Former football club director’s action for repayment of loans refused

Court of SessionA former director of a Scottish Championship football team who loaned more than £200,000 to the club has failed in a legal action to recover the money.

The pursuer Gerard Nixon, who was a director of the defender Livingston Football Club (LFC) between 2009 and 2013, sought decree of payment of a total of £215,367.48, but a judge in the Court of Session ruled that he failed to prove that he was entitled to repayment of the sums loaned on demand.

Lord Tyre heard that when the pursuer was a director of LFC along with certain other individuals he made a number of loans to the club during a period prior to and after its exit from administration in 2010, before the majority of the club’s board later voted to remove him in 2013.

The businessman, a Livingston fan, ran a painting and decorating business and wished to participate in efforts by other supporters to save the club.

He was part of a group who successfully bid for the club after it went into administration in 2009 because of debts owed to West Lothian Council.

Some of those loans were made by the pursuer himself and some were made by companies owned and directed by him, with the total sum repayable agreed to be £215,367.48.

The pursuer sought decree for payment of that sum which, he claimed, was “repayable on demand in the absence of any contrary agreement”.

However, LFC contended that the pursuer, along with other investors, agreed in 2010 that the loans would not be repayable until LFC was able to make repayment, which it said it was not.

The principal issue was the terms upon which the loans by the pursuer and his companies were made.

The judge said that after hearing evidence in the case, he was satisfied that an agreement was reached in September 2010 that loans made by four investors, including Mr Nixon, were not to be repayable on demand but only when Livingston could afford to pay them.

In a written opinion, Lord Tyre said: “I hold that the pursuer (Mr Nixon) has failed to prove that he is entitled to repayment on demand of the sums loaned to LFC by him or by companies under his control.

“The concept of making a loan on the basis that it is not repayable unless and until the borrower can afford to repay, which might be regarded, in certain contexts as uncommercial and therefore improbable, seems to me to be much less improbable where the borrower is a company operating a football club.

“Whilst I accept on the basis of the evidence led that an investor in a Scottish professional football club may entertain a hope of making a substantial profit on his investment, for example through a windfall benefit arising from a land sale, this is unlikely to be his or her primary motivation.”

He added that like many who are willing to put money into Scottish clubs the shareholders in the present case were “first and foremost football enthusiasts with a desire to participate in the control of a club”.

Lord Tyre said: “It is not inherently unlikely that they would agree not to demand withdrawal of their contribution unless and until the company operating the club was in a sufficiently sound financial position to afford to repay it.

“That is particularly likely to be true with regard to LFC in 2009 when the company was in administration and the club had been relegated to the bottom tier of the Scottish football league with consequently bleak financial prospects.”

Lord Tyre noted that according to his own evidence, Mr Nixon’s primary motivation was his support for the club and his desire to put something back into the town of Livingston.

“I do not doubt that he wished to obtain a return on his investment if possible, but I consider it improbable that he made his very substantial financial contributions to the club on the basis that he could demand them back at any time, regardless of the consequences for the future of the club,” he said.

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