Thread by @mikemccarthy

I’ve now read all 138 pages of the UTB LLC v Sheffield United judgement, it contains some fascinating and sometimes extraordinary details.

judiciary.uk/judgments/utb-…

Thread...

First some background, the dispute revolves around the investment and shareholders agreement (ISA) between Kevin McCabe (Sheffield United Limited) and Prince Abdullah (UTB).

In 2013 UTB received a 50% shareholding of Sheffield United after it agreed to invest £10m into the club over two seasons from 2013/14.

There was then a misunderstanding over what would happen after that. McCabe thought Prince Abdullah would underwrite losses, the Prince believed the bills would be spilt 50-50. Neither appeared to be correct.

To make the club more attractive (and cheaper) some assets including Bramall Lane and the training ground were separated from the club and held by SUL. They would be returned to club ownership if either party went on to hold more than 75% of the shares.

It soon became apparent that Prince Abdullah was not as wealthy as Kevin McCabe had been led to believe.

Worse, Prince Abdullah’s financial situation was becoming more problematic after the decline of his paper business which was described as his main source of income.

Disagreements about funding arose by 2015 at the end of the first two years of the agreement with “neither side well placed to inject further cash.”

The two sides were in disagreement about how the Prince’s investment had been spent. There is talk of trying to find another investor as early as 2015.

For the 2015-16 season both sides agreed to invest £4m each, split into instalments. UTB put its money in as agreed, but then Kevin McCabe did not do likewise.

This dispute was settled a few months later.

Prince Abdullah was concerned about how the club was being run and sent two representatives to report to him. They described management of the club as “a fiasco and chaos…where no controls or processes were imposed.”

But Prince Abdullah was now struggling to pay for his share of the bills. The club was only saved from insolvency in December 2016 when SUL put more cash in to cover the Prince’s share.

Prior to this, an investment from the Qatari Investment Authority, was explored but fell through.

A new investment, Project Delta, seemed to have more weight behind it. The investor was presented as Sela Sport, but it turned out to be the bin Laden family.

The loan was not repaid in time to avoid Sheffield United being put under a transfer embargo during the summer of 2017.

The judgement spends a lot of time discussing things Prince Abdullah wanted to happen but never did (such as the appointment of Deliotte to review how well the club was being run) or did not want to happen (including the removal of Stephen Bettis as CEO).

Bettis was told to resign by McCabe, but knowing Prince Abdulla wanted him to remain, he didn’t. This led to Kevin McCabe removing Bettis from the payroll without the knowledge of Bettis or the Prince.

To settle disputes in the ISA there were plans for informal mediation, then formal mediation. Ultimately one party could offer to buy the other out, knowing that they would have to accept a counteroffer at the same price.

After McCabe received a proposal from ALK Capital to purchase the club he considered the options for buying out UTB.

SUL served a call option on UTB on 29th Dec 2017. UTB served a counternotice, but only after an attempt to move it’s own shares. The plan was to not go above the 75% ownership threshold and trigger the purchase of Bramall Lane and other assets.

It didn’t work.

What follows is plenty of detailed legal argument about the parties obligations to each other to, amongst other things, act in good faith. There were clearly moments when both sides acted in bad faith towards the other, but the judge rules it doesn’t matter.

Along the way Mr Justice Fancourt is less than complimentary of Kevin McCabe on several occasions. Though he does recognise his “considerable generosity” towards Sheffield United.

The judge also describes some of the evidence provided by accountant Jeremy Tutton as a “fabrication”

The judge calls Prince Abdullah ‘a generally reliable witness’, but noted some concerns and pointed out he is “not a man for small detail”.

The breakdown of the working relationship between Kevin McCabe and Prince Abdullah is covered in some detail. These paragraphs are enlightening.

The judge finds Prince Abdullah to be justified in his annoyance at Kevin McCabe’s behaviour.

On the offer of £5m for UTB’s shares, the judge found that Kevin McCabe "hoped and expected" UTB would be unable to afford to buy out SUL and the associated properties.

SUL claimed that UTB was in breach of contract for its conduct. Here’s the judge’s response.

Did rebukes and criticisms of McCabe from UTB ultimately force the serving of the call notice as claimed? The judge says it “doesn’t stand up to analysis”.

In court SUL argued UTB had misappropriated funds by paying Stephen Bettis his November 2017 salary after he had been removed from the payroll without his knowledge. The judge finds not only was this the right thing to do, it is also a reason Bettis decided to return as CEO.

Neither did Mr Justice Fancourt seem to find much credit in the argument advanced by SUL that it would not be in the best interests of the club for UTB to gain full control.

The decision, as widely reported yesterday, is to enforce the sale of SUL shares for £5m, and for SUL’s property (stadium, training ground etc) to be transferred back to the club by July 2020. That will cost considerably more.

An appeal can be made from 14th October. Kevin McCabe says he is considering it. As it stands the club is moving into a new era and uncharted territory. Prince Abdullah in a statement says he wants to invest in the club. Time will tell.