Bain v Rangers
I blogged at Scotzine.com at the weekend about the generalities of the case between Mr Bain and the team he used to run as Chief Executive.
I speculated that, even although Mr Bain had been unsuccessful in an earlier application to arrest funds in Rangers’ hands, the freezing of £2.8 million by HMRC in relation to what is known as the “little tax case(!)”, might allow him to have another bite at the cherry.
Little did I suspect that his lawyers would be back in court as soon as today!
Lord Hodge’s Decision Today Regarding the Arrestment
The BBC has reported that Mr Bain today succeeded in his renewed application, having been given authority by Lord Hodge for arrestment of up to £480,000 in Rangers’ hands.
In recent days Rangers have been very vocal in criticising reports of their alleged financial difficulties.
Now however, we have a judge reaching certain preliminary conclusions about their finance.
At the hearing Rangers’ counsel Brian Napier QC said the motion for an arrestment was opposed and claimed that Mr Bain had not shown there was a real and substantial risk of insolvency.
His opposition was unsuccessful.
Lord Hodge said that he was concerned with the degree of possibility and “not actuality or even probability of insolvency”. He was not persuaded on the material before him that Rangers were presently insolvent “either practically or absolutely”.
He accepted that proceedings were at an early stage, but added: “I am not persuaded that the outcome of the Revenue claim is too remote in time for the court to form a view as to the existence of a risk.” He said: “Having regard to the structure and terms of the takeover deal I am satisfied that there is a real and substantial risk of insolvency if the tax case were to be decided against the defenders (Rangers) in favour of the Revenue in the sums being spoken about.”
The BBC reported that Rangers are contesting the action raised by Mr Bain, which is not a surprise, and that they have raised a counter claim against Mr Bain alleging breach of contract and fiduciary duties. Mr Napier argued that Mr Bain had held responsible positions at Rangers over a period when the two major alleged debts relating to tax liabilities were claimed to have been incurred.
Whilst the precise details of the allegations against Mr Bain by Rangers have not been made public yet, until there is a further leak, as with his initial claim of course (such leaks being entirely deplored) this gives some idea as to how Rangers want to deal with the case.
A spokesman for Rangers is quoted as saying, “The club is disputing any money is due to Mr Bain and we will be vigorously appealing the decision. It should be noted the case taken against Rangers has not yet been proven or even heard yet.”
Can Rangers Appeal Successfully?
On a legal note, the grounds of appeal are fairly limited. The judge has discretion to decide if the arrestment should be granted. Unless it can be shown that he took into account irrelevant considerations, ignored relevant considerations, or reached a decision that no reasonable judge could have arrived at (and based on the reports, brief though they are, none of those seems likely) any appeal against the arrestment order is (a) likely to fail and (b) simply going to cost Rangers yet more in legal fees.
It is quite true that the case has not been heard yet. This procedure is a protective matter, being action taken by a claimant when they have serious doubts that the funds will be there to pay them if they succeed.
But Rangers have gone further in their efforts to fight matters, heading out of the Court of Session and into the court of public opinion.
The Rangers spokesman referred to above is quoted by the BBC as saying, “In a week where the focus should be on football, the conduct of Martin Bain, who always claimed to have the best interests of Rangers Football Club at heart, is truly astonishing and I am sure our supporters would agree. “
One might say that Mr Bain had the interests of Rangers at heart till the new ownership decided to pre-empt their “investigation” by Craig Whyte announcing that Mr Bain was not coming back to Ibrox!
The BBC then quote “a source close to Craig Whyte” as saying, “It was clearly intended to embarrass the club in the run-up to the first Old Firm game of the season”. The source is also stated as saying that the details of the counter-claim by Rangers against Mr Bain, which apparently claims he breached his contract and duties as a company director, could be “explosive”.
First of all, I suspect that the timing of the application to Lord Hodge was motivated by HMRC’s actions rather than by some effort to “embarrass” the team in the run-up to the Celtic v Rangers match this weekend. And such an accusation seems to imply that it is simply a spurious approach to the court, which is belied by the fact that Lord Hodge granted it!
Bearing in mind the annoyance expressed at the weekend by Rangers about the leak of details of Mr Bain’s claim, it seems rather hypocritical for these “sources” to be leaking allegations about Mr Bain in response. As I mentioned in my article linked to above, I do not think that the leak of the “Bain Papers” was in the interests of either party to the case.
How Craig Whyte Undermines Rangers’ Case Against Martin Bain
From what was said in court on Rangers’ behalf it seems that they wish to blame Mr Bain for the tax issues assailing the club just now. If it could be shown that, in a hypothetical company, a senior Executive had acted in a way which breached taxation rules, landing the company with a huge and unexpected tax bill, then that Executive might expect to be dismissed and sued.
But according to Rangers owner, Craig Whyte, they are very confident about the outcome of both tax cases.
He is quoted in a piece on the Rangers website as saying “In terms of the second case I believe the tribunal meets in November to discuss the other case. We are told by our counsel that he is confident we can win the case.”
This relates to the claim for £49 million. It is odd that Mr Whyte thinks the tribunal is in November. I suspect that if I was in charge of a company facing such a large bill, I would know to the minute when the hearing was due to take place!
In connection with the “little” tax case the article states that “the chairman explained that he and his team are still poring over the first of two HMRC cases which relates to a £2.8million sum which was revealed last season before his takeover.”
He is quoted as saying, “In terms of the first case, we are looking through the paperwork of that at the moment. We weren’t given sight of the paperwork initially by HMRC and it’s unfortunate the way that case has been dealt with. However, we are working with HMRC now to try to resolve it. We are not there yet. They have put further penalties on it which we are disputing. So we hope to get it resolved and it is under discussion at the moment.”
Is it credible that Mr Whyte, in his due diligence on taking over, did not check these details? Of course he did! In fact, in a separate piece posted today on the Rangers’ website, he is quoted as saying “There were many times when I could have walked away from this, the tax bill being one of the reasons, but there were other reasons too during the negotiations that could have led me to walk away. But because I’m a fan I thought someone has to step up and sort this out – and there is a lot of sorting out to be done. There is a mess to clear up and my team and I are doing that now.”
So, we have Rangers’ owner stating that he knew about the tax issues before he took over; that he is confident of winning the ”big” case and that they are dealing with HMRC re the “little” case despite not having sight of the paperwork.
And, at the same time, Rangers’ counsel is stating that the tax issues are in some way related to the defence of Mr Bain’s action, which includes a claim for salary not paid up till his departure in June. Do Rangers seriously intend to maintain the position that Mr Bain is due nothing?
It seems so, and aggressive statements by spokesmen and “sources close to Mr Whyte” can only be intended to try to persuade the fans, and perhaps the media, that all remains well in Ibrox.
Rangers Take on Levy & McRae Too!
I had meant to write separately about the statement issued on the Rangers website on Friday.
I reproduce it in full below.
“The remarks in The Court of Session today made by Levy & McRae with regard to their concerns about the Club’s solvency are unfounded and unwarranted and these are nothing more than scaremongering tactics. The Club is extremely disappointed and angry that this action was taken when there were categorical assurances from the Club’s lawyers that the money was on its way and it is regrettable that those assurances were not deemed sufficient by Levy & McRae.” (Emphases added)
I find this to be a remarkable statement, and a precursor to the aggressive stance taken today.
Effectively the statement accuses Levy & McRae, one of the top legal firms in Scotland, of misleading the Court of Session. Accusations of misleading a court are very serious for any lawyer, striking at the heart of their professional responsibilities. From the reports published, it does not appear that Rangers’ counsel on Friday took the opposing advocate to task in open court for these comments.
I would not be surprised if we were to see some further action, even if only a call for a retraction and apology.
Perhaps their counsel refused to make such comments – we do not know.
Why would they be so outspoken about their former lawyers? There is a personal element here, I am sure.
I suspect that the reason why Levy & McRae proceeded so quickly, and why they are able to represent Mr Bain, is that it was made clear to them that Mr Whyte had his own lawyers lined up to act for Rangers. As the Levy & McRae connection was therefore ended, they had no qualms in immediately pursuing what they were due and when Mr Bain came to see them, feeling entitled to act for him against their former clients with no question of conflict arising.
It seems remarkable that, in the course of five days, Rangers have publicly criticised two parties who have taken court action against them. I cannot imagine any legal adviser counselling that as a course of action.
Perhaps Rangers’ PR team have seen this as the way to go – it will only do them harm if they continue on this route. There are rules about contempt of court which restrict comment on matters which are progressing through the judicial system. It would be an ironic conclusion to this sorry saga if executives of Rangers found themselves summoned to the Court of Session to answer charges of contempt of court!
As it stands now a judge has publicly declared in court that insolvency is a possibility for Rangers. The assurances of Rangers’ counsel that there is sufficient money there were rejected. Does this bring closer the possibility of Rangers entering administration with the consequences that might bring?
Rangers right now have more important contests to win than the Old Firm game at the weekend!