EFL charge Derby over ffp

[EssendonRam]

On 18/01/2020 at 20:59, ilkleyram said:

Much though I like the strength of the statement from Mel unfortunately we have only really got a good flavour of one side of the case. We have largely presumed what the EFL's case is.

Experience tells me that it is most often best to wait and see what both arguments are. There are question marks about our use of residual values, for example and how appropriate they are. 

If we do have letters from the EFL that agree both our valuation and the way we have treated residual values then I hope that they are clear and under lock and key, because they will be the difference between our winning and losing 

The most sensible post in the entire thread (and I’ve read every one of the 65 pages trying to understand what’s going on).

First, some words of caution: this is a charge. As much as I enjoy the conspiracy theories, bodies like the EFL don’t formalise charges on matters such as these unless they believe there are grounds. People can fantasise about the EFL doing it to satisfy Gibson, etc but, in the legal world, that just doesn’t happen. Why “in the legal world”? Because that’s very much where this is. If the EFL have brought these charges without reasonable foundation and vexatiously, the very damages that several posters have raised are a cause of action that’ll be very costly for them. 

Secondly, I acknowledge that the statement from Derby is very strong and categorical. I agree with @ilkleyram that the “written approval” is decisive assuming it’s clear and unqualified. Under the principle of estoppel, the EFL will be precluded from retrospectively withdrawing its approval. That DCFC has relied upon said approval is, in legal terms, the veritable cherry on top.

On one very large condition: provided there was no misrepresentation, deliberate or otherwise, that procured the approval. Even if the approval was given by an EFL employee that was not authorised to give it, the EFL are bound by it unless there are reasonable grounds to show that DCFC knew, or should have known, that it could not be relied upon.

Once again, these are very basic, long-standing legal principles even if the facts surrounding them can be ‘murky’. A tribunal or court will determine if these approvals will withstand scrutiny very quickly.

Which brings me to my concerns: if we’re entirely honest about it, Mel Morris can be quite litigious and has a history of “talking big initially, settle quietly” in at least two recent legal stoushes of which I’m aware; namely the Rush case and McClaren’s compensation after his first sacking. (Indeed, he didn’t settle quietly in the McClaren matter, he folded quietly for he had no legal leg to stand on.)

That’s relevant only to the extent that we must bear in mind the club’s statement, as strong as it is, is only the club’s view of the facts and it’s never wise to prematurely celebrate until you’ve seen the other guy’s cards.

 For mine, the first sign of the club’s degree of confidence in these approvals will come early in the working week (your time). If the club has these approvals in writing and they’re unqualified and unambiguous, I’d be amazed if Derby’s counsel’s advice is not to seek urgent injunctive relief.

In other words, prevent the EFL from proceeding with the charges. Given the likely damage to the club of the timing, a court will be very receptive to issuing an injunction. If that action isn’t taken early this week, it could be a sign that there’s more ambiguity in the issue than the club statement suggests.

But back to the statement: the claim that the club adjusted the valuation at the request of the EFL is also a critical fact in legal terms; potentially almost as decisive as the written approvals.

Why? Because it suggests the EFL assessed and was actively involved in determining the issue. If it’s correct, their ability to claim a mistake (or, indeed, that they may’ve been inadvertently misled) is compromised.

It’s a question of fact rather than legal principles but the claim that the EFL not only rubber-stamped the valuation but proactively requested changes that were accepted in full is likely deterministic in terms of the outcome.

Despite my concern about Morris’s past bellicosity in legal matters being somewhat of a chimera, that claim seems very very specific and very dangerous for the EFL.

As I say, watch this space. If Derby don’t seek expedited relief via the courts early this week, the question is “why not?”

[The Scarlet Pimpernel]

Thank you for that EssendonRam.... You sound as if  you are a lawyer or have a legal background so appreciate your input... 

[EssendonRam]

1 hour ago, RamNut said:

I’m speculating like everyone else. But if you care to check back you will indeed find that I was the one who broke the story about the roof. That turned out to be true despite a lot of cynicism and snidey remarks in response to my thread.

I also believe what I was told about the second investor. I think if the new company was 50/50 it would be classed as arms length, but that’s not my area of expertise. I was told the second investor was someone who had been involved with Derby county previously. I offered a few names - all of which were rejected: Peter gadsby, Adam Pearson, Tom Glick, Andy Appleby. I still suspect it was one of the Americans or Adam Pearson. It seems plausible. It would explain why the EFL advice would have been correct at the time but wrong in hindsight. It ties in with what @Ramleicester has suggested.

we’ll soon find out. 
 

 

 

No, legally you’re wrong @RamNut (as you have been on several points throughout this thread tbh starting with an employer’s, ie the EFL’s, vicarious liability for the actions of their employees).

Not only would an equal partnership (ie 50-50) still be a related party on the objective definitions but a less than half-share related to Morris can still trigger the broader definitions.

Whether a transaction is at arm’s length is triggered whenever related parties are involved and the question of whether related parties are involved is determined by ‘effective influence’.

[europia]

22 hours ago, RamNut said:

I hope they change the rules to expressively exclude income received from stadium sales as a means to offset revenue losses. Then the nature of the transaction will be irrelevant and the assessment of the valuation will be irrelevant. 

Yes definitely. That would remove any ambiguity. 

[EssendonRam]

23 hours ago, RamNut said:

Our statement doesn’t say that at all. It says make  “ a small adjustment in respect of its FFP/P&S submissions”. No reference to valuation.

Once again, you’re factually wrong @RamNut.

 

 The statement says, verbatim:

”The Stadium was valued by professional valuers immediately prior to the transaction. The transaction and valuation were discussed extensively with the EFL Executive, which asked for a relatively modest price adjustment which was accepted.”

It could not be more clear that the EFL reviewed the valuation and the proposed sale price and asked for the sale price to be adjusted. It’s not a statement about the general “FFP/P&S submissions” at all. It could hardly be more specific than that.

[EssendonRam]

23 hours ago, RandomAccessMemory said:

For reference to my earlier post about the club repeatedly mentioning the EFL Executive and the FFP/P&S rules also repeatedly mentioning the Executive, I thought to look at the definition section of the EFL rules, this is what it says:

https://www.efl.com/-more/governance/efl-rules--regulations/section-1----general/

I re-read the club statement and noticed the wording:

Maybe it's just me reading it wrong (it is late!) but would it be worded 'which asked for', if the EFL Executive referred to was a single person?

If you’re talking in pure English terms, you’re quite right. “Which” would be “who” if it was an EFL executive. But it’s in legal English; hence the capitalisation of the word “Executive”.

And that means the “EFL Executive” is whatever the EFL says it is. You’ve touched upon an important point the statement is making; whether or not the “Executive” was (for instance) the CEO or the full Board (or the ladies in the lunchroom), the statement is deliberately inferring that that person/those people were vested with the authority to make the decision by the EFL.

[B4ev6is]

Tell us something then law man

We have in writing that mel sound pp and brought it back to himself and had in writing and efl signed it okaying the matter and yet now saying they made a mistake surely they dont have a leg to stand on.

[rynny]

1 hour ago, EssendonRam said:

For mine, the first sign of the club’s degree of confidence in these approvals will come early in the working week (your time). If the club has these approvals in writing and they’re unqualified and unambiguous, I’d be amazed if Derby’s counsel’s advice is not to seek urgent injunctive relief.

In other words, prevent the EFL from proceeding with the charges. Given the likely damage to the club of the timing, a court will be very receptive to issuing an injunction. If that action isn’t taken early this week, it could be a sign that there’s more ambiguity in the issue than the club statement suggests.

This issue is not going to court, just yet, it is an independent disciplinary commission. We have no way of stopping that from happening. 

[EssendonRam]

14 minutes ago, rynny said:

This issue is not going to court, just yet, it is an independent disciplinary commission. We have no way of stopping that from happening. 

On what basis do you say that?

The issue can be taken to court - by Derby - to seek an injunction. 

[EssendonRam]

22 minutes ago, B4ev6is said:

Tell us something then law man

We have in writing that mel sound pp and brought it back to himself and had in writing and efl signed it okaying the matter and yet now saying they made a mistake surely they dont have a leg to stand on.

Think of it this way: that’s what Mel and Derby think happened. Until you know the EFL’s view of what happened, you can’t be sure they don’t know something that changes Derby’s understanding.

 

[BriggRam]

13 hours ago, jono said:

So while we all speculate about motives, rights wrongs and outcomes does anyone know how long this process will take ? 

About as long as the investment close thread

[rynny]

6 hours ago, EssendonRam said:

On what basis do you say that?

The issue can be taken to court - by Derby - to seek an injunction. 

Because the independent disciplinary panel will hear all the evidence from both parties and then make a decision. If they do not rule in our favour then I imagine we will take it further, hence why I said it is not going to court just yet. 

[LeedsCityRam]

2 minutes ago, rynny said:

Because the independent disciplinary panel will hear all the evidence from both parties and then make a decision. If they do not rule in our favour then I imagine we will take it further, hence why I said it is not going to court just yet. 

I think the point Essendon is making is that we could seek an injunction to stop it going to an independent disciplinary committee at all. If we believe that the previous written assurance from the EFL is clear, unambiguous & consistent with what we did, we should be prepared to go to court now to stop any further developments.

[Ghost of Clough]

A lot of fuss has been made about us selling our stadium for double the value stated in the accounts, yet nothing has been said about Wednesday selling theirs for almost triple - it's only been about the date of the sale.

PPS cost £28m to build. In today's money that is equivalent to roughly £56m. We've made improvements since then, so I feel it's safe to assume our stadium valuation is above this figure.
Althogh, applying the same logic for Reading doesn't quite work. They spent £50m building it and in today's money that would be almost double (£95m). Instead they sold it at half the original build cost (£23m?)

Brighton's 30,750 capacity stadium was opened in 2011, at a build cost of £93m.
The Ricoh Arena built in 2005 and expanded in 2010, had a total build cost of £113m.
Huddersfield's 24k capacity stadium was £40m in 1993 (£84m today).
Hull's (£42m in 2001) and Cardiff's (£48m in 2007) would be equivalent to around £70m today.
Brentford are spending £70m on their new 17,250 seater stadium (and 7 residential buildings for 500 apartments)

I feel there's enough out there to validate our £81m price tag.

[cheron85]

7 hours ago, EssendonRam said:

The issue can be taken to court - by Derby - to seek an injunction. 

Taking them to court would be a huge escalation though - I don't see that happening right away

The rules we've broken are EFL rules - Not laws - The EFL is a member organisation, the rules are come up with and then ratified by the members (ie, clubs) and then regulated by the EFL - The breaking of the rules isn't a legal matter (yet) and I think an actual legal case would be a rapid escalation of the current situation

You're absolutely right when you say we don't know what the EFL are charging us with - And until we know/understand the detail we can't properly argue against it - However I would have thought an appeal to the other member clubs of the EFL would be a more likely next step than legal proceedings 

[RamNut]

6 minutes ago, Ghost of Clough said:

I feel there's enough out there to validate our £81m price tag.

If we made a 40m profit by selling for 81m, is it the 41m asset value that is the issue?

[Ghost of Clough]

2 minutes ago, RamNut said:

If we made a 40m profit by selling for 81m, is it the 41m asset value that is the issue?

It wasn't for Sheff Weds

[The Scarlet Pimpernel]

29 minutes ago, Ghost of Clough said:

A lot of fuss has been made about us selling our stadium for double the value stated in the accounts, yet nothing has been said about Wednesday selling theirs for almost triple - it's only been about the date of the sale.

PPS cost £28m to build. In today's money that is equivalent to roughly £56m. We've made improvements since then, so I feel it's safe to assume our stadium valuation is above this figure.
Althogh, applying the same logic for Reading doesn't quite work. They spent £50m building it and in today's money that would be almost double (£95m). Instead they sold it at half the original build cost (£23m?)

Brighton's 30,750 capacity stadium was opened in 2011, at a build cost of £93m.
The Ricoh Arena built in 2005 and expanded in 2010, had a total build cost of £113m.
Huddersfield's 24k capacity stadium was £40m in 1993 (£84m today).
Hull's (£42m in 2001) and Cardiff's (£48m in 2007) would be equivalent to around £70m today.
Brentford are spending £70m on their new 17,250 seater stadium (and 7 residential buildings for 500 apartments)

I feel there's enough out there to validate our £81m price tag.

I think the club statement sounded very content regarding the status of the independent valuers and their valuation. Looking at your post above I can see why.

[RamNut]

9 hours ago, EssendonRam said:

No, legally you’re wrong @RamNut 

Not only would an equal partnership (ie 50-50) still be a related party on the objective definitions but a less than half-share related to Morris can still trigger the broader definitions.

Whether a transaction is at arm’s length is triggered whenever related parties are involved and the question of whether related parties are involved is determined by ‘effective influence’.

your vicarious liability point is interesting, but the employee was not the auditor of the ffp submission. 
I did say that I don’t know at what point a related party becomes an arms length organisation but I still think this could be the key to the issue, with the EFL advice being based on transfer to an external organisation. 

I said at the time how I didn’t understand how an asset listed at 56m in our own accounts could simultaneously be valued at 41m and sold for 81m. After all these months that does indeed seem to be the issue.

whatever happens happens. A lot of people seem very determined to believe that the club were acting correctly.

but the fundamental reality is that the club overspent on dross, and ended up losing ownership of its own stadium as a result.

not great stewardship in my book. 

[EssendonRam]

1 hour ago, LeedsCityRam said:

I think the point Essendon is making is that we could seek an injunction to stop it going to an independent disciplinary committee at all. If we believe that the previous written assurance from the EFL is clear, unambiguous & consistent with what we did, we should be prepared to go to court now to stop any further developments.

Exactly.

7 minutes ago, cheron85 said:

Taking them to court would be a huge escalation though - I don't see that happening right away

The rules we've broken are EFL rules - Not laws - The EFL is a member organisation, the rules are come up with and then ratified by the members (ie, clubs) and then regulated by the EFL - The breaking of the rules isn't a legal matter (yet) and I think an actual legal case would be a rapid escalation of the current situation

You're absolutely right when you say we don't know what the EFL are charging us with - And until we know/understand the detail we can't properly argue against it - However I would have thought an appeal to the other member clubs of the EFL would be a more likely next step than legal proceedings 

Need I remind you that the club’s statement describes the issuing of the charge as “unlawful”? In other words, that it’s against the law for the EFL to bring these charges.

EFL rules are still subject to the laws of the land and, again, that’s one of the precise purposes of injunctions; to prevent, in commerce (which professional football in case there’s any ambiguity about that) an unlawful act being perpetrated that’ll jeopardise your commercial interests.

Indeed, were Derby not to seek an injunction to stop the charges, the question of why we didn’t seek to mitigate the damage done to our business would be asked very strongly in any future action by Derby seeking damages from the EFL.

You seem to be under the misapprehension that seeking an injunction is a major legal matter. It’s not. Courts are more willing to provide injunctions where an applicant can show cause that an act (a) is not within the lawful powers in a commercial relationship; and (b) that the act could cause irreparable damage to the applicant.

In such cases, courts tend to ask “why can’t we put this in abeyance for a period until we can establish the bona fides of the applicant’s claim?” Think about it: in such a hearing - assuming, as I said earlier, Derby have these written approvals - the EFL would  be asked “why can’t these charges be deferred until we can properly assess Derby’s claim?” If a court ultimately decided that there’s reasons to question the approvals supposedly given, the injunction can be lifted.

Frankly, if the facts are as Derby say they are, it’d be the cheapest way for Derby to protect the business. Anyone with a legal background would tell you that, unless there are compelling reasons not to do this, it’s by far the smartest strategy.

Hence, my concern as expressed earlier: if Derby don’t seek an injunction, the question “why not?” needs to be asked very strongly.

This notion of not “escalating” the situation is, quite honestly, a bit ridiculous. It suggests that you neither understand the law nor quite grasp how seriously this could damage Derby.

The EFL isn’t investigating Derby for breaching FFP. It’s charged Derby for breaching FFP and in the middle of a transfer window at that.