Watford FC has been locked in a High Court battle this week over loans of £2.6 million arranged by former owner Laurence Bassini.

A company, LNOC, has taken legal action against the Hornets over £900,000 which remains outstanding from a loan agreement in 2011.

The dispute relates to forward funding deals borrowed against cash coming from the Danny Graham transfer and Football League payments.

Watford Observer:

Danny Graham in actions for the Hornets.

This week the club has argued the loans are not binding as the transactions were in breach of Football League regulations and Mr Bassini was not acting in the best interest of the club when he arranged them.

Watford FC has also launched counter claims against LNOC for fees which included £900,000 it repaid the company and a further £600,000 Swansea City paid to LNOC in relation to the deals.

The court heard in the autumn of 2011 Mr Bassini had arranged loans of £2.6 million from LNOC with the help of sport financier Nigel Weiss. The loans were due to be paid back with around £1million due from Swansea and around £1.8 million in Football League pool money.

This week, barristers from both sides laid out their case.

Jonathan Davies-Jones QC, acting for LNOC, said evidence showed the loaned money was intended to finance the South-West Corner development and there was no allegation Mr Bassini or anyone else had personally gained from it.

He said at the time Watford was not able to borrow funds from the bank for the construction and that documents showed in December 2012, its bank was in the process of trying to withdraw its overdraft facility.

Mr Davies-Jones said Mr Bassini had already injected almost £5 million into the club by the autumn of 2011 when he arranged the forward funding deals.

The club had received £3.9 million in the summer of 2011 from transfer fees, but the court heard this was already budgeted for in the club’s spending plans.

The court was told Mr Bassini hid the transactions from the Football League as he was frustrated when he learned that one of the deals would earn the club a transfer embargo.

The barrister argued Mr Bassini had asked football financer Mr Weiss to restructure the two deals as he reasonably believed they were not in breach of Football League regulations.

He also described Mr Bassini’s failure to tell the Watford FC board about the funding deals as “a failure of communication”.

Mr Davies-Jones also defended Mr Weiss from accusations that he had “turned a blind eye” when Mr Bassini asked him to hide the deals from the Football League. He said: “Suggesting he (Weiss) turned a blind eye is an unfair characterisation.

“If Mr Weiss had thought for a moment Mr Bassini was acting against the best interest of the company he would not have touched these transactions with a barge pole.”Watford Observer:

Laurence Bassini.

Setting out Watford’s case, Nicholas Randall QC, said the judge may want to draw “implications” for why LNOC had not called Mr Bassini to give evidence.

Mr Randall said in Mr Bassini’s evidence at the Football Disciplinary Commission hearing into the matter earlier this year, Mr Bassini had said he thought Mr Weiss had restructured the deals to comply with, rather than circumvent, Football League regulations.

Mr Randall also said the fact Mr Bassini’s company, Watford FC Limited, had not been called to the trial hindered the judge’s insight. He said the company had receive the loan payments and the court could not see what it did with the cash and if it ever reached the club.

Mr Randall later added: “It is fantastical to say it was to build the South-West Corner as we know the works were not done and there was no attempt to. We say there is a compelling body of evidence to show Mr Bassini and Mr (Angelo) Barrea (his advisor), believed these transactions were not legitimate.”

Mr Randall said the “smoking gun” was a later email in which Mr Weiss was pressuring Mr Bassini for repayment of the LNOC money, which was not forthcoming, and threatening there would be trouble with Football League regulations if he failed to pay.

In his evidence Mr Weiss said he was referring to Football League regulations around general financial impropriety. Yet Mr Randall argued a successful City lawyer of Mr Weiss’s intelligence would not make a threat of that kind without knowing what regulations he was referring to.

The hearings concluded yesterday and Judge Mackie is expected to give a verdict within the next eight weeks.