The success of Southampton's flagship Millennium Youth Games has been tarnished after a judge said the City Council had contracted the management of the event to a "worthless" company.

LEA Sports and Leisure Ltd promptly went bust after the August 2000 games, leaving debts that included £22,281 owed to Winchester's King Alfred's College for accommodation it provided to 500 competitors.

The council claimed the college's contract was with the company and it was not obliged to pay. But, after a complex hearing, Judge Anthony Thompson QC, sitting at Winchester County Court, ruled that it was.

The council now has to hand over £22,281 with interest of over £4,000 and costs in the region of £14,000, bringing the bill to around £40,000.

The council's own costs are thought to be considerably more than £14,000.

Judge Thompson described LEA Sports and Leisure Ltd as "worthless" because it was a recently formed offshoot of another company and had no trading history.

He said: "I find it extremely strange, bearing in mind the sums of money involved, that Southampton City Council entered into a contract that way. No explanation was offered as to the circumstances in which that came about."

He said it had not been made clear to the college they were entering into a contract exclusively with LEA Sports and Leisure Ltd.

More than 6,800 children took part in the city games after winning through from 250,000 youngsters in heats across the country. The games were universally hailed a success and were the biggest youth sporting event ever held in Europe.

King Alfred's College vice-principal, Tommy Geddes, said he was "delighted" at the verdict.

"We thought long and hard about whether we would take the risky and costly route of legal action against a public body such as Southampton City Council.

"But we weren't prepared to accept them acting with impunity when they take on fly-by-night companies who go bust after acting on their behalf."

Southampton City Council's head of leisure, Paul Mawson, said it was considering appealing against the ruling.

"It was disappointing and unfair, particularly given that King Alfred's College clearly entered into a contract with another party and we are now being asked to pick up the cost," he added.

"In good faith, we have already paid money for the accommodation to the contracted organiser - so we have to pay twice and that's why it is unfair.

"On the plus side, it was a hugely successful event and the city council obtained a £1.2m investment in sports facilities and it was an event which gave us an international profile."