Portsmouth’s continuing purgatory
Posted by John Beech on July 16, 2010
The grounds on which HMRC are appealing are twofold:
(a) The interests of HMRC have been or will be unfairly prejudiced by the taking of that decision;
and (b) There were material irregularities in the way in which the votes of creditors were counted at that meeting.
My thoughts on the two grounds differ, but, before I start banging on, it should be declared for the benefit of any reader unfamiliar with this blog, that I am a Pompey fan, although I hope that this is in no way relevant to my views.
The first objection is a statement that HMRC have had enough of the football creditors’ rule, and do not see why the Exchequer should get a lesser percentage than the 100% which football creditors – clubs owed transfer fees, players on contract, etc. – are entitled to. Frankly, I have no problem with this view. The defence that football is somehow special and needs to maintain the integrity of its transfer market cuts no ice with me. I can see no valid reason that HMRC is de facto an unpreferred creditor.
However, I am uncomfortable with the fact that they are challenging this through the courts against one club. The circumstances are exceptional, at least with respect to the sum owed (whichever you happen to believe the right sum is) granted, although the rate – 20p in the £ – is unexceptional. Other recent cases include Darlington, where creditors accepted a reported 0.9p in the £, Crystal Palace with a reported 1.9p in the £, Salisbury City with a reported 27p in the £, and Northwich Victoria with a reported 42p in the £.
It strikes me that whether the football creditors in the case of a football club’s insolvency should or should not have a preferential status over an agency of government, HMRC, is a matter for parliament to decide rather than by the establishment of legal precedent in a particular court case, pursued by a particular agency of government. For very many years they enjoyed this status, until it was taken away by the provisions of the Enterprise Act 2002. This was an act of unbelievable folly, and that status needs to be restored by Parliament, by amendment of that Act.
In short, I entirely sympathise with what HMRC see as in injustice, but I think they are going entirely the wrong way about resolving that injustice. They should be lobbying Westminster rather than pursuing a court case. It is surely the role of Parliament to ‘reverse’ legislation rather than one of its agencies and a court.
The second ground of HMRC’s appeal – the ‘material irregularities’ argument is more complex. My understanding of what they claim are material irregularities is centred on two distinct aspects of what has happened: a) that the Administrator ruled that their claims regarding image rights were invalid and b) the Administrator should not be in the position where he can make such rulings.
On the latter, I tend to agree, but again this strikes me as more appropriately tackled through Parliament and legislation rather than through the courts. The courts might be the right place to deal with the former, but why bundle it in a dispute with Portsmouth? This issue first, in my reckoning, raised its ugly head with respect to Sol Campbell at Notts County – why didn’t they take Notts County to court to resolve the issue?
HMRC seem intent on bringing all the issues to a single head against Portsmouth, which strikes me as tactically naive from their own perspective. No doubt their motivation is pour encourager les autres. Why Portsmouth? Well, we keep coming back to the massive and exceptional size of the debt (even at the lower, Andronikou level) – the highest previously I find in my records is the reported £7.7m due to HMRC by Leeds United in 2007.
A mess, rapidly turning into a dog’s breakfast, and one which, in the worst case scenario, could see Portsmouth liquidated, and HMRC ending up with much less than the 20p in the £ they are rejecting. No-one’s a winner if that happens, except of course the lawyers.