UTB LLC v Sheffield United Limited

This first-instance judgment concerned disputes arising from an Investment and Shareholders' Agreement dated 30 August 2013 (the "ISA") governing Blades Leisure Ltd and its subsidiary Sheffield United Football Club (SUFC). The principal legal questions were whether the company was a quasi-partnership, whether an obligation of good faith or other terms should be implied into the ISA, whether a sale contract arose on service of a call option counternotice, whether that contract could be avoided for mistake, and whether UTB/its advisers had acted unlawfully or in an unfairly prejudicial way under section 994 Companies Act 2006.

The judge held that Blades was not a quasi-partnership and that there was no general implied obligation of good faith binding the shareholders across the duration of the ISA; however the court did imply a narrower contractual obligation not to wilfully obstruct or hinder the operation of clause 9.1.12 (the obligation to procure exercise of the property call options) when a shareholder deliberately takes steps to acquire super-majority control under clauses 10 or 11. A valid contract of sale and purchase of SUL’s shares arose on UTB’s counternotice of 26 January 2018, but completion was required for UTB to have "acquired" the shares for the specific purposes of clause 9.1.12. UTB’s scheme to avoid triggering clause 9.1.12 failed; Jones Day's letter of 31 January was an anticipatory breach of the ISA, and SUL validly terminated the ISA on 6 February 2018. Nevertheless the clause 11 sale contract remained enforceable and the court ordered specific performance in favour of UTB; consequential claims in conspiracy, mistake and unfair prejudice were dismissed.

Background and parties: The dispute arose out of a 2013 ISA under which UTB LLC invested in Blades Leisure Ltd (the holding company of Sheffield United FC) and each of UTB and SUL held 50% of the shares. The ISA contained deadlock and buy‑out mechanisms (clause 10) and yearly call option windows (clause 11), and a protective clause (clause 9.1.12) requiring SUFC to exercise property call options on any shareholder acquiring 75% or more.

Relief sought and procedural posture: UTB sought specific performance of a contract of sale and purchase which arose after UTB served a counternotice on 26 January 2018 accepting SUL’s call option offer; SUL sought declarations that that contract was void or avoidable, damages for breaches and for conspiracy to harm SUL, and, by petition under section 994 Companies Act 2006, relief for conduct unfairly prejudicial to its interests. The issues were tried at first instance over an extensive multi-day hearing in 2019.

Issues framed: (i) whether Blades was a quasi-partnership or whether the ISA should be supplied with an implied general duty of good faith; (ii) interpretation and operation of clauses 10, 11 and 9.1.12; (iii) whether service of the counternotice created an enforceable contract and, if so, whether that contract was avoidable for mistake or otherwise unenforceable; (iv) whether UTB and its advisers conspired to use unlawful means or acted in a manner unfairly prejudicial to SUL; and (v) whether specific performance should be granted.

Court’s reasoning (concise): The judge found the ISA to be a detailed, professionally drafted contract that allocated rights and exit mechanisms between commercial parties; an entire‑agreement clause and the contractual architecture weighed strongly against treating Blades as a quasi‑partnership or implying a broad duty of good faith. The court followed authorities recognising a narrow category of "relational" contracts where good faith may be implied, but held the ISA was not such a contract in that broad sense; the parties expressly provided for dispute resolution, deadlock and buy‑out mechanisms and had allocated specific rights (including UTB’s rights under clause 11). Nevertheless the court read the ISA as implicitly forbidding a shareholder who elects to bring about conditions for clause 9.1.12 to then wilfully obstruct the reunification of the property assets that clause 9.1.12 plainly contemplated.

The counternotice of 26 January 2018 created a binding sale contract (subject to completion). The judge held that a buyer under such a contract becomes the equitable owner but for the specific operation of clause 9.1.12 the acquisition for triggering that clause occurs on completion (payment and transfer), so completion would have obliged UTB to cause SUFC to exercise the property call options. UTB’s last‑minute devices (incorporation/transfer to UTB 2018 and sub‑sales/puts/calls) did not succeed in avoiding that result: transfers lacked the necessary underlying transaction and/or would result in a resulting trust or otherwise leave UTB bound. Jones Day’s letter of 31 January seeking to restrain directors from exercising option notices was an anticipatory breach and SUL validly terminated the ISA on 6 February 2018; however termination of the ISA did not discharge the separate sale contract which remained enforceable.

The court rejected claims of unilateral mistake sufficient to void the sale contract, conspiracy to cause loss by unlawful means, and unfairly prejudicial conduct under section 994: the evidence did not show causation or loss of the sort required and, in any event, the disputed commercial steps were for the most part lawful exercises of contractual rights. The court ordered specific performance of the sale contract in favour of UTB and dismissed SUL’s claims; the property call options were subsequently exercised and SUFC required to purchase the assets in accordance with the ISA mechanics.

This is a first-instance judgment. The court held that UTB may enforce the share sale contract that arose on service of the counternotice (26 January 2018) and granted specific performance of that contract. The court rejected SUL’s submissions that Blades was a quasi‑partnership or that a broad implied duty of good faith bound the parties; it did imply a narrow term forbidding wilful obstruction of clause 9.1.12. UTB’s attempts to avoid clause 9.1.12 failed, Jones Day’s pre‑completion letter was an anticipatory breach and SUL validly terminated the ISA, but the separate sale contract remained enforceable. Claims in unilateral mistake, unlawful‑means conspiracy and unfair prejudice under s.994 Companies Act 2006 were dismissed.