New Chinatown developer wins injunction against council

A High Court judge has granted an injunction against Liverpool City Council to prevent it from attempting to wind-up the company behind the stalled £200m New Chinatown project.

New Chinatown is a mixed-use, 800-apartment proposal for Great George Street, granted planning permission in 2015. Apartments have been sold by developer North Point Global to overseas investors, however no work other than site clearance has taken place. With questions over why the project had stalled, Liverpool City Council, which owns the land, was seen to toughen up its stance on the scheme which it had previously been vocally supportive of, and started legal action against special purpose vehicle Chinatown Development Company in July this year.

The council claimed CDC still owed £950,000 out of a total of £2.5m in connection to lease agreements, and said it would issue a winding-up order against the company to get back the money. In response, CDC applied for an injunction to block it, which Judge Barling has granted, in a decision released yesterday.

The deal between Liverpool City Council and North Point Global was for three leases on separate sections of the land, assigned to North Point in 2015 from developer Urban Splash who had previously had an agreement with the council to develop the site but failed to bring forward the scheme. Mayor of Liverpool Joe Anderson has maintained that because the lease was transferred between two private sector companies, the council had no responsibility to do due diligence, despite being the landowner.

Scroll down for full interview with Anderson

CDC agreed to pay Liverpool City Council a total of £2.5m in a series of installments, in exchange for the leases. The current legal dispute has grown from differences in opinion as to what money relates to which lease, and what should be given in return for money paid by CDC to the council.

CDC has already paid around £1.5m to the council, and for that was granted a lease for the first phase in March 2016. Payments to secure the second lease were due at the end of 2016, but by then North Point had entered into negotiations with Your Housing Group over a potential sale and exit from the project. According to CDC, the council “was involved and supportive of these negotiations”.

The talks with YHG continued until April this year but came to nothing, so CDC then asked the council to complete the agreement for the second lease, which the council refused, on the grounds that the developer “had failed to comply with its contractual conditions” to obtain the lease, and was “out of time”.

The council then served CDC with a forfeiture notice for breach of contract in failing to pay the £950,000, which it said was outstanding in connection to the first lease.

However, lawyers for CDC argued that the developer has paid for the first lease as part of the £1.5m already paid, and the £950,000 is in relation to the second lease. CDC is maintaining that, should it pay the £950,000, the council should fulfil its obligation and grant it the second lease for the site.

Judge Barling pointed out that the council could have served a demand for payment much earlier, in August 2016, but delayed in order to allow for the negotiations with YHG. Steps weren’t taken until May 2017, when the council then refused to grant the lease due to too much timing having passed.

The council argued that there are possession and funding conditions which need to be satisfied for the phase two lease, however Barling ruled that “conditions are to be treated as satisfied in relation to phase two”. He also said that while there are “respectable arguments on both sides… insolvency proceedings are not the appropriate vehicle for resolving what I consider to be a genuine dispute on substantial grounds.”

Injunction is a delaying tactic, says council

North Point Global is currently in the process of selling its interests in all projects.

Craig Griffiths, director of Chinatown Development company, said: “Throughout this whole dispute China Town Development Company Limited have offered to complete the purchase of the Phase 2 lease so long as this was then granted to them but the Council have always refused this offer. Instead they have chosen to make gain from adverse media reports simply suggesting that the Company owed them a million pounds and were seeking to renege on the deal, this was never ever the case. The Council have already received nearly £1.45m from the Company in respect of the Phase 1 and 2 leases and the Company have invested a further £10m in the overall project.

“Furthermore Liverpool City Council were seemingly happy to agree very flexible terms when China Town Development Company Limited were in sale negotiations with the Council’s preferred buyer, Your Housing Group, but when these negotiations turned sour there was a sea change in their attitude.

“The Council’s intention here seems to be to take Chinatown back into their ownership but quite simply this is never ever going to happen. They have sold their interests in the project to Chinatown Development Company Limited and no matter the public money they seem intent on wasting, no Court proceedings are ever going to give them the land back. No doubt Liverpool City Council will attempt to make light of today’s judgement by Mr Justice Barling but it sends a clear message to them that the Courts will not tolerate inappropriate litigation.”

A spokesman for Liverpool City Council said: “The injunction application submitted by Chinatown Development Company is a preliminary technical point which does not address the overall legal arguments. The judge may have found for them on this occasion but the wider substantive issues have yet to be heard.

“The city council feels that this application is a delaying tactic and is draining both public funds and the judiciary’s time. Today’s decision is disappointing but the fact remains that Chinatown Development Company has failed to pay the debt which it owes to the city council and, most critically of all, has failed to deliver the scheme which it has promoted.

“The city council remains fully committed to regaining control of this site and looks forward to returning to court in the New Year to prove that this company has failed in its contractual obligations. The city council is confident in its legal position on the substantive issues in this matter but cannot expand further to protect the integrity of proceedings.”

Place North West met with Liverpool Mayor Joe Anderson at the MIPIM UK conference in October and discussed the scheme

Anderson said: “What happened at North Point was the land was sold by a private sector company at Great George Street.

“We have no moral obligation on this site, there should have been due diligence by the agents representing the buyers. My message to others would be, be very careful what you’re buying into.

“If I was to do due diligence on every private-to-private sector deal in Liverpool, I’d have no staff.”