A LEGAL battle involving two key players behind a regeneration scheme has taken a fresh twist, The Northern Echo can reveal.

English Partnerships (EP) and Tees Valley Regeneration (TVR) have filed court papers against Middlesbrough firm Chilli Developments relating to a dispute over the town's Middlehaven project.

EP and TVR are demanding that Chilli pay £325,000 to the court to prove it has the funds to cover any costs should it lose its £10m case for breach of contract.

Knowing Chilli would be crippled by such an order, managing director Simon Brown believes they are using tactics to prevent the case from reaching court.

He said: "It seems you have got to be wealthy to get justice in this country. They are putting up every obstacle in our way, but we feel we have a strong case."

The two bodies are understood to be covering their backs after Chilli allegedly failed to pay them £40,000 in costs, which relate to a previous court case last July, and are still being pursued.

A spokesperson for TVR said yesterday: "Despite attempts to reach settlement, the costs remain unpaid. An application has been made to the court for a stay of the proceedings until a suitable payment has been made by Chilli."

The case is scheduled to be heard at the high court on Friday, April 13.

The Northern Echo exclusively reported in January that Chilli's plans to sue EP and TVR for loss and damages, claiming both parties went back on an agreement signed in 2004 relating to the development of five acres of the 50-acre Middlehaven site.

Chilli intended to create a complex of flats, offices and bars on the site. It secured planning permission and private funding for the £50m scheme and in October 2004, signed a lock-out agreement with EP and TVR relating to the land.

It is this agreement that Chilli claims the pair went back on when entering into negotiations with other developers. Talks subsequently broke down and BioRegional Quintain was chosen as the preferred developer last November.

Chilli submitted its court papers claiming almost £10m in expenses and loss of profits in January.

EP said: "The case is considered to be without merit and will be defended in full."