Wrexham Association Football Club v Crucialmove Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Peter Gibson,Lord Justice Dyson,President of the Queen's Bench Division |
| Judgment Date | 14 March 2006 |
| Neutral Citation | [2006] EWCA Civ 237 |
| Docket Number | Case No: A2/2005/2458 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 March 2006 |
[2006] EWCA Civ 237
President of The Queen's Bench Division
Lord Justice Dyson and
Sir Peter Gibson
Case No: A2/2005/2458
IN THE SUPREME COURT OF JUDICAT
COURT OF APPEAL (CIVIL DIVISI
ON APPEAL FROM CHANCERY DIVIS
BIRMINGHAM DISTRICT REGIS
H.H.JUDGE NORRIS QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Clive Freedman QC and Patrick Lawrence QC (instructed by MessrsBerrymans Lace Mawyer) for the appellant
John Randall QC and Alistair Wyvill (instructed by Messrs Turner Parkinson) for the respondent
This is an appeal by the Defendant, Crucialmove Ltd ("CL") , from the order made on 4 th November 2005 by His Honour Judge Norris QC, sitting as a judge of the Chancery Division in the Birmingham District Registry. By that order the Judge, on an application for summary judgment by the Claimant, Wrexham Association Football Club ("the Club") , declared that CL held certain property on trust for the Club subject to a charge in CL's favour.
The Judge refused permission to appeal. The application for permission was renewed in this court and Jonathan Parker LJ granted permission on the papers. In reaching his conclusion the Judge had found a want of good faith on the part of Alexander David Hamilton, who owns all of the shares and is the sole director of CL. The Lord Justice thought it arguable that on an application for summary judgment the Judge should not have made that finding.
The facts
Wrexham Football Club is one of the oldest football clubs in the country. It was established in 1872 and incorporated as the Club in 1912. For a number of years it has been in the lower divisions of the Football League. Currently it is in Division 2 of the Coca-Cola League. It has had financial difficulties for some time and has been in administration since 3 rd December 2004. Its most important asset has been its ground, known as the Racecourse Ground ("the Ground") . Immediately before the events in 2002 which are at the heart of the present proceedings, the freehold of the ground ("the Freehold") was owned by Marston Thomas & Evershed plc ("the Brewery") subject to a lease ("the First Lease") dated 22 nd July 1998 and granted by the Brewery to the Club for a term of 125 years at a peppercorn rent. For the First Lease the Club paid the Brewery a premium of £750,000.
Mr Hamilton is a former solicitor who practised for 24 years. He has been involved in property development through a number of companies. Mark Guterman is also a property developer. Prior to 7 th February 2002 Mr Guterman and Mr Hamilton had collaborated on three property deals. The pattern was that Mr Guterman would find the development projects and that Mr Hamilton would provide the funding. On 7 th February 2002 Mr Guterman and Mr Hamilton entered into a Joint Venture Agreement ("JVA") . By it Mr Hamilton agreed to lend Mr Guterman £180,000. In the event of any joint venture involving Mr Hamilton or his associates, Mr Hamilton was to receive 60% and Mr Guterman 40% of the net profits.
One project which Mr Guterman wished to pursue and to which he introduced Mr Hamilton in mid-February 2002, when another business associate pulled out "fearing high adverse publicity", was what was known to them as "the Wrexham project". The project objective was said to be "to relocate the football club to a new stadium in Wrexham and redeveloping the existing stadium site for commercial retail purposes" (Mr Hamilton's second witness statement paragraph 24) . Mr Hamilton continued:
"From the upfront financial commitment of an institutional investment buyer there would be ample funds to construct the new stadium, and pay off all the historic club debt and thereafter the project should in theory provide a significant return to the developer."
For the project to be carried through to completion two steps were perceived as needing to be taken: obtaining control of the Club and obtaining ownership of the Ground.
Of the 9,980 issued shares in the Club, 7,868 shares (or 78% of the issued share capital) were held by the then director and chairman, Pryce Griffiths, who was willing to sell those shares. The Club needed financial aid urgently and Mr Hamilton was prepared to lend and did lend the Club money from the end of February onwards. By 26 th March 2002 Mr Pryce Griffiths and Mr Hamilton had agreed the terms of the sale of the shares. That day the Club's Board approved the transfer to "Mr Guterman of Memorvale" Ltd of the 7,868 shares. Memorvale Ltd ("Memorvale") , a company wholly owned by Broadhill Properties Ltd ("Broadhill") which in turn was wholly owned by Mr Hamilton, was to be the purchaser. Mr Guterman, who conducted the negotiations, was a director of Memorvale. The next day Memorvale entered into an agreement to purchase the 7,868 shares for £50,000 plus a further deferred consideration of £500,000, which became payable in certain events, one of which was the sale or development of the ground. Our attention was drawn by CL to this provision as indicative of the openness with which Mr Hamilton furthered the Wrexham project. It does nothing of the sort. It is hardly likely that the provision was inserted at Mr Hamilton's insistence and it must have been obvious that a 7.6 acre site on the edge of Wrexham town centre might have development potential. Still less can the approval by the Board of the sale of the shares be taken to be the approval of the Wrexham project nor can any inference be drawn that disclosure of that project or of Mr Guterman's and Mr Hamilton's interest in it was made to the Board, as the Judge correctly held.
In 2002 David Rhodes was the secretary and managing director of the Club. In proceedings ("the Guterman proceedings") commenced in 2004 in the Chancery Division by Mr Guterman against Mr Hamilton and three of his companies including CL, he has made a lengthy witness statement in which he says (in paragraph 15) that, following completion of the share sale, Mr Guterman took up the office of an executive director and chairman of the Club, although not officially appointed. His formal appointment did not take place until the Board meeting on 10 th June 2002 when Mr Pryce Griffiths resigned.
On 27 th March 2002 Mr Guterman and Mr Hamilton varied the JVA by a letter written by Mr Hamilton to Mr Guterman under the heading "Single variation of agreement 7 th February 2002 Wrexham Football Club Ltd Development at Stadium". In that letter Mr Hamilton confirmed his agreement with Mr Guterman that subject to Mr Hamilton funding the development up to £250,000 "the division or distribution of net profit … will be equal fifty per cent each", with a division in accordance with the JVA if he had to put in more than £250,000. The letter went on to explain that the variation was in recognition by Mr Hamilton of Mr Guterman's efforts and that it was because of Mr Guterman's footballing connections.
On 17 th April 2002 Mr Guterman and a company of his (together called "MSG") on the one hand and Mr Hamilton and Broadhill (together called "ADH") on the other entered into Heads of Agreement written in manuscript by Mr Hamilton. It was recited that MSG and ADH were jointly participating in property development ventures in accordance with joint venture agreements and that ADH had agreed to pay £100,000 to MSG upon the terms then following. There then followed three terms under the heading " Wrexham Football Club". The first term was to restore "the profit shares and/or distribution of profit arising out of development in Wrexham or connected in any way with the … Club" to the 60/40 ratio in the JVA. The second term was that if a particular project in Rotherham did not proceed, the percentage division of profit on the Wrexham project was to be amended to 75% to ADH and 25% to MSG. In the event those were the profit shares which applied. The third term ("clause Aiii") was in this form:
"Aiii. The management and control of the Football Club is to be on an equal control basis with main and sole objective to realise the maximum potential gain from the property assets of the Football Club for the benefit of ADH and MSG".
The Heads of Agreement were expressed to cancel and extinguish the variation agreement of 27 th March 2002.
Negotations to purchase the Freehold from the Brewery commenced in April 2002 with the help of Bolton Birch, chartered surveyors. It was the deliberate policy of Mr Guterman and Mr Hamilton that the purchase was to be in the name of the Club, although Mr Hamilton was to provide the purchase price. Mr Hamilton or a company of his was to be the beneficial owner. In paragraph 10 of his first witness statement Mr Hamilton said this:
"[Mr Guterman] suggested that the Football Club could approach the Brewery without informing the seller of the true purpose. I certainly accepted that it would be stupid to inform the seller of the true long term objectives and agreed he was not obliged to do so particularly when seeking to achieve Title assembly of different land titles and he should adopt the standard property developer procedure of keeping his true objectives to himself …. [Mr Guterman] wanted the Club to approach the Brewery directly, whilst I suggested approaching the Brewery directly as a major shareholder. I acceded to his views as he was in the driving seat".
In paragraph 12 Mr Hamilton said:
"[Mr Guterman] insisted that the Football Club should continue to front the acquisition on my behalf 'to avoid complications' as he did not want the introduction of a different purchaser to cause any possible revision of thinking by the Brewery".
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