Football claims: Loan was to help law firm take cases forward
A well-known sports law firm has failed to convince the High Court to restrain a litigation funder from advertising a winding-up petition over a loan it has not repaid.
Judge Curl KC, a deputy judge of the Insolvency & Companies Court, rejected Manchester-based IPS Law’s arguments that a subsidiary of US company Safe Harbor Equity did not have a right to seek a winding-up order.
He was critical of some of the evidence given by IPS’s owner, Chris Farnell, and highlighted the solicitor’s “significant silence” on whether the £500,000 Safe Harbor provided as bridging finance in July 2023 ahead of signing a litigation funding agreement had been spent.
This money, which was only to be used on the litigation, is the debt that Safe Harbor is trying to recover.
Underlying the dispute is ‘Project Red Card’, proposed claims over the allegedly unlawful collection and use of footballers’ performance data by gaming, betting and data processing companies.
The project is the brainchild of a company called Global Sports Data and Technology Ltd (GSDT), whose founders include former football manager Russell Slade. No claims have yet been brought.
Mr Farnell’s evidence was that IPS was engaged to act as GSDT’s solicitor and search for litigation funding, with IPS as the borrower, and that it would run the claims and be entitled to 10% of any damages.
IPS contested Safe Harbor’s right to seek a winding-up order on two broad grounds. First was that IPS was assured both orally and in emails that the facility agreement would never be enforced.
Second, IPS submitted that it has cross-claims worth £60m arising from the alleged contractual entitlement to a share of the damages, on the alleged bases that Safe Harbor induced GSDT to breach its contract with IPS and wrongly disclosed confidential information to GSDT. IPS said this led to the firm being cut out of Project Red Card.
The £500,000 was advanced because, Mr Farnell said, the 1,800 players on whose behalf GSDT was bringing claims were “anxious to see” those claims progressed.
Mr Farnell relied on three assurances he said he was given but the judge found that the first two “were not unequivocal”, while he was not convinced by the solicitor’s evidence on the third.
Though the solicitor’s account of a conversation with Safe Harbour’s managing director, Rafael Serrano, appeared unequivocal, “I do not consider that IPS has any rational prospect of succeeding at trial in proving that Mr Serrano spoke in those terms”.
Judge Curl said: “Mr Farnell’s evidence… is that he had been content to agree repayment within six months and had expressed disquiet only with the revised proposal that the loan should be repayable on demand.
“Yet IPS’s case is that, when the point was raised by Mr Farnell with Mr Serrano, the latter did not merely concede the ground over which an objection had been raised, but went far further than even Mr Farnell had proposed and spontaneously agreed that the repayment of the loan would not be enforced at all.
“This is so inconsistent with the way that any commercial lender could be expected to behave that the suggestion can, in my judgment, fairly be regarded as commercially absurd.
“Any reasonable commercial person (and certainly any solicitor) would have double-checked the position had they genuinely perceived such a volte-face.”
It was also “inconsistent, to the point of implausibility”, with the care that Safe Harbor and its solicitor took to negotiate the repayment provisions.
Such an interpretation was also inconsistent with subsequent correspondence as well as independent legal advice that Safe Harbor demanded Mr Farnell took as he was giving a personal guarantee.
The judge noted too that this whole argument was only raised in Mr Farnell’s first witness statement, “long after IPS had raised detailed grounds of opposition to the respondent’s claim”.
Safe Harbor argued that GSDT instructed IPS to obtain the funding but not run the actual claims, and Judge Curl found it was “clear” that IPS did not have an enforceable and irrevocable right to litigate and share in the proceeds of Project Red Card.
He held it was “sufficiently clear” that an unsigned ‘global agreement’ between IPS and GSDT from September 2020 was, as most, an early draft for discussion or negotiation.
“I take this view because it is not a document that any solicitor, let alone one of Mr Farnell’s seniority, could have regarded as fit for execution. It is also inconsistent with Mr Farnell’s evidence of how Project Red Card would work.” Subsequent engagement letters did not assist the law firm on this.
This meant IPS “has no rational prospect of showing any actionable loss or damage at trial capable of being set-off against the petition debt”.
Further, the judge said, there was no substantially triable issue over the contention that there was any wrongful disclosure or misuse of confidential information.
He gave several reasons for this, including that IPS was GSDT’s solicitor and negotiated with Safe Harbor on its behalf, notwithstanding that IPS was to be the borrower.
“Accordingly, IPS could not, as GSDT’s fiduciary, keep information about those negotiations, or in relation to Project Red Card generally, confidential as against GSDT.
“It is further obvious that IPS, as GSDT’s solicitor in the negotiations with Safe Harbor Group, could not derive or seek to derive any profit or advantage from those negotiations at the expense of its client GSDT, such that IPS might suffer actionable loss by reason of the substance of the negotiations being disclosed to GSDT.”
Judge Curl concluded: “There is in my judgment no substantial dispute over the debt identified in the petition and I propose to dismiss the application to restrain advertisement.”
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