The SPL Demands Rangers Pay Costs of Nimmo Smith Commission – Or Does It?

One cannot but admire the tenacity and news-finding abilities of that old master of the “inky trades” Mr David Leggat. Yesterday morning’s piece by him revealed that the SPL have asked Rangers to pay the costs of the SPL Independent Commission under Lord Nimmo Smith.

Mr Leggat’s revelation was followed later on by an official reaction from Rangers.

It is fair to say that Mr Leggat’s perception of how Rangers would receive the bill seems spot on.

The official statement, which I quote below, does not make reference to “attack dogs”, an “axis” or bribery. Nor does it seek to label this demand as a last hurrah for a bankrupt league, led into error by the Chief Executive of another team.

(As an aside, I note that people who criticise my blogging comment about how I am “obsessed” for writing about a football team I do not support – I see that the most recent 13 posts by Mr Leggat each refer either to Celtic, or to its Chief Executive, or both! Is Mr Leggat a Celtic supporter? I think not. Does that make him “obsessed”? Of course not. If he feels sufficiently motivated by something to write about it, then why shouldn’t he, as long as he does not break the civil or criminal law in doing so. And I do not propose to make an assessment of Mr Leggat’s state of mind either – that is a job for a professional – as indeed it would be for the assessment of anyone’s state of mind.)

So how did Rangers address this?

“This matter has been dragged out long enough and we had thought Lord Nimmo Smith’s verdict would have been an end to it. Attempting to stretch it out even further does nothing to help the image of a game torn by dissension and engulfed in turmoil.

‘It is important to remember that Lord Nimmo Smith apportioned no blame against Rangers FC and thus no sanctions were imposed on this Club. It is inconceivable, therefore, as well as ridiculous that the SPL should even think about pursuing this Club for costs against what was widely regarded as an ill-conceived and unwise course of action by them in the first place.”

That response strikes me as unduly antagonistic, and one which misrepresents the outcome of Lord Nimmo Smith’s Commission.

It also appears that both the esteemed Mr Leggat and Rangers have slightly jumped the gun on their anger.

Under the SPL Rules a Commission dealing with a Disciplinary matter has the power under Rule G6.1.19 to:-

make such order as to expenses, including the expenses of the Board and/or, as the case may be, Commission and/or other party, as it thinks appropriate.

The decision of the Nimmo Smith Commission made no reference to expenses. It might therefore seem odd for the SPL to write demanding payment of costs where the Commission made no order about them!

What we have is, as I explain below, a situation where there is a difference between a demand to someone for payment and an application to a decision-making body for a determination as to whom should pay.

It is possible of course that there was an argument about costs before the Commission which was not recorded in the formal decision, although I think that would be unlikely. Sometimes in a court case it is agreed that “expenses follow success” i.e. the loser pays the winner’s costs. This equally applies in disciplinary matters regarding occupations and professions. Usually though a judgement or decision in such a case would record that that determination had been reached alongside the substantive findings.

Here the “successful” party was the SPL, as the Commission found that there had been rule-breaking by oldco Rangers. I think it very implausible that counsel for Oldco/newco had instructions to agree that, if there was a finding against oldco, then newco would be liable.

If the SPL have, via their solicitors, made a demand to Rangers for payment, then the only way therefore in which I can see the demand being one with a chance of being paid would be:-

(a)   if the famous 5-way agreement specifically makes reference to newco being liable to pay the “football debts” of oldco;

(b)   if there is an agreement or at least an interpretation that the costs of a football disciplinary Commission are “football debts”; and

(c)    if counsel for oldco/newco did concede before Lord Nimmo Smith that, in the event of any sort of guilty verdict, newco would thus be liable to pay these costs.

In the absence of such a chain of agreement then I do not see how newco can be liable for the costs of the proceedings based on the determination of the Commission (so far).

It is possible though for a person who is party to legal proceedings to have to meet the costs, even where they succeed. For example, any readers in Scotland who find themselves sued by their mortgage lender, even if they succeed in their case, could find the mortgage company simply adding the legal costs to the mortgage, as the mortgage agreement allows them to do. In such a case the winner ends up paying!

The SPL issued a brief statement:-

“There has been a routine application for costs, given the case was successfully pursued by the SPL.”

That makes things rather clearer. It looks therefore as though the SPL wants the Commission to decide on who should pay the costs of the case, and thus exercise its powers under Rule G6.1.19. That is more sensible.

Whether this will require a further hearing, or if the Commission chooses to deal with it on paper submissions, is a matter for Lord Nimmo Smith and his colleagues. They regulate their own procedure.

So, what issues would the Commission have to decide before finding newco liable, and how does the Rangers statement relate to this?

First of all newco was represented at the hearing. Whilst the original plan was that neither oldco nor newco would participate, oldco then made an appearance, and, after concerns were raised by the Commission about newco not being a party, Mr Mure QC for oldco, confirmed that he was also now instructed by newco.

So newco took part in the proceedings, which makes it easier for a finding to be made against it. Of course newco would argue that its involvement was successful, as no penalty was imposed on the club.

Why should newco pay when, as Rangers state, “Lord Nimmo Smith apportioned no blame against Rangers FC and thus no sanctions were imposed on this Club”?

The simple answer is that the Commission never considered if Rangers FC was at fault, as opposed to the company having broken the rules!

As the Commission said, having determined that there was no evidence allowing it to find that the football club gained a competitive advantage from the rule-breaking which had occurred:-

[109] It is the board of directors of Oldco as a company, as distinct from the football management or players of Rangers FC as a club, which appears to us to bear the responsibility for the breaches of the relevant rules. All the breaches which we have found were therefore clearly committed by Oldco. We see no room or need for separate findings of breaches by Rangers FC, which was not a separate legal entity and was then part (although clearly in football and financial terms the key part) of the undertaking of Oldco. Rangers FC is of course now owned and operated by Newco, which bears no responsibility for the matters with which we are concerned. For the reasons already given, we have decided against the imposition of a sporting sanction. In these circumstances the financial penalty lies only upon Oldco and does not affect Rangers FC as a football club under its new ownership.

As the decision states, Rangers FC was not a separate legal entity and was part of oldco. Quite how the Commission could have determined that the club, rather than oldco, was at fault, rather baffles me.

If we take the argument which Rangers seem to deploy – namely that the directors and management of the company owning the club are separate and distinct from the club itself, then no football club with that same corporate structure could ever be held liable! After all it is through the employees of the company (as the club has no employees) that it acts.

The Rangers statement also seems to ignore the finding of the Commission, as follows:-

[107] We nevertheless take a serious view of a breach of rules intended to promote sporting integrity. Greater financial transparency serves to prevent financial irregularities. There is insufficient evidence before us to enable us to draw any conclusion as to exactly how the senior management of Oldco came to the conclusion that the EBT arrangements did not require to be disclosed to the SPL or the SFA. In our view, the apparent assumption both that the side-letter arrangements were entirely discretionary, and that they did not form part of any player’s contractual entitlement, was seriously misconceived.

Over the years, the EBT payments disclosed in Oldco’s accounts were very substantial; at their height, during the year to 30 June 2006, they amounted to more than £9 million, against £16.7 million being that year’s figure for wages and salaries.

There is no evidence that the Board of Directors of Oldco took any steps to obtain proper external legal or accountancy advice to the Board as to the risks inherent in agreeing to pay players through the EBT arrangements without disclosure to the football authorities. The directors of Oldco must bear a heavy responsibility for this.

While there is no question of dishonesty, individual or corporate, we nevertheless take the view that the nondisclosure must be regarded as deliberate, in the sense that a decision was taken that the sideletters need not be or should not be disclosed. No steps were taken to check, even on a hypothetical basis, the validity of that assumption with the SPL or the SFA.

The evidence of Mr Odam (cited at paragraph [43] above) clearly indicates a view amongst the management of Oldco that it might have been detrimental to the desired tax treatment of the payments being made by Oldco to have disclosed the existence of the side-letters to the football authorities.

[108] Given the seriousness, extent and duration of the non-disclosure, we have concluded that nothing less than a substantial financial penalty on Oldco will suffice. Although we are well aware that, as Oldco is in liquidation with an apparently massive deficiency for creditors (even leaving aside a possible reversal of the Tax Tribunal decision on appeal), in practice any fine is likely to be substantially irrecoverable and to the extent that it is recovered the cost will be borne by the creditors of Oldco, we nevertheless think it essential to mark the seriousness of the contraventions with a large financial penalty. Since Issues 1 to 3 relate to a single course of conduct, a single overall fine is appropriate. Taking into account these considerations, we have decided to impose a fine of £250,000 on Oldco.

If you read only the Rangers statement, one would think that there had been a not guilty finding! Instead the commission found that “Given the seriousness, extent and duration of the non-disclosure, we have concluded that nothing less than a substantial financial penalty on Oldco will suffice.”

One of the perennial issues  about penalising football teams relates to what happens after a change in ownership. The argument goes that, if the team is sold off, why should the new owners and the innocent fans pay for the wrongdoing of the incompetents or worse who formerly owned the club?

That however simply ignores the nature of corporate entities. If that interpretation was allowed to prevail, then a football club could commit the most heinous rule breaches, and then have its assets sold to another company before the disciplinary process concluded. Thus the “club” would be innocent and all the fault would lie on the old owners. This would be the case even where the assets were sold by one company to another owned by exactly the same people!

It looks therefore as if Lord Nimmo Smith and his colleagues will get the chance to decide one more issue about this case.

Would they find newco directly liable for the costs? I think that is not the most likely outcome. After all, newco’s role was primarily to argue that no sanction be imposed on the club. It succeeded in that.

Would a finding that costs should be paid by oldco matter? Possibly, if the costs fell into the definition of “football debts”. In the same way, might the fine of £250,00 be classed as a “football debt”?

If the Commission finds that oldco should pay the costs, and the SPL look to pursue newco under the “football debt” agreement, then in light of the tone of the Rangers statement, I do not see Mr Green accepting this.

If the Commission finds the club liable and the SPL look to pursue newco, then too I see another battle ahead.

One wonders if the statement by Rangers, whilst maybe having been drafted by someone of great journalistic expertise, had any legal advice behind it? If the matter does have to go back to the Commission for a decision on costs, then fighting the battles in media statements might not be seen by Lord Nimmo Smith and his colleagues as not quite “cricket”.

This episode is not over yet!

 

Posted by Paul McConville