Denaxe v Cooper

The Receivers sold a package of Denaxe's footballing assets together with VB's 20% shareholding in Blackpool Football Club (BFCL) following a court-sanctioned sale approved by Marcus Smith J on 5 June 2019. The central legal questions were whether the Sanction Order conferred immunity on the Receivers against Denaxe's subsequent negligence claim that the assets should have been marketed and sold separately to achieve a higher price, and whether Denaxe's claim was an abuse of process or otherwise precluded.

The court held that the Sanction Order engaged the same supervisory principles that apply when trustees or administrators seek the court's blessing for a "momentous" decision and that, once the court sanctioned the specific sale to a particular purchaser at an identified price, the Receivers enjoyed immunity in relation to complaints that the decision to enter that transaction was wrong. For the same reasons, and alternatively, Denaxe's principal claim was an abuse of process because Denaxe (and Mr Oyston) could and should have raised the argument at the Sanction hearing and chose not to do so.

The judge rejected the Res judicata argument but held it unnecessary because immunity and abuse of process disposed of the main claim. On the merits the judge considered the claim arguable but not sufficiently strong to survive the procedural bars. Limited secondary claims (intermeddling, alleged removal of an accounts computer) were not struck out but were ordered to be particularised and transferred to the county court.

Nature of the proceedings: Application by the Receivers to strike out Denaxe's claim for damages for breach of duty arising from the sale on 13 June 2019 of Denaxe's footballing assets (shares in BFCL, Bloomfield Road stadium, training ground and other property) and for reverse summary judgment on the Defence. Denaxe sought damages principally alleging the Receivers failed to obtain the best price by selling assets as a single package.

Background: Receivers were appointed by order of 13 February 2019. The Receivers marketed the footballing assets and, having negotiated a sale to Mr Sadler for £8.2m and obtained VB's application to vary a prior buy-out order, sought the court's approval of the proposed packaged sale. Marcus Smith J heard the Sanction Application on 5 June 2019, reviewed the marketing, rival bids and valuations and authorised the sale to Mr Sadler; Denaxe did not oppose the application at that hearing.

Issues framed by the court:

• Whether the Sanction Order conferred immunity on the Receivers to prevent a later challenge (in negligence, breach of duty or otherwise) to the decision to sell the assets as a package;
• whether the issues raised by Denaxe were res judicata;
• whether Denaxe's claim was an abuse of process because it could and should have been advanced at the Sanction hearing;
• whether, on the merits, Denaxe had any real prospect of establishing that a different sale strategy would have produced materially greater realisations;
• whether secondary allegations (intermeddling and removal/copying of an accounts computer) disclosed reasonable grounds to proceed.

Court's reasoning and conclusions: The judge reviewed authorities on trustees/administrators seeking court approval for "momentous" decisions and concluded the same supervisory principles apply to a receiver by way of equitable execution. If the court reviewed and sanctioned a specific transaction (sale to an identified purchaser at an identified price), that sanction gives the office-holders immunity against subsequent challenges that the decision to enter that transaction was improper, irrespective of whether the later claim is framed in fiduciary terms or as negligence, provided the alleged wrong relates to the decision-making that the court approved. Because the Sanction Application sought and obtained approval for the specific package sale and price, the Receivers enjoyed immunity against the principal claim that they should have sold differently to obtain a higher aggregate price. Alternatively, Denaxe's main claim was an abuse of process because Denaxe (and Oyston) had the documents and opportunity to challenge the packaged sale at the Sanction hearing but did not do so; that omission was a calculated decision, and to allow the belated challenge would be an abuse. Res judicata did not strictly apply but was unnecessary given the other grounds. On the merits the judge considered Denaxe's alternative case arguable but not so strong as to prevent disposal on the procedural grounds. The minor secondary claims were not struck out but Denaxe was ordered to particularise loss and the remaining matters were transferred to the Manchester County Court.

At first instance the Receivers' strike-out application succeeded in relation to the principal claim. The court struck out Denaxe's principal cause of action alleging the Receivers breached a duty to obtain the best market price by selling the footballing assets as a packaged sale (the Sanction Order conferred immunity and, alternatively, the claim was an abuse of process). The court refused to strike out limited secondary claims concerning alleged intermeddling and an accounts computer, ordered Denaxe to file particulars of loss and directed those remaining claims to be amended and transferred to the Manchester County Court. The strike-out and transfer were founded on the Court's view that the Sanction Order approved the specific transaction and so the Receivers enjoyed immunity in relation to that decision, and because Denaxe could and should have raised its objections at the Sanction hearing.