Nottingham Forest Football Club sale

Having just witnessed one of the most unpredictable and exciting world cups in recent history, it seems only fitting to have a football related article, and as such, this article discusses a recent case involving a club whose best years could be said to be behind it … and no, I do not mean Ipswich, I refer here to Nottingham Forest FC.

For a turbulent 5 year period, Nottingham Forest was owned by a Mr Fawaz Al Hasawi, a Kuwaiti businessman. Last year, with ambitions of taking the club to Champions League football unfulfilled, and having dismissed 8 managers during his tenure, he sold the club to Evangelos Marinakis (the owner of Olympiakos).

Sadly for Mr Al Hasawi, that was not the end of his woes with the football club, as in November 2017 he was sued by the purchasing company. Amongst several claims and counter claims, it was claimed that during the sale, the seller had stated that certain liabilities of the club stood at £6.5m, whilst according to the purchaser, the true liabilities were in fact £10.3m. The seller had therefore misrepresented the true financial position of the club and the buyer was entitled to compensation.

In law, a representation by a seller in negotiations leading up to completion of a contract can give rise to a liability to compensate the buyer for their losses, where that representation is untrue. This is however a complex area of law, and different rules apply depending on the type of misrepresentation (for example, an intentionally fraudulent one, or a negligent one, or indeed an innocent one).

There was however good news for Mr Al Hasawi. The agreement by which the club was sold contained complex provisions seeking to limit the liability of the seller and setting out how claims arising out of the sale should be handled. This meant that the claim the buyer made for misrepresentation could not be considered outside of that framework, and the Judge dismissed the claim.

Mr Al Hasawi was fortunate to be able to fall back on (from his perspective) a well drafted sale contract, which enabled him to successfully defend a £3m plus claim. Generally speaking though whether selling football clubs, businesses or properties, it is important to be as frank as possible with a buyer, to ensure that they have full details of the position of the asset in question. It is much better to lose a prospective buyer than become embroiled in hugely expensive and stressful litigation post-completion.

This article first appeared in the East Anglian Daily Times, 17th July 2018.

Luke Cain is a solicitor in the Property department at Barker Gotelee Solicitors in Suffolk.

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