Colchester Council is set to win back millions of pounds from a contractor it fired for failing to build the town’s controversial Visual Arts Facility.

An independent adjudicator decided Banner Holdings failed to follow the council’s instructions, did not carry out construction in a workmanlike manner and left project managers believing the Vaf would not be built on time.

The firm is now facing an estimated £2million bill from the council, while Colchester taxpayers will probably not be footing the bill for compensation and legal costs.

However, Peter Elston, Banner’s chairman and managing director, described the adjudication as an “interim decision” and pledged to take Colchester Council to court.

Paul Smith, councillor responsible for resources and the arts, said: “We are delighted with this result, particularly as the council has been awarded the vast majority of its costs.”

On April 8 last year, Colchester Council decided to terminate Banner’s contract to build the gallery, having already issued two notices listing perceived “defects”.

Banner launched legal action claiming it was wrongfully dismissed and insisting Colchester Council should pay the company £1.3million plus costs.

In January, Colchester Council issued a counterclaim, believed to be in the region of £2million, and an initial hearing was held at the Technology and Construction Court.

Now, an independent adjudicator has found the council was justified in cancelling Banner’s contract.

Costs, including what is understood to be much of the £2million claim, plus the six-figure cost of the council’s solicitors, are to be claimed by Colchester Council.

Mr Elston said he did not accept the adjudicator’s findings and planned to take the council to a hearing at the Technology and Construction Court in November.

He said the ruling found in Banner’s favour on some counts, including that one of Colchester Council’s notices was issued in bad faith, and the gutter outlets for the roof were not designed properly.

He said: “It’s only an interim decision, which is not clear cut. We’re still proceeding with our High Court claim against the council for in excess of £1.3million.

“We have a very good legal process in England and we will go through the process and I’m sure the court will give us the right, fair and true answer.”

Council spokesman Lucill Curtis said the authority now had to figure out what costs will be incurred to finish the work Banner were hired to do.

A third party currently holds a £1.4million bond set aside by the two parties last year, which will be awarded to the eventual victor.

Work on the Vaf restarted last November under the auspices of a new company, Mace.