Belokon v Oystons: '˜It seems to me a stringent plan of payment is necessary in order to concentrate the mind' - Judge
It was another explosive day in court in the ongoing saga between the Oyston family and Latvian millionaire Valeri Belokon. Here is the account of what happened at London's High Court yesterday
Owen Oyston and his son Karl failed at London’s High Court in a bid to spread payment of millions of pounds in respect of their “illegitimate” asset stripping of Blackpool Football Club over the next year.
Instead one of the country’s top judges at London’s High Court ordered them to pay the outstanding £25m by the end of May.
Alan Steinfeld QC, counsel for the Oystons, had told Mr Justice Marcus Smith that there had been “significant interest” by potential purchases of the club.
In the circumstances he argued that the court should allow the Oystons more time to sell in order to complete the £31m pay off they were ordered by the court earlier this year to make to minority shareholder Valeri Belokon.
Mr Steinfeld added that the Oystons only discovered last Friday that the club was legally registered as a community asset in 2014.
This gives organisations, such as Blackpool Supporters’ Trust, six months to put together a bid for the club before it can be sold on the open market.
That, said Mr Steinfeld, could hold things up.
He told the High Court there had been “significant interest” from potential purchasers but he could not disclose any information about this because it was confidential.
The value of the club, he said, would be more than enough to meet what the Oystons’ had to pay following November’s defeat in an action brought by Mr Belokon, he said. An indicative value of the club could be given at the end of this week, he added.
The Oystons have to buy back the Latvian millionaire’s shares after Mr Justice Marcus Smith ruled they had “illegitimately stripped” Blackpool FC of assets after it was promoted to the Premier League in 2010.
He found that the Oystons paid £26.77m out of the club to companies they owned which fundamentally breached their duties as directors and unfairly prejudiced Mr Belokon.
Mr Steinfeld said some property assets had been valued, between £11.5m and £14m - including the nearby Travelodge hotel.
He asked that the injunction freezing Oyston Group’s assets be varied so it only included those assets whose value was sufficient to meet the judgement sum so that normal business activities could be resumed.
Mr Steinfeld accepted that Mr Oyston had raised a loan of £5m, rather than using cash in their bank accounts, to help meet the first £10m payment on December 4 without gaining prior permission of Mr Belokon.
But he argued that this was not a breach of the freezing injunction because Mr Belokon’s advisers had unreasonably withheld their consent.
The court heard that using cash would have affected the Oyston Group’s cash flow and could have forced it into administration.
That would have made redundant 295 staff at the club and hotel, plus 50 others employees in the group’s different companies.
Mr Steinfeld told the court that Mr Oyston felt it would be “ridiculous” to use cash which could lead “to the imminent bankruptcy of the business” rather than to raise the money.
Although they had £10m in assets at the time they claimed they needed that for cash flow to stave off possible “bankruptcy”.
Nevertheless. the judge ruled the injunction had been breached by the Oystons securing that loan secured on Home Farm and their Travelodge without consent.
However, he retrospectively approved that move.
He accepted the group needed cash flow and said that the £3.1m in its bank accounts as at December 4 should be used as “working capital”.
He continued: “The freezing order can be tightened so there can be no question of any charging, or selling of any assets save in order to discharge the obligations they owe to Mr Belokon.”
The freezing order remained, said the judge, and they had to notify Mr Belakon within 24 hours of any payments made out of any of those accounts.
He also raised a question mark over the solvency of the Oyston Group saying that very “loose information” had been provided to either the court or Mr Belokon.
“One has to contemplate the possibility that the group is not solvent,” he said.
Mr Steinfeld said currently there was £2.1m cash in the Oyston Group and most of its spending financed the football club.
“The football club runs out of cash at the end of March,” he said.
He added that properties Stanley Farm, Queens Square and Oyston Mill were intended to go into public auction.
He said the football club assets, include the Travelodge, is in the course of very advanced negotiations with an interested party.
If those negotiations were successful he said they would result in an amount in itself which would be sufficient to cover the balance outstanding.
Mr Belokon’s barrister Andrew Green QC submitted that the Oystons had not provided any of the information requested at the last adjourned hearing on November 29 and had been given ample “latitude” which should now come to an end.
Their cash flows had no supporting evidence, not enough asset valuations had been provided and no marketing proposal put forward, he said.
He continued: “So we say the £24m should be paid in six months with appropriate staged payments.”
Mr Green said he was concerned that any money raised might be used to simply “prop up Oyston businesses” and that they “take an extremely lackadaisical attitude to selling properties”.
“Not one property has yet been sold.
“It’s an indicator of their attitude to money that when it became apparent to us on December 4 they had paid £1,000 over the £10m they demanded the £1,000 be returned to them,” he said.
“That’s a rather telling indicator how they intend to prioritise cash however small the amount.
“So unless they are forced by the court date the petitioner, Mr Belokon, is always going to be at the bottom of their priorities so the court has to protect the petitioner.”
Mr Green said Mr Oyston had stated that selling assets to satisfy the court order would “attract huge tax demands”.
He continued: “There’s no proper explanation given about tax demands, which properties will attract these unwelcome tax demands and why does that have any implications for cash flows.
“It may be suggested there’s been some spicy tax scheme which was entered into for some of these properties and perhaps on the sale the tax position will be in excess of the sale proceeds.
“We don’t know but on the face of it, it’s very bizarre and unexplained.”
Mr Green described paperwork as a “last minute chaotic mess” which was unreliable and “invariably wrong”.
He said that on November 29 the Oystons said they could not pay £10m by December 4 but added: “Yet lo and behold it has been paid.”
Concerning the £5m loan, Mr Green said: “The application was sought on Friday December 1, one working day before the £10m was due.
He asked us to consent to three different loans to three different companies in three different amounts secured over different assets.
“So to suggest we acted unreasonably is a great liberty.”
The barrister commented that any court order must be specific.
“It doesn’t matter how many times these people are told they simply cannot do what they are told.”
Mr Justice Marcus Smith, in his ruling, commented on the “dearth of information” being passed between the parties and that there was no marketing plan.
He said he was not saying it was deliberate withholding of material and he accepted the Oystons were under significant pressure and had a great deal of work to cope with. He could not accede to Mr Steinfeld’s application that time to pay should be “unfettered”.
They needed to be given specific targets and timetable.
Describing their evidence as “woeful”, he ordered the Oystons to pay another £10m by 4pm on January 31, and two lots of £7.5m by March 30 and May 31.
He added: “The evidence has been unsatisfactory indeed. I can have very little faith in the cash flow projections they put together.
“I have no clear understanding of the future financial needs of the Oyston Group. I have very little understanding of the assets within the group save for repeated assurances that they are both liquid and valued beyond the extent of the sums due.”
He continued: “Indeed I cannot be sure even about the insolvency of the Oyston Group.
“I have been told about valuation of the assets and about cash flows and about credit obligations and I am told assets exceed debts but the material I have I am sorry to say is woefully inadequate.”
The judge said he had to ensure that paying was a priority.
The deadline of December 4 had proved effective.
“It seems to me a stringent plan of payment is necessary in order to concentrate the mind.”
The Oystons are currently seeking leave to appeal the original court decision.
In addition to his order he also awarded costs against the Oystons for the last two hearings, totalling £120,000.