DURHAM County Council yesterday won part of its High Court fight against Darlington Borough Council, but suffered a setback in its bid to keep shares worth £13.5m.

The councils were locked in a legal dispute in front of Mr Justice Blackburne, which dated back to 1997.

Durham said that following local government reorganisation, it was wrongly ordered after arbirtation to give Darlington shares in the region's airports and a waste management company.

Durham was also left with a former landfill site it did not want and made to pay a seven-figure interest on a transitional payment.

This week at the High Court in London, Durham challenged those decisions with Timothy Straker QC spearheading its legal team.

After two days of legal argument, Mr Justice Blackburne said the decision on the landfill site at Creebeck, which Durham says is in Darlington's area, was "open to serious doubt" and granted permission for a High Court challenge.

The judge came to the same conclusion about the decision on a £1m interest payment on a transitional payment of £2.2m but refused to grant permission for Durham to appeal to the High Court on the shares issue.

Despite agreeing that the points of law were "of public importance", the judge turned down Mr Straker's attempt to take the matter to the Court of Appeal.

The events which caused the dispute began when Darlington became an independent unitary authority in April, 1997.

Councils were supposed to agree how assets and liabilities should be split, but Durham and Darlington failed to do so, which was why they went to arbitration.

During this week's case, the judge heard that after arbitration, Durham was ordered to hand over 16 per cent of its shareholding in Newcastle International Airport Ltd.

It was also ordered to give Darlington 70 per cent of its shareholding in Teesside International Airport Ltd and 16 per cent of shares in Durham County Waste Management Company Ltd.

Durham had also failed to off-load onto Darlington the Creebeck landfill site, which was described in court as an "onerous property", and was hit with the £1m interest bill.

Last night, Barry Keel, Darlington chief executive, said of the latest hearing: "It's a real victory and it demonstrates that we were right to follow this course of action. It is a good result for the people of Darlington."

He said most of the case had gone the council's way.

Kingsley Smith, Durham's chief executive, said: "The judgement totally vindicates our decision to appeal the issues involving Creebeck and the £1m interest, both of which are very significant."

Durham will consider its response to the other rulings.

The case has resulted in legal costs running to tens of thousands of pounds.