League loses £178.5m TV claim

13 April 2012

Carlton and Granada today won a crushing High Court victory over Football League clubs hoping for a payout from the collapse of ITV Digital.

The digital channel was closed down in May owing £1.2 billion after admitting it could not afford to pay the £178.5 million it owed the Football League. That left 30 of the league's 72 clubs facing bankruptcy and led it into a desperate legal bid to force ITV Digital's parent companies, Carlton and Granada, to honour the debt.

But today Mr Justice Langley threw out the application, finding the two TV companies were neither liable for a penny nor in breach of any contract. His decision, after a three-day hearing, is a devastating blow to league chief executive David Burns and chairman Keith Harris, who pressed for the legal action which has now left the cash-starved clubs with another big bill for costs.

Mr Burns dismissed suggestions he would resign in the wake of today's defeat. He said the league would take legal advice on the possibility of an appeal, and an action against the consultants involved in original negotiations with the doomed digital company.

The league had based their case on a clause in an "initial bid" document submitted by ONdigital - as ITV Digital then was - for the rights to televise league matches. It stated that: "ONdigital and its shareholders will guarantee all funding to the Football League outlined in this document." But the court heard that was only stated "subject to contract".

Negotiations for the eventual £315 million contract covered 18 months and eight drafts, but there was no mention of a guarantee by Carlton and Granada, which each owned half the shares. The judge ruled today that: "In no normal commercial negotiation do I think a party would be content to rely on such a statement from such a source as providing the security of shareholder guarantees.

"Nor do I think the league, in fact, did so or thought it had. The words were not phrased as an offer capable of acceptance but as something which, if pursued, would plainly require further agreement. There was no agreement for a guarantee by either Carlton or Granada."

The court heard the league only woke up to the fact clubs might not get the full payout under the contract when rumours first emerged that ITV Digital was on the brink of collapse.

In December last year a league solicitor involved in negotiations with ITV Digital wrote to the parent companies saying the clubs "must now look for parental guarantees". In answer, he was told there were no guarantees and the TV companies had never suggested any.

In January this year, two months before ITV Digital went into administration, the league's commercial director wrote to the TV firms again, admitting there was no formal agreement but begging to open negotiations.

However the beleaguered clubs were thrown a lifeline last month when they signed a TV rights deal with BSkyB worth £95 million over four years.

In a joint statement after the verdict, Carlton and Granada said: "It is time for everyone to draw a line under this. Carlton and Granada will get on with managing their businesses and hopefully can look forward to a more constructive and positive relationship with the Football League."

The City reacted calmly, with shares in Granada down 31/4p to 92p while Carlton's shares also slipped 31/4p at 1763/4p. Scott Penrose of NatWest Stockbrokers said: " They would not have entered a battle like this without doing their homework first."

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