Judge Hickinbottom made it plain that ACL had been a viable business up until the club withdrew the £1.3m annual rent. He also said that this had been a conscious strategy by the club’s owners.
He said: ‘In April 2012, the crisis in ACL was triggered by CCFC/Sisu refusing to pay rent which CCFC was legally obliged to pay, in pursuit of the Sisu strategy to obtain a return on their investment by buying into ACL cheaply. Sisu took that action quite deliberately to distress ACL’s financial position, with a view to driving down the value of ACL and thus the price of a share in it, which they coveted.
‘Indeed, as I have indicated, in these proceedings, the claimants use the argument that ACL’s impending insolvency [which Sisu provoked] drove the value of ACL down by up to 30 per cent. Those were commercial decisions that Sisu were entitled to take.’
Sisu have always argued that it is unfair to say they did not pay rent during the 2012 stand-off, arguing they contributed £500,000 which had been withdrawn from an escrow rent guarantee fund and went on to make further payments of £10,000 a game.
But the judge was not satisfied by this argument. He said: ‘No rent had been paid since April 2012, and it is recited that the escrow account of £500,000 had been exhausted in August 2012.
‘No rent having been paid, a judgment for it had been obtained and [by the time of the Hastie Report] a statutory notice served. The next step would be for a winding-up petition to be served, with the likely result that CCFC would enter insolvency proceedings.
‘That precis cannot be faulted. It refers to the escrow account being used, and the £10,000 per match was not an “interim rent agreement”. It was a payment in respect of expenses. It is true that such expenses had not been payable in addition to rent whilst contractual rent was being paid, but that rent was not being paid.’
During the subsequent appeal into the High Court judgment, Sisu tried to push an allegation that the council and/or ACL had actually encouraged them to withhold the rent and deliberately weaken ACL’s position.
They said the council had suggested it might be beneficial as talks continued to reduce the price Yorkshire Bank would request to buy out the ACL loan.
It has to be said that this is not entirely beyond the realms of possibility. Certainly the rent strike, and the impact on ACL’s business performance, would not have hindered negotiations with the bank, who faced being hit hard if ACL went bust.
But the Court of Appeal judges were far from impressed by the argument.
Sisu QC Rhodri Thompson said the tone of the 2014 High Court judgement was hostile to Sisu and unfairly suggested Sisu’s conduct was ‘outrageous’.
He added: ‘The suggestion this was some sort of ferocious rent strike needs to be read in context, that the council thought this was a good idea while negotiating with the bank.
‘The board of ACL said ‘let’s go softly softly’ on rent negotiations while pursuing the bank deal.
‘It was positive to have the rent low, to keep the value low.’
‘There was a common interest in driving down the value to negotiate better terms with the bank.
‘Sisu’s strategy was not to drive down the value of ACL. The strategy was to break what was strangling ACL, the unaffordable debt that ACL had and the unaffordable rent that the club had.’
Justice Tomlinson interrupted the Sisu QC and said the reason for withholding rent was ‘irrelevant’.
He added: ‘Why are we interested? The fact is the club didn’t pay legally required rent and that impacted the value of ACL.
‘So what? Why are we interested in all this toing and froing?’
Justice Treacy added: ‘The judgment says these were actions Sisu were entitled to take. Commercially, they’re perfectly entitled to do that.’
Justice Tomlinson replied: ‘This is of extremely limited interest. This seems to have generated a lot of heat at the time, but it’s a distraction from the issues.’
Back to the original High Court hearing, and Judge Hickinbottom went on to heavily criticise the historic financial performance of the club and Sisu’s attempts to blame their financial woes on ACL and the level of rent it was paying.
He also made it clear that Sisu knew exactly what they were getting into when they purchased the club in 2007.
He said: ‘The Sisu company CCFC had incurred substantial losses – regular losses of £4m to £6m per year including, in 2011/12, a £5m loss on a turnover of £10m – and was clearly balance sheet insolvent.
‘It appears to be common ground that poor management greatly contributed to these commercial problems of CCFC. Sisu invested about £40m in CCFC until 2012, and, as I understand it, another approximately £10m from April 2012 until CCFC’s demise [administration, which we will cover later in the book].
‘Sisu now seek to blame these financial woes on the rent for the Arena which they had to pay which, they have been at pains to stress at every opportunity, was considerably higher than CCFC’s competitors in the Championship yet alone League Division One [sic], but that is to look at only one small part of the whole canvas.
‘CCFC had sold their right to revenues from the Arena, to the Higgs Charity for good consideration; when Sisu bought CCFC, they did so in full knowledge of the absence of any right to Arena revenues and CCFC’s contractual commitments, including the commitment to pay rent at £1.3m to ACL; and the outgoings on rent were only a relatively small percentage – less than ten per cent – of the football club’s expenditure.’
The judge also compared the council’s investment to the one Sisu had made themselves in the club.
He said: ‘Sisu now seek to show that, in making a £14.4m loan to ACL in which it owned a half-share, the council acted in a way which no rational private investor would act.
‘However, they invested perhaps £50m in the hopelessly loss-making football club – £10m after April 2012 – in the speculative hope that they could make profits in the future, by buying into the Arena.’
Coventry City Council argued that the £14.4m loan it made to ACL was necessary in order to protect its investment in the stadium. But Mr Goudie dismissed that option – pointing to the fact the council was a 50 per cent shareholder in the firm along with The Higgs Charity.
He said: ‘Sisu’s conduct does come into equation. In fact, it takes centre stage. It represented a threat to the council’s commercial interest that could not be ignored.
‘Up to the rent strike, ACL was profitable. A consequence of the rent strike was to place the council in circumstances it could not ignore.
‘What could they have done instead that would have been a lesser commercial evil? That’s where Sisu’s case totally breaks down.’
He added: ‘The council could not itself put ACL into liquidation, because of the bank’s overriding power. It could have stood by and let that happen, but that would have been an extreme solution.
‘A public body would have allowed a company it and a charity had a 50 per cent stake in to go insolvent.
‘That argument doesn’t stack up. It’s not only deeply unpalatable, it’s plainly wrong.’
Mr Goudie also added that allowing ACL to go bust would have caused damage to the council’s commercial reputation, and that was an important consideration in the long term.
The argument that allowing ACL to go bust was a better commercial option for the council was dismissed initially in the Court of Appeal when Judge Hickinbottom said: ‘On the basis of all the evidence, in my judgement, a rational private market operator in the position of the council might well have considered that refinancing ACL on the terms in fact agreed was commercially preferable to allowing ACL to become insolvent.’
That view was later backed up by the Court of Appeal when Lord Justice Tomlinson ruled: ‘The circumstances that Sisu’s plan to buy out the bank debt had irretrievably run aground perhaps demonstrates that there was no viable alternative to the CCC plan, other than perhaps allowing ACL to go into insolvent liquidation, an alternative which the j
udge convincingly found the council was entitled to reject.’
The football club’s owners, on many occasions, suggested the bail-out of ACL in January 2013 had been done behind their backs. As we covered previously, there was a suggestion that Sisu actually knew about the council plan to take over the ACL loan. People will have to make their own decision on what the situation was in reality.
Regardless, Sisu strongly asserted the £14.4m loan to ACL was strongly motivated by a desire within the council to stop Sisu securing a stake in ACL and potentially force them out of the club.
There is evidence that there was ill feeling towards Sisu within the council. There is also strong evidence that ACL and the council believed they could force Sisu out as owners of the club through the administration process (which is covered later).
Internal council memos cited a distrust of Sisu, and one informal note taken during a council meeting in August appeared to suggest at least one member of the authority thought they should only do a deal for the Ricoh Arena with the hedge fund ‘when hell freezes over’.
That same note also asked ‘could Sisu sell on to another shyster?’, which clearly implied the author thought Sisu might seek to move on if they were unsuccessful in securing a share in the Arena.
There appears to be little doubt that those locked in disputes with Sisu would rather someone else ran the city’s football club. But why wouldn’t there be opposition to Sisu if these officials believed the hedge fund was trying to destroy a business which the council owned in partnership with a local charity?
A potential conflict of interest was also raised by Sisu’s legal team with Coventry City Council chief executive Martin Reeves and finance chief Chris West, both also appearing on the board of directors for ACL. Sisu suggested the pair could have had undue influence over the council’s decision to allow the loan to ACL. But the judge later said the advice provided to councillors by officers was satisfactory and even praised the thoroughness of the financial reports.
In summary, it’s almost certain there was animosity within the council towards Sisu at the time, but the courts were not impressed by the emphasis placed on this by the hedge fund’s QC.
Justice Hickinbottom branded it as irrelevant, suggesting Sisu was never in a position to agree a deal for a stake in ACL.
Justice Hickinbottom said: ‘The council do not accept that its officers acted in a manner “calculated fundamentally to undermine” the Sisu negotiations.
‘But, in any event, as I have explained, the Sisu plan had terminally stalled by the end of August 2012, because it was impossible for them to agree to purchase the Higgs Charity share in ACL, which was vital to the plan as a whole. This ceased being a material consideration well before January 2013.’
The Court of Appeal went further and labelled it a distraction from the real issues in its judgment.
Lord Tomlinson said: ‘I found merely distracting the appellant’s emphasis upon the apparent animosity towards Sisu manifested by some in the controlling group on the council.
‘I found equally irrelevant the council’s apparent belief, or at any rate the belief of some on the council, that Sisu had behaved in an unacceptable or predatory manner.’
He added: ‘Even if one accepts that some councillors wanted nothing to do with Sisu, and puts to one side the fact the decision of the council was in fact unanimous, still the focus of the enquiry is whether the transaction was one that could have been entered into by a market economy operator.’
The issue of how terribly Sisu believed they had been treated by the council emerged again during a Coventry City Council ethics committee hearing held over two days and concluded in January 2016. That committee ruled there had been no breach of the council’s code of conduct by Cllr John Mutton, who was leader of the council leading up to and at the time of the bail-out, and then council leader Ann Lucas.
Unsurprisingly perhaps, the result was branded a ‘whitewash’ by Sisu. But it did allow the hedge fund to make some of their grievances with the council public.
The ethics panel, made up of councillors from the Labour and Conservative Party, considered the complaints from Sisu and an independent report into what had occurred by Simon Goacher of law firm Weightmans.
The panel heard allegations that Cllr Mutton had been ‘rude’ and ‘aggressive’ towards Sisu boss Joy Seppala during talks with the council about acquiring a 50 per cent stake in the Ricoh Arena operating firm ACL during 2012.
But the author of the independent report, Mr Goacher, said the evidence was not there to back up those claims and questioned the timing of the complaint.
He said: ‘If the behaviour was as bad as you now say it was, you wouldn’t have waited three years to make a complaint about it.’
Cllr Mutton also dismissed the allegations, referring to one meeting where he and Ms Seppala had hugged and explained it wasn’t a one-off example of how they had communicated in the past, in a bid to demonstrate there was no animosity or aggression.
The club owners also said the language used by Cllr Mutton and Cllr Lucas in public statements at the time had been inappropriate and defamatory.
Cllr Mutton was quoted as saying that ‘Sisu is a predator with greed running through its DNA’ and had also admitted to chanting ‘Sisu Out’ at one match.
But Cllr Mutton said the first comment was simply him repeating during a BBC radio interview what former Coventry North East MP Bob Ainsworth had said in Parliament.
He added: ‘Yes, I did join in the chant [but] it wasn’t as a councillor [and] it certainly wasn’t as leader of the council.
‘It was as someone who has supported the club since seven years of age and was a season ticket holder that had seen the club go downhill rapidly during that time.’
Mr Goacher said Cllr Mutton had been entitled to make the comments because ‘what the law strives to achieve is a balance where people are allowed to express themselves in a way which allows robust discussion of matters in the public interest.
‘Some of Cllr Mutton’s comments get close to the line, I don’t think they cross it.’
He added the comments could also be justified as they were personal beliefs rather than gratuitous and personal insults.
As well as the conduct of the senior councillors during the Ricoh Arena discussions, Sisu attempted to suggest there had been a concerted media campaign against the football club and that the council had played an active role in it.
There was a catalogue of extracts from media articles included in Sisu’s evidence, which highlighted public comments made by councillors and officials in a bid to back up the argument.
E-mails and briefing documents from London PR firm Weber Shandwick were also read out which suggested targeting Joy Seppala, encouraging journalists to visit her at home and that a ‘media war’ was being fought. The PR company had been hired by by ACL – the firm which was jointly owned by the council and the Higgs Charity. However, both organisations denied use of the PR company directly and insisted Weber Shandwick was only ever employed by ACL. This distinction is made even more cloudy by the fact senior council officers and Higgs Charity officials sat on the ACL board at this time.
However, there did not seem to be any evidence that the suggestions made by Weber Shandwick were ever actually followed through. On the evidence available, ACL seemed to be paying hefty consultancy fees to a PR firm for advice that was never acted on.
The author of the independent report into the complaint, Simon Goacher, said: ‘When you follow the schedule [of e-mails] and what was actually said, it doesn’t seem to have been replicated. There’s no evidence of that. It isn’t translated to press comments to support this is what was going on.’
This allegation of press manipulation was seen as insulting to journalists at media outlets who had covered the Ricoh Arena saga over the years. The implication that a public relations firm is able to control members of the press and railroad them into writing exactly what they want is, in my experience, absurd
.
During my time covering the stadium issue, there has certainly been pressure from all sides to present things in a certain way from time to time. But journalists don’t tend to crack under pressure.
Some parties resorted to different ways of leaning on journalists. For instance, only Sisu has even resorted to involving solicitors – sometimes over seemingly obscure points – during my time at the Telegraph. It has also been my experience that the most pressure over the tone of coverage has undoubtedly come from the Sisu/CCFC side of the argument. During Mark Labovitch’s spell on the club’s board, I had regular dialogue with him.
That’s not to say others didn’t apply pressure, of course. However, I can honestly say you could probably count on two hands the amount of times Weber Shandwick, the charity or the council picked up the phone to me to complain about, or attempt to influence, coverage in the Coventry Telegraph in relation to the stadium saga.
But wherever the pressure emanated from, it was nothing more than a distraction and it certainly did not influence the way I reported or presented a story at any point. And I would hope none of the reporters at the Telegraph covering the stadium saga before I arrived could be bent to the will of any of the parties involved. I can confidently say nobody should question the professionalism of the team at the Telegraph today.
At various points throughout the Ricoh Arena saga, allegations of some sort of far-reaching conspiracy to target the club’s owners and force them out have surfaced repeatedly – usually when things don’t seem to be going so well for Sisu. I’m sure this is just a coincidence and in no way meant to distract from issues such as a lack of a new stadium or court judgments.
Since I joined the Telegraph in July 2013, the list of people apparently involved in this elaborate conspiracy theory has grown ever longer. As well as Coventry City Council, The Higgs Charity and ACL, I have also heard supporters group the Sky Blue Trust, elected members of Parliament and even my employers – the Coventry Telegraph – accused of colluding against Sisu.
Now I can categorically say that if there is some sort of elaborate conspiracy to ‘get Sisu’, I have never been forwarded the memo. Bearing in mind the thousands of pages of evidence, private communications and e-mails which have been turned over to the hedge fund after various legal actions, you would think some solid evidence of such a conspiracy might have emerged by now.
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