Grimsby Institute of Further and Higher Education has lost its legal bid for compensation over the capital funding fiasco.
The college was seeking pound;3.75 million from the former Learning and Skills Council (LSC) as repayment of the costs of developing its building plans, which had no hope of completion because the capital fund was overcommitted.
It argued at the judicial review, held in Leeds in July, that when the LSC granted approval in principle for the project, it said that the pound;94 million required had been set aside, and as a result the unavailability of funding should not have been a risk.
But the LSC maintained that colleges had no assurance of funding until they were given approval in detail, and the costs of developing plans were taken on at their own risk.
In his judgment, Judge Langan said the college's case that it had a legitimate expectation of receiving funding based on implied representations by the LSC was "fatally flawed". He criticised the college's acting principal, Ray Ellis, for being "argumentative" and in one respect "unreliable" in his evidence about assurances given by the LSC. He said the LSC witness, regional property advisor Michael Green, was "measured and transparently honest" on the issue.
The judge also rejected claims that the LSC had encouraged the college to make its plans bigger and more expensive, as Sir Andrew Foster's review of the crisis suggested may have happened on several other occasions.
Instead, he endorsed the evidence of Mr Green, who told the court: "I can't recall `world-class buildings' being mentioned at the meeting. We did not encourage (colleges) to come back with mega-schemes."
And the judge rejected the claim that the letter confirming approval in principle guaranteed that funding had been set aside for the college, since it stressed this was "without prejudice" to the decision on approval in detail.
Judge Langan said: "What happened cannot be dismissed as `just one of those things'. But, in my judgment, the facts of the case fall a long way short of what is required to make out, as can only be done in a rare case, conspicuous unfairness on the part of a public authority.
"The institute's request for the additional amount now claimed was not dismissed out of hand, but was considered together with similar requests from many other colleges. The result for the institute is most unfortunate, but it cannot be characterised as the product of an abuse of power by the LSC." He said the decision only to give extra funds to colleges facing insolvency "cannot be stigmatised as irrational".
The case was thought to have the potential to open the floodgates for compensation claims from 79 colleges whose building projects hit the buffers when the LSC discovered its budget had run out. The funding body kept its final pound;200 million unspent as a result, and the decision could mean that it is now released for a final handful of projects to go ahead.
Rodger McCracken, associate principal at the institute, said the governors would decide whether to appeal by the end of this month. "We are very disappointed," he said. "Leading counsel has advised us that there are grounds for appeal."
He said the college lawyers believe the judge misunderstood the case. While the college had not counted the cost of its legal challenge, he estimated costs of both sides would amount to pound;250,000.
Editorial, page 6.