JUSTICE MARCUS SMITH ------Between
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Neutral Citation Number: [2017] EWHC 2767 (Ch) Case No: CR-2015-006989 IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES CHANCERY DIVISION COMPANIES COURT Royal Courts of Justice Strand, London, WC2A 2LL Date: 06/11/2017 Before : THE HONOURABLE MR. JUSTICE MARCUS SMITH - - - - - - - - - - - - - - - - - - - - - Between : VB FOOTBALL ASSETS Petitioner - and- (1) BLACKPOOL FOOTBALL CLUB (PROPERTIES) LIMITED (formerly SEGESTA LIMITED) (2) OWEN OYSTON (3) KARL OYSTON (4) BLACKPOOL FOOTBALL CLUB LIMITED Respondents - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Mr. Andrew Green, Q.C. and Mr. Fraser Campbell (instructed by Clifford Chance LLP) for the Petitioner Mr. Alan Steinfeld, Q.C. and Mr. Eric Shannon (instructed by Haworth Holt Bell Solicitors) for the Respondents Hearing dates: 12 to 16, 19 to 23, 26, 28 to 30 June 2017, 3, 7 July and 6 November 2017 - - - - - - - - - - - - - - - - - - - - - APPROVED JUDGMENT Judgment Approved by the court for handing down VB Football Assets v. Blackpool Football Club (Properties) Ltd Mr. Justice Marcus Smith Contents A. INTRODUCTION Paragraph 1 (1) Factual overview Paragraph 1 (2) The allegations of unfair prejudice made in the Paragraph 21 Petition (3) The structure of this Judgment Paragraph 25 B. THE FACTUAL WITNESSES Paragraph 28 (1) VB Football Assets’ witnesses Paragraph 29 (2) The Respondents’ witnesses Paragraph 30 C. FACTUAL NARRATIVE Paragraph 36 (1) The original ownership of shares in Blackpool FC Paragraph 36 (2) The Oyston Group Paragraph 37 (3) Blackpool FC’s use of the football ground Paragraph 39 (4) Financial support by Mr. Owen Oyston Paragraph 46 (5) Mr. Belokon is introduced to Mr. Owen Oyston Paragraph 47 (6) The Subscription Agreement Paragraph 48 (7) The First Vlada Loan Agreement Paragraph 49 (8) The Second Vlada Loan Agreement Paragraph 51 (9) The nature of the agreement reached between the Paragraph 53 parties (i) The rival contentions Paragraph 53 (ii) Analysis: was there a wider agreement; and, if so, what Paragraph 57 was its nature and what were its terms? (10) The First South Stand Agreement Paragraph 96 (11) The Second South Stand Agreement Paragraph 99 (12) Ms. Beinare’s email regarding the ownership of Paragraph 101 Blackpool FC (13) The player trust Paragraph 104 (14) The board meeting of Blackpool FC on 12 November Paragraph 105 2009 (15) The Zabaxe debt Paragraph 106 (16) Blackpool FC’s promotion into the Premier League Paragraph 110 (17) The Enterprise Investment Scheme case Paragraph 111 (18) Post-promotion meetings Paragraph 112 (19) The Dorchester meeting: 23 May 2010 Paragraph 114 (i) The minutes Paragraph 115 Judgment Approved by the court for handing down VB Football Assets v. Blackpool Football Club (Properties) Ltd Mr. Justice Marcus Smith (ii) Mr. Belokon’s recollection Paragraph 116 (iii) Mr. Malnac’s recollection Paragraph 118 (iv) Mr. Owen Oyston’s recollection Paragraph 120 (v) Mr. Karl Oyston’s recollection Paragraph 122 (vi) Synthesis Paragraph 124 (20) Getting money out of Blackpool FC Paragraph 127 (21) The tax meeting Paragraph 140 (22) Preparing to put the matter to the board of Blackpool Paragraph 143 FC (23) The Blackpool FC board meeting of 25 June Paragraph 146 2010/Dinner at Claridge’s (i) Introduction Paragraph 146 (ii) The evidence in Belokon 1 Paragraph 148 (iii) The evidence in Malnacs 1 Paragraph 149 (iv) The evidence in OJO 1 and KO 1 Paragraph 150 (v) The “aide memoire” attached to Mr. Owen Oyston’s Paragraph 151 email of 22 September 2010 (vi) Evidence given in cross-examination Paragraph 154 (vii) Synthesis Paragraph 159 (24) Preparations for making payments out Paragraph 161 (25) The meeting on 12 August 2010 Paragraph 170 (26) Mr. Karl Oyston’s position as chairman Paragraph 172 (27) Mr. Malnacs’ query regarding the liabilities of Paragraph 173 Blackpool FC (28) The payment of the £4.2 million Protoplan debt and Paragraph 176 the initial response of the Belokon Side (29) The meeting in Riga, Latvia, on 7 October 2010 Paragraph 186 (30) Debate regarding the nature of the Protoplan payment Paragraph 192 (i) Communications between the Oyston Side and the Paragraph 192 Belokon Side (ii) Debate internal to the Oyston Side Paragraph 195 (31) A (further) proposal from the Belokon Side Paragraph 198 (32) The Belokon Side inquiries about corporate Paragraph 203 governance (33) The meeting on 17 December 2010 Paragraph 205 (34) The proposal to discharge the mortgage over the Paragraph 209 Travelodge (35) Payment of £4.9 million in respect of the Travelodge Paragraph 215 (36) Discovery of the payment Paragraph 218 Judgment Approved by the court for handing down VB Football Assets v. Blackpool Football Club (Properties) Ltd Mr. Justice Marcus Smith (37) Further progression of the Travelodge transaction Paragraph 221 (38) The meeting at Grange St Paul’s in May 2011 Paragraph 226 (39) Mr. Owen Oyston’s reaction after the meeting Paragraph 237 (40) The meeting at the Savoy in June 2011 Paragraph 241 (41) Mr. Belokon seeks to exit Blackpool FC Paragraph 246 (42) The “tax meeting” on 27 July 2011 Paragraph 254 (43) Conclusion of the Travelodge loan agreement by Paragraph 256 Blackpool FC and further payments in respect of the Travelodge and payment of the Zabaxe debt (44) The “Global Witness” letter Paragraph 260 (45) Mr. Belokon’s letter of 4 October 2011 Paragraph 261 (46) Mr. Malnac’s inquiry about payments away Paragraph 264 (47) A proposal that “certain bonuses” be paid Paragraph 267 (48) Mr. Malnacs’ view of matters appears in a “draft note Paragraph 269 to new [Blackpool FC] members” (49) The 20 January 2012 board meeting Paragraph 271 (50) Further signs of a deteriorating relationship and a Paragraph 275 failure to provide information (51) The 2 February 2012 board meeting and aftermath Paragraph 279 (52) The £11 million payment proposal Paragraph 284 (53) The 17 February 2012 board meeting Paragraph 292 (54) The payment of £11 million is made Paragraph 297 (55) Publicity surrounding the payment Paragraph 298 (56) Exit Mr. Malnacs; enter Mr. Varpins Paragraph 300 (57) 2013 onwards Paragraph 301 D. UNFAIR PREJUDICE: SECTION 994 Paragraph 304 (1) Introduction Paragraph 304 (2) Standing Paragraph 306 (3) The acts and omissions of which VB Football Assets Paragraph 307 complains consist of the management of the affairs of Blackpool FC (4) “Prejudice” to “interests” which is “unfair” Paragraph 310 E. THE GENERAL OPERATION OF BLACKPOOL FC Paragraph 324 (1) Duties on directors Paragraph 324 (2) Transfers of money between entities within the Oyston Paragraph 329 Group (3) Classification of the payments Paragraph 341 (4) Unfair prejudice Paragraph 349 Judgment Approved by the court for handing down VB Football Assets v. Blackpool Football Club (Properties) Ltd Mr. Justice Marcus Smith F. UNFAIR PREJUDICE: SPECIFIC PAYMENTS Paragraph 353 AWAY AND THE FAILURE TO PAY DIVIDENDS (1) The payments in question Paragraph 353 (2) Payment of the £4.2 million in respect of Protoplan Paragraph 356 (3) The payments in respect of the Travelodge Paragraph 361 (4) Payment of the Zabaxe debt Paragraph 368 (5) Payment of “directors’ remuneration” of £11 million Paragraph 371 (6) Non-payment if dividends Paragraph 375 G. UNFAIR PREJUDICE: EXCLUSION FROM THE Paragraph 380 COMPANY H. UNFAIR PREJUDICE: THE ALTERATION OF Paragraph 388 THE ARTICLES OF ASSOCIATION (1) The facts Paragraph 388 (2) The parties’ contentions Paragraph 407 (3) Conclusion Paragraph 413 I. RELIEF SHOULD BE DENIED BECAUSE OF THE Paragraph 416 CONDUCT OF MR. BELOKON (1) The contentions of the Respondents Paragraph 416 (2) The law Paragraph 417 (3) Analysis and conclusion Paragraph 420 J. RELIEF Paragraph 423 (1) The applicable principles Paragraph 423 (2) Approach Paragraph 426 (3) The value of Mr. Belokon’s share in Blackpool FC Paragraph 427 (i) The expert evidence Paragraph 427 (ii) Assessment of the opposing expert viewpoints Paragraph 432 (iii) The approach to be adopted Paragraph 435 (4) The appropriate order for relief Paragraph 446 (i) Factors militating against buyout Paragraph 446 (ii) A bespoke arrangement? Paragraph 448 (iii) Conclusion Paragraph 452 K. DISPOSITION Paragraph 455 Annex 1 Terms used in the Judgment Annex 2 Chronology of the development of the Blackpool stadium Judgment Approved by the court for handing down VB Football Assets v. Blackpool Football Club (Properties) Ltd Mr. Justice Marcus Smith Mr. Justice Marcus Smith: A. INTRODUCTION (1) Factual overview 1. The Fourth Respondent, Blackpool Football Club Limited (“Blackpool FC”1), was formed on 26 July 1887, and became a limited company in May 1896. It played its first league match in 1896. 2. English football has five national leagues.2 From the top, they are: i) The Premier League; ii) The Championship; iii) League One; iv) League Two; and v) The National League. 3. For the season just finished, Blackpool FC played in League Two, and has secured promotion to League One, where it will play in the 2017-2018 season. The history of Blackpool FC’s performance in English football, since 2007-2008 is as follows: Season Division 2007-2008 Championship 2008-2009 Championship 2009-2010 Championship 2010-2011 Premier League 2011-2012 Championship 2012-2013 Championship 2013-2014 Championship 2014-2015 Championship 2015-2016 League One 2016-2017 League Two 4. Prior to 5 June 2006, when (as will be described) a further 7,500 ordinary shares were issued, Blackpool FC’s issued share capital was 30,000 £1 ordinary shares. Of these shares, 1,393 (or 4.64%) were owned by 192 individual shareholders (the “Minor Shareholders”). The rest, 28,607 (or 95.36%) were owned by the First Respondent, 1 A list of terms, together with a reference identifying where each term is first used in the Judgment, is at Annex 1. 2 There are other, non-national, leagues, but they are irrelevant for the purposes of this Judgment.