The developer behind high-profile Birmingham city centre apartment scheme Masshouse has been told to hand back more than £250,000 in deposits to unhappy buyers after the project was delivered two years late.

Seventeen people who bought flats in the second phase of the Masshouse development in Eastside won a High Court battle to pull out of the purchases and recover their deposits which total £287,256 plus interest.

Deputy Judge George Bompas QC, sitting in London, ruled that developer Masshouse Developments had committed “repudiatory breach of contract” by failing to complete the building, known then as Block M, until March 2011, two years after it was due to finish.

He ordered the developer to pay back the deposits paid by the 17, most of whom sought to invest in the flats as “buy to let” properties.

Masshouse had claimed that clauses in its contracts with the purchasers meant that it could not be held liable for the delay caused by the fact that a key contractor had gone into administration in October 2008, delaying the project.

But the judge ruled that it had breached the contracts and must repay the deposits.

He said: “There was a failure to arrange during the second half of 2009 for the construction of Block M to be carried on with all due diligence.

"I have also reached the conclusion that in the circumstances of the present case this failure is not to be viewed simply as mere delay.

“The defendant’s failure, following the period of several months after the contractor’s administration when, to all intents and purposes, nothing at all was happening on site in the way of progress towards completion of the apartments, signalled an intention on the part of the defendant not to be bound by the contracts.

“The defendant was biding its time while deciding what to do and, materially, whether or not it would ever build out the residential development.”

The Masshouse scheme was originally a three-way partnership between north-west developer Nikal, RBS and contractor David Mclean and the first phase – the 173-apartment Masshouse Plaza – was completed in 2007.

However, during construction of the second phase – a 167-unit scheme then called Block M but since renamed Hive – David Mclean went bust and Nikal – the parent company of Masshouse Developments – ended up eventually going it alone and buying out RBS. The building was completed finally last year.

The scheme was dealt a further blow after a planned new £81 million magistrates court complex – which would have replaced the Victorian Law Courts in the city – fell victim to government cuts despite the fact that the Ministry of Justice had already spent £12 million acquiring a site next to the apartments for £12 million.

A Masshouse Developments spokesman said: “The delays experienced by these purchasers were the unfortunate result of our contractor David Mclean being declared bankrupt midway through the project, thereby delaying construction.

“While most of the 53 original purchasers proceeded to purchase, we were unable to resolve our differences with the remaining 16 individuals and are returning their deposits to be held in Escrow pending an appeal later this month.

"This ruling has no effect on our development plans at Masshouse and we are proceeding as normal.”