VB Football Assets v Blackpool Football Club & Ors [2017] EWHC 2767 (Ch)

“[Blackpool FC], with [Segesta’s] approval, confirms that, subject as referred to below and are subject to the disclosures in the attached documents (1)-(7), to the best of its knowledge, information and belief, there are no additional obligations of [Blackpool FC] which have not been disclosed in these documents. In the event that there is any breach of this confirmation by [Blackpool FC/Segesta], then [Segesta] will make good to [Blackpool FC] any costs suffers as a result of such obligations (provided that in any such case there shall be offset against such costs any benefits or assets of [Blackpool FC] which are not contained in the disclosed documents). In keeping with a practice over the years, Owen Oyston has recently made a short-term loan of £210,000 to [Blackpool FC] which loan it is intended will be repaid by [Blackpool FC] by the end of May 2006. The [Blackpool FC]’s financial statements (comprising its audited accounts for the year ending in May 2005 (1), its management accounts for January 2006 (including balance sheet) (2) and schedule of football club costs for February 2006 (3 and 4)) which are attached to this agreement form an integral part of this agreement. [Blackpool FC], with [Segesta’s] approval, confirms that such financial statements show all the liabilities and commitments of [Blackpool FC].”

“WHEREBY: (1) VB, or such other person, firm, company or corporation as he in his absolute discretion shall nominate, will within 14 days of the signing of this Agreement, loan to [Segesta] the sum of £1,000,000…interest-free (“the Loan”). (2) The Loan is to be used for the purpose of the construction of the South Stand at Blackpool [FC] (“the Stand”) by [Segesta] or by such other person, firm, company or corporation as it in its absolute discretion shall nominate and is for a term of 20 years (“the Term”) from the date of the 1st repayment of the Loan referred to in clause 3 hereof. (3) When the Stand has been practically completed and when the Stand has achieved an annual occupancy of 75% for an annual serviced accommodation income of £600,000 (whichever is the lower), then [Segesta] will on each annual occasion on which such level of occupancy or income is derived, make a repayment of part of the Loan to VB or to such other person, firm, company or corporation as he in his absolute discretion shall nominate, in the sum of £50,000 provided always that the repayment of the Loan shall commence no later than the 3rd anniversary of it being made. (4) [Segesta] and VB hereby agree that there is no right to any repayment in respect of the Loan or any part of it whether of capital or interest other than as set out in this Agreement.”

“…was entered into, in the context and on the basis of a common understanding and intention shared by Mr. Belokon (on behalf of [VB Football Assets]) and [Mr. Owen Oyston] (on behalf of the First to Third Respondents) that: (1) Mr. Belokon would arrange the provision of loans in the sum of £2,700,000; and (2) pending the contemplated future conversion of those loans into a further tranche of shares in [Blackpool FC] to lead to parity between [VB Football Assets] and [Segesta], [Blackpool FC] would be run as a quasi-partnership between [VB Football Assets] and [Segesta]. Specifically, that quasi-partnership would involve: (1) [VB Football Assets] having equal rights in the management of [Blackpool FC] (including the right to appoint two of the five directors of [Blackpool FC]) and equal rights to profits generated by it; and (2) the business of [Blackpool FC] being conducted on the basis of mutual consultation and cooperation, and unanimity.”

“Subject to contract I have spoken to Owen and Karl to see how we can simplify an entity in which you can participate on a joint venture basis on known risk levels and which could have a very healthy and profitable future. … I am pleased to advise you that we have spent £9.4 million on the construction and fitting out of the North and West Stands, using family money. So apart from a small overdraft of £250,000 arranged to support our cashflow we have no borrowings whatsoever other than loan to Owen. Self-evidently, from the context, what is meant is loans “from”

“1. [“Belokon Holdings” – the name of the vehicle Mr. Belokon was then envisaging would be used to acquire his interest in Blackpool FC] will subscribe for new shares in [Blackpool FC] equal to 20% of the enlarged share capital, subject to compliance with rules relating to minority shareholders and such that [Segesta] retains at least 75% of the enlarged share capital. The total subscription price payable by [Belokon Holdings] will be £4,500,000. The retention of a 75% holding by [Segesta] is necessary to enable the new venture to utilise the existing £10,000,000 worth of tax losses. These losses would not be available otherwise or to a newly established joint venture company as was initially proposed. 2. [Blackpool FC] will grant [Belokon Holdings] an option to subscribe for further new shares, subject to compliance with rules relating to minority shareholders, such that BH’s total holding after such exercise will be the same percentage of the enlarged share capital of [Blackpool FC] as that held by [Segesta]. The total subscription price payable on the exercise of this option will be the nominal value of the new shares. (This will be approximately £15,714 on the basis of the current capital structure.) To preserve the tax losses, this option may only be exercised in the event of and conditional upon the admission of [Blackpool FC’s] entire share capital to trading on a recognised stock exchange or the Alternative Investment Market. … 4. [Belokon Holdings] and [Segesta] will enter into a shareholders agreement relating to the operation of [Blackpool FC]. Its provision will include agreements that: … 4.4 [Belokon Holdings] will be entitled to appoint a director of [Blackpool FC] and for so long as that person is Valeri Belokon for him to hold the title of “President of Blackpool [FC]” or “Chairman” or such other similar title as is required by [Belokon Holdings] and agreed to by [Blackpool FC] (such agreement not to be unreasonably withheld or delayed). 5. [Blackpool FC] will enter into an agreement with (XYZ) Limited under which (XYZ) Limited will provide the services of Valeri Belokon as a consultant to assist [Blackpool FC] with its business strategy and in particular the development of its relationships with overseas clubs and players. The fee payable to (XYZ) Limited will be an amount equivalent to 50% of the net profits of [Blackpool FC] each year (subject to the adjustments referred to at clauses 4.1 and 4.2 above and after deducting any dividends to [Belokon Holdings]). 6. [Blackpool FC] will enter into an agreement with (ABC) Limited under which (ABC) Limited will provide the services of Karl Samuel Oyston as a consultant to assist [Blackpool FC] with its business strategy and in particular its UK operations. The fee payable to (ABC) Limited will be an amount equivalent to 50% of the net profits of [Blackpool FC] each year (subject to the adjustments referred to at clauses 4.1 and 4.2 above). 7. The agreements referred to at paragraphs 4 and 5 above will include provisions that if (XYZ) Limited waives its consultancy fee (or any part of it) in any year, then (ABC) Limited will do likewise.”

“If you still want to form a new company, we will try to accommodate this but you will now know that there are some intrinsic problems which are difficult to overcome. Firstly in the history of the football industry no one has ever transferred players from one company to another in the circumstances that we are discussing. To attempt to do so would be costly and ultimately, we are advised by the Football League’s lawyers, unsuccessful. Secondly we do have a serious problem where we may not be able to exploit the very substantial tax losses that currently exist within Blackpool FC. We believe we have a very good chance of using these tax losses if we do our venture within the Football Club. Any withdrawal of these tax losses will affect us both adversely, although we are still attempting to find a route through this. … May I stress, if I was in your position with any significant reservations about a transaction or deal, then I simply wouldn’t do it. So I fully understand your stance and should this prove to be a stumbling block to our joint venture, it certainly will not affect our friendship or the prospect of our doing other business in the future. Both Karl and I are very comfortable and happy with you, your colleagues and your organisation and furthermore we trust you. It is unlikely that we can have such a relationship with another buyer and it is almost certain that we will not do business with anyone else if we cannot do business with you. Therefore there is no pressure upon you to make a quick decision. The only pressure upon us all is the pressure of the fans and the media. … If the current proposals which I faxed to you on Friday [This is the draft agreement described at paragraph 69 above] were to materialise, then on flotation you would enjoy the same number of shares and the same capital gain as myself, even though our total investments would be substantially unequal. I have agreed to this because I really believe that you and your team and Karl and I can work together and create an exciting outcome and if we were successful in reaching the Premier League, the sums would be so substantial that I would not be concerned about the extent of my past investment. I was able to confirm with Karl and advise your colleagues over the weekend that on joining the Premier League each club receives approximately £37m from television rights alone. This includes two parachute payments in the event that the club is relegated after one season. This figure of £37m does not take into account the increase in sponsorship, ticket sales and other associated revenues which would increase dramatically. It is my view in these great circumstances that Blackpool Football Club would be worth not less than £100m and probably a great deal more. I stress this is my opinion. I have never mentioned this potential before because I am sure, like me, you are aware of it and also aware of what our relatively modest investments could produce if we are successful.”

“We can confirm that there are no off balance sheet liabilities of [Blackpool FC]. All the assets and liabilities are clearly disclosed on the balance sheet on the sets of financial statements that you have received. There are a number of post balance sheet events which will/have affected [Blackpool FC] which are: 1. [Mr. Owen Oyston] has made an additional temporary loan to [Blackpool FC] of £210,000 which is to be repaid by the 31st May 2006. … 4. The overdraft facility of £250,000 is in place until the end of June 2006. This is currently fully utilised but will be repaid by the 30th June 2006. This is a working capital arrangement. On the balance sheets you have received, you will have noted the loan between [Blackpool FC] and [Segesta] and the loan to [Mr. Owen Oyston]. The current arrangements under which [Blackpool FC] is entitled to retain income of serviced accommodation are terminable at any time at the sole election of [Segesta]. In the interim the property related income will be used to repay the loan to [Segesta]. There will be no call upon the football, shop or Gold Bond revenues detailed on the schedule to repay the [Segesta] loan. Owen Oyston will not seek repayment of his loan (other than the temporary loan of £210,000) unless agreed by the Board.”

“We are incorporating the points you have raised within the existing agreement and we will let you have a copy of this amended agreement, incorporating your points, as soon as possible. I left a hand written document with Valeri for his consideration. Valeri promised to send a copy of it as I did not retain one for myself. Could you please fax a copy to me? Does Valeri wish to incorporate my proposal also within the terms of the agreement of not?”

“Tomorrow Valeri will arrive in Riga and I hope he will give me the handwritten document you have mentioned in your letter. Today I have conversation with him. He is interested to start the process as soon as possible. In such order he think that better is to separate the purchasing process in steps. Valery’s idea is that these steps wouldn’t be compulsory connected one with other. In first step he would like to buy 20% of Football club shares in way of taking part in new shares emission. After that you and Valeri would look at the results of first step and make decision about way and urgency of next steps. Before starting to prepare any documents connected with upper mentioned Valeri’s idea I would like to know how do you feel about such schedule of deal.”

“The story continues…please see the attached email below. Could you call Owen on his mobile when you receive this email…”

“Needless to say in answer to your question we feel entirely relaxed about your proposals of proceeding step by step in order to achieve the fulfilment of our agreement. The whole of the Oyston family are delighted to embrace Valeri and his colleagues into this exciting venture.”

“Frankly speaking, Owen has always treated me as an equal partner. If you wish, I could say he has treated me as a gentleman.”

“…we are partners…”; “an honourable and fearless partner”. ii) In an email dated 6 August 2006, Mr. Rawlinson informed Mr. Oyston that: “I’ve just taken a call from Howard [Belton] which you need to consider urgently as the information affects the proposed agreement with Valeri considerably. I apologise if I did not understand it all correctly and you will probably feel it necessary to speak to him yourself to clarify the points. He said if an option is granted to VB [Football Assets] to acquire more shares in [Blackpool FC] then, irrespective of when and upon what terms the option can and is to be exercised, then Group Relief will be lost, as the option is considered to be exercised at the date it is granted, even if it is not exercised. Group Relief can be maintained at 100% up to when the option is granted, but is lost when the option is granted, although Howard did then go on to mention ‘Consortium Relief’, which apparently gave you similar protection but at which point, I’m sorry to say, I lost track of what he was explaining.”

“…considers that an agreement to act ‘in unison’ is a form of veto and, as such, because it imputes a degree of control, such agreement would fall foul of ‘s.416’ in the tax legislation and seriously affect Group Relief. He confirmed that an agreement ‘not to act to the detriment’ of the Club or similar words would not cause the same problems and would be acceptable.”

“You may recollect the lengthy conversation with [Mr. Belton] yesterday when he said that the granting of an option to [Mr. Belokon] for additional shares in [Blackpool FC] was not possible if [Blackpool FC] wished to preserve its tax losses, as the Revenue automatically considered that the option was exercisable on grant, as opposed to when it was actually exercised, thereby preventing the use of all the losses.”

“Clear with the Inland Revenue, that we are in order to offer an option to Valeri’s company and avoid any loss of our tax losses in [Blackpool FC] because its share capital has all been used up and it would require a vote of the Directors to produce more share capital. This is what you have discovered and it was you who found this information and in fact asked Howard to look at the Inland Revenue’s Guidance notes relating to it. I would be grateful if you could submit this to the Inland Revenue for their clearance as soon as possible for the reasons discussed.” vii) This is the last document to raise the issue of an option and the problem of its effect on Blackpool FC’s Tax Losses. The next relevant communication is a letter dated 8 February 2007 from Mr. Oyston to Mr. Belokon: “As discussed between us in the Fenwick Arms, sitting by the warm fireside, just before Karl’s significant birthday, I enclose the first draft of an agreement for your consideration, which agreement you will see intentionally follows the format of the previous agreement.”

“The Parties together agree that after the deduction of (i) all items of revenue expenditure (and any expenditure of a capital nature in excess of the amounts provided by the parties pursuant to this agreement) in relation to the South Stand and South West Corner and (ii) all such monies as are required to repay monies to any Mortgagee on the terms of a mortgage advance made to Segesta in connection with the South Stand and the South West Corner or either of them and (iii) any corporation or other taxes that may fall due, from all income of the South Stand and the South West Corner (including income from football revenue, commercial revenue and all other revenue sources), that the remaining income (“the Income”) shall be divided annually between the Parties on a 50/50 basis for a term of 1000 (on thousand) years from the date of this Agreement, such equally divided payments to be made within 21 days of the certification of Income by [Blackpool FC’s] Auditors. The share of such net income that would otherwise be an entitlement of [Ms. Belokon] shall be treated as a repayment of the [sums due under the First and Second Vlada Loan Agreements] until satisfaction, and shall then be treated as repayment of the South Stand Loan until satisfaction and then the remainder shall be treated as income of [Ms. Belokon]. v) Clause 18 provided that: “This Agreement supersedes all previous Agreements between the Parties and in the case of any conflict between this Agreement and any other Agreement between the Parties, this Agreement shall prevail save that insofar as the previous Agreements between the Parties have not been varied or modified by this Agreement, then the previous Agreements shall remain in full force and effect.”

“The initial intention of Valeri was to acquire in its ownership 50% of the share capital in [Blackpool FC]. At present he owns only 20% and all the other invested sums of money are not invested in share capital, but issued as loans. Such situation is because of UK legislation rules that allow to surrender the [Blackpool FC] losses to Segesta if Segesta owns not less than 75% in share capital of [Blackpool FC]. We understand the importance to preserve Segesta’s rights to use [Blackpool FC’s] losses, still we are thinking about legal ways how to change the present situation more closer to the initially planned one. We are having an idea that 30% of share capital of [Blackpool FC] could be pledged in favour of Valeri to ensure the loans. To my mind, in this situation, Segesta could still use the rights to have taxation relief due to surrender of losses. At the same time, the pledge of the shares would bring the present situation closer to the initial agreement between Valeri and Mr. Oyston. I would like to get your opinion from legal point of view regarding possibility to pledge 305 of [Blackpool FC] share capital in favour of Valeri and at the same time to preserve Segesta’s rights to use the [Blackpool FC] losses.”

“When the initial, principal Agreement dated the 5th June 2006 (“the Agreement”) was signed, there were exhaustive and detailed discussions about this point, over a period of many weeks. When the Agreement was signed, it was not possible to accommodate what you are now proposing, either in writing or orally, as such an arrangement would have damaged the tax losses available and this would have caused Owen substantial losses and, indeed, would cause Mr. Belokon losses in the future from his income from the South Stand and the South West Corner. The tax advice we received at the time of the Agreement, which Owen, Mr. Belokon and his advisers accepted, is that we could not give a written or even an oral agreement without losing the benefits of the accumulated tax losses, which would result in a very substantial loss of income for Mr. Oyston and so that is one of the reasons why the status quo was preserved on the signing of the Agreement. Indeed, as I said previously, Mr. Belokon will benefit substantially from these losses when the [South West Corner] and [South Stand] come on stream in terms of revenue.”

“Can you let Owen and Ian Cherry have copies of the notes Owen gave you at the last meeting and the latest draft of the Trust document as soon as possible? Owen is wanting to meet with you, Ian and Rod on the 10th June, probably at Sharrow Bay now, with an overnight. Is this ok for you? Ian will be contacting you today to discuss how Owen can pay the tax from the moneys coming into [Blackpool FC]. Ian thinks that [Blackpool FC] could buy the shares back and this would not have tax implications and be a simple way of sorting out the problem. Furthermore, the £944K that is now owed as a loan from Zabaxe to Segesta, could also be repaid with the money coming out of Zabaxe via Owen’s loan account. Please discuss these matters with Ian because Ian is having a tel con with Michael Sherry, our barrister, tomorrow and I am sending a copy of this note, in strict confidence, to Ken and to Rod asking them to be present at the tel con.”

“Howard, I forgot to mention to you and Ian about the £4,361,000 that is currently owing to Protoplan from [Blackpool FC]/Segesta. What would happen if this loan was repaid by [Blackpool FC] in one fell swoop and furthermore would it be possible to sell further shares to Valeri which of course would reduce my 75%? As you will appreciate, Valeri is anxious to become a full partner in terms of shares, even though there is a contract signed which is valid for the next few years and which restricts him to 25%. Can you put this on the agenda as well please for our meeting at Sharrow Bay on the 10th/11th. Also, Ian, can you ask Michael Sherry the ramifications of repaying this £4.36m and how would it affect my tax situation? I am hoping Ian can put a note to Michael Sherry before the tele con setting out these various points. Which would include also, are there any grounds for appeal? I have told Carol to tell HMRC we are considering an appeal, but if they are realistic on the repayment programme of the tax, we might not appeal.”

“Owen This loan is repayable by Segesta to Protoplan and could be repaid by Segesta without any tax implications. However Segesta does not have any funds. It previously assigned the benefit of the stadium rental to [Blackpool FC] and this has reduced the loan due from [Blackpool FC] to Segesta to aound £2,000,000. You may wish to consider rescinding the arrangement and taking the rental receipts into Segesta immediately. The overall problem is that any income from football will go into [Blackpool FC] and it is my understanding that you agreed not to take this money out when you agreed the loan arrangement with Valeri Belokon. However, this year’s income will almost certainly utilise all the tax losses available and leave [Blackpool FC] with a considerable profit. It will be possible to declare a dividend and pass 80% of the profit to the holding company. Thereby putting Segesta into funds. Not unreasonably when you consider that Segesta will have to build the Stadium to accommodate the Football Club. I have asked Rod to let me know when he has further details about the timing of the receipts.”

“With reference to your question about ‘drawing money out’, there is nothing I can see that would prohibit this. The loans are what they are – loans and they would not normally and do not contain any provisions preventing or restricting such a withdrawal. The [Subscription Agreement] deals with the acquisition of shares by VBFA and has nothing to do with distributions or drawing money out, which are considerations of the Board.”

“Jim You said yesterday that there were no constraints. Is that not the case? If there are constraints it won’t prevent [Mr. Owen Oyston] taking out a loan against cash in the football club will it? Also will it prevent Zabaxe being repaid? Also will it prevent £4.m+ which is owed to Protoplan being repaid?”

“The problem we face is that Segesta has no funds and therefore cannot pay any monies either as loan repayment, trade debt repayment or share repurchase. Any funds are likely to arise in [Blackpool FC]. Therefore we should immediately rescind the arrangement to let [Blackpool FC] have the use of the stadium income. This can then accrue in Segesta before being used to pay Protoplan as at present. A separate agreement needs to be negotiated with Belokon Holdings to allow the repayment of the Segesta outstanding loan. This is I understand from Rod around £2,000,000. A further method needs to be agreed to realise funds into Segesta from [Blackpool FC] both to facilitate the stadium development and the repurchase of [Mr. Owen Oyston’s] shares. As an alternative [Mr. Owen Oyston] could consider the sale of some of his shareholding to [Mr. Belokon] to make him an equal partner in the whole business…”

“[Mr. Belokon] wants parity in shares although there is no agreement for this but no price agreed.”

“I intend to put this motion to the board for their approval. It is likely that there will be an attempt to control the payments made to Segesta which I will resist because it is important that we have unbridled access to funds in view of the urgencies involved and the new season moving ever closer. It is likely that they will ask (a) why do we need to put the money into Segesta and (b) why can’t we control it as a board as payments are required etc etc My answer is that Karl must be unfettered in terms of his right to his ability to sign contracts and daw down monies without having rigid control, although I am entirely relaxed that the board appoints an independent person (and Normunds) to oversee the spend and to report back to the board accordingly. For possible inclusion to be discussed: Furthermore should I say that Owen wishes to borrow up to £5m over a period of time for personal reasons and he would like to draw down part of the £5m from this first tranche of £13m (probably in the region of £2.5m - £3m). Could Ian and Howard explain the implications of this; what interest I should pay for it (if any) and how we get the money to the IR tax free; and indeed do we advise them and get their agreement in advance? The Appeal that we intend to make against the Tribunal’s decision will at least give us time and perhaps a chance to negotiate with the IR, so will be asking Ken to drive on with this appeal immediately.”

“Subject to Contract Dear Normunds I enclose the list of liabilities and debtors of [Blackpool FC] and [Segesta] which [Mr. Dyer] sent to you on the 24th August 2010 showing £6.6m owing to [Mr. Belokon] and companies and £5,983,682 owing to me and my companies. I assume your request for this information from [Mr. Dyer] was stimulated by my discussions with [Mr. Belokon] concerning the repayment of various monies. You may recall that [Mr. Belokon], yourself, [Mr. Karl Oyston] and I met for an informal meeting at Claridges Hotel on the 25th June 2010 and after a private discussion with [Mr. Belokon] it was agreed verbally to repay monies to [Mr. Belokon] and his companies and monies to me and my companies. It was [Mr. Karl Oyston] who proposed this initially and I embraced it because I thought it demonstrated fairness and reward for the parties who had supported the Club in difficult times. [Mr. Karl Oyston] also felt that that it would make the Football Club so much stronger when it had discharged its liabilities and borrowings. … I am sure that [Mr. Belokon] will recall that I asked him if he wanted the repayment of the various loans that he and his companies had made to [Blackpool FC] and Segesta and he replied in the affirmative. Following our private meeting, I then wrote a brief note to [Mr. Belokon] which eventually I decided not to send but instead to read to him at our next meeting, so it became an aide memoire. Mr. Owen Oyston could not specifically recall whether the aide memoire had been read to Mr. Belokon; nor could he explain why the document could not simply have been sent to Mr. Belokon (Transcript Day 13, pp16 to 21). It was accepted that Mr. Belokon would have had knowledge of the aide memoire after it was received by Mr. Malnacs. I enclose this document now, which I used when reciting my proposals to [Mr. Belokon], which I thought he had approved. Indeed, I have discussed these repayments as well as other private matters relating to the possible floatation of the Club etc, on other occasions with [Mr. Belokon]. Again, I was reluctant to put anything in writing to [Mr. Belokon] concerning such a delicate matter, but with [Mr. Belokon’s] agreement I have now instructed an agent who is seeking further information before proceeding with the task at hand. (ie the flotation or sale of [Blackpool FC] The reason why I did not send it and did not discuss it at the board meetings is, to be blunt, that I was concerned that a certain gentleman might leak the information inadvertently to third parties and I felt it was mutually beneficial to both [Mr. Belokon] and myself in not airing our discussions and agreements publicly. … I did advise [Mr. Belokon] also that I was seeking a loan from [Blackpool FC] to deal with certain personal matters, but until now I had decided not to ask for a loan, but to fall in line with my agreement with [Mr. Belokon] to repay the outstanding moneys. In short, I am simply implementing what we agreed to do at various meetings, being the only sensible course of action to take, especially now we have decided to either float or sell [Blackpool FC]. It makes absolute sense to settle all these matters as it won’t make one jot of difference to the price of the shares or the purchase price that we might receive. Indeed it may well encourage a buyer to pay more because we have a clean balance sheet. After so many years of having such a good relationship between the board members, I am very sorry that there has been such a misunderstanding.”

“Can you confirm that everything is in order with this transaction and we can now proceed to draw out £6.9m from [Blackpool FC] to Segesta and other companies as on the 6th August 2010?”

“As you are aware, I have loaned to [Blackpool FC] various sums over the past few years. These loans were made because of my love for the Football Club without any thought of repayment. Now that we have achieved our dream of entering the Premier League I am seeking repayment of the loan moneys totalling £275,942.28 and I therefore give notice of calling in the loan and would be pleased to receive the funds within the next thirty days.”

“… 6. £4,200,581.63 owed to Protoplan for construction. 7. £944,652 owed to Zabaxe. 8. RD charged with raising these cheques after clearing with HB/JR. … 10. Have agreed to pay [Mr. Belokon] the money he put into the south stand over the year 2010/11 rather than from this first tranche. 11. [Mr. Owen Oyston]/[Mr. Cherry]/[Mr. Belton]/[Mr. Dyer]/ to meet over dinner in private room next Thursday. Meet 2pm at Clifton Arms. [Mr. Dyer] will prepare an agenda for the meeting. [Mr. Rawlinson]/[Mr. Stephenson] to attend. 12. All funds [Mr. Karl Oyston] needs must come out of Segesta apart from the bonuses. Segesta cannot pay these direct as in the future if there are problems creditors could come back against [Blackpool FC].”

“Flip 850 (1), 1000 (1), 4750 (2), repayments to VB Repayments to PP 4.2 (1), OJO/ZAB (2) – schedule staggered”

“[BLACKPOOL FC] £ [Mr. Owen Oyston] Loan account 275,942 SEGESTA [Mr. Owen Oyston] Loan account 562,506 [Protoplan] ([Mr. Owen Oyston]) 4,200,582 [Zabaxe] ([Mr. Owen Oyston]) 944,652 [Ms. Belokon] Loan account 1,850,000 [VB Football Assets] Loan account 4,750,000” £ [Mr. Owen Oyston] Loan account 275,942 [Mr. Owen Oyston] Loan account 562,506 [Protoplan] ([Mr. Owen Oyston]) 4,200,582 [Zabaxe] ([Mr. Owen Oyston]) 944,652 [Ms. Belokon] Loan account 1,850,000 [VB Football Assets] Loan account 4,750,000”

“Following our earlier discussions, this is a formal notification that on September 17, 2010 Blackpool [FC] has made a payment in amount of GBP 4,200,581.63 to Segesta…This transaction seems to be out of scope of the concluded agreements between the two major shareholders. Therefore, I would like to draw your attention for a need for a board meeting to resolve the issue and sign necessary agreement, if deemed necessary.”

“Hi all, please find below a schedule of the monies I wish to repay to the shareholders along with the timing of payments. This process will involve the dismantling of at least two of the shareholder agreements along with no doubt many other issues that Normunds, Rod and myself will work on so that solutions and ongoing policies can be agreed. To that end I have asked Rod to prepare a schedule of income that should rest with both [Blackpool FC] and Segesta along with a suggestion on how future joint costs should be apportioned. I have asked Rod to conduct an exercise to evaluate the best way to deal with the areas that [Blackpool FC] currently uses within the stadium that are also none match day income generators and I will formulate a strategy with Normunds regarding these. 1/ 4,200,000 Segesta paid 2/ 1,850,000 Vlada Jan 10th 2011 3/ 4,750,000 VBFA Jan 30th 2011 4/ 562,506 OJO Jan 30th 2011 5/ 944,652 Zabaxe Aug 15th 2011 6/ 275,942 OJO Aug 15th 2011 The concept is relatively simple and the issues are also relatively easy to resolve. I would like to propose that following our internal deliberations we have a meeting to discuss the issues we identify along with any others we fail to.”

“Normunds [Malnacs] informed the other board members by way of a written memo that this payment had never been approved and was out of the scope of the [Subscription] Agreement. I then asked Karl and Owen to meet me in Latvia to discuss why this payment had been made…”

“Mr. Belokon arranged a meeting with Karl Oyston and Owen Oyston in Riga on 7 October 2010 to discuss the payment, which I also attended. It was clear to me before that meeting and at all times that Mr. Belokon had never approved the contents of Owen’s aide-memoire. It was during this visit that Karl and Owen Oyston explained that the purpose of the £4.2 million payment was to settle an undisclosed debt owed by Segesta to Protoplan Limited, a company owned by Owen Oyston. Mr. Belokon was not happy with the Oystons’ actions and made this clear at this meeting. The Oystons seemed to think that somehow the payment of £4.2 million was within the spirit of the agreements between [VB Football Assets] and [Blackpool FC] and Segesta.”

“The balance sheet that I sent through does reflect reality and follows advice from the senior partner [that is, Mr. Cherry] at [Blackpool FC]’s external auditors. The amounts forwarded to Segesta, for payments and construction costs relating to the stadium development, are shown as advanced management fees. This will have significant tax benefits to [Blackpool FC] when these fees are realised through the P&L as management charges from Segesta (subject to the Boards approval) as they will be taxable expenses and hence give [Blackpool FC] future savings in corporation tax.”

“Thank you for useful explanation. However, what is certain difference between 1,5M advance which was used for the construction of the East Stand and was approved the board and 4,2M payment whose status is still to be resolved.”

“Dear Owen You have asked me to comment on the 2006 agreement between yourself and Valerie Belokon. As you have the time when the agreement was signed there were outstanding loans between yourself and BFC and also between Segesta (then BFC Properties Ltd) and BFC. In addition there was an outstanding debt (not a loan) between Protoplan and Segesta for the building of the original two stands. The loan agreement provided that no monies outstanding between BFC and Segesta should be repaid other than out of the proceeds of the rental income from the PCT. The mechanism was that the rental income belonged to Segesta but Segesta assigned the right to BFC which then used the money to repay the loan account between BFC and Segesta then use the monies to pay Protoplan. Unfortunately Protoplan was not party to the agreement and had always expected that Segesta would obtain bank borrowing to repay the cost of building the stadium. This proved difficult for Segesta and Protoplan was forced to take a long-deferred repayment of its debt. At May of this year Protoplan was still owed around £4.2 million. When the club obtained promotion to the Premier League it was required to carry out in a very short time a number of building projects including building a new stand and upgrading certain facilities and finishing the fit out of the south and south-west stands. Due to the outstanding debt with Protoplan it was felt that it would be difficult if not impossible to find a firm willing to undertake this work if the previous construction work was not fully settled. The decision was made therefore to loan monies from BFC to Segesta to repay the Protoplan debt and fund the construction and upgrade of the stadium. My understanding is that this does not contravene the 2006 agreement as all the loans outstanding at that time have been dealt with in accordance with the agreement. This is an entirely new loan say the 2010 loan which will be shown as such in financial statements. It is up to BFC and Segesta to decide how the loan should be repaid and whether or not interest should be payable by Segesta. However I would point out that BFC are the main beneficiary of the work done initially by Protoplan and then later to complete the stadium as without this work they would not be able to play in the Premier league and qualify for the substantial broadcasting payments and prize monies of around £100,000,000 which will follow. As such the funding of the construction works and repayment of an outstanding trader debt to Protoplan seems a small price to pay. I would also point out that when the original agreement was drafted in 2006 neither party envisaged that the club would reach the Premier league in 2010 nor that the prize for doing so would be so great. Please let me know if I can assist further.”

“I currently have the amounts paid to Segesta of 4.2M and the 1.5M for the East Stand has separate loans to Segesta on the balance sheet. Following recent discussions with [Mr. Owen Oyston] and an in-depth discussion with Ian Cherry, there have been suggestions on how these should be recorded in the accounts of [Blackpool FC]. Ian’s conclusion is that these should remain on the balance sheet as loans but should be consolidated into one low from [Blackpool FC] to Segesta of 5.7M titled ‘Stadium development loan 2010’ as Segesta needed these loans to complete paying for and constructing the Stadium for the benefit of [Blackpool FC]. Then Segesta can charge management charges for the stadium use, which can be used to offset elements of these loans or even be paid. A loan agreement between [Blackpool FC] and Segesta therefore for the above amount to reflect this does need to be drawn up. The East stand alone cannot be taken out of the balance sheet and put through the P&L as a management charge cost item as we had previously discussed, as these costs may be deemed to be of a capital nature. In accordance with the above I have prepared the attached draft balance sheet, which after approval I will circulate to Normunds and the Board. As far as effect on the profit forecasts I will also be circulating, I will make it clear that they could be subject to management charges from Segesta this year for use of the stadium which would reduce the profit, or shall I leave that out for now for the Board to discuss?” iii) The third email is from Mr. Cherry to Mr. Owen Oyston: “Owen 1. The [Blackpool FC] will receive at least £100,000,000 income from the Premier League in broadcasting rights and prize monies even if they finish last and are relegated after this year. That income is dependent upon the stadium meeting certain criteria. The monies advanced have enabled this to happen. And a relatively small at £6 Million in comparison to the rewards. 2. Protoplan is a building company set up to develop the initial two parts the stadium which were completed in 2002. Any debt owed to Protoplan is a trade debt. 3. Protoplan never received any interest on the outstanding debt. 4. It would have been impossible to carry out the additional works with existing debt to the constructor of the stadium unpaid after 8 years. 5. [Blackpool FC] has never paid any rental income to Segesta for the use of the Stadium. Hope this is sufficient.”

“In summary, in my opinion and subject to [Blackpool FC] complying with normal Company Law requirements, it can lend whatever it wants, to whomsoever it wants, whenever it wants, without the concurrence, agreement or approval of VB [Football Assets] and neither [Blackpool FC] nor Segesta has any obligation under either the Principal Agreement or the Loan Agreement to share any of the Premier League funds with VB [Football Assets] or its Associates.”

“Investment restructuring/payment back to shareholders You and your dad has repeatedly stated that you want shareholders investments paid back. The major disagreement is about what constitutes “investment”

“Normunds, before we go any further I want to take some strategic financial planning advice initially from Ian Cherry and thereafter from whoever answers the points that we need further advice upon. It seems nonsensical that we attempt to resolve any issue without being in possession of this information. I would suggest that we requested an adjournment of the board meeting pending this advice and I have asked for the meeting to be arranged by Rosemary. I have read your first draft which perhaps underlines how far the board is split on where we go from now and how we deal with the massive influx of cash and unprecedented profits. My feeling is that it should be dealt with as the shareholders wish and neither should stymie or seek to control the other and I believe this is possible. Let me know if you agree to the advice prior to our meeting? I’m happy in the meantime to continue working on the draft.”

“Of course, advice from Ian Cherry is always useful and would be needed sooner or later. However, I am not sure what you mean by “strategic financial planning” advice? Ian cannot help us to decide on the future of trust fund, what we do with East stand, etc. I see more need for his advice on how to do transactions from tax point of view once we have agreed on key points. I am not sure about delaying this process. As I said earlier, our financial year ends end of December, and we need to agree on things and make necessary transactions by then. Anyway, you do want to meet Ian, let’s do it together early next week. Let’s try to talk today – I’m eager to know what you seem to be no happy about with my proposal.”

“1. 4,2m payment. The Oystons and Ian Cherry believe that the payment was valid and in spirit with the original agreement. Moreover, from the legal point of view, the original agreement does not preclude [Blackpool FC] to make the payment to settle [Blackpool FC] mother company traded debt which incurred to build the West and North Stands. This has allowed [Blackpool FC] to achieve Premier League status. [Mr. Owen Oyston] reiterated that in his private conversation with Valeri [Belokon], Valeri wanted to get all his investment back – this is the reason why the 4,2m payment was made. [Mr. Cherry] confirmed that the 4,2m payment can be classified as advanced management fee and written off as a cost about 1m a year. This would reduce [Blackpool FC] taxable income. 2. East Stand The Oystons propose the following: - [East Stand] is Segesta property, - Stand was financed by [Blackpool FC] and now Segesta owes [Blackpool FC] 1,5m - If Valeri agrees with other arrangments, then Segesta will get x% of East Stand revenues until debit is repaid and then all revenue is BFC revenue. If there are disagreements, Segesta might keep rights to get all East Stand revenue and just repay the 1,9m debt. - There is a need to draw an agreement on [East Stand] loan. 3. South Stand The Oystons propose the following: - Valeri gets back his 4,75m investment - South Stand agreement is scrapped - Currently the [South Stand] fit-out is financed by [Blackpool FC] which will create [Blackpool FC] loan to Segesta - [South Stand] revenue is split into football and non-football revenue; football revenue is allocated to [Blackpool FC], non-football revenue to Segesta – first to repay [Blackpool FC] loan for fit-out, then profit 4. Valeri’s investments repayment: - [Mr. Cherry] confirmed, in case Valeri chooses to get back his investments, both 4,75m to [VB Football Assets] and 1,85m to Vlada, there is no problem these monies to be repaid from Segesta. - Originally, Karl proposed the following payback schedule: 1/ 4,200,000 Segesta paid 2/ 1,850,000 Vlada Jan 10th 2011 3/ 4,750,000 VB [Football Assets] Jan 30th 2011 4/ 562,506 [Mr. Owen Oyston] Jan 30th 2011 5/ 944,652 Zabaxe Aug 15th 2011 6/ 275,942 [Mr. Owen Oyston] Aug 15th 2011 Which is missing Vlada’s 850K payment (gift) to BFC. The Oystons are happy to repay this money as well. … 6. 50/50 shares parity [Mr. Owen Oyston] said he has never received any offer from Valeri about buying shares. Nobody wanted to comment on this and thought that [Mr. Owen Oyston] should speak with Valeri directly on this subject.”

“In summary the proposal is for both major shareholders to receive payment of the whole of the monies loaned to [Blackpool FC] (please set out the schedule as per Karl). Thereafter [Belokon Holdings] will be left with a 20% stake in [Blackpool FC] which has cost some £1.8 million. That shareholding would be worth considerably more than this cost in todays value. For example Blackburn Rovers FC recently sold for £50 million. The group as a whole would have no external debt. After the accumulated losses of £13.85 million have been wiped out [Blackpool FC] is free to declare a dividend which will accrue 20% to [Belokon Holdings]. At the current rate of profitability the club should make circa £20 million in 2012. Even if half of this amount is retained it will still leave [Belokon Holdings] with a potential dividend of £2 million in 2012. In addition [Belokon Holdings] benefits from the use of the stadium and all football related revenues even though it has not paid anything towards the construction of the stadium. By any reckoning this is a fair division of revenues. Furthermore Segesta will be responsible for the repayment of any loans advanced from [Blackpool FC] (subject to agreement on the East Stand). [Belokon Holdings] will continue to accrue the right to future dividends.”

“You will recall that we were left with a Travelodge mortgage of £4.7m and the mortgage lasts for only 5 years which means we have probably just about 3 years to run. I think we should pay this mortgage off or reduce it dramatically in accordance with our wish to extricate ourselves from Banks. Can you put your thinking hat on about how we best deal with it and I am sending a copy of this to Ian and Howard to seek their advice on how best to deal with it as the money would have to come from Segesta/[Blackpool FC].”

“Following our conversation yesterday, can I please set out what I understand to be what you want in this matter, to be put into a form of Agreement between [Blackpool FC], Segesta and [Mr. Owen Oyston]. [Blackpool FC] will loan Segesta c. £4,894,035 interest free (or whatever is needed to discharge the charge in favour of Lloyds TSB), to enable Segesta to discharge the outstanding Mortgage/Loan Lloyds has over the Travelodge. Owen will enter into a Legal Charge of the Travelodge in favour of Segesta as security for the loan and the payment to Lloyds by Segesta. Owen will then, at his absolute discretion, pay to [Blackpool FC], 22 equal annual payment of £222,446.14 (to equal the full amount of the loan of £4,894,035.18), such payment to be payable quarterly at £55,601.04 per quarter. [Mr. Karl Oyston] suggested that the difference between the annual rent receivable from Travelodge) currently £451,448 p.a., which rent is subject to upward only review in accordance with the Index of Retail Prices) and the amount to be paid by Segesta to [Blackpool FC] under this arrangement (£222,446.14), with that difference currently being £228,991.86, should, at the absolute discretion of Segesta, be split equally between Segesta and [Blackpool FC]. I’m unclear as to whether or not that difference, in this example £228,991.86, i.e. c £114,000 each to [Blackpool FC] and Segesta, if the payment being made to [Blackpool FC] is in further accelerated payment/reduction of the Loan or is a gratis payment. Can I please have comments and observations asap, so that I can prepare the required agreement? I understand [Mr. Owen Oyston] wants to complete this by the end of the month and if I hear from you soon, I can deal with that time limit fairly easily.”

“[Mr. Stephenson] has advised [Mr. Owen Oyston] today that the hedging fund arrangement is with a third party and therefore Lloyds cannot negotiate a deal. In these turbulent times, Mr. Oyston is anxious. However, if the capital to Lloyds TSB is paid off, then, of course, there would be no further interest to be paid to Lloyds. We would then only pay the interest to the third party hedging fund which, this quarter, would be £25/27,000. If interest rates climb, these payments will reduce and if interest rates fall, the fund may even have to pay us interest. However, in such an uncertain world, [Mr. Owen Oyston] would like to pay off the mortgage completely and the hedging fund penalty of c. £131,000, which takes the repayment to c. £4,894,035.18 and he thinks we are well rid of them. The other incentive to pay off the Lloyds mortgage/hedging fund arrangement, is that the £4.894 million would have a safe home. The information you gave your Dad over the phone, which apparently, you say, appeared in the Evening Gazette, should indicate caution, if you know what he means. Therefore [Mr. Owen Oyston] is suggesting the following, which will not be documented or legally binding 1. [Blackpool FC] loans Segesta c. £4,894,035.18, which includes the c. £131,000 to get rid of the hedging fund. 2. Segesta then redeems the mortgage with Lloyds, including the hedging fund arrangement. 3. [Mr. Owen Oyston] will not enter into a Legal Charge of the Travelodge site, in favour of Segesta…, or anyone else. The loans will be informal and effected in the next 2 or 3 days, without any written documentation. This will avoid the months and months of toing and fro-ing between the various parties. 4. [Mr. Owen Oyston] will continue to receive the income from the Travelodge, as now and currently at £451,448 per annum, for a minimum of 25 years and a maximum of 50 years, as Travelodge have an option for a further 25 year term at the expiration of the first 25 year term. 5. [Mr. Owen Oyston] proposes to pay Segesta the sum of £250,000 per annum which leaves £201,000 clear from the Travelodge income, before tax. 6. [Mr. Owen Oyston] proposes that Segesta pays to [Blackpool FC], the sum of £200,000 p.a., At its discretion, which Segesta can then continue to pay, if it so wishes, for up to 50 years. 7. Segesta retains the difference of £50,000 p.a. therefore Segesta and [Mr. Owen Oyston] will receive a total of £251,000 annually. 8. Over the informal and potential 50 year repayment programme, which payments are at the discretion of Segesta, [Blackpool FC] will receive £10,000,000 plus a discretionary percentage increase, based upon the 5 yearly rent reviews. 9. The £200,000 p.a. payment to [Blackpool FC] represents 4.09% on the loan of £4,894,038.18 which will increase as [Blackpool FC] receives its share of the rent reviews. 10. Karl is to invest simultaneously in BIB, up to a maximum of £2 million (depending on funds) as a sign of our good faith and on the best terms possible, in accordance with Normund’s email. 11. The whole of these arrangements are to be effected immediately and on an informal basis.”

“Just so that I’m clear on what you require. As I see it, you want 3 documents/agreements as follows: 1. An Agreement between [Blackpool FC] and Segesta under which [Blackpool FC] loans to Segesta the sum of £4,900,000, such loan to be repaid by Segesta to [Blackpool FC] by up to 50 years at the rate of 250,000 in respect of capital and interest. If the repayments are in respect of capital and interest, what is to be the interest rate applied and how with the annual payment of £250,000 to be apportioned between capital and interest? 2. An Agreement between Segesta and [Mr. Owen Oyston] for an interest-free loan to be made from Segesta to [Mr. Owen Oyston] in the sum of £4,900,000 (or in the exact sum of the redemption monies to be paid to Lloyds??) For a period of up to 3 months. 3. In the event that [Mr. Owen Oyston] makes the loan of £2,000,000 to Segesta set out below, an Agreement between Segesta and [Mr. Owen Oyston] that Segesta will repay the £2,000,000 within 4 months. 4. An Agreement between [Mr. Owen Oyston] and Segesta for [Mr. Owen Oyston] to sell the Travelodge to Segesta for £6,500,000 (plus VAT of £1,300,000), totalling £7,800,000. Unless and until I am instructed otherwise, all these agreements are presently to remain unsigned and undated. I understand that to cover the difference between the initial loan of £4,900,000 and the sale price (including VAT), of £7,800,000 (the difference being £2,900,000), [Mr. Owen Oyston] it is prepared to loan Segesta up to £2,000,000 (I believe interest free) from his personal account, if [Blackpool FC] can loan to Segesta the balance of the difference, £900,000. When Segesta recovers the VAT, which is to be repaid to [Mr. Owen Oyston] within 4 months of it being loaned, Segesta repays the VAT to [Mr. Owen Oyston]. What about the difference between the loan from [Mr. Owen Oyston] of the £2 million and the VAT repayment of £1,300,000 i.e. £700,000? Where does this come from? Presumably from the monies which Segesta holds in its accounts?”

“On February 24, 2011 [Blackpool FC] made a transfer of 4.9 million to Segesta. I understand the monies used to refinance Segesta loan from a commercial bank and now Segesta owes money to [Blackpool FC]. I still have not been informed about the terms of the [Blackpool FC] loan to Segesta. It is disappointing and not in line with good corporate governance that the Club has provided a long-term credit without board’s approval and prior information.”

“I thought you needed 4,9m to refinance bank loan? Now you want 8.06m?”

“Don’t get too attached to Owen, he’ll be dead in 12 months!”

“And Karl will be dead within two years!” [Mr. Belokon] had more to drink and became more argumentative and aggressive, saying “I want half the shares”

“Don’t get too attached to Owen, he’ll be dead in 12 months!”

“And Karl will be dead within two years!” [Mr. Belokon] had more to drink and became more argumentative and aggressive, saying “I want half the shares”

“Re Valeri Belokon File in particular the negotiations and paperwork that led to the 2006 contract Rosemary could you get this file(s) at and I want [Mr. Rawlinson] to go through the file(s) and dig out any information which shows that I never agreed to give my shares to [Mr. Belokon] in relation to parity. [Mr. Cherry] has already found some documentation which shows that [Mr. Belokon’s] people were seeking an option at the same price to be paid for the 20% but at the end of the day because of the tax implications we couldn’t agree to it. My last memory on subject is that I did agree to selling the shares that would give him parity with me but no price was ever discussed or finalised other than the initial paperwork from [Mr. Belokon’s] people as mentioned above. Please can you dig out the file(s) and send with my post this evening.”

“Please can you get to [Blackpool FC] tomorrow at 9am to speak to [Mr. Dyer] about the [Belokon] agreement. There appears to be a misunderstanding between [Mr. Belokon] and [Mr. Owen Oyston] over what was agreed at the time he bought the 20% of the [Blackpool FC] shares. At a recent meeting in London he told [Mr. Owen Oyston] that he believed that when he bought the 20% stake in [Blackpool FC] there was a clear understanding that he will also be buying share parity with me (i.e. with the same number of shares that [Mr. Owen Oyston] has). Owen would therefore like you to go through all the files to find any correspondence, emails, documentation, agreements which will further offer clarification to this misunderstanding. But if you start with [Mr. Dyer] as the football club he will give you anything he has on the matter which may be of assistance.”

“70. Despite a notice of Board meeting and agenda being circulated, a board meeting did not in fact take place and I never agreed to the terms of the Travelodge loan being entered into by the Club. A meeting did, however, take place at the Savoy hotel in London in around June 2011, at which Mr. Belokon, Owen Oyston, Karl Oyston and I were present. I have read the comments at paragraph 20(a) of the Defence, which refers to a further meeting at Claridge’s on 1 December 2010. I am not aware of such a meeting taking place. 71. I confirm that Mr. Belokon did not threaten any of the Oyston family at that meeting. It was, however, at this meeting that Mr. Belokon made a firm statement to the Oystons that he was thinking about exiting his investment in the club…It was at this meeting that Owen Oyston showed me a letter from Ian Cherry in which he stated that Mr. Belokon was entitled to 50% of the shares in the Club.”

“Once you left us in Savoy, we, of course, kept drinking and discussing our issues. Then your dad showed me a letter from Ian Cherry. I was pretty drunk by then, but I think that according to Ian’s records the intentions were that [Mr. Belokon] initially pays 1,8m for 20% and provides 2,7m loan which is turned into purchase price for the remaining 30% once parity is to be established. In addition, Valeri would have to pay some nominal few quid.”

“As you may be aware I would like to discuss some small-scale restructuring to allow the income from the Football Club to go directly into the Football Club and a split of non-football revenue but this is entirely a matter for the Board. The Football Club has also funded much of the fit out for the South Stand and will of course be funding construction and fit out of the South East corner along with construction of the East Stand. These matters need to be discussed and the position confirmed. I would also like the Board’s views on investing money between £3 and £5 million in London which should hopefully have a far higher return than current Bank rates. We currently have approximately £6 million on the NatWest money market and £2 million with BIB, the first parachute is payable half in August circa £8 million and the rest over the season. I would welcome anyone’s views on investments that will yield security and an acceptable return.”

“Hello all, following on from our meeting in London I have as requested been looking at the agreements I previously sent to you all with a view to unravelling them. When the agreements are taken in isolation it is a relatively simple process. The two initial loans totalling 2.7m will simply have to be repaid albeit early. The loan for the South and South-West stands similarly can be repaid in total 4.75m. The trust fund that was created to buy players has now had the capital repaid but there remains a potential further payment dependent upon the sale of any or all of three players. My view is that this must run until the players depart by whatever means as this may well only take a further couple of years. The most difficult aspect is of course the shareholding in [Blackpool FC] that was initially purchased for 1.8m. I would suggest that [Mr. Belokon] is free to sell the shares if he so wishes and that the club will provide a fallback price of 1.8m should [Mr. Belokon] not be able to dispose of the shares elsewhere. Ideally all of the above repayments would be over a period of time so that the club can attempts to return to the Premier League and not be starved of capital. I haven’t discussed this with any of you or any of the clubs legal tax advisers as I’m keen we keep matters between ourselves at this stage. I am of course hopeful that all of the above will not become a reality as I believe we have done such great things as a group that our collaboration should continue.”

“I have not managed to speak to [Mr. Belokon] yet about his expectations about price of his investments. I hope it was not him involved in fighting scenes at Ascot race! :) Is not that I expect or hope anything to change, but you might be interested in the following. Once you left us in Savoy, we, of course, kept drinking and discussing issues. Then your dad showed me a letter from Ian Cherry. I was pretty drunk by then, but I think that according to Ian’s records the intentions were that [Mr. Belokon] initially pays 1,8m for 20% and provides 2,7m loan which is turned into a purchase price for the remaining 30% once parity is to be established. In addition, [Mr. Belokon] would have to pay some nominal few quid. This is the passage quoted in paragraph 244 above. As I wrote above, I don’t know [Mr. Belokon’s] thoughts, but I can give you my thoughts on your valuations. 2,7m – fairly easy – just early repayment, I wonder if [Mr. Belokon] would want some interest for it. 4.75m – investment in [South Stand]. He invested (and risked) money to make return. You (your dad) had provided quite specific figures on expected return over 999 years. So, I would expect that [Mr. Belokon] would expect some return on that amount – not just return of the nominal. Trust fund – no idea if [Mr. Belokon] is happy to still keep the interest. Shares: If he bought bottom of league one club shares for 1,8, I imagine he will expect to sell them at substantially higher price, especially taking into account of this and the subsequent years profit to which he is entitled to. If I were you, I would buy the shares yourself – you might not be able to deal as swiftly with the future partners as you did with me and [Mr. Belokon].”

“I wanted to thank you once more for our common journey in the English football – you must agree with me that we had many memorable moments to remember all our lives! Unfortunately, I have decided to exit our partnership for the reasons we both are well aware of stop as I stated, I want to exit the club in the most favourable way for you and the Blackpool Football Club. Therefore, in our London meeting I offered you to prepare a proposal for the purchase of all my investments into [Blackpool FC]. As you remember, it was you who convinced me to invest in Blackpool FC in various ways. I set quite an ambitious target, which, I hope you agree, was reached with my direct and substantial contribution. Now I have received a proposal from Karl (see the attached) to buy back all my investments. I would like to ask your official confirmation in writing within seven days that this is indeed your as a shareholder proposal. In case of not receiving any message, I will take it as confirmation. As I said earlier, I would like to focus on good things in our partnership and remain in good relations.”

“[Mr. Cherry] says [Mr. Belokon] would be foolish not to take his loans back and then sit on the shares as the shares of only cost him £1.8m and these are worth appreciably more in due course if not now. [Mr. Cherry] thought the Club was worth £50m as we still have the parachute payments now out of the Premiership…”

“1. [Blackpool FC] has agreed to lend to Segesta the sum of £8,125,000 (Eight Million one hundred and twenty five Thousand Pounds) (“the Loan”) for the purposes of acquiring the freehold and property situate thereon and known as the Travelodge Hotel Bloomfield Road Blackpool more particularly registered with Title Absolute at HM Land Registry under Title Number LA 97016 (“the Property”). 2. The Loan is apportioned as to £6,500,000 for the purchase price of the Property, £1,300,000 for the VAT payable to HMRC on the purchase price of the Property and £325,000 for the stamp duty payable to HMRC on the transfer of the Property. 3. The Loan is to be repaid as is hereinafter set out. NOW IT IS HEREBY AGREED between the Parties as follows: IN CONSIDERATION of the Loan made by [Blackpool FC] to Segesta, Segesta hereby agrees (but at its absolute discretion): 1. To repay to [Blackpool FC] within 14 days of receiving the refund from HMRC of the VAT paid on the purchase of the Property in the sum of £1,300,000 and 2. To repay to [Blackpool FC] within 28 days after the date of the transfer of the Property the further sum of £1,600,000 (“the Further Sum”) in reduction of the Loan 3. To pay the balance of the Loan (being the Loan, less the VAT and less the Further Sum) to [Blackpool FC] together with the interest at the rate of 4.58% p.a. by up to either 50 annual payments of £250,000 p.a., (“the Annual Payment”) or up to a maximum of £12,760,000, whichever comes first, in respect of capital and interest, such payments to be paid quarterly, each in the sum of £82,500, with the first payment to be made on the ____ day of _____ 2011. 4. That in the event that the rent payable under a Lease of the Property (“the Lease”) in favour of Travelodge Hotels Limited for a term of 25 years (with an option for a further term of 25 years) computed from the 21st April 2008 at an initial years rent of £451,448 (“the Rent”) subject to upwards only reviews of the Rent every five years from 21st April 2008 and otherwise reviewed in accordance with and upon the terms as set out in the Lease (the benefit of which Lease is to vest in Segesta), increases or decreases (“the Increased or Decreased Rent”) from the current annual figure receivable of £451,448 then, in those circumstances, Segesta hereby agrees that the Annual Payment referred to in clause 1 above will be increased or decreased pro rata from the Annual Payment compared to the Increased or Decreased Rent.”

“It came to my attention that there have been several payments from [Blackpool FC] accounts to Segesta amounting more than 13.6m GBP in August and November. I request explanation about the status and purpose of the payments to all board members. I also would like explanation why all board members were not notified in advance about such a substantial transfers? Again.”

“As you know I have asked you to read carefully all the documentation and contracts that we have had with [Mr. Belokon] since the beginning to ensure that there are no prohibitions, restrictions or limitations in [Blackpool FC] paying to its directors bonuses in relation to their past services to [Blackpool FC] for which they were not remunerated. As you are aware, I have served 25 years in the harness of [Blackpool FC] and in the initial year saved them from extinction, loaned money interest free, converted loans into shares to strengthen [its Blackpool FC’s] balance sheet, made temporary loans every time they were in trouble, again interest-free and provided financial support for their borrowings. So now after the success of the Premier League and the strong financial position of the Club, the chairman is putting down on the agenda a proposal that certain bonuses are paid. The question is…are we able to do this without any problems or restrictions?”

“On September 17, 2010 [Blackpool FC] made a transfer of 4,2m to its parent company Segesta. The payment was not approved by the board, nor was agreed with [Mr. Belokon]. I wrote an official memo to the board members…, but an agreement has never been reached. On December 17, 2010 in an official meeting…the Oystons claimed that the payment was in spirit with the concluded agreements and should be written off as management fees over few years. However, in company’s interim audit… the transfer is classified as a loan to Segesta. On February 24, 2011 [Blackpool FC] made a transfer of 4.9 million to Segesta to refinance Segesta loan from a commercial bank. As I pointed out in a memo to the board…it was disappointing and not in line with good corporate governance that the Club has provided a long-term credit without board’s approval and prior information…I still have not been informed about the terms of the [Blackpool FC] loan to Segesta. In August and November [Blackpool FC] made transfers to Segesta in amount of 13,9m. I did not get answer why it has been done. Possibly to repay debts to [Mr. Belokon], possibly partially for constructing SE corner?”

“It’s pretty clear I was very ironic. Probably I was a little bit bitter, because I thought that’s it, I’m stepping down” (Transcript Day 5, p.181); Mr. Dyer said: “I think these are Normunds’ sarcastic, spoof minutes”

“On December 7, 2011 Mr. Malnacs enquired on the transfers from [Blackpool FC] accounts to Segesta amounting more than 13.6m GPB in August and November. Mr. Oyston explained that they were very worried about the NatWest financial health and decided to transfer money to Lloyds TSB which has the healthiest balance sheet in English bank industry. The transfers were made to Segesta as it takes time to open an account for [Blackpool FC]. The balances as Lloyds yielded little or no interest, which Mr. Malnacs wasn’t happy about.”

“Clarification of loans to Segesta [Mr. Malnacs] sought this clarification and [Mr. Morozov] asked if there were any written agreements in place. [Mr. Karl Oyston] and [Mr. Dyer] replied that the only written agreement currently being finalised was for Segesta’s purchase of a Travelodge Hotel. For the rest of the loans agreement needs finalising by the Board, this involves agreements on income and costs between Segesta and [Blackpool FC] (in conjunction with the current South stand agreements) for the East stand and the south-east corner. Points of view were put forward by [Mr. Karl Oyston] and [Mr. Malnacs], and it was left that this would be a separate agenda item for detailed discussion at the next Board meeting.”

“As at May 2014, £5.5 million of the £28.6 million was still cash in the bank.”

“Normunds, maybe a good idea would be for you to stop complaining all the time and actually do something positive. You are as capable as I am of researching and presenting ideas to the board to minimise our corporation tax payment. Why not spend your time on worthwhile activity as I am a little bit tired of your constant sniping from the sidelines whilst doing nothing helpful or productive. I am currently busy with the end of the transfer window. You seem to have gone from being nearly full-time in club activities to nil, unless you have more pressing matters I suggest you prepare the information you wish the board to be given and I will review and look to approve it adverse distribution. Rod will no doubt be willing to assist in your task notwithstanding your unforgivable insults directed at him last week.”

“As I stressed before, it only makes sense for us Latvians to attend board meetings, if relevant information has been circulated in advance so I have time to study it and consult with [Mr. Belokon] if necessary. Please, let me to remind company secretary Mr. Dyer that he still has not supplied me with the requested information: 1. Full list of debtors as of end financial year 2010/11. 2. Full list of creditors as of end financial [year] 2010/11. 3. Split of Segesta ‘advanced management fees’.”

“Let me kindly remind you and your team that you still have not provided answers to my questions or draft audit report. If we don’t get the requested information, we do not see much sense coming to the board meeting this Friday. Please, do send the requested information immediately, so we can prepare for the board meeting.”

“Please find enclosed a copy of the draft financial statements for [Blackpool FC]. I have gone through them in detail with [Mr. Dyer] and am happy that they will be presented to the board at the board meeting tomorrow for approval. You will note at page 13 there is an amount of Group undertakings of £11,521,885 which represents the total amounts owed by Segesta. This is the amount that is affected by the restructuring agreements regarding the South & South East stands and requires discussion as soon as the major shareholders can be assembled at a board meeting, which I will leave you to arrange. This also includes the now concluded agreement between Segesta and [Blackpool FC] in relation to the Travelodge. We will let you have a copy in due course. You will also see a note on page 11, note 8.1 relating to an accrual for remuneration payable to [Zabaxe] on behalf of my father’s long term involvement and support of Blackpool FC. Zabaxe has agreed to make a loan, if requested and following advice on terms of such a loan from [Mr. Cherry] and [Mr. Belton], to Blackpool FC of up to £8.177m.”

“As I expected, the draft audited financial statement includes a few things that are not acceptable to me and [Mr. Belokon]. This is reason I requested draft report at least few days before the board meeting – not less than 24 hours – so we can discuss and maybe agree. First, how could you decide on making 11 million worth emolument to one shareholder, without board’s other major shareholder’s approval or at least a meaningful discussion?! This is out of any acceptable corporate governance norms, even without mentioning the moral aspect of the transaction! We don’t question [Mr. Owen Oyston’s] contribution to the club, but any transfers of that size must be agreed with the board or the other shareholder. As I mentioned before, neither am I happy with how the Segesta debt to [Blackpool FC] is reflected in one figure [of] 11.5m. We want clear split of that amount into [its] components. I really can’t understand why despite so many requests I still can’t get a split of that amount? These are only two issues that I noted in such a short notice. I am sure I would have more questions once I have studied the draft report in more detail. In any case, neither me nor [Mr. Belokon] are happy with the draft report and we request postponement of the board meeting where the audit is approved. We understand that the approved audit report must be filed with the company house shortly; however, you have had enough months to timely prepare the audit report, so we can analyse, discuss and approve it.”

“Further to [Mr. Malnacs’] email I think the time has come for me to make some suggestions as to how we resolve the current position which is affecting the performance of [Blackpool FC] and its prospects of success. I will not postpone tomorrow’s Board Meeting scheduled to approve this year’s accounts and will not debate the various matters relating to the accounts via email. I would suggest that we consider arriving at a point whereby either [Mr. Belokon] or [Mr. Owen Oyston] take each other’s shares in [Blackpool FC] and to that end I suggest that [Mr. Malnacs] obtains [Mr. Belokon’s] instructions on the following 2 options: - Option A [Mr. Belokon] makes an offer to [Mr. Owen Oyston] to buy the whole of his shareholding in [Blackpool FC]. Option B Option A Option B [Mr. Belokon] proposes a sale price for his own shares to [Mr. Owen Oyston] alongside an agreement that allows [Blackpool FC]/Segesta to repay all loans and terminate all arrangements between those parties. I obviously haven’t discussed this with either [Mr. Belokon] or [Mr. Owen Oyston] in much detail but feel I must for the good of the company and my sanity attempt to find some solution to the current unsatisfactory position. It is of extreme distress that we worked so well together to achieve so much and having done so seem intent on stagnation and reversal of fortunes.”

“I fully agree that this saga can go forever and is not in the interests of anybody. My personal view is that indeed it is much better solution if any of the two parties just sell the shares to the other. In the summer [Mr. Belokon] wanted out and asked for valuation of his shares and investments. Please, be reasonable and agree that your proposal was not near right either from financial or morals positions. I have not spoken to [Mr. Belokon] for a while, but imagine he still could be open to a reasonable offer. When I have a chance I will try to speak to him about your proposal, [Mr. Karl Oyston]. As for audit report, I am really tired of repeating – we need time to analyse the figures before approving the audit. We can have a reasonable board meeting discussion only [if] we have had information for few days. So, please, postpone the meeting tomorrow. Otherwise, I have no option, but not to approve the audit and report it to our auditor and, if necessary, to pursue the matter further. Again, it is not in anybody’s interests. Please!”

“This is to officially notify you as Blackpool FC auditor that I am not able to approve [Blackpool FC’s] draft audit report for season 2010/11 prepared by you. Despite several requests to share above mentioned draft report at least few days in advance of the board meeting, I received it only on February 16, 2012 evening, with the board meeting scheduled on February 17, 2012 at noon to approve it. Needless to say, this is not an adequate time to study the draft report, especially given the fact that recently I have been denied financial information form Mr. Dyer and Mr. Karl Oyston on few occasions. Even a quick view at the draft report highlighted at least two issues: 1. £11,000,000 emolument to Mr. Owen Oyston was never discussed or agreed at a formal board meeting or meeting between the two major shareholders. It is not acceptable to propose an emolument of such a magnitude without proper discussions and on such a short notice, and in an environment of number of unresolved issues between the two major shareholders. 2. I also believe that the draft audit should single out two [Blackpool FC] payments (£4.2 and £4.9m) to its parent company Segesta which, again, were made without board’s approval and prior information. Apart from these two issues, there is additional time needed to study the draft report in details. I have asked Mr. Karl Oyston to postpone the board meeting for a week, but he seems to be ignoring my request. Therefore, in case the board meeting goes ahead as planned today and the draft audit report is approved, I request that the final audit reflect my disagreements above.”

“Matters arising – further to paragraph 6.3 of last meetings minutes where it was agreed to make an accrual of £7M for directors and staff. Following further discussions with the company’s advisors it was advised that the amount be lifted to £11m and paid as remuneration to the director Mr OJ Oyston. The payment would be made to the director’s service company Zabaxe Ltd. Mr. OJ Oyston disclosed to the meeting his interest in Zabaxe Limited and the remuneration, and therefore would not take part in the agreement of this proposal. After discussion the meeting confirmed the accrual and payment to Zabaxe Limited of £11M, proposed by [Mr. Karl Oyston], seconded by [Mrs. Oyston] and passed by the meeting. At this point [Mr. Malnacs] was invited to join the meeting by telephone conference so that his opinions could be heard. [Mr. Malnacs] initially stated he could not discuss his objections on the phone, but then he wanted his objections to the course of action that we being approved by the Board noted, these had also been put in writing to the auditor and the auditor had responded. It was pointed out that aspects of the information requested by [Mr. Malnacs] related to Segesta Limited and not [Blackpool FC] so these requests had not been complied with. At this point the conference call with [Mr. Malnacs] came to an end.”

“For [Blackpool FC’s] financial accounts for that 2010-11 campaign, filed in the past 48 hours and relating to their first season in the top flight for 39 years, reveal that one of [Blackpool FC’s] six directors was paid a staggering £11 million in remuneration for the season that ended with the club’s relegation back to the Championship. And the unnamed director, paid through his company, Zabaxe, was [Mr. Karl Oyston’s] father, Blackpool’s multi-millionaire majority shareholder, [Mr. Owen Oyston]. … Already supporters, politicians, players and industry observers have condemned the £11m director’s remuneration as ‘shocking’ and ‘barely believable’. … The £11m paid to a single director is understood to be more than for the wages paid to [Blackpool FC’s] first-team and the manager combined during their one season in the Premier League.”

“(1) A member of a company may apply to the court by petition for an order under this Part on the ground- (a) that the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or (b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial. (a) that the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or (b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial. (a). on grounds of divergence of opinions on accounting treatments or audit provisions, or (b). on any other improper grounds, 398. shall be treated as being unfairly prejudicial to the interests of some part of the company’s members.”

“…the words are wide and anything that the company does or fails to do can be relied upon. But wide as the category of acts may be it is necessary that the act or omission is done or left undone by the company itself or on its behalf, Thus, voting at a general meeting, whether annual or extraordinary, may result in a resolution being passed or defeated. The resolution is, obviously, an act of the company notwithstanding that the votes which pass or defeat it are the votes of members which are their private rights which…can be exercised as they choose. The acts of the members themselves are not acts of the company and cannot found a petition under [section 994].”

“Prejudice will certainly encompass damage to the financial position of a member. The prejudice may be damage to the value of his shares but may also extend to other financial damage which in the circumstances of the case is bound up with his position as a member. So, for example, removal from participation in the management of a company and the resulting loss of income or profits from the company in the form of remuneration will constitute prejudice in those cases where the members have rights recognised in equity is not at law, to participate in that way. Similarly, damage to the financial position of a member in relation to a debt due to him from the company can in the appropriate circumstances amount to prejudice. The prejudice must be to the petitioner in his capacity as a member but this is not to be strictly confined to damage to the value of his shareholding. Moreover, prejudice need not be financial in character. A disregard of the rights of the member as such, without any financial consequences, may amount to prejudice falling within the section.”

“(1) The concept of unfairness, although objective in its focus, is not to be considered in a vacuum. An assessment that conduct is unfair has to be made against the legal background of the corporate structure under consideration. This will usually take the form of the articles of association and any collateral agreements between shareholders which identify their rights and obligations as members of the company. Both are subject to established equitable principles which may moderate the exercise of strict legal rights when insistence on the enforcement of such rights would be unconscionable. (2) It follows that it will not ordinarily be unfair for the affairs of a company to be conducted in accordance with the provisions of its articles or any other relevant and legally enforceable agreement, unless it would be inequitable for those agreements to be enforced in the particular circumstances under consideration. Unfairness may, to use Lord Hoffmann's words, “consist in a breach of the rules or in using rules in a manner which equity would regard as contrary to good faith”…; the conduct need not therefore be unlawful, but it must be inequitable. (3) Although it is impossible to provide an exhaustive definition of the circumstances in which the application of equitable principles would render it unjust for a party to insist on his strict legal rights, those principles are to be applied according to settled and established equitable rules and not by reference to some indefinite notion of fairness. (4) To be unfair, the conduct complained of need not be such as would have justified the making of a winding-up order on just and equitable grounds as formerly required under section 210 of the Companies Act 1948. (5) A useful test is always to ask whether the exercise of the power or rights in question would involve a breach of an agreement or understanding between the parties which it would be unfair to allow a member to ignore. Such agreements do not have to be contractually binding in order to found the equity. (6) It is not enough merely to show that the relationship between the parties has irretrievably broken down. There is no right of unilateral withdrawal for a shareholder when trust and confidence between shareholders no longer exist. It is, however, different if that breakdown in relations then causes the majority to exclude the petitioner from the management of the company or otherwise to cause him prejudice in his capacity as a shareholder.”

“How can it be unfair to act in accordance with what the parties have agreed? As a general rule, it is not. But there are cases in which the letter of the articles does not fully reflect the understandings upon which the shareholders are associated. Lord Wilberforce drew attention to such cases in a celebrated passage of his judgement in Ebrahimi v. Westbourne Galleries Ltd [1973] AC 360 at 379, which discusses what seems to me to be the identical concept of injustice or unfairness which can form the basis of a just and equitable winding up…Thus the personal relationship between a shareholder and those who control the company may entitle him to say that it would in certain circumstances be unfair for them to exercise a power conferred by the articles upon the board or the company general meeting…”

“One of the traditional roles of equity, as a separate jurisdiction, was to restrain the exercise of strict legal rights and certain relationships in which it considered that this would be contrary to good faith. These principles have, with appropriate modifications, been carried over into company law…there will be cases in which equitable considerations make it unfair for those conducting the affairs of the company to rely upon their strict legal powers. Thus unfairness may consist in a breach of the rules when using the rules in a manner which equity would regard as contrary to good faith. This approach to the concept of unfairness in [section 994] runs parallel to that which your Lordships House, in Ebrahimi v. Westbourne Galleries Ltd [1973] AC 360, adopted in getting content to the concept of ‘just and equitable’ as a ground for winding up… I would apply the same reasoning to the concept of unfairness in section [994]…Lord Wilberforce…said that it would be impossible ‘and wholly undesirable’ to define the circumstances in which the application of equitable principles might make it unjust, or equitable (or unfair) for a party to insist on legal rights what exercise them in a particular way. This of course is right. But that does not mean that there are no principles by which those circumstances may be identified. The way in which such equitable principles operate is tolerably well settled and in my view would be wrong to abandon them in favour of some holy indefinite notion of fairness…”

“There have been since 2010 two intercompany loans”

“Our legal people have responded with the following points following your e-mail and yesterday’s discussions regarding the Articles: 1. At the moment the Articles are an old style 1984 Table A format. Table A itself has been updated three times, the last (2006) being the most comprehensive set of changes, whereas the Articles have not really been updated since then (save for ad-hoc changes). 2. The “shareholder agreements” between Segesta and VB [Football Assets] still stand and would provide VB [Football Assets] the protection they originally sought. For example, there are pre-emption rights in favour of each party if one party wants to sell their shares. 3. They still have their representation on the Board – it is the board that controls the direction of [Blackpool FC] (other than matters reserved to the shareholders). 4. The changes do mean that certain things require the consent of a majority or should be done if the majority require – that will ensure the direction of [Blackpool FC] is maintained and [that it] is not constantly fighting battles with errant minority shareholders. 5. The changes will not mean that a majority can force a minority to sell their shares unless there is a “drag-along” i.e. a bona fide sale (subject to the pre-emption rights in the “shareholder arrangements” referred to above). If your legal people want to discuss anything further with ours then let us know and we will send over contact details.”

“Ideally, it would be preferable to have [VB Football Assets] in agreement on the changes to the articles – technically, the articles can be adopted without their consent. However, unlike the other minority shareholders, they may have the funds to look at a possible action for unfair prejudice (as previously advised).”

“Regarding the [Draft New Articles], we had a phone conversation with your lawyer Akeel Latif. We have repeatedly indicated that the [Draft New Articles] in their current form are not acceptable for us as they treat us unfairly. We have also explained it to Akeel. As they stand today, they are not drafted in the spirit of fair cooperation among partners. Essentially, we are being treated similarly as these large number of minority shareholders. We suggest to include in these [Draft New Articles] some exemptions for us as your partners to grant similar rights in relation to voting, representation in the board, changes to share capital etc. Unfortunately, we will have to vote against [the Draft New Articles] in their proposed form.”

“We refer to those agreements set out in the appendix to this letter (Agreements). We hereby confirm that, while [VB Football Assets is] a shareholder of [Blackpool FC], insofar as the Agreements conflict with the articles of association (as amended from time to time) of [Blackpool FC] then, as between you, [Blackpool FC] and [Segesta], the terms of the Agreements shall prevail to the extent permitted by law.”

“…better that we make it two [directors] rather than three, [and] I suppose a solution is to make sure I am one of the two [directors] as chairman or in the event of a conflict [of interests] I nominate someone to chair the meeting in my absence. Two is better as it makes life at this end less complex as Dad and I can be a quorum without involving anyone else. There is no likelihood of things becoming any easier or a deal being reached. Can we make the change as described and get the notice [to shareholders] out please?”

“[if] the parties want to agree on something new, then you just agree on something new that you are happy with”

“to engage in such a quite complicated legal exercise, one needs to be willing to collaborate. What worth is it that we spend an enormous amount of time redrafting something and then the other party simply says no, that is not interesting, we are not going to do it? The practice that the Oystons have always been doing with all our proposals”

“(1) If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of. (2) Without prejudice to the generality of subsection (1), the court’s order may- (a) regulate the conduct of the company’s affairs in the future; (b) require the company- (i) to refrain from doing or continuing an act complained of, or (ii) to do an act that the petitioner has complained it has omitted to do; (c) authorise civil proceedings to be brought in the name and on behalf of the company by such person or persons and on such terms as the court may direct; (d) require the company not to make any, or any specified, alterations in its articles without the leave of the court; (e) provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the company’s capital accordingly.”

“…is to confer on the court a very wide discretion to do what is considered fair and equitable in all the circumstances of the case, in order to put right and cure for the future the unfair prejudice which the petitioner has suffered at the hands of the other shareholders of the company…”

“Once unfair prejudice has been established, the judge is obliged to consider the whole range of possible remedies and choose the one which on his assessment of the current state of relations between the parties is most likely to remedy the unfair prejudice and deal fairly with the situation which has occurred. ‘The Court must do what is fair’. In carrying out this task, the court can have regard to the effect of its order on third parties (particularly creditors) and their interests, although the weight to be given to their interests will depend on the circumstances.” ii) The range of orders that can be made span the broad spectrum from: doing nothing (see, e.g. Antoniades v. Wong [1995] 2 BCC 682); to ordering a share purchase or “buyout” (generally, but not necessarily, of the shares of the petitioner), thus enabling a “clean break”; to more or less detailed regulation of the conduct of the company’s affairs. This third course involves a “bespoke” solution and runs the risk of perpetuating an impossible relationship of joint management. It has been adopted comparatively rarely – no doubt because “solutions” seeking to impose co-operation tend not to work precisely because co-operation is required – but examples are Sikorski v. Sikorski [2012] EWHC 1613 and Re Neath Rugby Ltd (No. 2) [2008] BCC 390, on appeal [2009] 2 BCLC 427. iii) When considering the appropriate remedy, the Court is not bound by the relief sought by the petitioner. In Re Neath Rugby Ltd (No. 2) [2009] 2 BCLC 427 at [85], the Court of Appeal stated: “It was suggested that on a petition under section 994 the court cannot award relief that the petitioner does not seek. In the present case, the correctness or otherwise of that proposition is academic, since ultimately, when it was apparent from the judge’s judgment that Mr. Hawkes would not be able to buy out Mr. Cuddy, he agreed to the order proposed by the judge being made on his petition. On any basis, therefore, the judge had power to make the order he did. But I would not want it to be assumed that that proposition represents the law. The terms of section 996 are clear: once the court is satisfied that a petition is well-founded, ‘it may make such order as it thinks fit’, not ‘such order as is sought by the petitioner’…”

“Mr. Chivers also submitted that the judge wrongly took into account the matters to which he referred in para [291](iii) and (iv) of his judgment. He submitted that only the effect on shareholders of Neath and the shareholders in that company are relevant when the court makes an order under section 996. I reject this submission. If upheld, it would mean that the interests of the creditors of the company could not be taken into account. Their interests are clearly relevant, and may be decisive in deciding what order should be made under the section. I do not see why the court should close its eyes to the interests of others, and the effect of any order made under section 996 on them, although of course the weight to be given to their interests will depend on the circumstances…”

“…It is, of course, the case that in deciding what relief to grant on a petition under section 994 the court is not adjudicating on a “contest of virtue”

“My clients have asked me to update you on the following developments that have occurred since the trial was adjourned in case they have any impact on your judgment:- 1. On 23 August 2017, [Blackpool FC] received a letter from Mr. Belokon dated 22 August 2017 giving notice of his resignation from the board. I am instructed that my clients were told by the English Football League that such resignation followed discussions between the Football League and Mr. Belokon and Clifford Chance [VB Football Assets’ solicitors] concerning the implications as regards his eligibility to continue as a director of a football club playing in the English Football League of his recent conviction in Kyrgzstan for money laundering offences and fraud. 2. I am instructed that my clients have recently been told by the English Football League’s in-house solicitor that the League has now decided that Mr. Belokon should, in view of that conviction, be disqualified from acting as a director of a football club playing in the English Football League.”