Chairman scores spectacular own-goal in Swindon Town dispute

16/06/21

Swindon Town Football Club is embroiled in long-running litigation over the ownership and control of the Club. There are three key players: former footballer Lee Power, current Chairman of the Club and legal owner of 85% of the ‘topco’ through which the Club is held; Michael Standing, also a former footballer, who claims that Mr Power holds 50% of the ‘topco’ shares on trust for him; and Australian property magnate Clem Morfuni, whose company Axis Football Investments holds the balance of 15% of the topco shares.

At a hearing in April Mr Power told the Court that he could no longer afford to finance the Club’s ongoing losses and that he had either to sell it or put it into administration. The buyer to whom he wished to sell was a US company referred to as ‘Able’, about which little is known. Following a breakdown in trust between Mr Power and Mr Morfuni, Mr Power has shown himself implacably opposed to any sale to Axis.

Axis however contends that Mr Power cannot sell to anyone other than Axis itself, due to pre-emption rights held by Axis under the Articles of Association of the topco. At a hearing in May an injunction preventing Mr Power from selling his shares was varied to allow Mr Power to sell his shares in the topco via the pre-emption mechanism.

Following that hearing, Mr Power issued a transfer notice in relation to all 85 of his shares, apparently on the understanding that the Articles only required him to offer Axis 13 of those shares, corresponding to the proportion of the shares in the topco Axis already holds. It appears that Mr Power intended to sell the balance, amounting to majority control of the Club, to his preferred buyers in the US.

However, at a hearing yesterday before Deputy High Court Judge Nicholas Thompsell, the Court held that Axis was entitled to and had served a valid acceptance notice in relation to all 85 of Mr Power’s shares. Although the topco had issued an offer notice to Axis which on its face referred to only 13 of those shares, that notice must be read as referring to all of them, whether by a process of construction or rectification, because that is what the Articles required. Alternatively, even if the offer notice had to be read literally, Axis had an option under the Articles to nominate additional shares over and above those offered to it, up to and including all shares the subject of the transfer notice, which option it had validly exercised.

As a result, Mr Power’s own actions in triggering the pre-emption mechanism in the Articles appear to have led to him becoming obliged to sell his shares to Axis after all, the very outcome he has desired throughout to avoid.

Whilst the Court held that Axis’s acceptance notice was valid in relation to all 85 shares, it did not decide whether that meant Mr Power was now obliged to transfer those shares to Axis. That issue was adjourned to allow Mr Power to raise any further arguments he wished to raise, including in relation to the effect of his subsequent action in convening a Board meeting of the topco to revoke his own transfer notice.

The detailed reasons for the Court’s decision are to be provided by way of a judgment which is here.