Denaxe Ltd v Paul Cooper
| Jurisdiction | England & Wales |
| Judge | Mr Justice Fancourt |
| Judgment Date | 06 April 2022 |
| Neutral Citation | [2022] EWHC 764 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2020-MAN-000014 |
[2022] EWHC 764 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
BUSINESS LIST (ChD)
Manchester Civil Justice Centre
1 Bridge Street West
Manchester
M60 9DJ
Mr Justice Fancourt
Vice-Chancellor of the County Palatine of Lancaster
Case No: BL-2020-MAN-000014
Matthew Collings QC and Gareth Darbyshire (instructed by Fieldfisher LLP) for the Claimant
David Mohyuddin QC (instructed by BLM) for the Defendants
Hearing dates: 8, 9 March 2022
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Vice-Chancellor:
This judgment comprises the following sections:
| Introduction | 2 |
| The Dramatis Personae | 3 |
| Background to the Sanction Application | 4 |
| The Sanction Application | 6 |
| The Sanction Order | 9 |
| The Receivers' Application to strike out Denaxe's claim | 16 |
| The Immunity Ground | 17 |
| The Res Judicata Ground | 24 |
| The Abuse of Process Ground | 24 |
| The Merits Ground | 29 |
| The Secondary Claims | 30 |
Introduction
This is an application by the Defendants (“the Receivers”) to strike out a claim for damages for breach of duty brought by the Claimant company (“Denaxe”). The claim relates to the sale of some of Denaxe's assets by the Receivers on 13 June 2019. There is, alternatively, a claim by the Receivers for reverse summary judgment on their Defence, on the basis that there is no realistic prospect of the claim succeeding. Denaxe's principal claim is that the Receivers were in breach of their duty to use reasonable endeavours to achieve the best price obtainable in the market for its assets. The claim was originally for more than £78,000,000.
The Receivers were appointed by Order made on 13 February 2019 (“the Receivership Order”) as receivers of identified assets of Denaxe (then known as Blackpool Football Club (Properties) Ltd) and Mr Owen Oyston, in an attempt to satisfy a judgment debt of more than £31,000,000 against them.
The Denaxe assets that the Receivers sold on 13 June 2019 were a sub-set of those receivership assets. They comprised Denaxe's shares in Blackpool Football Club Limited (“BFCL”), the Blackpool F.C. football stadium at Bloomfield Road, Blackpool (“the Stadium”), the Club's training ground in Fylde (“the training ground”) and other smaller property assets (together referred to in this judgment as “the footballing assets”). The footballing assets were sold together with other shares in BFCL owned by VB Football Assets (“VB”). The sale was effected shortly after an Order made on 5 June 2019 (“the Sanction Order”) approving the proposed sale.
By the Sanction Order, the Court specifically approved the sale of the footballing assets together with the VB shares in BFCL as a single transaction, on terms that had been identified in evidence that was before the Court, to an identified purchaser, Mr Sadler.
The circumstances in which the application for the Sanction Order (“the Sanction Application”) was made, on notice to Denaxe, Owen Oyston, Karl Oyston and BFCL, the exact terms of the Sanction Application, what occurred at the hearing, the terms of the judgment of Marcus Smith J dated 5 June 2019 and the terms of the Sanction Order are central to the matters argued on this application and I will return to them in detail.
The application raises, among other matters, an interesting question about the extent of immunity conferred on a trustee or office-holder who seeks and obtains the sanction of the Court for their decision to enter into a particular transaction.
In the run up to the hearing of the application before me, Denaxe served draft Amended Particulars of Claim and then formally applied at a late stage for permission to amend the Particulars of Claim. The effect of the proposed amendment is to withdraw very serious allegations of negligence made against the Receivers. These include, in particular, an alleged failure to obtain in the region of £59,700,000 for the shares of Denaxe in BCFC. The Particulars of Claim were supported by a statement of truth.
What remains in the claim is, principally, an allegation that the Receivers were negligent in proceeding to sell the footballing assets with the VB shares, as a single sale to one purchaser, having failed to take advice about, market and then sell the real property assets, in particular the Stadium, in separate transactions. It is now alleged in Denaxe's evidence in opposition to this application that the shares in BFCL were “an impaired, or even ‘toxic’ asset” that adversely affected the price obtained for the real property assets. Rather remarkably, Denaxe, by its proposed amendment, intends to abandon its argument that in the region of £59,700,000 should have been obtained for the shares in BFCL, and now contends that the Club was insolvent.
In addition to the principal allegation of breach of duty, there are some allegations of breach of duty in relation to the conduct of the receivership, unconnected with the sale of the Denaxe assets. These allegations, if proved, appear on the basis of the pleaded case and evidence before the Court either to have caused no loss or to have caused losses that may amount to a few thousand pounds at most.
It was effectively common ground that the merits of the Receivers' application should be considered taking into account the terms of the draft Amended Particulars of Claim and that, if the application fails, permission to amend should be granted to Denaxe (subject to some minor points to which the Receivers objected in any event).
The Dramatis Personae
Mr Owen Oyston, the second respondent to the original receivership application and the Sanction Application, was the majority shareholder in Denaxe, which was the controlling shareholder of BFCL. VB was a significant minority shareholder in BFCL, holding about 20% of its issued shares. A little under 4% of shares in BFCL were owned by more than 150 individual shareholders, likely to be supporters of the Club.
The third respondent to the Sanction Application, Karl Oyston, is Mr Owen Oyston's son and business partner. It is unnecessary in this judgment to refer to Karl Oyston further, and so references hereafter to Mr Oyston are to the father, Owen Oyston.
When the Receivers were appointed, they used their control of shares in Denaxe and shares in BFCL to appoint new members of the board of Denaxe and BFCL. There were five such directors of Denaxe, one of whom, Mr Bolingbroke, is alleged to have been paid by the Receivers as an expense of the receivership and to have worked closely with the Receivers to sell the Club.
Background to the Sanction Application
In 2010–2011, the Club, which has a long and famous history, enjoyed a brief period in the 21 st Century football limelight when it played for one season in the Premier League. In consequence, the Club would have earned substantially increased revenue during that year, and in the following year on receipt of the Football League's “parachute payment” for clubs relegated from the Premier League. The Club's and Mr Oyston's treatment of the revenue and profits for that period became the subject of a petition issued by VB under s.994 of the Companies Act 2006. VB succeeded in obtaining an order for its shares in BFCL to be bought out by Denaxe and Mr Oyston at a price of £31.27 million (“the Buy-out Order”). A large part of that sum related to concealed dividends paid by BFCL to Denaxe or Mr Oyston and his son, rather than the value of VB's shares.
Denaxe and Mr Oyston paid less than a third of the judgment sum. Following failed attempts at enforcement using third party debt orders and charging orders, VB applied for the appointment of the Receivers over specified assets of Denaxe and Mr Oyston. The purpose of appointing a receiver, it is agreed, was to facilitate the sale of the Club and the “footballing assets” (as described in the judgment of Marcus Smith J of 13 February 2019, acceding to the application) as a going concern.
It is clear that prior to the receivership application, which was made on 4 January 2019, and possibly as early as November 2018, VB had consulted the Receivers and they and the Receivers formed the view that the best realisation would be achieved by selling the shares in BFCL and the real property assets associated with the Club as a package, rather than selling the assets individually. That had been Mr Oyston's intention too, prior to 2019, as he made clear in his witness statement dated 28 May 2019 in opposition to the Sanction Application.
The Receivers had substantial prior experience with high profile football clubs that had become insolvent and they had previously been appointed as administrators of several clubs.
The Order appointing the Receivers was sealed on 20 February 2019. By that time, they had already done substantial work to prepare for the conduct of the receivership. After their appointment, they instructed Lambert Smith Hampton (“LSH”) on about 25 February 2019 to give valuation advice, with a view to the marketing of the footballing assets. The Receivers instructed Hilco on about 27 March 2019 to advise how the sale of the footballing assets could best be advertised to attract potential buyers and conducted. The marketing process for the sale of the Club as a package of assets formally started on 9 April 2019, before LSH had reported on value (as they did on 26 April 2019).
Denaxe now alleges that the Receivers had in mind from the outset a single sale of the Club and the assets needed for its continuation as a going concern. That is not substantially in dispute, at least for the purposes of the Receivers' application....
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