Thursday, 13 January 2011

The Great Langston Debate

Since the turn of the year, debate has once again been raging on the Cardiff City message boards with regard to Sam Hammam and the mysterious Langston loan notes agreement. The arguments have been further fuelled in recent days by fanciful Media Wales reports suggesting that the Bluebirds’ former-owner could be set to make a dramatic return to the club.

On 5 January, Supporters’ Trust board member and football finance expert Keith Morgan outlined his thoughts concerning the loan notes and their likely impact on the club’s future in a lengthy post on the popular Cardiff City Online message board.

Within a matter of hours, self-styled Bluebirds oracle and staunch Sam Hammam supporter Carl Curtis had responded angrily on Annis Abraham’s message board. Curtis boldly stated that Morgan was “not in charge of all the facts” and was “on many issues factually incorrect.” He then published one of his notorious ‘updates’, in which he made a variety of unsubstantiated claims regarding the nature of the debt and the ways in which the club’s directors will have to deal with it.

In my opinion, Curtis’s piece was hopelessly one-sided and littered with inaccuracies. However, by the same token I’m not convinced that Morgan’s take on the current situation is entirely accurate either. Therefore, I think that now would be an ideal time to re-examine the information that is already available in the public domain regarding the loan notes debt. I’ve decided to pay particular attention to the lawsuit that Langston brought against the football club in August 2007, as I believe it is fundamental to understanding the issue.

The following review is based upon the information contained in copies of the club’s audited accounts from June 2004 to May 2009, the December 2006 notice to shareholders that was circulated ahead of the club’s January 2007 Extraordinary General Meeting, a transcript of Mr Justice Briggs’ March 2008 rulings on the legal battle between the Langston Corporation and Cardiff City Football Club and a variety of press cuttings from 2005 to present:

September 2004 – The First Loan Notes Agreement

The original agreement was drawn up in September 2004, when the previously-unknown Langston Corporation gave the football club an unsecured loan of £24 million. The bulk of that money was used to pay off Citibank, who at that stage were owed £21,766,000 and were charging the club interest on the arrears at a hefty rate. The loan notes deal meant the club became liable for interest at 7% per annum until January 2008, when a further 5% per annum was payable out of non-football profits from the new stadium development. The debt was repayable in full by 31 December 2011.

In the event, the stadium project suffered one delay after another and the club’s financial situation grew steadily worse. In October 2006, Sam Hammam stepped down as Chairman, ex-Leeds United supremo Peter Ridsdale took over the Ninian Park hot seat, and a restructured loan notes agreement with the Langston Corporation was negotiated almost immediately.

October 2006 – The Second Loan Notes Agreement

In late-October 2006, the Swiss-based Panamanian-registered company agreed to write down the loan notes debt from £24 million to £15 million in exchange for an entitlement to future income up to a maximum of £9 million arising from the sale of the naming rights at the new stadium. All historic interest was waived as a part of the deal, while interest on the remaining £15 million was set at 7% per annum.

The interest began accruing in March 2007, although the amended agreement stipulated that no payments of either the principle sum or interest were necessary until December 2016. The new agreement also meant that Langston became eligible for a £5 million ‘bonus’ payment if the Bluebirds managed to gain promotion to the Premier League before December 2011 or, if later, at any time that the principle sum of £15 million remained outstanding.

August 2007 – The Langston Litigation

On 14 August 2007, the Langston Corporation dropped an enormous bombshell on Cardiff City and its supporters when the company launched a major litigation against the football club. London-based law firm Hextalls issued a press statement revealing they had been instructed by Langston to commence legal proceedings against the Bluebirds to recover funds totalling £31,528,321.

The statement said: “Our client’s claim is that this sum is due for payment now as a result of the club’s inability to meet certain deadlines as well as breaching the terms of its loan agreement in respect of the capital sum plus interest. In the event that the club cannot meet its liabilities to our client, then the alternative is for the current board of directors to resign and our client to endorse the appointment of a new board and new management.”

Peter Ridsdale responded by saying: “We are astonished at the press release sent out today appearing to come from someone representing the Langston Corporation. Cardiff City’s board and Cardiff City Council have for some time been trying to identify who Langston are and have continually come up against a brick wall. We simply don’t know who they are. Sam Hammam, the club’s previous Chairman, has been acting as an intermediary with Langston and we have been in constant dialogue with him. He has always refused to divulge the identity of Langston and therefore we have never had any direct dialogue with them.”

Director Steve Borley dismissed Langston’s lawsuit as “scaremongering, posturing and misinformation.” He added: “This club is more stable now than it has been for years. The new stadium project will go ahead, there is no danger to that, and we are all focussed on moving forward. The board are totally behind Peter Ridsdale. Cardiff City would not be in the good state it is in now if it wasn’t for him. He has led us through the turmoil.”

Two days later, Ridsdale produced an agreement dated 24 October 2006 which he claimed proved the club had no obligations to pay Langston any money before December 2016. He told the Western Mail: “Without this document we wouldn’t have a new football stadium project. It was essential in order for us to demonstrate to the Council that we had a robust financial position so we could go ahead with the stadium. As far as we are concerned, it is legally binding. It is signed by the Langston Corporation and it is the document upon which all of the funding requirements for the new stadium project have been based.”

In another interview with the Wales on Sunday, Ridsdale said: “You have to ask if there is someone out there whose agenda is to destabilise the club. A lawsuit is certainly a strange way for Langston to try and get their money back as it’s in their interests for the club to prosper and we have a legally-binding agreement with them. The way this is being handled is surprising. Only someone who wants to cause the current board problems would take this route. You have to question who is behind it.”

Langston applied to the High Court for a summary judgement, which meant they were seeking a verdict in their favour without the necessity of a full trail as they believed the club had no legitimate defence against their claims. The first skirmish in the legal battle took place on 12 November, when Hextalls demanded the disclosure of various documents held by the club. City’s lawyers, Nabarro, had already given a written undertaking to provide the relevant papers, but Hextalls nevertheless took the matter to court. A brief hearing ruled the documents had to be presented by the club to Langston within seven days, but the plaintiff’s application for costs was dismissed by the judge.

Within a week, Hextalls had issued a further statement on behalf of Langston. It read: “With no prompting by Langston, Cardiff City Football Club has raised the spectre of administration. Hextalls is instructed to state that administration is not an option being considered by Langston. The success of the club on and off the pitch and the completion of the new stadium are in the interests of everybody. All that Langston wants is to be paid what is due to it. As previously stated, Langston has lost confidence in the board of directors, who should relinquish control of the club to Langston.”

Peter Ridsdale replied by saying: “If the court case goes ahead and the ruling goes in Langston’s favour, there won’t be any alternative other than administration, so they won’t get any of the money they are owed. I believe they would be lucky to get a penny in the pound. If Langston lose the court hearing and the judge deems it can go to a full trial, that wouldn’t happen for at least 18 months because of the legal paperwork involved. However, there is a third option, which is the common sense one. Namely that Sam Hammam sits down and talks to us and the court case is called off.”

The High Court hearing was originally scheduled for 10 December, but just three days before that date it was revealed that Langston’s lawyers had applied for an adjournment. In an open letter to Hextalls, Nabarro said: “Your client’s unwillingness to proceed on Monday gives rise to a strong inference that it believes it will be unsuccessful. The club has robustly defended itself and will continue to do so. Our client has no intention of wasting further money on costs and very reluctantly agrees to adjourn.”

In response, Hextalls issued another statement on Langston’s behalf claiming the adjournment was down to the football club. They said: “The true position is that Cardiff City failed to serve its evidence in accordance with court rules. It is a consequence of the club’s failures that have led to the summary judgement hearing being deferred to another date. Langston remains confident that it will successfully recover the monies that are due to it.”

On 10 December, PMG director and major club investor Mike Hall spoke to the South Wales Echo about the ongoing situation. Hall said: “For the avoidance of doubt, Cardiff City Football Club is totally committed to repaying Langston in full. But there is no way we will ever entertain Sam Hammam or Langston having anything to do with the running of the club. Paul Guy (Hall’s business partner) and I have no axe to grind with Sam Hammam. There is no personal grievance. We have acted in the best interests of Cardiff City – not with words, but with cash. The legal action by Langston is unwarranted and aggressive. It is placing a financial stranglehold on the club.”

In a bizarre twist, Sam Hammam contacted close confidant Annis Abraham on 17 December and dictated an open letter to Echo sports writer Terry Phillips. Hammam said: “I want to stress that I never want the football club back. I want to move on with my life and the decision has been made to leave the United Kingdom for good. I am never coming back. I am drained and I am hurting. I have lost my power. My wings have been taken away from me. All I want now is for everyone to get their money. I say again, I just want to get on with my life and be with my family. I am not Langston and I cannot tell it what to do. Langston got fed up with me long ago. I have no power over it. I never want to hurt Cardiff City and never would. I love the club, I love the fans and hopefully this will be sorted in the New Year. All I want is a future for Cardiff City Football Club, but I won’t be a part of it. I love the club and want the fans to remember me and love me.”

Lifelong Bluebirds fan Abraham commented: “While Sam was on the phone I asked him: ‘Are you Langston? Please be honest if you think anything of me.’ He told me he is not Langston and said he can’t tell Langston what to do. Sam was different to the man I have known in the past. He was quiet and sounded drained. He said he won’t ever try to hurt Cardiff City.”

When asked by the Western Mail to comment on Hammam’s open letter, Peter Ridsdale said: “I don’t know what to make of it, but if you take it at face value then it reads like a cry for help from a man who is desperate to be loved again. Here is a man who, in my view, has lost the will of the Cardiff City supporters and is trying to get back in favour. I think it’s absurd really. The letter does not actually say anything and nor does it answer any of the questions that are important to the club and its fans. He does not tell us who Langston are or how they can be persuaded to find a solution to this situation once and for all. It is fine to claim to love the club, but it’s action that people expect, not words. While we are fighting to safeguard Cardiff City, it is my view that Sam Hammam’s statements are of no help to anyone but himself.”

The dispute finally came to a head during a two-day hearing at the Royal Courts of Justice on 12 and 13 March 2008. After listening to the lengthy legal arguments presented by David Wolfson QC on behalf of Cardiff City and Michael Driscoll QC on behalf of the Langston Corporation, the Honourable Mr Justice Briggs retired to consider the evidence. He delivered his verdict on 19 March and ruled in favour of the football club on all three of the technical points upon which Langston’s lawyers had based their request for a summary judgement without a full trial.

Judge Briggs stated that Langston’s claim was “plainly not a case for summary judgement”. He said the club “had a realistic prospect of establishing a defence” on each of the technicalities cited by the creditors as contraventions to the loan notes agreement. The judge refused Langston leave to appeal, saying: “I consider this to be a clear case and I do not consider that an appeal stands any reasonable chance of success.” He added: “In my judgement, the club has a real prospect of obtaining the remedy of rectification it seeks.”

Mr Justice Briggs concluded there was also a “real prospect” that a full trial would conclusively prove that Sam Hammam was “the governing mind and will” of the Langston Corporation at all times. His verdict was a resounding victory for the football club, who were awarded legal costs of around £80,000 at the plaintiff’s expense.

December 2009 – The Third Loan Notes Agreement

In December 2009, a number of further amendments to the loan notes deal were agreed with Langston representative Sam Hammam. The new agreement had five key terms, which were:

1) Payment by the club to Langston of £83,333 per calendar month starting in January 2010.

2) A reduction in the principle sum to £10 million (less any monthly payments made) if the debt was repaid in full by 31 December 2010.

3) Payment by the club to Langston of up to £5 million if the new stadium naming rights were sold and/or promotion to the Premier League was secured, together with a further payment of £5 million if the club either retained its Premier League status or was promoted a second time thereafter.

4) An undertaking by Langston to suspend any legal proceedings against the club until 31 December 2010.

5) An undertaking by both parties to reach an agreement covering the full term and settlement of the loan notes by 31 December 2010 if the principle sum had not been repaid by that date.

While discussing the new loan notes agreement during a meeting at the Cardiff City Stadium in December 2009, former-Chairman Peter Ridsdale told me that the deal would remain valid until December 2016. He claimed there were major incentives for early repayment of the debt which could see the club’s liability reduce significantly (eg: if the debt was settled in full by December 2010, the total payable would be £10 million; if it was paid in full by December 2011, the amount required by Langston would be £11 million; if it was settled by December 2012, the total sum would be £12 million; and so on until December 2016, when the remaining balance of £8,000,000 would be due.). He also stated that all interest, both historical and future, had been waived by Langston.

Judging by the post balance sheet events listed in the club’s independently audited accounts for the year ended 31 May 2009 (which were filed at Companies House in July 2010) I now have considerable doubts as to whether the latest amendments to the loan notes agreement are valid until December 2016 as Ridsdale suggested. My feeling is they probably expired at the end of last month. I guess we will have to wait until the May 2010 accounts are published before we can be absolutely sure about that, but what is already certain is that the club failed to meet the December repayment deadline, so the matter is still ongoing.


Having considered all of the information that is already in the public domain, I have reached the conclusion that the loan notes agreement which is currently in effect is almost certainly the version that was drawn up in October 2006. To me, that appears by far the most logical scenario.

During his so-called ‘updates’ on Annis Abraham’s message board, Carl Curtis has repeatedly claimed that the terms of the agreement have reverted to those of the original deal (ie: £24 million plus interest backdated to September 2004) as a result of the club’s failure to repay the principle sum in its entirety by the end of December 2010. Personally, I don’t for one moment believe that’s an accurate reflection of the present situation.

After successfully fighting to preserve the terms of the October 2006 agreement during a lengthy and expensive High Court battle, it would have been utter madness for the club’s lawyers to sanction any further amendments to the deal which would have allowed the debt to rise to almost £35 million if it wasn’t repaid in full by the end of 2010. In my opinion, the Bluebirds’ legal representatives demonstrated in 2008 that they are a good deal smarter than that.

Unfortunately, many of the details with regard to the Langston situation that Cardiff City fans are currently reading on the internet forums are being supplied by a young man from Neath who has perhaps unwittingly set himself up as Sam Hammam’s personal information minister. Carl Curtis was apparently introduced to Hammam by Annis Abraham in June of last year and he appears to have been somewhat star struck by the experience. Ever since that initial meeting, Curtis has been speaking to the maverick Lebanese businessman on a regular basis and has been leading the calls for his return to the club.

Meanwhile, much of the alleged ‘information’ he has posted about the Langston affair on the message boards has been little more than pro-Hammam propaganda, some of which has probably come direct from the man himself. Those of us who have enjoyed close relationships with Sam in the past will no doubt have recognised his style in several of Curtis’s recent submissions.

As regards the loan notes issue, the version of events that Curtis has been furiously peddling for the last six months is undoubtedly the one that Hammam would want everybody to accept. However, I’m confident that a High Court judge would see things rather differently, although given the way that the 2007 summary judgement application worked out I’d be amazed if Langston would ever take this business back into court. In my opinion, which is based largely on Mr Justice Briggs’ rulings back in 2008, they haven’t got a leg to stand on.

Having done all of the necessary calculations, I firmly believe that the loan notes debt (including interest backdated to March 2007) currently stands at around the £18 million mark, although an additional £5 million will be payable if the team secures promotion to the Premier League and any money the club manages to raise from the eventual sale of the Cardiff City Stadium naming rights will also go to Langston. Crucially, however, the bulk of the debt (ie: the £15 million principle sum and interest) isn’t repayable until December 2016, so there is plenty of time yet for the Bluebirds’ hierarchy to negotiate a more favourable deal.

The Bizarre ‘Bring Back Sam’ Campaign

Thanks mainly to the timely intervention of wealthy Malaysian businessmen Vincent Tan and Dato Chan Tien Ghee, Cardiff City Football Club currently appears to be in its most stable financial position for many years. Meanwhile, the team is occupying second place in the Championship and looks to have a genuine chance of automatic promotion to the Premier League. Therefore, it seems utterly bizarre that a small but persistent group of supporters are rocking the boat by actively campaigning for the return of Sam Hammam – a volatile and divisive character who dragged the club up from the lower divisions but who also led it to the brink of financial disaster.

Nobody associated with Cardiff City has ever polarised opinion in quite the same way that Hammam does, so it’s understandable that feelings are running high following reports that he intends to get involved in the running of the club once more. Under the circumstances I think it’s entirely reasonable for people to question the motives of the individuals who are taking part in what appears to be a mini-crusade on Hammam’s behalf.

Bear in mind that one of the main protagonists has been honest enough to admit that he never wanted the club to leave Ninian Park and was happiest when the Bluebirds were playing in the lower leagues in front of small crowds, while another has long been considered Hammam’s staunchest ally here in South Wales.

So why are these particular supporters desperate to see such a temperamental and controversial figure as the ex-Wimbledon owner return to Cardiff while things are apparently going so well for the club? It’s a genuine puzzle and I won’t even try to solve it, but what I will say is that the timing of this peculiar episode couldn’t be much worse. The new regime is working hard to rectify the problems caused by a decade of financial mismanagement, the team is battling to win promotion to the top flight, and yet divisions are starting to appear within the Bluebirds’ fanbase because a small number of Sam Hammam's disciples want him back at the club. I was going to say you couldn’t make it up, but sadly you don’t have to.

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