A floundering property development in Liverpool’s city centre promising overseas investors a return on investments made in a ‘Chinatown’ development of restaurants, shops and living accommodation could see investors lose millions if a High Court judge rules in the favour of the local council’s plans to redevelop the site with an alternative investor.
The ‘New Chinatown’ idea, set up by a company with its main base in the United Arab Emirates, was to build on Liverpool’s historical Chinese connections and marketed the investment to Hong Kong and China-based investors looking to capitalise on UK property investment opportunities.
However due to cash running out and the project laying incomplete, Liverpool City council has demanded that site’s leases are returned to the council via the courts and is refusing to issue second phase leases unless cash is paid, as the scheme has stalled leaving a skeleton site.
As a result, investors, mainly overseas and from Asia are now set to lose millions of pounds, something that the Liverpool City Council believe is “no moral obligation” of theirs.
The High Court case began yesterday and is ongoing. If the judge rules in favour of Liverpool City Council then the original development, currently in a skeleton state of limbo, will be redeveloped based in the council’s own plans, despite investors calls for protection.
The judge overseeing a court battle about the stalled £200m New Chinatown scheme (artists impression pictured left), said yesterday that it could be “commercially nonsense” for the developer to be forced to pay £950,000 while still being kicked off the project.
China Town Development Company (CDC) began its action against Liverpool council yesterday over the stalled scheme. The council wants to reclaim £950,000 it says it is owed by CDC and wants to take back leases on the New Chinatown site. They have also threatened to wind up CDC.
Local Liverpool newspaper The Echo reported today that CDC, whose parent firm is developer North Point Global (NPG), says the debt is part of a wider dispute. CDC accepts that the £950,000 is outstanding but says the council is not entitled to take back the leases as a result, disputing the way the council has interpreted its lease agreements.
CDC has taken the council to the High Court to get an injunction to stop the council from taking action. CDC says it is in advanced talks to sell the development so the project can restart.
The £200m development in three phases would see the construction of hundreds of homes and a hub for Chinese businesses in Liverpool
The Echo reported that yesterday’s hearing was largely made up of dense legal argument into provisions of contract law.
North Point Global
Among those attending was Peter McInnes, the founder of North Point Global whose company argued that CDC should be given the right to develop Phase 2 of New Chinatown, David Mohyuddin QC, representing the council, said the £950,000 was owed to the council regardless of what might happen to the phase 2 contract.
Judge Sir Gerald Barling queried whether the council was suggesting that even if CDC did pay up the £950,000, it would not get the phase 2 lease on New Chinatown that it was expecting.
He said CDC would expect to get something for its money.
According to The Echo report Mr Justice Barling said: “Nobody in their right mind would consider the option of ‘we’ll pay you £2.5m but you don’t have to give us the leases’… that would just be commercially nonsense.
“You’ve (the council) created an issue here with the rejection of their (CDC’s) notice. You seem to have created an issue whether they will get anything for their money if they complete their undoubted obligation to pay.”
CDC has already paid just over £1.5m to the council, it argued.
Neil Berragan, acting for CDC, said the council was trying to say that the £2.5m owed to the council, which he called a “premium”, was one single debt.
David Mohyuddin, representing the council, said: “The reason (CDC) has not paid is because it cannot pay. It cannot meet its simple and straightforward obligation to make payment to Liverpool city council,” according to The Echo
Mr Mohyuddin said there was also an issue around funding for the rest of the development, as well as phase 1.
He said the council was not happy that the funding conditions for CDC’s scheme had been satisfied, meaning the council was not confident CDC had enough funding to make the development happen.
The court heard that an earlier email suggested Peter McInnes’s offshore company Blue Ray Holdings, understood to be based in the United Arab Emirates, had holdings of £1m that could be used to settle the debt.
The judge suggested that would be enough for the council to “call their bluff” to see if the cash could be paid.
The case was adjourned for further submissions from CDC and the council before Mr Justice Barling can give his judgement.
Earlier this month, Liverpool Mayor Joe Anderson told the Liverpool ECHO that the council has numerous investors looking to take over the site and that it has “no moral obligation” to compensate CDC investors and said it was up to them to make sure their money was safe.