1
Tuesday, 1 April 2014
2
(10.30 am)
3
MR BRENNAN:
May it please you, my Lord, I'm conscious of
4
the fact that we may be sitting in slightly the wrong
5
place, but I represent the claimants in this matter.
6
learned friends Mr Thompson QC and Mr Brown represent
7
SISU.
8 9 10
My
My Lord, have you had the opportunity of reading the skeleton arguments which the parties have provided? MR JUSTICE LEGGATT:
Yes, I have.
I'm not quite sure where
11
they've ended up.
12
right.
13
the pleadings, I've read the witness statements, but
14
I don't claim to have assimilated all the transactions
15
that are described in those.
16
contract.
17
MR BRENNAN:
I think they're in the file, it's all
I have read the skeleton arguments, I've read
And I have read the
That's about it. I'm grateful for that indication, my Lord.
In
18
those circumstances, it would probably be of assistance
19
to the court if I were to open the case before we turn
20
to two applications which remain to be resolved before
21
the evidence can be called.
22
The most important application is my friend's
23
application for additional part 20 claimants to be added
24
to the counterclaim and for the amendment of pleadings.
25
That application is in large part opposed. 1
1
My friend has another application to adduce witness
2
evidence after the extension of the deadline that was
3
agreed by consent.
4
cannot be done without permission of the court and it's
5
therefore simply not for me to grant that permission,
6
but I say now we're not prejudiced.
7
MR JUSTICE LEGGATT:
8
MR BRENNAN:
9
No.
The court order provides that that
I will grant that application.
I am grateful.
The first application that appears in the bundle is
10
an application to amend the reply and the defence to
11
counterclaim to correct a misapprehension as to the
12
facts.
13
with and permission has already been given, and we can
14
find the order if needs be.
15
essentially one substantial application.
16
In fact, that application has already been dealt
MR JUSTICE LEGGATT:
Right.
So as I say, there is
I'd like to have some
17
discussion in opening with both of you, I think, about
18
the compass of the case and the evidence because there's
19
a huge amount of history of Coventry Football Club and
20
the financing of its arena and so forth.
21
some difficulty at the moment to see that much of it is
22
relevant to the issues in the case.
23
MR BRENNAN:
My Lord, quite.
I'm finding
For our part, we perceive that
24
the court need only concern itself with events that
25
occurred after matters got going in earnest in the last 2
1 2
week of February 2012 onwards. It will be necessary to explain in broad terms the
3
history, but only insofar as it's necessary for the
4
court to be able to put into its proper context the
5
events that occurred after the first week of February
6
two thousand and ...
7
MR JUSTICE LEGGATT:
This may be too hasty, and you can both
8
explain to me shortly how you see the case, but as far
9
as I can see it at the moment, the real issue of fact is
10
whether the claimants acted in a way which prevented the
11
condition precedent from being fulfilled --
12
MR BRENNAN:
13
MR JUSTICE LEGGATT:
14
Yes.
issue.
15
MR BRENNAN:
16
MR JUSTICE LEGGATT:
17
impression.
18 19
-- which is a reasonably narrow factual
It is, yes. Anyway, that was just my preliminary
Opening submissions by MR BRENNAN MR BRENNAN:
My Lord, might I then in opening turn to say
20
a few general remarks by way of background?
There are
21
three matters.
22
now known as the Ricoh Arena.
23
initially as a joint venture between Coventry City
24
Council and the football club.
25
football club was then acting through its holding
The first concerns the stadium, which is
3
This was conceived
In point of fact the
1
company, Coventry City Football Club Holdings Limited,
2
and the intention was to develop a multi-purpose
3
facility in Coventry, which facility would include
4
a stadium suitable for use by a football team, namely
5
Coventry City.
6
The total development was expected to cost in excess
7
of ÂŁ100 million.
This was to be financed in a number of
8
different ways.
9
was an obligation upon a wholly owned subsidiary of the
Importantly, for our purposes, there
10
holding company, Football Investors Limited, to
11
contribute ÂŁ2 million in due course at a relatively
12
early stage.
13
The plan was for the football team, run by
14
Coventry City Football Club Limited, to be granted
15
a tenancy of a certain amount of office space at the
16
stadium and, more particularly, a licence to stage
17
football matches at the stadium.
18
always intended, that the entity who would grant those
19
rights would be a subsidiary of Arena Coventry Limited.
20
It is Arena Coventry Limited which is at the heart of
21
this dispute.
22
It was agreed, and
The plan was for Coventry City Council and Football
23
Investors Limited, which as I say, is a wholly owned
24
subsidiary of a company associated with the football
25
club, to subscribe for 50 per cent of the shares that 4
1
were issued by ACL.
2
of money -- I believe it may have been as much as
3
ÂŁ21 million -- in order to enable it to finance the
4
payment of premium to a company called Coventry North
5
Regeneration Limited, which was a company owned and
6
under the control of Coventry City Council, and in
7
return for which --
8 9 10
MR JUSTICE LEGGATT: you would. MR BRENNAN:
ACL was to borrow a substantial sum
Sorry, just slow down a little bit if
Yes?
Coventry North Regeneration Limited was to
11
grant a lease in return for that premium.
12
Coventry North Regeneration Limited held a lease from
13
the freeholder, Coventry City Council, so the chain is
14
this: freeholder, Coventry City Council; head lessee,
15
Coventry North Regeneration Limited, which is a company
16
owned and under the control of the City Council; below
17
that stands ACL; below that stands a subsidiary.
18
was the subsidiary of ACL that would grant Coventry City
19
Football Club Limited the tenancy/licence that it
20
required.
21
For its part,
And it
In the event, it became clear that Football
22
Investors Limited was unable to finance the ÂŁ2-million
23
payment.
24
turned, and the entire project looked in danger of being
25
stillborn.
At this point in time, not a sod had been
5
1
MR JUSTICE LEGGATT:
2
MR BRENNAN:
Sorry, what was the 2 million for?
Well, it's a little complicated, but
3
Coventry City Football Club has never been awash with
4
cash, to put it mildly.
5
of Coventry City Council became parties to the joint
6
venture agreement and, in short and in very broad terms,
7
the money that was needed would be provided by the first
8
instance by the directors personally and by a chain of
9
contracts.
Originally, certain directors
What that would boil down to would be
10
a requirement for Football Investors Limited effectively
11
to repay the debt which arose in the first instance from
12
the £2 million that was put in by certain directors.
13
MR JUSTICE LEGGATT:
14
MR BRENNAN:
Right.
It was at this point that the charity stepped
15
into the breach.
Had it not done so, the entire project
16
would have been stillborn and it looks for all the world
17
as if Coventry City Football Club would have collapsed
18
as well.
19
Coventry City Football Club Holdings Limited.
20
in return for a payment of £6.5 million, which payment
21
involved the charity writing off an existing loan of
22
£2.5 million and providing a further £4 million in cash.
23
The relations between the City Council, Football
It acquired Football Investors Limited from It did so
24
Investors Limited and the trustees are governed by
25
a written agreement dated 19 December 2003. 6
This is
1
an important document from the defendant's point of view
2
and it's only right therefore that we turn to it now,
3
if we may.
4
bundle, tab 36.
5
MR JUSTICE LEGGATT:
6
tab 34.
7
MR BRENNAN:
8 9
It's in the second volume of the trial
My second volume only goes up to
Forgive me, a typo.
Tab 34.
One can see that the parties to the agreement are the City Council, Football Investors Limited and the
10
trustees of the charity.
Could I ask you to turn in the
11
first instance to page 572 of the bundle, which is
12
clause 4.2.
13
What I propose to do is simply flag up those clauses
14
which are material, without spending too long subjecting
15
them to minute construction.
16
is that it can be seen that one of the first
17
responsibilities was to obtain banking facilities to
18
finance the debt which was then ÂŁ21 million.
But the upshot of 4.2
19
One can see from the final sentence of that clause:
20
"The shareholders [that's to say the City Council]
21
and Football Investors Limited] shall procure that that
22
facility was to be used by ACL solely for the purpose of
23
paying the premium pursuant to the Coventry North
24
regeneration lease."
25
MR JUSTICE LEGGATT:
Right. 7
1 2 3 4
MR BRENNAN:
4.5 over the page:
"If either of the shareholders wish to capitalise the company any further ..." That could only take place with the agreement of the
5
other, which agreement would require the other party to
6
contribute the same sum.
7
6.1.3, this is a particularly important matter.
8
If we just dwell on 6.1 at the foot of the page we're
9
on, these were certain matters which could not take
10
place without the prior written consent of the
11
shareholders.
12
MR JUSTICE LEGGATT:
13
MR BRENNAN:
14
Coventry City Council and Football Investors
Limited.
15
MR JUSTICE LEGGATT:
16
MR BRENNAN:
17 18 19
The shareholders of ACL?
Well, yes.
It is in fact important to actually
turn to the clause because it provides: "The shareholders shall procure that none of the following actions shall be taken by the company --
20
MR JUSTICE LEGGATT:
21
MR BRENNAN:
22
Who are the shareholders, sorry?
The company being ACL?
The company being ACL:
"Without unanimous prior approval of the directors
23
or, in the event a unanimous resolution is not passed by
24
the directors, without the prior consent of each of the
25
shareholders given in writing by the passing of 8
1
a unanimous resolution of the shareholders at a general
2
meeting of the company."
3
So that was the lockstep, unanimity amongst the
4
directors or the shareholders, and I say now that each
5
shareholder was given the right to nominate two
6
directors and in addition to that there were to be three
7
independent directors.
8
6.1.3, that related in particular to the borrowing of
9
any monies by ACL.
10
MR JUSTICE LEGGATT:
11
MR BRENNAN:
One can see over the page,
Right.
Clause 9.1.
There were restrictions imposed
12
upon the transfer of shares, effectively this created
13
a right of veto, which one can see in more detail --
14 15 16 17 18
MR JUSTICE LEGGATT:
So they're pretty much locked in
together? MR BRENNAN: 9.10.
Yes.
It's a tightly drawn ...
The trustees were locked in to this agreement
because they agreed --
19
MR JUSTICE LEGGATT:
20
MR BRENNAN:
Yes.
They're a party to -They agreed that they would not, without
21
the prior written consent of the A shareholder, that's
22
the City Council, sell or transfer any of their shares
23
in Football Investors Limited and various other matters.
24
That is not to say, however, that this agreement
25
should be regarded to have been seen as a long-term 9
1
investment by the charity.
2
made so as to enable the football club when it was back
3
on its feet to step back into the breach into which the
4
charity had placed itself.
5
for that at clause 9.11.
6
In particular, provision was
And one can see provisions
There were also rights of pre-emption, which one can
7
see at clause 10.
8
would have the right to obtain a transfer provided that
9
they were prepared to pay the price that a third party
10 11
So in broad terms either shareholder
was prepared to pay. We shall return to this agreement at the end of the
12
piece because it was necessary for the trustees to enter
13
into an agreement whereby this agreement was varied and
14
it is of that matter which in particular the defendants
15
complain.
16
In due course, Mr Knatchbull-Hugessen and
17
subsequently Mr Harris became directors of ACL.
18
all I wish to say in relation to the stadium.
19
That's
So far as the trust is concerned, the Alan Edward
20
Higgs Charity is run by trustees.
21
trustees is Mr Knatchbull-Hugessen.
22
trustee himself, although his wife is, and since her
23
brother's untimely death has served as its chairman.
24
The charity owns Football Investors Limited.
25
The clerk to the He is not the
purely an investment vehicle, its sole director is
It is
10
1
Mr Knatchbull-Hugessen.
2
Mr Knatchbull-Hugessen wore more than one hat, he was
3
a director of ACL.
4
the fact that he does not have a specifically legal
5
training, he sought and was provided with advice as to
6
his responsibilities.
7
letter of advice.
8
exhibit to his witness statement.
9
his witness statement.
10 11
As we know,
In view of that, and by reason of
Perhaps we could turn to the
It's in the first volume, it's an It's an exhibit to
It appears at D1, 304.
Page 304
of the first bundle. This is a letter from the charity's solicitor,
12
responding to a request for advice, in which the
13
solicitor flags up the statutory responsibilities
14
Mr Knatchbull-Hugessen was subject under section 17.2 of
15
the Companies Act.
16
what that actually meant in practice by reference to
17
a small number of well-known cases, which one can infer,
18
from the reference to Palmer's Company Law, had been
19
extracted therefrom.
20
And it provided a commentary as to
I respectfully submit that in the context of a short
21
letter of advice, this could not be improved upon in
22
terms of the advice that a person acting as a nominated
23
director of a third party could wish to obtain as to his
24
responsibilities when discharging his duties as
25
director.
The point was perhaps most clearly put at 11
1 2
paragraph 6 in the extract of Lord Denning.
He says:
"There is nothing wrong with the appointment of
3
nominee directors.
4
wrong that is so long as the director is left free to
5
exercise his best judgment in the interests of the
6
company in which he serves."
7
This is done every day.
Nothing
One matter of background in relation to SISU, if
8
I can use that term advisedly.
In early 2008, a company
9
known as Sky Blue Sports and Leisure Limited acquired
10
the entire share capital of Coventry City Football Club
11
Holdings Limited and Coventry City Football Club
12
Limited.
13
as a matter of fact it is not entirely straightforward
14
to identify the constituent parts of what Laura Deering
15
refers to as "the SISU Group".
16
straightforward to identify the nature of the
17
interconnections between its constituent parts.
18
clear is that Sky Blue Sports and Leisure Limited is
19
a special purpose vehicle, which was used specifically
20
for this transaction.
21
I do not wish to be in any way pejorative, but
Still less is it
What is
What Sky Blue Sports and Leisure Limited acquired
22
was a company which was entitled to field a team to
23
compete in the Football League and, by dint of that, to
24
obtain admission to the Premiership.
25
is that more money went out of the company than came 12
The difficulty
1
into it, and there are internal reviews from which it is
2
apparent that its wage bill was historically greater
3
than 90 per cent of the turnover.
4
unsurprising for anyone familiar with football clubs.
5
As Alan Sugar once said, if you don't like football,
6
don't buy a football club because that's where all your
7
money goes.
8 9
This is not entirely
The singular feature of the transaction is whereas most football teams play in their own stadium,
10
Coventry City play in a stadium owned by a third party
11
and had to pay for the privilege of doing so.
12
matters worse, by reason of its sale of Football
13
Investors Limited, Coventry City Football Club Holdings
14
Limited lost what could either have been on one hand an
15
appreciating asset, ACL, or rather its interest in ACL,
16
the value of which rose as the debt was paid off,
17
and/or, alternatively, a source of revenue, the amount
18
of which was dependent on ACL's distributable profits
19
and the directors' dividend policy.
20
a wise investment is open to very considerable doubt,
21
but this court need not concern itself with that.
22
Can I now cut to the chase?
To make
Whether it was
Could we focus first on
23
the period from September 2011 to February 2012?
24
provided a chronology to which I shall in broad terms
25
refer. 13
I have
1
MR JUSTICE LEGGATT:
2
MR BRENNAN:
Right.
Hang on a moment.
As is the nature of these long chronologies,
3
I plead guilty to the occasional typo and occasional
4
omission.
5
it's not agreed.
6
It is not intended to be controversial, but
It is apparent that in the period
7
from September 2011 to February 2012, there was
8
something in the air.
9
Mr Knatchbull-Hugessen met representatives of the
10
football club and it is evident from his notes of
11
a meeting that took place on 21 September 2011 that he
12
communicated the fact that the trustees were willing to
13
sell its interest.
14
Mr Knatchbull-Hugessen's note of his meeting with the
15
chairman of the football club on 23 September that
16
Coventry City Football Club, for its part, appreciated
17
that Coventry City Council had the right to veto a sale
18
of the trustee's interests in FIL.
19
Negotiations were in the offing.
It is also evident from
The minutes for the trustees board meeting during
20
this period evidence the fact that
21
Mr Knatchbull-Hugessen reported developments to the
22
trustees, who decided to take no action, save to await
23
developments.
24 25
In January Mr Harris, who was already a director of ACL, became a trustee.
Negotiations got going in 14
1
earnest in the six-week period from the end of February
2
to early April of 2012.
3
This may or may not have been due to the fact that
4
a lady named Joy Seppala assumed a more hands-on role at
5
this stage at SISU's end.
6
conducted through a gentleman named Mr Tim Fisher of
7
Coventry City Football Club, and we can see the state of
8
play as of 1 March in his note.
9
to it, if we may.
10
MR JUSTICE LEGGATT:
11
MR BRENNAN:
12
Sorry, what page?
Tab 15, page 426.
This is an e-mail chain. pertinent one.
14
provided by Mr Fisher.
15
MR JUSTICE LEGGATT:
16
MR BRENNAN:
18
Perhaps we could turn
It's in the second volume, tab 15.
13
17
Initially, negotiations were
The second e-mail is the
This is a summary of the state of play
Who is Mr Fisher?
Mr Fisher is SISU's appointee and is running
the football club. He indicates that he has met the charity, the
19
City Council, or at any rate its executive, its paid
20
staff, and he reports:
21
"We have agreed a deal framework and road map to
22
deal close.
23
follows."
24 25
The deal headlines and principles are as
One can see that the first bullet point concerns the charity.
It would exchange its stake for a stream of 15
1 2 3 4
annuity payments.
Importantly it provides:
"The quantum, timeline of payments, and security will be negotiated." The potential veto, it is said, would not be
5
exercised and support would be provided, and
6
Coventry City Council would accept the requirement to
7
extend the lease to 125 years.
8
part in the commercial consideration.
9
the lease was 42 years.
10
MR JUSTICE LEGGATT:
11
MR BRENNAN:
12
That was an important As things stood,
Right.
The fifth bullet point reads:
"Coventry City Council agree that the deal catalyst
13
could indeed be the removal of the mortgage and would
14
fully support an approach to Yorkshire Bank."
15
And the penultimate bullet point on that page:
16
"We agree the need to develop a financial model with
17 18
the City Council." Turning over the page, it was envisaged or
19
provisionally agreed that the deadline would be
20
30 June 2012.
It's a very tight timetable.
21
Next steps included, second bullet point:
22
"... Tim Fisher and Gary Ambrose [I think he was
23
a numbers man at Coventry City Football Club] would meet
24
with Mr Knatchbull-Hugessen and Mr Harris on 6 March to
25
discuss the annuity stream and the proposed return 16
1
profile."
2
So that is the position as of the 4th.
A meeting
3
subsequently took place at Mr Harris' offices in
4
Birmingham on 6 March.
5
a minute as such, it's in the nature of an internal
6
memorandum.
7
It's at tab 16.
8 9 10
A note was made; it's not
It was not circulated, still less approved.
Mr Knatchbull-Hugessen spoke.
There's a record of
what he said on the front page, just a few paragraphs in:
11
"Discussion began with PKH providing ..."
12
And he set out his agreement in principle.
He
13
started talking figures, a sum upwards of ÂŁ7.5 million,
14
and he flagged up:
15 16 17
"The trustees will find it very difficult to accept anything lower than this capital value." He subsequently went on to make three points, all of
18
which are mentioned, the second and third of which
19
reiterates the trustees' position that:
20
"Anything less than the capital value, trustees will
21
need to be able to justify why they took this lower
22
amount.
23
stream will be very important."
The security of the covenants in the annuity
24
He then goes on to make the point that he has
25
professional advisers on standby and that they require 17
1
to provide the comfort that the trustees need so they
2
can accept the deal, and the advisers were identified.
3
Thereafter, if this note reflects the sequence of
4
events as they unfolded, a gentleman called Chris West,
5
who was head of legal and finance at Coventry City
6
Council, made a series of points.
7
Tim Fisher then spoke.
8
a road map, to use his phrase.
9
are listed there, and it was proposed that the first
And thereafter,
He presented his suggestions for They were fourfold, they
10
step was to announce that a company had agreed to a deal
11
with the charity, and the charity was to confirm that it
12
was not speaking to anybody else, and so on and so
13
forth.
14
It was again that the date given there was 30 June.
15
It was a swift timetable, but what is noticeable is that
16
the announcement of a deal might be thought to be
17
putting the cart before the horse.
18
which was potentially a difficult matter that needed to
19
be resolved were the payments that fell due to be made
20
under the agreement, which Coventry City Football Club
21
had with the ACL subsidiary for its use of the stadium.
22
That is dealt with on page 430, just below the top punch
23
hole.
One of the matters
24
It is recorded thus:
25
"The rent holiday and escrow release in the cash 18
1 2 3
flow was noted by all." What is meant by "rent holiday" is not paying the rent.
4
MR JUSTICE LEGGATT:
5
MR BRENNAN:
Yes.
And the escrow account, there was a requirement
6
under the agreement for a sum of money, effectively
7
in the nature of a deposit, to be placed at the disposal
8
to guard against the risk of the rent not being paid.
9
"It was noted by all [the note records] no
10
objections were raised.
11
Mr Knatchbull-Hugessen seemed to understand the
12
rationale and the result if this wasn't achieved."
13
may or may not have been wishful thinking.
14
"no objections raised ... seemed to understand the
15
rationale" is a phrase which features again in the
16
conclusions.
17
But Chris White and
This
The phrase
A close textural analysis of this internal
18
memorandum might suggest that at the conclusion of the
19
meeting Mr White and Mr Knatchbull-Hugessen poured
20
something in the nature of cold water over the sunny
21
optimism by reiterating the difficulties that remained
22
to be addressed.
23
not, what we do know is that there was a telephone call
24
on or about 8 March.
25
Mr Knatchbull-Hugessen and Mr Fisher.
At all events, whether that's right or
That telephone call was between
19
1
Mr Knatchbull-Hugessen thought it appropriate to
2
reiterate what he said during the course of that
3
telephone conversation in writing by e-mail.
4
could turn to that now.
5
trial bundle at tab 3.
6 7 8 9
MR JUSTICE LEGGATT:
Perhaps we
It's in the third volume of the
I don't seem to have a chronological
bundle as such; is that right? MR BRENNAN:
I'm afraid that is the position.
The e-mail rather speaks for itself.
One can see
10
that Mr Knatchbull-Hugessen reiterated in writing the
11
need for the trustees to take advice, that its concern
12
over abortive costs made it a matter of vital
13
importance.
14
In fairness to Mr Fisher, he may well not have
15
appreciated the potential personal liabilities which the
16
trustees faced and their need to proceed by reference to
17
professional advice.
18
MR JUSTICE LEGGATT:
19
MR BRENNAN:
20
MR JUSTICE LEGGATT:
21
MR BRENNAN:
So what are NDAs?
Non-disclosure agreements. Right.
Happily, it would appear that there was no
22
principled objection to providing an agreement to
23
underwrite any abortive costs, which is apparent from
24
the e-mails that passed immediately thereafter, which
25
appear in the following tab. 20
Those e-mails at tab 4,
1
however, are perhaps more significant for the fact that
2
it was, pursuant to this e-mail, that Mr Fisher provided
3
what he described as a first draft communication plan.
4
We have the draft communication plan, happily.
It's
5
at tab 5.
The communication plan reads as if it was
6
conceived by a public relations department.
7
see that point 1 provides that, by 19 March, it was to
8
be announced that the charity had agreed a deal with
9
whatever this company would be for the sale of its
You will
10
50 per cent stake.
11
the author of this plan provided for a full ten days for
12
the negotiation and sale of an asset which the trustees
13
considered to be worth in excess of ÂŁ7.5 million, or at
14
least that's what they had stated to the prospective
15
purchaser, plus a proportion of a new property company
16
that currently existed in nothing other than conceptual
17
form.
18
But it must follow therefore that
One can see from point 4 that again completion by
19
30 June was envisaged.
It might well be thought that
20
the despatch, if not to say speed, of developments was
21
intended to serve an ulterior purpose, namely -- and
22
it's revealed at point 5 in the second column -- the
23
rationale was to force YB, Yorkshire Bank, to the table,
24
to put Yorkshire Bank under pressure publicly to help
25
get the transaction done and secure future. 21
1 2
If one turns over the page to page 608, we can see in a risk analysis, the penultimate point is:
3
"It was perceived to be a risk that Yorkshire Bank
4
will make contact/try and alter the plan."
5
The mitigation for that plan was:
6
"To move fast through the process as Yorkshire Bank
7
still getting up to speed."
8 9
The unbounded optimism of the public relations guru who drafted that document was revealed in the event to
10
be unrealistic in the light of the discussions that took
11
place shortly thereafter amongst the directors of ACL.
12
I say in the light of their discussions advisedly
13
because the upshot of their discussions was drawn to
14
Mr Fisher's attention by Mr Knatchbull-Hugessen himself
15
in an e-mail of 11 March.
16
That is to be found at tab 7.
Reading the bullet points at the top of the e-mail,
17
one is put in mind of Margaret Thatcher's "No, no, no,
18
no" speech, because this was not good news for
19
Mr Fisher.
20
not:
21
The ACL directors were saying they could
"... agree or accept the non-payment of rent, [they
22
were] not empowered to release funds held in escrow,
23
much more work was to be done on the communications plan
24
and it had not been agreed, and we can allow no contact
25
at all with Yorkshire Bank by you or others in anything 22
1 2 3 4
related to ACL's dealings with the bank." The fifth point was rather in the nature of putting the ball back in the football club's court: "We need to see a credible funding plan with
5
specific confirmation of the source of funds needed to
6
underpin your strategy to purchase the charity shares in
7
ACL."
8 9 10 11
The second bullet points were in the nature of representations made on behalf of the shareholders. They wanted: "1, sight of a credible funding plan.
12
funding.
13
mechanism to protect any annuity payment."
14
2, proof of
3, confirmation and description of the
Mr Knatchbull-Hugessen was obviously very aware of
15
the fact that he wore a number of different hats and he
16
made the point that:
17
"I have split these points as some of them fall
18
under the responsibilities of the ACL directors and
19
others to the shareholders."
20
It is evident that the request being made there was
21
for something in the nature of financial details.
22
I observe that they were then speaking a language which
23
a hedge fund could understand.
24 25
Mr Fisher, for his part, was anxious to initiate discussions with the bank as soon as possible. 23
He
1
raised this matter with Mr Knatchbull-Hugessen himself
2
over the phone.
3
Mr Knatchbull-Hugessen's e-mail to Mr Harris, which is
4
at tab 8.
That conversation is evidenced by
Perhaps we can turn to it now.
5
Again, what is noteworthy from this e-mail is
6
Mr Knatchbull-Hugessen's proper identification of the
7
demarcation between the City Council's interest qua
8
shareholder in ACL and as a director of ACL.
9
being referred to in this e-mail is Mr Fisher.
10
MR JUSTICE LEGGATT:
11
MR BRENNAN:
The "he" (Pause)
Right.
Nevertheless, the shareholders were prepared to
12
meet Mr Fisher so far.
13
a meeting.
14
Mr Knatchbull-Hugessen said he would attend simply to
15
view proceedings.
16
memorandum of that meeting.
17
necessary to go to the second volume, tab 17, for the
18
memo of that meeting.
19
They did agree to attend
This is the meeting which
Again, there is an internal Unfortunately, it's
This meeting took place -- and the days are
20
important -- on a Thursday.
It was 29 March.
One
21
doesn't know to what extent, if any, the defendants were
22
acting in accordance with the strategy of their prior
23
devising or not.
24
is that Mr Barber is noted as having been present.
25
He is identified as ARVO.
What is interesting from the meeting
24
ARVO Master Fund Limited is
1
a company that was registered in the Cayman Islands.
2
was, it would appear, a creditor.
It
3
It is evident from the memorandum that a very heavy
4
emphasis indeed was placed upon the imminent insolvency
5
of the football club at this meeting and the
6
consequences of the insolvency of the football club
7
would have on ACL were laboured.
8 9
MR THOMPSON:
I don't want to interrupt, but just to
clarify, ARVO is part of the SISU Group, but it was
10
actually providing the funds for the club.
11
explained in Laura Deering's witness statement.
12
I understand it, Mr Barber was advising ARVO that ARVO
13
was within the SISU Group and Mr Barber, as I understand
14
it at this stage at least, was an independent adviser to
15
ARVO, but was shown as appearing in the ARVO group.
16
think that is the position.
17
MR BRENNAN:
18
This is all As
I
I'm grateful, that's very helpful.
In addition to the consequences of the club's
19
insolvency, the need to initiate discussion with
20
Yorkshire Bank was emphasised.
21
out.
22
it was said that -- forgive me, the memorandum was dated
23
Thursday the 29th, the meeting was Wednesday the 28th.
The position was spelt
As one can see from the second page of the note,
24
MR JUSTICE LEGGATT:
25
MR BRENNAN:
Sorry, where are you?
The final paragraph on page 433. 25
Mr Fisher is
1 2 3
here speaking: "There is not enough progress on this transaction. They will advise filing for insolvency."
4
Mr Fisher notes the timings:
5
"We will honour payroll on Friday.
6
hence.
7
afternoon."
8
MR JUSTICE LEGGATT:
9
MR BRENNAN:
10 11 12 13
That is two days
And then announce to the staff on Friday
Right.
Miss Seppala then made the point, if the note
is accurate: "If they can't do a stadium deal, then SISU is finished funding the football club." And Miss Seppala noted that the full purchase of the
14
debt could be done by SISU or split 50/50 with
15
the council as they wished.
16
This was a development, possibly even
17
a breakthrough.
Rightly or wrongly, the shareholders of
18
ACL had not previously understood that SISU would be
19
willing to allow the council to bear a share of the
20
burden in that regard.
21
to discuss matters in private.
22
returned to the meeting.
The shareholders then adjourned After that, they
23
The memo records that Coventry City Council said in
24
terms "we'll get back to you and we'll do so urgently".
25
The memo records that Football Investors Limited said 26
1
nothing of substance, save that the interpretation of
2
the author of the minute was that there was room for
3
optimism.
4
MR JUSTICE LEGGATT:
5
MR BRENNAN:
6 7 8 9 10
Where are you reading from?
Just below the top bullet point:
"Mr Knatchbull-Hugessen considers significant progress made in the meeting." It's very difficult to understand what progress was made other than the possibility of the council bearing some of the burden of repaying the debt.
11
What was, however, abundantly clear is that ACL
12
shareholders, let alone its board of directors, had not
13
at this point sanctioned a direct approach by SISU to
14
Yorkshire Bank.
15
got wind of the fact that SISU had sought to initiate
16
a meeting with Yorkshire Bank itself, having, it is
17
believed, misrepresented their authority to do so.
18
led to a sharp exchange by e-mail, which is to be found
19
in the third bundle at tab 10.
20
Very shortly after this meeting, ACL
I say "sharp exchange".
This
Mr Knatchbull-Hugessen
21
pulled no punches.
He rehearsed what he'd understood to
22
be the position and he characterises this as disgraceful
23
behaviour.
24
of the way the issues have developed in this case, he
25
emphasised the need to proceed in good faith.
Rather ironically, you might think, in light
27
1
Mr Knatchbull-Hugessen considered this to be an
2
appropriate time to set out his views for the record in
3
a letter to Mr Fisher, a copy of which he also sent to
4
Miss Seppala.
5
bundle at tab 11.
6
made the position clearer.
7
a rehearsal of what has passed between him and Mr Fisher
8
and reiterated the matters which I've already referred
9
to.
10 11 12 13
This too is to be found in the third Mr Knatchbull-Hugessen could not have The letter begins with
He made the point in the penultimate paragraph on the first page of this letter: "We have engaged PricewaterhouseCoopers and are now acting under advice."
14
Final paragraph:
15
"You have again asked that we, as shareholders,
16
agree to your talking to the Yorkshire Bank to attempt
17
to purchase the loan made by the bank to Arena Coventry
18
Limited.
19
between the bank and ACL and it is for the board of ACL
20
to give that assent."
21
That is not within our gift.
The loan is
He then made the point that he needed financial
22
information and the financial information which he
23
referred to as "unsubstantiated doomsday spreadsheets"
24
were a totally insufficient basis.
25
He rounded it up by urging Mr Fisher to: 28
1
"Provide the information we and our partner
2
shareholder, the city council, have asked for over the
3
course of the last few weeks."
4
And they were identified in bullet points:
5
"How [they] would be able to guarantee an annuity
6
stream, what going to Yorkshire Bank would mean for ACL
7
and its trusts and the council, the structure and
8
funding of the new property company and the business
9
plans."
10
The ball was most firmly in Mr Fisher's court.
11
The city council, as one can see from tab 12, wrote
12
a broadly similar letter, setting out in the clearest
13
possible terms what it expected of Mr Fisher.
14
letter is notable on the first page for the final bullet
15
point for emphasising that:
16
That
"The council will need to be assured that you have
17
reached an appropriate agreement with the Higgs charity
18
that was acceptable to the trustees to secure the sale
19
of their shares in ACL.
20
been reached would the council consider whether or not
21
to give its consent to the transaction."
Only if such an agreement has
22
It also expressed in very measured language its
23
displeasure at what the shareholders perceived to be an
24
unwarranted approach to Yorkshire Bank.
25
the council official, put it: 29
As Mr West,
1
"Such conduct did not help to provide such --
2
MR JUSTICE LEGGATT:
3
MR BRENNAN:
4
page 2:
5
Where are you reading?
It's the top paragraph, third line down,
"As I understand it, an employee of a firm of
6
chartered surveyors representing SISU made contact with
7
Yorkshire Bank to try and set up a meeting between the
8
bank, ACL, and potentially also the city council and the
9
Higgs charity without our consent ...(reading to the
10
words)... sound basis upon which we can move forward.
11
The city council [it goes on to say] is committed to
12
trying to find a way forward for the football club as
13
this appears to be in the interests of all concerned.
14
We are therefore prepared to consider in the first
15
instance a meeting between Yorkshire Bank, the Higgs
16
charity and ourselves as shareholders in ACL."
17
We move then to the two-month period between,
18
broadly speaking, 19 April to the execution of the ITS
19
agreement on 19 June.
20
was the dismal performance of the football team on the
21
pitch.
22
what used to be called the third division.
23
financial implications of that for the income of the
24
football club in the following season were obvious to
25
all.
The background, unfortunately,
In April of that year Coventry were relegated to
30
The
1
A third strategic meeting took place on 19 April, to
2
use the language of the internal memorandum.
3
Unfortunately, the memo is not in the trial bundle, but
4
it is in an exhibit, which is not in the trial bundle,
5
to Ms Deering's witness statement, and we can get it if
6
needs be.
7
Essentially, Mr Fisher indicated that the football
8
club was living hand to mouth, it was balance sheet
9
insolvent.
The City Council asked Miss Seppala whether
10
she was willing to fund the business from May to July.
11
Her answer was reported in the note to be:
12
"Only if we can do the Yorkshire Bank deal."
13
She made the point that she did not require ACL's
14
consent to approach Yorkshire Bank and no decisions were
15
taken as such, save for the need for a plan to be
16
agreed.
17
During this period, relations between the
18
city council and SISU developed.
19
early May with the council leader and his deputy, and
20
a non-disclosure agreement was executed on 21 May 2012,
21
which agreement anticipated a due diligence exercise
22
being carried out on ACL.
23
little to report regarding the charity.
24 25
There was a meeting in
There is, however, relatively
There is, in tab 9 of the bundle, to be found the report of the trustees' meeting that took place on 31
1
20 April.
2
tab 9.
3
date in the documents is 28 March, but in the middle of
4
the page one can see a reference there to 20 April.
5
If I could ask you to turn to that.
It's at
It appears out of sequence because the first
If one turns over the page, one can see the resume
6
of the matters that were discussed and what was said.
7
It was evident from that that there was a lack of
8
confidence in ACL's professional management.
9
value of ACL was considered and they resolved to seek
The actual
10
professional advice.
Advice was provided in the modern
11
fashion by e-mail at the end of May, but more
12
particularly there was a far more substantial piece of
13
work, namely a report prepared by
14
PricewaterhouseCoopers, that was prepared on 19 June.
15
This was all done in anticipation of negotiations
16
that the charity expected to ensue.
17
Paul Harris and Joy Seppala met and spoke frequently
18
during this period, negotiations did not begin in
19
earnest because it did not prove, alas, to be possible
20
to agree the basis upon which such negotiations would
21
take place.
22
phrase that comes to mind is "talks about talks".
23
In fact, although
At any rate, not in short order.
The
During this period, drafts of what ultimately became
24
the ITS shuttled back and forth, but given the attitude
25
of the courts to the admissibility of certain 32
1 2
negotiations, I needn't turn to them now. What we do know is that the indicative team [sic]
3
sheet was executed on 19 June.
4
indicated that you have read it.
5
be the focus of attention in due course.
6
MR JUSTICE LEGGATT:
7
MR BRENNAN:
And my Lord has This will, of course,
Yes.
I do not want to labour any point now.
8
I ought, however, to flag up three issues of law, which
9
ultimately will have to be resolved.
The first is this.
10
The charity's case is that the agreement incorporated an
11
express unilateral obligation to negotiate in good faith
12
for the duration of the exclusivity period.
13
The defendant's pleaded case is that the agreement
14
incorporated an implied mutual obligation to negotiate
15
in good faith without limit of time.
16
of construction.
17 18 19 20 21
This is an issue
The second matter is this -MR JUSTICE LEGGATT:
So was there an implied term of the
kind alleged? MR BRENNAN:
Yes.
The second matter is this.
The claimant's case
22
is that once the exclusivity period ended, it was
23
released from the obligations to which it had agreed to
24
be subject during the exclusivity period.
25
defendant's pleaded case is that it was an aspect of the 33
The
1
implied mutual obligation to negotiate in good faith
2
without limit of time and that it, the charity, the
3
trustees, would not do anything or procure anything to
4
be done by any other party or parties to render
5
impossible or materially to impede the performance of
6
the conditions precedent.
7
MR JUSTICE LEGGATT:
8
alleged.
9
it --
That's part of the implied term that's
You're saying that there are two aspects of
10
MR BRENNAN:
11
MR JUSTICE LEGGATT:
12
MR BRENNAN:
13 14 15 16 17 18 19 20
Yes.
Yes.
-- so far as they might be different? Again, that raises an issue of
construction. Thirdly, it is the claimant's case that the reference to, and I quote: "The transaction being satisfactorily agreed between Clydesdale Bank plc and Yorkshire Bank and SISU." Means exactly that.
The defendant's pleaded case
is that it should be construed to mean: "An agreement between SISU and ACL's bankers for the
21
time [I think there should be the word 'being' in the
22
pleading] for the repayment of loans then owed to its
23
bankers."
24
That too raises a point of construction.
25
Might I now turn to the six-week period of 34
1
exclusivity?
2
The reason for that is that not a lot happened.
3
To be blunt, there's not a lot to say.
Rowley Higgs, a city solicitor, the son of
4
Sir Derek Higgs and the grandson of Alan Edward Higgs,
5
the settlor, became a trustee.
6
documentary record indicated that Paul Harris was
7
chivvying SISU along.
8
turn to the second trial bundle and tab 20.
9
If anything, the
Perhaps I could ask the court to
Tab 20 is a not insubstantial bundle of e-mail
10
correspondence.
11
page 449?
12
I characterise as Mr Harris seeking to ascertain what
13
developments had occurred and chivvying matters along.
14
If I could ask you again to turn to page 457.
15
taken these out of turn, but it matters not, I'm just
16
flagging the matter up.
17 18
Can I ask you to turn first to
This is an e-mail to Laura Deering, which
This long e-mail to Laura, actually you see from the top punch hole:
19
"I would suggest the following approach."
20
It would appear that Mr Harris was actually
21 22
I've
proactively putting forward suggestions. It is also apparent that Paul Harris was making
23
enquiries of Chris West, the head of legal and finance
24
at Coventry City Council, as to what was happening and
25
that, by the date of the e-mail in question, which is 35
1
the e-mail of 9 July, which appears in the third
2
bundle -- I'm sorry to bounce between them, but I have
3
no choice.
4
MR JUSTICE LEGGATT:
It demonstrates to whoever's doing it
5
next time that it might be more efficient if the
6
documents are put in chronological order.
7
MR BRENNAN:
That is true, but I must say, having spent
8
a number of years being unfairly critical of the
9
production of trial bundles, I recently had to do one
10
myself.
11
appears.
12
It's not quite as straightforward as it
At all events, I'm inviting you to have regard to
13
the e-mail in the middle of the page from Paul Harris to
14
Chris West.
15
MR JUSTICE LEGGATT:
16
MR BRENNAN:
17 18
You can see from the second paragraph -Sorry, which page is it?
Tab 30, page 686.
He's enquiring in the second
paragraph: "Is there any progress with SISU from your side?
19
Because the last I heard they were hoping to re-engage
20
with their due diligence."
21
His mind was now working towards what the next steps
22
would be and the first bullet point would be the charity
23
shares on expiry of the exclusivity period.
24
suggests in his final paragraph:
25
And he
"It would be good to start considering the above, 36
1
although we cannot forget the football club and the
2
current state of the rent discussions."
3
The trustees met during this period on 17 July.
4
minutes again are not in the trial bundle, but they are,
5
however, in Laura Deering's exhibit.
6
mention at this stage that Laura Deering's exhibit is
7
comprised of five volumes of papers.
8
rightly or wrongly, every document that was specifically
9
referred to in that exhibit is in the trial bundle, the
10 11
The
Perhaps I ought to
It's enormous.
So
documents that Laura Deering hadn't referred to are not. MR JUSTICE LEGGATT:
That's a sensible way of doing it, but
12
if there are other ones that are thought to be relevant,
13
they can be inserted at an appropriate place in the
14
bundle.
15
MR BRENNAN:
16
course.
17
that:
18
No doubt.
We shall get these minutes in due
Could I simply say that the minutes record
"After rehearsal of the assessment of valuation of
19
the trustees' interest in ACL and a brief review of the
20
state of play reading the trustees' relationship with
21
SISU and Coventry City Council, which review
22
incidentally baldly recorded that SISU had failed to
23
present any satisfactory security."
24 25
Well, in fact, it was pretty unsatisfactory we don't actually have that document because, no doubt, we will 37
1
turn to it.
2
I'll just pass on.
3 4
MR JUSTICE LEGGATT:
MR BRENNAN:
6
MR THOMPSON:
7
MR BRENNAN:
9 10
Do you have the reference? The fourth volume of Laura Deering's exhibit,
page 1343. MR THOMPSON:
My Lord, can I just clarify whether the court
has the exhibits to Laura -MR JUSTICE LEGGATT:
12
MR THOMPSON:
14
There are some minutes anyway,
17 July.
11
13
Okay.
of a meeting on what date?
5
8
But as we haven't got it for the moment,
No, I've been spared those bundles.
I don't know whether they should be somewhere
available to your Lordship. MR JUSTICE LEGGATT:
I don't think that will be necessary.
15
What I think would be helpful is if anybody wishes
16
to refer to documents which aren't in the trial bundle
17
that they be simply inserted at an appropriate place in
18
the trial bundle.
19
MR THOMPSON:
I'm grateful.
We've had a couple of
20
references, which we may need to go back to, but we'll
21
keep a record.
22
MR JUSTICE LEGGATT:
Unless there's going to be a lot of
23
documents referred to that aren't in the trial bundle,
24
but I'd prefer not to expand the volumes from three to
25
eight or something or whatever it becomes. 38
1
MR THOMPSON:
2
MR JUSTICE LEGGATT:
3
MR BRENNAN:
4
Yes.
We'll work on that as best we can. Thank you.
The minutes go on to record that:
"The exclusivity period contained within the heads
5
of terms would expire in 14 days.
6
should approach the city council to allow them to
7
exercise their right of pre-emption.
8
wish to do so, pressure would need to be applied to
9
allow the SISU purchase, assuming that the security
10
It was agreed that we
Should they not
issue could be settled."
11
Paul Harris, the city council, and SISU met on
12
24 July.
13
discussion document that was prepared in advance of that
14
meeting by, it seems, Coventry City Football Club.
15
in the third volume, tab 35.
16
now.
17
The lack of progress was evident in the
It's
Perhaps we can turn to it
It's called "Transaction update". It has sensibly been broken down into sections.
The
18
first section, sensibly enough, is the Higgs charity.
19
The heads of terms, one can see "Status: completed".
20
The next point was stage 1, "Status: in process".
21
all the other matters were not yet started.
22
author of the document was aware that on 31 July 2012,
23
exclusivity would end.
24 25
MR JUSTICE LEGGATT:
And
But the
This was a timetable somebody had done,
envisaging that everything could be achieved by the end 39
1
of that period?
2
MR BRENNAN:
3
MR JUSTICE LEGGATT:
4 5
It's not entirely clear. I'm looking at the start and finish
dates in the last two columns. MR BRENNAN:
It might be regarded, with the benefit of
6
hindsight, as a trial of wishful thinking, but in
7
fairness to the author, I note that Mr Harris, who is
8
present at the meeting, in his e-mail to which this
9
document was attached, referred to it as a discussion
10
document, which --
11
MR JUSTICE LEGGATT:
12
MR BRENNAN:
13
MR JUSTICE LEGGATT:
14
MR BRENNAN:
Is he the author?
No, he wasn't. Do we know who is?
Well, it looks to be Coventry City Football
15
Club because the club's crest appears on the front page
16
of the transaction update.
17
MR JUSTICE LEGGATT:
18
MR BRENNAN:
I see.
And it is also in a very similar format to
19
other documents which we know to have emanated from the
20
football club.
21
MR JUSTICE LEGGATT:
22
MR BRENNAN:
Right.
It is apparent from the third page of this
23
document that SISU itself anticipated a need to extend
24
the exclusivity period because one can see that the date
25
for 25 July was to agree the extension of Higgs' 40
1
exclusivity to 17 July.
2
whose handwriting appears immediately thereafter and
3
I can't read it, though it may possibly say, "Take back
4
to trustee".
5
MR JUSTICE LEGGATT:
6
MR BRENNAN:
Unfortunately, I don't know
Mm-hm.
That interpretation is reinforced from the
7
terms of Mr Harris' e-mail to Mr Knatchbull-Hugessen,
8
which appears at tab 34, where he says:
9
"Please see attached the discussion document re the
10
SISU transaction process tabled at last week's meeting
11
with Coventry City Council.
12
pertinent to extending the exclusivity would need to be
13
approved by the trustees."
14
I stated that any agreement
He then reflects upon and considers whether or not
15
the exclusivity period should be extended by agreement,
16
and he suggests attaching a condition to it.
17
It is obvious from the second paragraph of that
18
e-mail that so far as these two directors of ACL were
19
concerned, one of whom was a trustee of the charity,
20
that the extension of the exclusivity period was by no
21
means a foregone conclusion.
22
the second paragraph that there looks to be developing
23
what one might describe as a Catch 22.
24
shareholders regard resumption of payments by the
25
football club to ACL to be the first step in the 41
It is also apparent from
The ACL
1
process, whereas perhaps SISU were regarding it as the
2
last step.
3
MR JUSTICE LEGGATT:
4
MR BRENNAN:
Right.
The looming expiration of the exclusivity
5
period certainly focused Mr Knatchbull-Hugessen's mind.
6
For his part, he took stock and set out his position in
7
writing.
8
a tour de raison of the position as he described it.
9
This was circulated internally by e-mail on
The result is what might be described as
10
30 July 2012.
11
tab 72.
12
The tour de raison is to be found at
This document was plainly never intended for public
13
consideration, it's marked "strictly confidential".
It
14
was written in the knowledge that the expiration of the
15
exclusivity period was imminent.
16
factual position in a manner that is, I submit,
17
uncontroversial.
18
ask you to turn to it, it's the third page under
19
the heading "Best outcome", the first paragraph
20
underneath that heading -- what Mr Knatchbull-Hugessen
21
characterises as a get-out-of-jail-free card.
22
get-out-of-jail-free card was the acquisition by the
23
city council of Football Investors Limited.
It rehearses the
It identified -- and perhaps I could
The
24
If one turns over to the fourth page, you can see
25
that it culminates in the requirement for a decision. 42
1 2
It says: "Decision for the trustees.
Do you want to go into
3
talks with the city council to take this proposition
4
forward?
5
SISU to extend the exclusivity period."
6
To do this we need to refuse any request from
My Lord, I hope to persuade you at the end of this
7
trial that that statement reflects accurately the proper
8
construction of the obligations to which the trustees
9
were subject by dint of the agreement.
10
There is one final matter that needs to be dealt
11
with in relation to this period.
12
pleaded case is that the claimants failed or failed to
13
fully cooperate with the defendant in the provision of
14
documents and information that enabled the defendant to
15
complete due diligence.
16
through in the defendant's skeleton argument.
17
learned friends put the position thus:
18
The defendant's
This allegation is followed My
"SISU Capital Limited and their advisers were
19
hindered by inaction and lack of co-operation in the
20
task by ACL's directors and shareholders."
21 22 23 24 25
The evidence for this is set out at paragraph 17.2 of Miss Deering's witness statement, she stays: "We never received full co-operation from ACL in this process." And she refers to an exhibit, tab 20, which we have 43
1 2 3 4
briefly turned to: "In retrospect, it appears the charity and the council had an alternative plan." It's not entirely clear what to make of that.
5
Ultimately, this is a matter of fact.
6
persuade you that the documents to which Miss Deering
7
refers tend strongly to suggest that Mr Harris was not
8
only being helpful, but that he was regarded by SISU to
9
be helpful.
10
We will hope to
Perhaps I can identify from tab 20 in the second
11
volume a small number, half a dozen e-mails.
12
page 458.
13
information list.
14
paragraph.
Firstly,
Miss Deering sent Mr Harris the due diligence That's apparent from the first
She asks in her final paragraph:
15
"Please let me know the best way of ..."
16
It says "releasing this information request",
17
I wonder if she intended to put "realising this
18
information request".
19
for help.
20
It matters not, it's a request
Over the page at page 457, one can see Mr Harris'
21
response.
22
the top punch hole, he says:
23
One can see from the third paragraph, just by
"I cannot comment on the content of your due
24
diligence file.
I can perhaps provide guidance on how
25
best you should proceed, especially given that almost 44
1 2 3
two weeks have expired of the exclusivity period." And he suggests a certain approach.
His e-mail
ends:
4
"Trust this is helpful."
5
Moving on, at page 454, the bottom e-mail on this
6
page.
7
available for a call with herself and Mr Fisher
8
tomorrow:
9 10 11
Laura Deering asks of Mr Harris whether he'd be
"We would like to discuss next steps with respect to due diligence." At page 450 -- my Lord, I note with embarrassment
12
that because the documents in this bundle are not
13
consistent in whether they're chronological or reverse
14
chronological order, I may have taken some of these
15
e-mails out of order, but it matters not.
16
a question of drawing attention to these e-mails in
17
particular.
18
Miss Deering to Mr Harris, point 2:
19 20
It's simply
At page 450, you'll see an e-mail from
"High-level due diligence list attached.
This is
a work in progress."
21
The final sentence of the paragraph:
22
"This is what drove the request from myself and Tim
23
to meet with Daniel directly."
24
And it goes on to thank him for his assistance:
25
"Many thanks for any assistance you can provide in 45
1 2
moving this forwards." One can see from the e-mail which precedes it --
3
it's very confusing, the times of these e-mail chains.
4
Shortly after that e-mail was sent, Mr Harris sent
5
Miss Deering an e-mail pointing out certain difficulties
6
that appeared to have arisen.
7
suggesting a way of moving this matter forward, and he
8
identifies those matters by reference to bullet points.
9
It is he who is
Two days later, at page 449, Mr Harris makes
10
enquiries as to whether, as he put it, she had any joy
11
addressing the points below.
12 13
MR JUSTICE LEGGATT:
fruitful to slog through this now, is it?
14
MR BRENNAN:
15
MR JUSTICE LEGGATT:
16
No.
MR BRENNAN:
18
MR JUSTICE LEGGATT:
20
I'm conscious there's a stenographer
who might like a few minutes' break.
17
19
I'm not sure it's going to be very
I'm sure he's not the only one. Would now be a time to do that?
Five
minutes. (11.55 am)
21
(A short break)
22
(12.00 pm)
23
MR BRENNAN:
May I turn now to the five-and-a-half month
24
period after the exclusivity period ended on
25
31 July 2012 to the discharge of the Yorkshire Bank loan 46
1 2
on or about 15 January. The issues of fact that will fall to be determined
3
largely concern the interpretation of events rather than
4
the events themselves.
5
"negotiations cease by mutual consent or acquiescence as
6
a result of irreconcilable differences", as it's put
7
in the defence.
8
negotiations terminated in whole or in part by reason of
9
demands for security by the claimants.
10
The pleaded defence talks of
In particular, the pleaded case is that
The defendant relies in particular in its pleaded
11
case on an e-mail of 7 August 2012.
12
desperately important.
13
not being able to find it anywhere in the trial bundle,
14
but it exists, it's attached to the particulars of
15
claim, which was the last place I looked for it, and
16
unfortunately it was after I produced the chronology, so
17
it doesn't appear in it.
18
the current pleading, it's in the first bundle,
19
section A, tab 4, page 49.
20
That e-mail is
One can imagine my distress at
If I could ask you to go to
This e-mail was drafted in response by a request
21
made by e-mail, which we needn't turn to, for an
22
extension of the exclusivity period.
23
Mr Knatchbull-Hugessen and sent on 7 August.
24 25
It was written by It says:
"I have referred your request to the trustees and write as follows." 47
1
Three points essentially:
2
"The trustees have seen no progress towards
3
a transaction with SISU.
For the transaction to move
4
forward, you will recall there was work needed to
5
provide better security for any annuity stream that
6
might be agreed.
7
that any thought has been given to this fundamental
8
matter.
9
hurdle, they would now consider an extension over the
The trustees have seen no evidence
Had they had any proposal to overcome this
10
period of exclusivity."
11
Next paragraph:
12
"The trustees wish to remain open to other
13
approaches, should they be made, as there is little
14
evidence that the period of exclusivity has been used to
15
any effect."
16
My Lord, we say that short of putting this in
17
demotic terms, all bets are off, the position could not
18
be clearer.
19
to be bound.
20
The trustees no longer regarded themselves
The ACL directors met.
Their position is evidenced
21
by Mr Knatchbull-Hugessen's note, which appears at
22
tab 73 in file 3.
23
it's broken down into three sections.
24
is --
25
MR JUSTICE LEGGATT:
It is a slightly unusual document,
Sorry, where is it? 48
The first section
1 2
MR BRENNAN:
Tab 73.
The top section is concerned with the
ACL board meeting that took place.
3
MR JUSTICE LEGGATT:
4
MR BRENNAN:
5
MR JUSTICE LEGGATT:
6
MR BRENNAN:
Whose document?
This is Mr Knatchbull-Hugessen's document. Right.
And we're only concerned with the first third.
7
One can date it firstly because it refers to the date
8
expressly, and, secondly, if that be doubted, the
9
meeting took place at half time and the second half of
10
the ladies' Olympic bronze match, which took place at
11
the Ricoh Arena, from which one can infer that the
12
directors were not fans of ladies' football.
13
Five points.
14
"SISU/football club to agree a deal on the interim
15 16
First matter, matter of urgency:
rent." It was said, second point, in return the directors
17
would instruct Wraggs, they were ACL's lawyers, that
18
at the hearing that was due to take place on the
19
following Monday, which concerned their demands for
20
payments which fell due under the agreement, the
21
football club would be given until 20 December to
22
perform on the contract.
23
the money:
24 25
In other words to come up with
"This will give a window of time for the City Council and the charity to agree a deal with 49
1
Yorkshire Bank and for SISU to put together a future
2
plan for ACL as we have required from them as the basis
3
of any deal."
4
3:
5
"Subject to formal political approval [which is
6
an important caveat so far as the council is concerned],
7
the council will consider funding a restructure of the
8
Yorkshire Bank debt, significantly de-risking the
9
position of ACL."
10 11 12
Fourth point is a technical matter regarding the basis upon which the loan would be provided.
Fifthly:
"Should SISU be able to meet all the requirements of
13
the proposed overall transaction in a way which is
14
acceptable to both shareholders, SISU will reimburse
15
the council for the cost of the restructure and the loan
16
will be discharged in full, freeing ACL for future
17
repayments."
18
In the meantime, and in parallel with this, SISU was
19
seeking to progress matters with the council themselves.
20
They entered into a heads of terms agreement on
21
2 August 2012.
22
advice to SISU regarding how best it might approach the
23
city council.
24
particular and the general.
25
Mr Harris' input was sought as to how a draft letter to
Paul Harris was, for his part, providing
Mr Harris' input concerned both the
50
As to the particular,
1
the council should be framed.
I shan't take you to the
2
e-mails now.
3
reflected a proposition regarding the acquisition of the
4
debt on a shared basis between SISU and the council, but
5
the initiative came to naught as it was rejected by
6
Chris West on 14 August.
That e-mail was sent on 10 August, it
7
As to the general help Mr Harris provided, his
8
advice was sought as to the bigger picture, and again
9
there's an e-mail that refers to that.
This e-mail
10
perhaps ought to be referred to because it is referred
11
to expressly in the defence and it is the second e-mail
12
upon which the defendants rely in order to substantiate
13
their allegation that there were irreconcilable
14
differences between the parties.
15
which is attached to the defence and the amended
16
defence.
17
page 51.
18 19 20
Again, it is an e-mail
It's in the first trial bundle.
It's at
Just below the top punch hole, Mr Harris makes the point: "It is important to recognise that the charity will
21
not dispose of its shareholding without a bulletproof
22
guarantee.
23
transaction, the deal is unlikely to progress."
24 25
Therefore unless this is a 100 per cent cash
MR JUSTICE LEGGATT: page.
Sorry, I think I may be on the wrong
Oh, below the punch hole, I see. 51
1
MR BRENNAN:
The extent to which Mr Harris was rendering
2
assistance to SISU is evident from the fact that he
3
provided what he described as "personal (confidential)
4
advice".
5
but if I was you, this is what I would do.
6
In other words, look, it's a matter for you,
That was the 16th.
We move now to events of the
7
17th.
These events are particularly important to the
8
defendant's case because it is the defendant's case, as
9
it's put in my friend's skeleton argument, that it is
10
the trustees' conduct from 17 August onwards that gives
11
rise to the breach.
12
It's important, I think, to make clear that it is
13
apparent from the defendant's skeleton that the plan of
14
which they complain was conceived, even on their
15
analysis, by Coventry City Council, not by the charity
16
or anybody associated with them.
17
rely upon a document entitled "The proposed way
18
forward", which was written on 15 August 2012 by
19
Chris West, head of legal and finance at the council,
20
and was intended as a note for Mr Martin Reeves, the
21
chief executive of the council, which my friends
22
describe in their skeleton argument as "the August
23
report".
24
third volume at tab 45.
25
In particular, they
Perhaps I can turn to it now.
It's in the
This comment was considered sufficiently important 52
1
by my friends to warrant extensive quotation from it.
2
I know my Lord will have already read it, but in
3
fairness to my friends, could I take you to the extracts
4
from it that they highlight in their skeleton argument?
5
The first two paragraphs rehearse the position, which is
6
characterised as stalemate.
7
provides an explanation which, in Mr West's opinion, is
8
why the deal was not possible.
9 10 11 12 13 14 15
The second paragraph
Mr West refers in the third line of the third paragraph beginning "Since then, Martin" to: "There is very significant animosity in the group towards SISU." In the paragraph below that, beginning "I have been giving significant thought", it reads: "I have been giving significant thought over the
16
last few days to an alternative way forward to that
17
I was pushing with SISU last week.
18
come as no surprise to any of you as I have put it
19
together during a number of discussions."
20
The details will
It's not for me to say, I haven't taken instructions
21
on the author of the note, but I know that the note was
22
intended for the attention of Martin Reeves, one can see
23
that in the top left-hand corner, and was to be
24
circulated to other officials in the council.
25
MR JUSTICE LEGGATT:
Just repeat what Martin Reeves' 53
1 2 3
position was? MR BRENNAN:
Martin Reeves, chief executive.
Chris West,
head of legal and finance.
4
MR JUSTICE LEGGATT:
5
MR BRENNAN:
Right.
"My proposal and its key features as are
6
follows.
7
then refinance the Yorkshire Bank loans with ACL, but
8
with support and agreement from the Higgs charity as our
9
partner."
10
The council should unilaterally buy out and
Turning over the page, my friends draw attention to
11
the bullet point at the top of the second page, and in
12
particular the first sentences:
13
"In parallel, I believe that we need to put together
14
some thinking about how the council and the Higgs
15
charity jointly should approach Yorkshire Bank.
16
need to paint a picture of significant potential woe for
17
the future of ACL and the lack of rent agreements and
18
the court judgment against the football club will
19
of course be of significant help here."
20 21
It being the case that ACL had already obtained judgment by this point.
22
MR JUSTICE LEGGATT:
23
MR BRENNAN:
24 25
We will
What, for unpaid rent?
Unpaid rent.
If I could ask you to turn over the page, page 724, third bullet point: 54
1
"This action is likely to be regarded by SISU as
2
a very hostile act.
3
ACL's loan and, as major shareholder, is acting with the
4
complete support and agreement of the other shareholder.
5
I believe it is entirely appropriate for us to seek to
6
have this negotiation with the bank."
7 8
However, ultimately this loan is
He expresses the view at the bottom of that bullet point that:
9
"I think it is extremely likely that Yorkshire Bank
10
would want to do a deal, although probably not at
11
anything like the values that SISU believe, which they
12
are currently now talking around ÂŁ2 million to
13
ÂŁ5 million."
14
My friends emphasise the next bullet point:
15
"Having done this deal with Yorkshire Bank, it is
16
possible that SISU will put the club straight into
17
liquidation.
18
them to put the club on the market."
19 20
Alternatively, we may be able to persuade
The final bullet point on that page, right at the bottom, Mr West stated:
21
"I think we will need an agreement with the Higgs
22
charity about how we handle this.
23
..."
24 25
Options may include
And he gives three options and, in particular, point C.
Could I explain the significance of this? 55
1
"It is said an agreement that any consideration that
2
they receive above the amount that they agreed with SISU
3
should be deployed on projects specifically agreed with
4
the city council."
5
The point here was this --
6
MR JUSTICE LEGGATT:
7
MR BRENNAN:
Who is they, sorry?
The Higgs charity:
8
The point here was this: if the debt was going to be
9
paid off, the charity's interest in FIL would appreciate
10
in value because ACL would be less indebted and if they
11
were to sell their shares, they may get more for their
12
shares than SISU looked like putting on the table, and
13
the city council were not unaware of the fact of that
14
upside, to use the modern jargon, and their proposal was
15
that that windfall would be deployed on projects
16
specifically agreed, which met the city council's and
17
the Higgs charity's objectives.
18
something of a bone of contention between the
19
city council and Higgs, and the language that they talk
20
about was paying reparations, rightly or wrongly.
21
that is very much a side issue.
22
MR JUSTICE LEGGATT:
23
MR BRENNAN:
24 25
This proposal became
But
Okay.
The final bullet point my friends emphasise:
"I think that the reality of the situation is that the price Higgs have negotiated, if not the payment 56
1
mechanism, is very significantly above the market value
2
and, even after the restructure I am proposing, the
3
charity would struggle to get much above this."
4 5 6
At the foot of that page, final paragraph, my friends emphasise: "In parallel, my proposal is that we continue to
7
discuss the main deal with SISU to keep communication
8
open with them.
9
of information about ACL and due diligence, and they
This is going to mean further release
10
will certainly want to come and talk to
11
Daniel/John Street ..."
12 13 14
Daniel was Daniel Gidney.
He was a paid executive
of ACL: "... to get some deeper understanding of operations.
15
This is likely to be very badly received by
16
Daniel Gidney and John Street and we will need the
17
further support of the shareholder directors to insist
18
that the process is carried through."
19 20 21 22 23
That obviously involved Mr Knatchbull-Hugessen and Mr Harris: "The alternative is to consider a stand-off with SISU.
I think this will be difficult to maintain."
Other important documents, both before and after
24
that report, are as follows.
25
e-mail from Mr Harris at tab 42, which I think we may 57
As to before, there is an
1
have already turned to, which reports back on
2
a conversation which Mr Harris had had with Chris West
3
on that date, which is a few days before the note, and,
4
as discussions stand, he said the parties are at
5
stalemate and he is then applying his mind to the
6
various different possibilities that may apply.
7 8
What is clear from the foot of that note on page 716 is that, the last two lines:
9
"Item 3 above may well satisfy the charity's exit
10
position and may also be the only palatable all-round
11
solution, although this will be a difficult pill for
12
Coventry City Council to swallow."
13
It is perfectly clear from these internal documents
14
that the shareholders had a clear eye on their own
15
interests.
16
So far as documents after the August report, my
17
friends turn to an e-mail which Mr Higgs, who had
18
recently become a director, sent on 17 July.
19
tab 46.
20
it clear, that Chris West's August report, as it's
21
described, was circulated on the following day to
22
Mr Knatchbull-Hugessen and Mr Knatchbull-Hugessen
23
circulated it to the trustees.
24 25
That's at
I should point out, if I haven't already made
MR JUSTICE LEGGATT:
Right.
The following day being the
16th? 58
1
MR BRENNAN:
The 16th.
2
MR JUSTICE LEGGATT:
3
MR BRENNAN:
Yes.
So we're at tab 46? Firstly, could I draw your attention to
4
the e-mail in the middle of the page.
5
slightly difficult to follow as these e-mails tend to
6
be, but the bottom half of the middle section is
7
actually Mr Higgs' e-mail of the 16th at 6.27 pm in
8
which he thanks Mr Knatchbull-Hugessen for the report.
9
His third paragraph, which is parallel with the bottom
10 11
Again, it's
punch hole states: "I agree with his assessment [that's Chris West's
12
assessment] that decisive action is required in relation
13
to the Yorkshire Bank loan."
14
If I could ask you to turn to the e-mail at the top
15
of the page, which he sent the following day.
16
obvious, having a full-time job, he gave further
17
consideration to this report once he got back home, or
18
alternatively once he finished his work in the office,
19
because it was after midnight.
20
17th, the second paragraph says:
21
Council is a good option.
23
and we can share in upside."
25
So we're now into the
"Basically, I think holding tightly to Coventry City
22
24
It's
ACL will work if they invest
The upside, of course, is the appreciation in value which would accrue upon the discharge of the loan. 59
1
A meeting took place after the circulation of
2
the August report on 20 August.
3
year, neither Mr Knatchbull-Hugessen nor Mr Harris were
4
able to attend, and therefore they sent
5
PricewaterhouseCoopers to attend the meeting with
6
Coventry City Council on their behalf.
7
that took place on 20 August are evidenced in a note
8
that Chris West provided to the ACL directors shortly
9
thereafter, which appears at tab 51.
10
It being that time of
The discussions
This note, which is described as a draft,
11
effectively sets out the ground in support of a proposal
12
which Coventry City Council's nominated directors would
13
advance at the forthcoming board meeting.
14
is summarised at paragraph 12:
15
The decision
"Are the board prepared to support the proposal
16
outlined in this note, ie that ACL, the Higgs charity
17
and the council jointly approach the bank with a view to
18
the council paying off the loan at a discount and
19
refinancing a new secured loan to ACL at that discounted
20
amount?
If so, there are certain matters."
21
Can I draw your attention to 15, 16 and 17?
15:
22
"Do the board agree that in the meantime it will
23
release further information to SISU and hold meetings
24
with their advisers as required so that the original
25
deal with SISU can also be progressed?" 60
1
It should be emphasised that at this point the
2
proposal put forward by Chris West did not shut its mind
3
to the possibility that in due course SISU would come
4
back on board, though there was another possibility that
5
SISU would simply sell its interest to allow somebody
6
else to come back on board.
7
16:
8
"Do the board agree to extending the period we allow
9 10
for the football club to perform its rent by a further four weeks?"
11
17:
12
"Do the board agree, subject to all stakeholders
13
agreeing, that we move will all speed following
14
3 September?"
15
Paul Harris' response to this e-mail is at tab 50.
16
He makes a number of observations on the points that are
17
outlined in the note, which we've just referred to, and
18
in relation to paragraph 15 he says:
19 20 21
"I would need to understand the ethical impacts and tactics in more detail before agreeing." That is Mr Harris expressing his scruples regarding
22
the proposal that the board agree to release further
23
information to SISU.
24 25
Could I draw your attention to the passage next to the bottom punch hole? 61
1
"We should not underestimate the reaction from
2
Joy Seppala as if the intent is never to do business
3
with SISU, then ACL/shareholders will need to engage in
4
open and honest conversations as soon as possible."
5
MR JUSTICE LEGGATT:
6
MR BRENNAN:
Right.
In the event, agreement was reached.
The rest,
7
frankly, is history and not in dispute.
Negotiations
8
took place with the bank and I'm not sure it's entirely
9
necessary to explain the toings and froings with the
10
offers and acceptance, save to draw attention perhaps to
11
a meeting that took place on 10 December in 2012, at
12
which the bank were present, and there was there to be
13
found represented SISU/the football club's interest on
14
one hand and ACL's interest on the other.
15
is one of the documents, minutes, the record of which is
16
not in the trial bundle, but one's impression from that
17
meeting is that Yorkshire Bank were present, witnessing
18
a dispute between the parties as to the rent.
19
the only matters that were discussed.
20
Again, this
They are
It looks like, reading between the lines, that the
21
bank were seeking to bang the parties' heads together
22
and/or make an assessment of what the future
23
developments might bring.
24 25
In the event, matters came to a head with Coventry City Council instructing PricewaterhouseCoopers 62
1
to negotiate with Yorkshire Bank.
Offers were made and
2
rejected, and at a meeting on 20 December, which took
3
place at PricewaterhouseCoopers' offices in
4
Castle Donnington, Yorkshire Bank and Coventry City
5
Council thrashed out their differences.
6
Mr Knatchbull-Hugessen travelled to
7
Castle Donnington, but did not attend the meeting.
8
He was there to represent FIL's/the trustees' interests
9
should it be necessary to do so.
10 11
In the event he simply
wasn't called upon. On 21 December, confirmation was provided that the
12
city council was offering 14 million and, later that
13
day, by e-mail, ÂŁ14 million was accepted.
14
Could I now draw your attention to another important
15
document from the defendant's point of view, which is
16
in the third bundle, tab 63?
17
opening of this, we referred to the joint venture
18
agreement and I said it would be necessary to come back
19
to it, and it is.
20
MR JUSTICE LEGGATT:
21
MR BRENNAN:
You'll recall that at the
Sorry, just give me a moment.
(Pause)
This records a meeting with the board of the
22
trustees held on the 14th day of January where there was
23
presented a draft amendment and restatement agreement
24
relating to the joint venture agreement.
25
paragraph 1.2 it records: 63
At
1
"As a result of a refinancing arrangement,
2
the council has agreed to buy out the debt owed to ACL
3
to Clydesdale Bank on favourable terms for ACL.
4
The council will also advance ÂŁ400,000 as a working
5
capital facility to ACL.
6
venture agreement, it was not possible for a shareholder
7
to lend money to ACL.
8
the restatement agreement was to enable a shareholder to
9
advance money to ACL.
Under the original joint
The purpose of the amendment to
The board took cognisance of
10
a report from their solicitors, dated 11 January,
11
advising that it was appropriate for the trust to enter
12
into and for Football Investors Limited to enter into
13
the agreement under consideration."
14 15 16
And resolution was made that the agreement be executed by two of the trustees. The evidence does not disclose what in fact
17
Miss Seppala's reaction to these events was.
18
part, on 31 January, Mr Knatchbull-Hugessen wrote to
19
Miss Seppala, inviting it to state its intentions
20
regarding the abortive costs.
21
MR JUSTICE LEGGATT:
22
MR BRENNAN:
23
MR JUSTICE LEGGATT:
24
MR BRENNAN:
25
For its
What date was that letter, sorry?
31 January. Right.
Again, these letters are, with one exception --
actually, I say one exception, it may be two exceptions 64
1
because some of the correspondence was attached to the
2
particulars of claim.
3
MR JUSTICE LEGGATT:
4
MR BRENNAN:
5
Back to volume 1?
Volume 1, yes.
Section A, tab 1, page 10.
That letter, written by a layman,
6
Mr Knatchbull-Hugessen, to Miss Seppala, sets out in
7
broad terms the claimant's case.
8
trustees, regard this litigation as a simple matter of
9
debt recovery.
The claimants, the
Evidence by way of enclosure was
10
provided to that letter and the professional fees in
11
question.
12
Answer to that letter came there none.
On 26 February of that year, Brindley Twist Tafft
13
and James, the trustees' solicitors, at least the local
14
Coventry firm who were then instructed by the trustees
15
on this debt recovery action, wrote.
16
page 18 in the tab that we're looking at.
17
a formal demand giving warning that:
18 19 20
Their letter is at And they made
"If payment is not received in seven days, we are instructed by our client to commence legal proceedings." On 14 March, having not actually received
21
a response, they wrote again in terms that are familiar
22
to solicitors.
23
back crossed with the trust solicitors issuing
24
proceedings, and it was dated 21 March.
25
found at tab 2 in that part of the bundle that we're
In the event, the response that came
65
It's to be
1
looking at.
It is evident that SISU Capital Limited,
2
instructed Speechly Bircham, who have been their
3
solicitors at virtually all material times since the
4
very early days when Simmons & Simmons were involved,
5
which is a long time ago, setting out the basis upon
6
which they say that no payment was due.
7
which that basis materially departs from the basis upon
8
which it is now said that no payment is due is a matter
9
which can be explored in cross-examination.
10
MR JUSTICE LEGGATT:
11
MR BRENNAN:
The extent to
If it's relevant.
Insofar as it's relevant.
We say there is
12
a marked difference between the case then advanced and
13
the case now being advanced.
14
My Lord, so far as the matters of fact are
15
concerned, could I make the following four points?
16
focusing now upon the counterclaim.
17
is that -- and I quote:
18
I'm
The pleaded case
"In providing prior approval for ACL to borrow money
19
from the council, the claimants acted or procured that
20
other parties under their control acted in a manner
21
calculated to prevent the defendant agreeing
22
a transaction with Clydesdale Bank in relation to the
23
monies which ACL owed to Clydesdale Bank, unless to
24
prevent or materially to impede performance by the
25
defendants of the condition precedent." 66
1 2 3
MR JUSTICE LEGGATT:
I think it's helpful, reading that, for
me to have it open. MR BRENNAN:
Perhaps if I could ask you to turn to the
4
amended defence and counterclaim for the moment, which
5
is tab 4.
The counterclaim was a relatively --
6
MR JUSTICE LEGGATT:
7
MR BRENNAN:
8 9 10 11
Forgive me.
MR JUSTICE LEGGATT: MR BRENNAN:
Right.
This is the pleading currently before the
court. MR JUSTICE LEGGATT:
13
MR BRENNAN:
15
Well, it was amended in the sense
that the counterclaim was added in January of this year.
12
14
Tab 4 has the unamended version.
Right.
The term is set out at paragraph 24.
Paragraph 25 asserts that: "If, as the claimants aver, the transfer of the debt
16
from Clydesdale Bank to the council rendered compliance
17
by the defendants with the conditions precedent
18
impossible, a proposition which they do not accept, then
19
it is averred that the claimants breached the implied
20
term at paragraph 24 of its counterclaim.
21
in any event, the conduct of the claimants materially
22
impeded the performance of the condition precedent."
23
Further, and
The particulars of breach are set out in a separate
24
paragraph, that matters not.
25
relates to events of 2003, the second paragraph ditto, 67
The first paragraph
1
the third paragraph ditto.
The fourth paragraph,
2
uncontroversial.
3
before ACL could borrow any monies from anyone other
4
than Clydesdale Bank.
The claimant's approval was required
5
That allegation is at 30 and 31:
6
"It is as a matter of fact true that ACL entered
7
into a loan agreement with the council, by which it
8
borrowed 14.4 million.
9
council also repaid ACL's borrowing from
10
Clydesdale Bank."
11 12 13
On or around that day, the
They say at paragraph 31, this is the crucial bit -perhaps I could invite the court to read it. MR JUSTICE LEGGATT:
Yes.
(Pause)
14
The point is agreeing ACL can borrow money from
15
the council, that's to enable the loan to be repaid, is
16
it?
17
MR BRENNAN:
Yes.
Although it's not referred to expressly,
18
that must be a reference to the amendment and
19
restatement agreement, without which the transaction
20
would not have been possible, or it would have been
21
possible, but it would potentially would have been void.
22 23 24 25
In the logic of the pleading, that is alleged to be an act of bad faith. MR JUSTICE LEGGATT:
That's one way it's put.
It's also
said that it prevented the condition precedent from 68
1 2
being fulfilled and therefore -MR BRENNAN:
Yes.
At the moment I have more than one gun
3
pointing at me and, until the bad faith gun is put down,
4
I shall regard it as being a potentially fatal weapon
5
in the defendant's armoury.
6
The skeleton is helpful because my friend's skeleton
7
states that they do not accept that
8
Mr Knatchbull-Hugessen or Mr Harris are telling the
9
truth when they say that when they made the decision in
10
their capacity as directors of ACL, that they were
11
acting in their capacity as directors of ACL.
12
MR JUSTICE LEGGATT:
13
MR BRENNAN:
What decision?
The language that they use is at paragraph 80
14
in their skeleton argument.
15
because what I have sought to do is summarise it, but
16
the language is, if I may say, very elegantly put, but
17
the point is finessed.
18
MR JUSTICE LEGGATT:
19
MR BRENNAN:
20 21
It repays close attention
Sorry, did you say paragraph 80?
Paragraph 80, page 27.
Turning over the
page -- well, it starts at the bottom of ... "The claimant's protestations that in their dealing
22
with the council [so the claimants, that's all four
23
trustees] in respect of the latter's plan to buy out the
24
Yorkshire Bank loan by making its own loan to ACL,
25
Messrs Harris and Knatchbull-Hugessen were acting solely 69
1
in accordance with their duties as directors of ACL and
2
without regard for the interests of ACL."
3
That's what the trustees are saying.
4
case.
5
protestations are not credible.
That is our
It is said in the skeleton that those
6
MR JUSTICE LEGGATT:
7
MR BRENNAN:
Right.
This way of putting the case is, I respectfully
8
observe, not entirely clear to the reader what precisely
9
is being alleged.
Is it accepted that
10
Mr Knatchbull-Hugessen and Mr Harris were acting in some
11
part in accordance with their duties as directors of
12
ACL, I ask rhetorically, or if so to what extent?
13
It is equivocal as to whether it is being alleged
14
that Mr Knatchbull-Hugessen or Mr Harris were guilty of
15
dishonesty or negligence.
16
of dishonesty, there is bluntly no forewarning of how
17
this case will be put.
18
of enquiry extends a lot further than merely the
19
decision to execute the amendment and restatement
20
agreement.
MR JUSTICE LEGGATT:
22
MR BRENNAN:
24 25
What is plain is that the focus
It refers to the dealings with the council.
21
23
If it is to be an allegation
Right.
Moving on from -- Mr Knatchbull-Hugessen is not
a trustee, Mr Harris is. Moving on from Mr Harris, paragraph 81 of the skeleton puts the position thus: 70
1
"Likewise, the protestations by the other trustees
2
[so by a process of elimination that must be
3
Mrs Knatchbull-Hugessen, Mr Higgs and Mrs Barlow] and
4
particularly Mrs Knatchbull-Hugessen and Mr Higgs that
5
they did not seek to tell, direct or instruct
6
Messrs Harris and Knatchbull-Hugessen how they should
7
act qua directors of ACL to seek to portray a picture of
8
the trustees of the charity as pure bystanders,
9
disinterestedly observing the unfolding drama."
10
Again, if I may say, that prose is beautifully
11
elegant, but it is not an allegation; it is a comment on
12
the evidence.
13
Quite how the case is being put against those other
14
trustees, and in particular Mrs Knatchbull-Hugessen and
15
Mr Higgs, is, I respectfully submit -- and I acknowledge
16
the fact that neither of my learned friends had any part
17
in the pleading itself -- simply impossible to fathom.
18 19 20
MR JUSTICE LEGGATT:
Well, they're applying for leave to
amend the counterclaim. MR BRENNAN:
Yes.
We'll turn to that.
21
saying it's not their draft.
22
critical of their draftsmanship.
23
I think I'm right in
I'm not being personally
Might I finally mention Mrs Barlow?
She became
24
a trustee even later in the piece than Mr Higgs did.
25
She too faces a pleaded allegation of breach of 71
1
contract, which includes an allegation, as it's put at
2
its highest, of bad faith, and it's said she should be
3
jointly and severally liable for ÂŁ290,000 of damages.
4
How the case is put against her, frankly, my Lord, your
5
guess is as good as mine.
6
If each of the trustees had exercised their
7
entitlement to be individually represented, each counsel
8
would be undergoing, seeking the painful and laborious
9
process of picking apart the case, such as it is,
10
against each trustee individually and focusing like
11
a laser beam on the evidence in support of the
12
allegations that have been put.
13
My Lord, I shall save you the laborious synthetic
14
chorus of excoriation in relation to the pleading.
This
15
is a matter to which I believe we must return when the
16
court hears my friend's application to amend.
17
From the claimant's point of view, if the terms
18
which the defendants contend were incorporated and have
19
been breached, what losses, if any, flow from that
20
breach?
21
together with disclosure of certain invoices upon which
22
the schedule is based.
23
witness statement of Mr Carter-Silk in support of the
24
application to amend, it was pointed out at the
25
conclusion of the disclosure process by the trustees'
We have a schedule.
The schedule was provided
As is candidly accepted in the
72
1
solicitors that none of the invoices were addressed to
2
the defendant.
3
Absent permission being granted to introduce new
4
parties or the application for permission to amend, it
5
must follow, we say, that the counterclaim would be
6
restricted to an award of nominal damages for breach of
7
contract.
8 9 10 11 12
My Lord, I'm conscious of the time.
taken up rather more time, I suspect, than was necessary or desirable.
I'm sorry for that.
MR JUSTICE LEGGATT:
MR BRENNAN:
14
MR JUSTICE LEGGATT:
16
No, I don't think so.
It's helpful to
see what the chronology of events is first.
13
15
I have perhaps
Unless I can be of further assistance. Have you discussed a proposed timetable
for the trial between you at all? MR BRENNAN:
I don't want to prejudge events.
The position
17
will appear a lot clearer after the application to
18
amend, I suspect.
19
tight, very tight.
20
MR JUSTICE LEGGATT:
21
MR BRENNAN:
We have discussed timings and it's
All right.
I know my friend expects -- and it seems to me
22
perfectly reasonable -- to be two, two-and-a-half hours
23
with Mr Knatchbull-Hugessen, the first witness, and
24
Mr Harris, the second witness, less so with others, but
25
all the defendants will be cross-examined. 73
It's
1
thought, for example, Mrs Barlow would be 30 minutes
2
in the box.
3
The position is tight.
For my part, given the nature of my case, I will
4
perhaps have to be not quite so lengthy with
5
Miss Deering, but I've said that sort of thing before
6
and been proved wrong.
7
Miss Deering as my friends propose to be with the main
8
witnesses for the claimant.
9
MR JUSTICE LEGGATT:
Right.
I won't be any longer with
We'll revisit that again before
10
the start of the evidence and see where we've got to
11
then.
12
Thank you very much.
Mr Thompson?
13 14
Submissions by MR THOMPSON MR THOMPSON:
Yes, my Lord.
One apology I should make
15
is that the proposed amendment is quite difficult to
16
read and one thing that may be useful is to hand up
17
a version in a more conventional marked up form where
18
your Lordship can see --
19
MR JUSTICE LEGGATT:
20
MR THOMPSON:
21
MR JUSTICE LEGGATT:
22
MR THOMPSON:
23
What's been added?
Yes, what's been added. All right, thank you.
(Handed)
I don't know where your Lordship wants to put
that.
24
MR JUSTICE LEGGATT:
25
MR THOMPSON:
Wherever you'd like me to.
Tab 4 for now? 74
1
MR JUSTICE LEGGATT:
2
MR THOMPSON:
I'll put it at the front of tab 4.
My Lord, I'm aware of the time.
Your Lordship
3
will find that the application to amend itself appears
4
at bundle 1, tab C3.
5
parts.
6
being members of the SISU Group, namely the SISU Capital
7
Master Fund Limited, ARVO Master Fund Limited, Sky Blue
8
Sports and Leisure Limited, and Otium Entertainment
9
Group Limited.
It is an application in three
First of all, to add a number of third parties,
Those being group companies who are
10
directly involved in the operation of the football club,
11
essentially.
12
addressees of various invoices in relation to this case
13
and whose role within the group is explained in
14
Miss Deering's witness statement.
15
It's those companies that were the
The application is supported by the third witness
16
statement of Mr Carter-Silk, which is at pages 161
17
through to 168 of that tab, where he explains the course
18
of events and exhibits various correspondence,
19
essentially consequent on disclosure when this issue
20
arose.
21
following, and one of the points that Mr Carter-Silk
22
makes is that this was also sent to the claimants under
23
cover of a letter dated 26 February 2014, so that
24
although the application itself was made on 6 March, the
25
claimants had notice of the matter with effect from
Then the draft pleading is at pages 174 and
75
1 2
26 February, so in advance of the witness statements. We say that this proposed amendment falls
3
essentially into three or possibly four categories.
4
First of all, there was an adjustment made to my learned
5
friend's case about how the loan was repaid
6
in January 2013.
7
repayment was by the council, but it then emerged from
8
the documents that what had happened was the council had
9
made a loan to ACL and ACL had then been in a position
10
Initially, he had said that the
to discharge the loan.
11
MR JUSTICE LEGGATT:
12
MR THOMPSON:
So there's that amendment.
So you're taking account of that?
Yes, and I think that matter's probably not
13
controversial.
14
it's covered by the amendments or whether the amendments
15
go beyond that.
16
What may be controversial is how far
Secondly, there are amendments based on disclosure,
17
and I don't think Mr Brennan's addressed that, but
18
I suspect that may not be very hotly contested either.
19
In particular, he referred to the ARA document, and
20
I think that issue only really arose, in our
21
understanding, once we saw the disclosed document that
22
Mr Brennan took you to about the 14 January, so we see
23
that as one of the elements in our pleaded case.
24
MR JUSTICE LEGGATT:
25
MR THOMPSON:
Yes.
There are some clarificatory amendments, 76
1
we would accept, and we consider that that's of
2
assistance to your Lordship and should be permitted on
3
those grounds.
4
controversially, the addition of the third parties.
5
I can just set out briefly why we say that that's
6
appropriate.
7
Then finally, and probably most If
First of all, I think your Lordship has already seen
8
the indicative term sheet, and I think you indicated
9
that you'd read it already.
10
MR JUSTICE LEGGATT:
Yes.
11
MR THOMPSON:
12
defined.
It may be worth just looking at that very
13
briefly.
It's in various places in the papers.
14
example, it's exhibited to the particulars of claim.
You'll recall that SISU is rather strangely
15
MR JUSTICE LEGGATT:
16
MR THOMPSON:
For
Yes, I've got it there.
One finds that the definition of SISU is
17
rather curious.
I think it probably reflects the fact
18
that this is a short sort of pre-contractual document in
19
certain respects.
It says:
20
"SISU or another SISU Group company (SISU)."
21
And then it's used in that sense and then
22
"SISU Group" is referred to from time to time.
23
MR JUSTICE LEGGATT:
24
MR THOMPSON:
25
Yes.
Then at the end it is signed by "SISU Capital
Limited" or by "Laura Deering on behalf of SISU Capital 77
1
Limited", so it's not entirely clear who the first SISU
2
reference is to, but if one takes the first reference to
3
SISU and the expression "SISU or another SISU Group
4
company" to mean SISU Capital Limited, then "another
5
SISU Group company" is presumably companies other than
6
SISU Capital Limited.
7
within the term, so it's not entirely defined who is
8
actually going to carry through with the SPA if it goes
9
ahead and who is bound by the provisions of the costs
10
and who has the benefit of the exclusivity provision.
11
And all of those are comprised
So in one sense, this is simply a technical
12
amendment to reflect the rather unclear terms of the ITS
13
itself.
14
a point that's arisen in correspondence in the light of
15
disclosure and to avoid what could be a somewhat arid
16
legal debate about the operation of agency in the
17
particular circumstances of this case where the
18
claimants have sued SISU Capital Limited on the basis,
19
presumably, of Laura Deering's signature to the ITS,
20
whereas it is possible that in reality the correct party
21
is either undefined or one of the SISU Group.
22
the cleanest response that we could think of was to
23
identify the four SISU Group companies who were actually
24
likely to be involved as reflected in the invoices, and
25
we've applied to add them to the proceedings.
In a second sense, it's really to address
78
And so
It seemed
1
to us that that was the best way to go to limit the
2
scope of debate.
3
That sort of serves to open the matter, and I see
4
the time.
5
helped to look at the documents over the short
6
adjournment.
7
I don't know whether your Lordship would be
MR JUSTICE LEGGATT:
Yes, I think I probably would.
8
read the draft defence and counterclaim.
9
again.
10 11
I have
I'll do so
One thing I'm interested in is what further
particulars are being alleged or breached. MR THOMPSON:
Certainly, my Lord.
They primarily arise out
12
of the disclosure.
That's the reference at 43 in
13
particular and 41.
I'm sorry, I've taken it in the
14
wrong order.
15
surrounding the ARA and the amendment to the joint
16
venture agreement.
17
that is because I think Mr Brennan effectively opened
18
that issue.
19
the case that Mr Brennan addressed by reference to the
20
various documents from Mr West and Mr Harris in the
21
middle of August 2012.
22
going to be embarrassed by either of those and to the
23
extent it's a expanded case, it reflects documents that
24
were given to us on disclosure rather than any changing
25
case.
38 to 41 is essentially about the events
I'm not sure how controversial
And indeed, the second at 43 is essentially
So we would say that he's not
79
1
MR JUSTICE LEGGATT:
But the nature of the case has changed
2
substantially, hasn't it, because in the existing
3
pleading what's alleged is just that, as a matter of
4
fact, the trustees did things which prevented the
5
conditions from being met and that that amounts to
6
a breach, whereas now there's all sorts of adjectives
7
attached to what they're said to have done, which
8
relates to their states of mind or characterisation of
9
their conduct as being in bad faith, which changes the
10
nature of the case quite significantly.
11
to say they did things which made it impossible to
12
fulfil the conditions and that, in those circumstances,
13
they're not entitled to get the costs and we claim
14
damages.
15
a reprehensible manner through dealings with the council
16
behind our back and that that is a breach of the term of
17
good faith.
18
MR THOMPSON:
It's one case
It's another to say they behaved in
Well, my Lord, I understand exactly what
19
your Lordship's putting to me.
20
you to two passages in the skeleton argument.
21
MR JUSTICE LEGGATT:
Mr Brennan has pointed
I'm looking at paragraph 43:
22
"... artificial, contrived and/or on a false basis."
23
Your counterclaim.
24 25
MR THOMPSON:
Yes, my Lord, I can see that that pleading and
also the amendment to 32 at the end could be said to 80
1
change the nature of the case, whereas I wouldn't
2
necessarily accept that any other part of it -- I don't
3
know whether over the short adjournment I can consider
4
our position on those two elements if they're of
5
concern.
6
MR JUSTICE LEGGATT:
It seems to me to be a pretty
7
fundamental point to get clear at the start as to
8
whether this case is about whether certain transactions
9
had the effect simply, as a matter of fact, of
10
preventing conditions precedent being fulfilled or
11
whether it's alleged that behaviour was in bad faith,
12
whatever exactly that may mean -- we can discuss that --
13
and that that is a breach of an agreement.
14
MR THOMPSON:
Yes, my Lord.
15
MR JUSTICE LEGGATT:
That totally changes the nature of
16
cross-examination for a start, I would have thought, and
17
maybe whether cross-examination is needed at all.
18
MR THOMPSON:
Yes, my Lord.
I wouldn't accept the last
19
proposition because the nature of the case -- and
20
I don't think my learned friend rejected that in the
21
first instance -- includes a positive averment of the
22
contractual term to conduct the negotiations in good
23
faith.
24
your Lordship, who obviously has expressed judicial
25
views on what that exactly means.
I would hesitate to make submissions to
81
But in my submission,
1
it doesn't necessarily follow that if you rely on a term
2
of good faith that you are going so far as to plead
3
conduct in bad faith.
4
MR JUSTICE LEGGATT:
No.
If my views are accepted, which
5
they may not be by others, it can cover a multitude of
6
different things, depending on the nature of the
7
contract and the context, which is why precision is
8
important as to what it's said to entail in any
9
particular case.
10
MR THOMPSON:
Yes, my Lord.
I certainly submit that it's
11
always been a core part of our case in the counterclaim
12
that this was a situation where we were being expected
13
to bear costs on various contingencies, and that it was
14
implicit in that obligation that the claimants would
15
conduct themselves in good faith in the sort of sense
16
that your Lordship has described at length in your
17
judgment.
18 19 20
What I think I should consider -- I'm conscious of the time. MR JUSTICE LEGGATT:
We'll revisit it again, but it's
21
helpful to know what we're going to go away and think
22
about.
23 24 25
MR THOMPSON:
I'll come back to on you that specific point
after lunch. MR JUSTICE LEGGATT:
What's going through my head as 82
1
something for you to both reflect on -- but only if it's
2
going to save time and not waste it -- is that I could
3
decide as a preliminary issue, if you like, at the
4
outset whether your term is to be implied or not.
5
MR THOMPSON:
Yes.
6
MR JUSTICE LEGGATT:
I'm not sure it will necessarily -It may not save time if you rely on all
7
the same things for your defence, as it were, that you
8
rely on as a breach of the implied term, but I'm not
9
sure whether you do because your defence is pleaded
10 11
rather differently from the counterclaim. MR THOMPSON:
Yes, but I think that it's been taken -- and
12
I think probably fairly taken -- that the core
13
submission underlying in particular paragraph 28 of our
14
defence has a good deal in common with the core
15
submission underlying the core part of our counterclaim.
16
MR JUSTICE LEGGATT:
Well, it may do, in which case all the
17
facts may amount to the same thing.
18
because that part of your defence isn't ... Which is the
19
key paragraph there?
20
MR THOMPSON:
21
MR JUSTICE LEGGATT:
I'm not quite sure
It's what is now paragraph 28. That, you see, is what I described --
22
it's all factual in a sense, but a pure matter of fact
23
as to whether what was done did render compliance
24
impossible or prevent it as opposed to an enquiry into
25
whether conduct was of such a nature as could be 83
1
described as not being in good faith.
2
MR THOMPSON:
Yes, my Lord.
3
MR JUSTICE LEGGATT:
Anyway, we can think about that.
We've
4
extended things for long enough.
5
finishing rather late, we'll resume at 2.10 if that's
6
not inconvenient at all, having thought about these
7
things.
8
Perhaps, as we're
(1.10 pm)
9
(The Short Adjournment)
10
(2.10 pm)
11
MR THOMPSON:
My Lord, we naturally considered the matter
12
with some care over the short adjournment.
13
to us that it might assist and clarify the position for
14
my learned friend if I suggested that we would not
15
pursue four of the draft amendments.
16
It occurred
In particular, we didn't think that in paragraph 31
17
it was necessary to pursue the amendments from line 4
18
onwards.
19
that --
The "in particular or", so it would leave it
20
MR JUSTICE LEGGATT:
21
MR THOMPSON:
Sorry, did you say 31?
Yes, my Lord.
So reinstating the word "in
22
particular", and taking out the word "or", and the
23
changed reference in the last line would obviously still
24
be there.
25
MR JUSTICE LEGGATT:
Right. 84
1
MR THOMPSON:
And we would not pursue the amendment to the
2
second sentence of 32, where there's an express pleading
3
of not being in good faith, so that in reality the
4
"materially impeding the performance" would constitute
5
the breach of the implied term.
6
MR JUSTICE LEGGATT:
Yes.
I was thinking to myself over
7
lunch what good faith means in this context.
It seems
8
to me that it means, in particular, or might be normally
9
understood to mean in this sort of contractual
10
negotiation, as a duty to disclose material information
11
to the other side, including the fact that you're
12
negotiating with somebody else.
13
MR THOMPSON:
My Lord, that is one element of it.
I think
14
another element, which in fact my learned friend has
15
pointed out by reference to the learned work of
16
Lord Justice Lewison, is that there's a readily implied
17
term not to act inconsistently with the performance of
18
the contract.
19
we would rely on.
20
MR JUSTICE LEGGATT:
21
relying on?
So that might be another element that
22
MR THOMPSON:
23
MR JUSTICE LEGGATT:
But that's the element that you're
Indeed. And if you're removing the words "good
24
faith", I would interpret that to mean that you're not
25
asserting a duty of disclosure, the first element that 85
1
I mentioned.
I say this because one theme of your
2
skeleton, as I read it, is an allegation that the
3
trustees were negotiating behind your back with
4
the council.
5
MR THOMPSON:
Yes, my Lord.
6
MR JUSTICE LEGGATT:
And I think it's very important to know
7
whether you're alleging that they had a duty not to.
If
8
so, then you're alleging that they were doing something
9
in breach of an obligation.
Otherwise it's simply
10
a matter of pejorative comment, if you like, about -- it
11
may have some moral significance, but none in law.
12 13
MR THOMPSON:
My Lord, in paragraph 43, if I may, if we go
to the end --
14
MR JUSTICE LEGGATT:
15
MR THOMPSON:
16
MR JUSTICE LEGGATT:
17
MR THOMPSON:
Yes.
-- and consider the matter overall. Yes.
It appeared to us that it wasn't necessary to
18
maintain the pleading starting in the second line of 43B
19
where it says:
20 21 22
"On an artificial, contrived and false basis, ie ..." And it would be sufficient and clearer to say, keep
23
the negotiations with SISU open, simply with no
24
realistic prospect of SISU still ... deleting the words
25
"no", "or" and "intention" in 43B. 86
And likewise, in
1
43C, deleting the words after "with SISU open" through
2
to "intentional", so it would say:
3 4 5 6 7 8 9
"... electing to keep negotiations with SISU open, creating sufficient time." And then in the closing wording on the following page, it could simply say: "... which was done without notifying or informing the defendant." The reason why I'm slightly hesitant at
10
your Lordship's intervention is that would retain the
11
failure to notify as an aspect of the breach of the
12
implied term, which --
13
MR JUSTICE LEGGATT:
You see, if you remove the words "and
14
was not in good faith" before the particulars, then
15
there isn't anything on which that's a particular of, is
16
there?
17
MR THOMPSON:
Indeed, that's why I was hesitant.
I think
18
that is part of our case, the failure to notify, and so
19
in that limited sense perhaps the amendment to 32 should
20
stand because to that extent we are alleging ... (Pause)
21
We're to some extent coming almost to submissions,
22
but it is part of my case that not only was there an
23
obligation not to materially impede, but there was an
24
obligation of candour, if I put it in that way, and that
25
does remain in the closing wordings of 43. 87
1
MR JUSTICE LEGGATT:
Well, it does, which is why it seems to
2
me either you're removing the words "not in good faith",
3
or you're not.
4
have nothing to stand on.
5
MR THOMPSON:
If you are, then the last words of 43 (Pause)
My Lord, the point that's being made to me
6
is that the positive averment of the implied term is at
7
31 and the particularisation of breach is at 43.
8 9
MR JUSTICE LEGGATT:
Right.
I'm not sure whether that's really an answer to the
10
point because if the breach doesn't allege anything
11
other than impeding performance of the conditions
12
precedent, then nor can the particulars of it prove any
13
more than that.
14
MR THOMPSON:
(Pause)
My Lord, I'm seeking to address what
15
I understand to be a concern, both of Mr Brennan and of
16
your Lordship.
17
MR JUSTICE LEGGATT:
18
to meet.
19
MR THOMPSON:
Which is that he knows what case he has
Well, indeed.
I could either specify the end
20
of 32 to make it clear that it was limited to the point
21
that your Lordship put to me about candour and openness,
22
or --
23 24 25
MR JUSTICE LEGGATT:
That is part of your case, is it, there
was a duty of candour? MR THOMPSON:
Yes, that is part of what we say went wrong 88
1
here.
2
costs because if we knew they were going to act
3
inconsistently with fulfilment, then that's one thing.
4
If we didn't know, then we were wasting our time for
5
a period of months doing things which we wouldn't have
6
bothered to do if we'd known they were a waste of time.
7
Indeed, that is fundamental to why we wasted our
MR JUSTICE LEGGATT:
But that's the nature of negotiations
8
if the other party hasn't promised not to do it.
But
9
you say you can spell out of these two terms, one of
10
which gives an obligation to negotiate in good faith for
11
six weeks, an implied term to negotiate in good faith
12
for as long as it takes?
13
MR THOMPSON:
For as long as there is a costs obligation,
14
which relies on the fulfilment of conditions precedent,
15
which require a degree of co-operation if they are going
16
to be achievable.
17 18 19
MR JUSTICE LEGGATT:
What's the point of having a six-week
obligation then if it goes on for as long as it takes? MR THOMPSON:
My Lord, the six-week obligation was
20
a negative obligation of exclusivity not to negotiate
21
with anyone else.
22
MR JUSTICE LEGGATT:
23
MR THOMPSON:
That was part of it.
That was the binding provision.
It's true
24
that there was a specific good faith obligation during
25
that period. 89
1
MR JUSTICE LEGGATT:
It's got two limbs, hasn't it?
One is
2
to only allow SISU to conduct due diligence
3
investigations; the other is to conduct negotiations
4
with SISU in good faith.
5
MR THOMPSON:
Yes, my Lord, with a view to agreeing and
6
executing the legal agreements within the exclusivity
7
period.
8
MR JUSTICE LEGGATT:
9
MR THOMPSON:
Yes.
So it was quite a focused term.
10
MR JUSTICE LEGGATT:
11
MR THOMPSON:
Yes.
In my submission, it's in no way inconsistent
12
with a broader obligation to act in good faith generally
13
as a condition for being liable for the charity's costs
14
in the event that the transaction didn't go ahead.
15
MR JUSTICE LEGGATT:
16
MR THOMPSON:
Right.
Because it's clear that the costs provision
17
continued at least up to the point of a transaction with
18
Clydesdale Bank, so I think that's part of my learned
19
friend's case that that was effectively an indefinite
20
liability.
21
MR JUSTICE LEGGATT:
But the way you have pleaded it is not
22
to say: if you want to get your costs you have to act in
23
good faith and if you don't act in good faith, you can't
24
get your costs; it's to say you have to act in good
25
faith and, if you don't, I get all my costs. 90
That's
1 2 3 4 5 6 7 8 9
something quite different, isn't it? MR THOMPSON:
My Lord, it certainly goes beyond the defence,
that's true. MR JUSTICE LEGGATT:
It's not even in the defence.
Perhaps
I'm being a bit technical about this, but -MR THOMPSON:
What was 21 and is now 28 is perhaps not the
most elegant pleading in the world. MR JUSTICE LEGGATT:
It's not only not elegant; it doesn't
have the words "good faith" in it.
(Pause).
It may be
10
you wish to advance this case, but at the moment your
11
pleading advances a case that if you don't act in good
12
faith, that disqualifies you from recovering your costs.
13
It's an independent obligation which gives rise to
14
a claim in damages at the moment --
15
MR THOMPSON:
Yes.
16
MR JUSTICE LEGGATT:
17
MR THOMPSON:
-- as your counterclaim.
Yes, and the point that your Lordship's
18
putting to me is that 28 is in a sense a narrower or
19
certainly a different --
20
MR JUSTICE LEGGATT:
21
MR THOMPSON:
22
MR JUSTICE LEGGATT:
Yes.
-- pleading. Which doesn't have the good faith
23
aspect, which is the one we've been discussing, where it
24
goes beyond not doing anything to impede and is
25
cards-on-the-table in the negotiation. 91
1
MR THOMPSON:
Yes.
Well, I wasn't at the moment seeking to
2
amend my defence, so I won't take that forward, if
3
I may, at this point.
4
MR JUSTICE LEGGATT:
I think the question --
I'm only raising it now because I think
5
it's quite important to know at the start of the case,
6
not only for Mr Brennan, but for me, exactly what your
7
case is so that when we have the evidence, I know what's
8
relevant and what isn't.
9 10
MR THOMPSON:
Yes, my Lord.
MR JUSTICE LEGGATT:
Maybe in a sense it depends on whether
11
there's a duty of good faith or not because it's obvious
12
from the correspondence I've been shown this morning
13
that there were some discussions that led up to the
14
agreement with the bank, which your clients weren't told
15
about, and so either there was a duty to inform them or
16
there wasn't.
17
I understand exactly what duty you are alleging and
18
where it goes, whether part of your defence or not.
19
you say you're not asserting that as part of your
20
defence, so a lack of good faith in that sense won't
21
affect the payment of the ÂŁ29,000, but it will give rise
22
to a claim for damages on your case.
23
MR THOMPSON:
So that's why I'm trying to make sure
Yes, I think what we're saying is -- and
But
24
your Lordship's put to me the "materially impeding"
25
could be regarded as part of an aspect of good faith, 92
1 2
but could be free-standing. MR JUSTICE LEGGATT:
3
call it.
4
MR THOMPSON:
5
Yes, it doesn't really matter what you
And at the moment we're essentially resting
our defence on that relatively narrow point --
6
MR JUSTICE LEGGATT:
7
MR THOMPSON:
Yes.
-- whether or not it's part of good faith.
8
But what I would accept is that we positively plead
9
a term of good faith in relation to the counterclaim and
10
an aspect of breach is the lack of candour in relation
11
to the negotiations with the council and the bank,
12
whereby we were effectively stood up for a period of
13
months so that we were continuing to consider that
14
we were part of a negotiation in accordance with the
15
heads of terms agreed with the council and the
16
indicative term sheet agreed with the trustees when in
17
fact that appears to have been discounted from the
18
middle of August by Mr West on behalf of the council and
19
increasingly, though perhaps reluctantly, by Mr Harris
20
and Mr Knatchbull-Hugessen on behalf of the trustees,
21
but with the informed consent of the other trustees.
22
That's the gist of our case, although clearly the detail
23
of it would need to be examined with Mr Harris and
24
Mr Knatchbull-Hugessen, who were the principal actors
25
during this period. 93
1
MR JUSTICE LEGGATT:
My difficulty at the moment is seeing
2
where you get that duty of good faith from.
3
understand a submission that it's a condition of getting
4
your costs, but that's not the case you're making.
5
I can't at the moment see what possible basis there is
6
for a free-standing duty of good faith to support
7
a counterclaim when there's nothing in the agreement
8
which says that's so, and the general position in
9
contract negotiations is that there is no such duty.
10
MR THOMPSON:
I can
I think the way we've been seeing it is we're
11
in a relationship that my learned friend puts forward as
12
conveying an ongoing liability for the trustees' costs
13
until a deal is done with the bank at least.
14
MR JUSTICE LEGGATT:
15
MR THOMPSON:
Yes.
We say it's implicit in that relationship that
16
they will act in good faith, in particular by not
17
undermining the possibility of our doing a deal with the
18
bank, but more generally that they will act in
19
a straightforward way towards us, failing which we will
20
end up wasting our costs pursuing a chimera,
21
effectively.
22
And that's a matter of which we complain.
MR JUSTICE LEGGATT:
So if they don't act in good faith,
23
they have to act in -- well, it's not a condition of
24
them getting their costs, but it does mean, because they
25
want their costs limited to ÂŁ29,000, as a sort of quid 94
1
pro quo for that, if they don't act in good faith, you
2
get all your costs unlimited in amount, and that can be
3
implied somehow in the agreement?
4
proposition?
5 6 7
MR THOMPSON:
That's the
I think that must be something like the
proposition, yes, my Lord. MR JUSTICE LEGGATT:
Right.
Should I hear Mr Brennan and
8
see what he does or doesn't oppose of your application
9
to amend; is that sensible?
10 11 12
elaborate anything further on it at this stage? MR THOMPSON:
May I just see if anyone wants me to say
anything else?
13 14
Or would you like to
(Pause).
No, I think it's Mr Brennan.
Submissions by MR BRENNAN MR BRENNAN:
My Lord, at the risk of not cutting straight to
15
the main point, which is the counterclaim first, would
16
it assist if I went from the top of the document just to
17
indicate what is and is not in dispute?
18
MR JUSTICE LEGGATT:
19
MR BRENNAN:
20
MR JUSTICE LEGGATT:
21 22
Yes.
No problem with paragraphs 2 and 3. Why don't you just say what you do have
a problem with and we'll take it that -MR BRENNAN:
Paragraph 4 is the agency point, paragraph 5 is
23
the contrary to the contract rights and third parties
24
point.
25
Paragraph 10, which is the construction point as to
Paragraph 6, which is the third parties point.
95
1
whether it was in particular the Yorkshire Bank or the
2
bankers for the time being.
3
paragraph 21 effectively are the same point.
4 5 6
MR JUSTICE LEGGATT:
Paragraph 10 and
Sorry, paragraphs 10 and 21, did you
say? MR BRENNAN:
Yes, I think that's right.
Paragraph 10 and 21
7
are what I would characterise in broad terms as the
8
"lenders for the time being" point.
9
MR JUSTICE LEGGATT:
10
MR BRENNAN:
11
MR JUSTICE LEGGATT:
12
MR BRENNAN:
13
MR JUSTICE LEGGATT:
14
That's what you object to?
I do, yes. Because you say it is unarguable?
Yes. Was it not that before in some shape or
form?
15
MR BRENNAN:
I don't believe it was, actually.
16
MR JUSTICE LEGGATT:
It did say before in 21 that the
17
condition precedent was not predicated on the identity
18
of the bankers.
19
MR BRENNAN:
20
MR JUSTICE LEGGATT:
21 22 23 24 25
Point taken.
Touche.
It's a point of construction that could
be dealt with at any stage. MR BRENNAN:
Yes, it can be.
So that deals with the
defence. The counterclaim, we attack at source because we say it builds upon a case which had no prospect of success. 96
1
Anxious consideration was given as to whether or not to
2
object to the counterclaim when it first arose and
3
a view was taken not to do so, rightly or wrongly, and
4
I shan't go into the pros and cons of that, but we are
5
where we are and an application to amend is being made,
6
which we say is built on foundations of sand.
7
amendment fails in limine, that provides a proper basis
8
upon which to object to the amendments, and we say fail
9
in limine because we say the implied term at
If the
10
paragraph 31 for which the defendant contends cannot be
11
identified as an implied term of the agreement.
12 13 14 15
MR JUSTICE LEGGATT:
Will it shorten the trial if I decide
that point now or will it just take longer? MR BRENNAN:
No, it would shorten the trial very greatly.
The debt recovery claim, this is essentially an
16
attempt not to pick up a shield, but to wield a sword.
17
What the counterclaim involves and will require of is
18
a detailed factual analysis of not simply what happened
19
but why it happened.
20
involves allegations which will require detailed
21
analysis and considerable cross-examination.
22 23
MR JUSTICE LEGGATT:
And that factual investigation
Of the fact that people were doing
things without disclosing it to others?
24
MR BRENNAN:
Yes.
25
MR JUSTICE LEGGATT:
As opposed to simply that they did 97
1
something which, as a matter of fact, as I put it,
2
prevented the transaction from going ahead which you
3
don't really need much cross-examination on at all?
4
MR BRENNAN:
Precisely so.
There's a huge difference in the
5
factual enquiry as to what happened as opposed to why
6
what happened happened.
7
where, I think with the benefit of hindsight, it was
8
rather unwise firstly for the defendants to assert that
9
the counterclaim wouldn't materially extend the length
And in a case such as this
10
of the trial and, secondly, for the claimants to accept
11
that contention.
12
those circumstances, that is a reason which reinforces
13
my invitation to deal with the counterclaim on that
14
basis.
15 16 17
We are up against it time wise.
In
It may be convenient to deal with it as a preliminary issue. MR JUSTICE LEGGATT:
That was my thinking because then
18
I deal with it as an issue rather than as a real
19
prospect of success and any complications about it being
20
arguable.
21
point.
22 23
MR BRENNAN:
There's no reason why I can't just decide the
Absolutely.
My Lord, it will perhaps not surprise you to hear
24
that whereas we on this side of the court favour
25
your Lordship addressing it as a preliminary issue, 98
1
that is not met with unanimity of approval on the other
2
side of the court.
3
MR JUSTICE LEGGATT:
No, or any approval perhaps.
Perhaps
4
I'll hear Mr Thompson on whether it should be decided as
5
a preliminary issue and whether it isn't right, as
6
Mr Brennan suggests, that it could potentially save
7
a lot of time in evidence.
8
the day, going to be successful, the implied term, then
9
we don't need to waste a lot of time cross-examining
10
people about what they were or weren't disclosing to
11
others in the course of negotiation.
12 13
If it's not, at the end of
Reply submissions by MR THOMPSON MR THOMPSON:
Well, my Lord, I wouldn't accept that it was
14
a suitable moment, as it were, to decide the matter as
15
a preliminary issue.
16
candidly admitted that he considered, but didn't pursue
17
any sort of -- he didn't oppose the --
18 19 20
MR JUSTICE LEGGATT:
I think Mr Brennan's quite
He didn't apply for summary judgment or
oppose the amendment, but here we are at a trial. MR THOMPSON:
Indeed.
The case has been prepared for trial
21
and the court will need to hear evidence both as to the
22
factual background leading up to the ITS and what was
23
going on prior to that, and will also need to hear
24
evidence as to what happened afterwards and whether or
25
not the contingencies identified in the ITS were in fact 99
1
satisfied on a proper construction of the ITS.
2
MR JUSTICE LEGGATT:
3
MR THOMPSON:
Yes.
And in my submission, it's not going to be any
4
great saving of time given that your Lordship is going
5
to hear evidence, as it were, both before and after the
6
event, to determine issues of law before the evidence
7
has been heard.
8
MR JUSTICE LEGGATT:
9
Wouldn't it make a great difference
though to know whether we're simply concerned with
10
knowing whether anything was done that as a matter of
11
fact prevented conditions precedent, and in particular
12
a transaction with Yorkshire Bank, being consummated or
13
whether we're also concerned with allegations about not
14
informing SISU as to true decisions, plans, objectives
15
and motives?
16
MR THOMPSON:
My Lord, it's a slightly strange situation
17
because I don't think it's actually contended that
18
we were told what was going on.
19
MR JUSTICE LEGGATT:
20
MR THOMPSON:
21
MR JUSTICE LEGGATT:
No.
So it is more a question of law. So in a sense perhaps you don't need
22
much evidence anyway.
23
dispute as to what did or didn't happen very much, are
24
they?
25
MR THOMPSON:
The facts aren't really in
Well, they've obviously become less open to 100
1
dispute now that disclosure has been made.
2
disclosure, it was by no means clear as to what had
3
happened.
4
MR JUSTICE LEGGATT:
Prior to
No, I dare say, but now we have witness
5
statements, we have disclosure, I haven't discerned --
6
and I haven't read the witness statements with a close
7
study -- that there are disputes about what was said
8
particularly at meetings or things that are
9
controversial, really, as to the chronology of events
10 11
for the most part. MR THOMPSON:
Yes.
I think there is probably an area of
12
dispute as to how the change of horses took place
13
between the beginning and the end of August and the
14
circumstances surrounding that, which I think
15
your Lordship will need to hear evidence about.
16
MR JUSTICE LEGGATT:
17
MR THOMPSON:
18 19
Yes.
And likewise in December about how it was that
the SISU plan hit the buffers. MR JUSTICE LEGGATT:
Yes, because there's a dispute as to
20
what capacity perhaps people were involved in or working
21
in or as to what role the trustees took in it.
22 23 24 25
MR THOMPSON:
Yes.
And then obviously there's the question
of how the final decisions were taken and -MR JUSTICE LEGGATT: witnesses.
Yes.
I'm not suggesting we don't need
And you're saying your cross-examination's 101
1
going to be pretty much the same whether or not good
2
faith is in or out?
3
MR THOMPSON:
My Lord, I don't think I go quite as far as
4
that.
I just think it's a question of whether it's
5
going to be a good use of time to determine a legal
6
question now rather than to get on with the witnesses.
7
I anticipate that your Lordship has probably heard
8
both sides of the question and it's not going to help
9
for me to --
10
MR JUSTICE LEGGATT:
I haven't really heard the argument on
11
the substantive point, but it is quite a short point as
12
to whether this term could be implied or not.
13
MR THOMPSON:
Yes, my Lord.
I think we have set out our
14
position in our skeleton argument and no doubt
15
Mr Brennan has set out his.
16
your Lordship wishes to proceed really, whether you want
17
to, as it were, give us a short break or do you want to
18
decide and have submissions, or whether you want to
19
decide it on the hoof or decide tomorrow morning when
20
the court reconvenes.
21
MR JUSTICE LEGGATT:
I don't know how
I'm just thinking about it and working
22
out.
Before I started raising diversions -- well, we
23
had the question anyway about leave to amend, but
24
supposing everything flowed on now and we just started
25
on the evidence, what was your timing, as you saw 102
1
things, for the rest of the trial?
2
some idea, but I didn't quite take in where it added up
3
to.
4
MR THOMPSON:
Mr Brennan gave me
I think that we had slightly anticipated that
5
we would start the evidence slightly sooner than we have
6
done and that Mr Knatchbull-Hugessen and Mr Harris would
7
probably be somewhere between two hours and half a day
8
each, just to go through the narrative of which they are
9
the principal witnesses.
10 11 12
MR JUSTICE LEGGATT:
So that's basically a day as far as
you're concerned? MR THOMPSON:
Yes, whereas Mr Higgs and Mrs Barlow are
13
probably much shorter.
14
well, who's the chair of the trustees, but I think, to
15
a large extent, she left the detail of the negotiation
16
to Mr Knatchbull-Hugessen and Mr Harris, and so it's
17
a relatively short stint with her as well.
18
I obviously do have some questions for her.
19
MR JUSTICE LEGGATT:
20
MR THOMPSON:
And Mrs Knatchbull-Hugessen as
But
Right.
I think Mr Brennan was slightly more uncertain
21
about how long he would be with Miss Deering.
22
something of the order of two hours, I think he was
23
suggesting.
24
MR JUSTICE LEGGATT:
25
going to be best.
Right.
But
It's difficult to know what's
I think it may be most efficient to 103
1
decide the implied term point now so that everybody
2
knows where they stand for the rest of the trial and to
3
have all the claimant's evidence tomorrow.
4
a little bit earlier if you want to do that, if you want
5
a bit more time, and then to have your evidence on
6
Thursday morning.
7
afternoon.
8 9
MR THOMPSON:
We can start
And submissions on Thursday
My Lord, a point is being put to me, and
I think it's partly -- again, I say it with some
10
reticence on the basis of your Lordship's judgment
11
in relation to the nature of the obligation of good
12
faith, but that can, to some extent, be a matter of
13
evidence depending upon the nature of the relationship
14
between the parties.
15
a relational contract.
16
element of an ongoing relationship between the charity
17
and the football club, which has been, as I think
18
Mr Brennan outlined in brief, going on back to 2003, and
19
then more generally there is the relationship that there
20
was between the parties during the course of 2012, where
21
your Lordship only has a somewhat partial account based
22
on the documents.
23
that, there is a question as to whether there is
24
an issue of --
25
MR JUSTICE LEGGATT:
I think it's sometimes called And here, there obviously is an
So I suppose even in relation to
What's meant by relational contract, 104
1
I think, is some form of long-term contract.
2
contract here is the two clauses of the indicative term
3
sheet.
4
have been a relationship between the parties that's
5
a background to that.
6 7 8 9 10 11
MR THOMPSON:
That's the only contract, isn't it?
The only
There may
Yes, my Lord, I think that must be right.
It's more of a background issue than a -MR JUSTICE LEGGATT:
But you're saying the background may be
relevant to whether the term is to be implied, are you? MR THOMPSON:
Yes, that is exactly what I'm saying.
Your Lordship has been shown very briefly some
12
interactions between Mr Harris and Miss Deering over
13
a period of weeks and months, which is what culminated
14
in the ITS.
15
MR JUSTICE LEGGATT:
16 17 18 19
And you say that that can make
a difference to how the terms are construed? MR THOMPSON:
Well, I think it's part of our factual matrix
or background against which it is to be construed. MR JUSTICE LEGGATT:
So that the parties would understand
20
the words as having a different meaning because of their
21
previous relationship?
22
MR THOMPSON:
Well, my Lord, I'm referred to -- in fact, it
23
was an e-mail between Mr Knatchbull-Hugessen and
24
Mr Fisher, which you were taken to this morning, at
25
tab 10 of bundle 3.
Mr Knatchbull-Hugessen took 105
1
exception to a direct approach by SISU to the bank on
2
the basis that:
3
"If they were to try to resolve the multi-layered
4
issues surrounding the club ...(reading to the words)...
5
we have to proceed in good faith."
6
So Mr Knatchbull-Hugessen certainly appeared to
7
think that there was an interrelationship not only
8
between the charity and the council, but also in
9
engaging the club, and that he positively asserted that.
10
MR JUSTICE LEGGATT:
11
MR THOMPSON:
Yes.
Because, on the face of it, there was nothing
12
disgraceful about approaching the bank to see if
13
it would sell the debt to the benefit of the football
14
club, which SISU owned, but Mr Knatchbull-Hugessen
15
clearly took exception to it as being somehow beyond the
16
pale, whereas in a commercial context that would have
17
been a perfectly natural and normal thing to do.
18
Indeed, it had been envisaged in the meeting that
19
Mr Knatchbull-Hugessen was present at only a few days
20
before.
21
anything underhand at all.
22
telephoned the week before by Mr Fisher saying that he
23
wanted to arrange something and that Miss Seppala had
24
already spoken to somebody at the bank and he doesn't
25
seem to have taken exception to that at that point,
It wasn't, I think, perceived by SISU as
106
Indeed, he had been
1
which one finds at tab 8.
2
MR JUSTICE LEGGATT:
3
MR THOMPSON:
Right.
Essentially, it just goes to my general point
4
that this is a case where it's not necessarily going to
5
be clear that determining a preliminary issue, as it
6
were, in the middle of the trial is actually going to
7
short-cut the detail of the evidence because, on the
8
contrary, that evidence may actually impact on what the
9
right answer to the preliminary issue should be.
10
MR JUSTICE LEGGATT:
I can't actually see how either of
11
those documents has any relevance to the interpretation
12
of the contract.
13
MR THOMPSON:
Do you say that it does?
Well, my Lord, only in the sense that I have
14
put to your Lordship, that it's part of the context
15
against which the contract is to be construed.
16 17 18
MR JUSTICE LEGGATT: construction? MR THOMPSON:
Fine, but then how does it affect the (Pause)
Well, my Lord, it is quite a ... If we get
19
into the construction of the contract, as your Lordship
20
says, there are the two binding clauses, which are
21
stated to be binding on the second page of the contract,
22
and, as it were, by reference, the conditions precedent.
23
But they're to be read against the long section
24
in relation to preferred equity, which clearly does
25
envisage ongoing relationship and discussions between 107
1
the parties and, likewise, the due diligence process
2
necessarily envisaged ongoing co-operation between the
3
parties because, otherwise, these wouldn't be achieved.
4
And indeed, the conditions precedent themselves,
5
particularly those added by the claimants, would
6
necessarily also involve a detailed understanding of
7
what exactly had been agreed between the parties.
8
So it does appear to me that there is a factual
9
context against which those two binding provisions need
10
to be read and that it's not necessarily going to be
11
helpful to determine those questions, as it were, before
12
the factual context has been established.
13
MR JUSTICE LEGGATT:
Right.
You say that when I have
14
a better understanding of the commercial context of this
15
agreement, then that might inform the question of
16
interpretation?
17
MR THOMPSON:
Yes, my Lord.
I don't put it any higher than
18
that and I think the tests for construction of
19
a commercial contract are reasonably well-established
20
now and they incorporate a broad range of considerations
21
and they exclude certain other considerations.
22
MR JUSTICE LEGGATT:
23
MR THOMPSON:
Yes.
And they're obviously devoted to making
24
business sense of the overall relationship between the
25
parties.
I anticipate that your Lordship is very 108
1 2
familiar with all of those points. MR JUSTICE LEGGATT:
Yes.
Well, I can see advantages and
3
disadvantages in either course.
4
a fairly short trial anyway, it might be more -- it may
5
not save time to spend the rest of this afternoon
6
sorting out this point, especially if you say it's not
7
going to make a great deal of difference to the amount
8
of evidence we need to hear.
9
another --
10 11
Perhaps since this is
I'll give Mr Brennan
Submissions by MR BRENNAN MR BRENNAN:
Could I remind the court that if the
12
counterclaim proceeds, there will be the question of
13
ÂŁ290,000?
14
investigation and we have other reasons to object to
15
that as well, not least the absence of any disclosure.
16
We very much are of the view that we are really up
That gives rise to a great deal of
17
against it on the trial timetable and if there is a just
18
way of resolving that difficulty, which frankly is to
19
strangle at birth the counterclaim, which frankly should
20
never have seen the light of day, robust case management
21
is the only way forward.
22
MR JUSTICE LEGGATT:
Yes.
And there are some issues of law
23
and of fact, such as whether the third parties have any
24
claims, which fall away if there isn't a term to be
25
implied. 109
1
MR BRENNAN:
2
MR JUSTICE LEGGATT:
3 4
Absolutely. And questions of fact about causation,
I suppose, of loss. MR BRENNAN:
And we're mindful of the quite ticklish issues
5
of fact because it might well be thought that, in the
6
event of a breach being proved, the burden would be on
7
me to prove the counterfactual as to what would have
8
happened had the contract not been performed in
9
accordance to what the court would have held to be its
10
terms.
11
This is going to lead inevitably not only to
12
a considerable factual enquiry of Miss Deering, but
13
submissions of not inconsiderable length, which will
14
have to be dealt with in a judgment, which looks
15
increasingly, I regret to say, is going to have to be
16
a reserved written judgment.
17
MR JUSTICE LEGGATT:
That may be the case anyway, but it's
18
true that some issues -- of course, if all this is
19
decided in favour of the defendant, it'll all take
20
longer.
21
there are other issues that are contingent on this one
22
and that is the case, is it not, such as whether there's
23
an undisclosed principle and whether you've got rights
24
under the Third Parties Act and whether, as a matter of
25
fact, losses were suffered as a result of the alleged
That is a factor, I think, Mr Thompson, that
110
1
breach or wouldn't have been suffered anyway.
2
would have to be addressed by you in submissions, but
3
not if I've ruled against you on the implied term point.
4
MR THOMPSON:
All those
My Lord, some of the points of law might be
5
contingent.
I think Mr Brennan rather exaggerates the
6
points of fact and prejudice.
7
made of the invoices in very much the same way as
8
Mr Brennan has made disclosure of his invoices.
9
obviously could be a question or an enquiry as to
The disclosure has been
There
10
quantum, as to whether all those invoices relate to
11
relevant matters.
12
MR JUSTICE LEGGATT:
There's a matter of fact though.
What
13
would have happened in certain scenarios becomes
14
relevant, doesn't it?
15
about whether expenses would have been incurred if this
16
or that hadn't been done may depend on whether there was
17
a duty of disclosure.
18
MR THOMPSON:
19
MR JUSTICE LEGGATT:
Certain counterfactual questions
Yes. And if there was, or if -- there's even
20
more than one good part of your implied term, but not
21
the other half.
22
of ... I rather think I ought to grasp the nettle and
23
decide this point.
24
the transaction history, or you can point out any facts
25
you think are relevant to the construction are really
There are possibilities, aren't there,
I can't see that knowing more about
111
1 2
going to bear on it at the end of the day. MR THOMPSON:
My Lord, I think I would only say this: one,
3
that this is essentially a case about wasted costs on
4
either side and it's not a case where there's going to
5
be an elaborate investigation of causation and quantum.
6
MR JUSTICE LEGGATT:
7
MR THOMPSON:
No.
Although I understand Mr Brennan may wish to
8
dispute one or two discrete items, and he obviously can
9
do that.
Whether or not there's actually going to be
10
any saving of time in terms of evidence seems to me, and
11
I think inevitably must seem to your Lordship, somewhat
12
uncertain, given the limited opening your Lordship's
13
heard so far.
14
implied term, I'm not sure exactly how the preliminary
15
issue is envisaged to be formulated.
16 17 18
MR JUSTICE LEGGATT:
And in relation to the issue itself, the
It would be whether it was an implied
term of the agreement as stated in paragraph 31. MR THOMPSON:
As your Lordship has put to me, the implied
19
term of good faith to some degree overlaps with the
20
issue about interference with performance of the
21
contract, which, as I understand it, is an unchallenged
22
element of the defence as a matter of principle.
23
so --
24 25
MR JUSTICE LEGGATT:
And
Yes, but as I see it at the moment,
there's a significant difference between what the 112
1
contract means in terms of the requirements that have to
2
be satisfied in order for the claimants to recover their
3
costs and whether there can be implied a free-standing
4
obligation, as I call it, not to do certain things,
5
which, if broken, will give rise to a claim for damages.
6
MR THOMPSON:
Yes, my Lord.
I'm simply saying that that
7
second thing isn't necessarily a fully fledged good
8
faith obligation.
9 10 11
MR JUSTICE LEGGATT: MR THOMPSON:
No, no, it's got two aspects.
It might be a narrower element, which is not
material to interference.
12
MR JUSTICE LEGGATT:
13
MR THOMPSON:
It does.
I'm not sure whether your Lordship is
14
anticipating deciding both those questions or only the
15
first.
16
MR JUSTICE LEGGATT:
No, both of them, if we're going to do
17
this at all.
18
a counterclaim or whether you haven't.
19
I want to know whether you have
I think I ought to grasp the nettle, really, rather
20
than take up more time deciding what to do.
21
conscious that the clock is ticking.
22
turn out not to save time and it may only add to it, but
23
I'm going to follow my instincts that it will be helpful
24
to decide this point at the outset.
25
have a break now for the stenographer and when you're 113
I'm
Whatever I do may
So I'm going to
1
ready to argue the point, call me back in and I'd like
2
to decide as a preliminary issue whether there was an
3
implied term of the contract as pleaded in paragraph 31
4
in either or both those limbs.
5
(3.05 pm)
6 7
(A short break) (3.13 pm)
8 9
Submissions by MR THOMPSON MR THOMPSON:
My Lord, this is obviously a point of law that
10
we were anticipating addressing in closing rather than
11
in opening, as it were.
12
MR JUSTICE LEGGATT:
13
MR THOMPSON:
Yes.
Sorry to bounce you into it.
So I'm sorry if my submissions are slightly
14
less polished than they might be.
15
effectively come under four headings.
16
no objection was taken to the original implied term,
17
which included the good faith term and also the "no
18
material impeding" term by Mr Brennan.
19
thought about it, but the fact is he didn't challenge
20
it.
21 22
MR JUSTICE LEGGATT:
I think they The first is that
He said he
He didn't try and strike it out.
I don't think he conceded that there is an implied term.
23
MR THOMPSON:
No, I'm sure he didn't.
24
MR JUSTICE LEGGATT:
25
MR THOMPSON:
That's the issue now.
The second point -- and I think these are 114
1
probably points that have been made in argument already,
2
but if I may draw them together.
3
time limited and focused obligation of good faith in the
4
exclusivity period, which is provided for in the second
5
binding box of the ITS, is, in my submission, entirely
6
consistent with an ongoing good faith obligation pending
7
the agreement with the bank, which is what is provided
8
for in relation to the -- which is the temporal scope of
9
the costs obligation in the previous box.
10
In my submission, the
Thirdly, the factual context.
Your Lordship will
11
recall the e-mail from Mr Knatchbull-Hugessen that we
12
went to just before the break, going back to at
13
least March 2012, and was, in my submission, also
14
consistent with such an obligation.
15
the general point that we make at paragraph 77 of our
16
skeleton argument by reference to your Lordship's
17
judgment in Yang Sen(?), and that is at page 27,
18
I think, of the skeleton argument.
19
slightly narrower terms that it must have been in the
20
parties' contemplation that for as long as the defendant
21
and SISU Group was at risk of bearing the costs, namely
22
the costs of the claimants, the claimants would not
23
actively take steps to bring about the triggering of the
24
payment of such costs, and we referred to paragraph 131
25
of your Lordship's judgment in Yang Sen, which -115
And that feeds into
We put it in the
1
I don't know if your Lordship has a bundle of
2
authorities, but ...
3 4
MR JUSTICE LEGGATT:
I've got one from Mr Brennan, which
I don't think has this in.
5
MR THOMPSON:
If I hand this up, my Lord.
6
MR JUSTICE LEGGATT:
7
MR THOMPSON:
(Handed)
Thank you.
It's at tab 9 of that bundle, and we refer to
8
paragraph 131.
It's a general finding that we would
9
say, in the particular circumstances of this case and in
10
particular where there is a liability to meet the
11
claimant's costs in the event that certain specific
12
contingencies arise, then we would say this is a type of
13
contract where such a duty should be implied.
14
learned junior refers us to paragraph 143 of the
15
judgment, two pages on, where there's reference to
16
Yang Sen, which was:
17
And my
"... incurring expense in marketing products and was
18
trying to obtain orders and was arguably entitled to
19
expect to be kept informed of ITC's best estimates when
20
products would be available to sell and be told of any
21
material change in this information without having to
22
ask."
23
So we would say, by analogy, there was an ongoing
24
obligation not only to not impede the performance of the
25
conditions precedent, but also an obligation to keep -116
1 2
effectively what I called an obligation of candour. MR JUSTICE LEGGATT:
But isn't there a distinction between
3
a case like Yang Sen where the parties are in an ongoing
4
contractual relationship with each other and this case,
5
where they're negotiating for a contract?
6
contract they've got is the very limited one to -- well,
7
two branches, the exclusivity part, but that's expired
8
by the time you have got to, and then the other part is
9
the payment of costs.
10 11
The only
So that's the only peg you've got
to hang it on. MR THOMPSON:
Indeed, it is an attenuated contract, but it
12
is a difficult point for Mr Brennan to take, of course,
13
because the entire basis for his claim is that this has
14
a sort of Lord Voldemort-like -- it survives in an
15
attenuated form, but sufficient for him to claim his
16
costs, and effectively ours is a "sauce for the goose,
17
sauce for the gander" point, which is essentially that
18
as long as it survives in that form, he has to behave
19
himself.
20
failing to achieve the certain contingencies or for
21
certain contingencies becoming impossible to perform,
22
then he mustn't himself render those contingencies
23
impossible to perform.
24 25
If he's going to come against us for costs for
MR JUSTICE LEGGATT:
The proposition you have just stated
has some force to me, but you then want to go a further 117
1
step and say that it's not just that he wanted to come
2
after you for costs that he has to behave himself, but
3
if he doesn't, all bets are off, to use his terminology,
4
and you can come after him for costs.
5 6 7
MR THOMPSON:
My Lord, I agree that has a strong sort of
tit-for-tat element to this whole unhappy saga. MR JUSTICE LEGGATT:
But without limit.
Whereas he's
8
limited by the agreement to 29,000, the sky's the limit
9
for you.
10
MR THOMPSON:
11 12
Well, my Lord, he again has, to some extent,
brought this whole thing on himself. MR JUSTICE LEGGATT:
But the question is whether that's what
13
the parties have agreed, not just whether it would be
14
a ...
15
MR THOMPSON:
I know that Mr Brennan has referred you to
16
various findings, indeed a finding of, I think, no less
17
a judge than Lord Bingham, to the effect that you can't
18
rewrite [inaudible] good idea after the event.
19
not what I am saying.
20
what it means, and if this obligation continues, then
21
they must comply with their ongoing duties.
22
That is
I'm just saying that if this is
Temporally, it's pointed out to me that the matter
23
isn't completely open-ended, it's only because of
24
a slightly odd sequence of events -- in principle, it
25
was envisaged that it would last up to the agreement 118
1
with the bank, and then there would be effectively
2
a renegotiation in relation to ongoing costs thereafter.
3
That's how the binding clause was provided.
4
obviously a question about how the last sentence is to
5
be construed, but what was envisaged was that up and
6
until the agreement with the bank, we would be on risk
7
for costs and we say the quid pro quo of that would be
8
that they would act in good faith.
9
MR JUSTICE LEGGATT:
There's
What's slightly odd about this case, to
10
me at least, is the negotiations, such as they were,
11
seemed to have for the most part fizzled out, at least
12
from what I've seen so far, in the summer.
13
when -- maybe you'll show me that there were ongoing
14
negotiations between SISU and the trustees, but they
15
don't seem -- I think there are some statements in your
16
pleading even that they effectively came to an end.
17
then months down the line, when a new transaction is
18
entered into, that's said to trigger the costs payment.
19
It's just a bit ... It just doesn't seem obvious to me
20
that that's what the parties were contemplating.
21
MR THOMPSON:
But then
And
It's a strange situation because there were
22
effectively three battles going on in three different
23
parts of the forest: one was about rent, one was about
24
the bank debt and one was about the purchase of the
25
shares.
I think what Mr Brennan says is that not much 119
1
seems to have been going on about the purchase of the
2
shares.
3
battle about rent and the purchase of the bank debt.
4
the shares issue couldn't really go ahead until those
5
had been brought to a standstill.
6
life was rather quiet in that part of the forest.
But that's because my clients were locked in So
So I think that's why
7
That's where we do get into the evidence because
8
Mr Brennan made some play of Mr Harris being helpful on
9
due diligence and in due course I think it'll become
10
clear to you that the problem with due diligence, wasn't
11
with Mr Harris; it was with Mr West and Mr Gidney of
12
ACL, who not only were not being very cooperative, but
13
actually kept changing the ground rules.
14
MR JUSTICE LEGGATT:
Yes, I anticipate that obviously the
15
contract anyway has to be construed at the time it was
16
made and what happened afterwards is the future history.
17
I was just thinking as to how the claim operates in
18
a way.
19 20
MR THOMPSON:
I think it was all envisaged, of course, to
take place in a short time.
21
MR JUSTICE LEGGATT:
22
MR THOMPSON:
That may be it from those timescales.
Mr Brennan's case is that notwithstanding what
23
was the intention, his entitlement effectively rolled on
24
until the following January.
25
MR JUSTICE LEGGATT:
Until whenever it finally became 120
1 2
impossible to implement the conditions precedent. MR THOMPSON:
Yes.
And it seems to have been a slightly --
3
I was going to say mischievous, but perhaps that goes
4
too far to bad faith.
5
say, afterthought that they would come against us for
6
the costs.
An opportunistic, perhaps I can
7
It's put to me that there was actually a further
8
binding element, which acts as the context to all this,
9
which is that we had an option as the club to repurchase
10
the shares, subject to the veto rights of the council.
11
So there was, as it were, a background relationship
12
between the club and the trustees, which formed, as it
13
were, the contractual frame for these negotiations.
14
MR JUSTICE LEGGATT:
15
point properly.
16
MR THOMPSON:
Sorry, I'm not sure I understood that
My Lord, I think Mr Brennan took you to the
17
fact that the trustees, as it were, had stepped into the
18
breach when the club was unable to finance the position
19
back in 2003.
20
MR JUSTICE LEGGATT:
21
MR THOMPSON:
Yes.
And at that time an option agreement was
22
signed whereby we could buy the rights back and that was
23
envisaged and provided for in the joint venture --
24
MR JUSTICE LEGGATT:
25
MR THOMPSON:
Yes, he did mention that, yes.
-- subject to the general council veto, but 121
1
that was always part of the background that the club and
2
the -- the club was, as it were, the natural heir to
3
these shares because if the original agreement had gone
4
forward as it was intended, the club would have always
5
had a 50 per cent share of the ground and many of these
6
unfortunate events would never have taken place.
7
MR JUSTICE LEGGATT:
8
MR THOMPSON:
9 10 11
My Lord, if you wish to see the option
agreement -MR JUSTICE LEGGATT:
MR THOMPSON:
13
MR JUSTICE LEGGATT:
14
MR THOMPSON:
15
MR JUSTICE LEGGATT:
16
MR THOMPSON:
18 19 20 21
Since you mention it, I think
I probably would, yes.
12
17
Right.
That may bring -It may be not possible to see it?
It's in Miss Deering exhibits. Then I'll manage without it.
I certainly can pass it up to you.
at the beginning of this file. MR JUSTICE LEGGATT:
Right.
It's right
(Handed)
Thank you.
(Pause)
So was Coventry City Football Club Limited opened by one of the SISU Group companies? MR THOMPSON:
Yes, it was owned by Coventry City Holdings,
22
which itself was owned by Sky Blue, which is part of the
23
SISU Group.
24
exercise and it was the licensee of ACL in relation to
25
the ground.
But it was the affected(?) party to this
122
1
MR JUSTICE LEGGATT:
2
MR THOMPSON:
Right.
Thank you.
So effectively they had a first and second
3
option to buy the shares in tranches at agreed prices,
4
subject to the approval of the council.
5
MR JUSTICE LEGGATT:
6
MR THOMPSON:
How does that colour the situation?
Well, I was simply saying that that means that
7
it -- well, this contract was not simply a sort of share
8
purchase agreement in the ether, it was between parties
9
who had had an ongoing relationship for approximately
10
a decade and where the charity had stepped in with the
11
specific purpose of a saving the ground project and, in
12
a sense, saving the club because there was obviously
13
a risk that the whole thing would have gone down with
14
all hands had the charity not stepped in at that point.
15
As I understand it, it wasn't really an option for the
16
club simply to stay at its old ground.
17
MR JUSTICE LEGGATT:
You're saying that this was a sort of
18
transaction that was being contemplated as the kind of
19
thing that would take place?
20
MR THOMPSON:
Yes, I don't think that's disputed, but
21
I think the witnesses for the claimants make that point,
22
or indeed the claimants themselves.
23
MR JUSTICE LEGGATT:
24
MR THOMPSON:
25
Yes.
Right.
I think that reflects the overall position
that the ground of which ACL was the operating company 123
1
and which was owned 50/50 by the council and by the
2
charities, or the charity's subsidiary, was intended as
3
a community asset for the people of Coventry, but also
4
obviously as the home for the club.
5
submission, that whole relationship is relevant to the
6
background interpretation of these particular provisions
7
and how the charity could be anticipated to conduct
8
itself in the particular circumstances, given that it
9
was seeking an indemnity and that it was, for a period
So in my
10
up to conclusion of the arrangements with the bank,
11
which probably, when agreed, were anticipated to be
12
a relatively short duration, and in my submission it
13
could never have been anticipated that the trustees
14
would act inconsistently with performance of that or
15
that it would do so without informing my clients of what
16
it was up to.
17 18
So I think that's the way we would put it, unless I can assist your Lordship further.
19
MR JUSTICE LEGGATT:
20
Mr Brennan?
21 22
No.
Thank you very much, Mr Thompson.
Submissions by MR BRENNAN MR BRENNAN:
My Lord, our contention is that the implied
23
term upon which the counterclaim rests cannot be teased
24
out of the agreement upon its proper construction.
25
basis of our submissions have been advanced in writing 124
The
1
in the skeleton argument and are to be found at
2
paragraphs 36 onwards, which deals specifically with the
3
duty of good faith, and at paragraph 41 onwards, which
4
deals with the second limb, if I can put it like that,
5
which has been put variously either as an aspect of the
6
duty of good faith or as a free-standing term in its own
7
right.
8 9 10
The law is conveniently summarised in a case called the Reborn which is in tab 4 of my authorities bundle. MR JUSTICE LEGGATT:
There's a certain scholarly difference
11
of view, which I'm not sure is going to dictate the
12
outcome of this particular issue, as to whether the
13
Belize case changes the law of implied terms or whether
14
it doesn't.
15 16 17
MR BRENNAN:
Upon that, I shall defer to my elders and
betters. MR JUSTICE LEGGATT:
And the Reborn is sometimes cited as
18
saying it hasn't changed things that much and other
19
people argue that it has, but I don't think we need
20
worry too much about that.
21
MR BRENNAN:
These submissions are being made by
22
a technician rather than an engineer.
23
is actually identify what the law provides.
24
MR JUSTICE LEGGATT:
25
MR BRENNAN:
All I seek to do
This is as good a statement as any.
And I invite the court to the view that 125
1
paragraph 13 of the judgment of the Master of the Rolls
2
Lord Clark identifies the topic best.
3
would the contract reasonably be understood to mean?
4
That is the essence of the Belize.
5
falls to be construed, one can see, from paragraph 9:
6
It's simply: what
And that question
"Implication of a term is an exercise in the
7
construction of the contract as a whole.
8
to be implied, it can only be a term implied from the
9
language of the instrument read in its commercial
10 11
If the term is
setting." All that, I say, is entirely uncontroversial.
Might
12
I draw the court's attention to a useful citation in
13
paragraph 17 from the judgment of Sir Thomas Bingham,
14
Master of the Rolls, in a case called
15
Phillips Electronique.
16
corner on page 643 of the judgment, and I rely upon the
17
final sentence, just to cut to the chase:
18
It's in the bottom right-hand
"It is because the implication of terms is
19
potentially so intrusive that the law imposes strict
20
constraints on the exercise of this extraordinary
21
power."
22
MR JUSTICE LEGGATT:
I think paragraphs 14 and 15 probably
23
are relevant to that interpretation of Belize as not
24
overthrowing all the previous tests and the learning on
25
the subject of implied terms. 126
1 2
MR BRENNAN:
No, a proposition with which I would agree.
I take it in that order because I submit that it is
3
against those strict constraints that apply to the
4
exercise of this extraordinary power that the
5
defendants' contentions hit up against and fall foul of.
6
In particular, I say they fall foul of the obligation of
7
the constraints of inconsistency and necessity.
8 9
It cannot be doubted, having regard to the express terms of the contract, that the contract included an
10
express unilateral obligation on the claimant/trustees
11
to conduct negotiations with SISU in good faith with
12
a view to agreeing and executing the legal agreements
13
within the exclusivity period.
14
If one has regard to the series of hurdles
15
identified, certainly from the point of view of
16
practitioners, there is a very useful authority at
17
paragraph 14 in the Reborn.
18
MR JUSTICE LEGGATT:
19
MR BRENNAN:
20
MR JUSTICE LEGGATT:
21
MR BRENNAN:
22
Sorry, I put it away.
Forgive me, perhaps it's my fault.
Yes.
Tab 4, wasn't it? Paragraph 14, a series of points, the
second of which:
23
"It must be necessary to give business efficacy to
24
the contract ... 5, it must not contradict any express
25
term of the contract." 127
1
The difficulty for the defendants in this case
2
is that having provided for a time-limited unilateral
3
obligation of good faith, it's very difficult to see why
4
it should be that the obligation of good faith should go
5
any wider.
6
attention to paragraphs 10 and the first sentence of
7
paragraph 11?
8 9
In that regard, could I draw the court's
The default position is set out in paragraph 10. Perhaps I can read it out:
10
"Lord Hoffmann made the important point that the
11
question of implication arises when the instrument does
12
not expressly provide for what is to happen when some
13
event occurs."
14
This is the important bit:
15
"The most usual inference in such a case is that
16
nothing is to happen.
If the parties had intended
17
something to happen, the instrument would have said so,
18
otherwise the express provisions of the instrument are
19
to continue to operate undisturbed.
20
caused loss to one or other of the parties, the loss
21
lies where it falls."
If the event has
22
It goes on to say at the foot of the paragraph:
23
"Put another way, it is not a two-way test.
Absent
24
an implied term, the default position is that the owners
25
[in this case the shipowners] must bear their own loss." 128
1 2 3
Those propositions were endorsed by Lord Justice Carnwath at paragraph 63.
He said:
"I agree the appeal should be dismissed.
As the
4
Master of the Rolls has pointed out in paragraphs 10 and
5
11, the charterers do not need to prove anything.
6
owners have to establish an implied term whereby the
7
charterers impliedly undertook responsibility for even
8
unforeseeable risks associated with the nominated berth.
9
Otherwise, the damage lies where it falls."
10
The
This agreement worked perfectly well as it stood,
11
and it is simply not necessary for any such term to be
12
implied in it.
13
perfectly well without it, but there is an obvious
14
inconsistency between a unilateral obligation to
15
negotiate in good faith that is time limited and
16
a mutual obligation to negotiate without limit of time.
17
Not only would the contract have worked
The second limb of the implied term, I say, falls
18
foul for broadly similar reasons.
19
I draw the court's attention to the oft cited work on
20
the interpretation of contracts by Sir Kim Lewison?
21
in particular -- you'll find this at tab 5 of my
22
bundle -- page 315 of the book:
23
In this context could
"In general, a term is necessarily implied in
And
24
a contract that neither party will prevent the other
25
from performing it, a proposition with which I do not 129
1
disagree.
2
incorporation of such term by implication."
3 4 5 6 7
There are, however, limits to the
And they are set out at page 317 in the paragraph opposite the top hole punch: "However, the limits of the implied term must be recognised." And he identifies one category, limitation.
8
following paragraph, a second category.
9
paragraph is important:
The
The third
10
"The act complained of must itself be wrongful
11
either as a breach of the express or implied terms of
12
the contract or wrongful independently of the contract,
13
for example, tortious."
14
In this case, once the six-week period of
15
exclusivity had come to an end, the claimants and
16
trustees, were released from the obligations they had
17
entered into to negotiate with good faith.
18
that then obtained was a position that obtained
19
immediately before the agreement was entered into, which
20
is the default position that applies in relation to
21
commercial negotiations conducted at arm's length, which
22
is effectively no duty.
The position
23
In addition, as is pointed out in the following
24
paragraph, as with other implied terms, the test of
25
necessity must be satisfied. 130
1
Finally, if I may ask you to turn over the page to
2
page 318, the extent of the implied obligation is
3
governed by the express terms of the contract.
4
Mr Justice Cooke's decision of 2006 is there dealt with.
5
Could I invite the court to read that?
6
particular upon the second sentence.
7
MR JUSTICE LEGGATT:
8
MR BRENNAN:
9 10 11
Right.
I rely in
(Pause)
That which Mr Justice Cooke says cannot be done
is precisely, I submit, what the defendants are seeking to do in this instance. My Lord, may I now turn very briefly to my friend's
12
submissions?
13
reliance upon a proposition of fact, which is true, that
14
the counterclaim in its original formulation was not
15
objected to.
16
of respect, say, is besides the point.
17 18 19 20
The first submission that was made was in
That, if I might, with the very greatest
MR JUSTICE LEGGATT:
Well, we're now dealing with the issue
itself, not whether you opposed the amendment. MR BRENNAN:
Precisely.
Secondly, a submission was made as to the effect
21
that the time-limited obligation was not of itself --
22
well, the submission was put high, that the obligation
23
to negotiate in good faith, that was not limited by
24
time, was consistent with the time-limited obligation.
25
It may well be more accurately put that it is not 131
1
necessarily inconsistent.
2
MR JUSTICE LEGGATT:
3
each other.
4
meant to be an answer, I think, to your argument that it
5
contradicts the express term.
6
MR BRENNAN:
You could have both running alongside
They wouldn't contradict each other.
It's
The difficulty with that argument is that if
7
you had both of them, the express obligation would be
8
surplus, it would serve no useful purpose.
9
must do is gather from the instrument, by construing it
What one
10
in its commercial context, what it would reasonably be
11
understood to mean.
12
overlooks the default position that if the parties had
13
intended to make provision for loss, they would have
14
said so.
15
It also, if I may say, rather
Thirdly, may I deal with the analogy that is drawn
16
in relation to the exposure to the risk of costs, which
17
SISU assumed under the express term of the obligation.
18
It may be that there's a misapprehension in this extent
19
and perhaps we should have anticipated this
20
misapprehension arising and sought to deal with it
21
expressly in the skeleton argument.
22
So far as the exposure to costs is concerned, could
23
I make it clear that we do not contend that the exposure
24
of SISU to the risk of paying abortive costs is open
25
ended.
On the contrary.
Turning to the terms of the
132
1
agreement itself, if I just have a moment -- I'm afraid
2
I've made the mistake of burying it under a number of
3
different files.
4
The paragraph on costs on the second page of the
5
agreement demonstrates from its language that it was the
6
contemplation of both parties that the charity would
7
incur significant costs, fees and expenses in assisting
8
SISU's offer to purchase the shares and in negotiating
9
the transaction with SISU and its advisers.
10
SISU's offer to purchase the shares was the offer
11
which was rehearsed in broad terms on page 1.
12
Negotiating the transaction with SISU and its
13
advisers -- well, the transaction under the
14
contemplation of the party was the conclusion of the
15
legal agreements, the legal agreements being a defined
16
term two paragraphs above.
17
It was envisaged by the parties, they were working
18
towards that, the completion of that legal agreement,
19
namely the agreement, broadly speaking, set out on
20
page 1, would be dealt with by 30 June.
21
me just identify where precisely the ... Expected
22
closing date, I'm much obliged to my learned friend,
23
which deals with as soon as possible.
24 25
Forgive me, let
We say -MR JUSTICE LEGGATT:
Sorry, where have you taken something 133
1
from?
2
MR BRENNAN:
3
MR JUSTICE LEGGATT:
4 5
Page 2. Down the bottom of the page, "expected
closing date"? MR BRENNAN:
Yes, "as soon as possible".
Now, we say that
6
in circumstances where the claimant is granted a period
7
of exclusivity whereby they would not negotiate with any
8
other party and contemplated that the transaction under
9
consideration would be the completion of that agreement
10
as soon as possible, which agreement in the commercial
11
setting in which the parties were operating in, they had
12
always been working to an end date which was pretty
13
imminent.
14
the agreement was envisaged to be either 30 June or
15
30 July, I forget which for the moment.
16
In the very earliest stages the completion of
The point is this: the obligation for the exposure
17
for costs could only relate to costs incurred
18
in relation to the evaluation of SISU's offer and in
19
negotiating the transaction with SISU and its advisers.
20
It couldn't relate to any other offer put forward by
21
a third party.
22
What is more, in circumstances where the exclusivity
23
period has come to an end and one party chooses to
24
exercise its right not to renew the agreement so as to
25
extend the period of exclusivity, it would lead to 134
1
a result that is either unreasonable or absurd to
2
suggest that the clock continued to tick in terms of the
3
exposure to costs that were incurred thereafter.
4
MR JUSTICE LEGGATT:
Why?
If there were ongoing
5
negotiations, why wouldn't the clock be ticking, even if
6
there was no exclusivity?
7
MR BRENNAN:
8
MR JUSTICE LEGGATT:
9 10
Well, the -Because there still could be costs
incurred negotiating with SISU, even if they were negotiating with somebody else at the same time.
11
MR BRENNAN:
12
MR JUSTICE LEGGATT:
13
Well, my Lord ... You're trying to put a self-limit, as
it were, on that, are you?
14
MR BRENNAN:
15
MR JUSTICE LEGGATT:
16
Yes. But if one takes it on through, it goes
up to the point of transaction with Clydesdale Bank --
17
MR BRENNAN:
18
MR JUSTICE LEGGATT:
19
Yes. -- or, presumably, when there cannot be
such a transaction.
20
MR BRENNAN:
Yes.
21
MR JUSTICE LEGGATT:
May I deal very briefly with the option? Yes.
Just before you get to that, the
22
crux of the argument Mr Thompson makes really is that
23
you can't expect to get your costs -- let's focus on the
24
second limb, which may be a stronger argument -- and to
25
be entitled to do steps that would prevent the 135
1 2
conditions precedent from being met. MR BRENNAN:
Well, that has a superficial, and I submit,
3
meretricious attraction, on the basis that it
4
presupposes an element of reciprocity, which is the
5
essence of contractual obligations.
6
The agreement is what the agreement is and this
7
court ought to resist the seductive attraction of
8
seeking to rewrite into an agreement a term which, on
9
its face, might be regarded as reasonable, but for which
10
the parties simply did not provide for when the
11
agreement was made.
12 13 14 15 16
The point is more forcefully raised when it is raised as a sword rather than a shield because -MR JUSTICE LEGGATT:
Perhaps we should be dealing with
both now, but we're only dealing with the sword. MR BRENNAN:
17 18
Yes.
We're only dealing with the sword.
In relation to -MR JUSTICE LEGGATT:
Just so I know where we're going, you
19
take issue with the shield as well in due course, do
20
you?
21
MR BRENNAN:
Yes.
Could I ask you to turn back to the
22
interpretation of contracts, tab 5?
23
you will see authorities and an analysis of the
24
proposition described under the general heading "Party
25
not to take advantage of own wrong". 136
At page 375
1
This is, I submit, a rule of construction.
There's
2
quite a lengthy analysis and investigation as to whether
3
it's a free-standing principle of law, simply a canon of
4
construction and, at page 377, you will see, at the foot
5
of the page, opposite the bottom hole punch,
6
Lord Justice Patten, in a case called BW Trading v JMRO
7
Investments(?), stated in the second limb of that
8
sentence:
9
"It is now clear as a matter of authority that the
10
application of the principle can be excluded or modified
11
by the terms of the contract and that its scope in any
12
particular case will depend upon the construction of the
13
relevant agreement."
14
If I could ask you to turn over the page to 378,
15
again broadly speaking opposite the bottom punch hole:
16
"However, in order to bring the principle into
17
operation, the relevant breach of duty must be a duty
18
owed by one party to the other under the terms of the
19
contract.
20
on one party to it, for example because it is
21
a unilateral contract such as an option, there is no
22
room for the principle to operate."
23 24 25
Thus where the contract imposes no obligation
I also rely -MR JUSTICE LEGGATT:
Can you just translate that into this
case, sorry, for me? 137
1
MR BRENNAN:
Yes.
In the circumstances that obtained once
2
the exclusivity period had expired, the parties were
3
free to do whatever the law permitted them to do before
4
they entered into the agreement, which is to say the
5
general default position applied.
6
The law does impose certain obligations as to what
7
one party to a negotiation may do in the context of
8
negotiating with another.
9
tortious obligations relating to deceit and
You mustn't lie, there are
10
misrepresentation.
11
position is concerned, once the period of exclusivity
12
had come to an end, the trustees were released and, as
13
I put it, all bets were off, which, if you will recall,
14
is precisely what the trustees' clerk said when he
15
declined the invitation to extend the period of
16
exclusivity.
17
So so far as the contractual
Finally, in relation to this point, I do rely on the
18
bottom paragraph of page 378 where it is necessary to
19
show that the contractual rights or benefits which the
20
party in question is seeking to assert or claim arise as
21
a direct result of that party's prior breach of
22
contract.
23
So there's a causation point to it.
MR JUSTICE LEGGATT:
So you say as long as the trustees
24
didn't prevent the conditions precedent from being met
25
by virtue of a breach of contract or other wrongful 138
1
act --
2
MR BRENNAN:
Yes.
3
MR JUSTICE LEGGATT:
4
MR BRENNAN:
No party --
Yes.
-- there's no bar on recovery? One must be wary of slogans in the law,
5
but the proposition no party may take advantage of their
6
own wrong, on this occasion, does actually contain an
7
essential grain of truth.
8 9
There has to be a wrong.
And if the parties provided, as they did, that the trustees would not entertain, directly or indirectly,
10
enter into, restart, solicit, initiate or otherwise
11
participate in any third party negotiations, or amongst
12
other things, to enter into any third party negotiations
13
for a period of six weeks, it must be presupposed that
14
once that period of exclusivity had ended, they're
15
entitled to enter into any third party negotiations as
16
they saw fit.
17
Effectively, what this agreement did was create
18
a window of opportunity for the deal that was in the
19
contemplation of the parties to be struck within the
20
exclusivity period.
21
allowed to lapse, the window of opportunity was apt to
22
close unless the trustees were minded to keep it open.
23
MR JUSTICE LEGGATT:
24
MR BRENNAN:
25
And if the exclusivity period was
Yes.
May I finally mention very briefly the question
of the option, which has arisen today, or perhaps more 139
1
accurately I should say this afternoon, in this context
2
for the first time?
3
Coventry City Football Club Limited was granted an
4
option under the terms of the joint venture agreement,
5
which the city council, Football Investors Limited and
6
the trustees entered into.
7
as set out at volume 4 of the option agreement.
8
The option agreement was tightly drawn.
9
It is undoubtedly the case that
The terms of that option are
It required
a payment of ÂŁ6.5 million, and you will recall that one
10
of the conditions precedent set out in the joint venture
11
agreement that we looked at earlier this morning is that
12
it could not be exercised in circumstances where ACL had
13
any debt.
14
it would be necessary to pay off the debt and to pay
15
ÂŁ6.5 million, and, in addition to that, make provision
16
under the terms of the agreement for a further payment
17
relating to what was regarded as being a further
18
25 per cent of the value of Football Investors Limited's
19
shares.
So in other words, to exercise the option,
20
The entire reason why the parties entered into the
21
indicative term sheet is because there was no appetite
22
on the part of SISU to exercise its rights under the
23
option.
24
one that was available to them.
25
They wanted a different and better deal to the
Forgive me.
I've been corrected. 140
Such is the
1
excitement of submissions, I inadvertently said it had
2
to be that ACL was to have no debt.
3
club was to have no debt.
4
purposes I'm not actually sure whether the club's debt
5
was more or less than ÂŁ25 million at the time, but given
6
that SISU had -- and one can only feel sorry for them,
7
no one likes to see anybody throwing good money after
8
bad.
9
having sunk 50 million into the club already.
10
club was hopelessly insolvent, the option was
11
a non-starter. MR JUSTICE LEGGATT:
13
MR BRENNAN:
15
Though for all practical
So the
Right, thank you.
Unless I can be of further assistance, those
are my submissions. MR JUSTICE LEGGATT:
16
No, thank you very much.
Mr Thompson?
17 18
The
I have read references in the papers to SISU
12
14
It was not.
Submissions by MR THOMPSON MR THOMPSON:
19
Can I just respond briefly on five points?
First of all, Belize.
I may have a wrong
20
impression, but my impression was that Mr Brennan wasn't
21
particularly keen to show your Lordship Belize itself,
22
which obviously is certain a leading authority on this.
23
That is at tab 7 of the bundle of authorities we've put
24
in.
25
I'd simply remind your Lordship of the, in my 141
1
submission, coherent and seminal analysis of
2
Lord Hoffmann, which is at paragraphs 16 through to 27
3
of the judgment.
4
words at 23 and 25 as to the risk of putting undue
5
weight on to the terms "necessary to give business
6
efficacy" and "go without saying".
7
saying that there may be a good deal of work needed to
8
be put in in terms of the background to decide whether
9
those tests are satisfied.
And in particular, the cautionary
Essentially he's
It's not a simple matter of
10
a black-and-white test; it's all part of the overall
11
construction.
12
The second point that I take your Lordship to is the
13
passage from Lewison, and in particular page 317.
14
tab 5 of my learned friend's authorities.
15
the heading:
16
It's
It's under
"In general a term is necessarily implied in a
17
contract that neither party will prevent the other from
18
performing it."
19 20 21
And I think he rather skipped over the second point at 317, which says: "The implied term is limited to the active
22
prevention of performance and probably does not extend
23
to passivity in the face of the acts of some third
24
party."
25
In my submission the case that we are running 142
1
in relation to the implied term does extend to the
2
active prevention of performance, and in particular to
3
the amendment to the ARA, which facilitated the loan
4
from the council.
5 6 7
MR JUSTICE LEGGATT:
It's not really the active prevention
of performance in this case, it's -MR THOMPSON:
It's not performance of the contract itself,
8
it's performance of the condition precedent, so in my
9
submission that raises similar issues to that.
10
MR JUSTICE LEGGATT:
It's preventing the condition precedent
11
from being met and therefore bringing on the right to
12
obtain costs.
13
MR THOMPSON:
Yes.
14
MR JUSTICE LEGGATT:
15
MR THOMPSON:
I agree, I can see an analogy.
Yes, I agree.
16
The third and fourth points, I'm afraid, will
17
require just looking again at the ITS itself, if I may
18
take your Lordship to it.
19
MR JUSTICE LEGGATT:
20
MR THOMPSON:
Yes, I've got it here.
I think the first point is the point that
21
your Lordship has already.
22
no inconsistency between the express term of good faith
23
in the exclusivity clause, which is:
24 25
Our point was that there is
"To conduct negotiations with SISU in good faith with a view to agreeing and executing the legal 143
1
agreements within the exclusivity period."
2
Which in my submission is a specific obligation,
3
which is clearly time limited to the exclusivity period
4
and a broader obligation of good faith applying in the
5
costs box for so long as we're on the hook for the
6
ÂŁ29,000 indemnity, effectively.
7
MR JUSTICE LEGGATT:
I think he revises the submission to
8
say it renders (ii) otiose and therefore one shouldn't
9
favour an interpretation which makes that a pointless
10 11
thing to agree. MR THOMPSON:
But I think that's not correct because it's
12
not simply a general obligation to act in good faith;
13
it's a targeted act in good faith with a view to
14
agreeing and executing the legal agreements within the
15
exclusivity period.
16
obligation with a specific end in view.
17 18 19
MR JUSTICE LEGGATT:
It's, as it were, a focused
It's a sort of best endeavours type
thing, is it? MR THOMPSON:
Yes, my Lord, it could be seen in that way,
20
although obviously it includes good faith as an aspect
21
of that.
22
The fourth point is when one looks at the
23
contingencies, obviously we are now moving into the area
24
of general submission, but I think it's necessary to do
25
that, but one sees the sentence starting "accordingly", 144
1 2
and there are essentially three types of contingency. The first is SISU withdrawing its offer to purchase
3
the shares.
4
relevant one, is the charity withdraws from negotiations
5
as a result of SISU seeking a reduction in the purchase
6
price or seeking unreasonable terms.
7
The second, which in my submission is the
That is obviously a limited contingency, and in my
8
submission, had the charity candidly withdrawn simply
9
because it didn't fancy the deal any more, then that
10 11
wouldn't have fallen within that contingency. MR JUSTICE LEGGATT:
No, otherwise there'd be no point in
12
trying to narrow that condition.
13
to cover a situation when they withdraw without fault
14
rather than when they withdraw voluntarily.
15
MR THOMPSON:
Yes.
It's obviously meant
So in my submission, had the charity
16
simply withdrawn, then the ÂŁ29,000 hook would no longer
17
have applied and the contingency wouldn't have been
18
satisfied.
19
that for the charity to sit tight, as it were, without
20
telling the defendant or the defendants that it is no
21
longer going to pursue this and that it is inconsistent
22
with the way that this was supposed to operate for it to
23
act in that way.
24
that they had to act openly and in good faith for so
25
long as they wanted us to indemnify them against costs.
In my submission, it's not consistent with
That's effectively our implied term
145
1
Mr Brennan, not unreasonably, says there seems to be
2
a bit of a disproportion here, that all we were ever
3
entitled to was £29,000, but you're now claiming
4
£290,000.
5
our case, we were kept on the hook pointlessly for
6
a matter of months incurring professional fees when, had
7
the charity withdrawn openly, this arrangement would
8
simply have lapsed, they wouldn't have been entitled to
9
£29,000, and we wouldn't have been entitled to anything
But that merely reflects the fact that, on
10
if they acted inconsistently.
What we object to is
11
keeping this on foot for a period of six months, coming
12
against us for a claim which they effectively brought on
13
their own heads, and then saying, oh, there was no
14
implied term for them to act in good faith during this
15
period and that's it's not right for us to explain that
16
they secretly did a deal with somebody else.
17
So that's the way we put it legally.
Factually,
18
obviously, we go back to the point that I made in
19
arguing that this preliminary issue won't particularly
20
assist your Lordship in that inevitably you only have
21
a partial picture of the broader context and the extent
22
to which this deal was contingent on deals for the rent
23
with ACL and to the debt with Yorkshire Bank, which will
24
necessarily involve some consideration of additional
25
documents and some discussion with 146
1
Mr Knatchbull-Hugessen and Mr Harris of exactly what
2
went on during 2012 and how it was that this unfortunate
3
sequence of events came to take place, going on into
4
2013, and indeed to date.
5
a factual context which we say is relevant to
6
your Lordship's appreciation of this entire issue.
7 8 9
So there's obviously
I think those were the points I wanted to make. MR JUSTICE LEGGATT:
Just to ask you about the scope of the
obligation, Mr Brennan pointed out that the right to
10
recover costs is limited to costs incurred in evaluating
11
your offer and in negotiating the transaction with SISU.
12
The costs you claim, is this right, go wider than the
13
mirror image of that?
14 15 16
MR THOMPSON:
I think essentially that's ... I think they
were intended to be effectively a mirror image -MR JUSTICE LEGGATT:
Just for my information, what broadly
17
are the costs?
18
claiming in your counterclaim?
19
MR THOMPSON:
What was the money spent that you're
Well, my Lord, there are a number of
20
effectively legal and consultants' fees.
21
incurred by those instructing me, you saw reference,
22
my Lord, to a Mr Barber, I think, who was advising ARVO,
23
and so there are his fees.
24
acting in a professional capacity.
25
a schedule, my Lord, which is at page 184. 147
There are fees
There are fees of Mr Fisher Well, there's Rather than
1 2
me make it up, it might be better -MR JUSTICE LEGGATT:
Yes, that's the thing to look at.
3
I think some of it may be in your skeleton too.
4
page?
5
MR THOMPSON:
6
MR JUSTICE LEGGATT:
7
MR THOMPSON:
8 9
184 of ... The first bundle.
Yes, my Lord, C3.
(Pause)
I don't know if your Lordship has seen what the claim is based on.
I think it's based on three
10
categories, PricewaterhouseCoopers and lawyers,
11
I believe.
12 13 14
What
MR JUSTICE LEGGATT: to see. MR THOMPSON:
Right.
I'm just reading your schedule
(Pause) There could be a debate over quantum, but
15
I think in reality we were, as it were, on the front
16
foot trying to pursue something and inevitably incurred
17
more costs than someone who was essentially in a more
18
passive role.
19
higher.
I think that's why our costs are somewhat
(Pause)
20
MR JUSTICE LEGGATT:
21
MR BRENNAN:
22 23
Right.
My Lord, for the record may I correct my
earlier correction? MR THOMPSON:
I'm sorry, had you finished?
I think the only thing being said from behind
24
is our costs included the costs of due diligence, which
25
is obviously a cost I don't think my learned friend 148
1 2
particularly had to bear. MR JUSTICE LEGGATT:
He didn't, so there's no mirror image,
3
but that might be said to be the equivalent of
4
evaluating the offer or an aspect of it, anyway.
5 6 7
MR BRENNAN:
My Lord, as I say, this is an object lesson in
communication by Post-it note or the perils thereof. My correction was that the club had to be debt free.
8
In fact, the club had to have no debt to ACL, which is
9
a rather different matter.
10
I'm grateful for the
opportunity to correct that.
11
MR JUSTICE LEGGATT:
12
MR BRENNAN:
13
MR JUSTICE LEGGATT:
Did it have any?
Yes, it did.
It hadn't paid the rent.
Oh yes, of course.
14
relevant debt for those purposes?
15
pay its rent?
16
MR BRENNAN:
17
MR THOMPSON:
18
Yes.
So that's the It would have had to
Have I finally got it right?
Yes.
My Lord, I hesitate because we are getting to
the facts.
19
MR JUSTICE LEGGATT:
20
MR THOMPSON:
Of course we are.
I think the block on the rent on our case was
21
caused by the fact that we couldn't do a stadium deal.
22
Ms Barlow made it clear she wasn't going to -- and
23
indeed, I don't know why there's laughter because that
24
was relied on by the council itself as a key plank of
25
its negotiating position as against the bank that they 149
1
wanted to say ACL is a failing firm because the club's
2
not paying its rent and therefore you could discount the
3
debt.
4
that there was a negotiating advantage for the rent to
5
be in play, at least.
6 7
So it was understood quite clearly by both sides
MR JUSTICE LEGGATT:
Thank you.
I'm not going to give an
ex tempore judgment now,
8
I'll give a short judgment tomorrow morning on the
9
issue.
10
I can tell you I've decided, so you can plan for
11
tomorrow, that there is no such term to be implied into
12
the agreement as is alleged.
13
for that either orally or in writing first thing
14
tomorrow morning.
15
I will explain my reasons
I don't say anything at this stage about whether it
16
may be a condition of being able to recover the costs
17
that nothing is done to prevent the conditions precedent
18
from being performed, but it does seem to me, to put it
19
very shortly, for reasons I will elaborate on, that
20
it is not possible to imply a wider implied obligation,
21
which would not simply prevent the trustees from
22
recovering their costs if it is not complied with but
23
would give rise to a right to SISU to recover their own
24
costs, unlimited in extent.
25
see, can reasonably be, let alone necessarily, implied 150
Such a term, I am unable to
1 2
into what was agreed. So I will explain my reasons for that in the
3
morning, but it means that in the light of that
4
decision, that will dispose of the counterclaim because
5
it's all premised on the implied term.
6
overnight on how that affects your cross-examination on
7
the evidence.
8 9
You can reflect
What I'm envisaging is that we must finish the claimant's evidence tomorrow.
I hope that will be
10
realistic, Mr Thompson, so you know that in advance.
11
I know it may be necessary to go into a certain amount
12
of the transaction history, but a case on the defence
13
and on the condition precedent being unable to be
14
fulfilled doesn't have a good faith aspect to it, so
15
that may at least enable some concentration on what is
16
really relevant to the way the defence is put in terms
17
of what actions did actually prevent performance of the
18
condition precedent, which seems to be the critical
19
point.
20 21
I'm then envisaging, Mr Brennan, that you will complete your cross-examination on Thursday morning.
22
MR BRENNAN:
23
MR JUSTICE LEGGATT:
24 25
Yes. And we'll have the argument on your
claim on Thursday afternoon. MR BRENNAN:
Yes. 151
1
MR JUSTICE LEGGATT:
I hope that will be achievable, but
2
I think it has to be, really, in order to complete the
3
trial in three days and for the ÂŁ29,000 we're now
4
arguing about, I don't think more time can be afforded,
5
so cross-examination will need to be focused
6
accordingly.
7
As I say, I will give my reasons for the decision
8
I have just notified you of at 10 o'clock tomorrow, so
9
it won't interfere with your time for cross-examination,
10 11 12
Mr Thompson. (4.26 pm) (The hearing adjourned until 10.00 am the following day)
13 14 15 16 17 18 19 20 21 22 23 24 25 152
1
I N D E X
2 Opening submissions by MR BRENNAN ....................3 3 Submissions by MR THOMPSON ..........................74 4 Submissions by MR BRENNAN ...........................95 5 Reply submissions by MR THOMPSON ....................99 6 Submissions by MR BRENNAN ..........................109 7 Submissions by MR THOMPSON .........................114 8 Submissions by MR BRENNAN ..........................124 9 Submissions by MR THOMPSON .........................141 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 153