Saturday Night On Channel Five For The Football League
The Decline & Fall Of Leyton Orient
Rape, Disrespect & Fury: The Oyston Family & Blackpool FC
Is It Time For A New Football Club For Newcastle?
Tranmere Rovers & Cheltenham Town Stare Into The Abyss
Statutory demands are curious documents which have caused some degree of controversy in recent months in the world of debt recovery. They are served under the Insolvency Act of 1986 and are the first step in the process of petitioning somebody’s bankruptcy or issuing a winding up order against a company. The demand gives twenty-one days for an outstanding debt to be paid in full, pay instalments which are satisfactory to the creditor or offer to secure the debt, again to the satisfaction of the creditor. The recipient can apply to set the judgement aside, but there have to be material grounds for doing so. Saying, “it’s not fair” in itself isn’t usually considered to be reasonable grounds to set the demand aside.
The controversy surrounding their use came earlier in the year when a couple of companies dealing with debt recovery were found guilty of sending them as what was seen to be a threat to get people to pay up unreasonably large amounts to clear debts. The Office of Fair Trading sent a fairly clear message during this summer that statutory demands shouldn’t be issued as a “collection tool” and the upshot of it all was that it is now commonly understood that statutory demands should only be issued where a creditor intends to issue proceedings.
All of this is bad news for Swindon Town, who, it has been said, had a statutory demand issued against them by one of their creditors a few weeks ago. The debt – a not-inconsiderable £2.45m – stretches back to 2005, when the money was lent to them by a property company called St Modwen. At the time, the club faced what might have been a third spell in administration because of an unpaid tax bill. The property company agreed to pay off this debt as part of a proposed deal to sell The County Ground with the club moving to a purpose-built community stadium to be owned by the local council. The deal went through, but the debt remained with a two year grace period. St Modwen claim that the deadline passed with no repayment proposal having been made by the club. They also claim that they have had no reply to the demand issued.
From a practical point of view, there was action that Swindon Town’s owner could have taken but whether it is too late or not is open to question. A consortium headed by Andrew Flitton took the club overat the start of 2008 but the debt is owed by the football club rather than the consortium or any holding company that is currently involved with the football club. Much will come down to the quality of the paperwork that was signed in 2005. Flitton could dispute the existence of the debt if the paperwork signed at the time is not up to scratch, but the dispute would have to be a substantial one. There is also talk that the money might actually be owed to a company called Shaw Park Developments, a holding company jointly owned by Swindon’s previous owners and St Modwens, but this opens up a whole new avenue of questions.
The debt has always shown on the accounts as being owed to Shaw Park Developments, but there is no legal reason why this debt couldn’t be passed to St Modwen. There’s nothing in law to prevent this. The paperwork, however, has to all be in order, but this could theoretically be disputed. Also, if £1.45m was the amount borrowed in 2005, the fact that the amount owed has risen to £2.45m in such a short period of time could also be an avenue to dispute the amounts owed but, again, this would be dependant on the paperwork at the time. When a statutory demand is issued, the defendant normally has eighteen days to apply to set the demand aside. The question is not (as the club’s official website says) whether they are disputing the debt, but whether they have actually responded with an application to set the demand aside. If they have, they should – in the interests of their sanity of their supporters – go public with when it is and what the nature of their dispute is.
Ultimately, it seems likely that the question of whether this demand can be seen through comes down to whether the deal was signed by the former holding company that owned the club or whether it was signed by the clubs itself. If it was, then this could be a very expensive mistake made by the lenders. It seems unlikely, however, that a large company would make such a mistake (although such a thing is far from unheard of) and that they would seek redress through such heavy-handed means if they believed that there would be grounds for any claim to be successfully defended. If an application to set aside is unsuccessful, then the way is free for the creditors to apply to have the company wound up, although there may still be room for negotiation. Whether they will be willing to negotiate, however, may depend on what the assets of the football club are. Swindon supporters will be keeping their fingers crossed that their club’s legal team has been through this with a fine toothcomb.
Ian began writing Twohundredpercent in May 2006. He lives in Brighton. He has also written for, amongst others, Pitch Invasion, FC Business Magazine, The Score, When Saturday Comes, Stand Against Modern Football and The Football Supporter. Ian was the first winner of the Socrates Award For Not Being Dead Yet at the 2010 NOPA awards for football bloggers.
“Also, if £1.45m was the amount borrowed in 2005, the fact that the amount owed has risen to £2.45m in such a short period of time could also be an avenue to dispute the amounts owed”
Never underestimate the power of compound interest! An increase of £1m in total debt on an initial loan of £1.45m can easily be gained with a commercially reasonable annual interest rate of 14% applied over 4 years.
Very crudely: £1.45m x 1.14 x 1.14 x 1.14 x 1.14 = £2.45m
The power of compound interest, coupled with not paying off any capital. Scary stuff.
Hmm, this isn’t quite as cut and dried as the Guardian piece (which you seem, quite reasonably, to have based your article on) makes it sound. It seems the Guardian article basically came from a St Modwens PR flack touching up the journo directly – the information wasn’t released by the club or the courts, there was no general PR out on the wires, and in fact it seems no WUP was served yesterday. So this looks more like St Modwen have fallen out with the club over how much the debt is, who owes it and possibly a repayment schedule agreed in this mysterious Aug 2007 agreement.
The article contains a number of glaring inaccuracies, not least the claim that Fitton (note, not “Flitton”) took over in 2007, which would seem to fit with the expiry of this two-year repayment deal in Aug 2009. Except that Fitton didn’t take over until mid-Jan 2008. In Aug 2007, the old regime (who are at the heart of all this) were busy flogging us off to some group of dodgy Portugeezers who made Munto/Qabak/whoever the hell they are at Notts County look positively open and transparent. Indeed they even introduced the Portugeeezers’ chosen representative (Jim Little, ex of Cork City) on the pitch during our Sky game against Yeovil as “chairman designate”. So if St Modwen did agree a two-year repayment schedule in Aug 2007, they didn’t agree it with Fitton.
St Modwen certainly did put several tranches of money into somewhere in 2004/05, but it’s far from clear where it ended up. They set up Shaw Park Developments, a joint venture with the old regime’s Holding Company which was to be the vehicle to flog off the County Ground and build a new one at Shaw Tip. Except that never got off the ground, in part because of local objections and in part because the proposed housing development at the County Ground would never have got past planning (and the council probably couldn’t legally have given permission for it). In short, it was a typical cock-up of the old Wills/Diamandis regime – the Wills family being the owners at the time and Diamandis being the disqualified director they trusted to run the club. But despite the development being still-born, Diamandis persuaded St Modwen to plough money in via Shaw Park Developments. Where it went is anyone’s guess – some of it ended up at the club, but some went into the Holding Company. Who knows whether that was put into the club? If the fate of Bill Power’s later £1m investment/loan is anything to go by, well, about 10% of that never went near the club but went straight out to Diamandis-connected beneficiaries (including one of his creditors and the livery stables where his wife kept her horses).
None of which matters to St Modwen, they just want their money back. But it may well matter to the courts, who might well decide (as they did with Bill Power) that the beneficiary of the money was not the club but the (now defunct) Holding Co.
It’s all a sorry mess and one which Town fans now well used to the horrid pickle of any business dealings involving Diamandis are all too used to – a network of joint ventures, holding companies, investment vehicles and ultimately no-one being very clear who owes what to whom. So we can have some sympathy with St Modwen – like so many other people who unwisely chose to do business with Diamandis, they got stiffed. But at least they had a choice, we just had the beggar running our club (largely into the ground) without so much as a by your leave. And that may be where this all ends up – if this does go to court, a judge may rule, pretty much as he did with Bill Power, that St Modwen made a bad investment, with bad partners and sometimes in business you have to accept that, swallow your losses and move on.
What seems to be going on here is not as the Guardian’s rather wildly overstated article said an imminent threat to the future of the club, more an opening salvo to put pressure on the club after the breakdown of discussions about how, when and how much of the money should be repaid. Most likely sparked by St Modwen realising that when Fitton and Co come up with what are likely to be the first realistic plans to redevelop the County Ground to come from the club board, they ain’t getting a piece of the pie. So they’re throwing their toys out of the pram publicly in an attempt to pressure Fitton and Co into repaying yet another debt that Diamandis saddled the club with in his ongoing effort to break the world “peeing it up against a wall” record.
And I should add I’ve got a lot of respect for this blog – top work – and there’s no reason why you shouldn’t take a report in the Grauniad at face value, they usually have a good track record on football stories. In this instance though, it seems they’ve allowed themselves to be seduced by the “exclusive hot tip” and so gone for the more sensational angle. Still, at least they seem to know the difference between a Winding Up Petition and Administration which is more than today’s Sun can claim. Sadly, most Town fans are all too familiar with the workings of Administration and various other insolvency procedures, thanks to our time under Mr Diamandis’ wise leadership.
[…] little chance of a quick and simple resolution of this dispute. As Ian King has pointed out (17), it will become bogged down in arguments about the interpretation of documentation. Nothing but […]
Really interesting stuff, particularly from a pretty poorly informed Town fans perspective.
I see that CLubs in Crisis (122) is mounting a bid to overtake International Football (126) in the Categories list. How very sad.
Loved: “Saying, “it’s not fair” in itself isn’t usually considered to be reasonable grounds to set the demand aside.”
[…] per Companies House. The principal hang-up appears to be debt owed to one of the old creditors that wasn’t properly resolved along with the nearly £1 million claim from Datasat that had previously been assumed not to have […]