CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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LANGSTON GROUP CORPORATION |
Claimant |
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- and - |
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CARDIFF CITY FOOTBALL CLUB LIMITED |
Defendant |
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Mr David Wolfson (instructed by Nabarro, Lacon House, Theobald's Road, London WC1X 8RW) for the Defendant
Hearing dates: 12th – 13th March 2008
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Crown Copyright ©
Mr Justice Briggs:
INTRODUCTION
THE ASSUMED FACTS
(1) Repayment should be postponed to 2016 if required.
(2) £24 million should be written down to £15 million (in exchange for naming rights, to which I refer below).
(3) Interest should be simple and not compound.
(4) Non-payment of interest should not be an act of default.
(5) The Club was not to be at liberty to elect to pay interest or principal for ten years without the Council's approved.
(6) (7) …
(8) Interest should commence only upon the signing of a new agreement with Langston, with all historic interest written off.
I summarise those requirements from a note of that meeting prepared on behalf of the Club.
"Development Agreement" | Means the Conditional Development Agreement dated 13th February 2004 and made between the Council (1) and the Company (2) (as varied from time to time) |
"Instrument" | Means the Loan stock instrument created by the Company on 20th September 2004 constituting £30,000,000 in nominal value fixed rate unredeemable loan stock 2001 (as amended by a deed of variation to be entered in to the Stockholder and the Company in the form next hereto ("the Deed of Variation")); |
"Satisfaction Date" | Means the date of satisfaction or waiver by the relevant parties of all the Conditions as defined in the Development Agreement. |
"The payments and variation pursuant to clause 2.2 shall be conditional upon attainment of the Satisfaction Date on or before 31st May 2007. In the event that the Satisfaction Date is not attained by such date or the Development Agreement is otherwise terminated prior to such date this Agreement shall be of no further force or effect."
"The parties hereto agree that the Instrument shall be automatically varied on and with effect (without further notice or action on behalf of any party) from attainment of satisfaction of the Conditions (as defined in the Conditional Development Agreement dated 13th February 2004 and made between the County Council of the City and County of Cardiff and the Company) ("the Development Agreement") as follows:"
"This Deed of Variation is conditional on attainment of the satisfaction of the Conditions (defined as aforesaid) on or before 31st May 2007. In the event that such satisfaction is not attained by such date or the Development Agreement is otherwise terminated prior to such date this Deed of Variation shall be of no further force or effect such that the Instrument shall remain in its current format."
"The Club has agreed that Devco shall carry out the development (as defined in the Agreement) on its behalf and Devco has agreed to enter into this Deed of Variation."
The CDA Variation was expressed in terms of no less than 82 specific individual alternations to the CDA itself under the general rubric at the beginning of clause 1:
"The Agreement shall henceforth be varied and take effect as if:"
Clause 2 then provided that:
"Save as hereby varied the Agreement shall continue in full force and effect in all respects."
"Under clause 4.24 of the Development Agreement, discharge of the pre-conditions is to be confirmed by written confirmation from yourself to Peter Ridsdale. The position with discharge of the pre-conditions (as varied) is as follows-"
"If you are agreeable to unconditionality being acknowledged, subject to all appropriate documentation and funds being received in advance, would you please confirm by your response to this email. I will then hand this to Peter Ridsdale as a formal acknowledgement of unconditionality, once that event has occurred."
Peter Ridsdale was then the director of the Club with primary responsibility for the Project.
"I confirm my agreement to progress to unconditionality subject to the documentation and funding, referred to in your email, being in place."
"Further to your email please take this letter as confirmation from Cardiff Council that the Leckwith Development Agreement went unconditional on Friday 4th May 2007."
The Club's audited accounts later confirmed that this had occurred, as a post-balance sheet event.
THE ISSUES
"There is no doubt that if parties wish to bring another person into their contractual arrangement this can be achieved by rescission of the old contract and formation of a new one. It must often happen that contracting parties, especially businessmen, do wish to bring in a further party to their arrangement. If this is something which simply cannot be achieved by variation of the existing contract, I would have expected to find authority which says so. The researches of counsel and those researches I have been able to make have failed to reveal any support of this proposition."
Later, at page 4 he said:
"The proposition that a new party can be added only by novation (in the case of a tenancy by surrender by operation of law and re-grant) seems to me to smack of artificiality rather than principle."
"What is, of course, essential is that there should have been made manifest the intention in any event of a complete extinction of the first and formal contract, and not merely the desire of an alteration, however sweeping, in terms which still leave it subsisting."
"… if a detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common-sense, it must be made to yield to business common-sense…."
"As mentioned earlier, the condition precedent for the renegotiation of the terms should be subject to the City Council's approval of the Project and its unconditionality. I trust that these comments can be taken into account in the amendments and will be acceptable to all the parties."
CONCLUSION