LNOC Ltd v Watford Association Football Club Ltd
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Mackie,Judge Mackie QC |
| Judgment Date | 21 November 2013 |
| Neutral Citation | [2013] EWHC 3615 (Comm) |
| Docket Number | Case No: 2012 FOLIO 1264 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 21 November 2013 |
[2013] EWHC 3615 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
His Honour Judge Mackie QC
Case No: 2012 FOLIO 1264
Jonathan Davies-Jones QC and Benjamin Coffer (instructed by Holman Fenwick Willan LLP) for the Claimant
Nicholas Randall QC (instructed by SA Law) for the Defendant
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.
Hearing dates: 7 to 10 October 2013
His Honour Judge Mackie QC
The Claimant ("LNOC") lender seeks some £900,000 plus interest, the amount not repaid under two loans to the Defendant football club ("the Club") which totalled £2.62 million. The two loans have in this case been called the Danny Graham Transaction and the Football League Transaction. The Club contends that it is not bound by the transactions because they were plainly not in its best interests and therefore Mr Bassini, the then de facto Managing Director and ultimate owner, had no authority to enter into them as LNOC knew or should have known. The Club contends that Mr Bassini lacked actual or apparent authority to enter into the transactions on its behalf. The Club counterclaims for the sums it has already paid back to LNOC. LNOC has an alternative claim in unjust enrichment.
The Parties
LNOC is a company with money to lend owned and run by Mr and Mrs Francis. It is a client of Mr Nigel Weiss whose companies Good for Sport Limited ('GFSL') and New Avenue Projects Limited ('NAPL') act as intermediaries in the provision of funding to football clubs, matching funders with clubs who require finance and implementing transactions by drafting documentation. Mr Weiss' companies are paid commission by the funders. Mr Weiss is a qualified solicitor who had a successful career with leading law firms giving advice in this area before starting his business.
The Club is a well known football club which, at the relevant time, was in the Championship and subject to the rules of The Football League ("The League") as set out in The Football League Regulations 2011–2012 ("The Regulations"). From May 2011 until June 2012, the Club was owned and controlled by Mr Laurence Bassini. The other directors of the Club at the relevant time are distinguished, Mr Graham Taylor, the former England manager, Mr David Fransen, a very successful businessman and Professor Stuart Timperley. The Board was small and the directors, other than Mr Bassini, non executive.
The evidence
At the trial the parties relied on twenty bundles of documents. I heard evidence from Mr Weiss for the Claimant and from Mr Fransen, Professor Timperley, Mr Craig (from the Football League) and Ms Wareham for the Defendant. There were unchallenged witness statements from Mr Francis of LNOC, Mr Wilson (on behalf of the Club's bondholders), Mr Taylor (the Club chairman until May 2012), Ms Ives and Mr Wastall. The evidence of Mr Weiss was challenged by Mr Randall QC for the Club and I deal with this later. The evidence of the other witnesses was challenged and corrected to some extent but it was accepted that they were all telling the truth. I set out the effect of what they said when summarising the facts.
Both sides invited the Court to draw inferences from the fact that the other had not called Mr Bassini or Mr Barrea to give evidence. Both sides had reasons for not doing so. LNOC's counsel pointed to the fact that at the FDC hearing, to which I refer later, the Club had not put to Mr Bassini in cross examination the allegations now being made in this case. Despite the authorities relied on for this point it is as I see it a distraction to consider what evidence there might have been and I should focus on what there is. The Club does however face the difficulty that it has the burden of showing that Mr Bassini did not honestly believe that the transactions were in the best interests of the Club. The Club could have made Mr Bassini a party to the action but chose not to do so. Mr Bassini was thus not involved in the trial. It would therefore be unfair for me to pass comment on his role except to the extent really necessary for my decision. Equally it would be wrong for this decision to be seen as some overall vindication of Mr Bassini's role in events.
Facts
The facts are complex but few are in dispute. The factual dispute (and, as Mr Randall QC for the Club sees it, this is what the case turns on) is essentially about the state of mind of Mr Bassini (who did not give evidence) and Mr Weiss (who did) at various times. I take some of the uncontroversial facts below from the skeleton of Mr Davies-Jones QC and Mr Coffer who appeared for LNOC.
Mr Bassini was the de facto managing director and beneficial owner of Watford F.C. Limited ('WFCL') which acquired the Club's holding company, Watford Leisure Plc ('Watford Leisure') which owned 96% of the Club's shares. He took over the running of the Club assisted by an associate Mr Angelo Barrea, a solicitor. Mr Barrea was a consultant to Mr Bassini without an official Club position but was effectively in charge of its day to day running. Witnesses acknowledged that his instructions were complied with as he was the voice of the owner. Mr Barrea had a Watford Association Football Club e-mail address and an office at the Club, and became a signatory on the Club's bank account. He attended board meetings and reported to the board.
As part of the negotiation of the take-over, Mr Bassini had undertaken to provide funding to the Club to cover its short-term cash flow requirements. It seems clear that the Club also needed other funding but how far the money was to be put up by Mr Bassini himself and how far, if at all, it was to be raised by the Club was apparently left vague.
The Club wished to carry out improvement work to its stadium, Vicarage Road, including completing the construction of the south west corner stand ("The Stand") which had been part-built. It is common ground that the development of the south west corner was seen as an important step, but not the only step, in the development of the Club.
Like some other clubs the Club had previously raised money by discounting or 'forward funding' future sums due it for transfer fees. In June 2011, the Club received a bid from Swansea City Football Club ('Swansea') for the transfer of striker Danny Graham for £3.5 million, payable in instalments. Mr Bassini and Mr Barrea asked Ms Katie Wareham, the Club's Head of Finance to explore the possibility of forward funding the Danny Graham transfer. Ms Wareham made enquiries of a number of possible brokers known to her but not of Mr Weiss. Mr Barrea contacted Mr Weiss and arranged to meet him at the Club on 8 July. The upshot is summarised in Mr Barrea's subsequent email—he was " looking to finance two projects at Watford, both to provide better infrastructure for the club. The most pressing is the south west corner stand which I would like to start by October; I am currently lining up the builders for this project and therefore need to move quickly." The estimated cost of the SW stand development was "circa £2.5 million".
Another meeting took place on 19 July 2011 between Mr Barrea and Mr Weiss who recalls that his partner Mark Wollner was present as was Mr Bassini. Mr Barrea informed Mr Weiss that the Club had recently sold Danny Graham to Swansea and asked if it would be possible to accelerate payment of a further £1 million which was owing to the Club. Mr Weiss proposed finding a funder to pay the Club £900,000 in exchange for which the Club would procure the issuing by Swansea of two promissory notes, each of £500,000, in discharge of the sums owing to the Club by Swansea. The Club would then assign the promissory notes to the funder, so that " in essence, the funder purchased the two endorsed promissory notes from the Club at a discount". On 5 August 2011 Mr Weiss told Mr Barrea that funds were available and proposed what would become the transactions in dispute—forward funding of the money owed to the Club by Swansea on the Danny Graham Transfer and a transaction financing payments due to the Club from the Football League .
Before proceeding, Mr Weiss asked the Club to sign and return a non-disclosure agreement. This was returned on 22 August 2011, signed by Mr Barrea as " a consultant duly authorised to bind the club on behalf of L. Bassini, a director" and witnessed by Michelle Ives, the Club's Football Secretary.
The mandate for the Danny Graham Transaction was signed on 24 August and sent to Mr Weiss that day. The following day, a term sheet was drawn up and provided to Mr Barrea who had asked Mr Wollner to liaise directly with Swansea in relation to the Danny Graham Transaction. Mr Weiss therefore e-mailed Swansea asking them to issue the promissory notes to the Club. On 26 August 2011, Mr Weiss confirmed to Mr Barrea that he had spoken to Swansea, and requested again that Mr Barrea provide "your authority to bind the Club". He also provided the wording for a mandate for the Football League Transaction.
In response to Mr Weiss' requests for evidence of his authority, Mr Bassini provided a signed statement in the following terms: " I, Laurence Bassini owner and director of Watford FC Limited, Watford Association Football Club and Watford Leisure Plc hereby confirm that the clubs advisor and solicitors Angelo Barrea has authority to bind the aforementioned clubs.". On 6 September 2011, Mr Barrea signed a mandate for the Football League Transaction and a revised version of the term sheet for the Danny Graham Transaction (reflecting changes to the arrangement fee...
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