Camelot launches legal bid to block Branson takeover

The lottery operator Camelot has begun legal action to block the decision to give Sir Richard Branson a second chance to take control of the National Lottery.

The lottery operator Camelot has begun legal action to block the decision to give Sir Richard Branson a second chance to take control of the National Lottery.

Camelot went to the High Court in London yesterday after the National Lottery Commission announced on Wednesday that Camelot was being refused time to improve its bid for the next seven-year licence to run the game.

After a short hearing, Mr Justice Sullivan adjourned Camelot's application for a judicial review until next Tuesday, following the commission's promise it would suspend its talks with Sir Richard's consortium in the meantime.

Yesterday's challenge may be Camelot's last chance to reopen the competition to run the £5bn-a-year game from October 2001. As its application was being heard, Sir Richard and senior executives in his consortium, the People's Lottery, were locked in talks at the commission's headquarters.

Camelot's chief executive designate, Dianne Thompson, said the company was taking legal action to ensure "a fair hearing" from the commission after it rejected Camelot's appeal on Thursday to reconsider its decision. "Amidst the shock and disbelief over this week's decision, Camelot's 800 staff strongly believe that the decision to deny Camelot an opportunity to negotiate alongside the People's Lottery is totally unfair," she said.

As he left the commission's office, Sir Richard urged Camelot to drop their legal action. "I think Camelot should consider bowing out gracefully and give up going to the court," he said.

He remained confident that his consortium, supplied by KPMG, Microsoft and Kellogg's would meet the commission's remaining concerns about the need for a legally-guaranteed £50m fund to repay ticket-holders if the lottery folds or its equipment fails. He promised commissioners a £50m bank guarantee, funded by himself and other consortium members, which could also be used if ticket sales fell below viable levels for his lottery company.

The commission stunned both bidders on Wednesday by revealing that, though it had rejected their initial bids, it would hold one-to-one talks with the People's Lottery because it believed the faults in its bid were more easily remedied.

Dame Helena Shovelton, the commission's chairwoman, said it had taken legal advice to ensure its decision was proper. She believed it would have taken several months to meet its concerns - too long under the present time-scale.

It barred Camelot because it had "significant" concerns about a cover-up by G-Tech, Camelot's software supplier and co-founder, of a software glitch that affected 113,000 smaller prizes paid out over four and a half years. Camelot insists thatinternal reforms will prevent similar problems.