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Football Club Liable for £2.62 Million Loan

FootballA football club which accused its former owner of acting against its best interests by committing it to repayment of loans totalling £2.62 million without any authority has failed to convince the High Court that it should be let off the debt.

The club was sued for £900,000, plus interest, by the lenders but denied liability and counter-claimed for the return of payments that it had already made. The money had been borrowed largely to finance improvement works on the club’s stadium but members of its board had not been informed of the transactions.

It was submitted that the loans were unenforceable in that they had been unilaterally agreed without authority by the club’s then de facto managing director and ultimate majority owner. The loans were said to breach Football Association rules and the club argued that they were in any event unnecessary in that alternative methods could have been used to raise the required finance.

Dismissing those arguments, however, the Court found on the evidence that the loans had been agreed with the club’s actual and apparent authority. There was no evidence that the owner had sought to make any personal profit from the deals and it would be surprising if he had entered into transactions that he believed would damage a club in which he ultimately held a majority interest.

Finding that the owner had acted in what he honestly believed to be the club’s best interests, the Court concluded, “The club is free to delegate wide ranging authority to a managing director but it has to take the consequences of doing so. The club, acting through the de facto managing director it appointed, borrowed money but has not paid it back. It should now do so.”