Hawkes v Cuddy and Others (Nos 1 & 2)

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr. Justice Lewison:,Neath Rugby Limited
Judgment Date13 Dec 2007
Neutral Citation[2007] EWHC 2999 (Ch),[2007] EWHC 1789 (Ch)
Docket NumberCase No: 7BS30322/7BS30444,Claim Nos. 7BS30321/7BS30444

[2007] EWHC 1789 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

BRISTOL DISTRICT REGISTRY

Before

His Honour Judge Havelock-Allan QC

In the Matter of Part Xviii of the Companies Act 1985

And in the Matter of Neath Rugby Limited

Claim Nos. 7BS30321/7BS30444

Between:
Frederick Geraint Hawkes
Petitioner
and
(1) Simone Francesca Cuddy
(2) Michael Cuddy
(3) Neath Rugby Limited
Respondents
Between
Simone Francesca Cuddy
Cross-Petitioner
and
(1) Frederick Geraint Hawkes
(2) Neath Rugby Limited
Respondents

Stephen Davies QC and Hugh Sims (instructed by Morgan Cole) for Mr Hawkes

Robin Hollington QC and Hilary Stonefrost (instructed by Eversheds) for Mr and Mrs Cuddy

Richard Ascroft (instructed by M & A Solicitors LLP) for Neath Rugby Limited

Christopher Parker (instructed by Morgan LaRoche) for Neath-Swansea Ospreys Limited

Hearing dates: 26 th -28 th June, 3 rd-4 th July 2007

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.

HIS HONOUR JUDGE HAVELOCK-ALLAN Q.C.

Introduction

1

This judgment determines certain applications brought in proceedings begun by a petition under section 459 of the Companies Act 1985. The petition concerns Neath Rugby Limited. Neath Rugby Limited (“Neath”) is the company which owns and manages Neath Rugby Football Club (“Neath RFC” or “the Club”).

2

The Petition was issued on 4 th May 2007. At the same time an application was issued on behalf of the petitioner for summary judgment in respect of part of the relief claimed in the petition. The petitioner is Frederick Geraint Hawkes (“Mr Hawkes”), who is the owner and registered holder of one of the two issued shares in Neath. The first respondent to the petition is Simone Cuddy (“Mrs Cuddy”). She is the registered holder of the other issued share. Mrs Cuddy claims to hold the share as trustee for her husband, Michael Cuddy (“Mr Cuddy”), who is the second respondent to the petition. Mr Hawkes and Mrs Cuddy were, at the date the petition was issued, the only directors of Neath. Neath is the third respondent.

3

The first hearing of the petition and of the application for summary judgment was on 23 rd May. On that occasion, directions were given for an early hearing of the summary judgment application and for an expedited trial of the petition. One of the claims in the petition on which summary judgment was sought was for a mandatory injunction removing Mrs Cuddy as a director of Neath. In the event Mrs Cuddy agreed on 23 rd May to step down temporarily as a director. Her place has been taken by Eric Evans, a Cardiff solicitor who is interested in rugby and, by reason of his independence, is acceptable to Mr Hawkes and to Mr and Mrs Cuddy (“the Cuddys”).

4

Since the hearing on 23 rd May, Mrs Cuddy has issued a cross-petition and an application to strike out the whole, or parts of, the petition. The cross-petition was issued on 12 th June against Mr Hawkes and against Neath as respondents. Mr Hawkes responded on 13 th June with an application to strike out the principal claim for relief in the cross-petition. Neath followed suit on 19 th June by issuing a similar application to strike-out the principal claim for relief in the cross-petition.

5

The applications with which this judgment is concerned were heard in the following order: (1) the Cuddys' application to strike-out the petition in whole or in part; (2) Mr Hawkes' application for summary judgment in respect of part of the relief sought in the petition (which I shall refer to for convenience as “the Insolvency Act relief”), and (3) Mr Hawkes' application to strike-out the principal claim for relief in the cross-petition (which was referred to at the hearing as the “de-merger” proposal).

6

The hearing lasted a full 5 days. Mr Hawkes was represented by Mr Stephen Davies QC, the Cuddys by Mr Robin Hollington QC and Neath by Mr Richard Ascroft. A direction was given on 23 rd May that the petition should be served on Neath-Swansea Ospreys Limited, a company half owned by Neath and half owned by Swansea Rugby Football Club Limited (“Swansea”). Mr Christopher Parker appeared on behalf of Neath-Swansea Ospreys Limited and argued against the summary judgment application.

Neath Rugby Limited
7

Neath was incorporated on 9 th May 2003 under the name of Neath Swansea Rugby Limited. It changed its name to Neath Rugby Limited on 4 th August 2003. Although the objects of Neath in the memorandum include the carrying on of business as a general commercial company, Neath was created in order to acquire ownership and management of Neath RFC as from the start of the 2003/2004 Welsh rugby season.

8

Neath RFC needs no introduction to any fan of Welsh Rugby. It has come top of the Welsh Premiership in the last 3 seasons – a feat not matched by any club previously.

9

The current dispute is essentially one between the present co-owners of the Club, Mr Hawkes and Mr Cuddy. It has generated a great deal of publicity in the Welsh sporting press, not least for the allegations made by Mr Hawkes against Mr Cuddy and for the counter-allegations made by Mr Cuddy against Mr Hawkes.

10

It is important to remember that, save to the extent found in this judgment, they remain allegations which have not yet been established and which will not be established until the trial.

11

I shall begin by sketching in those aspects of the background which are either not in dispute, or which in my judgment are not open to serious contradiction.

The Club before 2003

12

The Club was founded in 1871 and has played at its ground (called “The Gnoll”) for over 130 years. Until 1995 it was a traditional members' club and the players were amateur. Welsh rugby turned professional in the 1995/96 season, but Neath RFC continued as a members' club, run by a committee, until 1998. The committee members were unpaid volunteers from all walks of life. As professional status began attracting money to the game, the existing members' club and committee structure proved unequal to the task of managing what had become a sporting business enterprise. The Club ran up substantial debts. By 1998 these had reached approximately £600,000.

13

Mr Cuddy, like Mr Hawkes, is a successful businessman in South Wales. With his brother he runs a company called Cuddy Demolition & Dismantling Services Limited. Mr Cuddy was a Neath RFC supporter in the 1990s, and eventually became a member of the Club's committee. In 1998 a consortium, of which he was a member, made an offer to the committee to acquire the assets and liabilities of the Club. The committee rejected the offer and turned to the Welsh Rugby Union (“WRU”) for assistance.

14

The WRU agreed to help. It established a private company called Gowerpark Limited on 26 th May 1998 to undertake the day-to-day running of the Club. Gowerpark was wholly owned and controlled by the WRU. The WRU appointed its own officers as directors, and agreed to appoint as directors certain Club supporters who had been members of the old committee. One of these was Mr Cuddy. He applied to become a director of Gowerpark from the outset: but was unsuccessful. He eventually became a director on 30 th September 2001.

15

Although Neath RFC did well on the pitch, it did less well financially. It ran at a loss and Gowerpark was not able to eliminate the liabilities it had inherited from the old committee. The Club's financial prospects were not improved by the reorganisation of Welsh Rugby which the WRU proposed for the start of the 2003/2004 season.

The re-organisation of Welsh Rugby in 2003

16

Until the season of 2002/2003 there were nine local clubs playing in the Welsh Premiership. For the following season the WRU announced that it wanted to establish five regional professional teams owned and supported by the local clubs. This would create a new professional league. The local clubs would revert to semi-professional status, borrowing professional players from the regional clubs and feeding the regional clubs with new players. The regional clubs would be bigger and better financed and more able to compete against other clubs outside Wales and at European level. Local clubs would continue to play against other local clubs in the Welsh leagues: but would not be entitled to play at regional level or to advance beyond the Premiership.

17

With the establishing of regional teams, the WRU proposed to re-organise its funding of Welsh rugby. During the 2002/2003 season, the nine Premiership clubs had received grants of approximately £8–9 million from the WRU. Gowerpark itself received about £1 million on behalf of Neath RFC. The WRU decided that in future its money would go to the regional teams, and that it would be for the new companies managing the regional teams to decide how much of the grant to give to the Premiership clubs. As a result, in the 2003/2004 season, Neath RFC's grant fell to around £50,000.

18

The WRU stipulated that the new regional sides could only be owned by an existing club. It directed the nine premiership clubs to decide who was going to establish which regional team. The five regional teams created were Cardiff Blues, Llanelli Scarlets, Neath-Swansea Ospreys, Newport Gwent Dragons and Celtic Warriors. Neath-Swansea Ospreys was the creation of Neath RFC and Swansea. Although geographically adjacent, Neath RFC and Swansea had a long rivalry and were not natural bedfellows. Mr Cuddy was involved in discussions with Bridgend RFC before eventually agreement was reached with Swansea. Bridgend RFC went on to link up with Pontypridd RFC in establishing the Celtic Warriors. But the Celtic Warriors did not survive the 2003/2004 season. The company owning Celtic Warriors was wound up in June 2004, leaving only four regional sides, which is the position today. On the demise of...

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