletcher’s evidence was that during after dinner drinks on the terrace Ms Dent gave her personal assurances that LCC did not itself wish to build the Arena, that LCC preferred a city centre site and that the process LCC was considering to procure the Arena would be entirely fair. (C/1/725-6/para 153). Mr Smillie said he was present at the conversation during which Ms Dent offered her personal assurance to Ms Fletcher that LCC did not want to build the Arena itself and that any competition would be entirely fair (C7/952/para 68).

Ms Dent said the event she attended was a formal Marketing Leeds dinner. It was held in honour of a visit to Leeds by the Lord Mayor of the City of London. Although this dinner was held at the home of Ms Fletcher, her understanding was that it was paid for by Marketing Leeds. She attended the event with Mr Rogers in their dual roles as Board members of Marketing Leeds and representing LCC. She remembered the dinner well but did not recall a discussion taking place with Ms Fletcher regarding the Arena that evening. She thought it unlikely that she would, in any event, have made the statements alleged as this dinner took place six months before LCC’s Executive Board made a decision to proceed with the Arena Project. (D1/1167/para 86-1169 para 90). However the Feasibility Study had already identified Holbeck as a potential location for an Arena.

Ms Fletcher said she made no note of these assurances.

In answer to questions from Mr Hollander QC, for MEL, Ms Dent said that she had a very vivid recollection of the evening. She and Mr Rogers had discussed their concerns about attending a dinner at a private home with the Chief Executive of the Council beforehand, but because this was a dinner in honour of the Lord Mayor of the City of London they were told that they should go, that they needed to be there to represent the Council at such an important dinner. So it was a very memorable dinner for her. She said she did not recall the conversation that Ms Fletcher and Mr Smillie said took place and did not believe that it did take place. It would not have been an appropriate place to have that sort of conversation or discussion, the reason for that was

“Because Ms Fletcher was the host for the evening, she was entertaining the Lord Mayor of the City of London and the Lord Lieutenant of West Yorkshire, and there just wasn’t the time or the place. I was with other colleagues. There wasn’t the time or the place for that conversation.” (Day 15/118/9—121/10).

On 20 September 2006 Ms Fletcher and Mr Aspinall met with Ms Dent and Mr Speak along with MEL’s planning consultant in order to have a further detailed discussion about the New Holbeck Vision and issues surrounding it. Ms Fletcher said that one of the specific issues addressed was in relation to LCC’s approach to the Arena. She said she still suspected that LCC intended to build the Arena itself at Elland Road. Ms Dent assured her again this was not the case (C/1/727/para 160). In MEL’s Further Response to LCC’s Request for Further Information under CPR Part 18 it is pleaded that Ms Dent, on behalf of LCC, “gave a categorical assurance that the Defendant definitely did not wish to develop the Arena themselves (‘Definitely not!’)”.

Ms Dent said that she certainly would not have been categorical regarding LCC’s intentions concerning the Arena as no decision had been made by the Executive Board. She could not recall the details of this meeting. However she believed that if she did make a comment she would probably have confirmed that LCC did not have the intention to build the Arena itself, which was true (D1/1169-70/para 92).

Mr Cawson asked Ms Fletcher about her notes of the meeting (T1/51-52). The original of the note could not be located. Mr Cawson suggested that the words “Council, no definitely not!”, which appeared to be squeezed in between two lines, were written at a different time from the remainder of the note. Ms Fletcher said she believed they were written at the same time (Day 5/83/23-84/19). Mr Aspinall’s note of the meeting (G7/174) makes no mention of a discussion in relation to the Council’s intentions or any assurance being given by Ms Dent. He deals with the various items on the Agenda which makes no mention of the Council’s intentions. Mr Cawson suggested that if this had been a matter of concern to MEL at the time, then surely Mr Aspinall would have made a note of that. Ms Fletcher said “Not necessarily, because it wasn’t as important to Ben as it was to me… [W]hen I would say something about Elland Road and ask the Council very direct questions, Ben would often be a little embarrassed about it and would feel that maybe I shouldn’t necessarily be asking them. So it’s—it is not important—as important to him, so he hasn’t written it down”. (Day 5/82/23-83/12). Ms Ansbro’s note (G7/177) also makes no mention of it. Ms Fletcher said that is because she would take notes of matters that concerned her as a planner (Day 5/83/16-17).

Ms Fletcher says that she was seated next to Councillor Carter at the dinner and took the opportunity to have “a full and frank discussion” with him regarding the Arena competition (C/1/730/para 169). She says that “Councillor Carter repeated his previous assurances in relation to the Competition. He told us in very clear terms that LCC did not prefer Elland Road, MEL was not being used as a stalking horse, LCC did not want to build the Arena themselves and that the Arena procurement process would be entirely fair”. (C/1/730/para 170).

Mr Smillie said that during the dinner Ms Fletcher “took the opportunity to challenge Councillor Carter, once again, about the Council’s attitude to the Arena process and to establish whether it was still his position that LCC had no intention of wanting to build it themselves”. He recalls that Councillor Carter’s view remained as stated by Ms Fletcher in her evidence (C/7/952/para 69; Day 11/147/25-148/11).

Councillor Carter said that he recalled attending the dinner. It was a social invitation from the Yorkshire Post and not a business dinner. He said

“I was seated at the same table as Ms Fletcher and I recall that I was unhappy with this situation. I commented to my wife that I was not particularly happy about it as I knew that Ms Fletcher would try to introduce business matters into what was supposed to be a social event. Again, I was on a table of acquaintances and it was not appropriate to discuss business matters. In spite of this Ms Fletcher took the opportunity, as she was in the habit of doing, to discuss the Arena project and in turn criticise the Developer Procurement. I recall however on this occasion that the conversation was fairly brief.” (D2/1398/para 56).

He did not recall saying that LCC “did not prefer Elland Road”, MEL “would not be used as a stalking horse”, LCC “did not want to build themselves” and that the “process would be fair”. However if he did say words to that effect, then it would all have been true and remained true throughout the Developer Procurement. (D2/1399/para 58). He said it had always been LCC’s position that a private developer and a private operator should be appointed regarding an Arena. He was “puzzled as to what LCC could gain by encouraging MEL to be part of a competition as a “stalking horse” (D2/1400/para 61). Councillor Carter’s wife attended the dinner with him. He disputes that Ms Fletcher had a “full and frank” discussion with him. Such a discussion would have been highly inappropriate on this social occasion. (D2/8/1422/para 23).

Ms Fletcher made no note of what was discussed at the dinner (Day 5/111/23-25), although she said “it was so very important to [her] at this time” (Day 5/114/17-18).

Councillor Carter said also at their table was Mr Chris Green, the managing director of the Yorkshire Post newspaper and his wife, and as he recalled there was the chief executive of Johnston Press which is the parent company of the Yorkshire Post newspaper. It was a table of ten people. (Day 20/5/17-6/21). It was a big dinner. There were some 200 people. Councillor Carter said that there were a lot of people there who he wanted actually to go up and meet, and there was no full and frank discussion with Ms Fletcher as she alleges (Day 20/6/2-5). He added “I don’t recall at a social event I attended, with or without Ms Fletcher, having full and frank business discussions around a table of people whom I didn’t know, and particularly if they were property developers or the press” (Day 20/12/10-14).

Ms Fletcher said that on 23 October 2006 Mr Russell phoned her. He said that he had heard from Ms Dent (following her meeting with Ms Dent on 20 September 2006) that she was still concerned that MEL was being used and that LCC was considering building the Arena themselves and that it preferred its own Elland Road site. Mr Russell told her that she must not be concerned and specifically stated that LCC did not want to build the Arena themselves nor to take the development risk. He emphasised that the Arena procurement process would be fair. (C/1/730/para 171-731/para 172).

Ms Fletcher said that Mr Russell called her again three days later, on 26 October 2006. He confirmed the timescales for the Arena competition. (C/1/731/para 173).

Ms Fletcher produced notes of the telephone conversation on 23 October 2006 (T1/57-58) and of a meeting with Mr Russell on 29 or 26 October 2006 (T1/60-61, and also see G8/293).

Mr Russell recalled that shortly after the Procurement Study was published, he met with Ms Fletcher at the Queen’s Hotel in Leeds. He believed that it was on or about 23 October 2006. At the meeting at the Queen’s Hotel Mr Russell explained to Ms Fletcher the process of the competition. This included the overlap in the Operator Competition and the Developer Competition. He may have agreed that City One was a strong contender but he is not sure that he would have said that it had a “good chance” (D3/1709/paras 47-48). Whilst he recalled Ms Fletcher seeking assurances about the Developer Competition and whether there was a preference for Elland Road, he did not recall a discussion about LCC developing Elland Road itself (D3/1708/para 46-1710/para 49). He thought that the note at G8/293/294 which bears the date “26 or 29 October 2006” may refer to a phone call that he held with Ms Fletcher and Mr Aspinall after the meeting on 23 October 2006. He cannot now be sure. (D3/1710/para 50-1711/para 52). As for the suggestion that Mr Russell called Ms Fletcher at the request of Ms Dent, he said that he did not recall discussing any concerns Ms Fletcher may have had at the time with Ms Dent and he would be very surprised if he had been approached by Ms Dent and discussed Ms Fletcher’s views (D3/1815/para 8).

Mr Russell thought that the meeting at the Queen’s Hotel was also attended by Mr Foster.

As for the Council building itself, Mr Russell said

“…I have no recollection of ever being asked: does the Council want to build the Arena itself? I don’t ever recall being asked that question by Ms Fletcher or, frankly, I think anybody else. If, however—and this is an important distinction but I hope it can be clear, I don’t recall ever being asked that. If, however, I had been asked it at 2006, 2007, 2008 I am sure I would have said that it doesn’t have a desire or an intention to build it itself. Our whole procurement strategy was built around having the private sector operating an Arena. It was built around the private sector developing, building and constructing an arena. So it was obvious that the Council wouldn’t have wanted to build it itself. But, importantly, I don’t recall ever being asked the question.” (Day 23/181/4-19).

Ms Dent said that she had no recollection of a conversation with Mr Russell in which she said that Ms Fletcher was still concerned that MEL was being used and that LCC was considering building the Arena itself and it preferred its own Elland Road site. (Day 15/128/6-18).

On 7 November 2006 Ms Fletcher and Ms Dent were interviewed together by a journalist from the Property Week journal for an article about the way in which the public and private sectors were working closely to bring about changes in Leeds. Ms Fletcher says that they spent two or three hours together. She said that Ms Dent was very excited about the city’s potential for growth and success, and stated they had a major opportunity now. During the course of their conversations she urged Ms Fletcher to develop City One and to bid for the Arena on the site, despite knowing that she was considering selling the site due to her husband’s health and their plans. Ms Dent gave her personal assurances that LCC did not prefer its own site at Elland Road and did not want to develop an Arena itself and that LCC wanted a private developer to bear the risk of development. She assured her that the process would be fair and transparent, in the sense that LCC genuinely wanted to appoint a private developer to develop an Arena on the best site. (C/1/733/paras 176 and 177). The article appeared on 1 December 2006 (G11/22-24).

Ms Dent said that her recollection of the day was that she and Ms Fletcher chatted informally in between being interviewed by the reporter at the hotel for more than an hour and then going to a car park to have their photograph taken.

Ms Dent said that she did not need to urge Ms Fletcher to bid for the Arena. She wanted to do the Arena. (Day 15/132/2-3). She did not encourage her; she did not need encouragement (Day 15/133/3-4). She said she had no knowledge then or at any other time that Ms Fletcher was considering selling the site (Day 15/133/9-10). Her overriding memory about this discussion was about [Sam] (Day 15/135/11-12). The discussion was about the broader New Holbeck Vision. Its focus was around [Sam] and the fact that she said she was talking to [Sam] not just as the landowner but looking at the opportunity of relocating them to the City One site (Day 15/131/4-9). Ms Dent did not recall Ms Fletcher saying anything about Elland Road. (Day 15/135/10-13).

Ms Fletcher said that on 8 November 2006 she and Mr Aspinall had a conference call with Mr Russell so that he could update them on the Arena procurement process. During the course of the conversation Mr Russell told them that LCC did not want to build the Arena itself, that it needed a developer on board and that LCC had no preference for Elland Road (C/735/para 182).

No note has been produced of this conversation. Mr Aspinall does not mention the conversation in his witness statement.

Mr Russell has no recollection of this conversation. (D3/1817/para 14). He reiterated that he had no recollection of being asked whether the Council wanted to build the Arena itself (Day 24/17/15-22). What Mr Russell did recall was Ms Fletcher asking about the process that he was recommending to the Council about the operator competition being held first and then a second competition to choose a site. She wanted LCC to commit to Holbeck and then go ahead to identify an operator (Day 24/17/1-6).

Ms Fletcher said that she and Mr Aspinall had a meeting on 16 March 2007 with Ms Dent on board a motor boat at the Annual MIPIM Exhibition in Cannes. Ms Fletcher expressed her concerns in relation to the proposed Developer Competition which had been heightened by the publication two days earlier of LCC’s report on the master plan for Elland Road, which made reference to and included in the plans the development of an Arena on LCC’s land. She said that she remained concerned that LCC intended to develop the Arena at Elland Road itself and any bid by MEL would effectively be a “stalking horse” for LCC’s development of an Arena there. She told Ms Dent that MEL did not want to waste its time and money if LCC intended to build an Arena at Elland Road and she would prefer her to just be frank with her. Ms Dent assured Ms Fletcher that LCC desperately wanted MEL to take part in the Competition. She gave her personal assurance that City One was not being used as a stalking horse, that LCC would prefer any Arena to be developed in the city centre and that LCC had no interest in developing the Arena itself. (C/1/745/para 220).

Ms Dent recalls having an informal chat with Ms Fletcher on a motor vessel which had been rented by Location Leeds. She recalls Ms Fletcher using the term “stalking horse” during conversations on a number of occasions during 2007-2008, however she does not recall that she specifically used the term on this occasion. She says the term “stalking horse” is not a term she would use and she has never fully understood what MEL meant by its use of the term. She presumed that it meant MEL considered that LCC really intended to develop the Arena at Elland Road. If Ms Fletcher did make such a statement, her belief was unfounded. The Developer Competition had not begun but it was LCC’s intention at this stage and throughout the Developer Competition that it would be fair and transparent. LCC had no pre-determined views as to the outcome of the Developer Competition although it did want the Arena to be developed by the private sector for the reasons set out in the report to the Executive Board in December 2006 (G12/105-117).

Ms Dent did recall reassuring Ms Fletcher that LCC had no pre-determined plan to select Elland Road as the site for the Arena. She did not specifically recall stating that LCC preferred the Arena to be developed in the city centre of Leeds during this meeting. However the October 2006 Procurement Study (G9/51-149) had shown that a city centre site had the greater economic impact and Ms Dent and other Council officers had indicated this at meetings such as the Leeds Property Forum of which Ms Fletcher was a member. Finally, Ms Dent did not recall specifically telling Ms Fletcher during this conversation that LCC did not want to develop the Arena itself. However she says that if she did make such a statement she believes that it would have been true as LCC acting as developer was simply not on the agenda at this time. (D1/3/1160-1164/paras 72-77; Day 15/138/10-146/5). Ms Dent does not recall nor does she believe she would have said that she or LCC “desperately” wanted MEL to participate in the Arena competition. By that stage Holbeck together with other sites had been identified in the Feasibility Study as an area suitable for the location of the Arena (D1/4/1232/para 35; Day 15/145/7-13). Ms Dent said that in her view in any competition the Council has to have willing participants. So, she said, “I am not seeking to persuade people against their will to participate. Yes, Holbeck has been identified. Yes, City One is a good site in terms of its location. I don’t know any details about site conditions, title, anything like that, that may [present] problems, whether there are site assembly issues.” (Day 15/142/13-18).

Mr Aspinall cannot recall exactly what was said on this occasion, but he can recall that Ms Fletcher raised her concerns and sought reassurances about LCC’s apparent pre-disposition towards Elland Road (C/3/830/para 47; Day 8/94/10-24).

Mr Cawson suggested to Ms Fletcher that if this had been an important conversation where important assurances had been given to her, then she would have taken a note of the meeting. No note has been produced. Ms Fletcher said that she thinks she did take a note of the meeting but she cannot find it. (Day 5/126/15-19).

Mr Williams recollected discussing the outcome of the meeting that he was told Ms Fletcher and Mr Aspinall had with Ms Dent on the boat (C/5/901/para 40) and Mr Smillie gave evidence (C/7/950/para 60) of what Ms Fletcher told him on her return from MIPIM. However neither Mr Williams nor Mr Smillie was present at the conversation on the boat.

On 29 May 2007 Mr Aspinall wrote to Mr Farrington (G18/259), copies to Ms Fletcher, Ms Dent, Mr Smith and Mr Russell, responding to the draft master plan for Elland Road, the Executive Board Report dated 14 March 2007 and the leader article in the Yorkshire Evening Post dated 21 February 2007 announcing public consultation. By letter dated 1 June 2007 (G19/171) Mr Farrington replied, copies to Ms Dent, Mr Russell, Mr Smith and Ms Fletcher. Mr Farrington concluded as follows:

“I have noted your concern that the master-planning process undertaken ‘queers the pitch’ for other developers/landowners to engage in the process. Whilst I acknowledge your viewpoint, I can assure you that Leeds City Council is commencing a transparent and competitive process for the development of an arena in Leeds. Elland Road, which is largely in Council ownership, is a site that one or more developers may choose as part of that process. Should this be the case, it is important that any proposals that come forward are developed within a master-planning context for the site, so that they can be appraised on a comparable basis. For this reason I feel that the master-planning option, which includes the potential for an arena, will add value to the procurement exercise. However, I can assure you that this is not a ‘fait accompli’ and the City Council is very keen to receive proposals from all potential developers/landowners to ensure that all sites can be appraised as part of the procurement process for the Arena which will be a clear and transparent process against pre-determined criteria which will be approved by Executive Board in the public domain.”

Mr Farrington said that this was his first experience of engaging with MEL. He remembered that he was surprised by the content of their letter. He thought it was very odd that the letter was marked as “Private and Confidential” in response to a public planning consultation. The tenor of the letter was that the use of Elland Road was contrary to planning policy and should not be considered. Mr Speak, who was the Chief Officer with responsibility for Planning Policy at LCC, disagreed with Mr Aspinall’s opinion and so Mr Farrington drafted a letter with the assistance of Mr Speak. Mr Farrington said that given its relationship to the Arena process the letter was cleared by Ms Dent before it was sent out. He said he did not understand MEL’s rationale in trying to undermine Elland Road. He thought it odd that MEL seemed to be taking a relatively adversarial stance from the outset (D1/1/989/para 54). Mr Farrington said that LCC was genuinely keen to receive proposals from all potential developers and landowners to create a strong competition which in turn would lead to the selection of the best possible solution for the building of an Arena in Leeds through the competition. LCC had no preference for Elland Road, but on advice had included Elland Road in the competition to allow developers to come forward who had no land holding in Leeds. That being the case, any master planning exercise had to provide for the possibility of an Arena being built at Elland Road. (D1/1/990/para 57).

In response to questions from Mr Hollander as to whether the competition was conducted as a fair and transparent process, he said it was. He said

“Yes, in the context of—well, two things. One, our obligations, and throughout that process my involvement was in the context of advice from Cobbetts, legal solicitors, for very experienced partners advising me throughout that process on meeting our obligations; and secondly, any analysis of this competition has to take place in the context of the very significant change in the economic conditions that took effect from the start of the competition and a buoyant property market, and a competition which [at] its inception was on the basis of that buoyant property market to one where there was the largest correction in that market for many decades.” (Day 12/12/3-18).

The Open Day was split into two parts. First, there was the public meeting at which Councillor Carter, Ms Dent, Mr Russell and Mr Smith gave presentations. MEL alleges that Ms Dent, Mr Russell and Mr Smith assured Ms Fletcher and Mr Aspinall that LCC neither wanted to develop or run an Arena. This was followed by a private meeting with LCC’s team. It was originally pleaded that Mr Farrington and Mr Coulson gave assurances that the Arena Competition would be fair and transparent; MEL was not being used as a Stalking Horse for Elland Road or LCC to build themselves; LCC “did not want to build [the Arena] themselves”; and LCC “really wanted” MEL in the competition.

Ms Fletcher noted that at the public meeting “Nick Russell and Andrew Smith talked about LCC wanting a developer/operator package, by which they meant that LCC neither wanted to develop nor run the Arena – it wanted the private sector to do both and for developers and operators to be selected by separate competitions”. (C/747/para 231). Asked about this by Mr Cawson she agreed that was the procurement competition that was being initiated. LCC was “seeking a developer to develop” (Day 5/129/11-19). Mr Smith said that at the public meeting what would have been said was “that Leeds Council wanted a private developer to develop and run… a private developer to develop, a private operator to operate. So that is what we would have said. Because that is what the meeting was all about, obviously.” (Day 25/38/18-22).

Ms Fletcher in her first witness statement said that Mr Coulson was present in the private meeting with MEL (C/1/747/para 232). In fact Mr Coulson attended a different private meeting, as he pointed out in his witness statement (D1/5/1280/para 104). In the light of his witness statement Ms Fletcher said in her second witness statement (C/2/809/para 28): “I believe that Chris Coulson was probably present at the private meeting on the Open Day, based on my hand-written notes, where I have noted ‘CC’ in the ‘our meeting’ section”. Mr Coulson then provided further detail of the events of the Open Day; he was present at various other meetings (D2/6/1353-1355/paras 5-13). In her third witness statement dated 3 October 2012 (C/964A9) she said:

“5.

Having further considered the witness statements and other evidence, I now realise that Chris Coulson, who is listed as being present at the first meeting, may not have been present at the second meeting. I had mistakenly assumed that my reference to ‘CC/MF’ in my notes meant that Chris Coulson was present.

6.

I do not think that I have ever met or seen Chris Coulson before the Arena Open Day and I would not then have recognised him. It is possible that I mistook somebody else present for Chris Coulson, hence the reference in my notes. It is also possible that my notes meant something else altogether, for example a reference to ‘city centre’ or ‘city council’. Another possibility is that this could also have been a reference to Chris Coulson and Martin Farrington being in charge of the Arena process, as I recall this was mentioned during the second meeting and that they were the two LCC people to contact.”

Ms Fletcher in her evidence said “… it is very confusing because that note [T1/66] is very… a very confusing note anyway.” (Day 5/134/13-15).

Ms Fletcher accepted that she was mistaken about Mr Russell and Mr Coulson being present at the meeting. (Day 5/131/11-19). In her first witness statement she referred to Mr Foster chairing the private meeting. She accepted that Mr Smith chaired the meeting.

Mr Aspinall’s notes (G20/32-35) record Mr Smith saying at the Open Meeting that “LCC doesn’t want to run (or own) an Arena. Any developer can bid against the Elland Road site. Want to encourage other landowners to come forward.” (Page 35). However there is no reference in his notes to any assurances being given during the course of the private session, nor did Mr Aspinall in his evidence make any reference to the specific assurances that Ms Fletcher said were given at the private meeting (C/832/para 55). Mr Finfer (G20/35B1), a solicitor who attended the Open Day meetings on MEL’s behalf also made notes. He noted “Elland Road not the preferred option”, but he did not record that Ms Fletcher had sought or been given any assurances during the course of the private meeting. Ms Fletcher said, “I can only assume that because we had been given some assurances in the first meeting that Leeds didn’t want to build themselves or own it – he hasn’t put it even in the first one, but Ben has.” (Day 5/137/24-138/3). PMP’s note of the private meeting with MEL is at G20/42-44; again there is no mention of the assurances that Ms Fletcher says she was given.

Mr Smith said that during the private meeting with MEL they raised a number of queries. One of the queries related to equal treatment of site options. He said that as far as he can recall MEL had concerns that Elland Road would be given favourable treatment by LCC including the land at low or no cost.

Mr Hollander referred Mr Farrington to Ms Fletcher’s note of the private meeting (T1/66) where next to his initials there are the words: “[Elland Road] not preferred option, don’t want to bld themselves” then the words, “Would be clear and transparent and no, not using us(!)”. Mr Farrington said “I don’t agree that was said.” (Day 12/117/19-118/10). He accepted that if he had made those statements he would have considered them to be completely true in June 2007. He said, however, “… the pertinent point is I don’t believe I did” (Day 12/119/18-19).

Ms Fletcher said that on 20 July 2007 Mr Foster of Arup dropped in to see her at MEL’s offices in Harrogate. He phoned her shortly before arriving, saying he wanted to discuss the Arena and the concerns she had voiced on the presentation day. She says that she re-iterated her concerns to Mr Foster in relation to the Developer Competition, specifically in relation to the perceived preference for Elland Road as a location. She says that Mr Foster gave her “his personal assurance that LCC did not want to build an Arena itself. He told me that they MEL had a good chance of winning, that City One was a ‘perfect site’, …” (C/1/750/paras 243 and 244). Ms Fletcher said that she “took a good deal of comfort from his assurances on behalf of LCC” (Para 245; see also C/2/807/para 21-22).

Mr Foster says that the main purpose of popping in to see Ms Fletcher was to discuss with her the fact that Arup was having its Group Board Meeting later that year in Leeds and was going to invite senior members of the Leeds business community, of which she was one, to a private dinner afterwards. He recalls Ms Fletcher did raise the question of the Developer Competition. She mentioned her concern that LCC had a preference to develop the Arena at Elland Road and that she therefore had concerns as to the fairness of the Developer Competition. (D2/21/1657-1659). He may have said that LCC did not have a wish to build the Arena itself as he believed that to be true from what was said at the Open Day and his understanding that the purpose of the competition was to find someone else to do it. He did not recall specifically using the words “perfect site” or “good chance of winning”, but he did recall discussing the general merits of the MEL site. The discussion he had with Ms Fletcher was one which was informal. He went there to discuss the Group Board dinner and also to keep in contact with MEL who were one of Arup’s clients. (D2/22/1669-1670). Ms Fletcher said in her first witness statement:

“At this stage I did not know, and Nigel Foster did not tell me, that he had any role in relation to the Arena project and I thought his visit was simply an attempt on his behalf to look after MEL as a client of Arup.” (C/750/para 245).

There is no note of the meeting.

Mr Hollander suggested to Mr Foster that he made the visit on 20 July because two days earlier at the Project Board meeting on 18 July, which he had attended, the project team agreed that they “… should engage with the developers to encourage their ongoing involvement in the overall developer/site procurement process” (G22/24 at 6.2). Mr Foster did not accept that was the reason for his visit and, in any event, nothing had been said at the Project Board meeting that would enable him to give a personal assurance that LCC did not want to build the Arena (Day 21/61/20-64/23). He said, “I may have said that my understanding is that Leeds City Council did not want to build an arena itself but I wouldn’t have given my personal assurance because that wouldn’t have been my responsibility”. (Day 21/65/4-11). Ms Dent said that he would not have had authority to make this representation on LCC’s behalf. (Day 15/159).

Ms Fletcher and Mr Russell met at the Radisson Hotel in Leeds on 27 July 2007. She says that she explained to Mr Russell her concerns about the Competition and that it would not be fair and transparent. Specifically, she says she told Mr Russell that she was worried that LCC preferred its own Elland Road site, that it wanted to build the Arena itself and that MEL was being used as a “stalking horse”. She says that Mr Russell said that he had been made aware of her concerns by Mr Foster and others. He wanted to assure her that the Competition would be entirely fair and transparent. He assured her that MEL would not be used as a stalking horse and that LCC did not wish to build the Arena itself and it really wanted MEL to take part in the Competition because City One was a “good site” with a “good chance of winning”. (C/1/751-752/paras 250-255). Ms Fletcher says she made notes of the meeting (T1/68). Prior to the meeting she made a list of the points she wished to discuss with Mr Russell (listed 1-5 in her notes), and then she made notes at the meeting. (C/2/811/para 34).

Mr Russell said he remembered the meeting reasonably well, but he did not recall Ms Fletcher taking any notes. He said they were at a breakfast table and it would be difficult to take a note with all the plates etc. on the table. He did not believe there was the opportunity to take a note. He said “At that quasi-informal discussion, I think it would be surprising if one was, and I certainly don’t recall that one was taken”. (Day 24/94/10-15). He did not recall discussing with her as to whether LCC wanted to build the Arena itself. The purpose of the meeting which he had arranged was to discuss MEL partnering up with a contractor. (D3/26/1723).

Cross-examined by Mr Cawson as to when she made her note of the meeting, Ms Fletcher said “I think I jotted one or two things down during the meeting yes, and then finished it off because Mr Russell had to leave”. (Day 6/3/24-3/1).

Mr Hollander referred Mr Russell to the aide memoire part of the note: “Assurances LCC process fair and transparent”. Mr Russell said he did not recall saying it specifically but he felt sure that if asked was it going to be a fair process he would have said it was. (Day 24/24/13-15). He agreed that Ms Fletcher raised various concerns that she had with him. On the aide memoire list he said: (1) LA Bowl, “I think that was mentioned”. (2) In terms of the competition, he said,

“she had raised concerns about Elland Road. I understand the concerns about Elland Road. And references to ‘stalking horse’, I very much recognise as a constant theme of MEL being concerned about being used as a stalking horse with regard to Elland Road and concerns that Elland Road wasn’t some form of fait accompli that the Council felt it was going to deliver on. … I don’t recall being asked: is the competition fair? To be honest, that is a strange question to ask in the circumstances. But did I believe it was fair? Absolutely I do”. (Day 24/28/11-29/3).

Ms Fletcher said that Mr Foster phoned her on 30 July 2007 and told her that he was calling on behalf of Ms Dent and that he had talked to her about her concerns. He stated that Ms Dent had asked him to speak to her in order to reassure her about the process and to confirm that MEL had a very strong change of winning the Developer Competition. Ms Fletcher said that she told Mr Foster that she was increasingly disillusioned with the procurement process and that she did not think that MEL would take part in it. Mr Foster said that LCC wanted MEL to be in the competition and to go straight through the first phase (the PQQ phase). He said that MEL were not merely a “stalking horse” for LCC developing its own Arena at Elland Road and that it did not want the development risk.

Ms Fletcher said that Mr Foster called her again the next day, 31 July 2007. He made it clear that he had discussed her concerns once again with Ms Dent and that she wanted, via him, to assure her that her concerns were unfounded. Mr Foster said that “everybody believed that we are keen to be involved” in the Competition and they were nervous that MEL might not take part. He said there were only likely to be two or three sites in the competition and that City One was the best (C/1/754-756). Ms Fletcher produced her notes of the conversations (T1/71 and 73).

Mr Foster said that whilst he was unclear as to the precise sequence of events he was certain that Ms Fletcher did raise with him her concern that MEL was being used as a “stalking horse”. He thought what she meant by the words “stalking horse” in the context of their conversation was to the effect that MEL had no chance of winning, there was no proper competition because the Arena would go to Elland Road from the outset. (D2/21/1659/para 35). Mr Foster did not believe that LCC had a preference for Elland Road and had no reason to think that the procurement competition initiated by the OJEU notice, which had only just been issued, was not genuine. He could not now recall what he said to Ms Fletcher about his beliefs but he said it was to the effect that he did not agree with her contention. He agreed that he would relay her concern to Ms Dent. He did so, and Ms Dent told him that he could tell Ms Fletcher that what he had already said to Ms Fletcher was right, that there was a proper competition and MEL was not a “stalking horse”. Mr Foster said:

“What I cannot say now is whether the conversation I had with Ms Dent was between 20 July 2007 and 30 July 2007, that is, after the meeting on 20 July 2007 and before the call on 30 July 2007, or whether it was following the conversation recorded by Ms Fletcher on 30 July 2007 in her notepad and the subsequent conversation the following day. I have to say that I cannot recall that there were two conversations on subsequent days but I have seen the notes which suggest that there were.” (D2/21/1660).

Mr Foster did not recall stating that MEL had a very good chance of winning the Developer Competition. Certainly he did not express such a view on behalf of Ms Dent or anyone else at LCC. He also did not recall stating that LCC was nervous of MEL’s reluctance to enter the developer competition. He said that any views expressed by him in any event were his own personal views apart from where he expressly passed on the comments made by Ms Dent to him. (D2/21/1661-1662).

Ms Dent said that while she could not recall the specific date, she did recall Mr Foster popping his head into her office, on or around 20 July 2007 and informing her that he had had a meeting with Ms Fletcher and that a discussion had taken place concerning the Development Competition. He said that Ms Fletcher had expressed concerns regarding the fairness of the Competition. She could not recall Mr Foster specifically telling her that Ms Fletcher had told him that she was concerned that MEL was being used as a “stalking horse”. However if he did use this term, it would not have surprised her as she was already aware that during the Development Competition Ms Fletcher had expressed a concern that MEL was being used as a “stalking horse”. During the very brief conversation that she had with Mr Foster she recalled that he said he had a good working relationship with Ms Fletcher, as a client, and asked if she would be happy if he spoke to her and reassure her that, in his opinion, the competition was fair. Ms Dent stated that if he thought it would help then fine. She did not discuss with him what he would say. She stressed that if Mr Foster did give any reassurances to Ms Fletcher concerning the City One site, the Development Competition and/or MEL’s participation within it, he did so without either her authority or that of LCC (D1/3/1180-1182).

Cross-examined by Mr Hollander, Mr Foster said he did not recall the detail of the conversation he had with Ms Fletcher, but he did know that she was very concerned at the time about Elland Road. He said “it puzzles me as to why I would say that she had a very good chance of winning the competition, and I don’t recall her mentioning—sorry, the competition with her site. Because at that time we didn’t know who was going to submit proposals or submit PQQs. (Day 21/77/11-17). He said that Ms Dent had not said to him that MEL had a very strong chance of winning and had not asked him to convey that to Ms Fletcher (Day 21/79/7-10).

Mr Hollander referred to the note dated 31 July 2007 (T1/73) and the passages: “everyone believes we are keen to be involved and deliver that”; “Nervous we might not want to do it”. Mr Foster said:

“I just do not recall that part of the conversation at all, I am afraid. I don’t know why I would say that. It is very early on in the process of the waiting for PQQ to be submitted. I don’t know why I would say that. There is no understanding of what the PQQs to that might come forward at that time.” (Day 21/87/10-24).

He said he didn’t know how he could say that the City One site was best because he didn’t know what was going to come forward (Day 21/91/12-14). Mr Foster said that he may have said City One was a very good site, but not that it was the “best site”. (Day 21/115/11-15).

Ms Fletcher said that she and Mr Aspinall met with Mr Smith and Mr Patel on 9 August 2007 at Donaldson’s offices in Leeds. She said Mr Smith was “at pains” to deliver the same message given to her by Mr Foster a week or so earlier, namely that the Competition would be fair and transparent. He re-iterated that LCC wanted MEL in the Competition. They said “we had by far the best site available”. (C/1/756/para 266).

Mr Smith remembered a meeting taking place, but he could not remember particularly what was said in it. When asked whether he could remember whether he said that the competition would be fair and transparent, he replied “No, but I can’t see any reason why I wouldn’t have said that” (Day 25/47/6-9). He said that he would not have said that MEL had “by far the best site available”. Mr Hollander suggested to him that it was obviously the best site. He replied,

“I had done a study. I don’t know how much earlier, maybe a year earlier, looking at sites, where we had gone through with a workshop and decided on a set of criteria, and then we had applied that to a range of sites, and this site hadn’t come up top.

… I just know that I wouldn’t have said that and I wouldn’t have been able to say that.” (Day 25/52/10-25).

Ms Fletcher said that on 17 September 2007 she attended the Arup global board dinner at Harewood House in Leeds as a guest of Arup’s directors and Mr Foster. She said she spoke “at length” with both Mr Foster and Ms Dent at different times and told them that she still had significant concerns about the competition and LCC’s intentions. She remained anxious that LCC wanted to build an Arena itself and asked whether LCC wanted to do the Arena itself at Elland Road. She said Ms Dent assured her that that was not the case and that the competition was going to be a fair one. Mr Foster gave her very similar assurances. (C/1/759/para 278).

Ms Dent said she does not recall speaking to Ms Fletcher at this event. She does not recall informing Ms Fletcher that LCC did not want to develop the Arena itself and that the competition was going to be fair. However if she did so, she would have believed these statements to be true, and they would in fact have been true. (D1/4/1234/para 38). She said that she had “absolutely no recollection of that discussion”. (Day 15/166/2-3). Ms Dent said that she knew they would be making a decision about short-listing on 21 September and therefore she would not have wanted to speak about the Arena. (Day 15/166/8-11).

Mr Foster cannot recall whether Ms Fletcher raised her concerns again with him at this event. He said:

“I don’t recall having a conversation about the arena, it was a very busy evening, and quite an important evening for me, because I was the principal organiser. I don’t recall a conversation about the arena, we may have touched upon it but I don’t recall that.” (Day 21/102/19-23).

He added:

“I wouldn’t have been able to give her assurances and I don’t recall doing so.” (Day 21/103/6-7).

Ms Fletcher said that on 11 October 2007 she and Mr Aspinall attended an ITPD Clarification Meeting with representatives from the LCC team responsible for the Arena project. The purpose of the meeting was to discuss technical and commercial aspects of the next stage of the procurement process. Ms Fletcher said that she was still very concerned that there might be a preference by LCC to build an Arena itself at Elland Road and that MEL might be used as a stalking horse for such a development. She asked for assurances that this was not the case and that the procurement process would be fair and transparent. She said she would much prefer LCC’s Project Team to be absolutely frank and honest with her and if there was any intention to build an Arena themselves would they please say so now and MEL would exit the Competition immediately and do something else with the site (by which she said she meant sell it for development). Mr Smith responded, she said, on behalf of LCC’s project team saying that Leeds did not wish to build an Arena themselves and did not want to have the risk associated with such a development. He gave “categorical assurances” that the Developer Competition would be fair and transparent and that this was what the new European procurement law was intended for – to protect participants entering competitions such as this. He went on to say that they would all prefer a private developer to build the Arena and in a city centre location. Mr Coulson and Mr Greer both nodded in agreement at Mr Smith’s comments. (C/1/760-761).

Mr Aspinall said that he was certain that Ms Fletcher raised their continuing concerns about LCC’s pre-disposition to build the Arena at Elland Road and MEL being a stalking horse. He said they received what they thought were satisfactory assurances from Mr Smith and Mr Coulson about the competition and he felt reassured that the process would be managed properly, fairly and transparently. (C/3/837).

Mr Smith recalled Ms Fletcher seeking reassurance at the meeting that the Developer Competition was fair and that she had a fair chance of winning. He was unsure what prompted this but believed at the time it related to her concerns that a solution at Elland Road was in some way favoured. He does not recall being asked about whether the Developer Competition was being run fairly and transparently, whether MEL was being used as a stalking horse and whether LCC had any intention of developing the Arena itself; rather there was an exchange dealing with the fairness of the process.

He said that nevertheless if he had been asked whether the Developer Competition was being run fairly and transparently he would have agreed that it was. They had just issued the ITPD that said just this. Ms Fletcher did however require and he provided reassurance that the Competition was fair and that MEL had an equal chance of winning. He did not remember Ms Fletcher using the specific phrase “stalking horse” or he or Mr Greer specifically confirming that MEL was not being used as a stalking horse. He did however remember Ms Fletcher asking questions to the effect of how she could know that it was a genuine competition, and LCC was not stringing MEL along, giving MEL the impression that it could succeed in the Developer Competition while at the same time wanting to use another site for the development of the Arena. He confirmed that it was a genuine competition and that LCC was not stringing MEL along in the manner suggested. He did not remember Ms Fletcher asking whether LCC had the intention of developing the Arena itself or of Mr Greer or himself saying that LCC had no intention of developing the Arena itself. He did not think that he would have made this specific statement although it was true that LCC did not want to develop the Arena itself at this point and, if asked, he would have confirmed this. He accepted that he said that LCC wanted a private developer to develop the Arena. There was a definite preference and desire for the Arena to be developed by a private developer partner who would take on the development risk. He recalled stressing this point at the meeting. (D3/29/1923-1926).

Mr Coulson’s note of the meeting (G34/148) records “Elland Road – don’t want to be seen as stalking horse”. He believes that Ms Fletcher or Mr Aspinall made that comment. His notes do not record what, if any, response was given to the comment. (D1/5/1284/para 117). Mr Coulson’s note does not refer to any of the other matters in respect of the assurances Ms Fletcher said she received.

Mr Aspinall made a note of the meeting (T3/85-87). Under the heading “Issues”, there are the words “Elland Road”. No assurances are noted. Ms Fletcher said that she knew that Mr Aspinall was concerned about her raising these matters openly and “therefore probably just didn’t write it down”. (Day 6/28/8-14). Mr Greer made a note of the meeting (G34/140). He records MEL’s “concern re development competition” and noted “cost to them of holding off development for other use – so please don’t mess around”. (G34/141). His note continues, “all noted position”. However he does not record any other assurance being given. DTZ also made a note of the meeting (G34/69A), but again there is no reference to the assurances that Ms Fletcher says were given.

Ms Fletcher’s note (T1/79) has at the top under the date the words “MEL holding costs. LCC build? Fair? Exit Now!” Ms Fletcher said that those words were written before the meeting as an aide memoire. She said that during the meeting she wrote above “LCC build?” the word “No”; above the word “Fair?”, the word “Yes”; and above the words “Exit now”, the word “No”.

Mr Coulson said he had no recollection of “nodding or otherwise” in agreement as Ms Fletcher suggests. (Day 18/20/4).

Mr Greer agreed that he had not noted the reference that Mr Coulson noted to “stalking horse” and “Elland Road”. He did not recall the term “stalking horse” being used at the meeting. He said his notes were not intended to be a contemporaneous record of everything that was said at the meeting. (Day 28/13/7-20). He had no recollection of the representations that Ms Fletcher alleged were made being raised. (Day 28/19/19-21/11).

Mr Hollander cross-examined Mr Smith on the passage in his witness statement, “I did not intend that MEL would rely on any statement of mine that LCC did not intend to develop the Arena itself at that time, to enter into or remain within the developer procurement or to induce MEL to do so”. (D3/29/1926/paras 205 and 209). He said “Frankly, I don’t know why we have got this paragraph here at 205”. (Day 25/58/7-8). He said he thought paragraph 205 “is badly drawn, and if I had my time again I would re-draw it”. (Day 25/60/21-24). He also thought that paragraph 209 “is badly written”. (Day 25/63/3). He accepted that if he made statements, to the extent that they amounted to representations he has to take responsibility for them. (Day 25/64/12-14). He did not agree that what he said was misleading. (Day 25/66/2-8).

In response to Mr Hollander suggesting that what happened was that during the course of the meeting she ticked off the points as they were raised, Mr Smith said:

“What you are saying to me is Ms Fletcher might [in] some way throughout that meeting have come to a view that Leeds City Council didn’t want to build it…

…

I can tell you that I do not recall being asked questions, ‘Does Leeds want to build the Arena itself?’ Ok? If I had been asked questions like that, it is the kind of thing I would have written down.

During the meeting – the whole meeting is about getting a developer to build it, so it wouldn’t surprise me if during the course of that meeting Jan Fletcher would come to the conclusion that Leeds wanted a private developer to do it. So if she has created a check list for herself and she is going to tick things off during the course of the meeting, then she might do that, and she might have reached that conclusion through all sorts of means. But I think if I had been challenged, I would recognise when somebody is looking for kind of assurances and I would recognise if they are anything different to what had been given already.” (Day 25/72-73).

Ms Fletcher said that Mr Foster telephoned her on 16 October 2007, having heard how concerned she still was about the procurement process. Mr Foster told her again that MEL’s site was “very good”; uniquely it was in one ownership and ready for immediate development and in this critical respect he said it was “the best site”. Mr Foster said that MEL was not being used as a stalking horse for an Arena at Elland Road and that, ideally, LCC would not want the Arena to be built there. (C/1/762/para 292).

Mr Foster said that he was in Madrid on 16 October 2007 and that he had no reason to ring Ms Fletcher when he was in Madrid and focussing on his business there. Ms Fletcher’s note that she made of the conversation (G31/128) says “Oct/07”. Ms Fletcher says it is quite possible that the call was a day or two before 16 October. (C/2/807/para 20). Mr Foster also disputes that he initiated the call; he may have returned her call. Mr Foster does not recall Ms Fletcher using the words “stalking horse”, but it would not surprise him if she did because she had used those words to him previously. He said it was possible that Ms Fletcher asked him to comment on whether various points such as mixed use, planning consent, city centre and ownership were good points in favour of MEL’s bid, to which he might well have said “yes”. However he was expressing his personal views. (Day 21/109/18-24). Ms Fletcher said “From my point of view he was speaking on behalf of Jean Dent and the project team and Project Board”. (Day 6/35/3-9). Mr Foster said it must have been obvious to Ms Fletcher when making her call to him that was outside the formal process of the competition. He said that whilst it does not surprise him that she might seek to do this, partly because they had a cordial relationship, “she could not seriously have relied upon any observations he might have made and certainly he did not intend that she or MEL should do so”. (D2/21/1664/para 42).

Neither the representations pleaded, nor Ms Fletcher’s note (T1/77) refer to Mr Foster stating that MEL’s site was “the best site”. The relevant part of her note says “Ownership – best no problems”.

Ms Fletcher says that on 30 October 2007 she attended a dinner hosted by Carey Jones Architects at Harewood House. Ms Dent and Mr Foster were also in attendance as was Mr Greer of Arup. After dinner, having retired for drinks and coffee in the Red Room, Mr Carey and herself discussed the Competition and her concerns in the presence of Ms Dent, Mr Greer and Mr Foster. All three of them repeated their previous assurances that LCC did not want to build an Arena, that it did not have a preference for Elland Road, that a city centre site was preferred and that the Competition would be fair and transparent (C/1/763/para 296).

Ms Fletcher now accepts that Mr Greer was not in attendance at that dinner. She says she must have been mistaken about him being there. (Day 6/36/4-5).

Ms Dent does not recall meeting Ms Fletcher or having any discussion with her during this dinner. She recalls there were about 25 guests at the dinner; she cannot recall the names of the people who she sat next to, but she does recall that the room was chilly, there was no music during the event and that Mr Carey made an informal speech. (D1/4/1234/para 39). She said, “I don’t recall… at all” having the conversation that Ms Fletcher says occurred. (Day 16/23/2). However if she had said that the Council did not want to build an Arena, that it did not have a preference for Elland Road, that a city centre site was preferred and that the Competition would be fair and transparent, she “believed that to be the case and it was the case”. (Day 16/23/3-19).

Mr Foster says that he does not recall discussing any details of the Arena on that evening. The subject of the Competition may have been “touched upon”, but he really couldn’t confirm whether it was or was not. He said it was an informal event, hosted by Carey Jones in celebration, he thinks, of a number of years as a practice. (Day 21/118/16-21).

Ms Fletcher said that on 11 December 2007 she attended the Leeds 800^th Anniversary Luncheon held at Leeds Civic Hall. During drinks she spoke with Councillor Carter and took the opportunity to tell him that she was still rather concerned about Elland Road and that LCC might still want to build an Arena itself. Councillor Carter told her not to worry and that LCC did not want to do that. (C/1/766/para 305). The conversation was over drinks before people sat down for lunch. (Day 7/2/23-3/3).

Councillor Carter said he remembered the events of the day very well as it was the occasion of a visit by HRH The Princess Royal to Leeds and he was part of the formal welcoming party for her at the Civic Hall and later at the Art Gallery. He has no memory of a discussion with Ms Fletcher on that occasion.

Councillor Carter produced the formal itinerary for the Royal visit (J5/235). The Princess Royal’s first formal engagement was at the John Charles Centre for Sport. Whilst he was not involved in that part of the visit, he said he was somewhat nervous about it as he knew that there had been problems with the aquatic centre and in particular with the hydraulic floor in the diving facility which could be raised or lowered as required. He was concerned that it would not function properly during the Princess Royal’s visit. He was due to be introduced to the Princess Royal at the Civic Hall at 1.00 p.m. He recalled that until some time between 12.30 p.m. and 12.45 p.m. he was in his office in the upper floors of the Civic Hall. He made his way down to the anteroom which is adjacent to the main ballroom/banqueting room where he waited for the Princess Royal along with Mr Rogerson, the Chief Executive of the Council, and other councillors. Councillor Carter produced a hand-drawn plan of the ballroom in the Leeds Civic Hall and the area adjacent. (D3/35/2117).

The Princess Royal took a comfort break at 12.45 p.m. He waited with others in the anteroom to be formally introduced to her. His recollection is that they were alone in the anteroom and that guests were assembled in the main banqueting hall. Whilst he may have looked into the banqueting hall at some point and acknowledged people he knew within the hall, he did not go around the hall or engage in conversation with the guests, not least because he was finalising a speech he was due to deliver, and for at least part of the time he was on his mobile phone trying to ascertain whether the Princess Royal’s trip to the aquatic centre was a success. At 1.00 p.m. he was introduced to the Princess Royal and he then made his way to the Art Gallery to receive her at 2.00 p.m. (D3/2112-2114).

Mr Hollander cross-examined Councillor Carter about his movements on this day and the conversation that Ms Fletcher says took place. The transcript of this part of his evidence is at Day 20/12:18-24:4. It includes the following:

“Q. Yes, but between 12 and 2 there was a time when you were milling around speaking to people. It may have been a short or a long time, but Ms Fletcher has a specific recollection that she was with Sir Tom Hunter and Paul Sykes, and Tom Hunter was the speaker that day. You came and talked to him and her, and you would have done, wouldn’t you?

A. Sorry, My Lord, my diary makes clear that I wasn’t at any such lunch. I entirely recall looking in and waiving at people, nodding at people. I don’t recall meeting Sir Tom Hunter or Paul Sykes that day. I am not going to say for certainty that Jan Fletcher didn’t approach me, she might have done; I think it highly improbable, because of the timescale I have put down.

MR JUSTICE SUPPERSTONE: Do you know Sir Tom Hunter?

A. I don’t, no…” (Day 20/17/11-18).

Later Councillor Carter said:

“… I think it is highly improbable. I think I would have remembered if I had met Sir Tom Hunter and Paul Sykes and Jan Fletcher, and I think if I had, would she have been asking questions about the Arena, presumably in front of them, or was I chased out of the room?” (Day 20/23/18-23).

Mr Hollander then suggested that Ms Fletcher was with Sir Tom Hunter and Paul Sykes but she had a short discussion with Councillor Carter privately. Councillor Carter replied: “No, I made it very clear, My Lord, I think”. (Day 20/23/24-24/2).

Following LCC’s evaluation of MEL’s initial proposals, MEL was invited to participate in the third stage of the Developer Competition, namely the invitation to continue in dialogue (“ITCD”). MEL relies upon those parts of that document that state the Developer Competition will be conducted using a fair and transparent process and that it would adopt an open and transparent mechanism for the selection of a site for the Arena. (G43/122B.1).

Ms Fletcher says that on 14 February 2008 she had a discussion with Councillor Carter immediately after a Marketing Leeds meeting that they had both attended. She told Councillor Carter that she still had very serious concerns about the fairness and transparency of the Competition and the very high holding costs being incurred by MEL. Councillor Carter assured her that the process was fair and that LCC did not want to build the Arena themselves. She said “uncharacteristically, he was extremely reluctant to discuss my concerns… However, I did not want to press him further as he made it perfectly clear that he didn’t want to discuss the matter”. (C/1/767-768/para 311).

Councillor Carter accepted that after a Marketing Leeds meeting, attended by Deborah Green, chief executive of Marketing Leeds and Ms Fletcher, Ms Fletcher hung back and had a conversation with him. (Day 20/29/4-10).

Councillor Carter said that he did not recall this conversation. However if there was such a conversation and he was less than willing to have a discussion, this would have been because he was becoming fed up with constantly being asked by Ms Fletcher the same questions. He also did not wish to have a discussion with her about the Arena during the competition as he considered that this would potentially have been unfair on the other parties involved in the Developer Competition. (D2/8/1423). He said that “she was coming to see [me] unannounced… somebody with the experience of Ms Fletcher in business would know that really to start discussing things at this stage [of the Competition] would not really be appropriate”. (Day 20/31/12-24). Whilst he did not recall saying that the competition was fair and transparent and that MEL had every chance to win it, if he did say that it would have been consistent with everything else he had said because he believed it to be so; so too would have been the statement that LCC did not wish to develop the Arena themselves. These statements would have been true and remained true. (Day 20/32/17-33/2; D2/8/1423/para 25). He did not recall Ms Fletcher ever mentioning the holding costs of the City One site.

Ms Fletcher and Mr Aspinall attended a further Developer Clarification Meeting on 20 February 2008. Also present were Mr Crabtree, Mr Coulson and Mr Speak from LCC; Mr Smith, Mr Patel and Mr Brooks from DTZ; Mr Greer from Arup; Mr Rhodes and Mr Barrow from HOK Sport; Mr Flounders from Cobbetts; and Mr Hall and Mr Birdsall from Yorkshire Forward.

At the meeting Ms Fletcher says that she said that she was very concerned that the competition would be fair and transparent and that LCC did not wish to build the Arena itself on its own site, and that City One was not going to be used as a “stalking horse”. She said she wanted the project team to be honest with her and to tell her if they really intended to build the Arena themselves, in which case MEL would withdraw from the Competition now and would not waste any more time and money. She said she tried to look each member of the project team in the eye, but most were not looking at her, preferring to look at the table and avoid eye contact. Their body language appeared uncomfortable. Mr Smith responded for the Project Team saying that the process was fair and that he could confirm that LCC did not want to build the Arena themselves and they did not want the cost risk associated with development. He assured her that the process would be fair and transparent and that the project team would do all it could to assist MEL with its bid. Mr Coulson confirmed that Mr Smith’s comments were correct and that the process would be undertaken fairly. (C/1/768-769). Mr Smith said that LCC was clear about there being two developers and that MEL was in a “market of two”. Mr Greer stated that there was no preference for Elland Road. Ms Fletcher’s notes of the meeting are at T1/90.

Mr Smith has no recollection of Ms Fletcher asking for confirmation that the Developer Competition was “fair and transparent”, but says that if he had been asked he would have agreed that it was. Similarly he does not remember Ms Fletcher using the phrase “stalking horse” or he or Mr Coulson confirming that MEL was not being used as a stalking horse. However if he had been asked he would have agreed that MEL was not being used as a stalking horse. He does remember Ms Fletcher wanting specific assurances that Elland Road was not favoured. He was happy to reassure her in this respect. (D3/29/1942). He did not recollect any reference to LCC building the Arena itself on its own land. He said he did not recall the prospect of LCC building the Arena itself being on anyone’s “radar” at this time. In any event there was no intention for LCC to build the Arena itself. (D3/30/2020).

In his second witness statement (D3/30/2021) Mr Smith stated:

“82.

Throughout her witness statement Ms Fletcher refers to ‘assurances’ that LCC did not wish to develop the Arena itself, or that LCC had no intention of building the Arena itself. The message that was given to Ms Fletcher and to MEL was consistent throughout and true, that is that LCC wanted a private sector developer partner to deliver the Arena as it did not want to develop the Arena itself, as it felt the private sector was better placed to manage the risks. These were not further or additional assurances – just re-stating what had already been said. I am certainly not aware that MEL was given an assurance that LCC would not build the Arena itself.

83.

If the Developer Procurement was to be cancelled LCC would need to look at every option it had available and see if any meant that an Arena could still be achieved. LCC had throughout retained the right to cancel the Developer Procurement and if this occurred then anything might happen next.”

Mr Smith’s notes of the meeting are at G45/201.

Mr Coulson’s notes record, although he did not specifically recall, that Mr Greer emphasised to MEL that LCC had no preference in favour of Elland Road (G45/193). Mr Aspinall’s notes also refer to Mr Greer stating “No preference for Elland Road” (T3/123).

Mr Coulson said that his manuscript notes did not record Mr Smith or himself making a representation to MEL that LCC “did not want to build or do the Arena development itself”, and he has no recollection of such a representation being made. However, he says, that such a representation would have been entirely consistent with LCC’s aim for the Arena Project of appointing both a private sector operator and a private sector developer to de-risk the project, in line with the recommendations which came out of the feasibility study. Therefore, had such a representation been made he would have believed it to have been true (D2/6/1360). He did not recall any uncomfortable body language at the meeting.

Mr Greer did not recall the meeting, although he notes that he was present from looking at the records. However it is now clear to him having found his own notes and read the notes of Mr Patel that he did say at that meeting, “No preference in favour of Elland Road” although he cannot recall saying it. (Day 28/2/2-9). Mr Patel’s notes record “operator has no preference for Elland Road v city” (G45/207). Mr Greer feels that he would have made that reference to “No preference for Elland Road” in the context of the operator competition (Day 28/2/14-21).

Mr Cawson asked Ms Fletcher about the notes of the meeting taken by others and the absence (apart from there being no preference for Elland Road) of the assurances that she says were given. First, as for Mr Aspinall’s notes, she said he concentrated very much on his own discipline as development director. He would not necessarily have noted down any assurances that were given. She said that “whilst he was concerned, he also didn’t want me to upset the team so that they thought that we were not perhaps as keen as the other developer” (Day 6/50/19-51/6 and 52/13-22). Second, she said:

“At this point in time I’m not surprised that people were uncomfortable, because looking at the disclosure, … they all knew very well they were working on a separate scheme outside of the competition and looking at other sites to build it themselves by this stage. … There is no wonder people perhaps didn’t jot anything down in their own notes, because they were obviously embarrassed …” (Day 6/52/23-53/6).

However, with regard to the assurances that Ms Fletcher says were given to her, Mr Coulson said:

“… if Ms Fletcher had raised those points either at the start or during the meeting, I’m sure I would have made a note of them. I made a note of the reference to ‘stalking horse’, I didn’t make a note of… anything else. And none of those representations appear, I believe, in my notes of this meeting.” (Day 18/99/5-11; also see Day 18/104/20-23).

Mr Hollander asked Mr Coulson whether if he or Mr Smith had said on 20 February “The Council does not intend to build or do the Arena themselves”, that would have been a lie. He replied “At that time, yes, I believe it would have been”. (Day 18/105/6-10; also see 105/12-109/3).

Mr Hollander asked Mr Smith whether he stood by his statement: “I do not recall the prospect of the Council building the Arena itself being on anyone’s radar” (D3/30/2020/para 79). Mr Smith replied that he thought he should have qualified that statement by saying

“… that the Council was going to look at a Plan B contingency plan in April but at this time we were going for – you know, the developer competition being successful, and I don’t think anyone at the bidder end was expecting that there was any difference and nor were we expecting there to be any difference. It was just sort of contingency plan.” (Day 26/61/17-25).

Similarly he said he would qualify the reference in paragraph 80 of his second witness statement (D3/30/2020) about not believing an intention for LCC to build the Arena themselves being “on anyone’s radar”.

Mr Hollander suggested to Mr Smith that he and Mr Coulson in particular were in a very difficult position at that meeting because they knew that Ms Fletcher would ask difficult questions and they knew that they were holding on to important information about Plan B that they could not share with her. Mr Smith said that he did not feel uncomfortable because he had been advised that they should not impart anything to developers until there had been a decision as to whether the Council was likely to accept Plan B development or not (Day 25/92/21-93/2; 97/9-11; Day 26/59/4-14).

Mr Smith said Ms Fletcher did not say: “can you confirm Leeds doesn’t want to build the Arena itself?” (Day 26/68/23-25). He said:

“I think it would be a most unusual thing to have said when you have just been invited into the first phase of a developer procurement where you have a Council spending money on a huge professional team, inviting bidders to come and put together proposals to deliver an Arena, to ask that question. I think it would have been bizarre. I think I would have sat up and gone ‘What? What kind of question is that when you have just put an invitation to tender in front of you?’” (Day 26/70/11-19).

Mr Hollander asked Mr Smith:

“When do you say it would have been untrue to say without qualification: the Council does not want to build the Arena itself?”

Mr Smith replied:

“Sorry, I am going to have to think about this because the Council made a decision on 14 May [2008] at Executive Board that they would introduce prudential borrowing but they hadn’t made a decision that they would be prepared to deliver it themselves. But we had… the Council didn’t want to build it themselves. I would say, the Council, to say the Council wanted to build it themselves would have been after 5 November 2008. Because the decision that… everything was contingency.” (Day 26/76/23 – 82/9)

Mr Smith said that Ms Fletcher’s questions kept on coming back to the Elland Road issue. Mr Hollander suggested that Ms Fletcher also said that she was concerned that City One was going to be used as a stalking horse. Mr Smith replied:

“”I think that was in respect of the Council – this idea that the Council had Elland Road in mind, but was giving a sham of a competition so that it could award it at Elland Road on its site and get Elland Road done. It was in the same context.” (Day 26/72/13-19).

In response to the suggestion by Mr Hollander that he would say absolutely anything to avoid the possibility that he would be found guilty of a deceit on MEL, Mr Smith said:

“I would rebut absolutely that I deceived Montpellier. I would know if I was being asked a question to make a further assurance over and above anything offered in the project documents, and I would know it was beyond my authority, and I would be very conscious of it happening. If Ms Fletcher had come away from a meeting with some perception that I have said anything that was an assurance over and above what has happened at a meeting, then what I am saying [is] that I did not intend that it should be relied on is that, if she has come away with that perception, then that will have been – that I’m clear that I didn’t intend or say anything by way of assurance there over and above any assurances that have already been given. I would know if I had done it.” (Day 26/65/9-23).

Mr Hollander further suggested to Mr Smith that deliberately withholding information from MEL about Plan B was not clear and transparent. Mr Smith responded:

“We didn’t have anything we could say; we didn’t have anything we could say because no decision had been made.” (Day 26/76/12-16).

Mr Hollander suggested that he must have had something to say, otherwise he would not have said it to the operators. Mr Smith replied:

“It is a different thing. We have been through that. One is a proactive decision to invest tens of millions of pounds as the end-owner of an Arena.” (Day 26/76/17-22; 79/17-20).

Mr Hollander also questioned Mr Greer about important information that on 20 February he knew he was sitting on which had been told to the operators which was not to be shared with the developers. Mr Greer said:

“Because it was shared with the operators as a final fall-back protection to the Council if they were ever to decide that a public sector comparator or a Plan B deliver was required, as I already set out. It was not something that was at that stage decided upon; and because we were not instructed, we could not enter that into the dialogue process with the developers.” (Day 28/38/4-14).

Mr Greer agreed with Mr Hollander that he had no real independent recollection outside the notes he had read of the meeting, but with regard to the suggestion that Ms Fletcher asked for confirmation that Leeds City Council did not want to build the arena themselves, he said:

“That is a question I do not recall Montpellier ever asking in any of the dialogue meetings.” (Day 28/43/25-44/3).

Mr Greer said he did not accept that they were hanging on to important information (Day 28/28/16-17). He did not accept information

“had been concealed, because the Council had not decided upon the requirement for a public sector comparator, it had not instructed the adviser team nor any other party to prepare and run a public sector comparator. Therefore, we couldn’t bring into the dialogue process another activity that had not actually—we had not been instructed to undertake. So there was no concealment…” (Day 28/32/5-13).

Ms Fletcher has said that on 11 March 2008, when in Cannes for the annual MIPIM conference, she met with Mr Barrow, the chief executive officer of HOK Sport and Mr Rhodes, the architect who was working on their bid, who told her they had heard rumours from another professional advisor of another Arena site. Ms Fletcher said that she was sufficiently concerned to raise the issue with Ms Dent. She arranged a meeting with her for 14 March at 11.00a.m. at the apartment leased by LCC for the MIPIM.

Ms Fletcher said that at the meeting she told Ms Dent that she was considering withdrawing MEL from the Competition. She told her she was seriously concerned that the process was not fair and that she remained uncomfortable, referring to the rumours that she had heard about a third site now being considered. Ms Dent told her this was not true and that only two sites had been shortlisted. She said that Ms Dent said it would be a “terrible shame if we pulled out”. She assured Ms Fletcher that LCC did not want to build an Arena itself and did not want the developer risk. Ms Dent also said that LCC “really want a city centre site” and that MEL were not a stalking horse for a council-built Arena. Ms Dent said that MEL had a “good chance of winning” and she urged Ms Fletcher to stay in the competition. (C/1/770-771).

Ms Fletcher said that the notes that she took of that meeting were made on the back of a copy of a speech Ms Dent had given the previous day and that she had handed to her (T1/96). She said she used the back of the speech to make a note of the main points for discussion before the meeting started. She then also made some very brief notes following the meeting. (C/2/809/para 26).

Ms Dent recalled that Ms Fletcher approached her at the apartment and asked for a chat about a few matters. They had an informal chat. Ms Dent said:

“I felt anxious at the point when she asked to speak to me as I thought she might raise the Arena; we are in the middle of a competitive procurement process and I particularly recall knowing that I needed to make sure that I did not say anything which would prejudice the process, or that was more favourable to one party than the other.” (D1/3/1190/para 152).

Ms Dent’s recollection of the conversation was that Ms Fletcher sought assurances from her that the competition was fair. This was a point that she had raised with her and other officers in the past. Ms Dent confirmed that in her view it was. Ms Dent made reference to the fact that LCC had chosen to go to the expense of the procurement competition because it did not want to build the Arena itself and the fact that the Feasibility Study showed that the greatest benefit to the city was from a city centre site. She said she believed these statements to be true and were no more than had been said to Ms Fletcher on several previous occasions and in public meetings. (D1/3/1192/para 157).

Ms Dent said that she was fully aware that throughout the conversation she needed to make sure that she did not say anything which would indicate any preference one way or another for either of the two shortlisted bidders. She does not recall nor does she believe that she would have said it would be a “terrible shame” if MEL pulled out of the competition or words to the effect of “please stay in”. She considered this was entirely a commercial decision MEL would need to make and she would not have wanted to influence it. (D1/3/1192/para 158).

Ms Dent does not recall nor does she believe that she would have said that MEL had a “good chance of winning” the competition. Such a statement would also have been inappropriate. She would not have known at that stage of the competition whether it was so or not. Detailed bids had not been made and two bidders remained in the competition. She observed that to make such a statement to one of the parties mid-competition would have exposed LCC to the other bidder alleging the competition was unfair. (D1/1192/para 159).

Ms Dent stressed that at no time did she intend to make any comment which would encourage MEL to remain in the Competition should they feel a wish to exit. (D1/3/1192-1193).

Ms Dent said that she did not make any notes of the conversation, nor does she recall Ms Fletcher taking notes. She can only assume that Ms Fletcher later wrote down her recollection of what had been said.

Mr Cawson asked Ms Fletcher:

“Are you saying to the court that when Ms Dent told you, in the context that she did, that the Council didn’t want to build, that she knew in her own mind that what she was saying was false and untrue, in order to deliberately mislead you?

A. Yes.

Q. So you’re absolutely sure of the Council’s case in respect of that, it is emphatically denied by Ms Dent and all the other representatives of the Council that when they said anything to you, they said anything to you that they believed to be false.

A. She clearly knew that was untrue and she clearly knew that it would damage my company and me if we carried on in the competition, with the expense and the cost, and she clearly knew at that time exactly what they were doing, and she also knew that if they told us the truth we would leave the competition and I was very—and I would sell the site. Because we’d already discussed that, … on a number of occasions.” (Day 6/64/24 -65/17).

Mr Hollander questioned Ms Dent as to her evidence that she believed at the time that LCC did not want to build the Arena itself and her statement that it was true at that time.

“Q. But, Ms Dent, you just told the operator, on 5^th February at latest, that you may want to build the arena yourself, and that is what all this discussion was at the Project Board on 30^th January, because the view was taken that the operator needed to know that the Council might build it itself and that it was working up an alternative procurement plan for that potential purpose and that operator needed to know that. You’re now telling Ms Fletcher precisely the opposite.

A. No, my Lord. The operator was told it was a concept, that it was potentially an alternative, but that we were obviously still pursuing the development competition. That was still running. We were still very keen to succeed in delivering an Arena through that process. The development competition was very clear that it was about the developer taking the risk, and that the Council provided grant… and its partners provided grant funding of up to £20million. I personally was very committed to that development competition because of the experiences I had had in the past…

So when I said this, I believed it to be true and it was true. There had been no decision by the Project Board, there’d been [no] decision by the Executive Board to do anything to the contrary with regard to the competition.” (Day 16/86/1-87/14)

A little later there was the following exchange between Mr Hollander and Ms Dent:

“Q. I would suggest to you that it is apparent from Mr Coulson’s email that we looked at in some detail, about the elections, [G45/122] that actually this was a deliberate decision of yours, because Mr Coulson refers to you being nervous about the developer being advised of the concept before the May elections, with negative press then appearing.

What had actually happened was that you knew perfectly well that there was a problem about telling Ms Fletcher the correct position, in the light of all the questions that she had asked previously and all the statements you had made, and you were concerned about doing that, so decided that you did not want to do that and that is why Mr Coulson says:

‘I recall Jean being nervous about the developer being advised of the concept before the May elections, with negative press then appearing.’

That is why you said nothing and that is why at MIPIM you actually say again, ‘The Council don’t want to build’, and I suggest to you that that conduct was entirely dishonest.

A. No, my Lord, it was not dishonest. I have explained the position with regard to Mr Coulson’s note. I am very clear about the question I asked with respect to the May elections, and my response to Ms Fletcher at MIPIM was honest, it was the position at that point in time, and there had been no decisions to the contrary.” (Day 16/91/94-92/25)

In relation to Mr Coulson’s e-mail Ms Dent said:

“I do not recall saying that I was nervous about the developer being advised by the May elections. At every Project Board in the period from January to May I would say: are there any issues out of this that we need to be concerned about? Because we enter a period, as we build up to local elections, where we need to be careful about the type of reports that we take forward. So that it is a general question I ask. It is for the chief officer or the project director to consider, and I think that Chris had misunderstood the question that I asked.

I certainly do not recall being nervous about the developer being advised. My personal position throughout this has been we should tell the developer what we should be advised to tell them. If we should tell them everything, we should tell them everything.

You discussed with Mr Farrington yesterday what the developer was told, and what the legal advice was, but I had no issues around if we needed to tell developers about what was going on, then we should. But at this point we had no propositions, and my comment was not about the developer being advised but it was about issues around any reports which were going to Executive Board at any time between January and May, were there any issues that we needed to be aware of which may be politically sensitive and may impact on local elections.

It is a question that I would then be asked at the corporate leadership team, at the cabinet meetings, and therefore I needed to know that I had asked that question about this.

As it happens, and a report did go into the process in April around the operator selection, and it also did have a piece around us investigating Plan B, my view was we just need to get on with that, and I know that was Mr Farrington’s view as well.”

Ms Dent disagreed that she told Ms Fletcher it would be “a terrible shame if [they] pulled out” or that they had a “good chance of winning” or that she said “please stay in”. She said:

“We are in the middle of a procurement process, there are two developers competing. I was anxious about having this conversation with her. The way she put it to me was that she wanted a word on a few matters, so she started off the conversation with Marketing Leeds and then moved on to the Arena. My recollection was that it was the usual assurance. I would certainly—I was very careful in terms of what I said. I certainly would not have been saying things like “You stand a good chance of winning, please stay in”. They are inappropriate in the middle of a competition where there is another developer and there is that need for even-handedness and making sure that what I am saying does not affect the other bidder.” (Day 16/97/7-25).

Ms Dent added:

“I really cannot comment on what Ms Fletcher recalled following the meeting and then scribbled down, but when I look at the witness statements of both Ben Aspinall [C/3/845] and David Williams [C/904], and their recollection of the comments that Ms Fletcher said in terms of reporting back that day, in terms of what I said, it doesn’t say that I said ‘You have a good chance of winning, it will be a terrible shame if you pull out.’ That is not mentioned in either of their witness statements.” (Day 16/98/17-99/9).

Ms Fletcher said that she and Mr Aspinall met with Ms Dent and Mr Farrington on 23 April 2008 in LCC’s Leonardo Building to discuss LCC’s proposals to purchase additional land at Elland Road and a number of concerns MEL had in relation to the procurement process, following an article in the Yorkshire Post. She said that Ms Dent and Mr Farrington were at pains to reassure them that the purchase of the land at Elland Road was entirely unrelated to the Arena and that LCC did not want to build an Arena itself, did not want to take development risk and that they still preferred a city centre site. They insisted that they were not using MEL as a stalking horse for a council-built Arena and that there were only two sites shortlisted. (C/1/773/para 330).

Ms Dent said she told Ms Fletcher and Mr Aspinall that LCC had no preference for Elland Road. She made it clear that the LCC’s interest in the Castle land, which had been ongoing since 1987, was a strategic purchase with a view to increasing the land holding at Elland Road and would proceed in any event whether or not Elland Road was chosen as a site for the Arena. She did not recall that either she or Mr Farrington made a statement to the effect that LCC did not want to develop the Arena during this meeting (D1/1200/para 181). However it was and remained LCC’s desire and preference not to develop it itself, but for the Arena to be built by a private sector developer taking the development risk, selected through the procurement process. The term “stalking horse” was constantly used by MEL; it was not, Ms Dent said, her terminology. She may have said that she believed that the Developer Competition was fair and transparent as these were words LCC often used to describe the procurement competition. She still believes this to be true. She did not recall herself or Mr Farrington commenting upon the positioning of the Arena in the city centre but they would both have accepted that a city centre site had the potential for a greater economic impact as demonstrated in the PMP report. (D1/3/1199-1202).

Ms Dent and Mr Farrington said that after the meeting concluded they both commented on the fact that no matter how many times they told Ms Fletcher that LCC did not have a preference for Elland Road she still did not believe this to be the case. (D1/3/1200/para 182 (Ms Dent); D1/1/1045/para 158 (Mr Farrington)).

Mr Farrington said that he made it clear that the acquisition of the Castle Land was not contingent upon the Arena being built there. He did not say that it was “unrelated” (Day 15/28/14-15). He said they were disappointed with the Editor’s slant on the story in the article. He did not recall using the term “stalking horse”. He explained that LCC had held an interest in acquiring the land dating back to 1987; LCC’s proposed purchase was strategic and with a view to enhancing the land holding at Elland Road and would proceed in any event whether or not Elland Road was chosen as a site for the Arena. He did not recall saying that LCC preferred a city centre site, but Ms Dent or he would have acknowledged the financial benefits of a city centre site and the potential for greater economic impact. Neither he nor Ms Dent made a statement to the effect that LCC did not want to develop the Arena. Whilst he believed that to be the case, he does not recall the subject arising during the conversation. He did not say the competition was being run transparently and fairly. That is not his sort of language. It is more likely that he said it was a real competition and they had not pre-determined that Elland Road would be the site of the Arena. He did not recall the issue of LCC preferring a private developer who would bear the development risk being discussed directly. Mr Farrington said that he told Ms Fletcher that she needed to forget about Elland Road and focus on the commercial aspects of MEL’s scheme. He said that if she got the commercial aspects right, MEL may have a credible proposal. He went on to say that if MEL did not focus on its own financial proposals, and then get them right, it would not succeed. For his own part, he said that he was becoming exasperated at MEL’s continued focus on Elland Road and lack of focus on its own financial prospects. (D1/1043-1045; and D1/1114-1117).

MEL produced an agenda for the meeting (G54/48). No item on the agenda specifically raised the question of any intention on the part of the Council itself to build the Arena. There is also no reference to it in Mr Aspinall’s note of the meeting. (T3/151).

On the issue of acquisition of land at Elland Road, Mr Aspinall said:

“… We were told that the Castle family were ‘looking to sell’ their land at Elland Road and that the Stanley’s casino option had fallen away. It was therefore opportune for LCC to be acquiring this land to deliver the master plan in whatever form it took. We were told that LCC was ‘flexing its muscles’ and that this was a ‘warning shot across developer’s [which we assumed to be GMI’s] bow to stay away’.” (C/848/para 114).

Mr Aspinall’s note of the meeting (T3/151) does not record Mr Farrington as having said that the purchase of the additional land at Elland Road was “unrelated” to the Arena. Cross-examined by Mr Hollander, Ms Dent said that the purchase of the additional land at Elland Road “wasn’t not related to the Arena, it was regardless of the Arena. It was not contingent on the Arena.” (Day 16/108/8-10). She added, “…We were going to buy it anyway”. (Day 16/109/10-11). She said that while she cannot remember the actual word Mr Farrington used, that was her understanding of why LCC were buying the land. (Day 16/110/14-16). This was a 45 minute meeting. Her note is not a verbatim note of what was said at the meeting. The background to the reason for the purchase of the land was explained. Ms Fletcher’s note (“not related to Arena”) “could have been her interpretation of the words [Mr Farrington] used”. (Day 16/108/11-14). Cross-examined by Mr Hollander Mr Farrington said:

“Mr Aspinall doesn’t support what Ms Fletcher has… said. I would say that I had a detailed understanding of the issues in relation to Elland Road and the Castle Land. Mr Aspinall also had quite a good degree of understanding, and perhaps the subtlety of what I was saying has been mistranslated there by Ms Fletcher.” (Day 13/165/12-18).

In response to a question from Mr Hollander as to Ms Fletcher’s note, “LCC not build, don’t want risk”, Ms Dent said

“A. I don’t actually recall that being discussed at the meeting and I don’t see that in terms of Ben Aspinall’s note either.

Q. No, but we do see it in Ms Fletcher’s note, don’t we?

A. We do. We do see it in her note. But that is not my recollection.

Q. You have said this on a number of occasions previously as we have discussed last night and this morning and I would suggest that you said exactly the same – she was bound to ask the question, wasn’t she, because she asked the question every time?

A. Not necessarily. I am saying I do not recall her asking either Mr Farrington or I, or either of us saying that.” (Day 16/112/2-16)

Ms Dent added:

“Actually, it wouldn’t have been untrue at that time. But I do not recall saying it. Mr Farrington does not recall it being said. It is not in Mr Aspinall’s notes.” (Day 16/114/15-17).

Mr Farrington did not accept that he told Ms Fletcher that the Council did not want to build itself because of the risk (Day 15/28/5-8).

Mr Hollander suggested to Mr Farrington that if the words “LCC did not want to build an Arena itself and did not want to take development risk” had been said, they would have been untrue. Mr Farrington did not agree. He said

“There was no intention in April 2008 for the Council to deliver the Arena itself. The Council’s desire was to deliver the Arena through a developer competition.” (Day 13/173/3-174/12).

In an answer to a question from Mr Cawson in re-examination, Mr Farrington said:

“…that was the intention of the Council. It had progressed a development competition; it was investing heavily in the development competition; that was the Executive Board mandate that had been delivered; and that was the desire the outcome that we wanted to achieve.” (Day 15/68/20-25).

Mr Aspinall said that on 20 June 2008 he and Mr Williams attended an ITCD “core” meeting with the Project Team of Mr Russell, Mr Smith, Mr Patel, Mr Greer, Mr Coulson, Mr Birdsall and Mr Fitzgibbon of Cobbetts. Ms Fletcher did not attend the meeting. During the meeting MEL were issued with a Clarification Note in draft dated 18 June 2008 specifying the requirements for the presentation.

In the section headed “Background” the Clarification Note states:

“It is expected that through the competition private sector developers will be able to demonstrate optimal value for the delivery of an arena within a wider scheme context. The Council has indicated a target level of up to c. £20million for public sector funding for the delivery of an arena.

The Council will compare the estimated shortfall with a public sector comparator (PSC) to establish that the gap funding achieves value for money for the public sector investment. In comparing the bidders’ current position with the PSC, the Council will be able to provide feedback.” (G59/226).

MEL’s pleaded case is that at this meeting Mr Russell represented to MEL that the PSC was only being used as a test to ensure that bidders were providing value for money. MEL was thereby reasonably led to believe that the PSC was not an actual site but a hypothetical comparator used to help evaluate the private developer bids.

Mr Aspinall said in his witness statement (C/854/para 137) as follows:

“During this meeting on 20 June [2008], Andrew Smith and Nick Russell were both very vague and gave cryptic responses when pressed on the issue of the so-called PSC and mention of another site. My notes show that Nick Russell said that the ‘PSC was based on “robust” figures including a “3^rd site”’ and when asked whether the ‘third site’ now being referred to was the so-called PSC, his response was ‘logic would assume this to be the case’ or similar words to that effect. He also said the PSC ‘could be built’ and that MEL would be given further formal feedback following the developer presentations on 14 July 2008. We were concerned by this, but thought that Nick Russell was bluffing because they could not (but actually would not) identify a site. Andrew Smith added that there were ‘a number of sites/options for the PSC’ which seemed to contradict Nick Russell and only added to the confusion.”

Mr Williams’ evidence of the meeting (C/913/para 83) is that

“… During conversation I noted that one of the Project Team (I believe it was Nick Russell) said the PSC ‘being used as a “stock check” to test for value for money’. Mr Russell went on to say that the Project Team would feed back how we compared against the PSC after we presented our proposals on 14 July 2008. I then asked Mr Russell whether the PSC (which I understood to be a hypothetical scheme) was based on the ‘third site’ that LCC had mentioned. Mr Russell’s response was that it would be ‘sensible to assume that to be the case’ (or words to that effect). I interpreted this response to mean that the hypothetical PSC (as we understood the term) would be based on this third site. To an extent, this addressed my concern about the rumoured ‘other’ site; it was simply a site we would be compared against to check we could deliver value for money…”

Mr Russell said that he could not specifically recall the detail of what was discussed at the meeting but he had refreshed his memory by reading the notes of the meeting prepared by DTZ and Mr Coulson. He said:

“… we made it clear to MEL that there was more than one PSC and I did say that the PSCs would be used to test value for money. I do not recall saying that the PSCs would only be used to test for value [for] money. Certainly, my view at the time was the PSCs’ role was as a test for value for money. However, as we had made clear to MEL at the meeting on 29 May 2008, if neither developer could offer a proposal that provided value for money, LCC would thwart the competition and explore how it would build the Arena outside the competition. At the same meeting I told MEL that LCC had the potential to deliver a scheme on a third site…” (D3/1770/para 260).

Mr Coulson did not recall Mr Russell making a statement that the PSC was only being used as a test to ensure that bidders within the developer competition were providing value for money. His notes of the meeting do not recall such a statement having been made. (G59/204). The relevant part of his note states, “AS Smith – several options available for PSC to consider + will be based on a realistic deliverable scheme” (G59/205).

Mr Greer did not recall the project team using the word “hypothetical” when describing the PSC, either at this meeting or at other meetings (D3/33/2101).

Mr Cawson asked Mr Aspinall what he thought Mr Russell was “bluffing” about. He replied:

“About a third site in—about the Council wanting to do something itself, because he was maintaining that they wanted the private sector to deliver it. So to start to suggest there is another site to, if you like, heighten the competition between us and—well, to heighten the competition, but within the rules of the competition we had already come down, we had a call for project, we had worked for three years to get to a point in the competition where there were two parties in it. I couldn’t comprehend a situation where the Council could be doing something separately, because that is totally contrary to what we have been told throughout [the] whole process.” (Day 9/48/19-49/7).

The DTZ minutes (G59/200 at 202) noted:

“NR [Mr Russell] tabled a note on presentation proposals for 14 July 2008. It is intended to allow the bidders to present where they are on their emerging Arena scheme proposals, financial viability (gap requirement) and economic and social impact implications.

It will be used to compare against the public sector comparator (PSC). The PSC is there to test that bidders are offering value for money and it is proposed that the bidder will be given feedback on their presentation and how they fared against the PSC.”

Cobbetts note (G59/214 at 215) recorded:

“DW [Mr Williams] brought up the point about the ‘third site’ as an alternative option to City One or Elland Road and asked whether there was a specific site in mind. NR/AS confirmed that the idea behind the conceptual third site was to give some form of benchmarking capacity to the Council in working out a viable benchmark/baseline position against which to rate the bidders’ submissions – the Project Team were aiming to make it ‘as realistic as possible’.”

Mr Williams in his note (T2/24) recorded:

“ ‘Public Sector Comparator’

‘it can be built’

‘stock check’ ”

Mr Cawson questioned Mr Williams on these words. Mr Cawson said that they would seem to suggest that there was a discussion about another public sector comparator being something that could be built as well as being a stock check. Mr Williams replied:

“The public sector comparator is as defined by HM Treasury. That is the problem we have here. The Council are talking to us in terms that we don’t understand. …” (Day 10/124/18-21).

On 1 July 2008 Ms Fletcher, together with Mr Aspinall and Mr Williams, along with Mr Finfer, MEL’s solicitor, met with members of LCC’s Project Team. Those present included Mr Coulson, Mr Smith, Mr Russell, Mr Greer, and also Mr Fitzgibbon of Cobbetts.

Ms Fletcher said that during the meeting MEL outlined a number of concerns in relation to the procurement process. They asked about the PSC referred to in the Clarification Note. Mr Russell told them that the PSC was not based on Elland Road, but on other unspecified sites. He stated it was a “series of them” (sites) so that they could compare the gap funding in the two schemes put forward in the Competition to get the “best competitive position on how it sits against the comparator”. She said they still did not fully understand so Mr Aspinall asked again “what is it?”, and Mr Smith said “they were real schemes and propositions at the same level as our scheme, purely for them to look at and benchmark” and they were working up the PSC at the same time which was “hypothetical”. She stated that Mr Russell did not tell them at this meeting that LCC was considering the possibility of building an Arena on the PSC site and that if this fact had been disclosed to them she would have immediately withdrawn MEL’s bid from the Competition and taken immediate steps to dispose of City One. (C/1/782).

Mr Aspinall said that in relation to the PSC they were told that the PSC “is not based on Elland Road [and it is] based on a number of sites”. Furthermore the PSC is a “full[y] priced up scheme in [terms of] risks” and that LCC and its advisors are “working as hard on [the] PSC as we are on our bid”. (G60/69). Mr Aspinall commented this is not the same as saying that LCC would build as a developer on its own site at Clay Pit Lane or any other site. We were also still confused and in the dark about the location of the PSC site, and how this was being developed for the purposes of comparison. We had not had satisfactory responses to our written clarification questions dated from April 2008 (C/3/856).

Mr Williams said that Mr Smith confirmed that the PSC was based on “real schemes” and the one that came top would be selected. (G60/80). He interpreted this as that either the GMI or MEL’s bid would be selected having been compared favourably with the benchmark measure of the PSC. Mr Smith said he would not tell them the sites that the PSC’s were based upon.

MEL’s minutes of the meeting (issued to DTZ on 2 September 2008) (G60/86/H1-H4) include the following:

“4.

The Public Sector Comparator and the nature of our competition (Q28).

MEL expressed concern about the nature of the Public Sector Comparator (PSC); it has always been known (from even before the initial Arena Bidders Open Day presentation) that Elland Road was being included in the process as a ‘fall back’.

MEL has therefore been encouraged by the Core Team to interpret this as that Elland Rd is the PSC ‘to beat’ in terms of the competition.

NR confirmed that PSC is not based upon Elland Rd but on a ‘number of sites’. BA enquired where these sites were located? NR would not confirm their location i.e. ‘hypothetical’ city centre location – ‘fully priced up’ scheme included risks. PMP/DTZ are working as hard on the PSC as we are on our bids.

PMP expect this process to deliver the best value for money for the Council, but there is a point at which this might not be achieved due to the market; but PMP considering introducing an ‘optional variant’ bid.

Bidder expressed concern that this apparent change to the PSC has changed the bidder’s risk profile i.e. thought that they were one of two locations; now it appears that we are one of three or more location[s] being considered.”

By the side of this last sentence Mr Aspinall has added the words in manuscript “i.e. out of town PSC to beat before”. (G60/86H3-4). Mr Cawson asked Mr Williams:

“So I think what you are drawing a distinction between is an out of town PSC and an in town or city centre PSC”.

Mr Williams replied:

“Yes, what I’m trying to say is the fact that Elland Road was there as a fall back, if you are introducing the PSC concept, surely you do it on the fall back. Which comes back to that point I was making before, that we have—we think we have a commercial advantage and are better able to show value for money on our site compared to Elland Road. If you introduce other city centre sites which we are going to be compared against as effectively producing a higher ability to provide value for money, it basically makes our job more difficult. So I am basically saying that—I think I was involved in this—things have changed. We are being compared to something that we weren’t initially supposed to be compared against.” (Day 11/47/13-48/3).

Mr Coulson’s notes of the meeting record as follows:

“BA [Mr Aspinall] – sought clarification of PSC

AS [Mr Smith] proposal based on real propositions, not theoretical sites – but can’t be site specific at this time.

NR [Mr Russell] – PSC will be assessed to same level of detail as developer proposals

- working on No.s of PSCs – addressing how could do it if dev. procurement route not progressed – have to price in all risks to Council of adopting such approach – but clearly at £40/50m gap funding clearly not VFM [value for money] to public to support such proposition – consultant team VFM can be achieved with the Montpellier site.

NR restate – up to circa £20m gap funding remains the public sector position.

Montpellier – sought clarification whether more [than] 2 sites being considered.

AS – LCC always has the flexibility to ‘pull’ the competition – tho expect process to deliver an arena, however, accepted point in process that may not be able to deliver in terms of VFM given state of current risk.

NR – if Mont can deliver VFM not an issue

- Stressed need for dev to table proposals + consultant team will work with dev to show can be achieved.” (G60/96-97).

Mr Russell said that he could recall that he informed MEL in clear terms that it should put its “best foot forward” at the presentation which was due on 14 July 2008 and that if the public sector funding gap was in excess of £40million, MEL should take it as read that this would not offer value for money for LCC. He also reiterated that they continued to explore PSCs to test value for money. During the meeting he said that they were working on a number of PSCs “…addressing how [the] Council could do it if dev[eloper] procurement route not progressed…”, by which he said he sought to make it clear that LCC would consider building the Arena at one of the PSCs if it could not achieve value for money through the Developer Competition. (D3/1771/para 263).

Mr Russell said that MEL sought clarification as to whether the PSCs would be based on the Elland Road site or a hypothetical site. Mr Smith repeated that the PSCs were real schemes and that LCC were working up the PSCs to the same level of detail as the developers were currently working with their schemes in order to test value for money. MEL would not be told the location of the third site. Mr Smith, he said, made it clear that the “…competition [could be] pulled on both bidders [and] a third site will be brought forward by the Council”. Mr Russell said against that background he genuinely believed that MEL would understand that LCC may well build the Arena on one of the PSCs if they were not able to come forward with a viable proposal (D3/1771-1772). He said that he did not recall the consultant team or a representative from LCC using the word “purely” in the context of benchmarking and the PSCs at that meeting. (D2/1822/para 33).

Mr Smith said that during the meeting Mr Russell stated that LCC were working on a number of PSCs “addressing how [the] Council could do it if dev[eloper] procurement route not progressed”, by which he made it clear that LCC would consider building the Arena at one of the PSCs if it could not achieve value for money through the Developer Procurement. MEL sought clarification as to whether the PSCs would be based on the Elland Road site or a hypothetical site. Mr Smith said he explained that the PSCs were based on real schemes but that LCC would not tell them the location of the site or sites. (D3/1981).

Mr Fitzgibbon made handwritten notes at the meeting (G60/83D1-4). At page 4 he noted

“PSC – (AS) is based upon a ‘real scheme’ – not a hypothetical. It will be up to the level of detail that the Dev bidders are currently undertaking yes (NR).”

In cross examination Ms Fletcher accepted that the word “hypothetical” does not appear in her notes of the meeting (T1/132) and should not have appeared in quotation marks in her witness statement (Day 6/144/1-10). Mr Finfer also makes no mention of “hypothetical” or “purely” for benchmarking purposes in his notes. (G60/80A2). Mr Patel in his notes (T4/22) records as follows:

“PSC Comparator

Bidder query

Is this a benchmark of the Elland Road or hypothetical site?

AS – it is a real scheme – Council has to test value for money.

We will not tell you the site?

Query is PSC some level of detail? Yes but not about the competition – test is value for money and balance risk.”

Mr Williams said that MEL knew that the PSC was there to test for value for money and that they were being compared against it. He said, however

“We come back to the definition. We are going to these meetings understanding that the PSC is a hypothetical test. We haven’t been told any different. The fact that there was comments that ‘You are being compared against a real scheme’, its still effectively—to us, it is a model, because we’re not being given any clarity to change the fundamental definition of what a PSC is.” (Day 10/133/16-134/16).

Mr Russell did not accept Mr Hollander’s suggestion that the public sector comparator was in competition with the developer bidders. Mr Russell said

“…The public sector comparator is not in a competition. It is clear it is not in a competition. Anybody that does any level of PFI, public/private partnership works, would understand that. It is clearly not in the competition. It is the comparator with the bids, the private sector proposals, that are in the competition.” (Day 22/67/11-22).

Mr Smith was asked by Mr Hollander about the words “an actual site”. Mr Hollander suggested to Mr Smith that there is no great problem in the PSC being based on an actual site; there could be an actual site but it would be a hypothetical benchmarking exercise and that, he suggested, would be a perfectly sensible PSC comparator (Day 25/134-135). Mr Smith responded:

“…the people who were in that room knew what we meant when we said ‘an actual site’. We meant a physical location that was somewhere that the local authority would deliver and achieve the same outcomes.

…

I think the bidders understood that the PSC was the cost [to] the public sector, the Council, delivering the Arena itself to the same—delivering the outcomes of the SMG specification itself on a real site, that we would not provide them with the details of, I accept.” (Day 25/135/8-20).

The parties’ closing submissions

In these proceedings MEL alleged that eight individuals made fraudulent representations. Allegations are maintained against five of them: Ms Dent, Mr Farrington, Mr Coulson, Mr Russell and Mr Smith. Allegations of fraud made against Councillor Carter, Mr Foster and Mr Greer have now been withdrawn.

MEL’s case based on October 2007 is no longer pursued. Mr Hollander states that, in the light of the evidence, it is not now alleged that any representations made prior to the Project Board meeting on 30 January 2008 were made fraudulently.

Mr Hollander submits that a series of representations made subsequent to 30 January 2008 were dishonestly untrue when made, in particular those made on 20 February, 14 March and 23 April 2008 and in the ITCD document dated February 2008.

Further he submits that a series of representations made prior to 30 January 2008 were not untrue when made but ceased to be true after 30 January 2008. It then became the obligation of each person who had made or been party to a false representation made prior to 30 January 2008 to correct that representation promptly and it was dishonest not to do so.

The earlier representations going back to 2005 are relevant, Mr Hollander submits (i) as a backcloth against which the subsequent representations are to be seen; (ii) to inform the content of any subsequent representation where there is a dispute as to the meaning or effect of the words used; and (iii) to support the case on continuing representations.

MEL’s pleaded case was that, in relation to the developer competition, Ms Fletcher expressed concerns and sought assurances that (1) LCC had a pre-disposition to build at Elland Road; (2) the competition would not be fair and transparent; (3) MEL would be used as a stalking horse; and (4) LCC wanted to build the arena itself. MEL no longer rely on (1), namely that LCC had a pre-disposition to build at Elland Road; and MEL’s reliance on (3), namely that MEL would be used as a stalking horse, is relied on to a much more limited degree (see para 379(2) below).

A small number of the representations originally pleaded were stated not to be relied upon in the light of the evidence. MEL do not rely in the deceit claim on the PSC representations pleaded; nor in relation to the meeting on 23 April 2008 do they rely on any representation that the Castle Land was “unrelated” to the Arena or “regardless” of the Arena. (Claimant’s written closing submissions, para 15). The representations relied upon by MEL are divided into three groups: (i) 15 representations made prior to 30 January 2008; (ii) 4 representations made after 30 January 2008; and (iii) 6 representations involving Councillor Carter and Mr Foster, relied on to support existence of other representations (MEL’s written closing submissions, pp10-33). Mr Hollander submits that each of these representations were made.

Mr Hollander submits that in the light of the decision taken by the Project Board on 30 January 2008, it was untrue to state thereafter that LCC did not want to build the Arena itself, or make any similar statement; and it was untrue to state thereafter that the competition was fair and transparent. He suggests that what was determined at that meeting needs to be seen in the light of what went before and what happened as a result of that meeting.

As for events before the 30 January 2008 Project Board meeting Mr Hollander submits that by August 2007 work had already commenced on “Plan B”, the “Alternative Development Proposal” and it was apparent that any development at Elland Road might well need to be done by LCC contracting directly with a contractor. Following their recommendations to the Project Board meetings on 20 September and 10 October 2007 “the consultants continued thereafter to bring LCC into line with what they regarded as the way forward” (MEL’s closing written submissions, para 126).

By 20 November 2007 the consultants had arranged for the presentation of a paper at the next Project Board meeting on 30 January 2008 which considered two separate options, namely a plan that involved the use of prudential borrowing to fund the Arena (“Financial Plan B”) and a plan that involved LCC constructing the Arena on its own land (“Development Plan B”). In respect of Development Plan B the minutes of the meeting between PMP and LCC on 20 November 2007 record that “a paper will be provided to the Project Board in January re the timescale for commencing Plan B/investigation into Plan B”. Also on 20 November 2007 the consultants themselves met and considered the timetable to ensure that Plan B could be aligned with the developer competition so that prior to the end of that competition work on Plan B had reached the same stage as the developer competition (G37/116). Mr Russell accepted that this was about “dove-tailing” Plan B with the competition (Day 23/133/2-8).

The submissions prepared by the developers were received by LCC on 9 January 2008. Mr Farrington states that it was on receipt of those submissions “it now started to register with [him] that the advisors had been right to express concerns that the developer competition may struggle to produce a viable outcome in the light of the faltering economy” (D1/1020/para 116).

In January 2008 LCC started actively to look at other City Centre sites with a view to the possible siting of the Arena on such land. One such site was Sovereign Street. The previous month, on 10 December 2007, LCC had made an offer to purchase the Castle land and were putting pressure on GMI not to bid for the Castle land in competition with LCC.

On 25 January 2008 Mr Farrington told Mr Russell that he expected the Project Board to authorise work on Plan B at the meeting on 30 January 2008, and in consequence Mr Russell told Mr Smith “there was no need to waste time on bringing a complex paper together at this point”. (G41/169).

Mr Hollander submits that the conduct of LCC subsequent to the Project Board meeting on 30 January 2008, and in particular that of Messrs Dent, Farrington, Coulson, Smith and Russell, should assist the court in determining the allegations of deceit and the question whether there was an appreciation on the part of the LCC witnesses that there was an obligation to correct representations that had now proved to be false. As time goes on, he submits, the level and extent of the concealment from the bidders grows, and the steps taken to ensure that the bidders do not find out what is going on are increased significantly. All five individuals against whom the deceit claim is maintained were involved in the decisions made on 30 January 2008. They each made representations after that date that were to their knowledge untrue by virtue of what to their knowledge and with their participation had been determined on 30 January 2008. In advance of the meeting on 30 January 2008 Mr Coulson and Mr Farrington anticipated that both operators and developers would be told about Plan B (G41/215). However at the Project Board meeting it was agreed not to tell the developers. Mr Hollander suggests that Mr Greer’s “would rather give the game away” e-mail (G46/52) (copied to Mr Russell and Mr Smith) shows a general understanding of what was being done.

Mr Hollander submits that various steps were taken on the basis of the decisions made at the Project Board meeting on 30 January 2008. On 6 February 2008 Plan B was introduced to the operator bidders. The confidential Operator Final Tender Document stated at paragraph 3.31: “Bidders are asked to note that the Council intends to investigate alternative delivery options, whereby, for example, the selected operator may be required to contract directly with, and guarantee the annual rental stream to, the Council rather than a developer”. (G44/136). Paragraph 3.32 states: “This solution would be delivered at Elland Road”.

Mr Smith stated in an e-mail dated 13 February 2008 to Ms Du Preez, copied to Mr Farrington, Mr Russell and others, to which he attached a draft Addendum for the Developer ITCD: “The ‘Plan B (Contractor)’ option would involve cancelling the present Developer Competition and starting a new OJEU procurement (or possibly several for work/services). … We don’t need to communicate any of this to Developer Bidders at this stage but the public sector comparator could be a useful tool later”. (G45/66). LCC continued to look at further city-centre sites such as Quarry Hill as possible Arena sites.

On 3 March 2008 Mr Coulson originated a formal request for variation to PMP’s commission terms (G46/94). On 19 March 2008 Mr Coulson wrote to Mr Russell stating that Ms Dent authorised PMP’s Plan B fees. (G47/64).

The Project Board at its meeting on 17 April 2008 considered a detailed presentation on the Alternative Development Procurement which included six options. (G51/177).

In support of his submission that it was plainly untrue for LCC to say after the meeting on 30 January that LCC did not want to build the Arena itself and that the competition was fair or transparent, Mr Hollander relied on the evidence that Mr Coulson gave in cross-examination (Day 18/105-109). (Mr Hollander points out that in re-examination Mr Coulson appeared to give a different response, albeit, he says, he did so without explanation (MEL’s closing written submissions, para 156).

Mr Hollander submits that the Cobbetts note of the Project Board meeting on 30 January 2008 (J6/1-9) makes it clear that Ms Dent expressed concerns in relation to Plan B (2) (i.e. Development Plan B) in the context of the forthcoming elections because “developers cd blow up in city”, i.e. adverse publicity could arise as a result of the developers making the information public. Mr Hollander submits that the evidence of each of Messrs Farrington, Dent and Coulson on this important matter was entirely unsatisfactory.

On 15 February 2008 Mr Coulson e-mailed Mr Farrington (G45/122):

“Whilst the project board at its last meeting agreed that the alternative development procurement concept should be introduced on a confidential basis to the two shortlisted operators, did the Board also agree that it be introduced to the developers (in April).

I recall Jean being nervous about the developer being advised of the concept before the May elections, with negative press then appearing.

I am aware that we are considering two approaches with firstly the public sector acting as funder, thus allowing costs to be taken cost out of the developer proposals and secondly as contractor/developer, with the developer procurement process being halted altogether.

The first of the approaches outlined above is probably acceptable but we need to be clear of the position as the developer meetings will commence in the near future.

Any thoughts on the approach and the timing as to when such information should be made available?”

Mr Farrington did not remember Ms Dent being nervous about the developer being advised of the concept before the May elections, with negative press then appearing. He said that if she said that, it would be improper. His view was that Mr Coulson misinterpreted the comments that Ms Dent made. Ms Dent said that she did not recall saying that she was nervous about the developer being advised. She said “[her] personal position throughout this has been we should tell the developer what we should be advised to tell them. If we should tell them everything, we should tell them everything”. (Day 16/62-64; and see para 211 above).

Mr Coulson in his witness statement (D1/1300/para 169) said:

“I have considered this e-mail several times when preparing this witness statement and recall that what had made Ms Dent nervous was the lobbying that occurred by MEL through to the Leeds Chamber Property Forum and the lobbying of Councillor A Carter which was outside the procurement process and therefore inappropriate. I recall that the timing of the local Council election had no bearing whatsoever as to when the PSC was introduced to the developer bidders.”

When cross-examined by Mr Hollander about this he stated that his comment in the e-mail about Ms Dent and the elections had nothing to do with the developer competition, and that he was wrong to make the link. (Day 18/72/5-88/16).

However at the conclusion of cross-examination but prior to re-examination, disclosure was made of the Cobbetts note of the meeting on 30 January 2008 (see para 271 above). Mr Hollander referred Mr Coulson again to the second paragraph of his e-mail of 15 February. Mr Hollander said:

“…You couldn’t have got it more right, Mr Coulson, could you, in that second paragraph? It is absolutely bang on, isn’t it?”

Mr Coulson replied:

“There does seem to be a relationship between what I said in my e-mail to Mr Farrington. But as I said yesterday, my Lord, I didn’t have the benefit of any notes from this meeting in my book, I was going on memory and I made a link.” (Day 19/13/13-20).

Mr Hollander also criticises the evidence of Mr Coulson that “no decision” was taken about the developers at the Project Board meeting on 30 January 2008. (Day 18/61-70). By contrast Mr Farrington did accept that a decision was made not to tell the developers (Day 13/87/23-24). Mr Hollander suggested that the problem for LCC was that those attending the meeting with MEL on 20 February 2008 were sitting on important information which they knew could not be disclosed to the developers, since that was the decision made by the Project Board on 30 January 2008. Ms Fletcher was always likely to ask difficult questions and it was not possible to answer the questions without revealing information that was not to be disclosed. Mr Hollander suggested that exactly the same problem arose when Ms Fletcher met Ms Dent at MIPIM on 14 March 2008.

Mr Hollander submits that it was apparent to each of Mr Farrington, Ms Dent, Mr Coulson, Mr Smith and Mr Russell that the fact work had been commissioned by LCC on Plan B as an alternative development procurement was important information for the developers to know. He submitted that as soon as LCC authorised work on Plan B on 30 January 2008, it could no longer truthfully be said that LCC did not want to build the arena itself. It had authorised substantial work to be done in consideration of that possibility. All the work done after 30 January 2008 involves consideration of whether Plan B is a better alternative option until a decision is made on 5 November 2008. In connection with the “build” representation, no distinction can be drawn between “want” and “intend”. Ms Dent (Day 16/93/13-22) and Mr Coulson (Day 18/105/10-20) both accepted that “want” means “intend”.

Mr Hollander submits that Plan B work is fundamentally at odds with the Developer Competition. LCC has a role of decision maker in a competition it has set up itself. Its role as decision maker requires it to act in good faith towards the competitors. The role of potential competitor is utterly at odds with the role of decision maker. LCC says it was not a competitor, however what happened in relation to the so-called PSC shows that it obviously was. There is, Mr Hollander submits, the most obvious conflict of interest between its two roles. However one puts it, it is impossible to avoid the conclusion that the work being done is to assess the position of LCC as a competitor to the developers.

Mr Hollander accepted that the evidence indicated that LCC wanted to acquire the Castle land for two reasons: one because of the Arena and one because it wanted to acquire the land anyway. However Mr Hollander suggested that LCC sought to use the existence of the Developer Competition in “a truly disreputable manner to strong-arm GMI out of the Castle Land” (MEL’s closing written submissions, para 195). Mr Hollander noted that LCC’s witnesses said that it was in the interests of all the parties that there was no competition between potential purchasers of the Castle land. He observed that of course, if there had been competition for the land it had the potential for pushing the price up and therefore increasing the cost of the Elland Road PSC.

Mr Hollander also criticised the deliberate decision not to tell the developer bidders about the Clay Pit Lane/Elmwood Road site. On about 22 April 2008 Ms Dent drew Mr Farrington’s attention to the Clay Pit Lane site as a potential Arena site when it became available because Castlemore pulled out from purchasing it. On 16 May 2008 Mr Greer told Mr Farrington that Arup’s view in relation to the suitability of the Clay Pit Lane site for the Arena was that “there are no showstoppers” (G56/42). On 9 July 2008 LCC entered into an exclusivity agreement with LMU whereby during the period of four months LMU would not deal with any interested party in relation to LMU’s land at Clay Pit Lane. Even if the evidence of LCC witnesses that Clay Pit Lane was concealed from the bidders because they were concerned that the developers would disrupt their purchase (or try to buy it themselves) were accepted, the effect would have been to make it more difficult or expensive for LCC to acquire the LMU land. The effect would thus be to make Clay Pit Lane PSC more expensive and less attractive when compared to the bids of the bidders. So LCC was concealing its intentions from the bidders in order to ensure that its PSC was more competitive with the bids than might otherwise have been the case, in other words it improved LCC’s competitive position as against bidders.

Mr Hollander referred to what he described as “the extraordinary lengths” that LCC went to to ensure that the operators did not disclose information about developer plan B to the developers (see MEL’s closing written submissions, paras 200-203).

Further Mr Hollander submits that what he describes as LCC’s “playing for time” or “getting ducks in a row” strategy supports MEL’s contention that LCC acted deceitfully. At the end of February 2008 Mr Russell proposed to Mr Farrington that, in circumstances where GMI were showing signs of wanting to pull out of the competition, that they be kept in the competition for a further “six weeks” whilst Plan B was assessed (G46/281). By July 2008 it had become apparent that more time was needed to get the position sorted with TCS, the Castle land, and the acquisition of the LMU land. It was this that led, Mr Hollander suggested, to the decision that the developer competition be extended by dividing it into two stages. By an e-mail dated 16 July 2008 from Ms du Preez of PMP to Messrs Farrington, Coulson and Brook, she considered the “various options for continuing with the developer competition” and the criteria and rationale in respect of the options. They included not having bidders withdraw earlier than contracting timeframe with key parties (e.g. LMU, Castle land); buying time to achieve certainty on key information (PSC, Castle land covenant etc.); time to contract with key parties (i.e. LMU, Castle and TCS); and minimise risk of challenge to current process if Council decides to go down PSC route. (G62/95)

Mr Hollander submits that the option of terminating the competition has no “benefits”; it has the stated disadvantage of weakening LCC’s bargaining position on the Castle land (and does not have the benefit enjoyed by the other options of assisting the position by buying time for the acquisition of the LMU land or the TCS deal).

Mr Coulson was away at this time. However Mr Hollander suggested that others in their evidence tried to distance themselves from the “options” memo but less truthfully. Mr Farrington was not sure if he ever saw it (Day 14/104/2 and 108/16-21). However a document subsequently disclosed showed that his initial response to Mr Brook was that “refinement is needed and the need to test this scenario against some of the key risks/scenarios that might ensue” (G62/127B), which suggested he was telling Mr Brook that they should not make a decision until they had had an opportunity to review the promised options paper. Mr Russell initially suggested he was not involved in the drafting of the options paper and that it was Ms du Preez’s document (Day 22/179/1-3), but Ms du Preez said that both she and Mr Russell drafted the paper on the train together (Day 27/7/2-10). On 29 August 2008 Mr Russell noted that for matters to progress and Clay Pit Lane to be selected for the Arena site LCC would need to agree Heads of Terms by the end of September to feed into a key decision making Project Board meeting on 2 October 2008 (G66/342).

Mr Hollander also relies on the conduct of those at the feedback meeting on 17 November 2008 in support of the allegation of deceit. Mr Farrington was asked when Clay Pit Lane was first identified as a site. He responded “in the summer” (G77/332, answer 3.43). In fact it was on 22 April 2008. In cross-examination he explained that at the time it was not clear in his mind when the site had been identified and he gave “an instinctive response” and accepted that what he had said to Ms Fletcher was incorrect (Day 12/39/20). In fact three days before the meeting on 17 November 2008 Mr Fitzgibbon had made it clear that it was important that at the feedback meeting “an agreed approach be taken with absolute consistency being exercised by all team members”, particularly to the key questions as to when LCC decided to pursue an alternative approach (G87/647 and 649). Mr Hollander suggested that LCC discussed the issue in detail and had a pre-agreed position.

Mr Farrington also stated that it was not until 2010 that he had ever heard any concern from Ms Fletcher about LCC building the Arena themselves (G77/293). However at the feedback meeting Ms Fletcher was recorded as stating (G77/329): “MEL was informed on numerous occasions that LCC would not build it themselves because of the risk profile it presented to the Council”. Mr Farrington accepted that at this meeting this was raised by Ms Fletcher. (Day 16/169/21-22). Ms Fletcher’s note of the meeting indicates that this question was not answered but instead Mr Russell changed the subject by asking whether MEL made their best offer in the final submission. Mr Russell said that he probably was not listening carefully because he was focussing on his next question (Day 24/41/22-24).

Mr Hollander also relies on the disclosure to MEL relating to the PSC as evidence of deceit. Mr Hollander submitted that the tactic adopted by LCC was to provide just enough information to be able to say “we told you” but to do it in a way which prevented MEL from understanding the true position.

The PMP Report to the Project Board on 2 October 2008 states as follows in a prominent box (G67/49):

“Note

…

Whilst the report is titled a ‘Public Sector Comparator’, the content of the report is not a traditional Public Sector Comparator as per HM Treasury definitions and guidance. The report does not seek to provide a technical PSC analysis, it provides a commercial analysis of an alternative procurement route, based around the City Council leading the process. As such, issues such as taxation implications and transaction structure require further detailed investigation if the Council is minded to follow this alternative approach.”

The standard HM Treasury definition of PSC is as follows (J6/160):

“Public Sector Comparator is a hypothetical risk-adjusted costing, by the public sector as a supplier, to an output specification produced as part of a PFI procurement exercise. It:

- is expressed in net present value terms;

- is based on the recent actual public sector method of providing that defined output (including any reasonably foreseeable efficiencies the public sector can make); and

- takes full account of the risks which would be encountered by that style of procurement.”

The HM Treasury definition refers to its use in private finance initiative (“PFI”) contracts. The arena contract was not a PFI contract. However Mr Hollander submits that it was essential that if some other definition was being used in the present case the bidders should have been provided with an accurate definition of the PSC being used. Yet there is no clear statement in any formal document that a PSC is other than the commonly understood PSC (i.e., hypothetical) even if it is based on a “real scheme”. Mr Hollander commented that LCC’s witnesses gave differing evidence as to what the definition was of the PSC used in the present case, (MEL’s closing written submissions, pp79-82). He acknowledged that a number of witnesses said that it was used to determine whether the bidders’ bids were value for money, which is the purpose identified in the Clarification Notes, and is the legitimate purpose of a PSC. However, Mr Russell, having said that it was simply about “value for money” (Day 22/37/7-14), then suggested that the role of the PSC “evolved over time” (Day 22/45/22-25; 46/1-8). Mr Smith saw the purpose of the PSC as follows (D3/2037/para 169):

“If the proposal required more than £20m gap funding, and although LCC had not agreed to provide further funding, any such funding would be limited to the maximum cost of LCC developing the Arena itself.”

Ms du Preez gave similar evidence (Day 27/28/6-15):

“If the public sector were to consider investing more money, it wouldn’t simply be able to select the lowest gap funding figure provided by the competition, it would need to understand whether that was value for money, i.e. whether the public sector could deliver it at a lower cost. Therefore, effectively, the public sector comparator was a measure of the amount, maximum amount, that it would be reasonable for the public sector to invest in the project. That isn’t to say that it would have been able to.”

Mr Hollander submits that this evidence discloses the real purpose of the PSC; it has nothing to do with whether the bids were affordable or value for money. The PSC was being assessed directly against the bids of the bidders, and the PSC was competing with the developer bids. Mr Farrington accepted that the PSC could be regarded as a competitor (Day 12/20/1-5).

Mr Hollander submits that the key to any genuine PSC is that it is a hypothetical comparator; anything else would create a manifest conflict of interest (see MEL’s written closing submissions, paras 324-335). Mr Hollander submits (MEL’s written closing submissions, p89):

“319.

… once the PSC has the potential to be [a] potential alternative bid worked up in parallel, it is a grossly and obviously improper exercise. LCC owes obligations to developers who have entered the competition on the premise that LCC has determined that the appropriate way of choosing a site and developer is through the competition it has initiated. If it decides, legitimately, that the developers do not offer value for money, then it is entitled to close the competition without a winner and consider afresh what alternative steps need to be taken to procure an arena.

320.

What it is not entitled to do, during the course of the competition, is to explore alternative strategies for delivering the arena outside the competition with a view to undertaking some form of comparison between those strategies and the bids of the competitors. So to do would fundamentally breach the defined rules of the competition.”

Mr Hollander suggests the comparison between the PSCs and the developer bids was not exactly “a fair fight”. The PSCs were based on a series of “interventions” by LCC (see MEL’s written closing submissions, para 334):

“(1)

LCC uses its own assets (e.g. Woodhouse Lane car park, LCC land at Clay Pit Lane);

(2)

It purchases land off-market without the market knowing (LMU land at Clay Pit Lane);

(3)

They do deals with third parties (e.g. LMU, Castle family);

(4)

They are in principle prepared to use their statutory powers to regulate on-street parking for the PSC, while disallowing all of the MEL on-street parking figures;

(5)

They put the cost of some items onto a different balance sheet so that they do not appear on the PSC calculations, e.g., the park and ride facility at Elland Road.”

Finally, Mr Hollander contends that during the period from July 2008 onwards LCC spent vast amounts of time trying to get the figures on the PSC below those of the bidders.

His criticisms include the following: (i) the £20m of TCS income was not “risk adjusted” by 20%; the private developer bids were risk adjusted. (ii) The gap funding cost of the PSCs was reduced by reason of “positive sensitivity”. This assumed that some of the PSC costs would be lower than assumed and that the PSC revenues would be higher than assumed. No such favourable adjustment was applied to the developer bids. (iii) When the developer bids were evaluated at the Project Board stage in October 2008 LCC added two new criteria – “Commercial Risk Analysis” and “Overall Risk Profile” which together accounted for 40% of the score. These criteria had not been previously disclosed to the bidders. (iv) The economic impact of the PSCs and the developer bids was not fairly presented to the Executive Board (MEL’s written closing submissions, para 340(4)). (v) In relation to the inclusion of revenue from the Woodhouse Lane car park in the PSC, at most £2.2m of the total repair cost was included in the PSC figures, when a consultant’s report at the time put this cost in excess of £5m. Further, in granting the Woodhouse Lane lease to TCS, LCC would forego about £7.5m of extra car park revenue.

Mr Hollander submits that the legal advice given by Cobbetts does not assist LCC. Mr Fitzgibbon’s advice which was circulated in draft to the consultants on or about 15 February 2008 did not go before the Project Board until 17 April 2008. Cobbetts’ advice is essentially concerned with prudential borrowing and, specifically, the risk that others who had not entered the competition would complain. Mr Fitzgibbon (Day 20/137/4 and 141/10) and Ms Anderson (Day 21/26/17-27) confirmed that Cobbetts were never asked to advise as to the representations.

Further Mr Hollander referred to LCC’s legal advice on the PSCs in support of MEL’s case on deceit. On 29 September 2008 Ms Anderson of Cobbetts wrote to Ms du Preez (G70/262):

“I don’t think I can contribute much on the queries from LCC, but with respect I do not agree with Mike Birdsall’s suggestions re the PSC evaluation – being done on the same basis as that for the developer competition. The possible PSC delivery route is entirely separate from the developer competition and there is no logic to scoring them the same – indeed there are dangers in doing so, in that the developer bidders can then argue more easily that the PSC was in fact a formal part of their appraisal (already a very significant risk) – which they should have had disclosed to them straightaway, which as I understand it, has not happened.

They could argue that they have been unfairly prejudiced by the fact that LCC has used appraisal methods in relation to the developer competition which it has not disclosed to them and the whole procurement process could be challenged, exposing LCC to significant risk of damages claims, lost costs claims etc.

The only reference point between the PSC and the developer competition as I understand it is the use (effectively outside of the developer competition) of the PSC to assess the value of the public sector investment in the arena overall through the developer competition. They should not be confused further.”

In her briefing note to her Cobbetts colleague dated 1 October 2008 Ms Anderson states:

“At this stage the reports from the project team indicate that the public sector comparator (originally established to evaluate the value for money of public investment in an arena circa £20m) has taken on a life of its own as a potential alternative delivery model. The reports make it clear that successful delivery of the PSC for Elmwood Road depends on complex negotiations with the private owner of local parking facilities (TCS) and with the landowner of part of the site (LMU). These may take time to resolve.” (G83/79).

Ms Anderson’s briefing note continues under the heading “Procurement issues”:

•

“In relation to the developer competition the options are either to being this to an end now, or put it on hold pending further analysis of the bids, (and further work on the PSC) with a view to a decision as to the future of the developer competition being made at the Executive Board in November.

•

LCC cannot decide to take one bidder forward and terminate the dialogue with the other bidder – either they terminate the dialogue with both bidders, or keep both bidders in the competition.

•

The terms of the tender and procurement documentation have always made it clear that the LCC has the right to terminate the developer competition at any stage.

•

If the view of the project board is that there is no prospect of the developer competition ever yielding a credible bid then there is a strong argument that they should terminate the competition now. However the reports to the project board suggest that there remains a possibility that at least one of the developer bidders could put forward a proposal which might be acceptable. In such circumstances it is not unreasonable to keep the competition alive, albeit on the basis that the bidders are not prejudiced in terms of them incurring unnecessary expenses in this period.

•

If the project board’s view is that the competition should be put on hold pending further analysis of the developer submissions/further consideration of alternative delivery models/a decision by the Executive Board, the developer bidders should be told in writing not to expend any resources on the competition during this period.

•

We have advised consistently that developer bidders may, in the event that the PSC delivery mechanism is adopted, argue that they were kept hanging on until LCC was ready to proceed with the PSC. That risk is already inherent in the situation in which LCC finds itself. We have advised in any event that there is a material risk of challenge from developer bidders (MEL having shown a willingness to challenge processes where they do not win) – and that risk remains whether the project board recommends termination of the competition now, or putting it on hold pending further analysis of the bids and reviews of other options. …” (G83/80).

Under the heading “Treatment of PSC” (G83/82) Ms Anderson stated:

“In recent e-mails about the reports to the project board Mike Birdsall of YF suggested that the same criteria should be used to judge the PSC models (one for Elmwood Road and the other for Elland Road) as are being used to judge the two developer interim submissions. I have made it clear that this is not appropriate, since technically the PSC model does not form part of the formal evaluation of the developer bids – and has not been disclosed to them. The PSC does not form part of the developer competition and needs to be kept quite distinct from it.”

Mr Cawson invites the court to accept the evidence of LCC’s witnesses as to the making of representations. When representations were made, he submits, they were true. None of LCC’s witnesses who are alleged to have made material representations acted dishonestly making them. No representations that were made subsequently required correction, but if and in so far as they did, again the makers of such statements did not act dishonestly in not correcting them.

LCC accepts that Ms Fletcher had concerns, albeit, Mr Cawson submits, wholly unfounded and unjustified, that LCC had a preference for having an arena constructed on its own site at Elland Road, and that she sought assurances that this was not the case. To the extent that Ms Fletcher’s concerns extended to a concern that LLC intended to build the arena itself, those concerns were, in reality, Mr Cawson submits, “inexorably linked to Ms Fletcher’s more general concerns as to a preference for Elland Road” (LCC’s closing submissions, para 510). When asked what made her think that LCC would want to build the Arena itself notwithstanding that it was running a procurement competition to find a private developer, she replied (Day 4/132/20-24):

“Because I had a concern about that because of the Elland Road brief, where there was an arena and a casino designed into it with a hotel.”

In fact LCC never had any preference for Elland Road as a site for the Arena.

From about September 2007 LCC was advised by its consultant advisors that, initially because of certain viability concerns in respect of Elland Road, and subsequently and more significantly in view of the deteriorating economic circumstances and the effect thereof on an ability to bring forward enabling development, it ought to consider two forms of contingency planning: first, implementation of a “financial plan B” involving the introduction of prudential borrowing with a view to making the proposals put forward by the developers more affordable; and second, the introduction of a “development plan B” involving introduction of a public sector comparator that would involve working up proposals by LCC in respect of one or more sites that could be used to test the developers’ proposals for value for money, as well, as it evolved, as providing an alternative development route if the developers’ proposals did not offer value for money. However, it was not until the Project Board received a report from its consultants at the Project Board meeting held on 17 April 2008 that it decided to recommend that the “financial plan B” be introduced to the developers, and that “the developer plan B” be investigated further. Thereafter, following the Executive Board meeting on 14 May 2008 and the meeting of the Project Team on 20 May 2008, the financial Plan B was introduced to the developers on 29 May 2008. By the Clarification Notice issued on 18 June 2008 and what MEL was told at meetings between 29 May 2008 and 22 July 2008, the PSC was introduced to MEL, and MEL was specifically informed that LCC looked to the PSC, as providing an alternative means of delivering the Arena in the event that value for money was not demonstrated by either MEL or GMI.

The only decisions taken at the Project Board meeting on 30 January 2008 were those recorded in the minutes of the meeting. The Project Board noted the content of the report from the consultants and requested a further report to the next meeting, identifying the proposed approach and an evaluation of the risks to the public bodies of pursuing the alternative development procurement route. The Project Board agreed to introduce “the concept” of the alternative development route to the shortlisted operators invited to final tender stage for good reason as contractual documentation was about to be finalised.

LCC made extensive use of the legal services of Cobbetts in order to advise as to procedure and compliance with the Public Contracts Regulations. On 13 February 2008 Mr Smith sent an e-mail to Ms du Preez and Mr Fitzgibbon (copied to members of the project team and other lawyers at Cobbetts) (G45/62) which stated:

“I have drafted the attached Addendum for the Developer ITCD. This deals with “Plan B (funding)” and hopefully helps clarify what we mean by this in terms of how the process would be taken forward.

Clearly we need Cobbetts advice at to whether this presents any difficulties from a procurement perspective. [Mark – can you advise].

The ‘Plan B (Contractor)’ option would involve cancelling the present Developer Competition and starting a new OJEU procurement (or possibly several for work/services). From our perspective the key preparation required for this is to understand (work-up) alternatives that the Council might pursue so that it is possible to make a value for money judgment. We don’t need to communicate any of this to Developer Bidders at this stage but the public sector comparator could be a useful tool later.

Assuming the attached is acceptable then I suggest we release this prior to the Developer Clarification meetings on 20^th and 25^th Feb so that we can explain it further to them when we meet.”

Mr Fitzgibbon replied to Mr Smith on the same day (G45/72):

“I have significant concerns about issuing the proposed Addendum to the ITCD documents to developer bidders at this point in time prior to LCC making a decision as to which approach it is going to take with regard to funding (i.e. whether prudential borrowing, if sought, would be used simply to fund the developer as planned, or whether it would be used to fund a contractor/professional team to build it on behalf of LCC itself). Clearly, to make that decision LCC need to have received my advice in relation to the various risks which would be encountered by changing arrangements at this stage in the process. I am in the process of finalising that note of advice and have not as yet released it to LCC, but would hope to release it to the Project Team (excluding LCC for the present) later today for internal consumption.

The risk LCC runs in adopting an approach whereby developing bidders are asked to incur costs putting together a variant bid to accommodate what amounts to Plan B – Funding, prior to LCC deciding to go ahead with that approach, is that if LCC subsequently decides to run with another option (Plan B – Contractor, for example) and thereby has to abandon Plan B – Funding, it is arguable for the costs which the developer bidders incurred in preparing the Plan B – Funding variant bid during this round of the process would be wasted costs which they could seek to recover from LCC.

Simply waiting until LCC has decided how to proceed, fully understanding the potential risk profile before releasing the Addendum (which might in fact prove unnecessary) would remove this risk)”.

On 15 February 2008 Mr Fitzgibbon finalised a paper (G45/113) which he circulated to the Project Team, other than representatives of LCC, and which was submitted to the Project Board before the Project Board meeting on 17 April 2008. The document states:

“… I have set out below my advice in connection with the proposal to potentially introduce monies obtained by LCC through the use of prudential borrowing and have covered off a number of other concerns within the body of this note.”

Mr Fitzgibbon considers “Plan A – Current Arrangements”, “Plan B –Contractor” and “Plan B – Funding”. The section on “Plan B – Contractor” includes the following:

“The essence of this proposal is that LCC obtains monies through prudential borrowing towards the capital cost of the Arena in substitution for the developer’s funding. Those monies would be used by LCC to have an Arena built either for itself or for some form of public sector joint venture vehicle or SPV with YF.

Consequences:

•

A ‘developer’ not required – instead LCC will act as ‘developer’ appointing the building contractor and the professional team (e.g. design and build team).

•

The nature of the contract being awarded would be completely different from that being currently envisaged therefore the current developer procurement process would need to be abandoned as soon as the decision was taken to run with this option (the risk of wasted costs recovery by the developer bidders in these circumstances has been set out as a risk below). LCC is entitled to abandon the process at any stage; it has reserved the right to do so from the outset.

In the section “Plan B – Funding” Mr Fitzgibbon writes:

“Plan B – Funding essentially involves a prudential borrowing route by LCC, as discussed in outline in relation to Plan B – Contractor. However, the key difference for Plan B – Funding is that the monies obtained through prudential borrowing are planned to be used as a funding mechanism for a developer selected pursuant to the existing procurement process…”

Mr Fitzgibbon sets out “Conclusions regarding Plan B – Funding” and he includes a section headed “A potential solution using Plan B – Funding” (G45/118).

On Mr Fitzgibbon’s advice the ITCD document issued in February 2008 made no reference to any kind of Plan B. Mr Smith said he spoke to Mr Fitzgibbon around this time and “what he was saying was that we shouldn’t introduce any Plan B arrangements until they had been through a decision, until the decision was reached by the Council that these should be introduced”. (Day 26/100/15-102/3; see also D3/1941). Mr Smith says that Mr Fitzgibbon was talking in this context about both “Plan B – Funding” and “Plan B – Alternative Development”.

In relation to the meeting on 20 February 2008 Mr Cawson submits there is nothing about which Mr Coulson and Mr Smith needed to feel “uncomfortable”. The fact remained that LCC had taken no decision that required a departure from the Developer Competition or the need to announce a change to it. This is entirely consistent with the legal advice that LCC had received about what developers should, or rather, should not, be told in the absence of a decision.

Mr Greer was asked by Mr Hollander about his “giving the game away” email dated 28 February 2008 (G48/52):

“Q. What game would that give away and to whom?

A. It would identify to other parties and bidders in the outside world that there was a process that hadn’t actually been decided upon.

Q. Can I put it this way: it would identify to the developers who were in the competition something that had been concealed from them.

A. It would reveal to the developers, yes, but I do not accept it had been concealed, because the Council had not decided upon the requirement for a public sector comparator, it had not instructed the advisor team nor any other party to prepare and run a public sector comparator. Therefore we could not bring into the dialogue process another activity that had not actually—we had not been instructed to undertake. So there was no concealment, …”. (Day 28/31/23-32/13).

Mr Cawson submits that Ms Dent was not dishonest in anything she said to Ms Fletcher on 14 March 2008. There was nothing to tell developers because LCC had made no decision (even to introduce prudential borrowing) at the time they spoke. Ms Dent told Ms Fletcher that LCC did not want to build the arena (and she drew no distinction between the words “want” and “intend”) which was true. Ms Fletcher’s note is no more than a record of her after-the-event recollection and is not a verbatim note of what was said .

On 17 April 2008 the Project Board decided (G53/270-271) to continue the Developer Competition process, while investigating the contractor delivery model, and to introduce hybrid funding (i.e. prudential borrowing) to the Developer Competition, whilst identifying the risks, both legal and procurement, of LCC pursuing either the hybrid funding or the contractor delivery approach.

At the meeting on 23 April 2008 Mr Farrington did not say that LCC’s purchase of the Castle Land was “unrelated” to the Arena but rather that it would proceed “regardless of the Arena project”. Mr Cawson submits that if Ms Fletcher wrote down “unrelated” she did so because that was her interpretation of what she was being told. Neither Ms Dent nor Mr Farrington said that LCC did not want to build the arena because it did not want the risk, though if they had said words to that effect they would have been true.

At the Executive Board meeting on 14 May 2008 SMG were approved as the preferred operator for the Arena. The Report placed before the Executive Board (G55/200) made express reference to the use of prudential borrowing and Mr Farrington made specific reference to it, thus ensuring that approval for its use was more likely should a recommendation be made subsequently to use it.

Mr Farrington made clear what his position was with regard to providing information to the developers at an internal meeting of the project team on 20 May 2008. Mr Fitzgibbon’s note of the meeting (G56/136A.1) records Mr Farrington as saying:

“MF – there is a point in time where need to decide whether in fact either of the bids will deliver the required outputs and if not then need to alert dev’s sooner rather than later, to avoid them incurring costs in developing their schemes.” (G56/136A.2).

Mr Farrington said that there was “no need to be silent on risk of pulling out” (G56/136A.4).

Evidence in support of Mr Russell’s honesty is, Mr Cawson submits, to be found in what he said in the telephone conversation that was secretly recorded by Mr Williams on 4 July 2008 (G60/162). Mr Williams repeatedly stated that the conversation was “off the record”. Mr Cawson said that Mr Russell reiterated what MEL had been told at the meeting on 1 July 2008. MEL could have been left in no doubt that it was very important that it took a commercial approach to the Developer Competition, focussing on the value it ascribed to its land. If it did so and was able to demonstrate that it had a value-for-money offer to make to LCC, there was the possibility that further funds might become available. Mr Russell said:

“… Our task, what we are looking to do, is to feed back to you the position after the 14^th [July] and you can make some decisions then about what you want to do. That’s the objective about the 14^th and to be fair, you know, you turn up saying we need 40 million quid and our advice to you is don’t waste your money.” (G60/162).

Mr Russell told Mr Williams:

“You know we’ll find a [town] centre site to do it if you’re not competitive”. (G60/163).

Mr Russell said:

“I don’t think it would be impossible to believe that there might be some more money on the table but the reasons… the main reason you may not get it is 'cause at the moment it looks like you are trying to engineer getting more money for your site, rather than a competitive bid on the site. And that means there may well be more money on the table but it won’t be ending up going to Montpellier, unless you can convince people you’re gonna be really competitive about getting a number that’s the lowest number you can possibly imagine.” (G60/165).

On 22 July 2008 MEL was informed the PSCs included a city centre site, and that LCC would build the arena itself if a PSC represented better value for money. Mr Williams and Mr Aspinall plainly understood that as can be seen from the amendments made to DTZ’s minutes of the meeting (see para 42 above).

Mr Cawson submitted that the amendment Mr Farrington proposed to the clarification note issued on 24 July 2008 (which formally introduced the two-stage process requiring best commercial offers in September 2008) again evidences his honesty. Mr Farrington e-mailed (G63/105) his proposed amendments which are shown in red (J4/714). They refer to public sector comparators in the plural and amend the wording of the timetable (J4/716-717). He was cross-examined about this. He said:

“Because at the conclusion of the 22 July meeting, as Andrew Smith records in his contemporaneous note, I asked to review that advice note and to oversee it. This was the only advice note in the entirety of this process where I made that specific request.

When I made some track changes, I asked for PSCs to be spelt out in full and in plural, because there were more than one PSC, and I felt that was inaccurate, and I put in words to the effect of—I don’t have it in front of me now—that the competition will either progress to full tender or will be closed down, with the selection of a PSC.

Now, that was me wanting to make it clear to the bidders what the position was. The only conceivable reason why I would say that was with that genuine intent in mind.

I received a phone call from Javid Patel, who was concerned that that wording would be too alarmist to the bidders. My view was, picking up on what I said earlier, that I just want to make it clear to the bidders, and if they find it too alarming and they decide the risk profile is too high, then that is fine. That was my stance.

I understand, then, that Mr Patel spoke to Mr Fitzgibbon, the partner at Cobbetts, and I remember an e-mail, but more importantly a telephone conversation, where he advised me from a legal basis that the wording that I had put in in relation to the PSC was unnecessary, and shouldn’t go in to that documentation.

It was on his legal advice and his legal advice alone that that wording came out. (Day 14/146/3-147/20).

…

Mr Justice Supperstone: What was the message you wanted to put across?

A. What I put in the timetable, that we would progress with a public sector comparator if the competition was closed. So there is the potential for us to continue to full tender with bidders, close down the existing competition with no contract awarded, and that that would lead to the selection of a public sector comparator.” (Day 15/4/23:5/6).

Mr Cawson submits that there is no definitive meaning given to the expressions “Public Sector Comparator” or “PSC” in the field of public procurement. The definition to be found in the Glossary to HM Treasury’s 2003 Green Book (J6/10/160) is not relevant in the present case, since the procurement never involved the award of a Private Finance Initiative contract. It is not suggested that LCC represented to the bidders that the definition found in the Green Book was applicable in this case and, Mr Cawson submits, it clearly was not.

The PSCs do not, Mr Cawson submits, represent a competing bid or bids that LCC wanted to win. LCC remained committed to the developer competition and continued to want to see a private sector developer chosen through the Developer Competition to develop the Arena. Mr Cawson submits that in an attempt to achieve this aim, LCC and its consultants sought to encourage MEL and GMI to put forward their best commercial submissions, and suggested to each of them ways in which they might seek best to do so.

Mr Cawson submits that on any sensible view, LCC was not saying that it would not build itself if the Developer Competition failed to come up with value for money proposals (LCC’s closing submissions, para 521.5).

Mr Cawson submits that Ms du Preez’s evidence about the way in which MEL’s September 2008 submission was evaluated and compared with the PSCs was incapable of serious challenge. Commenting on the “options paper” that she circulated by e-mail on 16 July 2008 (G62/109-110) she explained in her witness statement “the aim of the paper”:

“48.

… [It] was to provide a basis for the discussions that were due to take place between the advisers. It did not advocate any particular course of action and it certainly did not reflect the view of LCC. …

49.

At this point, my personal view was that the developers should be given the opportunity to put forward their best and final offer. This reflected the fact that I genuinely believed that the developers could still get there and that the proposals could be improved. If we did not give the developers this chance then we would never know whether they could have made an affordable proposal. I can recall that Mr Farrington and Mr Brook had struggled to see how the developers could get there, but they were prepared to listen to our views and take on board our advice.

50.

We recognised that if we could not deliver on the contractual elements which contributed to the PSC’s, such as the negotiations with Town Centre Securities (‘TCS’) regarding car park income at Elmwood Road, a private sector developer may still offer better value for money. It was far better for all parties to allow the developers the opportunity to bring forward their best commercial proposal because in the worst case scenario, the City would lose the chance to deliver the Arena and it was quite possible that LCC would not be able to deliver the Arena at all. With the loss of the developers, LCC would have to start again. As far as I was concerned, we were in the last chance saloon. We had not proven that we had a viable alternative to the Developer Competition (all we knew was that we had a possible fall-back), whilst the developers’ proposals continued to indicate a requirement for gap funding substantially in excess of what was acceptable (due not least in the case of MEL to the value placed on the land to be introduced), but we still believed that the developers could, if they wanted, produce affordable, value for money proposals that could deliver the Arena.” (D3/1853-1854).

On 1 August 2008 Ms du Preez wrote to Mr Russell and Mr Patel an e-mail (which was copied to Mr Fitzgibbon, amongst others) concerning the two stage approach that they decided to adopt. She stated that:

“Whilst we do need the bidders to submit their most competitive financial/commercial offer (to enable us to determine whether to continue), we cannot realistically expect this to be final or wholly qualified at that stage. We need to ensure that the bidders cannot go backwards with their offers, but likewise we cannot close the door to better financial offers, in particular if both bidders are taken forward in a competitive environment. …” (G64/15).

Commenting on her e-mail, Ms du Preez said:

“If the Developer Competition had proceeded to a full tender, then the developers would have had the opportunity to improve their proposals. However, for the purpose of determining whether the Developer Competition remained viable, it was made perfectly clear to the developers that they should come forward with their best commercial proposal and to hold nothing back. Whilst we needed to ensure that the developers could not go back on their proposals, there was a chance that a better financial bid would be received if both developers were taken forward in a competitive environment. …” (D3/28/1856/para 56).

In her witness statement at paragraphs 64-95 (D3/1858-1866) Ms du Preez deals with the “Evaluation and Assessment Process” of MEL’s final proposal, received on 10 September 2008. The steps that were taken to evaluate the bids received from MEL and GMI and the PSCs were set out in the three reports (the ITCD Commercial Submissions Report (G67/5-37), the PSC Report (G67/38-45) and the Developer Competition and PSC Report (G67/46-116)) that were presented to the Project Board in 2 October 2008. Commenting on the ITCD Commercial Submissions Report Ms du Preez stated:

“…We genuinely wanted [MEL] to come forward with the best possible proposal. It was in everyone’s interests that they did. Personally, I wanted to demonstrate that the split competition we had embarked on was a success. It is only with the benefit of hindsight that I know that LCC can deliver an Arena itself. There was no certainty, in my mind, that LCC would be able to build a satisfactory Arena itself more cost effectively, and providing greater value for money, than the developers might have been able to deliver it, if pressed to come forward with their very best proposals. By far my preference was to deliver what we had set out to deliver. That would reflect best on PMP. I was very keen to make the Developer Competition work, as I believe were LCC’s other advisers and LCC itself.” (D3/1859-1860/para 68).

An evaluation methodology is detailed in the main body of the ITCD Commercial Submissions Report. Ms du Preez said that as is explained within section 2.3 of the Report, and the Introduction to the Evaluation Process Document

“…the process was not used to ‘score’ the developers’ proposals relative to one another with the intention of selecting any developer as preferred or de-selecting any developer. Rather, where scoring was undertaken, this was with reference to the original ITCD criteria and only intended for the purposes of feedback to the developers, to improve their proposals in the event that the competition had continued. This is consistent with LCC’s intention that the stage should not be an additional burden to the developers but should contribute to the process of getting to bids in the event that the competition continued. It was not, for the purposes of the competition process, a ‘bid’ as the process had not reached the bidding stage.” (D3/1860/para 70).

As for positive sensitivity analysis, Ms du Preez said this was a form of sensitivity analysis applied to the base PSC models as part of the development and presentation of the PSCs. It was reported and is detailed in the PSC Report. However, as is clear from the report to LCC’s Executive Board dated 5 November 2008, that positive sensitivity was not formally considered in the final assessment of the PSC proposition nor in any comparison between the developers’ proposals and the PSCs. (D3/1864/para 88; and Day 27/78/12-16). Those figures with the positive sensitivity adjusted PSCs were not used in comparison with the developer bidders. Mr Hollander asked her why then was the positive sensitivity put before the Project Board at all? She replied, “It was purely for information and analysis in relation to the PSCs as they stood”. The reason why the positive sensitivity was not taken into account when a comparison was made with the developer bidders was “because the prudent thing to do is to compare the base position and the risk adjusted position with no positive sensitivity”. (Day 27/53/3-54/16).

Ms du Preez agreed with the view expressed in Ms Anderson’s e-mail dated 29 September 2008 (see para 298 above). Ms du Preez commented that this e-mail properly reflected, in her view, how the PSC was to be used. Ms du Preez said:

“We wished to use the PSC to test value for money and affordability to determine if it was worth continuing the Developer Competition. If, and only if, the PSCs were show[n] to offer better value for money, would LCC go on to consider whether it could build the Arena itself and in doing so, it would consider the suitability of the PSC sites.” (D3/1866/para 95).

Mr Greer gave detailed evidence explaining the calculation of the normalisation figures. (Day 28/73-86).

Ms du Preez said:

“The purpose of the PSCs was to assess value for money. We were not scoring the developers’ proposals against the PSCs.” (D3/1865/para 94).

Ms du Preez said that

“The PSC was… a tool to measure the maximum amount of public sector funding that it would be advisable to put into the project based on that method of delivery. Therefore, it opens the door for more than the £20m public sector funding than was on the table originally. So it should have helped bidders, in the sense that it was looking to be a measure to providing more funding into the competition if the developer bids came within—if they were less than the amount required by the public sector to deliver. So it was, in fact, an opportunity for the developer bidders.

If I can add to that, I saw the introduction of a city centre public sector comparator as a particular—well, not a disadvantage to MEL, because it was accepted that probably the development of an arena in the city centre would have a higher cost because of the higher design expectations, so by also providing a city centre public sector comparator we were making it a level playing field for the Elland Road bidder and MEL on a city centre site. Therefore I would have thought that MEL would have seen this as a benefit, and if it were not there, perhaps they should have insisted that it was.” (Day 27/104/20-105/18).

Mr Cawson also relied on the evidence of Mr Greer as to the role of a PSC. Mr Greer described the introduction of a PSC in the context of the procurement competition to be in three distinct stages. The first stage is a conceptual one, that is, do we need a PSC and why? That does not take a great deal of time and effort to consider. The second stage would be the planning stage. That would involve more effort in taking the original concept to a level where the parameters of a PSC and what would be involved in running the PSC can be identified and with relevant timescales. The third stage is the actual running of a PSC. This is time-intensive and expensive and would require a formal instruction from a client before the team of consultants would undertake this exercise. He stated:

“… This is because in order for the PSC to be relevant and useful in any procurement competition it would be necessary to deliver a PSC to a sufficient level of technical detail where it could be used as a robust comparator for what would be expected to be received from the competitors themselves. There would also need to be a considerable amount of financial and property service input into the PSC to assess its value, cost and deliverability.” (D3/2075-2076/para 43).

Mr Greer added:

“None of these three stages means that an employer has decided to ‘deliver’ a PSC – in other words procure and construct the development themselves on the basis of the PSC. This could only occur in the then (pre-credit crunch/recession) unusual event that a PSC showed better value for money than the private sector developer bids and would involve closing down the developer competition. In this regard it is important to note that to be fit for purpose, a PSC has to be capable of being delivered and has to be based on real information, such that it provides a robust comparator to the developer bids even though it is hypothetical at the time of running it because there is no decision nor intent to deliver against it. In other words the PSC also provides a ‘fall-back’ or a ‘Plan B’ as well as serving as a PSC.” (D3/2076/para 44)

Mr Greer said that LCC did not instruct the consultant team, led by PMP, to run a PSC until May 2008; that the developer bidders were advised that a PSC would be used to test value for money from 29 May 2008 onwards; and that the PSC was not available to test value for money in the developer competition until around August 2008 (D3/2074-2075/para 40). He said that by mid-June 2008 he recalled working on the PSC in relation to Elmwood Road and this carried on through July and August 2008. He said:

“Even at this stage however I was not aware that any decision had been made by LCC to deliver the PSC as a Plan B (Developer) instead of the competition nor do I believe that one was made. We were creating a viable Public Sector Comparator in order to test the competitors’ bids and which could be used as a fall-back option should the competition be terminated if the bids did not produce value for money and that determination whether to continue with the competition or terminate was not going to be made until the Executive Board met and considered all the options which it did in November 2008.” (D3/2080-2081/para 49).

Mr Greer said that he believed that the advisory team members were verbally instructed to start the initial stages of running the PSC to test its feasibility following the team meeting on 20 May 2008 as part of the ongoing investigation authorised by the Project Board and as approved by the Executive Board on 14 May 2008. He said this was the basis on which MEL were advised that value for money would be tested against a PSC at the ITCD addendum clarification meeting on 29 May 2008.

Mr Greer said that what was received from MEL on 10 September 2008 were not “bids”. He said:

“They were submissions made as requested by the clarification meeting; they weren’t bids in the context of the competitive dialogue process.” (Day 28/50/3-7).

Mr Hollander asked Mr Greer about the public sector comparator that was being used.

“Q. I think that you would agree that if a particular definition of a public sector comparator is being used for the purpose of this competition, it was essential that the bidders know from the outset what the special definition was?

A. There was no special definition… This was a unique procurement process. There was no specific definition to call upon and, therefore, we took best guidance from the range of information and tools available.” (Day 28/51/6-15).

Mr Greer added:

“HM Treasury guidance, what is called the Green Book, is specifically in respect of the public finance initiative, which is where the public sector is providing revenues to be capitalised in the private sector. The whole proposition for this arena competition was different to that, with private sector revenues coming into the public sector to be capitalised under prudential borrowing. They are fundamentally different things, and I believe this note [PMP’s report to the Project Board in September 2008, G67/39] sets out exactly what I just advised the Court, which was that it is not a traditional public sector in the sense of the Treasury guidance.” (Day 28/52/23-53/9).

Mr Greer said that it was essential that the developers were told at the earliest possible occasion, and they were, that the public sector comparator was being developed and being run. (Day 28/53/16-24). He said the running of a public sector comparator and that it was based upon real information, in terms of site and the like, was made clear to the developers in the competition from 29 May onwards. (Day 28/54/12-15).

Mr Greer stated:

“… it was a public sector comparator based upon real information on a real site, that was capable of being delivered in the event that the developer competition didn’t reach value for money and was closed.” (Day 26/56/9-14).

Mr Greer said that the whole point of a public sector comparator was to ensure value for money (Day 28/62/8-12). That statement led to the following exchange between Mr Hollander and Mr Greer:

“Q. Can I just ask you about value for money for a moment. Take Clay Pit Lane.

We know that:

(1)

the Council was using its own land on Clay Pit Lane, which was not offered to the market.

(2)

that it was purchasing the LMU land off-market.

(3)

it was using its own car park at Woodhouse Lane to generate value.

(4)

it was doing a deal with TCS, a third party, to generate value.

(5)

it was potentially using its statutory powers regarding on-street parking.

How will a PSC which takes into account all that information have anything whatsoever to do with the value for money of a bid by a developer?

A. I think it has everything to do with demonstrating value for money. I think it is—my understanding, it would be incumbent upon any public authority to ensure it can demonstrate that the public purse is being used to the best value for money and, therefore, the public authority to do everything it expressly can within the powers that it has, within the available land or whatever else it has, to ensure that it can be delivered at minimum cost to the taxpayer.

Q. What you are really saying, Mr Greer, is the exercise being done by the PSC is: using our own land, our statutory powers, our abilities to deal with third parties and our existing contractual and asset arrangements, can the Council do this cheaper? That is all. That is what the PSC was in this case, wasn’t it?

A.

Just a specific point… if I may, before I come back to that answer. I am not sure about what Counsel was referring to in terms of using powers over third parties, because I don’t believe the Council ever did that as part of the public sector comparator. But I think in terms of the process that [Counsel] has just set out, then it is really no different from the private sector developers who are there to try and provide the very best proposition that they can, and that the public sector comparator should similarly be the very best proposition that the public sector could deliver or bring forward.” (Day 28/63/2-64/18).

Findings of fact

The allegations of fraud that were made against Councillor Carter, Mr Foster and Mr Greer have now been withdrawn. In my view each of them gave honest and truthful evidence, which I accept.

Ms Dent was patently an honest and truthful witness, whose evidence I accept.

Mr Farrington was an honest and truthful witness, whose evidence I accept (see para 397 below).

I consider Mr Russell to have been an honest and truthful witness and I accept his evidence (see para 398 below).

In assessing the evidence of Mr Smith and Mr Coulson I have considered their evidence as a whole. They were subjected to lengthy and detailed cross-examination. I accept their evidence, save in each of their cases in relation to one matter (see paras 399 and 400 below).

I accept, having heard and observed Ms Fletcher give evidence over four days, that she was genuinely concerned that LCC had a preference for the Arena to be built on its own land at Elland Road and that she repeatedly sought assurances from LCC in respect of her concerns in this regard. She was repeatedly told, in my view truthfully, that there was no such preference, but she refused to accept the assurances she was given. On various occasions she sought confirmation that MEL was not being used as a “stalking horse” and on a few occasions she raised the issue as to whether LCC wanted to build the Arena itself. However I am satisfied that the assurances that she sought as to MEL not being a stalking horse and LCC not wanting to build the Arena itself were inextricably linked to her overriding concern that LCC had a preference for the Arena to be built on its own land at Elland Road.

I found the evidence of Ms Fletcher to be unsatisfactory in material respects, in particular in relation to the representations that she claimed LCC made about the Council not intending to build the Arena itself, which became the cornerstone of the deceit claim. In some instances she may have misunderstood what was being said to her. However in other instances she appears to have heard what she wanted or expected to hear. She has a tendency to exaggerate. In a few instances (the dinner on 17 September 2007; the dinner on 30 October 2007; and the luncheon on 11 December 2007) I am not satisfied that the conversations she related took place at all. Her note taking was coloured by her focus on her overriding concern that LCC had a preference for the Arena to be built on its own land at Elland Road. Her notes contain significant inaccuracies.

I accept Councillor Carter’s evidence of the meeting on 20 October 2005. The dinner was a social occasion during which he and Ms Fletcher had a casual conversation. Councillor Carter said that LCC did not have a preference for a site but probably acknowledged his personal preference was for a city centre site such as City One. I reject Ms Fletcher’s evidence that Councillor Carter used the word “best” to describe the City One site. He told Ms Fletcher that the competition would be open and fair and that MEL should take part if they were interested in developing the Arena. I do not accept Ms Fletcher’s evidence that she wrote her note at the time. I accept Councillor Carter’s evidence that if he had seen Ms Fletcher writing notes he would have asked her not to, as he would not have considered it appropriate. The phrase in the notes, “As discussed at dinner AC thinks that…”, suggests the notes were written after the meeting. I am not satisfied that Councillor Carter did say that LCC did not wish to build an Arena itself as it did not want the development risk. I accept Councillor Carter’s evidence that he did not say LCC’s officers were “not up to it”. (Representation (1)).

I accept Ms Dent’s evidence that at the meeting on 25 October 2005 she did not describe the City One site as “perfect” (Representation (2)).

Councillor Carter accepts that he told Ms Fletcher at a meeting on 16 March 2006 that the Council did not want to build an Arena or casino itself at Elland Road. I do not accept Ms Fletcher’s evidence that Councillor Carter assured her that he still thought Holbeck “was the best place” for the Arena and casino. I prefer Councillor Carter’s evidence that he would have described Holbeck as a “good” site. In my view the probability is that the following day, 17 March, if there was a conversation with Ms Fletcher which Ms Dent cannot recall having, the most she would have said would have been that is was her personal preference that the Council would be better trying to risk transfer (Representation (3)).

I accept Ms Fletcher’s evidence that Councillor Carter stated on 8 May 2006 that it was not the case that the Council had made up its mind to develop an Arena on its own site at Elland Road. He cannot recall the conversation. However in my view this would be consistent with what he had said previously. I accept Councillor Carter’s evidence that he did not say that he thought Holbeck was the “best” site for the Arena. (Representation (4)).

Ms Dent did not recall saying that she told Ms Fletcher at the meeting on 25 May 2006 that LCC did not want to own and operate an Arena itself. In my view the probability is she did not say that. I accept Mr Aspinall’s note that it was said by a representative of LCC, who is not identified in his note. However I do not accept that any assurance was given that LCC did not want to build the Arena itself. There is no mention of that in either of the two notes of the meeting. (Representation (5)).

I accept Ms Fletcher’s evidence that she had a conversation with Councillor Carter on 7 June 2006. Councillor Carter cannot recall having such a conversation. In my view the probability is that he said that the Council did not want to build the Arena itself and it wanted a private developer to do so. (Representation (6)).

I prefer the evidence of Ms Dent to that of Ms Fletcher and Mr Smillie in relation to the dinner on 26 July 2006. In my view the probability is that Ms Dent did not give personal assurances to Ms Fletcher that LCC did not itself wish to build the Arena, that LCC preferred a city centre site and that the process LCC was considering to procure the Arena would be entirely fair. This dinner took place six months before LCC’s Executive Board made the decision to proceed with the Arena project. Ms Fletcher produced no note of the assurances she said were given. (Representation (7)).

I accept Ms Dent’s evidence that at the meeting on 20 September 2006 she said LCC did not intend to build the Arena itself at Elland Road, which was true. I reject Ms Fletcher’s evidence that she used the words “Definitely not!”. Ms Dent stated, and I accept, that she certainly would not have been categorical regarding LCC’s intentions concerning the Arena as no decision had been made by the Executive Board. (Representation (8)).

I do not accept Ms Fletcher’s evidence that she had a “full and frank discussion” with Councillor Carter at the dinner celebrating the 150^th Anniversary of the Yorkshire Post newspaper on 19 October 2006. Councillor Carter stated, and I accept, that such a discussion would have been highly inappropriate on this social occasion. Councillor Carter’s evidence was that in spite of the fact that it was not appropriate to discuss business matters Ms Fletcher took the opportunity, as she was in the habit of doing, to discuss the Arena project. The conversation was fairly brief. I am not satisfied that Councillor Carter assured Ms Fletcher, as she alleges, that LCC “did not prefer Elland Road”, MEL “would not be used as a stalking horse”, LCC “did not want to build themselves” and that the “process would be fair”. (Representation (9)).

I prefer the evidence of Mr Russell to that of Ms Fletcher as to the conversation that they had on 23 October 2006. There was slightly confusing evidence as to the dates of conversations that they had on 23 and/or 26 and/or 29 October 2006. However the only pleaded complaint in the RRAPC relates to a conversation on 23 October 2006. In my view the probability is that Ms Fletcher raised her concern about a preference for Elland Road and Mr Russell stated there was no such preference. However I do not accept that Ms Fletcher asked Mr Russell whether the Council wanted to build the Arena itself. Further I accept the evidence of Ms Dent who said that she had no recollection of a conversation with Mr Russell in which she said that Ms Fletcher was still concerned that MEL was being used and that the Council was considering building the Arena itself and it preferred its own Elland Road site. (Representation (10)).

I accept Ms Dent’s evidence that on 7 November 2006 when she and Ms Fletcher were interviewed together for Property Week they chatted informally in between being interviewed and having their photograph taken. I also accept Ms Dent’s evidence that the discussion was about the broader New Holbeck Vision. I reject Ms Fletcher’s evidence that Ms Dent gave her personal assurances that LCC did not prefer its own site at Elland Road, did not want to develop an Arena itself, that LCC wanted a private developer to bear the risk of development and that the process would be fair and transparent. (Representation (11)).

I prefer Mr Russell’s recollection of the telephone conversation that he had with Ms Fletcher and Mr Aspinall on 8 November 2006. In particular I do not accept that Mr Russell told Ms Fletcher and Mr Aspinall that LCC did not want to build the Arena itself. The probability is that Ms Fletcher was asking about the process which Mr Russell was recommending to the Council about the operator competition being held first and then a second competition to choose a site. (Representation (12)).

I prefer Ms Dent’s recollection of what was said at the meeting on 16 March 2007 to that of Ms Fletcher. Once again Ms Fletcher raised her concern that LCC had a pre-determined plan to select Elland Road as the site for the Arena and Ms Dent told her that was not so. The probability is that Ms Fletcher did use the term “stalking horse” during this conversation. I accept Ms Dent’s evidence that she understood the term to mean that MEL considered that LCC really intended to develop the Arena at Elland Road. This was an informal chat. I am not satisfied that Ms Dent told Ms Fletcher that LCC did not want to develop the Arena itself. I accept Ms Dent’s evidence that she would not have said that she or LCC “desperately” wanted MEL to participate in the Arena competition. The one matter that Mr Aspinall recalls is that Ms Fletcher raised her concerns and sought reassurances about LCC’s apparent pre-disposition towards Elland Road. (Representation (13)).

I accept Mr Farrington’s evidence that he drafted the letter of 1 June 2007 with the assistance of Mr Speak and that the letter was cleared by Ms Dent before it was sent out. I accept the entirety of his evidence set out at paragraphs 121 and 122 above as being true. (Representation (14)).

In my view the probability is that what was said at the public meeting at the Arena launch on 11 June 2007 is, as Mr Smith said, that LCC wanted a private developer to develop and a private operator to operate the Arena. I do not accept Ms Fletcher’s evidence that she was given assurances at the private meeting by Mr Farrington (or anyone else on behalf of LCC) that the Arena competition would be fair and transparent, MEL was not being used as a “stalking horse” for Elland Road or LCC to build themselves, LCC did “not want to build [the Arena] themselves”, and LCC “really wanted” MEL in the competition. There is no reference in Mr Aspinall’s notes to any assurances being given during the course of the private session. Mr Finfer, MEL’s solicitor, noted “Elland Road not the preferred option”, but he did not record that Ms Fletcher had sought or been given any assurances during the course of the private meeting. Mr Aspinall in his evidence made no reference to assurances that Ms Fletcher said were given at the private meeting. I accept Mr Smith’s evidence that the queries raised by MEL at the private meeting related to equal treatment of site options and MEL’s concerns that Elland Road would be given favourable treatment by LCC. (Representation (15)).

I prefer the evidence of Mr Foster to that of Ms Fletcher in respect of the meeting on 20 July 2007. Once again Ms Fletcher mentioned her concern that LCC had a preference to develop the Arena at Elland Road and she therefore had concerns as to the fairness of the Developer Competition. During this informal conversation there was a discussion about the general merits of the MEL site. The probability is that Mr Foster did say that his understanding was that LCC did not want to build an Arena itself. I accept his evidence that he believed that to be true because of his understanding that the purpose of the competition was to find a private developer to build the Arena. Further I accept Mr Foster’s evidence that he would not have given his personal assurance to Ms Fletcher that the Council did not want to build the Arena itself because he would not have had authority to make such a representation. (Representation (16)).

In my view the probability is that at the meeting on 27 July 2007 Ms Fletcher raised with Mr Russell various concerns that she had about the competition and that it would not be fair and transparent. These included her concern that LCC preferred its own Elland Road site and that MEL was being used as a “stalking horse”. I am not satisfied that there was any discussion as to whether LCC wanted to build the Arena itself, despite the indication in her aide memoire prepared before the meeting that she intended to raise the matter. I accept Mr Russell’s evidence that Ms Fletcher did not take a note at the meeting and the probability is that she wrote the note after the meeting. (Representation (17)).

I prefer Mr Foster’s evidence of the telephone conversations he had with Ms Fletcher on 30 and 31 July 2007 to that of Ms Fletcher. Mr Foster said that Ms Fletcher did raise with him her concern that MEL was being used as a “stalking horse”. He thought what she meant by the words “stalking horse” in the context of their conversation was to the effect that MEL had no chance of winning, there was no proper competition because the Arena would go to Elland Road from the outset. He agreed that he would relay her concern to Ms Dent, which he did. Ms Dent told Mr Foster that he could reassure Ms Fletcher that, in his opinion, the competition was fair. In my view the probability is that Mr Foster did not say that MEL had a very good chance of winning the competition or that LCC was nervous of MEL’s reluctance to enter the developer competition because, as he said, at that time they did not know who was going to submit proposals or submit PQQs. Ms Fletcher’s note of the meeting on 31 July 2007 includes the words “ours is best”. In my view it is most unlikely that Mr Foster said that the City One site was the best site. He accepts that he may have said City One was a very good site. However I accept his evidence that he did not know how he could say that the City One site was best because he did not know what was going to come forward. (Representations (18) and (19)).

Mr Smith cannot remember saying at the meeting on 9 August 2007 that the competition would be fair and transparent, but he could not see any reason why he would not have said that. The probability is he did say it. However I do not accept Ms Fletcher’s evidence that he said that MEL had “by far the best site available”. I accept Mr Smith’s evidence that he “wouldn’t have said that and [he] wouldn’t have been able to say that”. (Representation (20)).

I do not accept Ms Fletcher’s evidence that she spoke to Ms Dent and Mr Foster “at length” at the Arup global award dinner on 17 September 2007 and was given assurances by Ms Dent and Mr Foster that LCC did not want to build an Arena itself, did not want to bear the risk of development, did not have any preference for an Arena at Elland Road and that the competition would be fair and transparent. Ms Dent had “absolutely no recollection” of the discussion that Ms Fletcher says she had with her. Ms Dent said that she knew they would be making a decision about short-listing on 21 September and therefore she would not have wanted to speak to Ms Fletcher about the Arena. I accept this evidence. I also accept Mr Foster’s evidence that as the principal organiser at the dinner he was very busy. He does not recall a conversation about the Arena and he said that he would not have been able to give her the assurances that she claims he gave her and he does not recall doing so. I am not satisfied that the conversation Ms Fletcher related took place at all. (Representation (21)).

It is MEL’s case that at the meeting on 11 October 2007 Mr Smith, Mr Greer and Mr Coulson represented to Ms Fletcher, inter alia, that “LCC had no intention of developing the Arena itself”. (RRAPC, para 95(5)). I do not accept that this representation was made. Ms Fletcher raised MEL’s continuing concerns about LCC’s pre-disposition to build the Arena at Elland Road and MEL being a stalking horse. She also sought reassurance at the meeting that the Developer Procurement was fair and that she had a fair chance of winning. Mr Smith confirmed that it was a genuine competition and that LCC was not stringing MEL along in the manner suggested. Mr Smith also accepted that he said that LCC wanted a private developer to develop the Arena who would take on the development risk. The notes of Mr Aspinall, Mr Coulson, and Mr Greer make no reference to a representation that LCC had no intention of developing the Arena itself. Ms Fletcher prays in aid her note that has the words “LCC build?” which were written before the meeting as an aide memoire and she says she wrote the word “No” above those words during the meeting. In my view the probability is that a reference at this ITPD Clarification Meeting to LCC wanting a private developer to develop the Arena (that being the whole purpose of the procurement competition) led Ms Fletcher to write the word “No” above “LCC build”. That is no basis in my view, for the claim that Mr Smith, Mr Greer and Mr Coulson represented that LCC had no intention of developing the Arena itself. (Representation (22)).

I accept that Ms Fletcher had a telephone conversation with Mr Foster on or about 16 October 2007 during which he agreed with Ms Fletcher that there were good points in favour of MEL’s bid. However I accept Mr Foster’s evidence that he was expressing his personal views. I do not accept Ms Fletcher’s evidence that Mr Foster stated that MEL’s site was “the best site”. MEL’s pleaded case is that Mr Foster said that MEL’s site was “very good”. (RRAPC, para 95(6)). (Representation (23)).

I am not satisfied that during after dinner drinks at Harewood House on 30 October 2007 Ms Dent, Mr Greer and Mr Foster all gave assurances that LCC did not want to build an Arena, that it did not have a preference for Elland Road and that a city centre site was preferred and that the competition would be fair and transparent, as Ms Fletcher claims Mr Greer was not in attendance at that dinner. Ms Dent does not recall at all having the conversation that Ms Fletcher says occurred. Mr Foster says that he does not recall discussing any details of the Arena on that evening. This was an informal, social event. There is no note of any such representations being made by Ms Dent or Mr Foster. I am not satisfied that the conversation Ms Fletcher related took place at all. (Representation (24)).

I reject Ms Fletcher’s evidence that Councillor Carter told her over drinks before the luncheon at Leeds Civic Hall on 11 December 2007 that LCC did not want to build an Arena itself. This was the occasion of a visit by HRH The Princess Royal to Leeds and Councillor Carter was part of the formal welcoming party for her at the Civic Hall. Councillor Carter said that he had no memory of a discussion with Ms Fletcher on that occasion and he gave very detailed evidence as to his movements on the day. I find no representations were made by Councillor Carter. I am not satisfied that Councillor Carter and Ms Fletcher had any conversation on this occasion. (Representation (25)).

The ITCD document dated February 2008 stated that “criteria will be used… to provide an open and transparent mechanism for selecting a preferred site, which protects the needs of the council” (para 3.17), and “LCC will conduct the competition process in such a way as to ensure compliance with the requirements of the EU Treaty and the Public Contracts Regulations 2006 which require the competition to be carried out [inter alia] with transparency” (para 4.2). (Representation (26)).

I am not satisfied that during a conversation Ms Fletcher had with Councillor Carter on 14 February 2008 he said that LCC did not want to build the Arena itself. Ms Fletcher said that she spoke to Councillor Carter because she still had very serious concerns about the fairness and transparency of the competition and the very high holding costs being incurred by MEL. Councillor Carter does not recall having this conversation. I accept his evidence that he did not wish to have a discussion with Ms Fletcher about the Arena during the competition as he considered that this would potentially have been unfair on the other parties involved in the Developer Competition. It is, in my view, surprising, considering her practice to write notes, that Ms Fletcher made no record of this conversation and the assurances she says she was given. (Representation (27)).

I accept that at the further Developer Clarification Meeting on 20 February 2008 Ms Fletcher stated that she was concerned that the competition would be fair and transparent, that LCC had a preference in favour of Elland Road and that MEL would be used as a “stalking horse”. In my view the probability is that she was given assurances with regard to these matters. However I do not accept Ms Fletcher’s evidence that she expressed concerns about LCC wanting to build the Arena itself on its own site and that Mr Smith responded confirming that LCC did not want to build the Arena itself and it did not want the cost risk associated with development; nor do I accept Ms Fletcher’s evidence that Mr Coulson confirmed such a statement or that Mr Greer or anyone else on behalf of LCC at that meeting stated that the Council did not wish to build the Arena itself. Mr Aspinall, who attended the meeting with Ms Fletcher, made a note of the meeting. He recorded “No preference for Elland Road (RG)”. His note made no reference to the assurance that Ms Fletcher stated she was given with regard to LCC not wanting to build the Arena itself; nor was any such statement recorded in any of the notes made by the others at the meeting, Mr Coulson, Mr Greer, Mr Patel, and Mr Smith. I agree with the observation made by Mr Smith that for Ms Fletcher to have asked “can you confirm Leeds doesn’t want to build the Arena itself?”, having just been invited into the first phase of a developer procurement competition, would have been rather unusual, to say the least. One might have expected someone to have made a note of this question and any answer that was given. (Representation (28)).

I accept Ms Dent’s evidence that on 14 March 2008 she had an informal chat with Ms Fletcher when Ms Fletcher sought assurances from her that the competition was fair. Ms Dent confirmed that in her view it was. Ms Dent made reference to the fact that LCC had chosen to go to the expense of the procurement competition because it did not want to build the Arena itself and the Feasibility Study showed that the greatest benefit to the city was from a city centre site. I accept Ms Dent’s evidence that she felt anxious when Ms Fletcher asked to speak to her as she thought she might raise the Arena; they were in the middle of a competitive procurement process and Ms Dent particularly recalled knowing that she needed to make sure that she did not say anything which would prejudice the process, or that was more favourable to one party than the other. Ms Dent did not accept that she said, as Ms Fletcher claimed, that it would be a “terrible shame” if MEL pulled out of the competition. She did not recall nor did she believe that she would have said that MEL had a “good chance of winning” the competition. Such a statement, she said, would have been inappropriate; and she would not have known at that stage of the competition whether it was so or not. Ms Dent did not recall Ms Fletcher taking notes at the meeting. Ms Fletcher said she made a note of the main points for discussion before the meeting started and then also made some very brief notes following the meeting. I prefer the evidence of Ms Dent to that of Ms Fletcher as to what was said on this occasion. (Representation (29)).

I accept the evidence of Ms Dent and Mr Farrington as to what was discussed at the meeting with Ms Fletcher and Mr Aspinall on 23 April 2008. Ms Dent said that LCC had no preference for Elland Road. The probability is that the term “stalking horse” was used by MEL in this context. Ms Dent may have said that she believed that the Developer Competition was fair and transparent as these were words LCC often used to describe the procurement competition and she believed it to be true. Neither Ms Dent nor Mr Farrington could recall saying that LCC preferred a city centre site but Mr Farrington said that either he or Ms Dent would have acknowledged the financial benefits of a city centre site and the potential for greater economic impact. Mr Farrington stated that neither he nor Ms Dent made a statement to the effect that LCC did not want to develop the Arena. Ms Dent did not recall that either she or Mr Farrington made such a statement. I do not accept that either Ms Dent or Mr Farrington said that LCC did not want to build an Arena itself. Mr Aspinall’s note of the meeting did not record any such statement being made. Ms Fletcher’s note does not record that LCC had no preference for Elland Road, but does include the words “LCC not build don’t want risk”. I am not satisfied that those words record a representation made by Ms Dent and Mr Farrington in those terms, as claimed.

Ms Fletcher has noted “MF – purchase not related to Arena. Needed for future master-plan”. That note relates to LCC’s proposals to purchase additional land at Elland Road. Mr Farrington’s evidence was that he made it clear that the acquisition of the Castle Land was not “contingent” upon the Arena being built there. He said that he did not say that it was “unrelated”. I accept Mr Farrington’s evidence on this point. (Representation (30)).

MEL claimed that at an ITCD “core” meeting with the Project Team on 20 June 2008 Mr Russell represented to MEL that the PSC was “only” being used as a test to ensure that bidders were providing value for money (RRAPC, para 95(11)). In my view it is clear from the evidence that Mr Russell did not say that the PSC was “only” being used as a test to ensure that the bidders were providing value for money. Mr Williams in his note recorded that the public sector comparator “can be built”. Mr Russell confirmed that the PSC was based on the third site that LCC had referred to at the meeting on 29 May 2008. At the meeting on 20 June 2008 Mr Smith said that there were several options available to consider as a PSC and that it would be based on a realistic and deliverable scheme. (Representation (31)).

MEL claimed that at the briefing meeting on 1 July 2008 Mr Smith and Mr Russell represented to MEL that the PSC, while relating to an actual undisclosed site which was not Elland Road, was still “purely” being used for benchmarking the bids and by this MEL understood the PSC to be a hypothetical comparator and not a genuine alternative means of developing the Arena. (RRAPC, para 95(12)). In my view the evidence makes clear that MEL was informed at the meeting that the PSC was based on a real scheme and not just a hypothetical one, and that the purpose of the PSC was to ensure that LCC obtained value for money. Further it was confirmed that LCC was working on a number of PSCs and addressing how the Arena could be built if the development procurement route was not progressed. (Representation (32)).

In summary, the position with regard to the making by LCC of representations on which MEL’s claim for deceit is founded is as follows:

From about September 2007 LCC was advised by its consultant advisers to consider the introduction of a “development plan B”, involving a public sector comparator that would involve working up proposals by LCC in respect of one or more sites that could be used to test the developers’ proposals for value for money, as well, as it evolved, as providing an alternative development route if the developers’ proposals did not offer value for money. However the only decisions taken at the Project Board meeting on 30 January 2008 were those recorded in the minutes of the meeting. The Project Board noted the content of the report from the consultants and requested a further report to the next meeting, identifying the proposed approach and an evaluation of the risks to the public bodies of pursuing the alternative development procurement route. The Project Board agreed to introduce “the concept” of the alternative development route to the shortlisted operators invited to final tender stage for good reason, as contractual documentation was about to be finalised.

It was not until the Project Board received a report from its consultants at the Project Board meeting held on 17 April 2008 that it decided to recommend that the “financial Plan B” be introduced to the developers, and that the “developer Plan B” be investigated further. Thereafter, following the Executive Board meeting on 14 May 2008 and the meeting of the Project Team on 20 May 2008, the financial Plan B was introduced to the developers on 29 May 2008. Further, by the Clarification Notice issued on 18 June 2008 and what MEL was told at meetings between 29 May 2008 and 22 July 2008, the PSC was introduced to MEL, and MEL was informed that LCC looked to the PSC, as providing an alternative means of delivering the Arena in the event that value for money was not demonstrated by MEL or GMI.

At the time of the meetings on 20 February, 14 March and 23 April 2008 LCC had taken no decision that required a departure from the Developer Competition or for LCC to announce a change to it. This was consistent with the legal advice that LCC had received from Cobbetts about what developers should, or rather, should not, be told in the absence of a decision by the Executive Board. I do not accept that there was anything about which Mr Coulson and Mr Smith needed to feel “uncomfortable” at the meeting on 20 February 2008; nor do I consider there was anything Ms Dent should have told Ms Fletcher on 14 March (or 23 April) 2008 because LCC had made no decision (even to introduce prudential borrowing) at the time they spoke. I accept Ms Dent’s evidence that she did not recall being nervous about the developer being advised of the concept of the alternative development route (see para 211 above). However I consider Mr Coulson’s evidence as to what he understood to be Ms Dent’s position in this regard to be unsatisfactory (see para 274-276 above). His e-mail (G45/122) indicates that he thought that Ms Dent was nervous about the developer being advised of the concept before the May elections but I am satisfied, having heard Ms Dent’s evidence, that this was not so (see also Mr Farrington’s evidence at para 273 above).

I accept Mr Greer’s evidence that LCC did not instruct the consultant team to run a PSC until May 2008; that the developer bidders were advised that a PSC would be used to test value for money from 29 May 2008 onwards; and that the PSC was not available to test value for money in the developer competition until around August 2008. He said that by mid-June 2008 he recalled working on the PSC in relation to Elmwood Road and this carried on through July and August 2008. As Mr Greer stated, it was a public sector comparator based upon real information on a real site, that was capable of being delivered in the event that the developer competition did not reach value for money and was closed. I also accept Ms du Preez’s evidence as to how the PSC was to be used. It was to test value for money and affordability to determine if it was worth continuing the Developer Competition. If, and only if, the PSCs were shown to offer better value for money, would LCC go on to consider whether it could build the Arena itself and in doing so, it would consider the suitability of the PSC sites. The definition of public sector comparator to be found in the Glossary to HM Treasury’s 2003 Green Book is not relevant, in my view, in the present case, since the procurement did not involve the award of a Private Finance Initiative contract.

On 22 July 2008 MEL was informed that the PSCs included a city centre site, and that LCC would build the Arena itself if a PSC represented better value for money. I find that MEL understood this to be so as can be seen from the amendments made by MEL to DTZ’s minutes of the meeting (see para 42 above). I accept Mr Farrington’s evidence (D1/1080/para 232) “that Mr Russell, in a frank and clear way, explained to MEL that we would be adopting a two-stage process. LCC would continue working on the PSCs and if the PSCs offered better value for money than the proposals of MEL and GMI, LCC would build the Arena itself”. I found Mr Williams’ evidence as to what was said at the meeting and his explanation as to why he made the amendments that he did to the draft minutes of the meeting to be confusing and unsatisfactory (Day 11/21-43).

MEL was informed at that meeting of a revised programme. The programme was now to proceed on a two-phase basis. The first stage would involve a formal written submission in early September 2008. It would be assessed on the basis of value for money and viability against proposals received and the PSC. On 25 July 2008 the Second Clarification Note dated 24 July 2008 was received by MEL and the document was re-issued in its final form on 25 August 2008. It provided that the bidders’ submissions in the first stage would

“be compared with the Council’s evolving public sector comparators in order to help assess value for money. On the basis of that evaluation the Council will then consider:

•

Continuation to full tender with bidders.

•

Closing down the existing competition with no contract awarded.

The Council intends to report on the Bidders’ bid proposals and its own public sector comparators to Executive Board in November 2008.”

I accept Mr Greer’s evidence that what was received from MEL on 10 September 2008 were not “bids”. They were submissions made as requested; they were not bids in the context of the competitive dialogue process.

On 2 October 2008 the Project Board met to consider the interim proposals put forward by the Developers. The Project Board agreed to recommend to LCC’s Executive Board that the developer competition should be terminated without the award of a contract for the reasons set out in the minutes. Further the Project Board agreed to recommend to the Executive Board that Elmwood Road be identified as the preferred site for the Arena development subject to concluding satisfactory legal agreements with Leeds Metropolitan University and Town Centre Securities, with the Elland Road PSC option being identified as the reserve site.

On 5 November 2008 the Executive Board approved the recommendations of the Project Board. The Board resolved that the developer procurement competition for the Arena be terminated without the award of a contract; and that Clay Pit Lane be approved as the preferred site for the development of an Arena, with Elland Road being approved as the reserve site.

I accept the evidence of Ms Dent that when on 14 March 2008 she referred to the fact that LCC had chosen to go to the expense of the procurement competition because it did not want to build the Arena itself, that statement was true and remained true. In so far as the same or similar statements were made on other occasions by Ms Dent or by Councillor Carter or any of the other individuals against whom MEL has made allegations of dishonesty I find that such statements were true and remained true throughout the competition. As I have stated, I do not accept that any independent and free-standing representation was made on behalf of LCC that LCC did not want to build the Arena itself (apart from the statements made by Councillor Carter on 16 March and 7 June 2006 and by Ms Dent on 20 September 2006 and 14 March 2008, if the 14 March 2008 statement be so interpreted). However I accept the evidence of Ms Dent, Councillor Carter and other LCC witnesses that LCC did not want or intend to build the Arena itself before the decision was taken by the Executive Board on 5 November 2008. Contingency Plan B would only take effect if the developer competition did not provide value for money. Contrary to Mr Coulson’s evidence under cross-examination that if he or Mr Smith had said on 20 February 2008 “the Council does not intend to build or do the Arena themselves”, that would have been a lie, I do not consider that in fact to be so. In re-examination Mr Coulson said LCC did not intend to build the Arena itself until the decision of the Executive Board on 5 November 2008. That, in my view, is correct.

In my view the competition was fair and transparent. The claim that it was not appears to revolve round the other representations that it is claimed were made, and principally that LCC had a predisposition to build at Elland Road. As for the PSC I find that LCC did inform MEL about the use of the public sector comparators and their true purpose at the meetings between 29 May and 14 July 2008. I accept Mr Greer and Ms du Preez’s evidence that the PSCs were not competing bids. Plan B was, and remained, a contingency plan. The decision to build at Elmwood Road was only taken by the Executive Board after the decision was taken to terminate the competition because the interim proposals did not indicate value for money which would warrant continuing with the competition. It matters not that the decision with regard to Elmwood Road was taken on the same day as the decision to terminate the competition or that it was taken at the same Executive Board meeting. The fact is that it was taken as a separate decision after the decision to terminate the competition had been made. In my view LCC acted throughout the competition in good faith. It took and acted upon legal advice as to compliance with public procurement law (although as Mr Hollander noted it did not receive advice with regard to any representations that were made by individual persons). It is clear in my view that LCC embarked on the private developer competition because it did not want to develop the Arena itself but wanted a private sector developer to bear the development risk and that remained the position until the Executive Board decided to terminate the competition on 5 November 2008. I accept Mr Cawson’s submission that on any sensible view LCC did not say that it would not build the Arena itself if the Developer Competition failed to come up with value for money proposals.

The representation that MEL was not a “stalking horse” was, in my view, true when made and remained true. I reject the claim that it became untrue by reason of LCC’s “playing for time” strategy in July 2008. Referring to Ms du Preez’s e-mail dated 16 July 2008 (G62/95) and the paper setting out the four options that LCC considered at this time (G62/125-126), Mr Russell explained the considerations to which LCC had regard (Day 22/153-Day 23/3). Mr Russell said that “the reality here is that we wanted to have the time that they could do their bids, that the PSC could become robust, so you would have a proper assessment of what was value for money, and that is what happened” (Day 22/166/7-10). The discussion as to how the developer competition should be taken forward was conducted within the consultant team with Mr Farrington’s involvement (see G62/95 and 109-10). Ms du Preez described the aim of her paper as being to provide a basis for the discussions that were due to take place between the advisers. It did not advocate any particular course of action and it certainly did not reflect the view of LCC. It was to allow the advisers to consider all of the options that were available to LCC and to advise them accordingly (D3/1853/para 48). Ms du Preez stated:

“To me, the exchange of e-mails during this period reflects the realism of the situation and the fact that no decision had been made. Just because the advisers had listed a number of options did not mean that they all had to be considered equally when deciding how to go forward. Nor was LCC bound to follow one of these particular courses of action. We were keen on reducing the work that had to be undertaken by the developers but at the same time providing them with the opportunity to come forward with their best possible commercial proposal. There was still a possibility that a developer would come forward with an affordable proposal. At the time it was an uncomfortable place to be in as we did not have the benefit of hindsight and we did not know if LCC could develop the Arena itself at an acceptable cost as the PSC relating to Elmwood Road was insufficiently developed. We needed time to develop the PSC’s and we needed to allow the developers time to come forward with their best commercial proposals. Only then could a proper view be taken as to whether the developers’ proposals, or one of them, represented value for money.” (D3/1854/para 51).

Ms du Preez was cross-examined by Mr Hollander on the options paper and the e-mail correspondence relating to it (Day 27/5-31). In my view she was an honest witness who gave her evidence with considerable care and attention to detail. I accept her evidence.

I also accept the evidence Mr Farrington gave in relation to the options paper. He said:

“Unlike Mr Russell, I was not concerned if the competition was closed down without LCC having the opportunity to determine whether the Arena could be built at Elmwood Road. One way or the other I knew that LCC could deliver the Arena, at Elland Road if necessary, if the developers were not prepared to put forward realistic and value for money proposals. My rationale for continuing the competition… was to allow the developers an opportunity to put their best foot forward, not to buy time for LCC to consider alternatives.

In short, I was struggling to see how MEL and GMI would come up with an affordable, value for money proposal unless they significantly changed their approach to the competition. MEL did not appear to be prepared to take a more realistic view of its land value and GMI was not prepared to reduce its build costs. However, I was not going to stop them having the chance to prove me wrong.” (D1/1076-1077).

Accordingly I reject the allegation that by 16 July 2008 Mr Farrington, together with Mr Russell and Mr Smith, had agreed a plan which involved extending the competition for the purpose of buying time to enable LCC to purchase key land parcels and enter into a contract with TCS which involved using the developers as a “stalking horse”.

I reject the suggestion that LCC “played with the figures” in order to get the figures on the PSC below those of the bidders. I accept the evidence of Ms du Preez and Mr Greer (paras 325 to 339 above) in this regard.

Ms Fletcher gave evidence that when Ms Dent told her on 14 March 2008, in the context that she did, that the Council did not want to build the Arena “she clearly knew that was untrue and she clearly knew that it would damage [her] company and [herself]” (see para 208 above). I totally reject this allegation and the allegations of dishonesty made against her.

In my view Mr Farrington acted honestly throughout this process. This is clear from Mr Fitzgibbon’s note of the internal meeting of the project team on 20 May 2008 which records his position with regard to providing information to the developers (para 318 above). Further, his proposed amendments to the clarification note issued on 24 July 2008, which were not made following legal advice, evidence his honesty (para 321 above). I reject the allegations of dishonesty made against Mr Farrington.

The telephone conversation (secretly recorded by Mr Williams on 4 July 2008 with Mr Russell, in which Mr Williams repeatedly stated to Mr Russell that the conversation was “off the record”) clearly evidences, in my view, Mr Russell’s honesty (para 319 above). This telephone conversation followed the briefing meeting on 1 July 2008 when I find, contrary to the evidence given on behalf of MEL, that Mr Russell (and Mr Smith) had informed MEL about the true nature and purpose of the PSCs. I reject the allegations of dishonesty made against Mr Russell.

The evidence of Mr Smith was unsatisfactory in one respect, namely as to whether as at 20 February 2008 LCC building the Arena itself was on anyone’s “radar” (see para 181 above). However I am satisfied that Mr Smith did not believe that any representation he made was untrue or needed to be corrected. I reject the allegations that he acted dishonestly.

The evidence of Mr Coulson was, in my view, also unsatisfactory in one respect, namely in relation to what was in his mind at the time he wrote his e-mail of 15 February 2008 (see paras 274 to 276 above). However I am satisfied that at no time did he act dishonestly. I reject the allegations that have been made against him.

Conclusion

I reject the allegations of fraud and dishonesty made against each of the eight named individuals (Councillor Carter, Ms Dent, Mr Farrington, Mr Coulson, Mr Foster, Mr Greer, Mr Russell and Mr Smith) in their entirety. Accordingly the claim in deceit against LCC fails.

Introduction

MEL alleges LCC acted in breach of the Public Contracts Regulations 2006 (“the Regulations”).

MEL’s written closing submissions (at para 437) set out MEL’s complaints as follows:

It is common ground between the parties that (i) the Regulations apply; (ii) the Developer Competition was conducted under the competitive dialogue procedure of Regulation 18 of the Regulations; and (iii) the overall award criterion was the most economically advantageous offer under Regulation 30(1)(a).

The legal framework

Regulation 47(1) sets out the basic statutory duty imposed on LCC and other bodies subject to the Regulations. It provides:

“47.-(1) The obligation on—

(a)

a contracting authority to comply with the provisions of these Regulations, other than regulations 14(2), 30(9) 32(14), 40 and 41(1), and with any enforceable Community obligation in respect of a public contract framework agreement or design contest (other than one excluded from the application of these Regulations by regulation 6, 8 or 33); and

(b)

a concessionaire to comply with the provisions of regulation 37(3);

is a duty owed to an economic operator.”

Regulation 47(7) provides:

“Proceedings under this regulation must not be brought unless—

(a)

the economic operator bringing the proceedings has informed the contracting authority or concessionaire, as the case may be, of the breach or apprehended breach of the duty owed to it in accordance with paragraph (1) or (2) by that contracting authority or concessionaire and of its intention to bring proceedings under this regulation in respect of it; and

(b)

those proceedings are brought promptly and in any event within three months from the date when grounds for the bringing of the proceedings first arose unless the Court considers that there is good reason for extending the period within which proceedings may be brought.”

The requirement of bringing proceedings “promptly” in regulation 47(7)(b), the parties are agreed, has no application (see Uniplex (UK) Ltd v NHS Business Services Authority [2010] ECR 1-817; and the Public Procurement (Miscellaneous Amendments) Regulations 2011, regulation 5(3)).

Regulation 4 sets out the various duties of transparency and non-discrimination imposed on contracting authorities and owed to economic operators, such as MEL.

“4-(1) In these Regulations, an ‘economic operator’ means a contractor, a supplier or a services provider,

…

(3)

A contracting authority shall (in accordance with Article 2 of the Public Sector Directive)—

(a)

treat economic operators equally and in a non-discriminatory way; and

(b)

act in a transparent way.”

Regulation 30 deals with various aspects of the award process, including award criteria. It provides, so far as is material:

“30-(1) Subject to regulation 18(27) and to paragraphs (6) and (9) of this regulation, a contracting authority shall award a public contract on the basis of the offer which—

(a)

is the most economically advantageous from the point of view of the contracting authority; or

(b)

offers the lowest price.

(2)

A contracting authority shall use criteria linked to the subject-matter of the contract to determine that an offer is the most economically advantageous including quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost-effectiveness, after sales service, technical assistance, delivery date and delivery period and period of completion.

(3)

Where a contracting authority intends to award a public contract on the basis of the offer which is the most economically advantageous it shall state the weighting which it gives to each of the criteria chosen in the contract notice or in the contract documents or, in the case of a competitive dialogue procedure, in the descriptive document.

(4)

When stating the weighting referred to in paragraph (3), a contracting authority may give the weightings a range and specify a minimum and maximum weighting where it considers it appropriate in view of the subject matter of the contract.”

Regulation 18 is concerned with the competitive dialogue procedure. It provides, so far as is material, as follows:

“18-(20) The contracting authority shall open with the participants selected in accordance with regulations 23, 24, 25 and 26, a dialogue the aim of which shall be to identify and define the means best suited to satisfying its needs.

(21)

During the competitive dialogue procedure, a contracting authority—

(a)

may discuss all aspects of the contract with the participant selected;

(b)

shall ensure equality of treatment among all participants and in particular, shall not provide information in a discriminatory manner which may give some participants an advantage over others; and

(c)

shall not reveal to the other participants solutions proposed or any confidential information communicated by a participant without that participant’s agreement.

(22)

The contracting authority may provide for the competitive dialogue procedure to take place in successive stages in order to reduce the number of solutions to be discussed during the dialogue stage by applying the award criteria in the contract notice or in the descriptive document.

(23)

Where the contracting authority provides for the competitive dialogue procedure to take place in successive stages in accordance with paragraph (22), it shall ensure that the number of economic operators to be invited to participate at the final stage is sufficient to ensure genuine competition to the extent that there is a sufficient number of economic operators to do so.

(24)

The contracting authority may continue the competitive dialogue procedure until it can identify one or more solutions, if necessary after comparing them, capable of meeting its needs.

(25)

When the contracting authority declares that the dialogue is concluded, it shall—

(a)

inform each participant that the dialogue is concluded;

(b)

request each participant to submit a final tender containing all the elements required and necessary for the performance of the project on the basis of any solution presented and specified during the dialogue; and

(c)

specify in the invitation to submit a tender the final date for the receipt by it of tenders, the address to which they must be sent and the language or languages in which they must be drawn up.”

Regulation 32 deals with communication after the event of the reason why decisions have been taken. Regulation 32(11) and (12) provides:

“(11)

Subject to paragraph (13) [withholding of confidential information, etc], a contracting authority shall as soon as possible after the decision has been made, inform any economic operator which submitted an offer, which applied to be included amongst the economic operators to be selected to tender for, to negotiate the contract… of its decision to abandon or to recommence a contract award procedure in respect of which a contract notice has been published, in relation to—

(a)

the award of a contract…

(12)

A contracting authority which informs an economic operator of its decision in accordance with paragraph (11) shall—

(a)

include the reasons for the decision; and

(b)

provide the decision and reasons in writing if requested by the economic operator.”

Statute bar to claims brought

LCC raised two limitation issues. Mr Williams QC submitted, on behalf of LCC, that (1) MEL failed to send a statutory letter to LCC, contrary to regulation 47(7)(a) of the Regulations; and (2) MEL’s complaints were made outside the three-month time limit, contrary to regulation 47(7)(b) of the Regulations.

The statutory letter before action

Mr Hollander submits that MEL did comply with regulation 47(7)(a). The letters dated 6 January 2009 (G79/41) and 3 February 2009 (J8/28), written by MEL’s solicitors to LCC, provide, he submits, the required information.

The letter dated 6 January 2009 is seven pages in length. On the third page it is stated:

“In circumstances where the Council has failed to comply with its obligations of transparency, MEL considers that it has no choice but to set out its concerns in relation to the process on the basis of the limited information made available to date.”

There then follows a section of the letter headed “The Conduct of the Developer Selection Competition – The Competitive Dialogue Procedure”, which needs to be read in full. It includes the following:

“We now understand that, late in 2007, and in parallel with the procurement competition in which MEL was engaged, Leeds City Council began to consider and then to put into effect an alternative scheme for the development of the Arena, whereby Leeds City Council would acquire a site at Clay Pit Lane and itself develop the Arena on the site.

MEL was not made aware of this proposed scheme, and indeed it is hard to reconcile the proposed scheme with the Council’s various assurances to MEL as described above.

In mid-2008 Leeds City Council introduced a public sector comparator into the competition. It now appears that the public sector comparator was used to evaluate MEL’s proposals against a new absolute value for money or affordability criterion which was not communicated to bidders and (on the basis of the assurances given to MEL) appears to have formed no part of the competition up to that point. The Council has also indicated that the public sector comparator was ‘evolving’ in parallel with the evaluation of bids.

It is apparent that Leeds City Council was considering the alternative scheme of a development on the Clay Pit Lane site when they introduced the new and evolving affordability criterion into the competition in which MEL was engaged. We infer from the sequence of events set out above that the introduction of the new criterion was related to, and resulted from, the Council’s consideration of this alternative scheme. The basis of the competition in which MEL was engaged was therefore altered in light of extraneous developments of which bidders were not made aware.

…

… In the present case, the dialogue was terminated in light of a new and evolving criterion of which bidders were not aware, and not because MEL’s proposals could not meet Leeds City Council’s needs and requirements.”

The letter dated 3 February 2009 also needs to be read in full. It includes (at J8/30-31) the following:

“… the assessment of value for money appears to have ignored obvious differences between the commercial proposals made by MEL in response to LCC’s stated needs (in particular in accepting development risk) and the basis of the PSC (under which the Council would lead the development). Moreover the contents of the stated criteria remain wholly unclear. Therefore, quite apart from the fact that the criteria said to have been used were not communicated to bidders, the minutes therefore give no comfort that the decision to terminate was made on the basis of a fair or meaningful assessment of affordability or value for money.

It is also highly significant that one of the two PSCs used was a Clay Pit Lane development, which was stated (as part of LCC’s reasons for terminating the process) to be the ‘preferred site’ for the development. We cannot reconcile the terms of the minutes with the point made in your letter, and previously made by LCC, that MEL was not in competition with Clay Pit Lane and that the decision to proceed with Clay Pit Lane was made only after the existing process had been terminated on affordability/value for money grounds.

It increasingly appears to MEL that LCC had resolved to pursue a development at Clay Pit Lane significantly before that decision was communicated to MEL and before the competition was terminated and that at least the latter stages of the competition were conducted with a view to that outcome rather than on the basis of LCC’s stated criteria. MEL’s bid was not therefore given a fair and lawful consideration, whether under procurement law or under the terms of the implied contract between MEL and LCC.”

There then follows a section of the letter headed “The Legal Basis of MEL’s Complaint” (J8/31-33):

“You suggest that our analysis of the legal position is flawed and without merit. We disagree. However it is of course also the case that our ability to articulate any cause of action which MEL has against LCC is dependent on the information which LCC makes available to MEL. In circumstances where LCC has singularly failed to comply with its obligations of transparency, MEL reserves its right to modify and/or add to the claims which it may wish to bring forward in due course.

However, so that there is no question of compliance with Regulation 47(7) of the Public Contract Regulations 2006, MEL apprehends a breach of the duty owed to MEL to comply with the Public Contracts Regulations 2006 and with enforceable Community obligations in respect of the contract to develop the Arena as follows:

…

3.

LCC is subject to an obligation to act in a transparent way under Article 2 of the Public Contracts Directive and Regulation 4(3) of the Public Contracts Regulations 2006. The obligation of transparency is essentially intended to preclude any risk of favouritism or arbitrariness on the part of LCC and implies that all the conditions and detailed rules of the award procedure must be drawn up in a clear precise and unequivocal manner. The competitive dialogue procedure operated by MEL must comply at every stage with the principle of transparency.

…

6.

LCC infringed EC law on public contracts and in the Public Contracts Regulations 2006 in the course of the competitive dialogue in particular in that LCC:

6.1.1

failed expressly to state the criteria or sub-criteria used to assess bids in the contract documents or tender notice; and/or

6.1.2

changed the criteria expressly stated in the contract documents or tender notice by the introduction of new criteria or sub-criteria which were not communicated to bidders; and/or

6.1.3

once those new criteria had been adopted, continued to further change those criteria, or its interpretation of those criteria, as the process of the assessment of bids was continuing; and/or

6.1.4

failed to specify the sub-criteria of affordability and/or value for money in an objective way that did not confer upon LCC an unrestricted freedom of choice and in a way that all reasonably well informed tenderers of normal diligence would interpret in the same way; and/or

6.1.5

dismissed MEL’s solution other than by the application of the award criteria in the contract notice or descriptive document.”

Mr Williams submits that the letter of 3 February 2009 which sets out the alleged breaches in five numbered sub-paragraphs (6.1.1-6.1.5) broadly correspond to the claims set out in paragraph 7(a)-(e) of the original Particulars of Claim. They may be categorised, he submits, by reference to the proper notification and application of the award criteria under regulation 30 of the Regulations and can only be relevant to what has now become sub-paragraphs 76(i)-(iii) of the amended Particulars of Claim. The other sub-paragraphs (76(iv)-(xii)) are consequently statute-barred by virtue of regulation 47(7)(a). Mr Williams submits that the earlier letter of 6 January 2009 principally requested disclosure of a number of documents and alleged breach of the principle of transparency in respect of the duty to provide them.

I do not accept these submissions. In my view the breaches set out at paragraphs 6.1.1-6.1.5 of the letter of 3 February 2009 must be read in the context of the letter as a whole. I accept Mr Hollander’s submission that it is clear from that letter and the earlier letter of 6 January 2009, that MEL was informing LCC in detail of multiple breaches of the Regulations and of the intention to issue proceedings.

In my judgment in the letters dated 6 January 2009 and 3 February 2009 MEL did provide the information required by regulation 47(7)(a) of the Regulations in respect of the complaints pursued in the procurement claim.

Three-month time bar

The Procurement Claim was filed on 4 February 2009 (A2/15/415) and amended on 20 November 2009 (A/3/4).

Mr Williams submits that any complaint of an alleged breach which occurred before 5 November 2008 and in respect of which MEL knew or ought to have known that there were grounds for bringing proceedings before that date is time barred by virtue of regulation 47(7)(b).

Paragraph 76 of the amended Particulars of Claim (A/3/20) contains 12 sub-paragraphs of particulars of breach of the duties owed by LCC to MEL pursuant to regulations 4(3) and 47(1).

In Sita UK Ltd v Greater Manchester Waste Disposal Authority [2011] 2 CMLR 32 the Court of Appeal considered the degree of knowledge or constructive knowledge required before time began to run in the context of the three-month time limit imposed in a similar provision, regulation 32(4)(b) of the Public Services Contracts Regulations 1993, implementing Directive 89/665. The Court (per Elias LJ at 837-838) adopted the test applied by the judge below, who formulated it thus:

“The standard ought to be a knowledge of the facts which apparently clearly indicate, though they need not absolutely prove, an infringement.”

The concept of “grounds” in the Regulations should be read consistently with the concept of “infringement” used in the Directive (830H5).

Mr Williams submits (a) applying this test, the grounds set out in paragraph 76(i)-(iii), (vi)-(viii) and (xi)-(xii) are out of time; (b) MEL no longer rely on sub-paragraphs (vii), (ix) and (x) (Day 35/2:6-3:5); and (c) only the scoring complaints in respect of normalisation/risk adjustment and positive sensitivity analysis (set out in paragraph 76(iv) and (v)) are not time-barred.

Mr Hollander submits that the decision to deselect MEL and select the “PSC” was on 5 November 2008. The feedback meeting was on 17 November 2008. Immediately thereafter MEL sought further clarification and disclosure from LCC of the reasons for rejecting the MEL bid. It was not before 6 January 2009 that MEL was able even to begin to articulate the apprehended breaches in the light of the further information and documentation provided by LCC. Because of the perceived urgency in commencing proceedings, the original Particulars of Claim were filed on 4 February 2009 pleading the case by incorporating by reference the letters dated 6 January 2009 and 3 February 2009. It was stated that full Particulars of Claim would follow (see para 1). Amended Particulars of Claim were served on 20 November 2009 pursuant to an order dated 11 June 2009 in light of a specific disclosure request made of LCC. The CPR provides for the power of the court to permit amendment to a Statement of Case. Mr Hollander submits that the amendments to the Particulars of Claim do not give rise to new causes of action (see Limitation Act 1980, s.35(2), and Berezovsky v. Abramovich [2011] EWCA Civ 153 at [59], per Longmore LJ); in any event they relate back to the date of the original Particulars of Claim by reason of the doctrine of “relation back”. The issue of termination of the competition and rejection of MEL’s bid was a core part of the claim. The substance of the claims in paragraphs 76(i)-(xii) was part of the original claim and the subsequent amendments constitute further particulars of that claim.

Mr Hollander further submits that the essential point made in paragraph 76(i)-(iii) of the Amended Particulars of Claim is that LCC used the PSC in place of its award criteria and applied it as a “pass/fail” test. That assessment was made on or around 5 November 2008. MEL was only made aware of the recommendations of the Project Board and the decision of the Executive Board and what had actually occurred at those two meetings after 5 November 2008.

Mr Williams accepts that following amendment of the Particulars of Claim, the amendments are deemed to have been made on the date of the original Particulars of Claim. However, as he observes, it does not follow that MEL may pursue a claim of breach of the Regulations which occurred before 5 November 2008 if MEL either knew or ought to have known the grounds for the bringing of proceedings had arisen before that date.

In paragraphs 377-378 and 384 above I set out the findings that I made in relation to what MEL was told at meetings on 29 May, 1 July and 22 July 2008 about the potential for LCC to use its public sector comparator to develop an Arena on a “third” site. On 6 June 2008, following the meeting on 29 May 2008, Mr Aspinall wrote to Mr Smith (copied to Ms Fletcher) stating (G58/314):

“28.

Reference was made to the Council developing an Arena on another ‘third’ site in the event that it could not achieve value for money from developers at Elland Road or City One; please confirm how value for money would be achieved in this scenario outwith a competitive process and the location of this option?”

Mr Williams’ amendments to the minutes of the meeting held on 22 July (see para 42 above), make clear that MEL understood that the PSC was an alternative proposition if the bidders could not deliver a value for money solution for LCC. Further I am satisfied that LCC explained and MEL understood that LCC would be adopting a two-stage process and continue working on the PSCs and that if the PSCs offered better value for money than the bidders’ proposals, LCC would build the Arena itself.

In my judgment in respect of the breaches of the Regulations about which MEL complains in sub-paragraphs (i)-(iii), (vi)-(viii), and (xi)-(xii) of paragraph 76 of the amended Particulars of Claim, MEL either knew or ought to have known the grounds for the bringing of proceedings had arisen before 5 November 2008. The only allegations which are not time barred, which are relied upon, are the scoring complaints made in sub-paragraphs (iv) and (v).

At the conclusion of the oral hearing on 30 November 2012 I gave Mr Hollander permission to file further written submissions in relation to the procurement claim in response to the final oral submissions made by Mr Williams (and permission to Mr Williams to respond in writing to those submissions within a further seven days). I subsequently received “Further Submissions on the Procurement Claim” from MEL, “Further Closing Submissions on the Procurement Claim” on behalf of LCC, and in addition a “Written Reply Submission on the Procurement Claim” from MEL, all of which documents I have considered. Mr Hollander in MEL’s Further Submissions on the Procurement Claim made, if necessary, an application on MEL’s behalf an application to extend time.

In support of the application to extend time Mr Hollander submits, at paragraph 72 of the MEL’s Further Submissions, that: (1) MEL acted promptly in raising and pleading a claim based on what it perceived as the basis for such a claim; (2) what was known to MEL was extremely limited compared to what was subsequently known after documentation had been provided and subsequent disclosure given; (3) there is evidence of concealment at various stages of LCC’s true intentions; (4) no prejudice has been caused to LCC. Indeed LCC failed to take any limitation point previously either at the time of amendment of the Particulars of Claim or in its unsuccessful strike out application; and (5) it would in all the circumstances be unjust to refuse to extend time.

Mr Williams responds as follows: (1) it is not accepted that MEL has acted promptly. The application to extend time is made over four years after the termination of the procurement competition. (2) LCC raised the limitation point in its original Defence (A2/437/para 17) and in its Amended Defence (A1/43/para 37). (3) If, as the court will have found (in order for MEL to need to make an application to extend time) MEL knew or ought to have known the grounds for the bringing of proceedings had arisen before 5 November 2008, the fact that further information was learned after that date cannot be a ground for extending time. (4) It is not accepted that no prejudice has been caused to LCC. However, prejudice on the part of the contracting authority is not a pre-requisite for refusal to grant an extension of time to bring a claim under regulation 47 of the Regulations. (5) There are no good grounds for extending the time limit to bring the proceedings in respect of the breaches now alleged.

In Jobsin Co UK Plc v Department of Health [2001] EWCA Civ 1241; [2002] 1 CMLR 44, a case concerned with extension of time in the context of regulation 32(4)(b) of the Public Services Contracts Regulations 1993, Dyson LJ stated at para 33:

“Regulation 32(4) specifies a short limitation period. That is no doubt for the good policy reason that it is in the public interest that challenges to the tender process of a public service contract should be made promptly so as to cause as little disruption and delay as possible. It is not merely because the interests of all those who have participated in the tender process have to be taken into account. It is also because there is a wider public interest in ensuring that tenders which public authorities have invited for a public project should be processed as quickly as possible. A balance has to be struck between two competing interests: the need to allow challenges to be made to an unlawful tender process, and the need to ensure that any such challenges are made expeditiously. Regulation 32(4)(b) is the result of that balancing exercise. It may often be the case that a service provider is not aware of the intricacies of regulations such as the [1993] Regulations, and has little or no understanding of how they should be interpreted. If ignorance of such matters were routinely to be regarded as a good reason for extending the time for starting proceedings, the clear intent to regulations 32(4)(b), that proceedings should normally be started promptly and in any event not later than three months after the right of action first arose, would be frustrated.”

In any event, as Mr Williams observes, by the end of May 2008 MEL had concerns about the tender process, and in particular about LCC developing an Arena itself elsewhere. On 30 May 2008 Mr Williams sent an e-mail to Ms Fletcher and Mr Aspinall headed “The Arena – moving forward” (G57/275) in which he said:

“We need to look into the legality of the council mentioning delivering something elsewhere if the sites in the running cannot provide VFM. Were we not told ‘Elland Road’ is the fall-back position? How many have they got? Would we have gone to all this trouble and expense had we known about this at the start of the process?”

There then followed MEL’s letter of complaint of 6 June 2008 (see para 428 above), and thereafter MEL involved their solicitor, Mr Finfer, in the process. He was present at the meeting on 1 July 2008 and asked questions about the PSC. The minutes of the meeting of 22 July 2008, as amended by MEL, make clear MEL’s understanding of the position (see para 42 above).

In my judgment there are no good grounds for extending time.

Breaches of the Regulations

I turn to consider MEL’s three complaints identified at paragraph 437 of the MEL’s written closing submissions on liability (see para 403 above).

LCC was in breach of its duty of transparency in not disclosing the true nature of Plan B to MEL.

Mr Hollander submits that the competition could not be fair and transparent or conducted in good faith to the tenderers in circumstances where LCC was working “in parallel” to assess whether it would be cheaper to do the job itself, and then deciding that it would be cheaper to do the job itself. Whilst it would be open to LCC to terminate the competition and then decide to do what it wished, it could not be fair and transparent during the course of the competition to set up an assessment as to whether it would be cheaper to do it itself and use that as a basis on which to decide whether in fact to do so. This provided a conflict of interest. The factual basis of this complaint is set out in paragraph 294 above where the “interventions” that LCC was, Mr Hollander submits, prepared to make are summarised. In support of this submission Mr Hollander relies on the case of Fabricom v Belgium [2005] ECR I-1577 where the ECJ accepted that the circumstance that the person who had input into some of the conditions for the contract was also a participant in the competition may give rise to a “conflict of interest” and unequal treatment. The present position, he submits, is far more striking than in Fabricom, which arose in the context of a private operator who only undertook some preparatory work for the public body in relation to the subject matter of a contract.

Mr Williams submits that a contracting authority might judge value for money by the use of a public sector comparator should have been obvious to any economic operator reasonably experienced in competitive tender procedures and in dealing with public sector bodies. Regulation 30(3) of the Regulations requires the award criteria weighting to be disclosed to tenderers. In ATI EAC Srl e Viaggi di Maio Snc and others v ACTV Venezia Sp A and others (C-331/04) the ECJ said at para 24:

“…in order to ensure respect for the principles of equal treatment and transparency, it is important that potential tenderers are aware of all the features to be taken into account by the contracting authority in identifying the economically most advantageous offer, and, if possible, their relative importance, when they prepare their tenders (see, to that effect, Case C-87/94 Commission v Belgium [1996] ECR I-2043, paragraph 88, and Case C-470/99 Universale-Bau and others [2002] ECR I-11617, paragraph 98).”

However, Mr Williams submits, the duty of transparency does not extend beyond factors relevant to identifying the most advantageous offer (i.e. between two or more competing tenders) to factors relevant to the decision whether a procurement procedure should be continued at all or whether, on the contrary, it should be abandoned.

Mr Hollander relies, in particular, on the passage in the judgment of the Court at paragraph 93 of the Universale-Bau case which states that:

“… the procedure for awarding a public contract must comply, at every stage, particularly that of selecting the candidates in a restricted procedure, both with the principle of equal treatment of the potential tenderers and the principle of transparency so as to afford all equality of opportunity in formulating the terms of their applications to take part and their tenders.”

In the recent decision of McLaughlin & Harvey Ltd v Department of Finance and Personnel (No. 2) [2008] NIQB 91 the High Court of Northern Ireland held that the defendant’s submission that the duty of transparency in respect of “all the features to be taken into account” (ATI case, para 24) simply applies to award criteria and nothing else “cannot be correct” (para 19). Denny J said at para 46:

“It seems to me that the language of ATI in particular is designed to secure, as it says, that the bidders know all the elements or sub-elements which could affect their preparation of the bid.”

In support of his submission that what LCC did was not unlawful Mr Williams refers to two decisions. First, Centro Studi Antonio Manieri SRI v Council of the European Union (Case T-125/06), which involved a restricted tendering procedure for a service contract for a crèche. At the beginning of 2005 the applicant submitted its tender to the Council. The Council notified the applicant by letter of 20 December 2005 that the date upon which the decision would be taken had been deferred to 16 January 2006. By letter of the General Secretariat of the Council of 16 January 2006 the applicant was informed of the Council’s decisions, first, to abandon the tendering procedure and, second, to entrust the management of the crèche to the Office for Infrastructure and Logistics (OIB) in Brussels. The letter stated that

“The General Secretariat has given a favourable evaluation of the proposal submitted to it during the second half of 2005 by the OIB…, for the direct educational and administrative management of the crèche, which is intended primarily for the children of officials of the General Secretariat.

In analysing that option, the many advantages it entails have become apparent, particularly as regards the contractual conditions offered to the staff, the economies of scale and the optimisation of the available resources in the context of appropriate interinstitutional co-operation.”

The applicant alleged infringement, inter alia, of the principle of transparency. The Court’s findings in this regard are as follows:

“85.

According to the applicant, the Council infringed the principle of transparency by entrusting the services in question to the OIB independently of the tendering procedure.

86.

As regard the infringement of that principle, it should be noted that, according to the case-law on public contracts, the contracting institution must comply, at each stage of a tendering procedure, not only with the principle of the equal treatment of tenderers, but also with the principle of transparency (Case C-87/94 Commission v Belgium [1996] ECR I-2043, paragraph 54, and Case T-203/96 Embassy Limousines & Services v Parliament [1998] ECR II-4239, paragraph 85).

87.

The principle of transparency implies an obligation upon the contracting authority to publish all precise information concerning the conduct of the entire procedure (see, to that effect, Embassy Limousines & Services v Parliament, paragraph 85).

88.

In the circumstances, it is apparent that the applicant was not kept informed, before the letter of 16 January 2006, of the discussions that had begun between the Council and the OIB which concluded in the Council’s decision to entrust the management of the crèche to the OIB. According to the information set out in the letter of 16 January 2006, those discussions commenced in the second half of 2005 when the OIB submitted its proposal.

89.

However, according to case-law, the objectives of publicity with which the contracting authority must comply under the obligation of transparency are, first, to ensure that all tenderers are afforded equality of opportunity (see, to that effect, Commission v Belgium, paragraphs 54 and 55) and, secondly, to protect the legitimate expectations of the tenderers, who have been encouraged to make irreversible investments in advance (see, to that effect, Embassy Limousines & Services v Parliament, paragraphs 85 and 86).

90.

In the present case, the applicant has failed to demonstrate that either of those objectives was compromised. First, since all the tenderers met with the same lack of publicity with regard to the correspondence between the Council and the OIB, it could not have rendered the chances of the applicant and of the other tenderers unequal. Secondly, the applicant has failed to demonstrate – and has not even claimed – that it was encouraged to make investments going beyond the risks inherent in participating in a tendering procedure.

91.

Consequently, the applicant’s arguments alleging infringement of the principle of transparency must be rejected as unfounded.”

The second authority on which Mr Williams relies is Risk Management Partners Ltd v Brent LBC and another [2011] 2 AC 34, where Brent LBC sought to enter into an arrangement for mutual insurance, to be provided by London Authorities Mutual Ltd (LAML), whilst at the same time holding an abortive OJEU tender competition. The Court held that entry into the contract with LAML was akin to an in-house award (in accordance with the so-called Teckal criteria) in which case there was no contract being awarded, with the result that there was no breach of the Regulations. Lord Rodger stated:

“91.

I am accordingly satisfied that in the circumstances of this case both of the Teckal criteria are satisfied and that, since the local authorities are not to be regarded as contracting with an outside body, Community legislation which is designed to secure the free movement of services and the opening-up to undistorted competition has no application. So the Directive is not intended to apply where a borough such as Harrow intends to contract with LAML.

92.

The 2006 Regulations give effect to the Directive in English law. In other words, they are the way in which English law secures the free movement of services and the opening-up to undistorted competition in relation to contracts which are to be placed by English local authorities. That being the purpose of the Regulations, they, too, cannot be meant to apply in circumstances where that purpose is not relevant because a contracting authority intends to contract with a body which is not properly to be regarded as an outside body. Although the Teckal criteria were formulated with particular reference to the predecessors of the Directive, they are simply a way of identifying situations where the authority can be regarded as obtaining the products or services which it requires in-house and, so, where there is no need to secure the free movement of services and the opening-up to undistorted competition. In my view, the criteria are an equally good indication of situations where, for that reason, the 2006 Regulations have no application. The insight of Advocate General Trstenjak in para 83 of her opinion in Coditel Brabant [2008] ECR I-8457, 8482 is instructive. To hold that the Regulations did apply in these circumstances would involve saying that the legislature intended to attach weight to competition law objectives in an area where they have no legitimate application. This would, in turn, involve inappropriate interference with local authorities’ right to co-operate in discharging their public functions.”

In my view the decision of the ECJ in Universale-Bau does not assist MEL. It simply confirms that at every stage the procedure for awarding a public contract must comply with both the principle of equal treatment and the principle of transparency. It is the guidelines produced by the European Court of First Instance in Citymo SA v Commission of the European Communities (Case T-271/04) which are relevant in the present context. In that case liability arose under the Commission’s Financial Regulation, rather than directly under Directive 2004/18/EC, however the principles of transparency, proportionality, equal treatment and non-discrimination still apply (see paras 122 and 123). Significantly, for present purposes the court made clear that the contracting authority has “a very broad discretion” to refuse to conclude the contract and, therefore, to terminate pre-contract negotiations which have been started (para 111). The Court stated:

“112.

It follows that, in order for the condition concerning the existence of unlawful conduct to be fulfilled, the applicant must show not only that the Commission breached one of the rules of law relied on by the applicant, having regard to the circumstances of the decision not to take up the lease and consequently to terminate the pre-contract negotiations, but also that that breach constituted a manifest and serious disregard of the limits imposed on the Commission’s discretion.”

Accordingly, if the contracting authority delays informing the other party to the negotiations of its decision to abandon the procurement and has thus continued the pre-contract negotiations which it knew were bound to fail, that conduct could breach the principle of good faith and amount to the abuse of its right not to contract (para 131).

Mr Hollander submits that even if LCC had been truthful with MEL about the purpose of the PSC, the principles of equal treatment and transparency required LCC to disclose the key parameters of the PSC modelling/assumptions it was using (MEL’s written closing submissions, para 452). In my view the true nature of Plan B was disclosed to MEL. MEL was informed that it was a fall-back option that LCC was working on to be used by LCC if the private developers’ bids did not produce value for money. In my judgment LCC was not in breach of its duty of transparency in not disclosing additional information to MEL about Plan B. MEL and GMI were treated equally with regard to the disclosure of information about the PSCs.

The public sector comparators were not participants in the competitive dialogue procedure. LCC was not, as MEL alleges, trying to make its “bid” cheaper. LCC had no rival “bid”. I accept that what LCC was doing was, through the PSCs, robustly seeking to ascertain how cheaply the public sector could build the arena itself, having regard to the original premise of the competition that the public sector costs would be restricted to about £20m because the developer bidders would use significant enabling development to fund the building of the arena. Only if the private sector bidders could not come up with cheaper proposals would LCC consider building the Arena itself, and it would do so only as a fall-back option which was never its preference (see LCC’s Further Closing Submission on the Procurement Claim, para 6). In my judgment LCC was entitled to develop this fall-back option. Had MEL (or GMI) put forward their “best commercial proposals”, as they were asked to do, then LCC’s consultants and advisers believed they may have beaten the PSCs (see para 325 above).

The conduct of LCC in continuing with the competition until the decision of the Executive Board on 5 November 2008 did not, in my view, breach the principle of good faith. LCC acted lawfully in deciding to abandon the tender exercise, having discovered that to award the contract on the basis of the advertised award criteria would not achieve value for money due to the level of public sector funding which it would need to make the project viable. MEL were, in my view, provided with proper reasons for the decision to abandon the competition.

A “competition” between LCC’s Plan B/PSC and the private developers was inherently unequal and lacking transparency

In relation to an alleged breach of the general principle of equal treatment, the Court in Centro Manieri Studi SRL stated:

“81.

According to the applicant, the fact that the Council evaluated the proposal submitted by the OIB independently of the tendering procedure constitutes infringement of the principle of equal treatment.

82.

The general principle of equality is one of the fundamental principles of Community law. That principle requires comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is subjectively justified (Case C-304/01 Spain v Commission [2004] ECR I-7655, paragraph 31).

83.

Given that, as was established in the examination of the fourth plea, the OIB is a department of the Community institutions, its situation cannot in any way be compared to that of the participants in a tendering procedure. Accordingly, the fact that the Council evaluated the proposal submitted by OIB independently of the tendering procedure cannot constitute infringement of the principle of equal treatment.

84.

The applicant’s arguments alleging infringement of the principle of equal treatment must therefore be rejected as unfounded.”

The reason why the Council in the Centro Manieri Studi SRL case did not have to comply with the rules governing public procurement, including the general principles of equality of treatment and transparency, was because in deciding to abandon the competitive tender procedure and to accept the proposal that the required services be provided by OIB, it was not awarding a contract at all because OIB was in-house, i.e. the “contract” with it formed part on an administrative arrangement concluded between the departments of Community Institutions. Mr Williams contends LCC found itself in a similar situation when it decided not to award a contract but, instead, to develop the Arena itself.

Mr Hollander submits that LCC fundamentally, and unlawfully, changed the entire basis on which the competition was to be conducted. MEL was never informed that the competition had been radically altered from the published criterion based on the most economically advantageous offer to whether LCC would build the Arena more cheaply itself, i.e., lowest price.

In support of this submission Mr Hollander refers to the statement of Mr Smith (and evidence from Ms du Preez and Mr Farrington) that:

“If the proposal required more than £20m gap funding, and although LCC had not agreed to provide further funding, any such funding would be limited to the maximum cost of LCC developing the Arena itself.” (D3/2037/para 169.2).

Mr Hollander submits that it is “clear that this was how the decision was presented to the Executive Board on 5 November 2008: see G74/25 Table 1 which compares the cost of the MEL bids with the PSC. Councillor Carter also confirmed that this was the basis on which he made a decision as the Executive Board member”. (MEL’s further submissions, para 31; and for Councillor Carter’s evidence, see Day 54/8-55/14).

I reject this submission. In my view, as Mr Williams observes, in relation to the competitive dialogue procedure, the only step taken was to introduce prudential borrowing in order to assist the tenderers. No formal decision to increase the absolute level of public sector contribution above £20m was taken in the competitive dialogue. Following receipt of the bidders’ best commercial submissions on 10 September 2008, the decision was ultimately taken that value for money could not be achieved and thus the procedure would not proceed to the conclusion of the competitive dialogue and submission of final tender, in accordance with regulation 18(25). It is not the case that LCC changed the award criteria from the terms set out in the tender documentation.

I am satisfied that at no point did LCC adopt a fundamentally different procurement process. The introduction in July 2008 of the two-stage process, whereby tenderers were to put forward their best commercial submissions so that LCC could properly judge whether value for money was likely to be achieved before putting the tenderers to the increased costs of preparing base and final offers, was consistent with the competitive dialogue procedure and the process envisaged under regulation 18(22)-(25) of the Regulations.

For the reasons I have already explained I find that there was no “competition” between LCC’s Plan B/PSC and the private developers.

There was a lack of transparency and fair treatment in the scoring of the bids

I can deal with this complaint shortly. By the conclusion of the evidence there was, in my judgment, really nothing to it.

In opening Mr Hollander stated: “Our case is they [i.e. LCC and their advisers] gerrymander[ed] the scoring” (Day 3/48/3). Having heard the key participants in the scoring process (in particular, Mr Russell, Mr Smith, Mr Patel, Ms du Preez and Mr Greer) give evidence and be cross-examined on the various matters raised in the document entitled “Scoring the Bids” produced by Mr Hollander, I reject the allegation of “gerrymandering”.

I am satisfied that Mr Russell and the project team encouraged MEL (and GMI) to put forward their best commercial submissions so as to enable the Developer Competition to be a success in selecting a private sector developer to develop the Arena and that they acted in good faith in so doing.

In Centro Studi Antonio Manieri SRI the Court stated at para 62:

“As regards the existence of any manifest errors of assessment, it must be borne in mind that an institution using the tendering procedure has broad discretion with regard to the factors to be taken into account for the purpose of deciding to award a contract and that review by the Court must be limited to checking that the rules governing the procedure and statement of reasons are complied with, the facts are correct and there is no manifest error of assessment (see judgment of 12 July 2007 in Case T-250/05 Evropaiki Dynamiki v Commission, not published in the ECR, paragraph 89, and the case-law cited). The applicant has not put forward any facts capable of establishing that the decision to abandon the tendering procedure was vitiated by a manifest error of assessment. With regard to the decision to have recourse to the services of the OIB and, in particular, the supposed advantages to be gained from such a decision, while the Council is of course required to justify its choice to the political authority and internal auditors, it is not required to demonstrate to a participant in a tendering procedure the advantages of the decision to perform the services in question by its own means. Such a decision is a matter of policy and thus within the Council’s discretion. It follows that the Court is not required in these proceedings to examine whether the decision to have recourse to the services of the OIB is justified economically and at institutional level.”

In any event I find that the manifest errors alleged by MEL in relation to the issues of normalisation, risk adjustment, positive sensitivity and the treatment of the PSCs have been satisfactorily answered by LCC, in particular in the evidence of Ms du Preez (D3/2118; Day 27/3-107) and Mr Greer (Day 28/44-86), whose evidence was not and could not be seriously challenged.

Two short answers to this complaint, made by Mr Williams, which I accept, are: first, there is no effective allegation of inequality of treatment as between tenderers and there is therefore no allegation of an actionable breach of the principles of transparency and fair treatment. Second, there was no “scoring of the bids”. MEL never reached the stage of submitting a formal “bid”. It submitted its “best commercial offer” pursuant to the revised procedure introduced by the Revised ITCD Programme and Requirements dated 24 July 2008 (G64/52) and re-issued on 25 August 2008 (G66/119). Further, MEL’s commercial submission was not “scored” against any criteria (save for internal and feedback purposes if the Developer Competition continued), but merely compared value for money against LCC’s PSCs.

Findings of fact

I do not repeat the findings of fact I made in the Deceit Claim (paras 340 to 400 above), but they are equally relevant to the Procurement Claim.

Shortly after LCC decided to develop Plan B as a fall-back option in May 2008 they informed MEL from 29 May 2008 onwards as to the public sector comparator as it evolved, in particular at meetings on 1 July 2008 and 22 July 2008. MEL were informed of and understood the true nature and purpose of the PSCs, as is clear from the amendments made by MEL to the draft minutes of the meeting on 22 July 2008.

There was no “competition” between LCC’s Plan B/PSC and the private developers. I am satisfied that the PSCs were used for the legitimate purpose of assisting LCC to decide whether the private developer competition should continue.

There was no scoring of “bids”. That stage in the competition had not been reached when the competition was terminated on 5 November 2008. I accept the evidence of Ms du Preez and Mr Greer on the scoring issues about which complaint was made, in particular, as to normalisation, risk adjustment and positive sensitivity. I reject the complaint that LCC changed the scoring criteria applied to assess the developer bids by introducing different internal scoring criteria that had not been communicated to MEL, namely “Commercial Risk Analysis” and “Overall Risk Profile”. It is clear from the Introduction to the Evaluation Process Document that the process was not used to “score” the developers’ proposals relative to one another:

“This is an internal evaluation process and is intended to evaluate bids commercially in terms of the value for money these present. It is not intended to be used to deselect any bidder. … The analysis will assist in understanding the quality of bids to date and enable a comparison with the PSC to determine how the competition should move forward.

… The purpose of the evaluation is to allow the Council to review whether the arena facility can be better delivered by the developer bidders and whether it offers value for money against the Council’s own PSC.” (G68/273).

The implied contract claim

In the alternative to the claim under the Regulations, MEL claims breach of an implied contract (Amended Particulars of Claim, para 77 at A3/23). MEL claims that LCC had an implied duty at common law (1) to consider its bid fairly, honestly and in good faith and in accordance with the evaluation methodology set out in the Contract Notice and tender documents, and (2) base any decision to exclude MEL from the procurement on objectively justified, reasonable and consistent criteria, with previous representations it had given to MEL (including that any such exclusion would be only in accordance with the terms of the procedure laid down in the Contract Notice and tender documents).

MEL accepts that, in terms of LCC’s duties to assess the bids, the implied contract issues to a large extent overlap with the substance of the claims under the Regulations. However Mr Hollander in opening submitted that the implied contract claim may be material to issues of limitation (and in relation to one issue on quantum) (MEL’s skeleton argument for trial, para 239; Day 3/33-34).

LCC accepts that a contracting authority may be under an implied obligation to consider tenders in good faith, however Mr Williams submits that the implication of further obligations are not necessary to give efficacy to the contract, nor could there be a common intention that any implied obligations should extend further than the duties imposed upon the contracting authority by virtue of the EU public procurement regime. In short, he submits, the implied contract adds nothing to the claim.

In JBW Group Ltd v Ministry of Justice [2012] EWCA Civ 8; [2012] 2 CMLR 10, Elias LJ stated:

“58.

[The applicant] accepted that if he had succeeded in establishing that there was a service contract, this would add nothing to his case. It would then be unnecessary to imply any contract. Initially he suggested that even then the implied contract argument might entitle him to bring a claim for six years rather than within the much stricter three-month period permitted under the Directive. However, in reply he resiled from that position and conceded that it would be inconsistent with the purpose of the Directive to imply any such contractual right.

59.

That concession was, in my view, rightly made and is consistent with the decisions of two first-instance judges, Morgan J in Lion Apparel Systems Ltd v Firebuy Ltd [2007] EWHC 2179 (Ch) at [212] and Flaux J in J Varney and Sons Waste Management Ltd v Hertfordshire CC [2010] EWHC 1404 (QB) at [232]-[235] citing Monro v Revenue and Customs Commissioners [2008] EWCA Civ 306.”

Accordingly, MEL cannot use an implied contract to extend the three-month limitation period in the Regulations. In any event I agree with Mr Williams that the implied contract claim adds nothing to the claim under the Regulations.

Conclusion

In my judgment (1) all the complaints in paragraph 76 of the Amended Particulars of Claim are time barred, save for the scoring complaints made in sub-paragraphs (iv) and (v); (2) there are no good grounds for extending time; (3) there was no breach of the Regulations; and (4) the implied contract adds nothing to the claim under the Regulations.

Conclusion

For the reasons I have given, these claims fail.