A government department has lost its appeal against possible legal action over a proposed multi-million pound quayside redevelopment.

The Department of Infrastructure has been accused of ’negligent mis-statement’ by a consortium, which was initially told it had been chosen as the preferred developer only for its bid to be rejected the following month.

In a high court judgment in January, Deemster Andrew Corlett ruled that Sondica Group Inc had a ’potential and arguable’ cause of action and that the DoI is likely - perhaps with others - to be a party to subsequent proceedings.

And now the DoI has lost its appeal against that judgment, with the Appeal Court ruling that Sondica may have a ’viable cause of action’ and there is a ’reasonable prospect’ of them establishing they have sustained a compensatable loss.

The contract was ultimately awarded to developer Kane Ltd which has planning consent (18/00846/B) for a seven-screen cinema, 80-bedroom hotel, flats, restaurants and cafe, on the former Lord Street bus station site in Douglas.

There is no challenge by the unsuccessful bidder to the final award of the contract to Kane Ltd.

Judge of Appeal Jeremy Storey QC and First Deemster John Needham likened the case to the challenges by Eurotunnel and P&O to the UK Government’s awards for ’no deal’ ferry contracts to DFDS, Brittany Ferries and Seabourne Freight.

North Quay Consortium, represented by Sondica, were informed in February 2016 it had been selected as the preferred developer.

But at a meeting the following month, they heard that the bid could not be accepted as the DoI could not provide underwriting or a step-in guarantee.