Bluebirds saved from financial disaster

Mar 20 2008 Western Mail

CARDIFF CITY Football Club was yesterday rescued from the brink of financial disaster after a High Court judge ruled that it would not have to repay immediately up to £24m to its creditors.

Swiss investment bank Langston is suing the club over loan notes which it holds and had sought “summary judgment” – meaning the club should pay up immediately.

But Mr Justice Briggs, sitting in London, dismissed the claim for summary judgment.

As a result, the case will go forward to a full trial on the complex issues involved.

Speaking after the judgment was given, Bluebirds chairman Peter Ridsdale criticised the way the case had been handled by Langston – a Panamanian-registered company with corporate British Virgin Islands directors and offices in Switzerland.

“I’m relieved,” he said.

“I think that we have always accepted that we owed Langston £16m and the proceeds of the naming rights of the new stadium up to a maximum of £9m.

“We feel that the action over the last seven months has been strangling the club and has been unnecessary.

“We would expect anyone who has a difference of opinion to sit down and come to an amicable conclusion, but all that happened was we were dragged through the courts, which was very expensive and time-consuming and stops the process of raising cash which could have gone towards resolving this dispute.

“I sincerely hope they will sit around the table and realise that an amicable situation is the only way forward for both parties.”

In the judgment, Mr Justice Briggs said the case was “clearly unsuitable for summary determination”.

He refused Langston permission to appeal against it to the Court of Appeal.

The judge was invited by both sides in the dispute to delay the full hearing of the case for two months in the hope that it can now be resolved without the need for further court action.

The Coca-Cola Championship club, due to face Barnsley in the semi-finals of the FA Cup on April 6, had faced possible administration if Langston succeeded in its claim.

Langston’s counsel, Michael Driscoll QC, had told the court it was common ground that Langston was a substantial creditor of the club and that the debt owed to it was more than £15m.

It was also common ground that Langston lent £24m to the club in 2004, and it had yet to be repaid anything.

It was the club’s case that nothing was payable at the moment.

The judge extended the time limit for Langston to renew its application for permission to appeal to the Court of Appeal until June 10.

Announcing that a two-month stay on the action had been agreed, the club’s counsel, David Wolfson, said, “It has always been the club’s aim to reach a settlement without incurring further legal costs and, over the next two months, we hope very much to do that so we can concentrate on matters on the field where, I’m glad to say, we have enjoyed some success.”

The judge wished the two sides “every success” in their endeavours to resolve the dispute.

Cardiff City won another small victory when Langston agreed to pay costs incurred by the club in contesting the summary judgment application after the judge refused to “stay” payment pending any renewed application for leave to appeal.

Mr Justice Briggs said Langston held £24m fixed rate unsecured redeemable loan notes issued by the club under a document dated September 2004.

It was agreed between the parties that if the document continued to govern the terms for the redemption of the loan Langston was entitled to judgment for more than £30m.

But the club claimed the document was varied by a written agreement with Langston in October 2006, with the result that nothing was immediately due for repayment.

The judge said the club had “a real prospect of a successful defence” and should not be subjected to a summary judgment.

The club borrowed the money to meet its obligations under an agreement with Cardiff City Council for a new football stadium, athletics venue, sports centre, residential development and retail complex.

The judge said Langston had chosen not to identify its owners or its “governing mind and will” for the purposes of the transactions in dispute.

The club’s evidence disclosed a real prospect of establishing that Langston’s “governing mind and will” was at all material times Sam Hammam. Mr Hammam was, until October 2006, a director of the club and, until December that year, the majority beneficial owner of the club.

The evidence showed Mr Hammam was actively involved in the management of the club, particularly its participation in the redevelopment project, in the run-up to the 2006 agreement.

The judge said there was a genuine likelihood that the club would be able to establish at a full trial that Langston agreed to the write-down of the club’s debts to £15m and postponement of repayment to allow the club to fulfil its obligations under the redevelopment agreement.