A multi-million pound claim for damages faces Comhairle nan Eilean Siar from Kenman Holdings Ltd, the company says.
This follows a court case brought by the local hotel group - owner of Stornoway's Cabarfeidh and Royal Hotels, and the Caladh Inn,
The group announced yesterday (Friday February 3) that it had won its appeal against an earlier decision favouring the Comhairle.
Back in June 2015, Kenman Holdings Ltd raised a petition in the Court of Session requesting a Judicial Review of the award of the contract for 'Private Sector Partner' at the newly redeveloped Lews Castle. This relates not to the museum aspect of the restoration project but the accommodation and cafė/restaurant provision.
When the case was heard in October 2015, Lord Tyre’s decision was that there was “unreasonable delay” in Kenman bringing the case so the company's petition failed.
Kenman lodged an appeal against this decision in early 2016, which was heard by the Inner House last November. The Appeal petition was reduced to a plea for damages only in relation to the contract awarding process. The plea for Judicial Review was dropped as, despite the legal challenge having been made, the Comhairle decided to proceed with the project construction.
Therefore it was too late for the company to request the Court to reduce the contract award.
The Opinion of the Court, as delivered on Friday by Lord Menzies, was that: “The Council was not notably prompt or cooperative in disclosing all information: we regard senior counsel for the petitioner’s description of this process as a “slow drip-feed of disclosure” as not unfair.
"The challenge by the petitioner was not straight forward and until the receipt of around 12,500 pages of documentation in late March 2015 the legal advice which the petitioner received was that litigation was inadvisable.
"Even now, some documents which the petitioner has called for have not been produced. In light of all of these factors, we do not consider that the elapse of time from 20 August 2014, when notice of the award of the contracts was published, until 28 May 2015 when the petition was lodged, amounts to an unreasonable delay in the particular circumstances of this case (which circumstances include the fact that the only remedy which the petitioner now seeks is Francovich damages).”
Speaking for the Hotel Group, managing director Kenneth Mackenzie said: “We welcome the Appeal Court's decision and the opportunity it provides for the substantive merits of our case to be heard at last."
He said that the work of the Comhairle, of Highlands and Islands Enterprise and of Natural Retreats during the procurement process "will now be subjected to legal scrutiny."
Mr Mackenzie went on:"The Comhairle now finds itself at the wrong end of a multi-million pound damages claim."
Comhairle nan Eilean Siar said today (Monday February 6) that it has noted the decision of the Court of Session in an appeal by Kenman Holdings on the first stage of a judicial review regarding the tendering of the hospitality contract for the Lews Castle Development in the Outer Hebrides.
The Council agreed that the Court upheld Kenman’s appeal that the claim, which is now much more narrowly framed, had been submitted within an acceptable time. This decision was not about the merits of the case and Kenman’s claim for damages will now proceed to be determined by the Court of Session.
Councillor Angus Campbell, Leader of Comhairle nan Eilean Siar and Chair of the Lews Castle Project Board, said: “The Comhairle remains confident that its processes in the awarding of the contract were proper and competent. The restoration and development of Lews Castle is hugely popular and has already provided a major economic boost for the islands.”
(The Council reaction has been added since the original report was published)