LNOC Ltd v Watford Association Football Club Ltd

The Claimant (“LNOC”) lender seeks some £900,000 plus interest, the amount not repaid under two loans to the Defendant football club (“the Club”) which totalled £2.62 million. The two loans have in this case been called the Danny Graham Transaction and the Football League Transaction. The Club contends that it is not bound by the transactions because they were plainly not in its best interests and therefore Mr Bassini, the then de facto Managing Director and ultimate owner, had no authority to enter into them as LNOC knew or should have known. The Club contends that Mr Bassini lacked actual or apparent authority to enter into the transactions on its behalf. The Club counterclaims for the sums it has already paid back to LNOC. LNOC has an alternative claim in unjust enrichment.

LNOC is a company with money to lend owned and run by Mr and Mrs Francis. It is a client of Mr Nigel Weiss whose companies Good for Sport Limited (‘GFSL’) and New Avenue Projects Limited (‘NAPL’) act as intermediaries in the provision of funding to football clubs, matching funders with clubs who require finance and implementing transactions by drafting documentation. Mr Weiss’ companies are paid commission by the funders. Mr Weiss is a qualified solicitor who had a successful career with leading law firms giving advice in this area before starting his business.

The Club is a well known football club which, at the relevant time, was in the Championship and subject to the rules of The Football League (“The League”) as set out in The Football League Regulations 2011-2012 (“The Regulations”). From May 2011 until June 2012, the Club was owned and controlled by Mr Laurence Bassini. The other directors of the Club at the relevant time are distinguished, Mr Graham Taylor, the former England manager, Mr David Fransen, a very successful businessman and Professor Stuart Timperley. The Board was small and the directors, other than Mr Bassini, non executive.

At the trial the parties relied on twenty bundles of documents. I heard evidence from Mr Weiss for the Claimant and from Mr Fransen, Professor Timperley, Mr Craig (from the Football League) and Ms Wareham for the Defendant. There were unchallenged witness statements from Mr Francis of LNOC , Mr Wilson (on behalf of the Club’s bondholders), Mr Taylor (the Club chairman until May 2012), Ms Ives and Mr Wastall. The evidence of Mr Weiss was challenged by Mr Randall QC for the Club and I deal with this later. The evidence of the other witnesses was challenged and corrected to some extent but it was accepted that they were all telling the truth. I set out the effect of what they said when summarising the facts.

Both sides invited the Court to draw inferences from the fact that the other had not called Mr Bassini or Mr Barrea to give evidence. Both sides had reasons for not doing so. LNOC’s counsel pointed to the fact that at the FDC hearing, to which I refer later, the Club had not put to Mr Bassini in cross examination the allegations now being made in this case. Despite the authorities relied on for this point it is as I see it a distraction to consider what evidence there might have been and I should focus on what there is. The Club does however face the difficulty that it has the burden of showing that Mr Bassini did not honestly believe that the transactions were in the best interests of the Club. The Club could have made Mr Bassini a party to the action but chose not to do so. Mr Bassini was thus not involved in the trial. It would therefore be unfair for me to pass comment on his role except to the extent really necessary for my decision. Equally it would be wrong for this decision to be seen as some overall vindication of Mr Bassini’s role in events.

The facts are complex but few are in dispute. The factual dispute (and, as Mr Randall QC for the Club sees it, this is what the case turns on) is essentially about the state of mind of Mr Bassini (who did not give evidence) and Mr Weiss (who did) at various times. I take some of the uncontroversial facts below from the skeleton of Mr Davies-Jones QC and Mr Coffer who appeared for LNOC.

Mr Bassini was the de facto managing director and beneficial owner of Watford F.C. Limited (‘WFCL’) which acquired the Club’s holding company, Watford Leisure Plc (‘Watford Leisure’) which owned 96% of the Club’s shares. He took over the running of the Club assisted by an associate Mr Angelo Barrea, a solicitor. Mr Barrea was a consultant to Mr Bassini without an official Club position but was effectively in charge of its day to day running. Witnesses acknowledged that his instructions were complied with as he was the voice of the owner. Mr Barrea had a Watford Association Football Club e-mail address and an office at the Club, and became a signatory on the Club’s bank account. He attended board meetings and reported to the board.

As part of the negotiation of the take-over, Mr Bassini had undertaken to provide funding to the Club to cover its short-term cash flow requirements. It seems clear that the Club also needed other funding but how far the money was to be put up by Mr Bassini himself and how far, if at all, it was to be raised by the Club was apparently left vague.

The Club wished to carry out improvement work to its stadium, Vicarage Road, including completing the construction of the south west corner stand (“The Stand”) which had been part-built. It is common ground that the development of the south west corner was seen as an important step, but not the only step, in the development of the Club.

Like some other clubs the Club had previously raised money by discounting or ‘forward funding’ future sums due it for transfer fees. In June 2011, the Club received a bid from Swansea City Football Club (‘Swansea’) for the transfer of striker Danny Graham for £3.5 million, payable in instalments. Mr Bassini and Mr Barrea asked Ms Katie Wareham, the Club’s Head of Finance to explore the possibility of forward funding the Danny Graham transfer. Ms Wareham made enquiries of a number of possible brokers known to her but not of Mr Weiss. Mr Barrea contacted Mr Weiss and arranged to meet him at the Club on 8 July. The upshot is summarised in Mr Barrea’s subsequent email- he was “looking to finance two projects at Watford, both to provide better infrastructure for the club. The most pressing is the south west corner stand which I would like to start by October; I am currently lining up the builders for this project and therefore need to move quickly.” The estimated cost of the SW stand development was “circa £2.5 million”.

Another meeting took place on 19 July 2011 between Mr Barrea and Mr Weiss who recalls that his partner Mark Wollner was present as was Mr Bassini. Mr Barrea informed Mr Weiss that the Club had recently sold Danny Graham to Swansea and asked if it would be possible to accelerate payment of a further £1 million which was owing to the Club. Mr Weiss proposed finding a funder to pay the Club £900,000 in exchange for which the Club would procure the issuing by Swansea of two promissory notes, each of £500,000, in discharge of the sums owing to the Club by Swansea. The Club would then assign the promissory notes to the funder, so that “in essence, the funder purchased the two endorsed promissory notes from the Club at a discount”. On 5 August 2011 Mr Weiss told Mr Barrea that funds were available and proposed what would become the transactions in dispute- forward funding of the money owed to the Club by Swansea on the Danny Graham Transfer and a transaction financing payments due to the Club from the Football League .

Before proceeding, Mr Weiss asked the Club to sign and return a non-disclosure agreement. This was returned on 22 August 2011, signed by Mr Barrea as “a consultant duly authorised to bind the club on behalf of L. Bassini, a director” and witnessed by Michelle Ives, the Club’s Football Secretary.

The mandate for the Danny Graham Transaction was signed on 24 August and sent to Mr Weiss that day. The following day, a term sheet was drawn up and provided to Mr Barrea who had asked Mr Wollner to liaise directly with Swansea in relation to the Danny Graham Transaction. Mr Weiss therefore e-mailed Swansea asking them to issue the promissory notes to the Club. On 26 August 2011, Mr Weiss confirmed to Mr Barrea that he had spoken to Swansea, and requested again that Mr Barrea provide “your authority to bind the Club”. He also provided the wording for a mandate for the Football League Transaction.

In response to Mr Weiss’ requests for evidence of his authority, Mr Bassini provided a signed statement in the following terms: “I, Laurence Bassini owner and director of Watford FC Limited, Watford Association Football Club and Watford Leisure Plc hereby confirm that the clubs advisor and solicitors Angelo Barrea has authority to bind the aforementioned clubs.”. On 6 September 2011, Mr Barrea signed a mandate for the Football League Transaction and a revised version of the term sheet for the Danny Graham Transaction (reflecting changes to the arrangement fee and discount rate). Essentially LNOC would pay £951,041 to the Club in exchange for two promissory notes payable at deferred dates with a combined value of £1 million. Mr Weiss then provided to Mr Barrea drafts of the following documents:

The documents for the Danny Graham Transaction were executed by the Club and provided to Mr Weiss on 7 September 2011. Mr Weiss went to Swansea personally to collect the signed promissory notes and brought them to the Club’s offices on 19 September 2011 to be endorsed by the Club in favour of LNOC .

Mr Wastall, the Club’s company secretary and Mr Bassini endorsed the notes. Later that day, Mr Barrea provided to Mr Weiss by e-mail details of the bank account to which funds were to be sent: a bank account at Lloyds Bank in the name of Watford FC Limited ( ie the parent company not the Club).

Mr Weiss and Mr Francis did not notice that the account was not in the name of the Club. The trial bundles contain many documents where the Club was colloquially referred to as Watford FC.

Meanwhile on 9 September 2011 Mr Weiss had provided a term sheet for the Football League Transaction. LNOC would immediately pay to the Club £1,701,642 in exchange for an assignment to LNOC of the next nine monthly payments of £200,000 due to the Club from the League.

On 13 September, Mr Weiss provided a draft of the assignment to Mr Barrea and was provided with the Club’s bank account details. Mr Weiss also asked Mr Barrea about any charges which might impact on the Football League Transaction. Mr Barrea asked the Club’s lawyers, SA Law, to provide the information directly to Mr Weiss and they did.

One of the “Conditions precedent to drawdown” identified in the term sheet was “FL approval in accordance with the FL Regulations.” On Friday 16 September 2011 Mr Weiss sent the draft assignment to Mr Craig, the League’s Director of Legal Affairs asking for approval.

At this point I mention two Regulations which are relevant to what happened next.

The League had recently introduced a new rule, Regulation 19, which provided:

“19.1

Subject always to the provisions of Regulation 19.2 below, any Club that enters into an assignment of some or all of that Club’s entitlement to distributions from the Pool Account (as defined in the Articles of Association) (or any other form of security or arrangement of similar effect) (“Assignment”) shall notify the League in writing no later than 24 hours after the date of that Assignment. Any Club that enters into an Assignment shall be subject to a registration embargo for the Effective Period of any Assignment such that it should not be permitted to register any Player with that Club without the prior written consent of the Executive. For the purposes of this Regulation, “Effective Period” shall mean the period commencing with the date on which the League is notified (or otherwise becomes aware) of the Assignment, and ending on the date on which The League is notified that the Assignment has been finally released.”

So this was relevant to the Football League Transaction. Any club which had assigned its entitlement to distribution from the League’s pool account had to notify the League within 24 hours and would be subject to a “registration embargo” (i.e. prohibited from registering new players) for the duration of the assignment.

Regulations 44 and 48 were to bear on the Danny Graham Transaction. Regulation 44.2.2 provides as follows:

“44.2

In addition to the forms and documents specifically required by these Regulations, a Club shall submit to the Secretary:

44.2.2

any contract it proposes to enter into (save for a Representation Contract with an Agent) which gives the Club or any other party to the proposed contract the right to receive payments in respect of a Player.

Any such proposed contract shall be subject to the approval of the Board. In deciding whether to give such approval the Board shall have regard to (without limitation) Section 9 of these Regulations.”

Regulation 48 provides in relevant part;

“48.1

Unless otherwise agreed by the Board and subject to Regulation 48.2, a Club may only make or receive a payment or incur any liability as a result of or in connection with the proposed or actual registration (whether permanent or temporary), transfer of registration or employment by it of a Player in the following circumstances:…..”

48.1.10

in the case of a Transferee Club, by assignment of its entitlement to a Fee or a Loan Fee to a Financial Institution.”

A Financial Institution is defined in the Definitions Section of the Regulations and does not include the Claimant.

On Friday 16 September Mr Craig commented internally that he would not approve the Football League Transaction “given the embargo rule plus the issue of why the club needs to do this in light of business plans approved under change of control” and suggested that they formulated a response the next week. However, rather than respond directly to Mr Weiss, Mr Detko and Mr Craig of the League telephoned Mr Bassini in the evening of Monday 19 September 2011. Mr Craig’s evidence is that he and Mr Detko spoke to Mr Bassini about their concerns that money was being raised and that the assignment would result in the imposition of a transfer embargo. He confirmed in cross-examination that during the call with Mr Bassini, there was no mention of player forward funding arrangements or of Regulation 44.2 or 48.1.

The League’s stance angered Mr Bassini and he asked Mr Weiss to help him persuade the League not to impose an embargo. On 20 September 2011 Mr Weiss sent an e-mail to Mr Bassini, copied to Mr Barrea, providing some points to make with the League. Mr Bassini also asked Mr Weiss to find a way of re-structuring the Football League transaction without involving the League. Mr Bassini was adamant, as a result of his conversation with Mr Craig, that he did not want the Danny Graham Transaction disclosed to the League either. According to Mr Weiss “….because he [Mr Bassini] had fallen out with the Football League and because he had this belief [“rightly or wrongly”] that they would do anything they could to obstruct him……”. It was agreed that LNOC would hold off sending the payment instruction to the League which the Club had already signed as part of the transaction documentation for the Danny Graham Transaction. Mr Weiss says that he agreed to that on condition that the Club would not give LNOC cause to act differently.

Mr Weiss re-structured the Football League Transaction so that instead of receiving re-payment from the League under an assignment, LNOC was to acquire from the Club two promissory notes, each for £900,000, payable on 1 February 2012 and 1 September 2012 respectively. The Club’s obligations were to be supported by a personal guarantee from Mr Bassini. LNOC would also take an assignment of the Club’s entitlement to payments from the League but the assignment would be held in escrow by Mr Weiss and only released to LNOC and completed if payment was not made. The assignment was expressed to be conditional and would remain incomplete and ineffective as against the League who would not be notified of it unless the Club defaulted on the required payments under the promissory notes when due. Mr Weiss took the view that there was never an assignment within regulation 19. At this and all other points Mr Weiss was not acting as a solicitor for the Club but as agent for LNOC.

Mr Craig responded to Mr Weiss’s e-mail, on 22 September 2011:

“Thanks for this. Just to confirm this has not been approved by the FL as yet and we await further information form the Club about the effect of this arrangement on business plans and we also need to consider the implications of our new Regulation 19 approved by Clubs last Summer which means clubs assigning central distributions are subject to an embargo until such time as the assignment is cleared.”

Mr Craig accepted in evidence that the use of the word ‘approved’ in this context was inaccurate, in that there was no requirement that the League give its approval. The Club was entitled to enter into the transaction, albeit that the consequences prescribed by Regulation 19 would then follow.

The documents for the Football League Transaction were signed by Mr Bassini and Mr Wastall and Mr Weiss went to the Club again on 26 September 2011 to collect the executed documents. Payment was made to the same account as for the Danny Graham Transaction the same day and Mr Barrea confirmed on 3 October 2011 that “Watford fc” had received the funds.

The Club relies on the fact that the money advanced by LNOC went to the parent company and not to the Club’s own account. As the trial proceeded it became clear that this was not a good point. I accept LNOC’s submission that there was nothing unusual or improper in directing that payment be made to the holding company rather than the Club itself. WFCL had authority to receive funds for the Club. The management of the two companies treated the two companies’ bank accounts as Group bank accounts, with, for example, transfer funds received into both accounts and payments to the Club’s creditors made by both WFCL and the Club itself. This emerged from the evidence of Ms Wareham who had an impressive grasp of the financial issues. The board was aware of and sanctioned this movement of funds between the two companies and the existence of the inter-company running accounts which the above approach necessitated. This was clear from the evidence of Professor Timperley who accepted that WFCL could receive funds on behalf of the Club and vice versa.

The witness statement of Ms Wareham claimed that as a result of Mr Bassini’s involvement with Watford WFCL obtained very substantial amounts of cash at the expense of Watford Leisure/the Club. That claim starts with assumptions based on a broad commitment by Mr Bassini to inject £3.5 million in working capital and overlooks the fact that WFCL made very substantial payments to noteholders. After Ms Wareham had been cross examined and had given direct and truthful answers it was clear to me that it was Watford Leisure/the Club that may have, in cash terms, benefited at the expense of WFCL and that the position was, at worst, neutral.

It follows that this is not a case where it is alleged that a director has benefited personally at the expense of the company, a significant factor when I turn to the law later in this judgment.

The transactions were not disclosed to other Directors and senior employees at the Club. This was the evidence of Mr Fransen and Ms Wareham, which I unhesitatingly accept, and of Mr Wilson whose witness statement is not challenged. Similarly Ms Ives, who was responsible for player registrations and liaising with the League, was not informed of the Danny Graham Transaction either.

Against that, as appears from what I have said above, Mr Bassini and Mr Barrea did not conceal what they were doing. The documents were executed at the Club’s offices on 19 and 26 September 2011 and by Mr Wastall (the Club’s company secretary) as well as by Mr Bassini. Ms Ives (the Club’s Secretary) witnessed Mr Barrea’s signature on the Good for Sport non-disclosure agreement. Mr Barrea asked Mr Weiss to deal directly with the Club’s lawyers, SA Law, without imposing any secrecy. On the Danny Graham Transaction, Mr Weiss was asked to liaise directly with Swansea and was not told to keep things secret.

The directors other than Mr Bassini were not ciphers and did not owe their position to him. The board was small and non executive. As I have said the directors are distinguished people and Mr Fransen and Professor Timperley gave clear and transparently honest evidence. The Board delegated authority to Mr Bassini and let him get on with it in a way that many public companies in other spheres would not. That was not neglect on their part but recognition that the owner of a football Club must be allowed to call the shots- a theme echoed, in connection with a separate issue, by Mr Craig of the League in clear, fair minded and very knowledgeable evidence.

Payment under the first of the promissory notes issued by Swansea was due on 1 January 2012 but the Club failed to pay. Mr Weiss sought payment from Mr Bassini and Mr Barrea directly. After a series of broken promises to pay LNOC received £500,000 on 23 January 2012.

The first payment under the promissory notes for the Football League Transaction was due on 1 February 2012 but the Club failed to pay eventually issuing a cheque for £900,000, which was signed by Ms Wareham and Mr Barrea. The cheque bounced as there were inadequate funds to meet it. Mr Barrea instructed Ms Wareham to make a bank transfer of £900,000 to the Club stating untruthfully that the payment related to improvement works on the south west corner of the Club’s stadium. Ms Wareham brought the payment to the attention of the Club’s board of directors at the next board meeting on 25 February 2012, stating that “no paperwork has been received to date relating to this payment”. Mr Bassini untruthfully informed the board that the payment to LNOC related to the development of the south west corner of the ground and the East Stand, and stated that he would provide the paperwork to Ms Wareham.

The second payment for the Danny Graham Transaction was due on 1 March 2012. Again, the Club failed to make payment to LNOC. From 6 March Mr Weiss repeatedly pressed Mr Barrea for payment with no success. He wrote to Mr Barrea on 18 April 2012 explaining that if payment was not made by the Club, LNOC would insist on payment from Swansea which would expose the Club to the possibility of a fine and possibly a points deduction. That email is much relied on by the Club for what it says it reveals about Mr Weiss’ knowledge. It contains the following: “Nick now requires the funds for another investment which is why he is pressing me. I do not want him to take action without involving me because that is most likely to be insisting upon payment from Swansea. That would be a dreadful outcome and would place the Club in a very difficult position with the FL (including a large fine and possibly even a points deduction for breach of the Regulations). It would also be very bad for me personally. Given that I went out of the way to structure this without reference to the FL I now wish I had not done so.”

Mr Weiss explained in his statement and in evidence that he did not believe at the time that the Danny Graham transaction was a breach of the League Regulations but wanted Watford to pay and so he raised the possibility that they might get into trouble with the Football League if they did not. The Club says that this message indicates that Mr Weiss knew full well that the Transaction broke the Regulations and that is why it was concealed. Mr Weiss explained that the adverse consequences which he was suggesting would follow if LNOC wrote to Swansea and the League demanding payment under the promissory notes related to the Club’s failure to pay over trust money to LNOC, and to the fact that Swansea would be placed in the position of potentially having to pay twice over. I am not sure that Mr Weiss’s recollection about that is correct. It is more likely that he was angry about not being paid and wanted to put pressure on the Club. I doubt that he was expressing a considered view about the effect of the Regulations. However while his memory now about what he considered the effect of the Regulations to be at the time might not be reliable on its own, it is supported by the fact that he was saying just that at the time. This is clear from emails of 27 February and 12 March 2012 when promoting the Sordell deal to which I now turn.

At the end of February 2012, Mr Weiss entered into discussions with the League about arranging forward funding for the transfer of Marvin Sordell to Bolton Wanderers. The proposed deal was to have a similar structure to the Danny Graham Transaction. Mr Craig drew the attention of Mr Weiss to the Regulations. Mr Weiss tried to persuade the League that a transaction structured around the use of promissory notes would not fall foul of the regulations because it “cannot give the funder any rights in or to the player”.

The Sordell transaction did not proceed. The League was adamant that it would contravene the Regulations. On 11 April 2012, Mr Barrea wrote to the League setting out his reasoning as to why he believed that Regulations 44.2 and 48.1 did not apply and threatening litigation with the League over that issue. The Club sought advice from Counsel on the prospects of litigation and was advised that it would lose.

In the following weeks, Mr Bassini and Mr Barrea made and broke a series of promises to pay. Eventually Mr Weiss demanded payment from Swansea on behalf of LNOC. Swansea’s solicitors responded asserting that as Swansea had had no notice of the endorsement, their obligations had been discharged by the payment to the League. Payment of £606,302, representing the full sum due to LNOC including interest, was eventually made by Swansea on 22 June 2012 out of funds advanced to them by the Premier League, who in turn sought reimbursement from the League.

The League became aware of the Danny Graham Transaction and on 12 June 2012 wrote to the Club and to LNOC suggesting that the Danny Graham Transaction may have been in breach of the League’s Regulations (in particular Regulation 44.2 and 48.1).

By now Mr Bassini had entered into negotiations for the sale of the Club to new owners. The sale was completed at the end of June 2012. Mr Weiss wrote to the Club on 26 June 2012 to remind them that the final payment for the Football League Transaction was due on 1 September 2012. Ms Ives responded that “no one here has any knowledge of such an agreement.”

Thereafter, the Club continued to adopt the position that it had no knowledge of the LNOC transactions, and refused to pay the £900,000 which was due under the second promissory note for the Football League Transaction. LNOC therefore commenced this claim to recover that sum.

Meanwhile no work had been done on the Stand. It is not suggested that Mr Bassini has benefited personally from use of the money which was advanced.

Charges were laid against the Club and Mr Bassini by the League and a football disciplinary commission (“FDC”) comprising three QCs took place on January 2013. The Club was accused of breaking Regulations 44.2 and 48.1 (in respect of the Danny Graham Transaction) and Regulation 19 of the Football League Regulations (in respect of the Football League Transaction) and Mr Bassini was accused of misconduct in relation to those breaches.

The League’s case on the Danny Graham Transaction case was that it was an agreement which gave LNOC the right to receive payments and which was ‘in respect of a player’ for the purposes of Regulation 44.2. The Club did not provide the League with a copy of that contract as required, or seek or obtain the approval of the Board of the Football League. The League said that the Club broke Regulation 48.1 because it received funds from LNOC in connection with the transfer of Danny Graham without the consent of the League’s Board.

The Club argued (as it does in this claim) that it was not bound by the transactions because the actions of Mr Bassini were not authorised by the Club. Mr Bassini gave evidence and LNOC points out that the Club did not put to him the allegations that they make in this action. The FDC rejected the Club’s argument, holding that the transactions were authorised and that the alleged breaches had been proved. The FDC imposed a registration embargo but appears to have seen Mr Bassini as primarily at fault for these contraventions.

By the assignment entered into under the Football League Transaction, LNOC is entitled to payment by the League of sums which would otherwise be due to Watford up to a total amount of £1,800,000. However, the Club has informed the League that it disputes the validity of the assignment on the same basis that it disputes the validity of the transaction as a whole. On 3 April 2013, the League issued an application to the Bristol Mercantile Court seeking interpleader relief. That Court ordered that the League should pay the sum of £900,000 into court, plus simple interest at a rate of 2% per month, and continue to pay a further £18,000 per month until the further order of the court to cover future interest payments. The funds remain in court pending an order in this case. So LNOC has amended its claim to include a declaration as to the validity of the assignment.

On the face of it the Club seems liable for the debts which its de facto managing director incurred on its behalf. The Club contends however that Mr Bassini lacked authority to commit to the transactions. The Club rests its position on four propositions of fact and law. These are as follows.

First it says that both transactions were manifestly in breach of the Football League Regulations and in entering into them the Club was exposed to the risk of extremely serious sanctions from the Football League. The possible and realistic sanctions included a transfer embargo, a fine, a deduction of points and relegation in addition to the obvious risk of serious reputational damage. The consequences arising from the transactions were potentially catastrophic for the Club.

Secondly there were not only alternative methods of funding available to the Club at the time but there was no pressing financial need for the Club to enter into the transactions at all. Furthermore the Club did not, in fact, benefit financially from the transactions.

Thirdly in the circumstances the transactions were manifestly not in the best interests of the Club for the purposes of Section 172 of the Companies Act 2006. It necessarily follows that, as a matter of law, Mr Bassini and/or Mr Barrea lacked actual authority to enter into those transactions. They clearly knew this and hid the fact of the transactions from the Board and others at the Club.

Fourthly Mr Weiss had sufficient knowledge of the nature of the transactions such that he must have known that Mr Bassini and Mr Barrea lacked actual authority to enter into them or any belief he may have had to the contrary was irrational. In the alternative he had sufficient knowledge to trigger an obligation to make relevant enquiries of the position but he decided not to do so. In short he turned a Nelsonian blind eye. As a result the Club is not bound by the transactions in accordance with Section 44(5) of the Companies Act 2006.

Mr Davies-Jones QC and Mr Coffer submit that Mr Bassini had actual or at least apparent authority to enter into the Transactions. They suggest that there are six relevant questions;

I will deal with the submissions and the relevant evidence broadly under the Claimant’s headings but in substance the Club has to show that Mr Bassini lacked actual and apparent authority. Mr Randall’s case at times elides the issues of actual and apparent authority (understandably as the relevant facts overlap to a degree). He also asserts in general that the law is common ground while at some points indicating by his submissions on the facts (which is what he says this case turns on) that the parties approach the principles differently. I therefore next identify the relevant principles and resolve the differences about the law. I take the uncontroversial principles from LNOC’s skeleton argument.

It is common ground that authority to manage the affairs of a company is vested in its board of directors. The board usually delegates authority for particular matters to individual directors or officers. The delegation of authority can be express or implied. Often the conferring of authority on a particular individual is implied from his position. A managing director will have implied actual authority to do all such things as fall within the usual scope of that office: see Hely-Hutchinson v. Brayhead [1968] 1 QB 549 at 583 per Lord Denning MR.

There need not be any formal appointment process for a director to be clothed with implied authority. If the board permits or authorises a director to act as a ‘de facto’ managing director, that director will have the authority which he would have had had he been formally appointed: see, for example, Hely-Hutchinson at 584.

A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole. Section 172(1) of the Companies Act 2006 provides;

“172(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to-

(a)

the likely consequences of any decision in the long term,

(c)

the need to foster the company’s business relationships with suppliers, customers and others,

(d)

the impact of the company’s operations on the community….

(e)

the desirability of the company maintaining a reputation for high standards of business conduct….”

Mere negligence on a director’s part will not vitiate a transaction. Correspondingly a director cannot have actual authority to act in a way which he does not consider in good faith to be in his company’s interest. Provided that the director does not do so, he does not transgress the limit on his authority which s172 of the Act imposes. This duty is sometimes referred to for short as ‘the duty to act in the best interests of the company’; it is subjective, not objective. The obligation is to act in a way that the director (not the Court) honestly believes to be in the company’s best interests- see for example Extrasure Travel Insurances Ltd v Scattergood [2002] AllER (D) 307 at [87]. At this point the common ground (which I have taken from LNOC’s skeleton) stops.

Mr Randall qualifies this approach by reference to - Hopkins v Dallas Group Limited [2004] EWHC 1379 (Ch); in which Lightman J said at paragraph 88

“The grant of actual authority should be implied as being subject to a condition that it is to be exercised honestly and on behalf of the principal: Lysaght Bros & Co Ltd v Falk (1905) 2 CLR 421. It follows that, if an act is carried out by an agent which is not in the interests of his principal, for example signing onerous unconditional undertakings, then the act will not be within the scope of the express or implied grant of actual authority. As a result there cannot be actual authority: “the agent is simply not authorised to act contrary to his principal’s interests: and hence that an act contrary to those interests is outside his actual authority. The transaction is therefore void unless the third party can rely on the doctrine of apparent authority”

Mr Randall submits that this is still an accurate statement of the law although he accepts that the decision has been questioned on other grounds. However the case needs to be seen in its context. The relevant individual, Mr Towey, was Deputy Managing Director of the two companies in question and knowingly pursuing his own interests at the expense and to the prejudice of the companies. It follows that he could not have considered the transactions to be in the Companies’ best interests and the issue of subjectivity did not arise. It is unsurprising that in summarising legal principles only relevant to the facts the judge left out what, as I see it, was an essential ingredient relevant to this case, the director’s view of what he considered in good faith to be the Club’s best interests. I emphasise that in this case there is no evidence that Mr Bassini was pursuing his own personal interests at the expense of the Club. As I see it therefore the test remains that set out in Extrasure.

Accordingly the two issues under actual authority are first the extent of Mr Bassini’s role in the Club and secondly whether the Club can establish that when he entered into the Transactions he did not act in what he considered in good faith to be the Club’s best interests. It is irrelevant whether, with the benefit of hindsight, the transactions were ill-advised.

The Club realistically conceded at the start of trial that Mr Bassini would have had authority to enter into the two LNOC transactions but for two matters said to vitiate that authority. First it is alleged that Mr Bassini was not acting in what he honestly believed to be the best interests of the Club.

Secondly at the trial the Club alleged, but had not pleaded, that the transactions were in breach of the ‘Supplemental Deed of Covenant and Guarantee’ dated 10 March 2011 issued by Watford Leisure plc with the Club as guarantor in respect of secured notes issued by Watford Leisure plc (‘the Noteholders’ Agreement’). This allegation was not pursued in closing so I say no more about it.

The Club’s skeleton identifies four specific features of the LNOC transactions which are said to support the Club’s case that Mr Bassini must have known that the transactions were not in the best interests of the Club. I will deal with these one by one because the lawyers have done but it is important to look at the situation as a whole and in context.

First Mr Randall says that the Club had other financing options available to it and there was no pressing financial need for the Club to enter into the transactions. Mr Randall relies on passages in the evidence which were not challenged in cross examination. Mr Wilson makes it clear that the Noteholders would have funded the Club in any event. Mr Fransen confirms that Lord Ashcroft would not have allowed the Club to go into administration. Ms Wareham confirmed that the Club was not short of funds at the material times and that other forms of funding were available.

Mr Davies-Jones submits that Mr Bassini was seeking to raise funds not to prevent the Club going into administration but to complete the development of the SW corner of the Vicarage Road stadium. Work had begun on the south west corner stand by about 2008 at the latest but had stopped because of a lack of funds. The Club had been left with a ‘skeleton’: an outline concrete shell with no walls and no fit-out. Further as Mr Fransen and Professor Timperley accepted the delays to the fitting out of the Stand were causing some dissatisfaction among the fans. In the summer of 2011, the cost of completing the SW corner stand was assumed by the Club to be some £2.5 million. Mr Bassini had not undertaken any obligation to provide funding for the completion of the SW corner from his own resources. There was nothing to suggest that the noteholders would have been willing to provide funding for completion of the SW corner. As Mr Fransen put it “I was already a bondholder and a lender to the company and it was fairly early on, at this stage, in Mr Bassini's tenure at the Club. I didn't say – and I had been very helpful in not taking, and being flexible about my loan, extending it, so I wouldn't say that I wouldn't have done it, but Mr Bassini was the owner of the Club, and I always said to him I wanted him to develop the business as he saw fit rather than going another way.”

The Club did not have cash reserves to finance the completion of the south west corner stand.

As I see the evidence of the directors and the senior executives the Club had money to keep going but not to develop the Stand which was at the least an unfinished project which it was desirable to finish. There was nothing odd about Mr Bassini wishing to use a funding method the Club had adopted before for the purpose indicated to Mr Weiss at the outset and summarised in Mr Barrea’s initial email.

Secondly Mr Randall submits that Mr Bassini knew that the Danny Graham Transaction was in breach of Regulations 44.2 and 48.1 of the Football League Regulations and that the Football League Transaction had to be notified to the League under Regulation 19 and they therefore exposed the Club to the risk of extremely serious sanctions. He points out that the FDC established that Regulations 44 and 48 had been breached and says that Mr Bassini must have known that the transactions exposed the Club to the risk that sanctions would be imposed by the League. On a straightforward reading Regulation 19 applies not only to a formal assignment as such but also to ‘any other form of security or arrangement of similar effect.’ As such it is widely drawn and manifestly covered the Receivables Agreement in this case. He says that it is difficult to see how any alternative conclusion could sensibly be drawn. The obligation to notify arose after the date of the Assignment not after the Assignment came into effect. Furthermore the obligation on the Club is to notify the League within 24 hours of the date of the Assignment which then triggers the appropriate embargo. It follows that the refusal to notify in this case was a clear breach of Regulation 19. It was for the League to determine whether or not the transaction fell within Regulation 19 and, if it did so, to then impose the embargo.A serious punishment was in prospect for the Club arising out of the transactions as structured by Mr Weiss. Even a deduction of one or two points could have extreme repercussions for the Club in terms of relegation and promotion depending upon the state of the League. This could have had a detrimental financial impact on the Club of many millions of pounds in view of the lucrative nature of Premier League membership. Mr Bassini must have known about these risks.

LNOC says that there is no evidence to suggest that Mr Bassini knew or believed that the Danny Graham Transfer infringed the Football League Regulations. The Club’s pleading relies on inference. None of the correspondence contains any evidence that they turned their minds to Regulations 44.2 or 48.1 at all. The reaction of Mr Bassini and Mr Barrea in April 2012 to the refusal by the Football League to approve the Marvin Sordell forward funding shows that they still did not believe Regulations 44.2 and 48.1 applied to a forward funding structure based around the purchase of promissory notes and they sought Counsel’s advice. The Club was bound by the Danny Graham Transaction prior to the telephone call between Mr Barrea and Mr Weiss on the evening of 19 September 2009. Until that call, both parties envisaged that the Football League would be notified immediately by sending to the League the payment instruction letter. At that point Mr Bassini could not have had a belief that the transaction might break the Regulation. Regulations 44 and 48 had not been discussed on the call. Mr Weiss later requested Swansea to instruct the Premier League to instruct the Football League to pay the deferred consideration to LNOC’s account out of the Transfer Fee Account (once Swansea had paid into it). Mr Weiss would not have done so if either he or Mr Bassini had thought that Regulations 44.2 and 48.1 applied to the transaction. Mr Bassini instructed Mr Weiss to restructure the Football League Transaction so that it no longer had to be disclosed to the League. He had no reason to believe that the revised structure fell within Regulation 19. The revised transaction was restructured around the purchase of promissory notes issued by the Club and a personal guarantee from Mr Bassini.

LNOC say that even if Mr Bassini had appreciated that the revised structure fell within Regulation 19 he could still have been acting in what he believed to be the best interests of the Club. Any such judgment would have depended upon the way Mr Bassini weighed the advantages against the disadvantages.

As I see it there is no evidence either in the documents or in the recollection of the witnesses that Mr Bassini turned his mind to the Regulations. During his time at Watford he does not appears to have been much interested in detail or Regulations generally. He did not take legal or other advice about the transactions and was content to rely on Mr Weiss, LNOC’s agent when the issue arose. The telephone conversation with the League would not have put Mr Bassini on notice of concerns about the Danny Graham transaction, which at the outset was clearly going to involve disclosure to the League. Similarly once the Football League Transaction had been restructured by Mr Weiss Mr Bassini could reasonably have assumed that it complied with the Regulations. Mr Bassini’s determination to conceal the Danny Graham Transaction from the League after 19 September seems to have been based on wider concerns and perhaps a degree of petulance since the details would become apparent eventually. His decision to seek legal advice in April 2012 is not consistent with him having the opinion which the Club now claims. Even if Mr Bassini was aware of the risks he might well have thought them worth taking to achieve the completion of the Stand, although in the event of course he did nothing about it. The League might never find out and if it did the sanctions might be worth it. The most serious ones, such as expulsion, would never have been on the cards. The Club’s evidence does not substantiate its claim in this regard.

Thirdly and fourthly the Club submits that it received no benefit from the transactions and that these were concealed from the directors. Mr Randall argues that there is compelling evidence which establishes that both Mr Bassini and Mr Barrea knew that the transactions were not legitimate or in the Club’s interests. Mr Bassini told Mr Weiss that the transactions must not be disclosed to the League. Mr Bassini and Mr Barrea did not disclose the transactions to the other Directors and senior employees at the Club. Mr Bassini and Mr Barrea advanced a false basis for the payment from the Club to LNOC as being in relation to works at the stadium. Mr Bassini and Mr Barrea did not inform Michelle Ives, who was responsible for player registrations and liaising with the Football League, of the existence of the Danny Graham Transaction.

Mr Bassini and Mr Barrea were, as I have explained, remiss in not disclosing these arrangements to the Board but the transactions were not actively concealed. The omission would have been worse if the Board had not been generally content to allow Mr Bassini to get on with things. Mr Bassini and Mr Barrea were dishonest about the purpose for which a payment was required but that is not the issue I have to consider.

I have explained when considering where the money went, why the Club’s submission (still unpleaded) is in my view misconceived and of course the issue is Mr Bassini’s state of mind at the outset. There is no allegation or evidence that Mr Bassini hoped to make any personal gain at the expense of the Club as a result of these transactions. Mr Bassini’s company, WFCL, owned most of the Club, it would be odd for him to wish to damage what was essentially his asset. Further he was entering into a personal guarantee of the Club’s obligations under the Football League Transaction.

I conclude both from considering the four matters raised by the Club and looking at things in the round that it has not shown that when Mr Bassini entered into these transactions he was not acting in what he honestly believed to be the best interests of the Club. In case I am wrong about that I now turn to apparent authority.

The Club argues that Mr Bassini did not have apparent authority to enter into the transactions and give payment directions to LNOC because it says that Mr Weiss knew that the transactions were not entered into by Mr Bassini acting in the best interests of the Club.

Here too there is much common ground but a difference arises. I again take the common ground adapting from the Claimant’s skeleton. Under Section 43 of the Companies Act 2006 (“the Act”), a contract may be made either by some duly authorised person acting on behalf of the company or by the company itself by writing under its common seal. By Section 44(2) a document is validly executed by a company if it is signed on behalf of the company by two ‘authorised signatories’. By Section44 (3), every director and the company secretary of a company are ‘authorised signatories’. By Section 44 (4) a document signed in accordance with Section 44(2) has the same effect as if it had been executed under the company’s common seal.

The relevant contracts in this case were signed by Mr Wastall and Mr Bassini. They were ‘authorised signatories’ for the purposes of Section 44(3). So the relevant contracts have the same effect as if those documents had been executed under the common seal of the Club. Section 44(5) protects a purchaser in good faith where a document which purports to have been signed in accordance with Section 44 (2) of the Act has not in fact been so signed.

LNOC’s primary case is that because the relevant documents (i.e. the two sets of promissory notes and the Assignment) were in fact signed by a director and a company secretary it is unnecessary to rely on section 44(5). If the Court accepts LNOC’s primary case as to the application of Section 44, it is therefore unnecessary to consider whether LNOC was acting in good faith. LNOC says that Section 44 deems the relevant contracts to have been made by the Club without more and its claim must therefore succeed. I did not understand Mr Randall to challenge that proposition but it is a bold one. As the point is not necessary for my decision and is controversial I will proceed on the assumption that reliance on Section 44(5) is required.

Common ground stops on the question of good faith. LNOC says that Section 44(5) of the Act irrebuttably presumes authority in favour of a purchaser in good faith. The good faith requirement it imposes does not mandate a general enquiry into whether any aspect of a transaction deserves moral opprobrium. It is much more focused. The relevant question must be whether LNOC acted in good faith as regards the authority of the relevant Section 44(3) signatories to enter into the transaction on the Club’s behalf.

The Club, in its pleading, asserts that LNOC was not acting in good faith in entering into the transactions because: (i) the failure to notify the League and obtain its prior approval was a breach of Regulations 44.2 and 48.1; (ii) Mr Bassini must have known that; (iii) as such, it was “plainly not in the best interests” of the Club; and (iv) Mr Weiss “knew or should have known” that. The Club asserts that LNOC was not acting in good faith in entering the Football League Transaction because: (i) in breach of Regulation 19 it was not notified to the League within 24 hours of its entry; (ii) Mr Bassini knew that; (iii) as such it “was unlikely to be in the best interests of the [Club]”; and (iv) Mr Weiss “knew or should have known that”. In closing submissions this was summarised as “Mr Weiss had sufficient knowledge of the nature of the transactions such that he was aware that Mr Bassini and Mr Barrea lacked actual authority or any belief that he had that the transactions were legitimate was irrational. In the alternative he had sufficient knowledge to trigger an obligation to make relevant enquiries of the position but declined to do so. In short he turned a Nelsonian blind eye. It follows that LNOC was not a “purchaser” within the definition of Section 44(5) of the Companies Act 2006 and the Club is not bound by the transactions. ”

LNOC says that this is ‘setting the bar too low’. Mr Davies-Jones submitted that, in order to establish a lack of good faith, the Club must show a dishonest or an irrational belief by Mr Weiss in the authority of the relevant Section 44(3) signatory. That was the approach of Lord Neuberger (sitting as a judge in the final Hong Kong Appeal Court) in Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (in liquidation) [2010] HKCFA 64 at [52] - [62]. He said:

“52.

In a commercial context, absent dishonesty or irrationality, a person should be entitled to rely on what he is told: this may occasionally produce harsh results, but it enables people engaged in business to know where they stand. As to principle, apparent authority is essentially a species of estoppel by representation (see per Diplock LJ in Freeman & Lockyer [1964] 2 QB 480 , 503, cited above, and per Brennan J in the High Court of Australia in Northside Developments Pty Ltd v. Registrar-General (1989-1990) 170 CLR 146 , 173–4). In the field of misrepresentation, it is clear that “it is no defence to an action for rescission that the representee might have discovered its falsity by the exercise of reasonable care” – per Chitty on Contracts (30th edition) para.6-039 and the cases cited in footnote 190. Even more in point, there is this passage in Halsbury's Laws (4th edition reissue) Vol 16(2), para.1072, dealing with estoppel by representation: “If … [the party contending that he relied on the representation] really has relied upon its truth, it is no answer to say that, if he had thought about it, he must have known that it was untrue; the representation itself was what put him off his guard. If the representation is clear and unequivocal … he is under no obligation to make investigation or inquiry to ascertain whether it is true

…

62.

I conclude that it is open to the Bank to rely on Mr Ting's apparent authority (if he had such authority) unless the Bank's belief in that connection was dishonest or irrational (which includes turning a blind eye and being reckless)”

The approach of Lord Neuberger has subsequently been applied by the English Court of Appeal in Quinn v CC Automotive Group Ltd (t/a Carcraft) [2010] EWCA Civ 1412 at [23], by Vos J in Gaydamak v Leviev [2012] EWHC 1740 (Ch) at [249] and by Proudman J in Newcastle International Airport v Eversheds [2013] PNLR 5 at [108-109].

LNOC accepts that these cases were concerned with the doctrine of apparent authority and not with Section 44(5) but submits that the sub section is, in effect, a statutory presumption of apparent authority in favour of a purchaser in good faith. Mr Davies-Jones submits that it will promote clarity and consistency in the law if Lord Neuberger’s approach in Thanakharn is carried over into the meaning of ‘good faith’ in Section 44 (5) of the Act. The test for negating apparent authority should not differ between cases where the apparent authority is the product of the common law principles and cases where it arises under the statutory presumption. I agree and to an extent so does Mr Randall.

He does however emphasise what Lord Neuberger says about irrationality and turning a blind eye. He cites consideration by the Court of Appeal of the predecessor provisions of the 1985 Act in Wrexham Association Football Club Ltd v Crucialmove Ltd [2008] 1 BCLC 508, where Sir Peter Gibson at paragraph 47:

“I do not see that either s 35A or s 35B absolves a person dealing with the company from any duty to inquire whether the persons acting for the company have been authorised by the board to enter into the transaction when the circumstances are such as to put that person on inquiry (see Buckley on the Companies Acts paras 35B.7-8). In the unusual circumstances of this case Mr Hamilton was put on inquiry and CL cannot satisfy the requirement of good faith. Nor can s 36A, deeming in favour of a ‘purchaser’ the proper execution of documents by a company assist CL. There is no presumption of good faith applicable to the purchaser and a purchaser means a purchaser in good faith for valuable consideration (s 36A(6)). CL cannot satisfy the requirement of good faith for the purposes of this section.”

Mr Randall’s approach moves away from good faith towards mere constructive notice. I agree with his opponent that the issue is not constructive notice or matters which might have caused a reasonable man to ask some questions. The issue is whether or not the circumstances were such that any belief by Mr Weiss that Mr Bassini had actual authority would have been dishonest or irrational.

The Club says that Mr Weiss, as an intelligent man of business with legal training, must have known that the transactions were not in the best interests of the Club. In the alternative it is the Club’s case that Mr Weiss had sufficient knowledge of the abnormal nature of the transactions such as to put him on inquiry that Mr Bassini and Mr Barrea lacked actual authority. In the circumstances his admitted failure to make any inquiries at all means that LNOC was not a purchaser in good faith for the purposes of Section 44(5). Although he may not have been acting as a solicitor at the material times Mr Weiss has a legal training and had a distinguished career as a solicitor. He must therefore be taken as having a solid grasp of legal principles and method. Mr Weiss was very experienced in football finance and held himself out as such. His promotional material asserts that Good for Sport “have developed over 15 specific football financing products which have been used to complete over 70 player transfer contract financings…”. He accepted in evidence that he had to know the Regulations in order to structure his transactions and that he was familiar with them. He accepted that the reason why Mr Bassini did not want the transactions disclosed was because of his relationship with the League and the fact that they would try to make life difficult for him. That was not a legitimate reason. But for Mr Bassini’s request he would have disclosed both transactions to the Football League. Mr Weiss says in his witness statement “I understood from Mr Bassini that the Club simply wanted access to the funds quickly and were prepared to take the consequences whatever they might be”. He clearly knew that there was the risk of punishment arising from non-disclosure. Mr Weiss in his evidence said for the first time, that Mr Bassini had told him that he needed the funds quickly because he had promised a payment to a contractor after he had served three statements in various proceedings without mentioning it. Mr Randall makes many other criticisms of Mr Weiss’ evidence.

Mr Davies-Jones submits that LNOC was acting in good faith. It had neither a dishonest nor irrational belief in Mr Bassini’s authority, nor (for completeness, and even though this is not the relevant test) should it have been aware of any defect in that authority as regards the transactions. The only feature said by the Club to undermine Mr Weiss’s good faith is his alleged knowledge that there was a possibility that the Club would be exposed to sanctions imposed by the League if the transactions came to light. LNOC makes four general points. First, the transactions were of a type which is familiar in the world of football. Second, the transactions were entered into for a commercial purpose which was plainly legitimate (and the Club has not alleged the contrary).Third, there was nothing to suggest to Mr Weiss any attempt by Mr Bassini or Mr Barrea to keep the transactions secret within the Club. Fourth, the question of good or bad faith for the purposes of s.44(5) of the Act needs to be approached with due regard to the commercial realities. Businessmen are not required to be detectives. They are entitled to take matters at face value and proceed on the basis that those who purport to be authorised are authorised, save in the most exceptional of circumstances.

The good faith of LNOC in issue is in effect that of its agent Mr Weiss who was politely but very ably cross examined by Mr Randall. Some answers were unexpected-it seems improbable that if Mr Bassini had told him that money was needed for a contractor he would not have recollected it until in the witness box. He was at times ill at ease when addressing his view of the Regulations in a context where the FDC had taken a quite different approach. But it is important to bear in mind that Mr Weiss was not acting as a solicitor for the Club. He has left that occupation and works for his clients not the Club. While Mr Weiss’ view of the Regulations was a bold one I believe that he genuinely held it and did so in good faith and his actions at the time are consistent with that. Forming a view of the practical effect of internal regulations is not simply a matter of applying rules of contractual construction but also of anticipating the approach that a particular tribunal is likely to take.

It is highly improbable that Mr Weiss would imperil the goodwill of his business or the money of his client (in this case a personal friend) by acting improperly as regards the Club for the sake of Mr Bassini. He would know that owners of clubs come and go. Mr Weiss’s duty was to his client not the Club who chose not to take independent advice. The Club was represented by, in effect, the owner and his solicitor and colleague Mr Barrea. All sides agree that the owner calls the shots. It is well known that in professional football business affairs are often informal and rumbustious. The obvious advantage of the LNOC transactions was that they would raise the £2.5m the Club needed to complete the Stand. Mr Weiss asked for authority and it was provided, one document witnessed by Ms Ives. When formal documents were needed Mr Wastall as Company Secretary obliged. Mr Weiss went openly to the Club and to Swansea. There was no sign that Mr Bassini might be concealing anything from the Club. At the time the Club entered into the Danny Graham Transaction there was no issue about the Regulations and the details were to be lodged with the League. If Mr Weiss had concerns about the Regulations it is improbable that the transaction would have gone ahead. The decision not to notify the League was taken later after the transaction had taken effect and the subsequent events when closely examined do not indicate lack of good faith on the part of LNOC.

It seemed to me very clear that Mr Weiss genuinely believed that Mr Bassini had authority to commit the Club to relatively conventional transactions. Even if Mr Randall’s test, which I consider to be the wrong one, were applied Mr Weiss would not have been put on enquiry by Mr Bassini’s actions. The defence based on apparent authority fails.

As LNOC succeeds if either of the two defences fail, and I have found that both do on the basis of findings of primary fact, it is unnecessary for me to consider the alternative case for unjust enrichment beyond recording that on the facts that I have found the suggested response from the Club that it never received financial benefit from the transactions is not correct.

The Club is free to delegate wide ranging authority to a managing director but it has to take the consequences of doing so. The Club, acting through the de facto managing director it appointed, borrowed money but has not paid it back. It should now do so. The Defences of lack of actual or apparent authority fail as does the Counterclaim.

I am most grateful to Counsel and solicitors for the admirable and cost conscious way in which this case was prepared and presented.

I shall be grateful if Counsel will submit a list of corrections of the usual kind and a draft order, both preferably agreed, together with a note of matters they wish to raise at the hand down of this judgment not less than forty eight hours before the hearing.

This case has been about money rather than the real purpose of a club which is playing football. I will not leave a case about Watford Football Club without recording my gratitude to and admiration for one of its players, the late Mr Tommy Harmer. I still recall vividly an otherwise miserable Saturday afternoon in 1961 or 2 when, playing unaccountably in the Third Division, dancing and weaving his way repeatedly through the opposition like a butterfly with determination, he brought worthwhile delight and pleasure to thousands.