A Stornoway hotel group is set to sue the council in a multi-million pound claim
over the way the commercial lease of the restored Lews Castle was awarded.
Cala Hotels maintains the comhairle acted unlawfully when it entered into a contract
with Natural Retreats.
The Lewis-based hotel group was legally barred from suing the council following a
judicial review in the Court of Session in 2015 which found the company took too
long to seek legal action.
That ban has been lifted following an appeal, paving the way for the council to be
taken to court.
The court heard they sought damages estimated to be £23,340,538.
The council is due to defend the action.
In November, three judges heard arguments whether Cala should be allowed to sue the
council and has now found in favour of Kenman Holdings which owns the Cabarfeidh,
Caladh and Royal hotels in Stornoway under the Cala brand.
The court judgment delivered by Lord Menzies found the “slow drip-feed of disclosure”
showed the council “was not notably prompt or cooperative in disclosing all information.”
The Court of Session also heard allegations the comhairle engaged in discussions
with Natural Retreats before the tender and “disregarded the principles of equal
treatment and transparency.”
Ruth Crawford, QC for the council, told the court that Cala Hotels made a deliberate
choice not to submit a bid for these contracts.
“They did not compete, so they have no complaint that their offer was not properly
In addition, the council owed a duty to the public at large, and not specifically
to Cala Hotels, she said.
Cala could have opposed the contract award in summer of 2014. They had sufficient
information and did need fully formulated grounds to raise a legal challenge, said
Information regarding pre-tender and post-tender discussions was disclosed in June
and August 2014 and Cala could have raised proceedings then, she submitted.
If they raised legal action in June 2014 then the council would not have concluded
the development agreement with Natural Retreats, she said.
Following the judgement, Kenneth Mackenzie, managing director of the hotel group,
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 added: “The interaction among the Comhairle, Highlands and Islands Enterprise
and Natural Assets during the procurement process will now be subjected to legal
“The comhairle now finds itself at the wrong end of a multi-million pound damages
“In addition, we understand that some of the millions of pounds of funding for the
project received by the Comhairle was conditional upon it complying with procurement
The council said it has “noted” the judgement.
A comhairle spokesman said: “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.
Council leader, Angus Campbell, who is also chairman of the Lews Castle project board,
said: “The comhairle remains confident that its processes in th awarding of the contract
were proper and competent.
“The restoration and development of Lews Castle is hugely popular and already provided
a major economic boost for the islands.”