UTB LLC v Sheffield United Ltd [2018] EWHC 2779 (Ch)

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Case No BL-2018-000281

[2018] EWHC 2779 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURT

OF ENGLAND AND WALES

BUSINESS LIST (Ch)

Venue Rolls Building, Fetter Lane

London EC4A 1NL

Date Wednesday 3 October 2018

Before

MR JUSTICE FANCOURT

B E T W E E N:

Between

UTB LLCClaimant/Respondent

SHEFFIELD UNITED LIMITEDDefendant/Applicant

MR A. GLEDHILL QC and MR T. MOUNTFORD (instructed by Jones Day) appeared for Claimant/Respondent.

MR P. DOWNES QC and MISS E. SAUNDERSON (instructed by Shepherd and Wedderburn LLP) appeared for Defendant/Applicant.

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J U D G M E N T

[1]This is an application by Sheffield United Limited (which I shall call ‘Sheffield’) by an application notice dated 2 July of this year for an order that UTB LLC (which I shall call ‘UTB’) pay it its costs of a previous application that was only formally issued on 1 May this year but was heard by Hildyard J on 30 April. I will call that application the “funding application”. Notice of the funding application, returnable on 30 April, was first given by Sheffield to UTB by email at about 7.30pm on Saturday, 28 April, together with a draft order and draft evidence in support of it.

[2]The funding application was stood over by Hildyard J by consent on the basis of mutual undertakings of the parties, to be heard on 14 May, but by 9 May the parties had reached agreement and were able to agree that no further order should be made on the funding application except that the costs of it be reserved.

[3]The circumstances of the funding application were touched on in the hearing of another more substantial application that I heard on 20 and 21 June this year. I gave a judgment on 29 June. It was following that judgment that Sheffield issued this costs application. The detailed background to the dispute between the parties is set out in my judgment of 29 June, which is

[2018] EWHC 1663 (Ch)

, and it is not necessary to repeat it in this judgment.

[4]Sheffield argues that UTB should pay it its costs of the funding application on the basis that it substantially succeeded on the application, in that UTB eventually agreed a form of relief that Sheffield was principally seeking and that it was reasonable in the circumstances, as they were on Saturday 28 April, in the light of what had happened and not happened in the previous seven days, for notice of the application to be given to UTB and for the application to be pursued on 30 April.

[5]UTB argues that it should not have to pay Sheffield’s costs because Sheffield did not substantially succeed on its application and it was unnecessary and unreasonable for Sheffield to make and/or pursue the application that it did. This is on the basis that UTB had previously indicated its agreement to the terms on which the application was eventually disposed of and indicated, late on the evening before the hearing, that it was prepared to consent to the interim funding solution that Sheffield had indicated it would accept.

[6]The application was made on the basis that it was just and convenient that Blades Leisure Limited (‘Blades’) should be provided with funding of £2 million to meet urgent working capital needs and that terms should be provided upon which the parties must provide that funding. The form of order sought was somewhat complicated because it comprised two alternative groups of orders and the application concealed that a third temporary alternative had been offered. The basis for the order sought on the application was an undertaking by Sheffield to remit either £1 million, as a loan, or £2 million, as subscription money for share capital, to Blades’ bank account, the amount depending on whether UTB took up the first alternative. On that basis, if UTB paid £1 million into Blades’ bank account by one o’clock on 30 April, the payment was to be a loan repayable in the event that Sheffield succeeded in the underlying proceedings, and UTB and His Royal Highness Prince Abdullah were to undertake to indemnify Sheffield if Blades was unable to repay Sheffield’s loan of £1 million in the event that UTB succeeded in the underlying proceedings. There would be an order that Blades should convene a general meeting at which it would resolve to borrow the £2 million and use it to repay a loan of £1.4 million, payable to Charwell Limited (the ‘Charwell loan’). This was to be paid on or after 30 April 2018.

[7]In the event that UTB did not pay the £1 million within the stipulated time, the alternative order sought was to the effect that Sheffield should provide £2 million to Blades and in return Sheffield would then have control over just over 2 ½ million of UTB’s shares in Blades until further order of the court. Consequently, control of Blades would then be enjoyed as to nearly sixty percent by Sheffield, with the £2 million subscribed to be used similarly to repay the Charwell loan. Sheffield was also to be entitled, in those circumstances, to nominate two new directors of Blades, thereby giving it board control too.

[8]The hidden alternative, not referred to in the draft order or application notice but described in the witness statement of Philip Sewell in support of the application, was that Sheffield and UTB would cause Blades to exercise its control of its subsidiary, Sheffield United FC (which I shall refer to as ‘FC’) to provide a £2 million loan to Blades for the purpose of repaying the Charwell loan, itself repayable by 31 May out of loans to be made later by Sheffield and UTB. This alternative had been first identified by Sheffield in a letter written by its solicitors to UTB’s solicitors, Jones Day, on Friday afternoon, 27 April, at 3.19pm, following an indication from a finance officer of FC that FC had substantial cash reserves available. In the event, that was the alternative that the parties agreed to use at the hearing on 30 April, with the loan from FC then being repaid out of loans made by the shareholders seven days later.

[9]As explained in my judgment of 29 June, the parties have fallen out badly and do not trust each other. As a result, what should have been a straightforward injection of working capital into Blades by both shareholders, which was agreed in principle over the weekend of 21 and 22 April, was not agreed and prepared as expected during the following week. In the substantial evidence in support of and in opposition to this costs application, both parties have to an extent indulged in attributing bad motives to each other and casting doubt on their good faith and seeking to draw adverse inferences from their conduct. The inferences to be drawn from the facts, as well as certain of the facts themselves, were in dispute.

[10]Witness statements were made by the transactional and litigation solicitors involved in the matter, but not by the main protagonists for each of the parties. It is, of course, impossible on an interim application to reach factual conclusions on the probity and honesty of these witnesses and those for whom they were acting or, indeed, on many of the disputed facts. Neither is it appropriate to do so, given that a lengthy trial will take place in May next year and it is clear that the making of the Charwell loan, arrangements for its repayment and the funding of Blades generally will feature in the trial. In dealing with the costs application I must, therefore, confine myself to the uncontested facts in evidence before me, except where a factual inference from those facts is irresistibly clear.

[11]The starting point under Part 44.2 is to identify the successful party on the funding application, given that it was brought before the court, issued and eventually compromised by the parties. Sheffield says that it was the successful party on the basis that the application was made in order to secure £2 million of working capital for Blades by means of shareholder loans, one half from each of the two shareholders, and that is what was agreed after an interim arrangement whereby FC lent the £2 million to Blades for a short time. Once the funding agreement had been made on 7 May, the funding application fell away by agreement.

[12]UTB contends that it, and not Sheffield, is the successful party in that the order made by Hildyard J on 30 April was not in the form of the order sought by Sheffield, either the form originally sought or the revised form circulated on the Sunday evening. Instead, the order was simply for directions with both parties undertaking to procure that FC should lend £2 million to Blades. UTB also points out that Sheffield did not succeed in getting an indemnity from UTB or from the Prince in relation to the repayment of its loan, as it sought to do it in its draft order.

[13]In my judgment, Sheffield substantially succeeded on its application and is to be treated as the successful party. The funding application was not disposed of by the order of Hildyard J. It was stood over to be argued, if necessary, on 14 May. The parties agreed interim relief by way of mutual undertakings to ensure that Blades had the necessary funding until then. The funding application did not need to be heard on 14 May because by then the parties had agreed a funding agreement under which each of them loaned Blades £1 million, substantially on the terms that Sheffield had been seeking. UTB’s argument wrongly seeks to compare what Sheffield sought with what was ordered on 30 April, whereas the correct comparison is between what was sought and what was obtained by agreement on 7 May, which made the further hearing of the funding application unnecessary.

[14]It is correct that Sheffield did not succeed in obtaining a guarantee from the Prince, which was only rather belatedly sought by Sheffield on Friday, 27 April, but in the event the parties agreed in the funding agreement to depart from their original understanding that contingent repayment of each party’s loan would be guaranteed by the other party and, under the funding agreement, only Blades itself has a liability to repay the loan of the unsuccessful party. The proposed guarantee of the Prince was, it seems to me, only ever a bit of icing on the cake that Sheffield was seeking. Sheffield did not succeed on its application for the right to subscribe £2 million of share capital and so gain control of Blades, but that was in substance only ever an alternative remedy if UTB chose not to make a loan of £1 million. In the event, UTB did choose to make that loan. Further, to the extent that temporary relief, by way of undertakings, was obtained on 30 April, this was in line with what Sheffield had proposed in the draft evidence of Mr Sewell, that was served with notice of the funding application. UTB did not succeed in resisting Sheffield’s application to any substantial extent. It agreed to the principal relief that Sheffield was seeking.

[15]UTB’s stronger argument is that the funding application was either unnecessary in order to provide Blades with a £2 million cash injection or to repay the Charwell loan and, therefore, was unreasonably brought or was only required on account of Sheffield’s own culpable conduct in the week preceding the issue of the application. On that basis, and on the basis that UTB says that it had previously offered the relief that Sheffield obtained, UTB argues, in effect, that the court should depart from the general rule by virtue of rules 44.2(2), (4)(a) and (4)(c) of the Civil Procedure Rules and not award Sheffield any of its costs despite its substantial success on the funding application.

[16]To address those arguments it is necessary to delve a little into the factual background to the funding application. Prior to 20 April this year Sheffield’s position had been that despite the terms of the Charwell loan agreement and the Charwell subscription and novation agreement, Blades was not liable to repay £1.4 million to Charwell. On 19 April the CFO of Blades and FC, Simon Ratcliffe, had a meeting with the Prince and UTB representatives, at which he told them that Blades would not be able to repay the Charwell loan since Sheffield was refusing to inject further capital and that there was potential for Blades to be pushed into insolvency, despite having some £3 million in the bank at that time.

[17]As a result, Mr Giansiracusa of UTB wrote to Mr McCabe and others at Sheffield on 20 April urging them, on that basis, to join with UTB in injecting £1 million each into Blades and pointed out the serious consequences of not doing so. He proposed a directors’ meeting on 23 April, the following Monday, to discuss shareholder loans with a view to repayment of the Charwell loan on 30 April. Mr McCabe’s initial reaction was the matter was not very urgent but, on reflection later, on 21 April, he proposed that a board resolution of Blades should be passed to make every effort to raise £2 million of capital to meet ongoing commitments and that then UTB and Sheffield could meet to discuss how the injection of capital would be structured. He proposed mirror loans of £1 million each, guaranteed by the other side, with repayment by the winner of the litigation to the loser and, in the event of deadlock after the litigation, that the loans be converted into equity. He stated that there would have to be conditions regarding the use of the funds, “i.e. the repayment of the Charwell loan.” At that stage, therefore, Sheffield was accepting that the Charwell loan was to be repaid by Blades.

[18]Mr Giansiracusa replied on 22 April, agreeing on behalf of the UTB directors to the proposed board resolution and the loan structure that Mr McCabe had suggested. A draft would be prepared by UTB’s solicitors, Jones Day, to be discussed at a telephone meeting at eleven o’clock on Monday morning. The initial drafts of the board resolutions, exchanged on the Monday, also supported the conclusion that Sheffield was now accepting that the Charwell loan was to be repaid by Blades. The drafts referred expressly to £1.4 million being owed by Blades to Charwell and due for repayment on 30 April and that a condition of the loans would be that the funds should be used to repay the Charwell loan. The actual draft resolution itself was in more general terms, speaking of efforts to raise £2 million by way of equity or loan capital to meet ongoing commitments of Blades.

[19]Matters then started to take a different turn at 3.19pm on the Monday, when a further redraft from Sheffield’s side removed the references to the amount outstanding from Blades to Charwell (though not all references to a Charwell loan) and the reference to the use of the loan monies to repay the Charwell loan. That draft caused no initial consternation for Jones Day, who thought it was just a bit of “wordsmithing” by Sheffield’s lawyers, but Jones Day requested that an express reference to raising £2 million in order to meet Blades’ obligation to repay the Charwell loan be included in the draft resolution.

[20]Shepherd & Wedderburn replied that they would prefer to see the existing “bland” version retained and could not see why it was desired to introduce reference to that specific commitment. When Jones Day explained that the purpose of the injection of capital was to repay the Charwell loan and asked whether Shepherd & Wedderburn could explain why it was objectionable to include that reference, the terse response came back:

“No. Our position is as stated.”

This has been referred by the parties as the “curt email” and I shall do likewise.

[21]At that stage the lawyers at Jones Day say in their evidence that they were caused real concern, not just by the objection to any express reference to the repayment of the Charwell loan but by Shepherd & Wedderburn’s refusal to explain why they objected to it or to engage further. It appeared to Jones Day, in the light of the curt email, that Sheffield may be attempting to resume its previous position that Blades was not liable to repay the Charwell loan. They were anxious to avoid the possibility of the loans being made and then Sheffield objecting to use of the funds to repay the Charwell loan. They were only willing to lend £1 million if the monies would be used to repay the Charwell loan.

[22]Mr Downes QC, for Sheffield, frankly accepted that the validity of the Charwell loans was an issue in the underlying proceedings and that Sheffield was concerned not openly to make any acknowledgement of the validity of that loan. But this was not explained to UTB at the time, on 24 April.

[23]As a result of the curt email, communications between the parties’ lawyers ceased. UTB say that they regarded what happened on 24 April as a breakdown in negotiations but, nevertheless, their client instructed them to proceed with drafting a loan agreement, presumably in the hope or expectation that matters might be resolved. Sheffield’s lawyers say that they considered that there was no breakdown on the wording of the board minute, just an issue that needed to be worked out at the same time as, but not prior to, the agreement on the loan documents.

[24]In support of their case that the curt email caused them real concern, UTB rely on evidence of a conversation between Mr Giansiracusa and a Mr Bettis, a Sheffield nominated director of Blades, which took place on the evening of 24 April and was reported in detail in an email of Mr Giansiracusa to Mr Bettis on the following day. It says that the intransigence of Sheffield’s lawyers on the drafting of the resolution caused UTB:

“… understandable concerns that [Sheffield] intends to challenge the validity of the Charwell Loan or otherwise obstruct its discharge by [Blades]. You confirmed to me last night that indeed Kevin McCabe, without notice or reason, had decided that [Blades] was not bound by the Charwell Loan ...”

[25]Despite Sheffield’s carefully constructed and argued case that UTB was not at all troubled but wanted there to be a crisis with the repayment of the loan for its own tactical reasons, I accept that the curt email did cause UTB anxiety. It is logical that it might do so given the background and there is contemporaneous evidence that appears to support such a conclusion. I cannot reach a conclusion on this application that the professed concerns of UTB about prompt repayment of the Charwell loan were merely colourable or were disingenuous and that UTB had some other scheme or motive in mind for its own advantage. These matters will no doubt be explored with the witnesses at trial.

[26]What is very odd is that between Tuesday morning, 24 April, and Friday morning, 27 April, neither side communicated further with the other, though it is apparent that both were in fact taking steps (without informing the other) towards settling the new loan documents and repaying the Charwell loan on 30 April. I have no doubt that the reason for this, on both sides, was the considerable hostility and distrust that each party has for the other. Neither was willing to give any ground and each suspected the other’s motives.

[27]Both these parties have been obdurate in some respects in their conduct of this litigation and unwilling to give ground, even when a reasonable solution to funding difficulties has been within relatively easy reach. I refer in this regard to my judgment of 29 June this year. Both parties might have made conciliatory or encouraging communications from 25 April onwards but neither did so. Although one might have expected UTB to be more eager to resolve matters, it believing that the negotiations had broken down as a result of the curt email, it in fact made no attempts to do so at all. It was Sheffield that blinked first, sending to UTB at 10.28 on the Friday morning a draft loan agreement, albeit one containing guarantees given by UTB and the Prince, together with its confirmation that its solicitors held £1 million ready to be lent to Blades.

[28]Importantly, the draft loan agreement that was sent stated in terms that the loan was to be used principally to repay the £1.4 million owed to Charwell. Sheffield was therefore clearly backing down on the position that it had adopted in relation to the draft board minute on the Monday, though perhaps seeking to bypass that precise issue by means of the terms of the loan agreement itself. But even then UTB did not react. Sheffield’s solicitors sent a further letter that afternoon at 3.19pm urging UTB to reply quickly, confirming that it was still willing to lend £1 million as previously agreed in principle and offering an olive branch of a temporary loan from FC pending agreement on the drafting of suitable loan agreements. It asked for confirmation that matters would be actioned by UTB in time for repayment of the Charwell loan on the following Monday. It also threatened that failing any response Sheffield might have to take matters to court early the following week. Even then Jones Day did not reply.

[29]UTB says, though there is no evidence at all from Mr Giansiracusa, that the letters were not replied to by Jones Day because they had no instructions from Mr Giansiracusa, Friday being a weekend day in Saudi Arabia where Mr Giansiracusa, who is a partner of Jones Day, was working at the time.

[30]I reject the explanation, which was not properly established by evidence in any event, that the weekend in Saudi in some way prevented Mr Giansiracusa, or Jones Day, from replying to the letters of Friday, 27 April. The excuse of the early Saudi weekend is, in my judgment, a mere fig leaf for the desire of UTB to be obstructive. In this connection, I consider that the absence of any evidence from Mr Giansiracusa is highly material and conclude that there is no proper explanation that he could give for failing to respond. When subsequently, on Saturday evening, Sheffield served on Jones Day the draft application and supporting evidence, Mr Giansiracusa was easily contacted by email and able to respond to his colleagues. I consider that UTB was playing hard ball with Sheffield and its lawyers, determined to make matters difficult for Sheffield, though it may be – and I do not need to decide – that it had no intention to cause any default by Blades on its obligations. Indeed, it was clear by Friday, 27 April that FC had additional capital at the bank and was in a position to lend money to Blades in the short term, something that by agreement between UTB and Sheffield, but only by agreement between them, could be actioned very quickly if necessary.

[31]But what caused UTB to act quickly was the service on its solicitors of draft proceedings on the Saturday evening. By Sunday morning UTB had its draft loan agreement in final form and sent this to Shepherd & Wedderburn at 13.04. The email said that UTB was willing to lend £1 million subject to agreement on the terms of a loan agreement and confirmed that Jones Day held £1 million in its client account.

[32]In the light of those factual circumstances and the limited factual findings that I have made, I return to the question of whether it was unnecessary for Sheffield to serve the draft application on UTB and pursue it, and whether it was unreasonable of Sheffield to act as it did in the light of UTB’s position.

[33]UTB says that the application was unnecessary for essentially two reasons. First, that UTB had always been willing to agree the loan structure (without any guarantee from the Prince) that Sheffield sought and which was eventually put in place. The second is that by the Friday it was clear that FC had sufficient funds to lend Blades the £2 million in the short term, so no relief was necessary. Indeed, it was in the end, and by agreement, FC that did provide the short term funding.

[34]In my judgment, it was Sheffield’s fault that the agreement in principle, reached on the weekend of 21 and 22 April, did not result in an agreed board minute by 24 April. For its own tactical reasons, Sheffield wished to avoid reference to a liability of Blades to Charwell and so tried to remove these from the draft minutes, even though repayment of the Charwell loan had been agreed between Mr Giansiracusa and Mr McCabe as the main reason for the further loan. Although the actual resolution itself had always been drafted in general terms, the express references elsewhere in the draft minute to repayment of £1.4 million of the Charwell loan by Blades on 30 April gave the previous drafts of the minutes a very different colour and meaning from which Sheffield was seeking to escape. Had the emails from Mr Sewell, late on 23 April and early on 24 April, not been sent the parties would, in my judgment, have agreed a board minute and proceeded to implement the loan agreements that week.

[35]Despite what Mr Bettis and Mr Birks may have thought and said to Mr Giansiracusa that week, Mr McCabe had not, in fact, reneged on the agreement in principle reached with Mr Giansiracusa the previous weekend. He was simply following his lawyer’s advice to try to avoid acknowledging the validity of the Charwell loan. Nevertheless, given the terms of the curt email and what had gone before, I find that UTB was justified in considering Sheffield’s position to be a threat and a matter of concern, because it gave the appearance that Mr McCabe was vacillating and it created a risk for UTB that the monies raised would not be able to be applied to repay the Charwell loan. However, one would have expected UTB to go back to Shepherd & Wedderburn and explain that, in order to tease out Sheffield’s true position, but they did not do so. They stood back and did not engage further.

[36]Both parties were, in my judgment, to some degree at fault in the stand-off that followed the curt email and which lasted until Friday, 27 April. Shepherd & Wedderburn proceeded to draft a loan agreement but not with the speed that, in the circumstances, was required. It was not ready until the Friday. In the meantime, there was no attempt to communicate with Jones Day. Jones Day’s draft loan agreement was finalised by Wednesday, 25 April, but Mr Giansiracusa did not authorise Jones Day to send it to Shepherd & Wedderburn until late on the Saturday. UTB was deliberately not engaging with Sheffield even though it knew that the Charwell loan would likely have to be repaid on the Monday. It was waiting for Sheffield to back down.

[37]In the circumstances, as they were on 28 April, with no apparent attempt by Jones Day to progress matters and no response by UTB or Jones Day to the 27 April letters, it was reasonably necessary for the draft application to be served by Sheffield on UTB. Sheffield could not afford to take the risk of not getting the matter before the court on the Monday. Given that Sheffield was effectively conceding on 27 April the point that had caused the blockage on 24 April, one would have expected UTB to reply quickly, even if in doing so they immediately rejected the new proposal that the Prince should stand as guarantor. Although UTB can say that it had effectively offered during the previous weekend, and on Monday, the terms that were eventually agreed, it had failed to do what it should have done between Tuesday and Sunday, namely to provide a suitable loan agreement or agree with Shepherd & Wedderburn that they would draft one, and confirm that it was willing to lend £1 million on the basis that the loan was to be used principally to repay the Charwell loan. Its unreasonable failure to do so is highlighted by its failure to respond to the Friday letters from Shepherd & Wedderburn. It only responded when it had been served with the draft application. By Saturday evening, therefore, UTB was giving the impression to Sheffield that it was unwilling now to document the loan structure that had been agreed in principle the previous weekend.

[38]As for the argument that FC could lend Blades the money so no application for relief was needed, there are two flaws in this argument. First, and principally, FC could only lend Blades the money on Monday if UTB agreed to pass appropriate resolutions of both companies, but by Saturday afternoon UTB was giving the impression of not agreeing. It had failed to agree, or even respond to, the proposal to this effect made by Shepherd & Wedderburn the previous day. Secondly, a loan from FC could only be a very short-term solution, as both parties were aware. Although a loan from FC, if agreed, would have taken the extreme urgency out of Sheffield’s application, there would still have been a need to pursue an order for the final relief by way of two £1 million shareholder loans if this was not agreed. Sheffield’s draft application made it clear, in the supporting evidence, that it was content with a short-term fix of a loan from FC if UTB agreed it.

[39]Accordingly, I conclude that Sheffield substantially succeeded on an application that it was reasonable in the circumstances for it to instigate on 28 April, but two questions remain. First, should any award of costs in its favour be ruled out or reduced because of its own responsibility for creating the impasse in the drafting of the board resolution? I have found that Sheffield was at fault in this respect. Second, did Sheffield unreasonably pursue the application after UTB’s indication on the evening of 29 April that it agreed the making of a loan of £2 million by FC pending agreement on the shareholder loans?

[40]On the first question, I consider that the costs recoverable by Sheffield should be reduced but not extinguished on account of its fault on 24 April. The crisis on Saturday, 28 April was not caused solely by Sheffield’s conduct on 23 and 24 April. Although it may be true that the crisis would not have happened without that culpable conduct, the crisis was effectively caused as much by UTB’s own unreasonable conduct after 24 April as by Sheffield’s original fault. Had UTB sent out its draft loan agreement on 25 or 26 April and reacted to the Friday letters from Shepherd & Wedderburn promptly and positively, as it should have done, then the application papers would never have been served. UTB was duty bound to respond promptly to the Friday letters because its own conduct since 24 April had contributed to the real urgency of the position by Friday, the working day before the day for repaying the Charwell loan. However, it did not do so because it wanted to play hard ball and create difficulties for Sheffield. Sheffield must also bear a share of the blame for not sending the first Friday letter earlier than it did.

[41]I consider that Sheffield’s costs should be reduced by fifty percent to reflect its partial responsibility for the need for the funding application.

[42]On the second point, UTB’s position at 13.04 on the Sunday was that it required Sheffield to sign its draft loan agreement, then supplied for the first time, and that on that basis the funding application would not be needed. Shepherd & Wedderburn responded that Sheffield was not prepared to withdraw the application until a concluded solution was arrived at. It was not until 8.21pm on Sunday that Jones Day confirmed their client’s consent to the suggestion that FC could make a loan to Blades. They suggested that that obviated any need for a hearing, but no draft resolutions of FC or Blades, or draft order with undertakings, were provided at that time. At 9.28pm on Sunday, Shepherd & Wedderburn replied, deprecating Jones Day’s last minute tactical approach, as they saw it, and suggested that the application could be disposed of by each side undertaking to make a loan, but reserved the right to seek to adjourn the application on terms that FC provide a short-term loan. Shepherd & Wedderburn said that on any view the matter should be recorded in a court order. At 11.08pm Jones Day invited Shepherd & Wedderburn to agree instead to the short-term loan by FC with each side reserving its position to future discussions on the form of any shareholder loans. Shepherd & Wedderburn replied the next morning that Sheffield was unwilling to proceed without making the application and adjourning it and, in the event, the parties agreed terms to that effect, undertaking to cause FC to provide short-term finance.

[43]In my judgment, given what had happened since the previous Friday, given that no explanation had been offered by Jones Day for the failure to respond to the Friday letters, and given that there were no agreed terms for either the FC finance or the shareholder finance, Sheffield was reasonable to pursue its application and obtain the agreed terms that it did rather than abandon its application late on Sunday evening with no agreed terms. Although on Sunday evening Jones Day said that it could confirm its client’s consent to the FC funding proposal, that proposal depended on board resolutions of Blades and FC, which in turn required the assent of the UTB directors. In other circumstances, of course, a solicitor’s confirmation of his client’s agreement in principle might be sufficient for an opposing party to withdraw his application but, in these circumstances, it was reasonable for Sheffield, at that very late stage, to bring the matter to court the next morning. In any event, by late on Sunday evening most of the costs would already have been incurred.

[44]In view of the way that UTB had acted, it was reasonable of Sheffield to want some protection in the form of an issued application, undertakings given to the court and the ability to bring the application back to be heard if necessary.

[45]Accordingly, for the reasons that I have given, I determine that UTB should pay Sheffield one half of its costs of the funding application.

LATER

[46]I have to assess summarily the costs that are claimed by Sheffield in relation to the funding application. The grand total that is claimed in the schedule of costs is £85,896.65.

[47]Two matters referred to in the schedule itself give me some concern about whether costs have been included in that schedule that are not properly referable to the application itself. The first is that the dates in relation to work undertaken by all the fee earners start from 5 April. The second is that in the schedule of work done on documents there is accepted to be a significant amount of time that relates to costs incurred on Shepherd & Wedderburn’s drafting of Sheffield’s own proposed loan agreement, which was drafted between Wednesday and Friday of the week in which the application was first intimated on the Friday. It seems to me likely, therefore, that some of the solicitors’ time costs that have been included here are not properly referable to the preparation of the funding application itself.

[48]So far as the loan agreement is concerned, Mr Downes has been able, with the assistance of the partner of Shepherd & Wedderburn sitting behind him, to identify particular times spent by transactional lawyers on work on Wednesday, Thursday and Friday of the week in question, which he fairly accepts is likely to be referable to the drafting of Shepherd & Wedderburn’s own loan agreement.

[49]In my judgment, even if those costs turned out subsequently to be costs wasted by reason of things that happened during the course of the application itself, that does not make them properly costs of or associated with the application and, therefore, those costs are not recoverable. The precise amount attributable to those hours spent can be calculated on the basis of the hours’ work identified and, in my judgment, it should be deducted.

[50]The rest of the costs spent on reviewing various facility agreements are more properly to be attributed to the costs incurred in settling the application because those costs were actually incurred at a time after the application was served on UTB, and the negotiation of loan agreements was the basis on which the parties then reached agreement. It seems to me that even if those costs would have been incurred in other circumstances, in actual fact they were costs of settling the application and, therefore, should properly be treated as costs of the application.

[51]That deals with the challenges to the work done on documents.

[52]So far as the other costs of the solicitors are concerned, that is to say attendances on client, opponents and counsel, it seems to me that some allowance ought to be made for the likelihood that some of those costs are attributable to periods of time before the funding application was properly in consideration. Mr Downes, again on instructions, has said that the application was only really properly in consideration in the sense of work being done on it from Friday onwards. In those circumstances, the costs incurred before then, even if they related to the subject matter that then became litigious, are not properly to be treated as the costs of the application.

[53]In those circumstances, doing the best that I can with very little material, I shall say that fifteen percent of the total costs in those categories of attendances on client, opponents and on counsel, should be deducted. Clearly the costs of attendance at the hearing itself are costs referable to the application and I am satisfied that counsels’ fees are also properly to be treated as costs referable to the application.

[54]That does not enable me to pronounce a precise figure for what is recoverable and work will have to be done on that. When that calculation has been done, then it is one half of it clearly that is properly payable by UTB to Sheffield. 55. __________ CERTIFICATE Opus 2 International Ltd. hereby certifies that the above is an accurate and complete record of the proceedings or part thereof. Transcribed by Opus 2 International Ltd. (Incorporating Beverley F. Nunnery & Co.) Official Court Reporters and Audio Transcribers 5 New Street Square, London EC4A 3BFTel: 020 7831 5627 Fax: 020 7831 7737 civil@opus2.digital This transcript has been approved by the Judge