VB Football Assets v Blackpool Football Club (Properties) Limited

The court found that the petitioner (VB Football Assets) had established unfair prejudice under section 994 of the Companies Act 2006. The judge concluded that a non-contractual "gentleman’s agreement" existed between Mr Belokon and Mr Owen Oyston, under which VB Football Assets was to be treated as an equal partner in Blackpool Football Club pending formalisation. The majority (the Oyston side) effected a number of substantial payments out of the club and took management decisions to the exclusion of the petitioner, including payments characterised by the court as disguised dividends (notably payments in respect of Protoplan, the Travelodge transactions and a large payment to Zabaxe), and changes in governance. Those acts and omissions were held to be unfairly prejudicial to the petitioner’s interests.

Applying section 996, the court ordered a buyout of VB Football Assets’ entire financial interest in Blackpool FC, on terms designed to produce a clean break: the respondents were ordered to purchase the petitioner’s interest for £31.27 million, subject to the usual procedural matters and any submissions invited on a late football-league-related development noted by the judge.

The petitioner, VB Football Assets, acquired a 20% stake in Blackpool Football Club in 2006 under a written subscription agreement and related loan agreements (the "Subscription Agreement" and two "Vlada" loan agreements). The parties disputed whether those written documents were supplemented by an oral non-contractual "gentleman’s agreement" under which the petitioner would ultimately obtain parity of shareholding and equal management rights once tax considerations permitted.

Nature of the claim: the petitioner sought relief under section 994 Companies Act 2006, alleging that the affairs of Blackpool FC had been conducted in a manner unfairly prejudicial to its interests by (i) substantial and improper payments out of the club (and failure to pay dividends), (ii) exclusion from management and information, and (iii) an unfair alteration of the company’s articles of association.

Issues framed:

• Whether the petitioner established unfair prejudice within the meaning of s.994;
• Whether the written agreements were the whole agreement or whether a wider oral understanding existed;
• Whether particular payments (including a £4.2m Protoplan payment, Travelodge payments and an £11m payment to Zabaxe) were improper or amounted to disguised dividends;
• Whether the petitioner was unfairly excluded from corporate management; and
• What relief (if any) was appropriate under s.996.

Court’s reasoning and findings: The judge made extensive factual findings from documentary and witness evidence. He found that, although the formal written documents did not give parity, the parties had reached an informal gentleman’s agreement (because the tax position made a lawful structure impossible at the time). After Blackpool’s promotion to the Premier League, the majority shareholders (the Oyston side) proceeded to make payments out of the club and to make management and governance decisions without the petitioner’s consent or participation. Some transactions were given defensive characterisations by the majority but were either undocumented, uncommercial, or served principally to benefit the majority (and in effect constituted disguised dividends). The court held that those acts were both prejudicial and unfair to the petitioner’s interests, and that the petitioner had standing and a recognised equitable expectation founded on the parties’ dealings.

Relief and wider context: The judge considered remedies, expert evidence on valuation and proportionality. Having regard to third-party and company interests, and to subsequent developments identified in correspondence, the court ordered a buyout of the petitioner’s interest: the respondents were to purchase the petitioner’s entire interest for £31.27 million. The judge noted practical and public-law limits to bespoke remedies and emphasised that the order sought a clean break while addressing sums already paid or subject to other proceedings.

The petition under section 994 Companies Act 2006 is well founded. The court held that the respondents conducted the affairs of Blackpool Football Club in a manner unfairly prejudicial to the petitioner by making substantial payments out of the club, excluding the petitioner from management, and changing governance. The court ordered that the respondents purchase the petitioner’s entire interest in Blackpool FC for £31.27 million (a buyout), providing a clean break and unwinding rights as necessary; this order follows the conclusion that the petitioner had a legitimate equitable expectation (a "gentleman’s agreement") and that the listed payments were, in substance, discriminatory and unfairly prejudicial.