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The taxpayer-funded Teesside regeneration body chaired by Lord Ben Houchen faces a potential legal bill of more than £4mn after losing an action in London’s High Court against Britain’s fifth biggest port.
Mr Justice Eason Rajah on Wednesday said the South Tees Development Corporation and its development joint venture, Teesworks Ltd, had believed they could extract a ransom payment from PD Teesport via a three-year battle over access rights to their land.
Awarding PD Teesport most of its costs, Rajah said: “The defendant is clearly the successful party. In these proceedings [STDC and Teesworks Ltd] have maintained that the defendant has no rights of way across its land . . . The defendant has established that it has rights of way over three significant routes.”
Rajah — who last month upheld PD Teesport’s access claims across three parts of the site — dismissed a claim by Teesworks Ltd that it had won as “simply wrong”.
PDT had established access to routes thought by the claimants to carry “a ransom value”, he added.
The claimants have been ordered to pay £1.2mn upfront, with the final figure to be determined. The proportions payable by each of the two claimants is unclear.
STDC has already spent more than £3.1mn on legal fees in the case, according to board papers published in February. Taken together, the amount spent on legal fees and more than £1.2mn in costs to PDT could leave the taxpayer with a bill in excess of £4mn.
Owned by asset manager Brookfield, PDT is the fifth-largest port by tonnage in the UK and the statutory harbour authority for the river Tees.
A viable settlement offer from PDT had been rejected by the claimants last September, the court heard, resulting in the case progressing to a costly trial.
That offer was rejected “out of hand” by the claimants two days later, said the judge. “Had that offer been accepted, significant parts of the costs of the trial would have been avoided,” he added.
The STDC was set up in 2017 to transform the vast former steelworks in Redcar, Britain’s largest brownfield project. The flagship project — which is overseen by Houchen, the high-profile Conservative mayor of Tees Valley — has been mired in controversy over its finances and governance.
In March 2021 STDC launched legal action against PDT, seeking a ruling that the port operator had no rights of access across the 2,500-acre former steelworks it was regenerating next to the port in north-east England.
STDC was later joined in that claim by Teesworks Ltd, a joint venture established to develop the site — which is now 10 per cent owned by STDC and 90 per cent by two local developers, Chris Musgrave and Martin Corney.
PDT argued that the action was aimed at forcing a distressed sale and, when that failed, securing a ransom payment for access.
The court had heard that in January 2023, 10 months before the trial began, the claimants made a settlement offer.
Its terms required that PDT hand over 90 per cent of any dues it received, as the statutory harbour authority, from all ships or cargo handled by tenants or occupiers of the Teesworks steel site.
Andrew Walker KC, for PDT, told the court that the proposal amounted to a “clear example” of attempts by the claimants to “hold the defendant to ransom”.
PDT rejected the offer. Last September it made its own, including dropping its claim to one of the key access routes in dispute.
Two days later, in a letter sent by STDC chief executive Julie Gilhespie, PDT was told that the board of the regeneration body had rejected PDT’s proposal. A six-week trial followed in October.
Both claimants have been at the centre of controversy for some time.
The STDC established Teesworks Ltd in 2020 to develop the former steelworks in a joint venture with Musgrave and Corney. A series of secret deals and complex, lucrative land transactions has since resulted in allegations of impropriety.
A government review into Teesworks in January found no evidence of corruption or illegality but said there were not sufficient guardrails in place to ensure value for money for taxpayers and identified major governance failures.
It also published part of a November 2021 commercial deed between the claimants providing that half of any “cash consideration” paid by PDT for access rights, up to £54mn, would be paid to Teesworks Ltd “to assist” the business.
The same deed provided that another company owned by Musgrave and Corney, DCS Industrial Ltd, would be “entitled to a fee for consultancy services in connection with the dispute”, again up to £54mn.
Teesworks Ltd has indicated it may appeal against the court’s decision.
STDC said its focus had “always been to clarify PDT’s rights to accommodate them and prevent hindrance to future economic development” and that it had “made extensive effort to avoid legal action”. STDC is not expected to appeal against the decision.
PDT and Teesworks Ltd were contacted for comment.