DURHAM City Council has confirmed the authority will be taking legal action against the directors of the company it appointed to run the £14m Gala Theatre.

Chief executive Colin Shearsmith said the action, against directors Michael Power and John Nicholas Rule, will aim to recover a £75,000 loan made on their personal guarantees.

Mr Power and Mr Rule have remained unavailable for comment.

The debt is among more than £700,000 owed to 150 creditors by The Entertainment Team (Durham) Ltd, now in liquidation.

The council, which owns the theatre, has accused the company of a financial cover-up, claiming it had withheld information on the huge cost of a disastrous opening event featuring pop band Westlife.

The council also claims that The Entertainment Team (Durham) Ltd went back on financing agreements made before the exchanging of contracts.

Mr Shearsmith said the city council - which has already pledged an investigation into what went wrong - constantly monitored the financial state of the management team, but it was not until May 16 - more than five months after the Gala's opening - that it admitted its true financial position.

Its contract was terminated last month by the council, which temporarily took over the running of the venue. But liquidator Alan Marlor disputes council claims that The Entertainment Team (Durham) Ltd and its parent company, Full House Management, had enough working capital in place to make the venture work.

Mr Marlor says: "There was always going to be a problem because it just had no access to this - the project was entirely self-financing.

"They forecast by the end of February that they would have £600 cash in hand and it was not too much to expect that this would not be available by then, particularly as they were setting up a new venture which may not go to plan."

Mr Marlor also says there was nothing in any contract between the council and The Entertainment Team (Durham) Ltd to say the parent company Full House Management would meet the costs of an opening event at the Gala.

Checks made by the council on the background of The Entertainment Team (Durham) Ltd also remain in question.

Director Michael Power had already seen a business venture - Entertainment Team Rides Ltd, set up to manage a James Bond simulator ride in London - collapse with debts of more than £1m. Another of his companies, Shaping A Nation Ltd, had a short-lived tenure in charge of a multi-themed tourist attraction in Edinburgh.