A COUNCIL-owned bus company is suing the bosses of a rival firm for £127,000 after a passenger war which plunged it into the red.

Rishton couple David and Suzanne Bailey, who ran buses against Blackburn Borough Transport Ltd in 2002 and 2003, have received details of the compensation claim being demanded of them.

The couple had registered the name 'Blackburn Transport Ltd' with Companies House and had painted it on the side of several of their red buses, even though their bus companies were called catch-me-bus.com and Buzy-Buz.

The Baileys, currently being investigated by the police for alleged insurance irregularities, pulled their services at the end of 2003 - a decision which led to Suzanne Bailey being stripped of her operator's licence.

Last year, Blackburn Borough Transport Ltd, entirely owned by Blackburn with Darwen Council, successfully persuaded a high court judge the Baileys use of 'Blackburn Transport' on the side of buses caused confusion and cost them business as a result.

Blackburn Borough Transport has used the shortened 'Blackburn Transport' on its buses since 1986. After being told by Blackburn Borough Transport that the Baileys had damaged trade and unfairly poached passengers, deputy high court judge John Martin QC said the couple had "no real prospect" of arguing they had not used the reputation of Blackburn Borough Transport Ltd to their advantage.

He gave Blackburn Borough Transport leave to seek damages, and to prepare a case of how much they want.

Mr Bailey would not reveal whether the couple had £127,000 but said: "We have received documents from Blackburn Borough Transport saying they want £127,000 from us.

"They are not chasing the money from our companies, but from us personally.

"We will go and defend it, and just see what happens."

Michael Morton, managing director of Blackburn Borough Transport Ltd, said: "We were given leave to prepare our case and that is what we have done.

"We are due in court next month and I understand the Baileys have been given documentation stating how much we intend to ask for."

In the company's accounts for 2003, a loss of £462,243 was recorded, and blamed on the 'war' with the Bailey's bus companies.