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Paul Cooper v VB Football Assests (Petitioner) & Blackpool Football Club (2019)

Summary

Receivers by way of equitable execution were in an analogous position to trustees and administrators: they should seek the court's approval where they contemplated making a momentous decision. In the instant case, the court approved the proposed sale by receivers of Blackpool Football Club.

Facts

The applicant receivers sought the court's approval to a planned sale of the fourth respondent, Blackpool Football Club Ltd (the club).

Most of the shares in the club were owned by the first respondent company. The second respondent was the former majority owner of the club; he owned 97.2% of the shares in the first respondent. The third respondent was his son. In November 2017, the court gave judgment on an unfair-prejudice petition brought by the petitioner under the Companies Act 2006 s.994. The petitioner owned some 20% of the shareholding in the club. The court ordered the first to third respondents to purchase the petitioner's shares for £31,270,000. However, the respondents had paid only part of that sum, leaving over £25 million outstanding. Various efforts at enforcement had been made, culminating in the appointment of the applicants as receivers by way of equitable execution. The receivers were appointed over the "footballing assets", being the assets related to the club. It had always been felt that a better price could be obtained by selling the club as a going concern rather than by selling the receivership assets separately in an asset sale. The sales process conducted by the receivers had produced three bids, and the receivers wished to proceed with one of them. The matter was urgent, partly because the club was in need of significant funds. The proposed purchaser wished to acquire all the shares in the club, including those held by the petitioner. The petitioner was content for the transaction to proceed, even though there would still be a very considerable shortfall in the moneys owing to it by the respondents. The entire consideration payable by the proposed purchaser would go to the receivers, for them to deal with in accordance with their duties.

The issues were: whether the receivers needed the court's approval to proceed with the sale; whether the order of November 2017 should be varied, given the possibility that the second respondent would at some future date offer to pay whatever balance was due from the respondents to the petitioner and then demand the petitioner's shares in return; and whether the sale should be approved.

Held

Need for court's approval - Receivers by way of equitable execution were in an analogous position to trustees and administrators. There were some transactions conducted by receivers by way of equitable execution that were of sufficient importance to require the court appointing such receivers to look at the transaction to ensure that it was in the interests of all concerned. The decision and question of whether, and on what terms, to sell the club was a momentous one, being one that was enormously important both for the second respondent and for the petitioner. The receivers had therefore acted entirely appropriately in making the instant application, Nortel Group, Re [2016] EWHC 2769 (Ch) applied (see paras 43, 45-46 of judgment).

Variation of earlier court order - CPR r.3.1(7) could be used to vary the interlocutory aspects of the order made in November 2017. The fact that the second respondent's non-compliance with that order could thwart the enforcement measures that had since been taken as a direct result of that non-compliance indicated that varying the order was appropriate. It also gave rise to the material change in circumstances that had to exist to justify revisiting the order. Both the petitioner and the second respondent would benefit from a variation of the order. The petitioner would benefit in that the transaction would go ahead and the judgment debt would be reduced. The second respondent would benefit in receiving a consideration for a minority shareholding that he was only getting because someone wanted to acquire all the shares in the club. The order of November 2017 would be varied so that the sale of the petitioner's shares by the petitioner to the proposed purchaser, and payment by the latter of the consideration for the club to the receivers, with the petitioner itself receiving no payment for its shares, should be deemed to constitute the purchase of the petitioner's shares by the respondents, and also the sale by the respondents of the petitioner's shares to the proposed purchaser (paras 64, 66-67, 69).

Whether sale should be approved - The proposed sale was a proper one that should be sanctioned. The price that had been obtained had been achieved after a competitive process. The price was a reasonable one and the proposed purchaser had produced the best bid. Even without the urgency of the sale, there was no proper point in waiting and seeing whether something better could be achieved. The petitioner had been kept out of its money for quite long enough and there was, for that reason alone, a degree of urgency in effecting the sale. But, over and above that, there was the overriding urgency that unless the sale took place and a further injection of cash by the proposed purchaser occurred, the club would be facing solvency difficulties. Waiting and seeing would not just achieve nothing: it would positively hinder the club's future (paras 73-74).

Judgment accordingly

Ch D
Marcus Smith J
Judgment date
5 June 2019
References
[2019] 6 WLUK 366 : [2019] 4 WLR 93 : LTL 25/6/2019