UTB LLC v Sheffield United Ltd

JurisdictionEngland & Wales
JudgeSir Geoffrey Vos
Judgment Date09 April 2019
Neutral Citation[2019] EWHC 914 (Ch)
Docket NumberCase No: BL-2018-000281
CourtChancery Division
Date09 April 2019
Between:
UTB LLC
Claimant
and
Sheffield United Limited
Defendant
HRH Prince Abdullah Bin Mosaad Bin Abuldaziz AL Saud
Third Party
Yusuf Giansiracusa
Fourth Party

And in the Matters of Blades Leisure Limited

And in the Matter of S.994 of the Companies Act 2006

Between:
Sheffield United Limited
Petioner/Applicant
and
(1) UTB LLC
(2) UTB 2018 LLC
(3) HRH Prince Abdullah Bin Mosaad Bin Abuldaziz AL Saud
(4) Yusuf Giansiracusa
(5) HRH Prince Musa'ad Bin Khalid M Bin Abdulrahaman AL Saud
(6) Blades Leisure Limited
Respondents

[2019] EWHC 914 (Ch)

Before:

Sir Geoffrey Vos, CHANCELLOR OF THE HIGH COURT

Case No: BL-2018-000281

Claim No: CR-2018-003995

IN THE HIGH COURT OF JUSTICE

IN THE BUSINESS AND PROPERTY

COURTS OF ENGLAND WALES

BUSINESS LIST (ChD)

Royal Courts of Justice

7 Rolls Building, Fetter Lane

London, EC4A 1NL

Mr Paul Downes QC, Ms Emily Saunderson and Mr Luke Krsljanin (instructed by Shepherd & Wedderburn LLP) for the Sheffield United Limited

Mr Robert Weekes (instructed by Jones Day) for UTB (as defined below)

Hearing dates: 3 rd and 4 th April 2019

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.

Sir Geoffrey Vos, Chancellor of the High Court

Sir Geoffrey Vos, Chancellor of the High Court:

Introduction

1

This judgment concerns three issues. The first issue relates to the circumstances in which the court should apply the provisions of the new Practice Direction 51U (“PD51U”) relating to the “Disclosure Pilot for the Business and Property Courts” (the “Pilot”).

2

The second issue before the court concerns the amendments that Sheffield United Limited (“SUL”) should be permitted to make to its Defence and Counterclaim in what has been described as the “Main Action”, and to its Petition in the claim it makes under section 994 of the Companies Act 2006.

3

The third and most contentious issue is the question of whether, and in respect of which documents, the UTB parties (namely UTB LLC, UTB 2018 LLC, Prince Abdullah and Mr Yusuf Giansiracusa) should be permitted to assert legal professional privilege. This issue also raises some more minor further applications for extended disclosure.

4

I heard argument on the pre-trial review in this case on the 3 rd and 4 th April 2019. I reserved judgment on these three issues for just a few days, because both parties were concerned to hold their expedited trial date. The 25-day trial of the Main Action, an additional claim for conspiracy brought by SUL against the UTB parties, and the Petition is fixed to start before Fancourt J in the first part of May 2019.

5

The matter was listed before me rather than the trial judge, because SUL was asking the court to look at some of the privileged documents in order to determine its application, and it was not thought appropriate that the trial judge should undertake that exercise. I should say at once that the suggestion that I should look at any of the allegedly privileged material was initially resisted by Mr Robert Weekes, counsel for the UTB parties. Ultimately, however, at lunch-time on 4 th April 2019, under what might be described as some persuasion from the court, exercised avowedly in order to cut the gordian knot, the UTB parties relented and agreed that I should look at two redacted email exchanges of 10 th and 15 th November 2017 respectively (the “Redacted Documents”) so that I could judge for myself whether the privilege asserted was justified or not. I will return to that issue in due course.

6

This dispute has generated thousands of pages of inter-solicitor correspondence, and a dispiriting volume of mistrust. As I said repeatedly in the course of argument, the parties will need to keep proportionality in the forefront of their minds as matters proceed. The Business and Property Courts are indeed willing and able to resolve the most complex of commercial disputes. But the parties must focus on the issues that require resolution, and not allow themselves to take every point, however small, nor to permit their mistrust of their opponents to become the driving force behind the litigation. There is, I am afraid, a danger of that here. The court expects the parties to cooperate to allow it to achieve a just, expeditious and proportionate resolution of the real commercial issues that separate them. Court proceedings are not a stage for a grudge match.

7

It is vitally important that the central legal and factual issues that divide the parties are identified and agreed, so that the trial judge is able to focus on what he has actually to resolve, and can do so justly and openly despite the unfortunate hostility that seems to have developed.

Factual background

8

The facts of this dispute can best be taken from paragraphs 1–16 of Fancourt J's judgment of 29 th June 2018 at [2018] EWHC 1663 (Ch), which are reproduced below. I will adopt all his abbreviations, save that I will use “SUL” rather than “Sheffield” to refer to Mr Paul Downes QC's client.

9

Fancourt J described the background as follows:-

“1. This is my judgment on an application for interim injunctive relief made by Sheffield United Ltd (“Sheffield”) against UTB LLC (“UTB”). Sheffield and UTB each own (or, in the case of UTB, own or control) 50% of the shares in Blades Leisure Ltd (“Blades”). Blades owns all the shares in The Sheffield United Football Club Ltd (“FC”), which in turn runs the football club of that name.

2. Sheffield is a subsidiary company in the Scarborough Group of Companies, owned and controlled by Kevin McCabe and his family. Sheffield owns the football ground at Bramall Lane and the football club's academy (“the Properties”). Mr McCabe has long been associated with the football club and invested much money in it.

3. On 30 August 2013, Mr McCabe and his companies reached agreement with Prince Abdullah Bin Mosaad Bin Abdulaziz Al Saud (“Prince Abdullah”) for him, through UTB, to invest £10 million in the football club, by subscribing for 50% of the shares in Blades at that premium.

4. The agreement is in the form of an Investment and Shareholders' Agreement (“the ISA”). Voting and board control of Blades and its subsidiary, FC, is evenly shared between the two shareholders. Neither has a casting vote. Clause 10 of the ISA specifically provides for what happens if, on any important business matter, there is deadlock in the affairs of Blades. Failing reasonable attempts in good faith by the principals to resolve the matter, either shareholder may serve notice on the other offering to buy out the other's shareholding at a specified price. The offeree may either accept and sell or serve a counternotice to buy the offeror's shareholding at the same price, in which case the offeror is bound to sell.

5. Clause 6.1 of the ISA recognises that Blades may require further finance to fund its and FC's projected cash requirements. The shareholders are given the right, once in any six-month period, to subscribe for extra shares at a premium calculated on a basis that effectively valued Blades at about £20 million. That right is subject to pre-emption provisions giving the other shareholder the right to subscribe for an equal number of new shares.

6. By clause 9 of the ISA, Blades undertook to each of its shareholders, and the shareholders agreed so far as they could, to procure that Blades did certain things. These included, at clause 9.1.5 that Blades and its subsidiaries should be properly managed and comply with the law and the regulations of the Football Association and the Football League, and at clause 9.1.10 that none of the matters listed in schedule 4 to the ISA should occur without the consent of a majority (in some cases a super majority) of shareholder votes. These included the making of any loan and the borrowing of any money in excess of £25,000 in aggregate.

7. Clause 9.1.12 of the ISA provides that if any shareholder acquires more than 75% of the entire issued share capital of Blades, FC is obliged to exercise its property call options (“the FC Options”). The important one of these entitles FC to purchase from Sheffield the Properties at their market value with vacant possession. The Properties are in fact let to FC on long leases at a reduced rent, so exercise of the options would confer a very substantial financial benefit on Sheffield.

8. Clause 11 of the ISA gives each shareholder the right, during specified option periods, to make an offer for the other shareholder's shares, in similar terms and with the same consequences as under the clause 10 provisions.

9. In recent years, the fortunes of the football club have improved, after some bad years previously. It was promoted last season to the Championship Division of the Football League and finished its first season there in a creditable 10th place. It has ambitions to regain its place in the Premier League, which – it goes without saying – would make an enormous difference to its profitability. As it stands, FC is consistently loss making and depends for its survival on financial subsidy from Blades. Blades in turn depends on large contributions from its shareholders.

10. By the end of 2017, relations between Prince Abdullah and Mr McCabe had deteriorated to the point that Mr McCabe wanted to put an end to the joint venture basis on which Blades operated and was even willing to give up his involvement in the football club. Sheffield therefore served notice on UTB on 29 December 2017 pursuant to clause 11 of the ISA, offering to buy UTB's shares for £5m. Mr McCabe knew that that was a low price. He expected UTB to serve a counternotice to buy Sheffield's shareholding at the same price. The low price for its own shares would be compensated, Mr McCabe believed, by the fact that UTB and Sheffield would thereupon become bound to cause FC to exercise the...

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