There was something about the loan transfer of Craig Bellamy from Manchester City to Cardiff City that was always going to cause a fuss. Cardiff’s financial travails have been well documented on this site before. Having already been hit with a Football League transfer embargo in December of last year, in March 2010, the club had a winding up order from HMRC issued against them with the taxman’s counsel, Matthew Smith, describing the club as being “plainly insolvent” – an analysis that was difficult to argue with. The petition was eventually seen off in May after a promise of investment of £6m by a Malaysian consortium led by the businessman Dato Chan Tien Ghee, but this didn’t prove to be the end of the club’s difficulties.
The registrar, a Mrs Registrar Derrett, had said that Cardiff resembled “a company unable to pay its debts as they fall due”, but they were allowed a stay of execution in order to pay off their debts nevertheless. However, after delays in making the payment the transfer embargo was placed upon the club again, this time until the debt was confirmed as having been paid. Another date was set at court, although this time the club managed to pay their debt back. That said, however, the amount owed to HMRC was a drop in the ocean when compared to the club’s total debt, which is understood to be in the region of £30m.
The new owners are attempting to restructure this debt, but other than that Cardiff got off relatively scot-free from their difficulties. They finally managed to rid themselves of Peter Ridsdale (although his legacy remains in the form of their remaining debt), avoided administration and managed to get themselves a couple of handy signings in the form of Jason Koumas and Seyi Olofinjana, both on season-long loans. They also turned down a £1m offer from Nottingham Forest for striker Peter Whittingham, even though Whittingham is out of contract at the end of this season and, unless a new contract can be agreed with Cardiff, will be a free agent by next summer, as well as a reported £2.5m offer from Ipswich Town for Michael Chopra.
Against this background, it is perhaps understandable that eyebrows were raised when Craig Bellamy signed for Cardiff on loan for six months. Since Bellamy was earning £90,000 per week, it seems unlikely to the point of preposterous that Cardiff would (or could) be covering a wage bill of that size. Bellamy may be having a proportion of his wages being paid by Manchester City, but he can’t have taken a wage cut – it’s not allowed under FA or PFA rules for loan players. He certainly said stated that family reasons were his primary motivating factors for returning to Cardiff, at least. There is definitely a perception on the part of the supporters of other clubs that perhaps Cardiff should be doing a little more towards paying their debts but, no matter how unseemly such a grand signing being made at this time might seem, they haven’t, as far we know, broken any rules in managing to persuade him to join them.
John Boyle, the chairman of SPL club Motherwell, however, evidently feels differently. His club chose today to issue a public statement regarding a sum of £175,000 that Cardiff still owe them over the sale of right-back Paul Quinn, £100,000 of which fell due in January, with a further £75,000 falling due during the summer. The club’s chief executive, Leeann Dempster’s words couldn’t have been any clearer:
“It is critical that clubs work constructively with each other to ensure we can manage a very difficult financial climate for the game. We have given Cardiff every chance to do the right thing. The board now believe that Cardiff’s position is untenable given their activity in the transfer market acquiring Jason Koumas, Tom Heaton, Danny Drinkwater, Seyi Olofinjana, Martin John and, today, the loan signing of Manchester City’s Craig Bellamy. Given all these circumstances and with legal and moral weight behind us, Motherwell FC have no option but to immediately pursue all legal routes to ensure this significant sum paid to us as quickly as possible. These may include issuing a winding-up order, arresting assets or sending bailiffs to their ground on match day to take possession of cash. Every option will be fully considered and implemented as soon as possible.”
Motherwell’s use of the phrase “moral weight” is an interesting one, considering that they themselves have had a spell in adminstration in 2002, but the actual legalities of a dispute between a Scottish club and a Welsh club (playing in the English league system) are also worthy of our time here. Scotland has different laws for these matters, and this complicates the issue of what enforcement action could be taken against Cardiff through the court system. It would depend upon the specifics of the case heard (and it is not as if Cardiff are disputing the debt), but the case was heard at Hamilton Sheriffs Court on Friday (Cardiff didn’t provide representation) and, as such, any decree awarded at the hearing would need to be transferred to England or Wales to be enforced. A certificate to do this has to be issued by the awarding court, and the application to the court requires to be made by affidavit, requiring the services of a notary will be required, if only for the notarization of the deed itself.
Presuming the court agrees to provide the certificate, the matter will then be transferred to the High Court in London and High Court Enforcement Officers become involved. They can act more quickly than ordinary bailiffs and their charges are higher, but defendants in such cases can still apply for stays of execution and the powers of a High Court Enforcement Officer are no greater than those of an ordinary bailiff. What we can say with a degree of certainty in this case is that, in view of the potential legal pitfalls facing Motherwell in this particular case, it is highly unlikely that bailiffs are going to turn up at Cardiff’s ground taking away bin bags of cash. The aim of what has happened so far was, presumably, to embarrass Cardiff into addressing the matter at hand and it seems to have worked. The Cardiff chief executive Gethin Jenkins stated this afternoon that, “”Our lawyers have been in communication with them and it will be resolved within the next seven days”.
As, effectively, a foreign club, Motherwell aren’t covered by FA rules stating that football creditors have to be paid in full. If Cardiff were to enter into administration (not, we should point out, that there is at the moment), they would be lumped in with other creditors in a proposed CVA, as they are not covered by the “preferred creditor” status and, to give an idea of scale, Motherwell’s entire annual turnover for the 2007/08 season was £4.65m. Set against these facts, £175,000 is money that they can ill afford to lose. The route that they took in order to force Cardiff’s hand was heavy-handed, but perhaps we will see more of this sort of behaviour in the future, and it may not even be such a bad thing if it pushes clubs into addressing obligations that they may otherwise have put on the back burner.
As for Cardiff, there can be little doubt that they have been lucky in obtaining the services of a player of the calibre of Craig Bellamy, and these are exciting times to be a Cardiff supporter. Whether they can get promoted this season remains to be seen, but even if the club is only paying, say, £25,000 per week towards Bellamy’s salary, that is an extra expense that will put even greater strain on their wage budget. Attempts to restructure their existing debt notwithstanding, the issue of the £30m that they already owe to various creditors hasn’t gone away and Cardiff supporters would be best advised to keep asking what are often difficult questions because the long-term future of the club has to be more important than a massive gamble on promotion, however tempting that may seem in the first flourish of the new season.