SeasideEssexXile
Vital Football Legend
An important High Court decision which boosts receivers’ immunity against subsequent claims surrounding their conduct
United Kingdom April 28 2022
This month’s High Court decision of Mr Justice Fancourt in Denaxe Limited v Cooper & Anor [2022] EWHC 764 (Ch) (06 April 2022), brings the final curtain down on the saga surrounding the relinquishment by Mr Owen Oyston of his ownership of Blackpool Football Club. Of much wider significance, the decision (in which Martin Jensen, partner at Beale & Co, acted for the successful receiver defendants in striking out the claimant’s claim for damages for breach of duty), provides welcome clarification for court appointed receivers as to the extent of immunity acquired against subsequent claims surrounding their conduct in office where their proposed strategy has received prior approval from the court.
Background
The case is notable in that it involved a challenge to the terms on which court appointed receivers sold the football club where the terms of that sale had already been sanctioned by the court prior to the deal going through.
Whilst the dispute concerned the sale of the club by the receivers back in 2019, its genesis was Blackpool’s single season playing in the Premier League in 2010-2011. This moment at the pinnacle of English football, albeit brief, nevertheless brought considerable riches to the club both in terms of massively increased revenue in its promotion year and also in respect of substantial “parachute payments” which it received in the period following its swift relegation. However, in 2017, a significant minority shareholder in the club, VB Football Assets (VBFA), was successful in its petition under s.994 of the Companies Act 2006 with the court determining that it had been unfairly prejudiced by Mr Owen Oyston and his son Karl Oyston illegitimately stripping the club of its promotion windfall by paying out substantial sums to themselves/companies in their control by way of concealed dividends. Mr Oyston and his company Denaxe Limited (formerly Blackpool Football Club (Properties) Limited were ordered to buy back VBFA’s shareholding for a sum in excess of £31million.
Most of the judgment debt remained unsatisfied and conventional enforcement methods proved ineffective. Accordingly, in early 2019, following an application by VBFA, the court appointed, as joint receivers by way of equitable execution, Mr Paul Cooper and Mr David Rubin – both highly experienced in dealing with high profile football clubs – over various assets of Mr Oyston and Denaxe by which his controlling shareholding in the club was held. These assets included, among others, the majority shareholding in the club, its Bloomfield Road stadium, and its training ground. The purpose of the receivers’ appointment was to effect a sale of the club and related assets as a going concern in order to discharge the judgment debt.
Despite various attempts to obstruct and frustrate a sale, the receivers successfully secured a deal for the club’s sale in June 2019 for over £8.2 million and in the process averted Blackpool’s risk of relegation the following season. Significantly, before completing the deal, they successfully applied for the court’s approval of the transaction.
The claim against the receivers
Following their subsequent discharge from office, the receivers were promptly met with High Court proceedings from Mr Oyston’s company Denaxe in which it was alleged that they had undersold the club and related assets by some £80 million. The primary case evolved during the course of proceedings into an assertion that the receivers’ duty to secure the best price for these assets was by way of separate asset sale; Blackpool Football Club ought to have been put into liquidation and Bloomfield Road sold for redevelopment.
The receivers applied to strike out the claim on various grounds; primarily because they had immunity against it by virtue of the court’s prior approval, and because the proceedings were abusive in circumstances where the claimant resolved not to challenge the strategy at the time the court approved it.
Immunity
On the issue of immunity, the receivers’ case followed on from the judgment of Marcus Smith J in June 2019 in which he approved the club’s sale. On that occasion, the judge proceeded by analogy with cases involving trustees and administrators (following the line of authorities including Public Trustee v Cooper [2001] WTLR 901, a case concerning trustees, and Re Nortel Networks UK Ltd [2016] EWHC 2769 which extended the principles applicable to trustees to administrators) in finding that it was entirely appropriate for the court upon application to scrutinise and, in appropriate circumstances, approve a receiver’s proposed course of action where it involves a “momentous” decision for the beneficiaries. The court went on to find both that the decision regarding the sale was sufficiently momentous that it could entertain the application, and that the receivers had devised and implemented a sufficiently rigorous marketing and sales strategy of the club and related assets that the proposed sale ought to be sanctioned.
The court was not on that occasion required to determine the issue of whether or not the effect of its approval of the transaction would confer immunity on the receivers (as would be the consequence in the context of trustees and administrators) in the event of any subsequent complaint regarding the terms of the sale, the judge merely observing that such immunity would appear logically to flow from the analogy drawn.
Accordingly, the receivers contended in their strike out application that immunity from the undersale logically followed the court’s prior approval of the terms of the very sale which the claimant was seeking to challenge.
Mr Justice Fancourt readily accepted that immunity for the receivers did result from the court’s prior approval of the sale of the club in light of Marcus Smith J earlier finding that the position of a receiver by way of equitable execution was analogous with that of a trustee or administrator seeking the court’s directions. He rejected the claimant’s argument that the earlier cases concerning court approval of trustees’ decisions only conferred immunity in respect of assertions of a breach of trust, finding that, “There is no suggestion in the authorities that a trustee is only immune to such a claim and not to a claim for breach of a common law or statutory duty in making a decision to invest or sell.” The judge went on to clarify that immunity results from the fact that the court has determined that the decision to exercise a power is a proper decision for the trustee or office-holder to have made in reliance upon which approval they then proceed to act. It operates to prevent subsequent complaint by a party affected by that decision that it was improperly taken, whatever cause of action is involved.
Whilst the claimant sought to argue that the receivers’ application for approval had been of a limited nature (namely to ensure merely that the proposed sale had been within the power conferred by the receivership powers), the court found that by their application the receivers had expressly sought approval for sale of the club and related assets as a going concern as part of a single transaction; the court had specifically approved the decision to sell those assets “in one transaction, to a specific person, at a specific price.” To assert that the receivers ought to have entered into an entirely different transaction necessarily involved an allegation that their power had been wrongly exercised in circumstances where the court had already sanctioned their strategy as being a proper exercise of their powers. Accordingly, the court determined that the receivers had immunity in respect of the claim against them that they ought to have sold the assets in a different way which might have realised a higher price.
United Kingdom April 28 2022
This month’s High Court decision of Mr Justice Fancourt in Denaxe Limited v Cooper & Anor [2022] EWHC 764 (Ch) (06 April 2022), brings the final curtain down on the saga surrounding the relinquishment by Mr Owen Oyston of his ownership of Blackpool Football Club. Of much wider significance, the decision (in which Martin Jensen, partner at Beale & Co, acted for the successful receiver defendants in striking out the claimant’s claim for damages for breach of duty), provides welcome clarification for court appointed receivers as to the extent of immunity acquired against subsequent claims surrounding their conduct in office where their proposed strategy has received prior approval from the court.
Background
The case is notable in that it involved a challenge to the terms on which court appointed receivers sold the football club where the terms of that sale had already been sanctioned by the court prior to the deal going through.
Whilst the dispute concerned the sale of the club by the receivers back in 2019, its genesis was Blackpool’s single season playing in the Premier League in 2010-2011. This moment at the pinnacle of English football, albeit brief, nevertheless brought considerable riches to the club both in terms of massively increased revenue in its promotion year and also in respect of substantial “parachute payments” which it received in the period following its swift relegation. However, in 2017, a significant minority shareholder in the club, VB Football Assets (VBFA), was successful in its petition under s.994 of the Companies Act 2006 with the court determining that it had been unfairly prejudiced by Mr Owen Oyston and his son Karl Oyston illegitimately stripping the club of its promotion windfall by paying out substantial sums to themselves/companies in their control by way of concealed dividends. Mr Oyston and his company Denaxe Limited (formerly Blackpool Football Club (Properties) Limited were ordered to buy back VBFA’s shareholding for a sum in excess of £31million.
Most of the judgment debt remained unsatisfied and conventional enforcement methods proved ineffective. Accordingly, in early 2019, following an application by VBFA, the court appointed, as joint receivers by way of equitable execution, Mr Paul Cooper and Mr David Rubin – both highly experienced in dealing with high profile football clubs – over various assets of Mr Oyston and Denaxe by which his controlling shareholding in the club was held. These assets included, among others, the majority shareholding in the club, its Bloomfield Road stadium, and its training ground. The purpose of the receivers’ appointment was to effect a sale of the club and related assets as a going concern in order to discharge the judgment debt.
Despite various attempts to obstruct and frustrate a sale, the receivers successfully secured a deal for the club’s sale in June 2019 for over £8.2 million and in the process averted Blackpool’s risk of relegation the following season. Significantly, before completing the deal, they successfully applied for the court’s approval of the transaction.
The claim against the receivers
Following their subsequent discharge from office, the receivers were promptly met with High Court proceedings from Mr Oyston’s company Denaxe in which it was alleged that they had undersold the club and related assets by some £80 million. The primary case evolved during the course of proceedings into an assertion that the receivers’ duty to secure the best price for these assets was by way of separate asset sale; Blackpool Football Club ought to have been put into liquidation and Bloomfield Road sold for redevelopment.
The receivers applied to strike out the claim on various grounds; primarily because they had immunity against it by virtue of the court’s prior approval, and because the proceedings were abusive in circumstances where the claimant resolved not to challenge the strategy at the time the court approved it.
Immunity
On the issue of immunity, the receivers’ case followed on from the judgment of Marcus Smith J in June 2019 in which he approved the club’s sale. On that occasion, the judge proceeded by analogy with cases involving trustees and administrators (following the line of authorities including Public Trustee v Cooper [2001] WTLR 901, a case concerning trustees, and Re Nortel Networks UK Ltd [2016] EWHC 2769 which extended the principles applicable to trustees to administrators) in finding that it was entirely appropriate for the court upon application to scrutinise and, in appropriate circumstances, approve a receiver’s proposed course of action where it involves a “momentous” decision for the beneficiaries. The court went on to find both that the decision regarding the sale was sufficiently momentous that it could entertain the application, and that the receivers had devised and implemented a sufficiently rigorous marketing and sales strategy of the club and related assets that the proposed sale ought to be sanctioned.
The court was not on that occasion required to determine the issue of whether or not the effect of its approval of the transaction would confer immunity on the receivers (as would be the consequence in the context of trustees and administrators) in the event of any subsequent complaint regarding the terms of the sale, the judge merely observing that such immunity would appear logically to flow from the analogy drawn.
Accordingly, the receivers contended in their strike out application that immunity from the undersale logically followed the court’s prior approval of the terms of the very sale which the claimant was seeking to challenge.
Mr Justice Fancourt readily accepted that immunity for the receivers did result from the court’s prior approval of the sale of the club in light of Marcus Smith J earlier finding that the position of a receiver by way of equitable execution was analogous with that of a trustee or administrator seeking the court’s directions. He rejected the claimant’s argument that the earlier cases concerning court approval of trustees’ decisions only conferred immunity in respect of assertions of a breach of trust, finding that, “There is no suggestion in the authorities that a trustee is only immune to such a claim and not to a claim for breach of a common law or statutory duty in making a decision to invest or sell.” The judge went on to clarify that immunity results from the fact that the court has determined that the decision to exercise a power is a proper decision for the trustee or office-holder to have made in reliance upon which approval they then proceed to act. It operates to prevent subsequent complaint by a party affected by that decision that it was improperly taken, whatever cause of action is involved.
Whilst the claimant sought to argue that the receivers’ application for approval had been of a limited nature (namely to ensure merely that the proposed sale had been within the power conferred by the receivership powers), the court found that by their application the receivers had expressly sought approval for sale of the club and related assets as a going concern as part of a single transaction; the court had specifically approved the decision to sell those assets “in one transaction, to a specific person, at a specific price.” To assert that the receivers ought to have entered into an entirely different transaction necessarily involved an allegation that their power had been wrongly exercised in circumstances where the court had already sanctioned their strategy as being a proper exercise of their powers. Accordingly, the court determined that the receivers had immunity in respect of the claim against them that they ought to have sold the assets in a different way which might have realised a higher price.