Cardiff & Southend vs The High Court: Round Three

Cardiff & Southend vs The High Court: Round Three

By on Mar 17, 2010 in English League Football, Finance, Latest | 3 comments

Cardiff City and Southend United were both given a stay of execution recently by the High Court in their bids to stave off winding up petitions brought against them. Mark Murphy takes a look at what they have been up to since then and doesn’t find much cause for encouragement.

Well, reports are emerging of a fourth “Pirates of the Caribbean” movie. So technically it’s possible. But surely Cardiff and Southend can’t stretch their material to a fourth script – anymore than I can stretch this film analogy to a fourth sentence. Yet, away from the attention which accompanied Portsmouth into the Companies Court on London’s Strand last month, both the Bluebirds and the Shrimpers have been up before the beak again, promising that next time, definitely, they’ll pay all their taxes. By all accounts (except one, see below), both Cardiff and Southend tried the same “strategy” when they re-appeared in court on March 10th, both promising that there was a shedload of money round the corner, you’ll see, we just need a bit more time. Notts County tried that line before Christmas. And it worked. And remarkably, on March 10th, it worked again. Twice.

It seemed Cardiff had found the £1.7m they owed after their February hearing. Newspaper headlines such as “Land sale saves City” and “Land sale to pay tax bill” hinted that the sale of land near the club’s stadium at Leckwith would…er… save City and pay their tax bill. Indeed, with club shareholders needing to approve the deal at an Extraordinary General Meeting, the benefits of the sale were publicised on that basis. Chairman Peter Ridsdale told the EGM that approving the sale would “help enormously.” And media reports before the latest court hearing suggested the bill would be settled. In the event, a tax bill which was reduced from £2.7m to £1.7m by a £1m payment in February was “helped enormously” by the proceeds of the land sale and now stands at…er…£1.9m…because in their rush to pay past tax debts, Cardiff had neglected to pay present ones.

Indeed, it seems that they are unable to do so. Despite the land sale proceeds and a significant share of the significant gate at their recent FA Cup tie at Chelsea, Cardiff have left £1.053m PAYE and VAT unpaid. As HMRC’s counsel in court, Matthew Smith, said, without need of recourse to legalese, Cardiff are “plainly insolvent.” What has saved them appears to be that Mrs Registrar Derrett, the presiding judge at the proceedings, hasn’t been reading the South Wales Echo over the past nine or so months, so hadn’t heard the “investment around the corner” line that Ridsdale and his cronies have been peddling throughout. The club’s counsel, Elaine Palser said that “an Asian investor” had “indicated that he will give the club £6m.” And the court has given the club both the benefit of some very considerable doubt and 56 days, until May 5th, to find the money…or else…

Mrs Registrar Derrett said that Cardiff resembled “a company unable to pay its debts as they fall due,” which is criteria numbers one, two or three for a company ripe for administration. And Smith gave us a nice line in unintended irony by describing Cardiff’s budgetary strategy as “robbing Peter to pay Paul.” As Cardiff fans, almost to a man, woman and child, have pointed out since, it isn’t Peter that’s being robbed. Ridsdale has long claimed that the prospects of new investment were enhanced by his presence as chairman. The story now runs that new investment will only come in if he goes out. It’s almost as if Ridsdale is no longer trusted by potential investors, including – especially – those that have met him. Now, how did that happen?

Accusing Southend chairman Ron Martin of going on and on a bit about Southend’s battles with HMRC was, a reader of this site suggested, a nice line in unintended irony from me. This was a fair point. But Martin has surpassed himself in the four weeks between the last time Southend didn’t pay their taxes and this time. And, despite Martin’s lengthy protestations to the contrary, that is the only issue facing Southend. Oh…and the fact that they had to get the players’ union, the Professional Footballers’ Association, to pay the players January salaries. Oh, and the fact that they couldn’t pay back the SIXTY…THOUSAND…POUNDS they borrowed from the Supporters Trust before Christmas. I hope I haven’t missed anything out in the need for brevity.

In Martin’s latest “statement” on the club web-site, he opined: “I have read three news reports upon (sic) yesterday’s ten minutes in court and from what I have read, I must have been in a different place.” As unintended ironies go, that’s the best yet. On planet Earth, meanwhile, Southend were allowed to stay alive as a club despite the increasingly weary Mrs Registrar Derrett noting: “On the face of the evidence, this company is insolvent.” You would search long, hard and in vain for any reference to that unequivocal statement in Martin’s web-site piece. Martin mentions “some wages being paid late” but only in the context of HMRC apparently claiming some money that isn’t due to them until 22nd April, not the club’s failure to pay those “some” wages.

In a statement to the Southend Echo he accuses observers of “a serious misunderstanding as to what role the PFA play.” You would search long, hard and in vain for any reference as to why the PFA have a role at all in the payment of players’ wages. Indeed, when the Echo originally ran the story, the club dismissed the “speculation” as “tiresome” and said that as a result, “we will not be co-operating with the Echo.” In other words, Martin remains “in a different place” – denial. An Echo article from eleven months ago about the last time the club borrowed money from the PFA to meet a potential wages shortfall, contained a reference to “South Eastern Leisure, the company behind the ambitious plans for the new stadium at Fossett Farm.”

Southend escaped winding-up on March 10th because of the promise of future funding streams from these ambitious plans. “It’s only the retail development that makes me hesitate,” said Mrs Registrar Derrett, when deciding not to wind the club up last week (something else which Martin didn’t hear from his “different place”). This is the retail development of their Roots Hall ground once they’ve left for their new ground at Fossett’s Farm. “South Eastern Leisure”, the 2009 Echo article notes, “was set up in 1998.” And while Martin argues about “inappropriately applied surcharges” for past tax misdemeanours,” he files the existence of £82,000 unpaid PAYE and VAT for February under the “Oh, by the way” column.

After post-match protests at the weekend, Martin has promised fans a question and answer session, which will either be a revelation or a film version of his web-site statements. If it’s the latter, it will be interesting to hear his response to the one question that will surely come up: “What the **** are you talking about?” But the bottom line is that Southend can’t pay their players and/or their taxes, and have 56 days to sort it all out, and no amount of accusation or obfuscation by Ron Martin can change that. I might take a trip to the High Court for Cardiff and Southend’s next and, one way or another, last appearances. It will be a better plot than the Pirates of the Caribbean, that’s for sure.

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    3 Comments

  1. This is unfair.

    It’s not like anyone had heard of this Peter Risdale bloke before he took Cardiff City to the brink of liquidation…

    Martin

    March 17, 2010

  2. So, if HMRC have even a modicum of courage, that’s two Football League clubs out of existence. Many more could follow, especially in the context of a belligerently cost-cutting Cameron administration. Anyone else note that, by total coincidence (I think…), Cardiff and Southend’s final hearing is on the presumptive Election Day?

    Anyone else wondering if there’ll be major reform of the Football League, including but not limited to the return of Division Three North/South, whatever they might be called this decade? The return of regionalised leagues could be sold as a ‘green’ measure, especially as there’s now an energy firm sponsoring the league as of next season…

    David Howell

    March 18, 2010

  3. I doubt that semi-national travel would make much difference to the total carbon foot-print of a lower league football club.

    Banning midweek games or moving to summer football (and thus remove the need for flood-lighting and heating etc.) would be far more effective if that were the goal.

    Martin

    March 24, 2010

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