City developer wins £5m court battle over car park plans

COUNCIL-backed developer EDI is set to be awarded £5 million in a court battle after a judge ruled the firm was not at fault for the failure of a proposed development of Castle Terrace car park.

• Castle Terrace car park

The developer launched a legal action against National Car Parks (NCP) for the return of the cash after plans to turn one of Edinburgh's biggest central car parks into offices or shops did not materialise.

EDI paid the multi-million-pound sum for the right to redevelop the site, which was leased by NCP from the city council, back in 2005.

After the project failed to come to fruition, EDI asked for the money back as part of the contract between the two firms.

NCP refused to pay up, claiming at the Court of Session in Edinburgh that EDI had failed to pursue the development with "all reasonable endeavours" as the terms of the deal stipulated.

Now Lord Glennie has ruled in favour of EDI, finding that its efforts were not "significantly different from those to be expected of a normal experienced prudent developer".

Councillor Gordon Mackenzie, chairman of EDI, welcomed the ruling and said he hoped it would pave the way for a settlement to be reached.

At a recent hearing, the court heard that NCP ran the car park, which was "very profitable". But the company wanted to generate more capital to help pay bonds of up to 1m to win contracts for on-street parking.

As part of this strategy, NCP bosses identified Castle Street car park as an opportunity for development, but its lease with the council did not include the right to build on it.

Instead, NCP approached EDI with the plan, offering to take a cash payment and a share in the profits from any project the developer could realise on the land.

The deal was agreed in November 2005, and EDI handed over 5m.

Lawyers for EDI told the court that their clients were told by council chiefs that the Castle Terrace project could only proceed if alternative car parking space was provided.As a result, EDI put forward proposals to redevelop a nearby site on King's Stables Road, along with creating new car parking, as part of the same development.

However, the local authority declined to support the plans for the King's Stables Road site, and lawyers for EDI said councillors were "aware of the political sensitivity" of developing Castle Terrace itself.

When EDI served a notice on NCP in May last year requiring it to buy back the stake bought in the site, the car park giant balked.

NCP claimed that the sole strategy pursued by EDI was linking developments at Castle Terrace and King's Stable's Road, in violation of its contract to pursue the project with "all reasonable endeavours".

However, Lord Glennie found that the joint development would have been viewed by "normal prudent developers" as "offering the only realistic prospect of success", and ruled NCP could not withhold payment of the 5m.

Lord Glennie said he would schedule a further hearing to discuss his ruling if the parties could not agree on a conclusion.

Cllr Mackenzie said: "We welcome Lord Glennie's decision and confirmation that EDI fulfilled its obligation and hope this will pave the way for settling this matter with NCP."

A spokeswoman for NCP said the company was unable to comment until the court case was concluded.