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

11 June 2014

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

Coventry City Football Club’s Judicial Review against Coventry City Council moved into its second day at Birmingham Crown Court.

The SISU QC started proceedings by continuing the case against Coventry City Council (CCC) before the CCC QC started the case for defence in the afternoon. 

Here are the key points from the second day at the Judicial Review:-

- SISU QC recapped the some previous points from the first day. SISU QC said that SISU had agreed to pay £400k as part of a proposed restructuring of ACL’s debt to its bankers in a deal brokered by Yorkshire Bank (YB).

- Judge said that the YB believed ACL could have serviced the restructured loan. SISU QC responded by stating the YB only thought the loan could be restructured as long as they agreed a rent deal with CCFC.

- SISU QC said that the YB rejected a £12m offer for repayment of the ACL loan. The bank expressed concern about a conflict of interest with ACL directors (CCC officers who sit on ACL’s board) after the suggestion of selling the debt to the council. 

- SISU QC said that the officers had not told the councillors that the YB had offered to restructure the loan or that ACL were in default of the YB loan.

- SISU QC read out a council e-mail saying that the council planned to take action against the club once the deal between the council and the YB was agreed. SISU QC read out another council memo which shows the council wrote the business plan for ACL, which included job cuts and cost savings of £350,000. SISU QC says this shows there was a conflict of interest between the council and a private company.

- Judge said the ACL accounts show a profit in 2012 of just over £1m. SISU QC quoted the Pricewaterhouse Coopers’ financial report on ACL which found that their profitability was ‘over-stated’. The profit and loss accounts included “one off” items. The cash had been received in one year but shown in the accounts over subsequent years.

- SISU QC said that public funds used to build the Ricoh Arena was paid back in 2006 and this wasn't made clear to councillors.

- SISU QC raised ACL account documentation which shows the loan repayment resulted in negative cash-flow. Judge suggested that the accounts temporarily go into the negative but do recover. SISU QC said that this isn’t the actions of a profitable company and reads out an e-mail from an ACL director who says the company is ‘flat-lining.’

- SISU QC said that EU state law says state aid can only be granted when an independent valuation is made and when the EU is informed of any state aid action. SISU QC says these steps weren’t followed. Judge says that the points the SISU QC has raised ‘aren’t controversial.’

- SISU QC referred to case law in EU state aid pointing to examples from Copenhagen, Denmark and Uppsala, Sweden, where EU state aid was rejected at local levels under competition laws. The fact that the stadiums attracted an international audience was sufficient to bring them in breach of European state aid rules.

- CCC QC started the defence in the afternoon session. CCC QC said that ACL and the council have ‘no duty’ to SISU and says that SISU think they’re ‘god’s gift’ to Coventry.

- CCC QC said that SISU’s case has flaws and that SISU fail to recognise the CCC and ACL as separate entities.

- Judge said that whether the YB would have accepted SISU’s £5-6m offer for the ACL debt is ‘debatable’ but that SISU’s better negotiating powers could have played part. Judge says that it would have been ‘a legitimate commercial option’ for the council to let ACL to go into liquidation. 

- CCC QC said that the CCC had a shareholding interest in ACL long after the public fund money was repaid to the council in 2006.

- CCC QC asserted that SISU ‘shook hands’ with CCC on a CCFC rent deal in January 2013. CCC QC said it didn't happen because Ms. Seppala ‘wouldn't have it.’ 

- CCC QC said that decision to stop paying rent forced CCFC into administration and was not the fault of CCC or ACL. CCC QC is set to continue his defence tomorrow morning. 

- CCC QC said that Mr. Paul Harris makes it clear in his witness statement that SISU can approach ACL on a potential rent deal at the Ricoh Arena.

- CCC QC said that CCC will make £19.4m in interest over the 40 year lease and that SISU were dealing with the YB behind ACL and the CCC backs’. SISU QC said that there is no evidence for that, stating ‘nothing will get in the way of a good story.’

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