A recent High Court decision has brought attention to the financial intricacies and legal obligations within the realm of sports law, as a prominent sports law firm has been unable to stop a litigation funder from proceeding with a winding-up petition due to an unpaid loan.
Judge Curl KC, serving as a deputy judge in the Insolvency & Companies Court, has ruled against Manchester-based IPS Law in a case involving a significant financial dispute. The case centres around a £500,000 loan extended to IPS Law by Safe Harbor Equity, a US company, which IPS Law failed to repay. The funds, originally intended as bridging finance to facilitate litigation under the arrangement known as ‘Project Red Card’, have become the focus of the contention as Safe Harbor seeks to recover the debt.
The disagreement stems from alleged assurances given to IPS Law that the facility agreement underpinning the loan would not be enforced. Chris Farnell, owner of IPS Law, asserted that verbal and email communications assured the firm of non-enforcement. However, Judge Curl found no decisive evidence to support these claims. Mr Farnell’s cited assurances from conversations with Safe Harbor’s managing director, Rafael Serrano, were deemed commercially impractical. The judge’s analysis suggests that any rational party would have sought written confirmation of such assurances, particularly in a commercial context.
Furthermore, IPS Law argued that it held cross-claims amounting to £60 million. This was based on alleged contractual rights to a share of potential damages from the Project Red Card litigation, claims that Safe Harbor had induced contract breaches, and unauthorised disclosure of confidential information. However, Judge Curl noted that IPS Law, as the solicitor for the project, could not claim confidentiality against its own client, GSDT, and that no enforceable rights to litigation or damages existed under the unsigned agreements between IPS and GSDT.
Judge Curl concluded that IPS Law’s application to prevent the petition’s advertisement lacked substantial grounds. The loan terms were consistently upheld by Safe Harbor, undermining IPS Law’s position. His decision indicates that IPS Law’s allegations were inconsistent with the documented negotiations and independent legal counsel that had been advised.
The court’s decision underscores the importance of clear, enforceable agreements in financial dealings within the legal sector. This case illustrates the complexity of litigation funding and the critical need for transparency and sound documentation in contractual relationships.