FORMER Wrexham Football Club chairman Alex Hamilton "did not act in good faith" when he gained control of the Racecourse Ground in a bid to make millions from its development potential, the Appeal Court ruled yesterday.
The judges made the ruling despite acknowledging there was "some evidence" Mr Hamilton and his joint venture partner, Mark Guterman, thought the club would "obtain a benefit" from the fulfilment of The Wrexham Project, meaning the stadium being redeveloped as a shopping centre.
But the judges ruled that was far outweighed by the fact "Mr Guterman was misusing a profitable opportunity which belonged to the club".
The decision of three top judges yesterday effectively unravelled the pair's plans for the Racecourse.
Mr Hamilton's company Crucialmove Ltd now holds the Racecourse Ground on trust for the club, which could now cash in on its development. But the ruling does not necessarily get Wrexham FC out of its financial difficulties.
The stadium will still be subject to a legal "charge" in Crucialmove's favour, amounting to the £300,000 it paid for the ground's freehold and other costs the company ran up.
At Birmingham High Court last year, Judge Norris QC "regarded it as a straightforward case in which a fiduciary position in the club had been misused for the benefit of those interested in the exploitation of its property assets", judge Sir Peter Gibson told the Appeal Court.
Mr Guterman was a director of the club at the time of the critical transaction, in July 2002, when a declaration of trust was signed transferring the stadium's freehold to Crucialmove. The company was owned by Mr Hamilton, who paid £300,000 for the freehold.
The former solicitor was introduced to the Wrexham project by Mr Guterman in February 2002.
Crucialmove leased back the ground to the club but gave notice of termination of the lease in July 2004.
It was that move which culminated in the court action brought by Wrexham FC's administrators.
Remarking on the "unusual" nature of the trust transaction, Sir Peter Gibson agreed with Judge Norris that it was "fanciful to suggest that there was disclosure to the (Wrexham FC's) Board and actual or implied assent to what was going on".
Sir Peter said the "central question on the appeal was whether Judge Norris could properly conclude on the material before him, without a trial, that there was an absence of good faith on the part of Mr Hamilton".
The club argued successfully that Mr Guterman, who had been involved in property development projects with Mr Hamilton before, was not acting "wholly for the purpose of the club without having made full or any disclosure of his personal interest" in the transaction.
It was also Wrexham FC's case that Mr Guterman breached his duty as a director of the club and that Mr Hamilton was "on notice of it and accordingly could not be said to be acting in good faith, whether or not he was guilty of dishonesty".
Sir Peter told the court: "There can, in my judgment, be no real doubt but that there was no disclosure by Mr Guterman, full or otherwise."
The joint venture agreement (JVA) between Mr Guterman and Mr Hamilton stated unambiguously that they were "engaged in property development" and did not contain "a word suggestive of the need to consider the interests of others, or of the necessity to make full disclosure".
"On the contrary: the parties were only addressing their own interests and objective under the JVA in relation to the Wrexham Project," said Sir Peter.
The judge, sitting with Sir Igor Judge and Lord Justice Dyson, accepted there was "some evidence that the joint venturers thought the club would obtain a benefit from the fulfilment of the Wrexham Project".
But he added: "However, that does not begin to meet the objection based on what the joint venturers were aiming to achieve....nor to give proper recognition to the fact that Mr Guterman was misusing a profitable opportunity which belonged to the club."
Sir Peter said nothing Crucialmove's lawyers said in the Appeal Court cast doubt "on the correctness of the decision of Judge Norris that Mr Hamilton did not act in good faith in relation to the Declaration of Trust". He added: "Mr Hamilton, through his personal involvement in the JVA and its variations, knew of the personal interest of Mr Guterman in the Wrexham Project.
"He had, pursuant to that project, caused Mr Guterman to be put into his fiduciary position in relation to the club by the purchase of the outgoing chairman's controlling shares.
"He knew of the importance attached to the freehold's purchase, funded by him, being made in the name of the tenant of the ground, the club. He knew that the Declaration of Trust was a significant step to be taken by the club to enable Mr Guterman and him to redevelop the ground as part of the Wrexham Project."
Judge Norris had been well aware of the seriousness of the allegation against Mr Hamilton, but had been entitled to give summary judgment in the club's favour.
Crucialmove's appeal was dismissed and the company is now facing heavy legal bills, which will be "set off" against the club's own liabilities to the company.
That amount will be assessed at another court hearing unless settlement terms are agreed.
Crucialmove is also entitled to a legal "charge" over the Racecourse Ground to cover the £300,000 Mr Hamilton spent on buying the freehold and other costs.