Monthly Archives: November 2011

A General Update on Scottish Footballing Legal Issues (Part 1) Rangers Edition – Friday 11th November

 

 

A busy few days, so various issues to comment upon.

 

Capita Trustee Services Limited v Rangers

This case is back in court on Monday morning (14th November).

12 Capita Trustee Services Ltd v The Rangers Football Club Plc WRIGHT JOHNSTON AND MACKENZIE CA234/11

 

This suggests that the “agreement” to have the case continued was to allow a payment to be made. It will be interesting to see if the action is dropped because full payment has been made, or whether this is another case, similar to the Levy & McRae claim, and, allegedly, action by at least one player’s agent, where Rangers have simply decided to hold on to their cash for as long as possible.

One imagines that, if agreement has not been reached and settlement made, Capita will be looking for an order allowing them, as did Martin Bain and Donald McIntyre before them, to seek to freeze Rangers’ funds or assets as a protective measure pending resolution of the case. Surely Rangers cannot be prepared to allow another arrestment to come into effect!

 

HMRC – Small Tax Case

Talking of cases where it appears Club do not wish to pay, as has been commented before, it is understood that HMRC successfully arrested £2.3 million of the agreed liability in the “small tax case”. The passage of time since the arrestment means that, in the event of Rangers going into administration or liquidation, HMRC would be preferred creditors for that sum. If Rangers went into receivership though, the legal position is less clear. On one view, the funds would go to the receiver to satisfy the creditor under the floating charge (Rangers FC Group Ltd aka “Group” which is Mr Whyte’s vehicle for owning Rangers Football Club PLC or “Club”). There is an alternative view, which places me in the minority, that there is a preference for HMRC in that event too. I won’t give myself a migraine analysing that any more, unless and until such an event comes to pass!

If the arrestment lasts for 14 weeks without Rangers agreeing to hand the funds over to HMRC, and without an insolvency event taking place, then the funds are automatically paid over by the bank holding them to HMRC. It seems that the 14 weeks expires in early December. Mr Whyte indi9cated that, in the contract he had with the Murray Group to buy Rangers, that Group would pay this bill. There has still been no explanation I have seen as to why this agreed sum has not been paid.

 

HMRC – Big Tax Case

This case has been proceeding at a “secret location” this week and it is believed that there is one more day to go. The First Tier Tribunal (Tax) hearing the case is not expected to produce a judgement till into next year. Some have speculated that the length of the case, now in its third session, means that Rangers are doomed, whereas others believe this means that HMRC are taking heavy fire.

As the Rangers Tax Case Blog indicated many months ago, this Tribunal, hearing Rangers’ appeal against a huge HMRC assessment for unpaid tax due to the use by the Club of Employee Benefit Trusts, would have to deal with each individual payment made from the Trust to the players. It is not automatic that every payment made attracts Income Tax and National Insurance. Equally, it will not be the case that none of them do.

If the position was that there was a knock out blow available to Rangers to establish that, without going into the details, none of the EBT payments could attract tax, then the hearing would have been done long ago. However, even if HMRC landed a haymaker establishing that, in general, Rangers operated the EBTs in a ham-fisted way so as to attract tax, then the FTT (T) needs to go through everything to determine the exact sum due by Rangers. On that basis, and taking account of the numbers of payments that there are assumed to have been, it remains possible that the case still does not finish, and that it is further continued again for several months. How that would affect what some, including Mr Whyte, perceive as Rangers’ precarious cash flow is a question for more numerate folk than me.

Once the judgement comes out from the FTT (T), either party, or indeed both, would have the right to appeal to the Upper Tribunal on a question of law. The taxpayer is normally required to pay the sums assessed as due by the FTT (T) prior to being allowed to appeal, unless the Tribunal decides, in the interests of justice, to waive that requirement. I suspect HMRC would very vigorously oppose such a suggestion, relying on various matters including Mr Whyte’s public comments and the Club’s tardiness in settling the small bill.

 

Third Party Payments and Players’ Contracts

There is a discussion ongoing, prompted in part by an excellent post by Brogan, Rogan, Trevino and Hogan which he was kind enough to allow me to post here, which considers the implications for the SFA and SPL in dealing with the matter. Some of this has focussed on whether or not a “newco” would be admitted straight to the SPL, and even with the oldco’s points.

There has also been a focus on whether or not Rangers might have broken SPL rules by making payments from the Trust to their players or by failing to produce all required details to the SPL. To recap briefly (which as regular readers know does not come easily to me) it is alleged that “loans” were made to players and other Rangers’ employees by the EBT. These “loans” are in fact alleged to have been remuneration for work done, and it is alleged, paid to the players at any rate in terms of “back letters” or “side letters” which accompanied the players’ contracts and which specified how much the player could borrow from the Trust and also that these loans were non-recoverable by the EBT.

Put simply, if the FTT (T) decides that these payments were disguised pay, then it renders Rangers liable to pay an amount of tax thereon, and also would have caused them to underpay employer National Insurance contributions.

The relevant SPL rules regarding player registrations, payments and contracts run as follows.

D1.1 Subject to these Rules, to be eligible to Play for a Club a Player must first be Registered either as a Professional Player or as an Amateur Player.

D1.2 An application for a Player to be Registered or to change Status must be made, in the case of Professional Registration, by submitting to the Secretary a fully completed and executed Contract of Service for the Player concerned

D1.13 A Club must, as a condition of Registration and for a Player to be eligible to Play in Official Matches, deliver the executed originals of all Contracts of Service and amendments and/or extensions to Contracts of Service and all other agreements providing for payment, other than for reimbursement of expenses actually incurred, between that Club and Player, to the Secretary, within fourteen days of such Contract of Service or other agreement being entered into, amended and/or, as the case may be, extended.

D9.2 All Contracts of Service between Clubs and Players must be in writing, fully completed and in a form approved, from time to time, by the Board.

D9.3 No Player may receive any payment of any description from or on behalf of a Club in respect of that Player’s participation in Association Football or in an activity connected with Association Football, other than in reimbursement of expenses actually incurred or to be actually incurred in playing or training for that Club, unless such payment is made in accordance with a Contract of Service between that Club and the Player concerned.

So what does this tell us?

1                     Players must be registered before being permitted to play.

2                     A player’s registration application must be accompanied by a copy of the player’s signed and executed Contract of Service with a signed and executed original delivered within 14 days of the contract being entered into. Any agreement providing for payment to the player, between Club and Player, must be handed over too.

3                     The form of the contract must be approved by the SPL.

4                     A player cannot be paid by or on behalf of a Club for playing football, or any activity connected with football, unless in accordance with the Contract of Service.

The speculation has been as follows. Did Rangers produce full contracts plus the alleged side letters to the SPL? Even if they did, was a payment to the player from the EBT a valid payment, coming as it did from a third party?

I have repeatedly said that Rangers will not, despite Insolvency Events etc, lose their titles due to what has been referred to as “financial doping.” Some have suggested that playing ineligible players, either because the full contracts were not produced, or because a third party made some of the payments, would cause the SPL to re-assess matters and retrospectively punish Rangers for such alleged misdemeanours.

What is prohibited is payment from or on behalf of a Club, in respect of football or football related activity and such payment must be in accordance with a Contract of Service.

It would be of interest to see the form of contract approved by the SPL and whether or not this approved format allows a side letter to constitute part of the said contract.

This seems to imply therefore that payments can be made to a player, legitimately, in the following scenarios over and above normal remuneration:-

1                     Clubs can pay players for activities which are neither “playing football” nor “football related” and details of such a payment, under SPL rules, need not being included in Contract of Service.

 

An example of this could be, for example, a profit share paid to a player, even if ex gratia, rather than a bonus for winning a trophy. The argument would run, as I could see it, that this was not for the player’s “participation” in football or football related activities, but for his being an employee of a profitable company (on the assumption there might actually be a football team making a profit). In terms of clause D1.13 such a contract would need to be produced if it mentioned such a payment, referring as it does to “all payments between player and club” but the different phraseology of D9.3 suggests that the SPL accepts that there can be payments which can be made without being notified, if ex gratia and of that nature and that there are payments which can be made not for football activity which are not per the Contract.

 

2                     Players can be paid by third parties, as long as these payments are not made by or on behalf of the Club. Therefore under SPL rules, it is legitimate for a payment to be made by a third party, if not “on behalf” of the Club. One hears every so often about some expensive player coming to a club (if I recall correctly this was said about Fabrizio Ravanelli at Dundee) and the Chairman or a rich benefactor agreeing to pay that player’s wages.

Where does this take us? Could Rangers, or any other team in a similar position, argue to the SPL that (a) the EBT from which payments were made was not for “participation” in football activities and (b) was made by a third party and not “on behalf” of the Club? Thus getting round any argument that they had breached SPL rules?

On the basis that there is no word that the SPL has mounted any inquiry into this issue, one assumes that Rangers can adjust their submissions in light of the outcome of the big tax case. Indeed, it is not unknown for lawyers, on their client’s instructions, to argue two mutually inconsistent positions – for example “my client has an alibi, and anyway he was acting in self-defence”.

As I have said, and in any event, if Rangers are left heading to insolvency as a result of the big tax case, I suspect the SPL and SFA would be happy to determine (a) that any breach of the rules about third party payments etc was merely “technical” and (b) so long ago that it might no longer even be legal to look to examine the alleged offences. If Rangers were liquidated, then there would not even be the miscreant there to be punished!

A Rangers win in the tax case, or at least a substantial reduction in the sums to be paid, would also not have them, in my view, fall foul of the rules mentioned above, for the reasons mentioned.

 

Boston United – A Helpful Comparison?

In 2006, Steve Evans, manager of Boston United and his former chairman at the club pled guilty to “conspiring to cheat the public revenue between 1997 and 2002”. I mention in passing that Steve Evans qualifies as an Albion Rovers “Great”!

As the BBC say in the article linked to above:-

“The jury heard the club operated a shadowy system of parallel contracts and secret payments which enabled them to recruit the best players which they otherwise would not have been able to afford.

Star striker Ken Charlery told the trial he was given one contract which promised him £620 a week plus a £16,000 signing-on fee.

Neither the Football League nor the Inland Revenue was ever shown this contract.

They were shown a bogus contract which purported to pay Mr Charlery only £120 a week and failed to mention the signing-on fee.”

So we have “secret contracts” provided over a number of years, and hidden from the football authorities, and done in such a blatant fashion that a criminal prosecution was mounted (and as I have mentioned before, criminal tax prosecutions are very rare events).  This case was seen as being such a scheme as to justify a prosecution. What was the penalty imposed by the football authorities on Boston, bearing in mind that the team did not enter insolvency?

The FA punished Boston by fining them £100,000 and docking them four league points!

The points deduction was not even applied to the previous season, which would have resulted in Dagenham & Redbridge being promoted instead.

So, for a tax scam which resulted in suspended gaol sentences for the manager and former chairman, which lasted over a number of years, and which was of admitted direct benefit to the club, resulting in promotion, there was a measly four point deduction.

The FA in England is not the body clearly with jurisdiction over Rangers’ case, but in terms of the scale of the punishment, if Rangers were found to have “cheated” the tax man and deceived the football authorities, then rather than the prospect of numerous league titles and cups being deleted from the record, we might see a small points penalty on top of the insolvency deduction.

I should make it clear that I am not suggesting that Rangers or its former or present management is or was engaged in tax fraud of any nature, nor of deceit of the football authorities in Scotland.

 

What About Gretna?

Gretna was a great romantic football story. Based on the financial backing of Brooks Mileson, who himslef was a remarkable character, they climbed form low non-league status to the SPL, the Scottish Cup final and to European competition, before Mr Mileson’s ill heath caught up with him, and when he was no longer fit to fund the club, it folded. It had clearly been run at a level beyond its means, though no suggestion fo financial improprietry has been made.

When it passed into liquidation, did the football authorities expunge their dividion titles achieved on their drive to the SPL? No, they did not.

In the same way, I do not see them affecting the past when it comes to finalise any “penalty” on Rangers.

 

Coming Next

The plan is for part 2 of this post to address issues regarding the proposed anti-sectarian legislation in Scotland, Hearts and the prospect of a sale, and the referee’s assistant whose life ban was upheld. Stay tuned!

 

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Filed under Bain v Rangers, Football, Rangers, SFA, SPL

The Coming Bonfire – Lessons from Guy Fawkes for the Scottish Legal Profession?

 

 

Austin Lafferty, Vice President of the Law Society of Scotland, and Walter Semple, Law Society Council member, last week used the electronic pages of The Firm to discuss the coming “ABS tsunami”.

The highly esteemed gentlemen fail to see eye to eye on the role of the Society in how the profession got to this point, but each acknowledges the struggles which lie ahead, with Mr Lafferty bluntly saying “the core workstreams of many firms will be decimated, with obvious consequences.

Conveniently for the days after 5th November, the blogger Guido Fawkes, normally one for hot-off-the-press political gossip, has written a piece about the role of the investment banks in the global financial crash, prompted by his having read the excellent and chilling “The Big Short” by Michael Lewis. Anyone wanting to understand the limitless greed and stupidity which brought the financial world to a halt should read Mr Lewis’ book.

Dealing with investment bankers, Guido, as a former investment banker himself, points out when the rot set in at the major institutions. He describes one of the problems as the fact “that investment banks were no longer partnerships; they were publicly listed companies, with shareholders who were not involved in day-to-day management. This has proved to be a disastrous form of capitalism, with owners who don’t know what the managers of their money are doing.

Investment banking, till the early 1980’s, was carried out by partnerships made up of investment bankers. The capital in the firms, and the risks, were both the responsibility of the partners. As Guido says “the oldest and most experienced partners tended to have the most capital in the firm. This had a risk management effect greater than any Nobel Prize winning computer-calculated risk model, the old guy with the grey hair stood to lose everything when some testosterone charged 27 year-old trader bet the firm’s capital … The bosses’ desire to keep their retirement pots concentrated their minds”.

Stock market listing, and external ownership, such as that brought in by the Big Bang during the Thatcher years lead to a situation where the providers of the capital, and therefore those bearing the risk, were no longer in any control of that risk. Is it a coincidence that Collateralised Debt Obligations and the rest of the alphabet soup which made up the speculative “investments” at the root of the crash were financial instruments dreamed up by the corporate whizz kids on massive salaries, but who stood only to lose their jobs if they got it wrong, rather than everything they owned?

As Guido says “There is nothing moral in asymmetric markets where the risks are borne by others than those taking the risks.

The Scottish legal profession faces an imminent and huge upheaval. As Mr Lafferty says, “The threat…is that the high street legal market will get hoovered up like the high street optical market has been, in which 80 per cent of the trade is owned by a tiny number of brand names.” As a profession, solicitors “need to be sales-savvy, market-alert, entrepreneurial” to avoid “having to watch as companies with increasingly bizarre names and brands try to elbow their less-qualified way into the market place.

Mr Semple, expressing a concern going further than merely commercial and marketing matters, warns that “(The Law Society has) been presiding over a potential catastrophe for many solicitors in Scotland which was entirely avoidable. … The changes in the Legal Services legislation now require solicitors to act independently (rather than be independent)…This change will compromise the independence of solicitors who offer services to the public. External owners of legal service providers will not be directly bound by solicitors’ ethics. They will be motivated only by commercial interests.” (Emphasis added.)

I have no doubt that investment bankers, in the old days, were as a rule, as professional and ethical as solicitors. However, the passage of time, and the loosening of the direct connection between capital and risk, allowed corners to be cut, and edges to be shaved, all in the interest of profit. The creators of the wacky financial “instruments” described by Mr Lewis were not unethical either. But, as I mentioned above, is it coincidental that they were only created once the capital/risk link was broken, or at best severely stretched? Financial backers will want a dividend on their money – we are in a capitalist society after all, and pressures will inevitably increase on legal businesses under ABS to provide a good return on their investors’ capital. Over time, as with the investment banks, things are likely to slip.

Even although the ABS model to be applied here is not (yet) full flotation, the twin risks identified by Messrs Semple and Fawkes place the profession at great risk. The “liberalisation” of the financial markets too was intended to allow greater competition, and permit the investment banks to act outwith the hidebound old rules, whilst of course remaining true to their ethics, thus allowing them to increase their profitability, both for the banks themselves and their investors and backers. We can see, laid out in Mr Lewis’ book, and indeed on the news daily, where that led to.

Self-interest is a necessary human trait, and who could fault a partner at a big practice who sees the possibility of their business floating, with a huge windfall for the people lucky enough to be owners when the music stops? It seems inevitable that, as time progresses, the restrictions in place in the imminent ABS structure will fall away, as they are seen as being “anti-competitive” or still as leaving legal businesses at a “financial disadvantage” in raising capital, as compared with other professions. Full flotation will come in due time, even though there are probably only a handful of firms where, in reality, this will have any substantial direct effect. It is unlikely that, for example, even the best High Street one-man criminal practice will be able to have an IPO!

Mr Lafferty refers to the “ABS tsunami”. As we have tragically seen in real life, if a tsunami is already on its way towards you, then there is nothing which will stop it.

 

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Filed under Alternative Business Structures, The Law Society of Scotland, The Legal Profession

Rangers’ Tax Case Hits the Big Time! Scotland Tonight Covers the Story – Will Graham Spiers Get a “Red Card”?

Introduction

STV’s Scotland Tonight programme on 7th November followed up their earlier story about the First Tier Tribunal (Tax) re-starting yesterday.

Their reporter, David Marsland, presented the introductory piece to camera from the dark and chilly street outside Ibrox, so that he could tell us that no one inside was talking to him about this.

He pointed out that Rangers were fighting on at least three fronts (a) Sectarianism, as exemplified by the appearance at court today of their reserve goalkeeper, Grant Adam, on an aggravated charge of breach of the peace (to which he pleaded ‘not guilty’); (b) media bias, as shown by the small gathering of fans to protest outside the BBC Scotland HQ at Pacific Quay on Saturday and (c) Tax.

John Cairns, chair of the tax committee of the Institute of Chartered Accountants in Scotland, appeared on screen to tell the audience that HMRC may well be looking to pursue this as a high profile case, and he referenced the Lester Piggott and Ken Dodd cases. Interestingly of course both those cases resulted in criminal prosecutions of the alleged “tax dodger”.

The reporter summarised the issue as follows – the Tribunal commenced its hearing today at a “Secret location” somewhere in Scotland. Images of the members of the FTT(T) entering a hidden hearing room situated under a swimming pool, as in Thunderbirds, come to mind.

The secret location for the First Tier Tribunal?

The Tribunal is to consider the use by Rangers of Employee Benefit Trusts, by which, since the 1990’s, Rangers paid players via these EBT’s. The players received loans, which were never to be repaid, through the trust and as such they were only taxed on the interest element, rather than the “loan” being treated as salary, and thus chargeable to full Income Tax. In addition, payments to the trust could be offset against Rangers’ own taxes, and in addition, they did not need to pay National Insurance on the sums alleged to have been paid qua wages.

As Mr Cairns commented, these were legal, as long as they were operated properly. The implication therefore is that these were not.

STV then showed a clip of Mr Whyte’s interview shown by them on 19th October where he confirmed he was aware of the tax case when he took over, but that he had a “contingency plan” if it went bad.

Mr Marsland concluded by pointing out that a £50 million tax bill would result in a loss of points, at the very least, for Rangers.

The discussion then moved to the studio, where John McKay spoke to both Graham Spiers, the Times journalist, and John McMillan, representing the Rangers supporters.

Graeme Spiers

Dealing firstly with Mr Spiers, I wonder if his appearance to discuss matters Ibrox will get him his “red card” from Mr Whyte? There was little or nothing in fact in what he said that could be seen by a normal observer as defamatory of Mr Whyte. That might not stop him being threatened with banishment from the marble halls.

He started off by saying that the possibility of a £20-£40 million bill was a ticking time bomb for Rangers. If the bill ends up at that sort of level, then Rangers as a Club will be crippled. He accepted tether was a chance they could win, but if they lost, then administration was inevitable.

He went on to say that, if the Club went into administration, that WOULD BE GOOD FOR MR WHYTE! It would not be good for Rangers. Why would a sensible businessman take on a possible £45 million liability?

The quicker Rangers went into administration, the better for Mr Whyte, as he is a preferred creditor. If the tax bill causes the demise of Rangers, Mr Whyte can say it is not his fault. This would allow Rangers to eliminate all of its debt, and for Mr Whyte to get come of his money back.

He said that it was inconceivable that the Rangers “diaspora” could “chip in” to save Rangers.

Administration would be a humiliation for a club with Rangers’ proud tradition, but from a business point of view, the best thing for Mr Whyte was administration.

Perhaps he could broker a private deal with HMRC for £10-15 million, but why should he do so? THE LAST THING MR WHYTE WANTS IS A DEAL WITH HMRC. Why should he be putting in more money over the sum already paid to clear the bank debt?

Rangers face “total obliteration” ad it is all the fault of Sir David Murray and the old regime.

He was then asked a question which took him by surprise – is Craig Whyte Rangers’ equivalent of Fergus McCann? He said on reflection that he was not. When Fergus McCann took over Celtic, the club was at death’s door. Celtic only had days to live. The similarity was that no one else was willing to step in at Parkhead as no one else was willing to replace the Murray ownership, other than Mr Whyte. However, Rangers, whatever happens, will go on. Mr Spiers does not believe though that Mr Whyte can make this work.

John McMillan

Mr McMillan was there, as I said, to represent the views of Rangers fans. His diagnosis was that the situation was serious but the fans were behind the club. The fans hoped that the tax case would be won.

He acknowledged that Mr Whyte had gone into Rangers with his eyes open – he knew about the tax case. This suggests he is confident of the result, as was Sir David Murray before him.

Things were not looking good, but there should be no doom and gloom.

Mr McMillan agreed that the Rangers fans could not save the situation if the case went against them, but the fans would do whatever they could.

When asked about possible changes, Mr McMillan said that whilst the fans would not like it, they would maybe “have to accept” a Rangers 2012, but he did not think that supporters would accept the bane of Ibrox Stadium being changed. However, the club and the fans would need to look at all angles.

He ended by stating that the supporters had to back Craig Whyte and that the fans were 100% behind him.

Conclusions

Mr McMillan fulfilled his role on the programme perfectly. I imagine his view is one shared by many of the fans – Mr Whyte is the only person who was willing to take on the challenge – he is a clever businessman who must have a plan to deal with the situation he knew about when he took over.

The fans would accept whatever was necessary to ensure the club’s survival, though they might not like the ground being re-named for example. The bottom line for the fans is that Mr Whyte has to be trusted because he is the only man n position to do something about the situation.

Mr Spiers gave a very interesting range of replies. I am sure he was not affected by Mr Whyte’s threats to ban him from Ibrox, and being on a retrospective “yellow card”.

However, what he said seemed somewhat schizophrenic. On one hand, the club faces “total obliteration” and humiliation if forced into administration. The process of administration would be good for Mr Whyte but not for Rangers. Why should he enter any arrangement with HMRC if this would lead to less of a financial return for him?

It is interesting though that the contrast Mr Spiers used with Celtic was that they were at death’s door, and by implication, despite facing “total obliteration” Rangers are not at death’s door. Mr Spiers tweeted a week or so ago that he expected them to enter administration in 14 days.

He also stated that he was sure that Rangers continued, with the debt all gone. In what way therefore is that outcome a bad one for Rangers?

Clearly in a short TV slot, the full implications as detailed and debated, for example on RangersTaxCase.com, could not be gone into.

Mr Spiers’ position seemed to be (a) that administration is not good for Rangers but (b) they will continue debt-free, with none of the potentially awful consequences spelled out.

Mr Spiers is, from what Mr Whyte has said, very close to being persona non grata at Ibrox. One suspects that some fans might view his comments through a negative prism. However, taking all that he said at face value, did he say anything really that was offensive (a) to Mr Whyte or (b) to the team?

Perhaps the suggestion that the respective interests of the owner and the company might not be at one could trouble some, but that is really only a reflection of reality, isn’t it?

It will be interesting to see any official Rangers reaction either to STV as a whole or to Mr Spiers.

It is also interesting, despite the full picture not being spelt out, that the tax case is being discussed on one of Scotland’s national broadcasters. (Perhaps one day the credit to RTC will be given!)

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Filed under BBC, Football, Rangers, STV

Golfer and Golf Club Found Liable to Player Struck in the Eye – Phee v Gordon + Another

 

 

Lord Brailsford today found both defenders liable in the case of Anthony Phee v James Gordon and Niddry Castle Golf Club, reported at http://www.scotcourts.gov.uk/opinions/2011CSOH181.html.

On the 10th August 2007, Mr Phee, the Pursuer, was playing a round of golf at Niddry Castle Golf Club. Passing from the 6th to the 7th holes, he was struck in the eye by a golf ball driven by Mr Gordon, the First Defender. Mr Gordon was driving off the 18th tee, some 150 yards away from Mr Phee. There were no warning signs on this path, despite its proximity to the 18th tee.

Mr Phee’s position was around 12 degrees to the left of Mr Gordon’s position. According to Mr Gordon, he realised immediately he had hit a bad shot, and shouted “fore”.

Mr Phee heard the warning cry and ducked down, covering his head with one hand and looking up for the ball. In doing so, he was struck in the eye.

The case against Mr Gordon was that he failed in his common law duty of reasonable care not to cause harm to the Pursuer, both by playing his shot when it was unsafe to do so, and by not being quick enough to shout “fore”. The case against the Golf Club was that it failed to fulfil its duty of reasonable care as laid down in the Occupiers Liability (Scotland) Act 1960, s2(1).

Lord Brailsford first had to determine if the defenders owed duties of care to the Pursuer. He followed the approach of Lord Bridge of Harwich in Caparo Industries v Dickman [1990] 2 AC 605:

“What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of ‘proximity’ or ‘neighbourhood’ and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope upon the one party for the benefit of the other”.

Lord Brailsford described the three stage test for determining if a duty of care arises:- “first, it must be determined if damage is reasonably foreseeable; second, it must be determined if there is sufficient proximity between the parties and, thirdly, it requires to be determined if it is fair, just and reasonable to impose the duty.” His Lordship decided that these tests were satisfied for both defenders.

Counsel for Mr Gordon sought to argue that the shot was a “freak shot and a remote possibility which was foreseeable but not reasonably foreseeable”. The Golf Club had accepted that “the shot struck by Mr Gordon which struck the pursuer was a bad or wayward shot but one which would on occasion be struck by every golfer.”

Counsel for the First Defender also argued (and this was adopted too by the Second Defender) that it was necessary to have regard to “the sporting context and the relationship between the two players”. This argument proceeded on the basis that there was a social value in the game of golf in Scotland and that such social value was a fact within judicial knowledge. The social value was that the game was played, on a regular basis, by a very large number of people who derived pleasure from the game. Beyond that it required to be considered that there was an inherent relationship between players on a golf course who played the game within the context of a recognised set of rules and an acknowledged etiquette to the playing of the game. These rules and this etiquette recognised that the game was not risk free but were designed to ensure that risk was reduced to a level which would be acceptable, and importantly, recognised by those playing the game.

In addition, the Golf Club argued that there was an issue of causation in relation to whether or not the erection of warning signs, as desiderated by the Pursuer, would have prevented the accident. The Club argued it would not.

Both defenders sought to place a high degree of contributory negligence on Mr Phee, even though he was only playing his fifth round of golf in his life. They argued that he had not paid attention as he walked along the path in the direction of the 18th tee, and that he had not acted correctly when he heard the warning shout. Indeed, counsel for Mr Gordon sought to argue that the Pursuer was entirely to blame for the accident.

Lord Brailsford rejected that argument saying “I accept that a very experienced golfer might instinctively duck and cover his head. I do not consider that the same reaction could or should be expected of a person in the position of the pursuer. I do not consider that the pursuer, whatever he may have done, acted inappropriately.”

As far as Mr Gordon’s perception of risk went, he told the court he felt he was playing very well that day, and he was not concerned about the risk of hitting someone by driving off line. The court disagreed with that assessment saying “On the basis of his own evidence I consider that these errors were caused by an inflated degree of confidence occasioned by what Mr Gordon considered, wrongly in my view, to be the very good round of golf he was having.” As an aside, one wonders of His Lordship is a golfer – the feeling of playing better than one actually is, is well known to anyone who ventures on to the links.

The court considered that Mr Gordon ought to have had in his contemplation the fact that golfers do, from time to time, play bad shots; that it would not take much of a bad shot to place the Pursuer at risk, and that his own skills were not enough to eliminate such a possibility. Accordingly he owed Mr Phee a duty of care and indeed the primary responsibility for the accident lay on him.

As far as the Golf Club went, the court considered that it too owed a duty of care to the Pursuer and that this was breached by failure to erect signs. “There was evidence from all the golfers involved that they would have had regard to signs had they been in place. Both experts considered that signs would have been a proper and effective way to draw risk to the attention of golfers and, moreover, that such signs, had they existed, would have been likely to have been heeded.” As a result of this failure, and weighing the comparative blameworthiness of the parties, Lord Brailsford decided that Mr Gordon was 70% to blame, and the Club 30% liable.

As touched on above, he rejected the claim that any blame fell on the Pursuer, stating “There is, beyond even these time calculations, the consideration that the pursuer was a novice golfer with, at best, only a sketchy knowledge of how to react to warnings shouted on a golf course. I do not consider that a person in the position of the pursuer on the golf course that day should be judged too finely in any avoiding action he may, or may not, have taken. Quite simply, even if I were incorrect in my finding that he did duck, simply staring and trying to sight a ball would not in my view constitute negligent behaviour”.

Quantum having been agreed already, the case was put out By Order to discuss the precise terms of the decree.

Conclusion

As the court observed, these cases often turn on their individual facts. But there are some wider lessons to be learned, I think.

I imagine that prudent Golf Club Secretaries across Scotland will be out checking their courses to see if there are any areas where warning signs might be placed. There might also be an addition to the scorecard telling players what to do if they hear a shout of “fore”. If, for example, the Second Defender here gave a clear warning that, on hearing such a cry, a player should not look up for the ball, might they have escaped liability, or had it reduced?

In addition, one would not be surprised if insurers of Golf Clubs sought to have some form of limitation or exclusion of liability incorporated into the “contract” for playing golf, though that raises further legal complications.

Prudent golfers too should be checking their home insurance policies to see whether or not they would be covered personally, in the event of a wayward drive having the same catastrophic effects as that of Mr Gordon on Mr Phee.

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Filed under Civil Law, Courts, Damages Claims, Negligence

Levy & McRae v Rangers – Back In Court – 9/11/11 – But Only To See If The Bill’s Been Fully Paid

On Wednesday November 9th November Lord Hodge is to deal with a By Order calling of the case brought by Rangers’ former solicitors for non-payment of fees.

When the case called before, there were the undertakings about payment, and accusations that Levy & McRae were being unfair in pursuing the action and not accepting the pledge that they would be paid.

This delay, which was admitted by Craig Whyte as having been caused by his annoyance at Levy & McRae deciding to act for Mr Bain despite what the Court was told,  will have cost Rangers several thousand pounds in legal fees, but infinitely more in terms of cost to its reputation.

The judge continued the case till Wednesday between 930 and 10 am.

As long as (a) Rangers have paid the full sum due and (b) paid full costs as demanded by their former agents, then the calling will be purely formal, and Lord Hodge will have the action brought to an end.

If Rangers have not paid the legal costs of the case, or these have not been agreed, then the remaining issue would probably be referred to the independent Court official whose job it is to decide the fair level of costs.

There is little prospect of there being interesting legal argument in this case next week.

It means one down, but how many more to go? As even Mr Whyte himself admitted, when interviewed by Tom English for the Scotsman, he did not know how many there were!

 

LORD HODGE – D. Morrison, Clerk

Wednesday 9th November

 


By Order

between 9.30am and 10.00am

 

1 CA100/11 Levy & McRae v The Rangers Football Club

 

Balfour + Manson LLP Warners  

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