The unsuccessful candidate in the competition for chief executive of the State agency leading the Luas initiative has returned to work at the Railway Procurement Agency.

Regarded by some as favourite for the post, Mr Dónal Mangan declined the post of Luas project director after failing to secure the chief executive post.

The former head of infrastructure finance at KBC Bank, Mr Frank Allen, was selected by the agency's board. It is understood he was regarded as an outstanding candidate.

Mr Mangan initiated a High Court case against the agency during the summer and is believed to have returned to work while that action is pending.

He remains in situ at the agency's offices in Parkgate Street, Dublin, where Mr Allen has worked since August.

When asked, a spokesman for the agency said Mr Mangan had returned to work in the past fortnight after taking holidays. Asked what job Mr Mangan was doing, the spokesman said: "He left here as head of the Luas project. We haven't been notified of a change to that."

The post he declined is thought to have carried the same conditions as the acting chief executive post. His pay is thought to be in the region of €130,000, roughly the same as the salary for the post of permanent chief executive.

It is not known whether any date has been set for a hearing of the case when the legal term resumes or whether there have been any discussions on a possible settlement of the case.

Mr Mangan is understood to have been strongly opposed to the commencement of a competition for the post of chief executive on the basis that he did not want to apply for his own job. But having indicated that he would not enter the process, he later applied for the post.

His legal action is understood to state that the competition to appoint a chief executive should be declared null and void. Under the terms of the Transport (Railway Infrastructure) Act 2001, Mr Mangan argues that he should be made head of the agency because he was the acting head immediately before its establishment.

It is understood he is calling on the Minister for Transport, Mr Brennan, to designate him head of the agency, arguing that this is provided for in the Act.

There is speculation that the C&C managing director, Mr Maurice Pratt, might be appointed to the agency's board to replace the late Mr David Manley, who died on August 15th.

Mr Pratt is a council member with the transport brief in the Dublin Chamber of Commerce. He declined to comment.