Oyston & Anor v Rubin & Anor

CONTENTS

INTRODUCTION

Mr David Rubin and Mr Paul Cooper of David Rubin and Partners Limited (DRP (Footnote: ¹)) (the Receivers) were the court-appointed receivers of certain assets belonging to Owen Oyston and Denaxe Limited (the Receivership).

Denaxe Limited (company number 01970661) was known from 17 February 2017 to 24 June 2020 as Blackpool Football Club (Properties) Limited. For around 10 years prior to that it was called Segesta Limited. It is referred to as Blackpool Football Club (Properties) Limited in most of the evidence, but the names Denaxe and Segesta also crop up. I am going to refer to it as Segesta, simply because that is the name used at the original trial of the section 994 proceedings before me back in 2017.

I shall refer to Segesta, together with Mr Oyston, as the Claimants.

The assets over which the Receivers were appointed included shares in Segesta, shares in Blackpool Football Club Limited (BFC), which operates Blackpool FC, Blackpool FC’s stadium (the Stadium) and a hotel (the Travelodge). The Travelodge – as will become apparent – is an asset of particular significance in the matters before me.

The Receivers were appointed by an order dated 13 February 2019 (the Receivership Order) on the application of VB Football Assets (VBFA), by way of equitable execution of a judgment debt owed by the Claimants to VBFA.

In form, there are three matters before the Court:

In fact, there is considerable overlap between these three matters, and I propose to consider the many issues in dispute between the parties arising out of these matters in the order set out in Section E below. Before I do so, however, it is necessary to begin with some background.

BACKGROUND

The original judgment

The Claimants’ Claim for an account and surcharge and the Receivers’ Declaration Application for declaratory relief in relation to the Receivership Order are made in a complicated receivership.

On 6 November 2017 VBFA obtained judgment of over £30 million (the Judgment Debt) against the Claimants (and certain related parties) following a 16 day trial before me. Thejudgment also included an order that Mr Oyston should buy out the Petitioner’s minority shareholding in BFC.

Subsequently, VBFA made a number of attempts to enforce the Judgment Debt, none of which resulted in payment in full.

The Receivership

VBFA (referred to, in the application, as the “Petitioner”) applied to appoint receivers over a number of the Claimants’ assets (the Receivership Application). On 13 February 2019, the application came before the Court at a one-day hearing at which the Claimants and VBFA were represented (the Receivership Hearing). The Receivers did not appear at the Receivership Hearing. I gave an unreserved judgment on that day, and I ordered that the Receivers be appointed over the shares in Segesta and all the properties owned by Segesta.

My order, the Receivership Order, was made on 13 February 2019, and was sealed on 20 February 2019. The Receivership Order:

The Receivership Order was over the property set out at the Annex to the Receivership Order: as is clear from paragraph 1(a) of the Receivership Order, these were defined as the Receivership Interests; and the income flowing from the Receivership Interests was defined as the Sums Receivable.

The Receivership Interests comprised:

Conduct of the Receivership

In accordance with paragraph 8 of the Receivership Order, the Receivers provided detailed Reports to the Court as to the conduct of the Receivership. Those Reports record the challenges faced by the Receivers in the exercise of their powers and the conduct of their duties. These challenges are set out in an appendix to the Receivers’ written submissions before me. I do not propose to read into this Judgment the detail of this appendix, but I should say that I accept its accuracy and – because it has a bearing on the level of the Receivers’ Costs – I append it to this Judgment as Annex 2. (Footnote: ²)

The appendix to the Receivers’ written submissions is appropriately entitled “Resistance to the Receivership” and that resistance, on the part of the Claimants, is a material factor going to the level of the Costs of the Receivers.

The sale of the Football Assets

The process relating to the marketing and sale of the Football Assets is confidential, but I can describe it sufficiently in this open Judgment without disclosing confidential information.

The sale of the Football Assets (as a package) was a complicated process,which resulted in substantial time-costs for the Receivers, substantial legal fees of Stephenson Harwood (SH, the Receivers’ solicitors) and counsel and substantial agents’ fees.

This was for a number of reasons, but principally because:

The sale of the Residential Properties

33 Bloomfield Road, 4 Martin Avenue, 20 Martin Avenue and 16 Henry Street were sold at auction on 25 April 2019 for a total of £271,867.20.

Certain further properties – notably the Quernmore Properties – were not sold before the Receivership ended.

The Travelodge

The sale of the Travelodge was not straightforward either. The final Report of the Receivers – dated 20 December 2019 – states at paragraph 2:

“The Receivers are extremely experienced in the sale of property assets. Dealing with the Travelodge asset has been one of the most complex property assignments encountered in their experience.”

Part of the reason was that – as with Blackpool FC – the asset was held in an irregular manner. At the outset of the Receivership, THL, the company operating the Travelodge hotel business, was occupying the building without a contractual lease in place.In addition, a rent review was outstanding from April 2018: this was undertaken by the Receivers.

The Receivers first ran a marketing process for the property in April 2019, which resulted in two serious offers. The Receivers considered that the lack of a formal lease was a factor in there being a relatively low level of interest. An offer was accepted in principle, but the buyer’s due diligence revealed issues with the building’s cladding which raised concerns in light of the Grenfell Tower tragedy. The offer was reduced by an unacceptable level and so the sale did not go ahead.

As a result of this, the Receivers took steps to negotiate a formal lease for THL and in parallel undertook a second marketing process. Both of these processes were lengthy.

The Receivers found a buyer for the Travelodge for £7.9 million. They also negotiated a new lease and back payments of rent from April 2018, with £123,366 due to be paid in respect of this by THL on the completion of the lease.

On 12 December 2019, at 10:16, VBFA requested that exchange on the Travelodge be delayed.On 13 December 2019, a similar request came from Clifford Chance on behalf of VBFA, and from Slater Heelis and HHB on behalf of the Claimants. Slater Heelis also wrote to SH on 13 December and 15 December 2019. The latter letter threatened injunctive action if the Receivers took any steps towards selling the Travelodge or finalising the lease. On 16 December 2019, at 18:48, the Claimants informed the Receivers that the Judgment Debt had been extinguished by settlement, so that work was to cease.

As a result, the sale of the Travelodge (and the related conclusion of a lease) never took place. It is the evidence of the Receivers, which I accept, that both the lease and the sale would have been finalised had it not been for the settlement. Indeed, given the timings, it is quite possible that the exchange of contracts (but not completion) would have taken place before settlement had occurred, had the Receivers not agreed to refrain from taking any further steps in the sale in response to the multiple requests received beginning on 12 December 2019. Thus:

An application to extend the Receivership was due to be heard on 17 December 2019. For obvious reasons, that application was never made, and, in the event, the hearing slot was instead used for the discharge of the Receivership, which I shall come to describe in due course.

In his evidence to me, Mr Cooper suggested that the imminent sale of the Travelodge brought about the settlement. In his fourth witness statement (at paragraph 43) he says:

“Mr Oyston had not attempted to prevent the sale during the course of the ongoing work until the point at which contracts were due to exchange. I believe that Mr Oyston’s desire to settle the proceedings was in a direct response to the threat of the extension of the receivership and the imminent sale of the Travelodge…But for the imminence of the sale of the Travelodge together with the application that threatened the extension of the receivership, I believe that the negotiations would not have been commenced and the settlement would not have been achieved.”

This is not challenged in the Claimants’ evidence, and I accept that this is likely to have been the case.

THE POSITION AT DISCHARGE

In paragraph 26 of their written submissions, the Receivers say that the Receivership was discharged before completion of the assignment undertaken by the Receivers. That overstates the case. Certainly, it is true that the Receivers had been appointed to realise all of the Receivership Interests described in the Annex to the Receivership Order and – by paragraph 1(a) of the Receivership Order – were “appointed and entitled” to do so. But the realisations were for a purpose – essentially, to pay the Judgment Debt down to zero – and, once that purpose was achieved, further realisations would require careful justification. Certainly, the Court would not, without more, sanction realisations pursuant to the Receivership Order to no purpose.

I will come to the hearing at which the Receivership was discharged in a moment. For the present, I must consider the position which pertained at that time, and which is set out in the final Report of the Receivers dated 20 December 2019.

The following data is material and – to be clear – I accept its accuracy, which was not seriously challenged by the Claimants:

Had the transactions concerning the Travelodge completed and the Travelodge lease and Travelodge sale gone through, the Receivers would have realised a further £8,023,366, comprising:

More specifically, the Receivers made two Fee payments to themselves in the course of the Receivership: a payment of £510,000 on 17 June 2019; and a payment of £90,000 on 1 October 2019. As at 19 December 2019, a further £360,137.40 was said to be due. These amounts are inclusive of VAT. Accordingly, as at 19 December 2019, their total remuneration was £960,137.40 including VAT or £800,114.50 plus VAT.

The Receivers made distributions totalling £7,335,774 to VBFA, as follows:

As is readily apparent, distributions tended to follow realisations, with some Costs payments intervening between realisation and distribution.

DISCHARGE

Following a settlement between the Petitioner, VBFA, and the Claimants, on 17 December 2019 Mr Rubin and Mr Cooper were conditionally discharged from their duties, at a hearing originally listed to deal with an application to extend the Receivership.

The Discharge Order, dated 17 December 2019 and sealed on 19 December 2019, provided as follows:

As I have already noted, the Receivers filed their final Report and final account on 19 December 2019.

The Claimants made the Claim on 30 January 2020.

The Receivers are not yet fully released: paragraphs 8, 10 and 16 of the Receivership Order continue in force.

In the period after the Discharge Order, both the Receivers’ time-costs and their legal costs have continued to rise, although realisations have (obviously) not been made. It will be necessary to consider these costs, which I shall refer to as the Post-Discharge

As well as questions relating to the Receivers’ Fees and Disbursements (both before and after the Discharge Order), I must consider the position of third party creditors. Although the Receivers have settled some liabilities from DRP’s office account and some using a loan facilitated by VBFA, I understand that a number of third party creditors remain unpaid, and that interest is accruing on their entitlements at their contractual rates (or at 2% above the base rate if there is no provision as to interest in the relevant contract), pursuant to paragraph 3 of the Discharge Order. The Receivers invite me to deal with the settlement of the account in this regard, and it seems to me entirely right that this matter be dealt with at this hearing. It seems to me appropriate to

MATTERS FOR DETERMINATION

A number of matters or issues are controversial between the parties and fall to be resolved in this Judgment. Listing them in the order in which I propose to deal with them, they are as follows:

Before I turn to these issues, it is necessary to say something more general about the Receivers’ duties and their performance of them.

GENERAL POINTS REGARDING THE RECEIVERS’ DUTIES

In both his written and oral submissions, Mr Collings, QC, laboured the status of the Receivers as officers appointed by the Court and as fiduciaries, owing stringent fiduciary duties in their conduct of the Receivership. He stressed that the taking of an account is a serious and important matter, and that it was for the Receivers both to document the sums that had been and were being claimed as Fees and Disbursements (whenever incurred), and to bear the burden of proving that these Fees and Disbursements were properly incurred.

This was not challenged by the Receivers, and I accept everything that Mr Collings, QC stated in this regard.

However, it is important to note that neither the Declaration Application nor the Claim obliges me to conduct or to order the conduct of a line-by-line detailed scrutiny of the Receivers Fees and Disbursements. The burden of proof on the Receivers does not necessarily require this. Of course, where the materials produced by the Receivers suggests a level of incompetence or dishonesty or some other kind of failure as to warrant a line-by-line scrutiny, the Court will not hesitate to order it. However, such line-by-line scrutiny should only take place when appropriate and proportionate, and will not be directed by the Court automatically or as a matter of course.

In this case, although wide-ranging, the points articulated by the Claimants were directed to certain points, which I have identified in Section E above, and which (with one exception) are capable of a clear and distinct answer, without conducting a line-byline scrutiny.

The exception is Issue 7 which consists of a generalised suggestion on the part of the Claimants that the Fees and Disbursements (whenever incurred) are too high (or excessive, unreasonable or disproportionate – the precise thrust of the attack varied). Of course, such suggestions must be taken seriously by the Court, and I have considered the materials adduced by the Receivers with some care, and specifically in light of the Claimants’ points. Although I address this aspect of the Claimants’ contentions in greater detail in Section M below, it is important that I make clear my general conclusion as to the conduct of the Receivership by the Receivers and by DRP. It is my view that – looking at all of the evidence before me – the Receivership was carefully and prudently exercised and run by the Receivers, and properly documented, both in the Reports submitted by the Receivers to the Court during and at the end of the

Since this conclusion has the effect of framing the more specific issues, which I consider next, it seems to me important that I state it at the outset. As I have noted, I consider the point again, in greater detail, in Section M below.

ISSUE 1: ARE THE FEES INCLUSIVE OR EXCLUSIVE OF VAT?

The relevant materials

I have already referred to paragraph 10 of the Receivership Order. (Footnote: ³) This paragraph refers to the Receivers being paid their reasonable fees, liabilities, costs, expenses and disbursements in accordance with the terms set out in the letter from the Receivers to the Petitioner’s (i.e., VBFA’s) solicitors dated 11 December 2018.

This letter was before me when I made the Receivership Order and (as was not contentious between the parties) is to be treated as attached to and part of the Receivership Order. (The fact that it was not is due more to the electronic sealing and circulation of orders than anything else.)

I shall refer to the letter of 11 December 2018 as the December Letter.The December

This letter – and, as we shall see, there are in fact two letters of 26 November 2018 – was not before the Court at the time of the making of the Receivership Order and was not seen by the Claimants (or the Court) until relatively late in the day. Although the Claimants were rightly critical of this fact, they accepted that these letters formed part of the legal basis upon which the Receivers were acting and I proceed upon that basis. Nevertheless, it seems to me that the Receivers would have been well-advised to have placed all of the relevant contractual material before the Court and ensured its (virtual) annexation to the Receivership Order.

The desirability of that course of action becomes all the more clear when the two versions of the 26 November 2018 letter are considered. As to this:

The agreement as to VAT

The November Letter materially says this about the Receivers’ Fees. The quotation below shows the differences between the Superseded Letter and the November Letter. Essentially, there are two deletions that are material, which are marked in boldstrikeout. These words appear in the Superseded Letter but not in the November Letter:

“Our fees will be calculated as the lower of:

•

Time costs plus VAT incurred during the course of the assignment based on the following hourly charge out rates

	£
Senior / Managing Partners	550
Partners / Office holders	495
Managers /Senior Managers	350-395
Senior Administrators	220-295
Administrators	160-200
Cashiers and Assistants	150-295
Supports	120-150

•

and 5% of realisations plus VAT

•

plus disbursements

•

DRP will meet all property agents costs with regard to the sale of properties from their fees

At inception of the assignment, VBFA will provide a £30k loan, which is secured and payableout of the first property realisations made.

DRP have suggested that in respect of the football assets it would be optimal to utilise the services of a football public relations specialist. This cost will be met from DRP’s fees.

In the event that realisations are not sufficient to meet VBFA’s liability in full (currently £25.25m) DRP are prepared to reach an agreement with VBFA as to the payment of a fair and reasonable level of fees with regard to non-property related assets, namely the sale of any shares (most likely Closelink and Segesta, or any of its subsidiaries). Ongoing converations will be held in this regard once a better idea of the realisable values for certain assets are ascertained.”

So far as Fees and VAT on Fees are concerned, the December Letter is not materially different. However, for completeness, I set out the relevant parts:

“The costs of the Joint Receivers have been set out in the Letter of Engagement to VBFA, dated 26 November 2018. These are to be calculated as the lower of time costs and 5% of gross realisations. The Joint Receivers will meet the costs of instructing agents for the residential properties out of the realisations.

David Rubin & Partners maintain detailed time ledgers and our hour charge out rates are as follows:…”

There is then set out a table materially identical to the table set out in the November Letter (see paragraph 59 above).

The approach to construction

I have before me various disputes as to how the Receivers are to be remunerated. Specifically, in this Section, I am considering whether the rates in the table set out and described in paragraphs 59 and 60 above are inclusive or exclusive of VAT. This is an issue going only to Fees, and does not relate to Disbursements.

The relevant instruments that I am to construe are described in paragraph 58(5) above, and comprise the Receivership Order, and the various communications constituting the contractual relations between VBFA and the Receivers.

The principles of interpretation of contracts are sufficiently well-known for it to be unnecessary for me to set them out in detail in this Judgment. Certainly, I was not specifically addressed by either the Claimants or the Receivers on these principles. Where, in the course of this Judgment, I have regard to these rules or principles, I will, of course, set them out. For present purposes, it is sufficient to note that the process of construction is an objective one, considering the agreements reached between the parties in their factual matrix.

I was, however, addressed on the approach that should be taken in relation to the construction of orders. Because the Receivership Order features as the starting point for many aspects of the disputes between the Claimants and the Receivers, it is as well to set out the relevant rules (which are substantially based on the canons of contractual construction) now.

I regard the following as a statement of the approach that I ought to take:

In order to resolve the question of whether the Fees are inclusive or exclusive of VAT, the process of construction is, in my judgment, as follows:

I appreciate that this may not have been the subjective intention of either or both of VBFA and/or DRP and/or the Receivers. But that is irrelevant in the objective process of construction; and there is no application to rectify the contract before me. (Footnote: ⁹)

Conclusion

In relation to Issue 1, I conclude that the hourly rates by way of which the Fees are calculated are inclusive and not exclusive of VAT.

ISSUE 2: WHETHER DISBURSEMENTS INVOICED TO DRP, AND NOT TO THE RECEIVERS PERSONALLY, ARE RECOVERABLE

It is trite that appointment as a receiver is a personal appointment: as both parties accepted, appointments of receivers must be personal, that is they must be made to natural and not merely legal persons. By paragraph 1 of the Receivership Order, Mr Cooper and Mr Rubin were appointed Receivers. Their firm, David Rubin and Partners Limited, which I refer to as DRP, was not so appointed.

It follows that had either Mr Cooper or Mr Rubin sought to retire or relinquish the role of Receiver, it would have been necessary for an application to have been made to Court, and for the appointment of Mr Cooper or Mr Rubin to be terminated and a fresh receiver appointed. This is simply a necessary and important aspect of the Court’s control over the receivership process. That control is personal to the named receiver, and the Court will always know the identity of the specific person or persons who bear(s) responsibility for the receivership. That accountability is, quite properly, never eroded by entrusting the functions of a receivership to a non-natural person.

That does not, of course, mean to say that the receivers appointed in a receivership must do everything themselves. That would be impractical, even absurd, particularly in a complex receivership such as this. In this case, Mr Cooper and Mr Rubin formed a part of a larger firm – DRP – and it was DRP that was engaged by VBFA to act in the receivership. That is clear from all of the letters setting out the contractual relations between VBFA and the DRP, including in particular the November and December Letters. Thus, all of the letters are on DRP headed notepaper, and it is obvious that DRP is VBFA’s contractual counterparty.

The terms of the letters also make this clear. Thus, the November Letter states:

“The purpose of this letter is to outline the services to be provided by DRP and to confirm the basis for charging fees in respect of these services.”

Under the heading the “DRP Team”, the November Letter (which is signed by Mr Cooper as a partner in DRP) states:

“David Rubin and I will lead our team and be responsible for dealing with all matters. We will be assisted by my Senior Manager, Adam Shama and his team consisting of Jon Chaplin, Ian Hardwick and Stephanie Bidaud. We may also call upon specialist staff as appropriate. We may change the staff working on this assignment should the need arise.”

The table of hourly rates – set out in paragraph 59 above – reflects the range of persons within DRP that would working with the Receivers.

There is no inconsistency between the personal appointment of the Receivers pursuant to the Receivership Order and the contract for the provision of receivership services in the agreement between VBFA and DRP. The fact is that the contract between VBFA and DRP contains an element of personal service, whereby DRP will have to procure the services of Mr Rubin and Mr Cooper specifically. DRP was providing the services of Mr Cooper and Mr Rubin through the contract and the contract in no way abrogated their personal responsibilities as Receivers. By way of example, had Mr Cooper and Mr Rubin left DRP to join another firm, then either the Receivership Order would have had to have been amended, so as to appoint new receivers within DRP, or a new contract between VBFA and Mr Cooper and Mr Rubin’s (hypothetical) new firm would have had to have been entered into. (Footnote: ¹⁰)

Thus, Fees (as I am defining them) embrace not merely the hours worked by the

Equally, as the contract between VBFA and DRP makes clear, the Receivers may incur expenses in the form of Disbursements. The contract does not specify what these Disbursements might be – it simply says “plus disbursements” – and that is unsurprising, because the range of proper Disbursements is likely to be quite wide in any receivership, and certainly was in the case of this one.

In this case, Disbursements involved the engagement of various solicitors (notably SH, but others also) as well as property agents and others. In some cases, notably in the case of SH (but by no means exclusively so), the invoices were addressed to DRP and I anticipate that the retainer (or contract) was between the provider of the service and DRP. Certainly, I proceed on that basis.

The Claimants say that all such disbursements are irrecoverable. Quoting from their written submissions:

“7.1

[SH’s] invoices are all addressed to [DRP], which is its client…

No explanation is needed. For the reasons I have explained, the manner in which the Receivership was conducted is clear on the face of the documents. The legal basis upon which Fees and Disbursements were incurred is entirely transparent. This is a frivolous challenge on the part of the Claimants, and one that I reject.

Disbursements, whether invoiced to the Receivers or to DRP are in principle recoverable. Of course, whether they are proper Disbursements, apart from this, is a matter I must consider further.

ISSUE 3: THE LEVEL OF THE “CAP” ON FEES

Introduction

Paragraph 10 of the Receivership Order refers to the Receivers being paid their Costs in accordance with the terms set out in the December Letter.

For present purposes, the relevant part of the December Letter states:

“The costs of the [Receivers] have been set out in the [November Letter]. These are to be calculated as the lower of time costs and 5% of gross realisations. The Joint Receivers will meet the costs of instructing agents for the residential properties out of the realisations.”

I have set out the relevant provisions in the November Letter in paragraph 59 above, and do not repeat it here.

As is clear, the Fees are calculated by reference to two alternative bases:

So far as Fees are concerned, the lower of the two bases applies. Although Mr Collings, QC baulked at the label, it is right to say that the higher basis of charge is “capped” by the lower basis of charge. In this case, the Claimants’ case was that the Receivers’ time costs were higher than 5% of gross realisations, and that the Receivers’ remuneration was therefore capped at 5% of gross realisations. The question before me is precisely how “5% of gross realisations” is calculated and what that figure is in the present case.

I should be clear that there was no suggestion by anyone that if the cap was higher than time costs, it should prevail. Should I conclude that the cap in fact exceeds the time costs of Fees, then only the time costs will be recoverable. Whilst that may be selfevident, it is nevertheless worth stating.

The Claimants’ case

As I have described, realisations were £8,937,544.82 (net of VAT, which seems to me to be the correct figure: recovery should not be inflated because of tax). (Footnote: ¹¹) 5% of this sum is £446,877.24.

The Claimants contend that the contract calculates the 5% cap by reference to actual realisations, and that therefore any time costs above this amount are irrecoverable. Thus, according to the Claimants, the cap (in monetary terms) is £446,877.24.

In terms of the Fees to which the cap applies, I should make clear that I do not, in this Section, consider whether the cap extends to:

If the Claimants are right, then the cap will (even if regard is had only to Fees incurred on a time cost basis during the Receivership) have a significant effect on the recoverability of the Receivers’ time costs. I have set out the Receivers’ Fees in paragraphs 34 and 36 above. In summary, the Receivers made two payments to themselves in the course of the Receivership:

Given the conclusion that I have reached on Issue 1, it is clear that the net figure put forward by the Receivers of £800,114.50 is actually to be regarded as a figure inclusive of VAT. I consider that the cap ought to apply in relation to net fees (this was not, as I understand it, disputed by the Claimants) because the recoveries that define the cap are themselves net of VAT. Accordingly (and I am not making a finding as to the correct figure, but will leave the precise calculation to the order consequential on this Judgment) the net figure is something like £666,762. Clearly, even having regard only to time costs incurred during the Receivership, and on the basis of the hourly rates as they are in light of my conclusion on Issue 1, the cap bites to a significant extent if the Claimants are right.

Indeed, the Claimants – quite logically – say that not only can the Receivers not recover any unpaid amounts above the cap, but that – to the extent that they have received Fees in excess of the cap – such payments constitute improper over-payments, which should be restored as part of the account. Subject to the correct level of the cap being established, I did not understand the Receivers to disagree with this proposition (and it is difficult to see how they sensibly could).

The Receivers’ case

The Receivers contended that the cap was not 5% of actual realisations. The Receivers advanced two, different, contentions as to how the cap should be calculated, a primary contention and an alternative contention. These contentions were as follows:

Analysis

I am thus presented with three alternative contentions as to the meaning of the words “5% of realisations”:

It is important to stress that I do not regard any of these alternative constructions as involving the implication of a term. The fact is that the word “realisations” is susceptible of multiple meanings and needs to be given a definition. Mr Collings, QC sought to persuade me that the meaning of the word was plain. It meant, he said, “actual realisations”, and that is a phrase that all of us used as a convenient shorthand to describe the Claimants’ case during the course of the hearing. But this phrase is, in itself, only a shorthand. Thus:

In short, although I was referred to the law regarding the implication of terms, I do not need to consider the law in this regard. I am engaged in a process of construction, not implication.

I turn to this process:

Conclusions

For all these reasons, I conclude that the cap in relation to the Receivers’ fees was 5% of the realisations necessary to discharge the Claimants’ outstanding judgment debt to VBFA as at the date of the Receivership (13 February 2019). Since it would appear to be the case that the value of the Receivership Interests exceeds the outstanding judgment debt as it stood at 13 February 2019, the cap is (as Mr Isaac described it) at the level of c. £1.25 million.

If I am wrong, then I consider that the Receivers’ alternative case represents the proper construction of the contract, in which case the cap is – as I have described - c. £840,000.

ISSUE 4: RECOVERY OF FEES AND DISBURSEMENTS INCURRED DURING THE RECEIVERSHIP BUT PAID AS AT THE DISCHARGE OF THE RECEIVERSHIP

The Claimants’ contentions

As I have described in paragraph 34(3) above, the amounts outstanding as at 19 December 2019 – the date the Receivership was discharged – amounted to £690,161.95. These items include one item of Fees, and sixteen items of Disbursements. The element attributable to Fees was £360,137.40. (Footnote: ²⁵)

The outstanding Fees:

In principle, therefore, these items all ought to be recoverable by the Receivers. However, the Claimants contend that there should be no recovery of these sum even if the cap does not bite. The Claimants contend that the Receivers’ outstanding Fees and Disbursements should have been recovered out of realisations made during the Receivership, and that if the Receivers have failed to retain sufficient assets to meet these amounts, then they simply cannot be paid (other than pursuant to any indemnity from VBFA).

In effect, the Claimants say that there is a prescribed “order of priority” in the Receivership Order which compels this outcome. The words the Claimants rely upon in the order are those in paragraph 10, which provides that Fees and Disbursements are “to be retained by the Receivers and applied in satisfaction of the Costs prior to anydistribution to the Petitioner” (emphasis added).

It is the Claimants’ contention that the effect of these words – in particular the ones I have emphasised – is that the Receivers are only entitled to their Costs (Footnote: ²⁶) if they retain these prior to any distributions to the Petitioner. This construction would require the Receivers to ensure that all Costs were paid out of realised assets, and to postpone any distribution until those expenses and disbursements have been discharged.

The construction of paragraph 10 of the Receivership Order does not quite incentivise the Receivers to get in all of the Receivership Interests, discharge outstanding Costs, and only then distribute. But it does mean that the Receivers must be be extremely cautious and conservative in making distributions, if the Receivers want to be confident

Thus, in the present case, to take a concrete example, the Receivers should have retained the realisations from the Football Assets so that they could discharge expenses incurred later in relation to the realisation of the Travelodge, which (in the event) never occurred.

In effect, the Claimants’ contention implies a later distribution to VBFA than would otherwise occur. It creates a powerful disincentive against early distribution.

Analysis

The Receivers contended that this is not the correct construction of the Receivership Order, and I am satisfied that the construction contended for by the Claimants is not the correct one. I conclude that there is no “priority effect” of the sort contended for by the Claimants, and that the Receivers can recover their Costs (that is, the Fees and the Disbursements as described above) even if they have distributed the recoveries that they have made.

I have reached this conclusion for the following reasons:

In short, the Receivers have conducted themselves exactly in accordance with the Receivership Order, and I reject the contention that the outstanding Costs cannot be recovered. They can, and should be, and (given the delays and the accruing interest) this needs to happen in short order, at least so far as the third-party creditors are concerned.

I have particular regard to the third-party creditors, who clearly need to be paid promptly. I did not understand the Claimants to be advancing any other ground for not paying these creditors. Indeed, the fact that the Claimants’ “priority” argument meant that these creditors would be unpaid (absent payment from either the Receivers personally or VBFA, the Petitioner) is a further clear pointer that the Claimants’ construction of the Receivership Order is incorrect.

ISSUE 5: WHO BEARS THE COSTS OF AGENTS’ FEES?

The November Letter provides:

“DRP will meet all property agents costs with regard to the sale of the properties from their fees.”

This is very clear. Whilst – ordinarily – such costs would naturally be regarded as

“disbursements” within the meaning of the November Letter (and so, Disbursements as I am using the term), this provision of the contract makes clear that such costs will not be Disbursements, but will be paid out of Fees.

The matter does not, however, end there. The December Letter provides (with emphasis added):

“The costs of the Joint Receivers have been set out in the Letter of Engagement to VBFA, dated 26 November 2018. These are to be calculated as the lower of time costs and 5% of gross realisations. The Joint Receivers will meet the costs of instructing agents for the residentialproperties out of the realisations.”

The change is not particularly clearly flagged in the December Letter, but I am satisfied that the objective wording of the December Letter must be given effect to. The unambiguous meaning of these words is that, whereas under the November Letter, DRP was bearing the costs of all agents out of its Fees, the regime so far as agents for the residential properties were concerned would change, with their fees being paid for out of realisations. In other words, so far as residential agents were concerned, the position described in the November Letter was being changed back to the position that would ordinarily pertain, namely with these costs being paid for out of realisations. On the face of it, no change was made to the concession regarding the payment out of Fees of the costs of the non-residential agents.

Mr Phillips, QC, sought to contend that the contractual intention was different. The reference to “realisations” was in fact intended to be a reference to “fees”. As a result, the true construction of the change wrought by the December Letter was to retain the position of residential agents being paid out of fees, but to alter the position so far as non-residential agents was concerned, so that the concession made in the November Letter was effectively narrowed so as to exclude non-residential agents.

I am quite prepared to accept that Mr Phillips, QC was accurately describing the thinking of DRP and the Receivers. But absent a claim for rectification (which again, has not been made, and which I am not encouraging), the contractual wording is unambiguous. I do not see how I can properly read “realisations” to mean “fees”, when the use of the word “realisations” makes perfect sense.

Accordingly, the Receivers cannot recover the costs of non-residential agents as Disbursements, although they can recover residential agents’ fees. As I have indicated to the parties, precisely what falls within and without the definition of “non-residential agents’ fees” is a matter that I will – if necessary – debate at a consequentials hearing, the parties having by then the benefit of this Judgment so as to enable them to finally resolve (and set out in an order) the issues between them. But I should make clear that I do not regard Hilco’s costs as falling within this class. Mr Cooper has explained that Hilco were instructed for a fixed sum of £100,000 plus VAT and expenses to conduct the marketing and sale of Blackpool FC’s business and assets.Mr Cooper summarises the work Hilco did (including creating sales and marketing materials, marketing the assets, and assisting with due diligence including by managing a due diligence room for the sale). I raised with Mr Collings, QC, in the course of submissions, whether he was contending that Hilco’s fees were “non-residential agents’ fees”, and he confirmed that this was not the Claimants’ contention. Accordingly, I did not hear much argument on the point, but it seems to me that Mr Collings, QC is right, given the nature of the services rendered by Hilco in the sale of a complex set of assets like the Football Assets.

ISSUE 6: WHETHER THE RECEIVERS ARE ENTITLED TO HAVE (i) THEIR PRE-APPOINTMENT LEGAL COSTS PAID AND (ii) THEIR FEES AND EXPENSES POST-RECEIVERSHIP PAID

Introduction

So far, I have only been considering the questions of Fees and Disbursements incurred during the course of the Receivership. Here at issue are sums incurred either side of this period, either before the Receivership began or after it was discharged by the Discharge Order.

It will readily be appreciated that the recoverability of these items raises rather different considerations from the recoverability of Fees and Disbursements incurred during the course of Receivership. Although these costs arise on different temporal sides of the Receivership, what they have in common is that they were not incurred during the Receivership, and for that reason are considered together in this Section. Nevertheless, the analysis will begin with the pre-receivership costs.

Pre-Receivership costs

There was some debate between the parties as to when, exactly, the Receivership commenced. The Claimants placed considerable weight on the mismatch between the making of the Receivership Order on 13 February 2019 and the sealing of that Order on

As has been described to me, the Receivers incurred legal fees (payable to SH and to counsel) prior to this date, and the question is whether these are recoverable. The starting point is (again) paragraph 10 of the Receivership Order, which provides that Costs (defined as per paragraph 12(4) above) are to be paid in accordance with the terms set out in the [December Letter]. The wording of paragraph 10 strongly suggest that Costs are future costs (“shall be entitled…to be paid…”), but it seems to me that if the December Letter (and, of course, the November Letter referenced in that letter) clearly provided for the recovery of pre-Receivership Costs, then those costs would be recoverable as “Costs”.

But neither the November Letter nor the December Letter in any way suggests that costs pre-dating the appointment of Mr Cooper and Mr Rubin as Receivers are recoverable pursuant to the terms of those letters. To the contrary, the November Letter states:

“SCOPE OF SERVICES

We will provide the following Services:

 Act as Court Appointed Receivers over all assets determined by VBFA.”

This strongly suggests that the services begin with the appointment of Mr Cooper and

Mr Rubin as Receivers, and that the incurring of “fees” (which, in the letter is “plus disburements”) is co-extensive with this assignment. In short, the assignment begins on appointment (13 February 2019), and the liability to fees commences on the same date.

It seems to me, therefore, that there is nothing in either the Receivership Order or the December Letter (read so as to embrace the November Letter) to provide any basis for the recover of pre-Receivership costs (or fees – but these are not claimed).

Nor can the Receivers rely on any general proposition of law. As I have noted, (Footnote: ³⁰) a receiver is entitled to recover his remuneration costs and expenses from the assets he or she has been appointed to receive – here, the Receivership Interests and the Sums Receivable. That is so, whether or not the receiver ought to have been appointed in the first place; and even if the order appointing the receiver has been discharged. Whilst that general proposition extends to costs incurred after the discharge of a receivership, (Footnote: ³¹)

In my judgment, the Receivers can identify no basis for the recovery of their preReceivership costs, and these cannot be recovered.

Post-Receivership costs

I should be clear that I am not referring to Fees or Disbursements incurred during the course of the Receivership but unpaid at the discharge of the Receivership. These, as I have described, are recoverable for the reasons I have given.

What I am here concerned with are the costs – both in terms of Post-Discharge Fees and Disbursements – that have been incurred since the Receivership was discharged by the Discharge Order. These sums are, on any view, very substantial, amounting to some £550,000. (Footnote: ³²)

It was the Receivers’ primary contention that their Post-Discharge Fees and Disbursements were not Costs within paragraph 10 of the Order nor covered by the December (and November) Letters. Rather, it was contended that these costs were recoverable as costs relating to the administration of the Receivership under the principle articulated in Glatt v. Sinclair. (Footnote: ³³) Accordingly, these costs were not “Costs” as defined in the Receivership Order, and were not “Fees” or “Disbursements” as I have defined them.

The Claimants disputed this, and contended that these costs were “Costs” as defined in the Receivership Order, and therefore were “Fees” or “Disbursements” as I have defined them. In making those point, the Claimants placed particular reliance on the fact that, under CPR 67.7, the Receivers’ could only recover their fees if the Court so directs, specifying the basis for such remuneration.³⁷ Thus, according to the Claimants, the Receivers could either recover their Post-Discharge Costs as Costs under paragraph 10 of the Receivership Order or not at all.

This dispute matters – or may matter, depending on the significance of my conclusions on Issue 3 – because on the Claimants’ case the cap on Fees applies, whereas on the Receivers’ case it does not. As to this:

ISSUE 7: “LINE-BY-LINE” ANALYSIS OF THE SUMS CLAIMED BY THE RECEIVERS

Neither the Claimants’ submissions, whether written or oral, nor the evidence adduced by the Claimants stooped to particularity in terms of a detailed analysis of the Receivers Costs, using that term to embrace all of the costs items considered in the course of this Judgment.

What was said, in essence, was that the costs were “too high” and therefore warranted a closer consideration, ideally by a Costs Judge. The closest the Claimants came to any specificity was in a report on legal expenses, produced for the Claimants, by a Mr Christopher McClure of The John M Hayes Partnership Limited, a firm of costs lawyers and law costs draftsmen.

In his report, Mr McClure provides his opinion on the reasonableness of the legal expenses incurred by the Receivers, in particular in relation to SH, although his report is by no means limited to SH’s costs. His conclusion was that:

“24.

…in my preliminary view the level of costs sought by the [Receivers] in connection with legal expenses is, on balance, more than sufficient to justify a detailed examination of the same. Regrettably, the information presently available to the Claimants is inadequate to that end for the reasons I have given and, in my opinion, raises questions the Claimants are entitled to ask and which the [Receivers] – if they are to prove the reasonableness of the legal expenses claimed – are required to answer.

25.

My opinion is the most appropriate forum for the parties to make their submissions on costs, and for the Court to make a determination on those issues, would be the costs assessment process outlined at CPR Part 47. There are principally two reasons for this.

26.

Firstly, it would provide the [Receivers] with an opportunity to justify the reasonableness of the legal expenses claimed through the means of a detailed bill of costs. This would necessitate the provision of thorough descriptions of all work undertaken by [SH] and Teacher Stern (Footnote: ³⁴) in order to support the time claimed. In turn, the Claimants would then be in a position to make an informed judgment as to the reasonableness or otherwise of the costs claimed and, where appropriate, question any aspect of the expenses claimed by way of points of dispute. In response, the [Receivers] would be at liberty to serve formal replies to the Claimants’ points of dispute if so advised.

27.

And secondly, in the event that costs cannot be agreed between the parties then the matter would be placed before a Costs Judgewho, in possession of the [Receivers’] file of papers (which, according to this process, are filed with the Court in readiness for the assessment hearing) and with the assistance of oral representations from the parties, would then conduct a line-by-line assessment of the reasonableness – CPR 44.4(3) refers – of all items in dispute inter partes by reference to the bill of costs, points of dispute and formal replies thereto.

28.

The intended outcome of this process is to ensure that the Claimants’ liability for costs extends only to a sum that is reasonable – no more, no less – as required by the [Receivership Order], whether by agreement between the parties or upon assessment by a Costs Judge.”

I am in no doubt that there should be no detailed assessment of the Receivers’ Costs (whether legal costs or otherwise, and whether during or after the Receivership), but that the Costs and Disbursements as identified by the Receivers should be recovered by them, in full (subject to the very limited concessions made during the course of this process), pursuant to the lien that they have over the Receivership Interests. (Footnote: ³⁵) I have reached this conclusion for the following reasons:

I should say that I have considered carefully whether there should be some discount to reflect the fact that the Receivers have not been successful on each and every point. The Receivers have lost on Issue 1 and not completely succeeded on Issues 5 and 6. I do not consider – bearing in mind the points set out above – that any discount should be made. The Receivers were, in my judgment, entitled to take the approach they did on these (as well as on the other) issues, and I consider that they needed the guidance of the Court in order for the account to be completed.

CONCLUSIONS AND DISPOSITION

I have set out my conclusions on the issues before me, and do not repeat those conclusions here. As I have described, the issues before me and which I have determined were more in relation to the true meaning basis of the Receivers’ remuneration and cost recovery under the Receivership Order, the Discharge Order and the November and December Letters. There may be minor points of controversy that remain to be resolved, and I indicated during the hearing that I was alive to the possibility of this.

I am going to invite the Receivers to put together a draft order dealing with all matters arising out of the Declaration Application, the Claim and the account for further remuneration, and to submit that draft to the Claimants for their agreement and/or comment. Whilst I would very much hope that substantial agreement can be reached in light of this Judgment, I will list the matter for further hearing in the next three weeks, so that any outstanding matters, not capable of agreement, can be resolved then.

Finally, for the sake of completeness, there are two secondary points advanced by the Receivers, which are academic in light of my conclusions, but on which I should say a few words. The Receivers contended that I could reach the same outcomes in their favour either by varying the Receivership Order under the liberty to apply contained in paragraph 16 or else correcting the Receivership Order under the “slip” rule. Neither of these points arises, given the conclusions I have stated, but I should briefly say that I would have been disinclined to take either course.

It is extremely difficult to see how any of the matters on which I heard argument could be determined by reference to the “slip” rule. I simply do not see how that jurisdiction could have been exercised.

So far as variation of the order is concerned, I accept that (under CPR 3.1(7)) I have a broad jurisdiction and/or a broad discretion, but the circumstances in which that discretion can be exercised has clearly been laid out in a series of cases, beginning with Tibbles v. SIG plc, [2012] EWCA Civ 518, and further elucidated in Optis v. Apple, [2021] EWHC 131 Pat); Allsop v. Banner Jones, [2021] EWCA Civ 7; and Neurim Pharmaceuticals (1991) Ltd v. Generics UK Ltd, [2021] EWHC 530 (Pat).

In this case, I would have been most disinclined to vary the Receivership Order under CPR 3.1(7). There is no change of circumstance to point to, and (although perhaps not a final order in the absolutely strict sense) the Receivership Order is much more “entrenched” than an “ordinary” interlocutory order. I can see no basis for varying the Receivership Order under CPR 3.1(7).

Terms and abbreviations used

From the outset of the Receivership the Receivers encountered obstructive conduct from the Claimants and their legal representatives. This had a significant impact on the Receivers’ time-costs and legal costs.

One index of the extent to which the level of correspondence with the Claimants has driven up the expenses of the Receivership is the fact that the term “HHB” (ie Haworth Holt Bell, the Claimants’ solicitors) appears approximately 112 times in SH’s time narratives for the period to 18 December 2019: Cooper-2 [13/205/12]).

Access to documents and information

Mr Cooper had to obtain access to company documents and information:

Mr Cooper asked Ms Christopher for access to BFCP’s and BFC’s financial records and books on 21 February 2019 [PSC1/2/5].

SH emailed HHB on 21 February 2019 asking that they explain the obligation to cooperate with the Receivers and to provide them with such information and documents as they reasonably required to Ms Christopher (who was also HHB’s client) [PSC1/26].

SH sent HHB a letter by email on 21 February 2019 setting out the BFC personnel with whom the Receivers required to meet and a schedule setting out the information which the Receivers required: [PSC1/41].

Mr Cooper received reports suggesting documents had been removed or destroyed: [PSC1/11/51], [PSC1/11-12/2].

The first documents which were provided were a Memorandum of Association and Articles of Association for BFC made under the Companies Act 1948 to 1976 both dated 4 December 1980 [PSC1/103-106] [PSC1/107-113] and a Memorandum of Association and Articles of Association made under the Companies Act 1985 dated 22 November 1985 and 16 October 1985 respectively for Glenhaven Properties Limited (an old name of BFCP) [PSC1/114-119] and [PSC1/120-126]. The records of Companies House suggested that these documents had been superseded. These documents were provided on 27 February 2019 (and only for the purpose of supporting the Claimants’ claim that the boards of BFCP and BFC had been improperly changed): [PSC1/95102].

The second documents which were provided were two licence agreements between BFCP and Denwis Limited dated 17 August 2012 [PSC1/165-173] and 1 January 2016 [PSC1/174-179] licencing Denwis Limited to use office space in the Stadium and a space on the top floor of the Stadium known as the Penthouse. These were provided on 4 March 2019 [PSC1/162-164].

On 8 March 2019 HHB informed SH that much of the information and material requested had already been sent to Clifford Chance and was therefore not available, and that the rest would be posted to the Receivers: [PSC1/321-33]. Clifford Chance had already provided the Receivers with what information it had: [PSC1/223/25].

On 11 March 2019 the Receivers received a package of documents from the Claimants including [PSC1/225/29] tangible assets lists for BFCP and BFC, some share certificates, some leases for non-football assets, keys to these, insurance policies, occupation agreements for various premises at the Club. The information and documents received is indexed at [PSC1/327-329].

On 18 March 2019 SH requested information which was missing from the package sent: [PSC1/333-337]; on 24 March HHB responded explaining much of the information was not in its clients’ possession: [PSC1/350-354].

Access to Key personnel

Mr Cooper was unable to access key personnel:

Although the Receivers changed the boards of BFCP and BFC on 25 February [PSC1/5/23] [PSC1/60-63] staff were repeatedly told that the changes in the boards were ineffective: [PSC1/7/33] [PSC1/77] [PSC1/8/37] [PSC1/79].

Ms Christopher instructed staff not to attend work, apparently in order to prevent them speaking to Mr Cooper: [PSC1/3/12], [PSC1/136-137/36], [PSC1/224/26]

Michael Parsons of Denwis Limited, through HHB, resisted the Receivers’ requests to meet with him in relation to the Company’s financial affairs [PSC1/197-199] [PSC1/355-356] [PSC1/361-2] [PSC1/381-384]. Given the lack of availability of financial documents and information to the Receivers, speaking to Mr Parsons was important to the Receivers.

These difficulties made matters difficult for Mr Cooper becauseBFCP’s and BFC’s financial affairs were complicated. In particular, payments of £1 million had left BFCP’s account following the making of the Receivership Order on 13 February [PSC1/8/26], [PSC1/200-1], [PSC1/133-134/25], £36,185,419 of intra-group loans were written off in the period leading up to the Receivership [PSC1/219-220/9-11] [PSC1/239-258]. The finances of various group companies were intertwined eg [PSC1/136-137/36].

Increased involvement of Stephenson Harwood

SH’s involvement was required at all stages, and the level of its involvement was driven up by the Claimants’ and HHB’s uncooperative attitude as well as by the complexities of the Receivership. For example:

Allegations made about the conduct of the Receivership

Repeatedly, serious issues and allegations were raised in correspondence from HHB, requiring SH to devote time to dealing with them, and then dropped or not progressed. For example:

Conduct post-discharge

As Mr Cooper explains in Cooper-3[19/367/15] HHB’s conduct has continued to increase SH’s fees still further, for example: