Liverpool Football Club dispute reaches the High Court

Today (12th October) the problems affecting Liverpool Football Club will reach the High Court Chancery Division.  At the heart of the case is a dispute between the American "owners" (Messrs. Hicks and Gillette) and the board of directors but the Royal Bank of Scotland - as a major creditor - have a huge interest.  See Telegraph 12th October. 

The Chancery Division is one of the three principal "divisions" of the modern High Court of Justice.  The others are the Queens Bench Division and the Family Division.  Historically, the Chancery Division's predecessor was the ancient Court of Chancery which emerged in the Middle Ages (probably in the late 14th century and early 15th century).  The court appears to have grown out of a practice by which persons unhappy with the outcome of an action in the common law courts would petition the King's Chancellor to do justice.  The Court of Chancery developed the body of law known as "Equity" which operated alongside the common law.  "Equity" always "followed the common law" but, as part of the process of achieving justice and fairness, the Court of Chancery developed new doctrines such as trusts and new remedies such as the injunction (usually aimed at preventing something).  Interestingly, in the Liverpool FC case, the judge issued an injunction to prevent the American owners seeking to dismiss the directors.

The work of the modern Chancery Division is considerable.  It is complex work and is of major economic importance but does not reach the attention of the media anything like as much as the big criminal cases!  The scale of Chancery work may be seen on the website of the Chancery Bar Association.

For more information about "Equity" as a body of law see here.

Addendum 13th October:  The Independent report on the decision of Mr Justice Floyd may be read here.

Addendum 1 -  14th October:  The District Judicial Court, Dallas County, Texas, USA has issued a "Temporary Restraining Order" against Martin Broughton, Christian Mark, Cecil Purslow, Ian Ayre, The Royal Bank of Scotland PLC, NESVI and Philip Nash.   The legal effectiveness in the UK of this order is questionable but it may be read via The Guardian.

The action in the Texas court has been brought by a number of companies (which are controlled by Messrs. Hicks and Gillette).  The companies include Kop Investment LLC which is based in Dallas, Texas and this is the ultimate "holding company".   Underneath Kop Investment LLC are several other companies (including one based in the Cayman Islands) until one reaches Liverpool Football Club and Athletic Grounds Ltd (which people would ordinarily think of as "Liverpool FC").  This "chain" of companies with a Dallas based company at the top of the pyramid may be the reason why the Texas court considers that it has some jurisdiction in the matter?

It is unclear whether, given this action in Texas, the Royal Bank of Scotland - (based in Edinburgh) - will now seek to exercise the "nuclear option" of issuing a winding up petition.  The RBS is a major creditor and, lest it be forgotten, above them is the British government which owns some 84% of RBS - (a shareholding managed via UK Financial Investments Ltd).  It may well be necessary for action to be taken to protect the ultimate interest of the hard-pressed British taxpayer in all of this.

Addendum 2 -  14th October:  The High Court has now ruled that the "restraining order" of the Texas Court is ineffective in this country - see here.  Further details in The Telegraph.

Addendum 3 - 15th October:  The restraining order obtained by Messrs Hicks and Gillette was withdrawn and a purchase deal by NESV of Liverpool was concluded.   The deal appears to clear most of the debt owed to Royal Bank of Scotland.  It appears that Hicks and Gillette are persisting in a claim for damages on the basis that the sale is at an undervalue.  See BBC 15th October.  How, against whom and where that claim will be pursued remain to be seen.  Within the English courts, alleged sales of companies at an undervalue have been productive of some very difficult litigation.

Addendum 4 - 16th October:   Messrs. Hicks and Gillette have withdrawn their claim for damages in the Texas Court.  Nevertheless, it is reported that they may bring an action in the English courts - see The Guardian 16th October - though it is claimed that Liverpool Football Club will not be one of the defendants.