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Key points from Day One of the Judicial Review between Coventry City Football Club and Coventry City Council

10 June 2014

Here are the key points from the first day of the Judicial Review at Birmingham Crown Court today...

Coventry City Football Club challenged Coventry City Council in a Judicial Review at Birmingham Crown Court today.

The first day of the review, a review which is expected to last three days, consisted of the SISU and CCFC QC putting across their argument against Coventry City Council.

The argument is expected to continue tomorrow morning before we hear from the defendants, Coventry City Council.

The full court transcript will be available in the coming days.

Here are the key points from today’s court proceedings:-

- Having considered the recent disclosure from Coventry City Council (CCC), CCFC has dropped two of its original four arguments from its claim, but has developed its ‘irrationality’ argument in light of the information now available.  

- In particular, CCFC argues that the CCC failed to take into account relevant and important considerations in taking the decision on 15 January 2013 to make the £14.4m loan to ACL (including the fact that the Yorkshire Bank (YB) had offered an alternative solution to ACL’s problems which the CCC Cllrs were not told about).  

- The Judge viewed this as a new argument but said he would decide whether to give permission to include it after he has heard full argument what CCFC has to say.

- CCFC says that documents from the time show CCC was advised that £14.4m loan was far in excess of what ACL was worth as a company; and that YB had offered to restructure its £15.5 million loan to ACL provided a new revised rent could be agreed between ACL and CCFC. SISU QC noted that CCFC had agreed to the YB’s rent proposal around 12 December 2012, but ACL refused to accept those terms. 

- SISU QC said that, while there was insufficient evidence to show that the Cllrs as a collective group had acted with an improper purpose, CCFC SISU strongly suspected that CCC officers and leadership, along with ACL, had hoped the CCC decision would drive SISU out of Coventry via an administration process for the Club and result in its sale to a new owner.

- SISU QC took the Judge through the history of dealings between the Club and ACL. CCFC representatives urged ACL to meet to discuss a new rental deal in 2006 (before SISU bought the Club), explaining the financial difficulties the club faced due to the high-rent level. Sisu QC argues this shows the level of rent has been an issue for CCFC since moving into the Ricoh Arena. The Judge questioned whether this was relevant to the state aid argument.

- Turning to the negotiations in 2012, Sisu QC noted the CCC and SISU appeared to agree on the need to renegotiate rent in April 2012 and signed up to non-binding heads of terms on 2nd August, 2012, by which CCC SISU would purchase and write off ACL’s debt from YB in return for CCC extending ACL’s lease to 125 years. Sisu QC also noted that SISU proposed to engage AEG to operate the Arena.  

- The Judge made clear his view that CCFC remained legally obliged to pay the £1.3m annual rent.  The SISU QC accepted that was CCFC’s legal obligation. SISU QC noted however that, in a private Higgs memo, Peter Knatchbull-Hugessen had accepted that the £1.3m annual rent was ‘always unaffordable’.

- SISU QC then moved on to the period from August to November 2012, pointing out that the CCC, and in particular CCC director of finance Mr Chris West, were stringing SISU along in rental negotiations while negotiating secretly with the YB to buy out the debt.  The Judge suggested this was just normal commercial negotiations and questioned how this affected what he had to decide. 

- SISU QC talked the Judge through the numbers involved in the deal, pointing out that ACL’s shares had no value before CCC made its loan to ACL  and afterwards.  ACL’s problem was that its business was worth much less than the money it owed (first to YB, then to CCC).

- SISU QC then turned to the final part of what happened in 2012, looking at events in December 2012 and noting that CCC proposed an offer of between £11m-£13m to buy the YB debt and threatened ‘a major media assault’ should YB do a deal with SISU instead of going with the CCC’s offer.  The day ended with this part of the story to continue tomorrow.

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