Monthly Archives: December 2011

Frances Curran, Former SSP MSP, Loses Defamation Claim Against Daily Record [2011] CSIH 86 – Court Defends Press Right to “Exaggeration, Provocation and Harshness”

Frances Curran was one of the Scottish Socialist Party (SSP) MSP’s elected to Holyrood on the coat tails, some would say, of Tommy Sheridan.

However, when the SSP imploded in the aftermath of the News of the World’s allegations of “swinging” against Mr Sheridan, and his successful defamation claim against News International (NI) she, along with all of the other SSP MSP’s, lost her seat.

Ms Curran was not of the group which aligned itself with Mr Sheridan. She was assuredly not one of the “Sheridanistas”.

Ms Curran did not give evidence for NI in the original defamation trial, although the Daily Record suggested she had. She was not called upon to do so. Other SSP members did give evidence but unwillingly, having decided that they could not flout the law by refusing to appear.

In the aftermath of the victory for Mr Sheridan, which has turned out to be a Pyrrhic one in light of his subsequent prison sentence for perjury, three prominent SSP MSP’s, Ms Curran, Rosie Kane and Carolyn Leckie, issued a statement indicating their dis-satisfaction at the behaviour of Mr Sheridan and of the outcome of the trial.

On 5th August 2006 Ms Curran was quoted in the Daily Mail stating that Mr Sheridan had lied in the trial.

Tommy Sheridan replied in the pages of the Daily Record over the next few days. He accused Ms Curran, amongst others, of being a “scab” which is the ultimate insult to left wing politicians. He made it clear that he could see no way of working with the three specific members mentioned above for their “betrayal” of what he and the SSP stood for.

In November 2008, Ms Curran raised an action for defamation against the Record (but not against Mr Sheridan). She claimed that she had been defamed by the articles in the Record. She alleged that “the innuendo contained in the article was that, notwithstanding her professed commitment to socialism and trade unionism, the pursuer had been happy to align herself with, and to assist, the anti-socialist NI, in furtherance of a plot to destroy Mr Sheridan’s political career, and that in consequence she was a “scab” and a “political scab”, failing to act in accordance with her publicly professed principles in a way which was dishonourable, hypocritical and lacking in integrity, all of which was untrue. In particular, the article appeared to suggest that she had given evidence as a witness for NGNL against Mr Sheridan, when she had not.”

The paper defended the action, stating firstly that the articles were not defamatory, but even if they were, which was denied, they were covered by “qualified privilege” and as not motivated by malice, there was no liability.

The action was dismissed by the Temporary Judge at first instance, who upheld the defence propositions.

Ms Curran appealed and the appeal, before Lady Paton, Lord Hardie and Lord Kingarth had its decision issued today.

The court has rejected the appeal and upheld the initial decision.

The court decided that the “rough and tumble” of political discourse was an area where the court, traditionally, had been reluctant to interfere as regards defamation. The court reviewed a number of cases, including those from the European Court of Human Rights, and agreed that public figures, whilst not fair game for the press, ought to be prepared for rigorous analysis and discussion in the political field.

The judges quoted the European Court in Dlugolecki v Poland, 24 May 2009, Application no 23806/03 saying:-

The limits of critical comment are wider if a public figure is involved, as he inevitably and knowingly exposes himself to public scrutiny and therefore must display a particularly high degree of tolerance…. In the context of a public debate the role of the press as a public watchdog allows journalists to have recourse to a certain degree of exaggeration, provocation or harshness.

The court determined:-

“In particular, we are not persuaded that the article would lower the pursuer in the esteem of right-thinking members of the public. The public were well aware of the nature of Mr Sheridan’s dispute with the NGNL. As was noted by Lord Macphail in Macleod v Newsquest (Sunday Herald) Ltd 2007 SCLR 555 (quoting Neill LJ in Gillick v BBC [1996] EMLR 267):

“… (2) The hypothetical reasonable reader (or viewer) is not naïve but he is not unduly suspicious. He can read between the lines. He can read in an implication more readily than a lawyer and may indulge in a certain amount of loose thinking. But he must be treated as a man who is not avid for scandal and someone who does not, and should not, select one bad meaning where other non-defamatory meanings are available …”.

In our view, the readers of the article would appreciate that they were witnessing a political skirmish, with warring factions within the SSP and diametrically opposed views about how the party and its members should conduct themselves, including a characteristically forthright public berating by Mr Sheridan of those who, in his view, had failed to give him the unquestioning public and political support he needed in whatever way he demanded and at whatever personal cost to the individual.”

As far as the question of qualified privilege went, the court stated as follows:-

“In the present case, Mr Sheridan did not respond by calling the pursuer a liar. He focused instead upon the main themes underlying his whole campaign, namely socialism against anti-socialist forces epitomised by NI; his hope and belief that he would be wholly supported by fellow socialists, and in particular by members of the SSP; the fact that the pursuer had (so far as he was concerned) demonstrated political disloyalty both to him and to his socialist cause – which in his eyes qualified her as a “scab”; and his resulting anger and disappointment, with the caveat that he and the pursuer might find it difficult to work together in the SSP in the future. In our view, that retort, in the circumstances, came within the parameters of “fair retort”. Thus the defenders were entitled to qualified privilege on the occasion that they reported that retort.”

Bearing in mind that Mr Sheridan is a convicted perjurer, the words of the court seem almost complimentary to him! The suggestion of the court is that, rather than resort to personal attacks, as Ms Curran had done, he engaged in a political discourse detailing what he perceived to be the faults of the parties.

Finally, Ms Curran had added in a case that the words used were motivated by malice on the part of Mr Sheridan, as he now being a convicted perjurer knew that the foundation of his “attacks” on Ms Curran and others was unsound. By extension, if Mr Sheridan’s words were malicious, then the malice should be attributed to the Daily Record also.

The court rejected this argument too, saying:-

Quite apart from the lack of precedent, we consider that there is no support in principle for the pursuer’s proposition. Malice on the part of an individual is not necessarily easy to detect. Accordingly, to deprive a newspaper or other publishing medium of the defence of qualified privilege because the individual whose views were reported is subsequently proved to have been motivated by malice would, in our view, place too heavy a burden upon the publisher.”

A hearing at a later date will determine liability for costs, but one can only assume that Ms Curran will be found liable for all, or almost all, of them. The financial consequences for her will be grave. Whilst not as drastic a defeat as that of Mr Sheridan, as he ended up in prison, Ms Curran has lost the chance to vindicate her reputation (which I assume was her primary motivation, rather than financial recompense).

It would be ironic, to say the least, to see another former SSP MSP brought down by their voluntary decision to pursue a case through the courts, where in general, the politicians of the Left have been sceptical about achieving justice. Neither Mr Sheridan nor Ms Curran were forced to raise actions – but they both did and have had, or will have, to pay the consequences of their decisions.

For the press too, especially bearing in mind the barrage of negative publicity it has received and is receiving, it might be useful to bear in mind the quote from the European Court mentioned above – “In the context of a public debate the role of the press as a public watchdog allows journalists to have recourse to a certain degree of exaggeration, provocation or harshness“.

When the public perception of the press is that it only deals in exaggeration, provocation or harshness, it is legitimate to point out that, in some cicrumstances, such coverage is justified!

 

 

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Filed under Civil Law, Courts, Curran v Daily Record, Defamation, Press, Tommy Sheridan

Craig Whyte – “The Jim Delahunt of Corporate Finance” + Interesting Idea Re Why He Took Over Rangers

The last 30 days have not been the best for Craig Whyte and Rangers. His team has dropped points, and now no longer sits at the top of the SPL. At the end of November he was forced to admit to the PLUS-SX that he had been disqualified from holding directorships in the UK for seven years in 2000. It was publicised that the SFA were enquiring into his “fit and proper” status to hold a position within a football club. The deadline for lodging audited accounts with Companies House and holding an AGM is about to pass, with the potential that this might bring criminal convictions for Mr Whyte and his fellow Directors.

I thought it might be of interest to look back to sunnier times for him, back to before the eyes of the world (or at least the West of Scotland) were upon him.

Let’s jump in the time machine back to November 19th 2010. Mr Whyte had burst on to the scene as the new prospective buyer of Rangers from Sir David Murray.

The press clamoured for his attention. Who was this man willing to come to the rescue at Ibrox, and why is he doing this?

The Sun had an interesting idea. Their reporter, Andy Devlin, went to ask an expert!

Professor Chris Brady is a “business guru”. He was, in 2010, Dean of the BPP Business School in London. He has enjoyed a diverse working life with a variety of jobs ranging from a line worker at Chryslers in Detroit to a claims clerk in the City of London, from a land surveyor with the Ordnance Survey to a betting shop manager, and from a semi-professional footballer and coach to a naval intelligence officer.

Professor Brady’s areas of expertise are in policy-analysis, the role of teams in organisational structures, corporate coaching, decision-making theory, international organisation and game theory.

As a UEFA ‘A’ Licence coach, Chris still maintains coaching ties within the Football Association and is also a member of the Institute of Personnel Development and a Fellow of the Chartered Management Institute. Professor Brady is the co-author of the FT/Pearson Publications ‘Rules of the Game’ and ‘The End of the Road’ and recently published the much acclaimed book entitled ‘The 90 Minute Manager’, now in a third edition.

He is a wise man, with great business knowledge and also a thorough grounding in football.

He strikes me as a very good person to ask about Mr Whyte’s apparent plans.

Shall we see what he had to say?

(I have not been able to access the article on the Sun’s website. I suspect the fault is mine, rather than that of News International. However, I was able to access it via Proquest.com, an online newspaper database accessed through my local library. I highly recommend it, and well done to South Lanarkshire Council for signing up to it!)

(The fault was mine – the link is here.)

To set the scene, in November 2010, the speculation was that Mr Whyte was going to pay £32 million to buy Rangers (which included the sum required to settle the Lloyds Bank debt).

As the Sun said:-

“Tycoon and lifelong fan Craig Whyte has been locked in talks with Murray and an agreement is almost in place. The venture capitalist, whose business interests are worth £1 BILLION, could have control of the SPL champs by Christmas.”

Professor Brady raised the question which has, to be frank, baffled many since Mr Whyte came on the scene:-

“The question I’d ask is a simple one: Why would he want to buy Rangers at this moment in time? Does Mr Whyte believe that the market is about to change?

“Would I personally buy Rangers? …I would buy Rangers if I thought that in the next four to five years I would be taking them out of the SPL and into somewhere where the club was going to make money.

I can’t think of any reason why Whyte would want to buy Rangers other than the fact that perhaps they’re heading for the Premiership or some new European league.(Emphases added)

Did Mr Whyte have contacts who led him to believe that the Eldorado of the Old Firm entering the SPL was finally looming into view? Surely Sir David Murray and his cohorts did not persuade him that was about to happen?

Professor Brady continued:-

“Of course, he’s a fan so it might just be a toy. But if it was my money I wouldn’t buy Rangers unless I thought they were coming out of the SPL. Perhaps Whyte knows something we don’t. There’s NO way Rangers can make money in Scotland.

The Sun continued by pointing out that, the previous day, they had revealed that a “£20m January war chest” had been promised to boss Walter Smith. Of course the war chest turned out to be unnecessary, as Rangers won the SPL without spending £20 million in the transfer window. One suspects Ally McCoist would like that rumoured chest to turn up a year later!

Professor Brady had one other theory:-

“Mr Whyte might want a toy to play with, that’s the only other alternative. And that’s not necessarily a bad thing. If I was a Rangers fan I wouldn’t be bothered by that. If he’s worth £1bn then he’s not going to miss £30m or £40m. If it’s a toy it won’t matter to him if he’s not making money out of it. Perhaps, however, he believes it can make money. Perhaps he believes Murray ran the club badly and that he can do a better job.”

As time has passed, the IF regarding Mr Whyte’s worth has increased as the estimates of his fortune have decreased. It seems unlikely, though not impossible, that it is simply a “toy” for him, although it seems pretty clear by now that Mr Whyte would very much miss £30 or £40 million, if indeed he actually has or had that amount to lose!

The Sun repeated the story of Mr Whyte’s stock market investments from age 15 onwards.

Professor Brady then made an astonishing comment I had not seen before:-

“Essentially, Mr Whyte is a tipster. He’s the Jim Delahunt of corporate finance!

“Mr Whyte owns a private equity company; he is what we term a venture capitalist. He’s got cash and he’s looking to make more. He’s looking for businesses which are under performing.”

 “It won’t be his money. He will be the face of a consortium. There will be a group of people involved in a deal like this. He didn’t get where he is today — with business interests worth a billion — by spending his own money. He’ll be looking to spread the bet and that’s why I suspect more people are involved behind the scenes.”

Has the learned Professor come closer than anyone to the reasons behind the move? Did Mr Whyte think that there would be imminent developments regarding the EPL? Bearing in mind how much people were spending to buy “real” EPL clubs, then even the rumoured £32 million for Rangers would have been a snip, if the Premiership and Sky’s riuches beckoned. That idea, although it would appear totally wrong, would in fact fit perfectly with the venture capitalist mindset – as Professor Brady said “He is a tipster” and by the nature of tipsters, some tips win, and others do not. As long as your gains exceed your losses, you are smiling.

What a perceptive man Professor Brady was last November – Whyte “didn’t get where he is today by spending his own money” and “There’s NO way Rangers can make money in Scotland.

As Rangers face up to a bleak midwinter, with the transfer window perhaps their only chance of raising the funds they need to survive through to the end of the “Big Tax Case” which itself would probably close them down, and with their best players either injured or playing poorly and losing value, and with signs that some of their fans are already turning on their manager and owner, could it be that Professor Brady coined Mr Whyte’s footballing epitaph, those 13 long months ago?

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Filed under Football, HMRC v Rangers, Rangers

Bad Law or the Art of Spin – Today’s Mail, Telegraph and Independent re Compensation for Criminals – A Case Study

 

 

The days of the Christmas holidays are light for news. Newspapers are desperate for articles to take up column inches. Private Eye’s own Polly Filler columnist would be engaged 24/7 at this time of year, should she wish.

It is therefore not surprising to see political stories running in the press because, as most politicians are on holiday, and Parliament is not sitting, there is little chance of stories being questioned seriously.

This morning there are three stories I have seen (there may be more elsewhere too) about criminals being compensated for their injuries. These can be found in the Daily Mail, the Daily Telegraph and the Independent. Click on the names of the papers for the respective stories.

On the face of it, there is a “scandal” taking place which must be stopped. No right thinking person reading the articles could fail to agree that “something must be done”. However, the pieces all seem to be blatant attempts at government spin, ignoring the present legal position, and in fact, apparently, though inadvertently disclose a far greater “outrage”.

What we have, it appears, is a Ministry of Justice (MoJ) attempt to look tough on criminals by denying them compensation for ridiculous injuries, including, for example, Ian Huntley being compensated for being attached in prison, as this keeps money from innocent victims who in fact are left owed huge sums by the Criminal Injuries Compensation Authority (CICA). The “official sources” quoted however fail to disclose the reality of the rules of the CICA scheme just now, and attempt to conflate two entirely different issues in an effort to appear even tougher on the convicts and jailbirds. The spin is to create a sense of outrage, and having done so, to emphasis that the Coalition is not going to let this continue.

The “source” has also taken the chance to take a kick at Legal Aid, which is generally not a topic people want to support, unless they, or someone close to them, are being denied help for a vital legal battle.

The MoJ seems successfully to have worked on the basis that hard pressed newspapers, especially those without correspondents with relevant legal backgrounds, simply cannot devote the time and resources to having a Government inspired “story” subjected to detailed critical analysis.

The articles are written by Tim Shipman, Martin Evans and Oliver Wright respectively. I do not intend to criticise any of these journalists who, I am sure, are excellent practitioners. However the story seems to me anyway to be an exercise in the Government getting out a story for headline effect, whilst hoping no-one will actually look too closely at what they are saying.

 

A Brief History of Criminal Injures Compensation in Britain

In 1964 the Government established the Criminal Injuries Compensation Board (CICB), to pay compensation to victims of violent crime, based on an assessment of what victims would have received for their injuries if pursuing claims in a civil court. This was the commencement of what was, and remains, the most comprehensive system for compensating victims of crime in the world, a fact of which successive governments should be proud.

In the mid 1990’s, as a result of concern about the increasing costs, the Conservative Home Secretary, Michael Howard, brought in a revised “Tariff Scheme” where set amounts of compensation were to be paid for specified injuries. The new scheme was overturned by the High Court, after a challenge by various Trades Unions, but was, with some amendments, reintroduced and in 1996 the CICA was born and took over from the CICB.

The Scheme has been revised on various occasions, most recently in 2008, though it seems further revisions are on their way.

Now victims of crime who suffer injury can receive a maximum award of £250,000 for their injuries and a maximum additional sum of £250,000 for financial losses, as long as various conditions are satisfied.

However, as a function perhaps of present day society, the numbers of claims continue to increase year after year, and despite various efforts to streamline the claiming process, there are delays endemic in the system.

The CICA only makes news after a large tragedy, like the London bombings, when it gets criticised for delays, or hen apparently perverse decisions are made. An understanding of the scheme would render these apparently odd decisions clear (in most instances).

As the Annual Report of the CICA for 2010-2011 said, over 65,000 claims were resolved in the last year, and over £280 million paid out in compensation.

 

The Details

It is of note, before we get to the legalities, that the pieces have the following similarities.

1                     Each is illustrated with a picture of convicted murderer Ian Huntley.

2                     All three refer to him claming £15,000 for having his throat slashed in prison.

3                     Each quotes “a senior source close to Kenneth Clarke”. The Telegraph attributes its quote to what the source told the Mail, but the Independent does not.

4                     Each has the same quote from a “Ministry of Justice spokesman” (presumably not the senior source close to Mr Clarke).

5                     All the articles refer to £5 million per year being paid out to convicted criminals, or “jailbirds” as the Mail refers to them.

6                     Two of the pieces (Mail and Independent) also have a quote from Philip Davies, a Conservative MP complaining about the “outrage and scandal” of taxpayers’ money being “wasted on compensating criminals”.

One difference, in keeping with the respective papers’ philosophies, is that the Independent quotes the Prison Reform Trust and NACRO putting the case against the changes. No such “balance” appears in the Telegraph or the Mail. (Though, to be fair, that would not be expected anyway on an issue like this.)

 

So what is being suggested?

Even though all three pieces come from the one origin, one assumes, the detail is not on all fours.

The Mail states that “Convicted criminals will be banned from claiming compensation for their injuries…Ken Clarke will announce plans to ensure the money goes to victims of crime rather than criminals…Every year criminals claim around £5 million from the CICA”.

The Mail refers to “controversial claims in which burglars have demanded money for injuries sustained while escaping the scene of the crime.” The Mail states “Thousands is (sic) also paid out every year to criminals who sustain injuries in prison as a result of feuds and drug-fuelled violence”.

The Telegraph goes further, stating that “In some of the most extreme cases burglars, who have been hurt as they escape the scene of a crime, have received payments”.

The “official figures” and the detail around them quoted in the pieces are of interest too.

According to the Mail, “340 inmates made successful claims for injuries resulting in payouts and costs of £3.1 million last year. More than 3,000 prisoners made claims…Another £2 million was claimed by convicted criminals who are not jailed. Most of the payouts for jailbirds are for injuries caused by trips, falls or slips as well as accidents while playing sport.”

The Telegraph also refers to the applications covering “a range of injuries and activities, but included slips and falls and also accents while playing sport.”

All three articles refer to the lack of money available to the CICA for compensating victims of crime, and the impression is clearly given that dealing with, and paying, these criminals is a reason for, as the Mail puts it, “Almost 50,000 victims of violent crime have been kept waiting for compensation worth in excess of £600 million because the compensation authority has run out of funds. They include the children of murder victims and others who need the money to cover medical bills and compensate them for their disabilities and lost wages. Some are owed up to £500,000 after being crippled by vicious thugs.”

 

So what is wrong with the articles?

Why Do All These Criminals Get These Payouts?

They don’t!

First of all, there are two targets, and only the Mail piece makes clear that one of them remains untouched. The CICA only deals, as the name suggests, with “criminal injuries”. Slips, trips and falls, and sporting injuries are nothing to do with the CICA. They are negligence claims. If a prisoner, or indeed anyone else in prison, suffers injury there which is the fault of another party, then a negligence claim can be pursued and, if blame can be established, they would be entitled to compensation. These are civil court matters, dealt with in the normal way. Mr Huntley has as much right to pursue such a claim as anyone else, although ay damages he might receive could result in legal action for damages being taken against him by his victims’ representatives.

The civil courts would not reduce any award of damages because the victim was a convicted criminal. The “source” does not appear to suggest any change in that principle.

The target therefore is the CICA system.

However, the scheme, dating back to the days of the CICB has always taken account of criminal convictions! Under the initial scheme, the CICB was empowered to take account of the applicant’s “character, conduct and way of life, as evidenced by their criminal convictions” even where the convictions had nothing to do with the incident in which the injuries were inflicted. Over the years I conducted a number of appeals for clients where awards of compensation had been either reduced, or refused entirely because of convictions, and, as was said by more than more than one member of the Board “Why should we pay compensation to someone who has probably already cost the CICB in compensation for someone else?” It is hard, in general, to argue with that principle, which has been a part of the criminal injuries regime since 1964! However, the CICB allowed the exercise of discretion. In one case, I acted for a man who had been imprisoned for a number of years at a young age. He had lived his next 35 years after his release as a model citizen. The CICB decided that it was in the interests of justice to make him a full award. He was credited for having made a radical and positive change in his life.

Equally I know of cases where a family member claiming compensation for the death of a child was refused, because of the father’s own criminal record, and also where the family was denied compensation following the murder of their child due to the child’s “offences” which had led him to appear before the Children’s Panel.

Criminal convictions have therefore always been one of the factors to be considered.

When the tariff scheme was created there was also the inception of the “Penalty Points” system. The discretionary element all but disappeared. There is now a sliding scale of percentage reductions from any award based on the number of penalty points the claimant has.

The scale is detailed on pages 62 and 63 of the Guide to the CICA Scheme. The scale make sit clear that the “problem” of criminals obtaining criminal injuries compensation is already well covered.

A 10 point count reduces the award of compensation by 100%.

What results in 10 points? Any sentence of imprisonment results in 10 points for the duration of the sentence imposed. This applies even if the sentence is suspended, or there is early release. In addition, even after the sentence has been served, there is a sliding scale of points. Obviously multiple offences make it even less likely that a claimant will receive any award.

Mr Huntley, who is serving a life sentence, will therefore have a 100% deduction applied to any award of compensation for criminal injuries otherwise made to him, unless exceptional circumstances can be shown. In light of the drafting of the scheme, the only “exceptional circumstances” considered would be where he was injured in the course of preventing crime, or assisting the police or other authorities in preventing crime.

Even at the other end of the scale, a criminal conviction resulting in a fine of £250 or less, results in 2 penalty points (a 15% reduction) for 2 years from the date of sentence, and 1 point (10% deduction) form 2 years till the conviction is spent.

The scheme therefore covers far more than “jailbirds”.  The case mentioned above, where the claimant had lived free of trouble for 35 years, would, under today’s rules, have resulted in 5 points and at least a 35% reduction from any award.

Anyone in prison who receives an award from the CICA has gone through a rigorous process to get there and will have had any award reduced to some extent. In addition, they must have been successful in satisfying the “exceptional” circumstances test.

 

Who is a Criminal?

As Mr Davies, MP, suggests, we should be concerned about “criminals” getting money due to innocent citizens. But the penalty point scheme goes all the way down to dealing with cautions and absolute discharges! Does Mr Davies, or the MoJ intend to prevent anyone with an unspent conviction, of any type, from pursuing a Criminal Injuries claim? If so, it would be a surprise quite how many people were to be excluded.

The scheme keeps in place, but with the more draconian penalty point system, the restrictions on claims in fatal cases. The criminal convictions of both the deceased and of the claimant come into play.

It is a matter of policy whether or not family members with criminal records (even for trivial matters) should be compensated for the killing of a close relative. The papers report every so often an aggrieved claimant who falls foul of this rule, and generally the reports focus on the unfairness of the decision. However, it all depends who you classify as a “criminal”. Mr Davies wants a wide net cast. Is that fair?

 

Do Escaping Burglars Get Compensation?

The reports, especially those in the Mail and Telegraph, look to show the ridiculous things which result in criminals being paid. Suggestions that there are people “demanding” payment for being injured when escaping, and according to the Telegraph being paid, seem daft. It might be that, in one or two specific cases there have been circumstances justifying such awards, whether by Criminal Injuries or via negligence. I suspect that is all of that type there have been, if indeed any exist.

The Tony Martin case, where Mr Martin was imprisoned for shooting an escaping burglar in the back, was one of the rare cases where such a claim might possibly be successful, even to a small degree.

In fact, I am surprised that health and safety was not mentioned by the Mail!

 

Don’t These Cases Delay Justice for Everyone?

The figures also make clear that, despite the impression given, the CICA is not gummed up dealing with all of these prisoners’ claims. They make up a small percentage of the total case load and an even smaller percentage of the payments made.

People are not sitting waiting for decisions simply because prisoners make claims. If people in the 10 point category were barred from applying, it might save some administrative time, but on the other hand, some of these people might still apply, and their applications would still need to be weeded out of the system.

 

Financial “Errors”

The Mail refers to payments plus costs, which ignores the fact that no costs are paid. Any legal fees charged to the successful claimant come out of the compensation awarded.

The Mail also states that Government “sources” describe the present system as a “shambles” overspending by £50 million per year. The Labour administration is blamed.

The system in place however is one created in 1996 by the Conservatives. The annual report for 2010-2011 linked above shows that significant progress has been made in shortening administrative delays. However, the cost of the system in payouts goes up as more and more people apply!

From my own knowledge of the system I would not say that it was an unduly extravagant one as far as running costs were concerned. The staff of the CICA at its Glasgow HQ were always as helpful as they could be, bearing in mind they enormous workload they had.

Blaming Labour for the “overspending” seems to be a cheap party political point, designed to appeal to the Mail readership, as I am sure it did.

 

Rights of Prisoners

It should be said also that, if a claimant succeeds in a Criminal Injuries claim, and later received damages through an insurance company or civil court for the same injuries, then the CICA is reimbursed.

Not every prisoner attacked in gaol will have been a victim of negligence by the prison authorities. However, in the case of prisoners such as Mr Huntley, his very notoriety, and the evil of his crimes, in fact makes it easier for him to succeed in such a claim. The prison authorities would find it very hard to say that they were not aware of risks and threats to him, more than to other criminals, and as such need to put in place greater security measures.

As the spokesman for the Prison Reform Trust said in the Independent, a gaol sentence does not deprive someone of all their rights.

Unless the Coalition wants to move to a Fort Apache: The Bronx style of prison regime, than they have to be able to protect prisoners, as far as is reasonable. The authorities have a duty of “reasonable care”. They need to fulfil it.

 

Legal Aid

The Mail also has a sly dig at Legal Aid. It states that “The legal aid bill for convicts has doubled in two years to £21 million – although that sum also covers those demanding release from jail and softer punishments.”

The latter half of that statement seems to describe legal aid for appeals! Does the Mail want convicts to be told that they have no right to assistance from lawyers if they think their conviction is wrong or unsafe, or if the sentence imposed is excessive?

If the Crown appeal on the basis that a sentence is too lenient does the Mail believe that no representation is needed, as the court will see to fair play?

The answers to the above are probably yes, but that should not be the determining factor for the country as a whole.

This is spun though as the Coalition “trimming” the Legal Aid budget as part of its austerity measures. Trimming is a word with few of the unpleasant connotations of “cutting” isn’t it?

 

What is the Real Scandal?   

First of all, I do not think there is a real scandal here. But if there is, then the Mail report completely misses the point.

The article states ”Almost 50,000 victims of violent crime have been kept waiting for compensation worth in excess of £600 million because the compensation authority has run out of funds.. Some are owed up to £500,000 after being left crippled by vicious thugs.”

If the government run and funded scheme was actually lagging to that extent, as a result of dealing with prisoners’ claims, as the article implies, this would be a disgrace. Indeed any reason for such a delay would be unacceptable. The impression is given that almost 50,000 people have been awarded money, up to £500,000 but have not been paid as the fund is empty.

That is simply not true. The CICA has a budget, but as the payments it makes are dependent on the level of claims assessed, it does not “run out of money” any more than the DWP would run out of money for benefits.

Read the Annual Report for yourself. If the situation was as bad as the “senior source” makes out, one wonders (a) why it has taken this length of time for the Government to speak out and (b) why the only matter being addressed relates to claims by criminals.

 

In Conclusion

We have a blatant effort by the MoJ to get good headlines, by relying on the pressures on newspapers not actually to look at what is proposed and to analyse it.

As I state in the heading, I am not sure of this counts as Bad Law on the part of the press, or blatant political spinning, with a bit of “churnalism” as defined by Nick Davies in “Flat Earth News” thrown in.

In any event, it fails to give anything like an accurate picture of the problem and simply blames the bogeymen of convicts, lawyers and the Labour government for the present issues.

I find it sad.

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Filed under Bad Law, Civil Law, Conservative Party, Daily Mail, Damages Claims, Independent, Politics, Press

Rangers’ Company Secretary + the Millionaire Disqualified Director, Thoughts Re Disqualification + a Tenuous Celtic Connection

There seems to be a certain déjà vu for Mr Gary Withey in his involvement with Rangers. For Mr Withey has previously become the Company Secretary of a company owning a football club, after a takeover by a man whose wealth is stated to be very large, with the team involved suffering from a financial “black hole”. These dealings resulted in court proceedings to disqualify allegedly errant company directors involved in the football club, and certain criticisms were voiced of Mr Withey in an effort by one of the Respondents to avoid or reduce his own blame.

It must be said that Mr Withey was not a party to the proceedings and did not in fact give evidence. If there had been any significant question of fault on him in his role as Company Secretary, then he would at least have been called as a witness.

No findings were therefore made in relation to him (nor could it have been, as he was not a party to the case). Nothing stated below should be taken as suggesting or implying any wrongdoing on his part.

Equally, there is no suggestion that the faults of Mr Goldberg below have any connection with the operation of Mr Whyte’s ownership of Rangers.

There is also an interesting Celtic connection arising from this case, although based on a piece by James Traynor in the Daily Record! See the bottom of this post for more!

 

 

Who Is Gary Withey?

 

Gary Withey is a highly respected solicitor, a partner in the blue chip London firm of Collyer Bristow. He was recognised as one of “The Lawyer” magazine’s Hot 100 Lawyers for 2010.

On 26th May 2011, he was recognised by The Times as “Lawyer of the Week” in connection with his work in the takeover of Rangers FC by Craig Whyte’s Wavetower vehicle.

He was appointed as Company Secretary of Rangers Football Club PLC when the takeover went through, and he has remained in that post since.

Mr Withey has a great deal of experience and expertise to bring to bear for the assistance of Mr Whyte. By various accounts the running of Rangers is now dealt with by Messrs Whyte and Withey and Ali Russell, the Commercial Director.

 

Gary Withey Has Been Here Before

 

In 1998 Crystal Palace FC was purchased by Allowclear Ltd. This company was a vehicle set up for the purpose by Mark Goldberg to buy Crystal Palace from Ron Noades.

The sorry history of the takeover is detailed in the decision of Mr Justice Lewison in the High Court action by the DTI to seek disqualification orders against Mr Goldberg and James McAvoy, a Chartered Accountant who was also a director of Crystal Palace after the deal.

The full judgment can be found here.

I am sure that the disastrous turn of events at Crystal Palace have taught Mr Withey many lessons which he is using to benefit his new team.

 

He will have seen close at hand a brash young millionaire taking ownership of a club with a long history, and promising the earth in terms of investments and progress.

 

He also saw the very quick demise of the club under the weight of debt brought about by mis-management, and an ethos of having few if any formal board meetings. A lack for proper accounting was also alleged.

 

Board minutes were prepared recording Board meetings which had not taken place.

 

As Company Secretary, Mr Withey would clearly not have been at the heart of the dealings of Messrs Goldberg and McAvoy, as shown below. I am sure that these experiences have helped him attain the present heights in his career and will help him, as far as possible, to avoid the pitfalls which trapped Mr Goldberg!

 

 

Mark Goldberg

 

 

Mr Goldberg made his fortune in the recruitment industry. He was and was perceived as being a wealthy man. He took up a place on the board of Crystal Palace prior to his takeover concluding.

 

The court was told that:- he had been a lifelong supporter of Crystal Palace;  he was a man of great drive and vision and an excellent salesman; he was a man who could inspire belief in his vision; he had boundless self-confidence and a belief that he could solve problems; and he had great energy and was always on the go.

 

The court noted that “One result of Mr Goldberg’s self-confidence was that he did not always take advice. As Mr Barnes (one of the witnesses) put it: “Mr Goldberg wanted his own way all the time, and whilst he sought advice he did not actually take it.”

 

He was described to the court as always having a ready answer for any difficulty put to him by other board members, and plausible excuses for failure to adhere to previous decisions. Another witness described him as “an extremely difficult person to handle“.

Mr Goldberg’s companies had a complicated structure. Whilst not subsidiaries of each other, they were very much inter-related. Mr Goldberg’s vehicle purchased, coincidentally, 85% of the shares in Crystal Palace. One difference was that Mr Goldberg agreed a purchase price of £23 million for the takeover, rather more than the £1 paid by Mr Whyte.

In addition, whilst Mr Whyte acquired Ibrox Stadium and Murray Park for his pound (and taking over the bank debt), Mr Goldberg bought neither the ground nor the training facilities, these remaining in the hands of Ron Noades, the former owner. Bizarrely, after the takeover had taken place, Mr Goldberg briefly appointed Mr Noades as caretaker manager of the team! I can guarantee that Mr Whyte is not going to choose Sir David Murray to run the football side of Rangers FC, should Ally McCoist leave!

Mr Goldberg was a man with big ideas. He also appeared to be very wealthy. Not only had he just paid £23 million for his shareholding in Crystal Palace (albeit that £4 million was left outstanding on loan notes), he also had remaining shareholdings worth in the region of £10 million at that time, and other assets besides.

His Lordship found that “He gave the impression that he was willing to invest more of his personal wealth into Crystal Palace, although no binding commitments to that effect were ever given.

Mr Goldberg’s “personal financial adviser” and a “specialist in structuring corporate transactions and in arranging asset finance and cash-flow finance for shipping fleets” were appointed to the Board with him.

Mr Goldberg told the board that he would pledge 400,000 shares in MSB to the bank in order to secure the team’s overdraft. At the same board meeting Mr Goldberg dealt with the future financing of Crystal Palace. He said that he was negotiating with a number of possible lenders, including individuals who would be prepared to lend money in return for becoming directors. He also mentioned a possible AIM flotation within 6 months to raise £15 million. He described these plans as “very much amorphous” but said that he would keep the board informed. Nothing appears to have been said at that meeting about sales of players.

At the first substantive board meeting after the takeover, on 26 June 1998, Mr Goldberg presented his vision to the board. He outlined his “five year plan” with a “mission” to have a club capable of competing in Europe and with a value of £100 million within five years. This was to be achieved by new sports medicine and skills development; a new playing structure and the latest technology and discipline. In the short term his ambition was to secure promotion to the Premier League at the earliest possible opportunity. Mr Gary Withey, a solicitor, was appointed as company secretary.

The court commented “During the period when Mr Noades was the chairman and majority shareholder the board met infrequently. Mr Goldberg proposed, and the board agreed, to changes in corporate governance. First, the full board was to meet quarterly, and an executive board was to meet monthly. Second, Mr Goldberg said that he wanted Crystal Palace to operate as if it were a publicly quoted company. The board thus appointed an audit committee and a remuneration committee. Mr Morley described the appointment of the two committees as “overkill” for a small private company… However, it seems that the board did not meet at quarterly intervals, nor did the executive board meet once a month. The audit committee does not seem to have met at all, and the remuneration committee met only once. Mr Morley said that Mr Goldberg genuinely wanted to run a model company, but it did not happen that way.

Mr Goldberg lost his fortune and ended up personally bankrupt. After initially opposing the disqualification proceedings, he reached an agreement with the DTI to accept a disqualification, so the case proceeded to a conclusion as regards Mr McAvoy alone.

Mr Goldberg received a 10 year ban.

Bizarrely, Mr Goldberg is back in football, but not as an owner. He is on his third stint as manager of Bromley FC!

 

What Went Wrong at Crystal Palace? Some Examples

 

Neil Emblen

There were various, indeed numerous, problems. One related to the purchase of Neil Emblen from Wolves.

 

This lead to the “charge” against Mr McAvoy that “Mr Goldberg and Mr McAvoy caused or permitted Crystal Palace to agree to forego a payment of £400,000 due to it from Wolverhampton Wanderers in return for Wolves foregoing an equivalent sum due to it from Mr Goldberg personally”

Wolves wanted £1,800,000 as a transfer fee, but Crystal Palace was unwilling or unable to pay that. Mr Goldberg agreed to contribute £500,000 personally towards the transfer fee. On 12 August 1997 he entered into a written agreement with Crystal Palace under which he agreed to contribute £500,000 before 30 September 1997. The agreement stated: “The consideration for the £500,000 will be that if Crystal Palace Football Club at any time in the future sell the player then Mark Goldberg will receive 25% of the eventual sale price”.

 

Lewison J decided that the agreement, read as a whole, “certainly does not suggest that the £500,000 was a loan, which would have entitled Mr Goldberg to the return of his £500,000 in addition to 25 per cent of the eventual sale price.

 

He rejected Mr McAvoy’s suggestion to that effect.

 

He went on “On 14 October 1997 MGI (one of Mr Goldberg’s companies) transferred £500,000 to Crystal Palace. Mr McAvoy suggested that this payment was a payment by MGI on account of wages whose liability was that of Crystal Palace and that the agreed payment for Mr Emblen came out of Mr Goldberg’s personal account. However, this was only an assumption on his part, and there was no evidence to back it. I bear in mind that there has not been disclosure of a full set of Crystal Palace’s bank accounts, which blunts the lack of documentary evidence. But even so, I reject the suggestion that there were two payments, and find that the £500,000 transferred by MGI to Crystal Palace was Mr Goldberg’s promised contribution to the purchase cost of Mr Emblen.

 

By the following spring, the club wanted to sell Mr Emblen. Wolves were willing to buy him back at the lower price of £600,000. The profit in less than a year was great business by Wolves – less so for Crystal Palace. Eventually, on 25 March 1998, a deal was structured under which the nominal price for Mr Emblen’s transfer was £1,200,000 plus VAT payable in three stages. The first stage was a payment of £600,000 (plus the VAT) payable on registration of the player with the Football League. At this stage, no money was to change hands, as the payment was to be satisfied or “contra-ed” by bringing forward £810,000 of the remaining £900,000 still owed by Crystal Palace to Wolves under the terms of the original transfer.

 

However, in order to fund the remaining payments, Mr Goldberg, through MGI, was to pay £200,000 to Wolves on or before 25 April 1998 and £400,000 on or before 31 August 1998. The agreement between MGI and Wolves was signed on behalf of MGI by Mr McAvoy. The latter payment of £400,000 was not made.

 

I am sure the lessons of an owner failing to fulfil his financial promises have been taken on board by Mr Withey.

 

Mr McAvoy sought to argue that there was an off set of monies due to Mr Goldberg’s companies and by them. However, as the court decided, in fact what happened was that Mr McAvoy was party to a scheme “which effectively gave away £400,000 of Crystal Palace’s money to benefit MGI. Mr McAvoy’s two inconsistent justifications of this scheme do him no credit. Moreover, all this occurred at a time when Crystal Palace was in need of cash, as Mr McAvoy knew.

 

His Lordship continued “It is an example of Mr McAvoy failing to respect the separate legal personalities and interests of the various companies in “the Goldberg empire” and, indeed, Mr Goldberg  himself. It also demonstrates Mr McAvoy’s willingness to bypass the board.

 

Fortunately no such concerns arise at Rangers.

 

Michele Padovano.

 

He played for Juventus until November 1997, when he was transferred to Crystal Palace. He was one of two Italian players, the other being Attilio Lombardo. Mr Padovano entered into a written contract with Crystal Palace on 15 November 1997. At the date of this contract, Mr Goldberg was already a director of Crystal Palace, although Mr Noades, through his company Altonwood, was the majority shareholder. Three days before Mr Padovano signed with Crystal Palace, he entered into an agreement with Mr Goldberg and SMCG (another Goldberg company). The agreement with SMCG and Mr Goldberg supplemented the contract agreed with the team.

 

The court put the different terms into a table as follows:-

 

Crystal Palace contract Goldberg/SMGC contract
Salary
i. 15.11.97 to 30.06.98: £321,000
ii. 01.07.98 to 30.06.99: £540,000
iii. 01.07.99 to 30.06.00: £540,000
Additional payments
i. 12.11.97 to 30.06.98: £189,000
ii. 01.07.98 to 30.06.99: £170,000
iii. 01.07.99 to 30.06.00: £170,000
  Loyalty bonus as at 30.06.00: £350,000
Goal bonus for goals scored in FA Premier League Championship matches Goal bonus for goals scored in official matches instead of championship matches
Contribution of £2,500 per month for living expenses for 6 months Contribution of £2,500 per month to living expenses from cessation of Crystal Palace’s contribution
  Provision of reasonable company car
  Provision of four return flights each year from London to Turin

 

Various witnesses referred to the “supplementary agreement” as an agreement relating to “image rights”. However, image rights were not mentioned in the agreement. The payments under the agreement with SMCG were to be made by SMCG and guaranteed by Mr Goldberg personally. Mr Goldberg undertook considerable liabilities towards Mr Padovano which the team were unable or unwilling to take.

 

Padovano was not a success at Crystal Palace. He rarely played for the first team, and was prone to injury. All the witnesses agreed that he would have been content to take his money and not appear on the pitch at all. He was clearly a bad buy.

Efforts were made to sell Padovano. At the same time, he took action against Mr Goldberg’s company for the monies he claimed he was still due over and above his contract with the team. As part of the settlement on his sale, his claim against Mr Goldberg’s company was dropped. It was argued by the DTI that Mr McAvoy was complicit in this, again putting the interests of Mr Goldberg over Crystal Palace.

As it was alleged “Mr Goldberg and Mr McAvoy caused or permitted Crystal Palace to incur a liability to Mr Padovano, a player who had been bought from Juventus, of £1,200,000 for the purpose of settling the personal liabilities of Mr Goldberg and an associated company of his, Sports Management Corporation Group Ltd (“SMCG”)”. This accusation was not made out against Mr McAvoy though.

The court’s findings are interesting as regards our topic of discussion however.

On 30 June 1998 Mr Withey reported to Mr Goldberg that he had been approached by Padovano’s agent, Marcello Bonetto, with a proposal for combining his contract with Crystal Palace and his contract with SMCG. Mr McAvoy was copied in to this memo. A letter from Mr Bonetto set out the combined terms. It seems that Mr Withey prepared an amended schedule to be attached to Mr Padovano’s contract combining the terms of the two agreements, and also a draft letter under which Mr Padovano was to be paid £264,000 in settlement of his “image rights”. Both the amended schedule and the draft letter are dated 6 July 1998. But neither is signed.

However Padovano’s two contracts had not been amalgamated. The court continued “That is not surprising as amalgamation of the contracts could not have been to Crystal Palace’s advantage. Mr McAvoy’s suggestion that amalgamation of the contracts would have been in Crystal Palace’s interest because it would have made Mr Padovano more amenable to a transfer was unconvincing, and is belied by what actually happened. Mr Padovano was quite happy to be transferred to Metz even though the contracts had not been amalgamated. However, no complaint is made in the case against Mr McAvoy that he participated in an amalgamation of the two contracts.

Mr McAvoy said that his belief was that the two contracts had been amalgamated, because he had been told as much by Mr Goldberg and Mr Withey. Mr Goldberg and Mr Withey were the people within Crystal Palace who were dealing with the possibility of amending the contract with Mr Padovano. Mr McAvoy’s first step, if he had attempted to find out more, would have been to contact them. If the allegation of failing to make inquiries had been clearly made, one or both of them might have been called to give evidence. Neither was. Thus this is not a mere pleading point. In my judgment this allegation is not one on which the Secretary of State can rely.

Interestingly, as a result of the DTI failing to make this allegation against Mr McAvoy clear (namely that he improperly failed to make proper inquiries into the amalgamated contract) Mr Withey was not called to give evidence in the case, which he might well have been if the allegation had been made timeously.

It is ironic that one of the matters reputed to be at the bottom of the “Big Tax Case” is the use of “side letters” running alongside employment contracts. As these are allegedly the fault of the ancien regime at Ibrox, I am sure that neither Mr Withey nor Mr Whyte would fall into the same errors, which, apparently, caught out Mr Goldberg at Crystal Palace and the Murray Board at Ibrox.

On a side note, Padovano was imprisoned for 8 years and 8 months for hashish smuggling recently.

The Padovano minute

It was further alleged that “Mr Goldberg and Mr McAvoy caused or permitted a board minute purporting to record a board resolution of Crystal Palace approving the payment of £1,200,000 to Mr Padovano to be produced, notwithstanding that no such resolution had been passed.”

Mr McAvoy’s response was that the minute was prepared by the company secretary, Mr Withey, who told Mr McAvoy that two members of the board, who had not been present at the meeting, had approved the payment by telephone. Mr Withey told Mr McAvoy that he was getting the minute signed.

Counsel for the DTI (Mr Newey) made a number of serious criticisms of the Padovano minute. First, despite what it said, the board meeting was not duly convened, since the members of the board were not given notice of the meeting. Second, neither Mr Barnes nor Mr Alexander was physically present. That in itself was not controversial; but Mr McAvoy said that he was told by Mr Withey (the company secretary) that both those gentlemen had been contacted by telephone and had given their consent. Mr Newey submitted that no such conversation took place, but that, even if there was a conversation, there was no conversation to which all three directors were party, and hence no collective discussion or consideration of the proposed agreement. Third, there was nothing in the minute to indicate that Mr Goldberg’s keen personal interest in the agreement was disclosed to the board. In consequence he says Mr McAvoy can have been under no illusion that entry into the settlement agreement had not been properly authorised by the board. Mr McAvoy agreed that there was no meeting, in the sense of him and Messrs Alexander and Barnes being physically present in the same room, or even participants in the same three-way telephone conversation. Indeed Mr McAvoy accepted that he did not speak to either Mr Alexander or Mr Barnes. But he said that he was told by Mr Withey, who prepared the minute, that he (Mr Withey) had spoken both to Mr Alexander and Mr Barnes, that they had approved the agreement and that they would be signing a minute. Although Mr Withey was interviewed, he was not asked about the circumstances in which this minute came to be produced. Nor was he called to give evidence. The judge noted thatI record here that Mr McAvoy was given permission to serve evidence from Mr Withey, but chose not to do so.

 

The court noted “Mr Barnes said that he was not present at any meeting to discuss the Padovano settlement (because he was in London at the time having lunch with Mr Leon Angel) and he was not telephoned to give his consent. I accept his evidence. Mr Alexander gave evidence to the same effect, although it was not as firm as Mr Barnes’. I accept his evidence too.

 

Lewison J continued “I find that the contents of the minute were probably prepared by Mr Withey or at his dictation. The minute was signed by Mr McAvoy. However, no meeting took place, either by the physical presence of the purported participants, or by telephone. I find that Mr McAvoy knew that no such meeting had taken place. He also knew that Mr Withey had not telephoned the other named directors. I am, however, prepared to accept that Mr McAvoy was told by Mr Withey that the other named directors would be signing the minute. But even if that had happened, the resolution would still not have been valid under article 29, because, as Mr McAvoy knew, not all directors had been given notice of the meetingMr McAvoy signed a minute that purported to record a board meeting that he knew had not taken place. However, I find that he did so without any intention of misleading the board of Crystal Palace. He signed the minute because Mr Padovano’s lawyers wanted a minute, and one had to be produced in a hurry. Nevertheless, this allegation is made out against Mr McAvoy.

 

Agent’s Fees

 

The court commented on the issue of fees payable to agents. Over £1 million was paid to agents for the various transfers which took place.

 

One of the striking features of expenditure on players is the large amounts that Crystal Palace paid to agents. Perhaps the most striking example is that of Del Rio. In his case agents’ fees amounted to nearly £450,000 as against a transfer fee of £187,500.

 

Terry Venables

 

It was alleged that “Mr Goldberg and Mr McAvoy failed to ensure that the board of Crystal Palace was aware of the onerous terms on which Crystal Palace was to employ Mr Terry Venables as its head coach, but on the contrary caused or permitted the board to be misled as to such terms”.

 

In March 1998 Mr Goldberg personally entered into an agreement with Mr Venables, recorded in Heads of Terms, which were to be binding until a more formal contract was executed. The effect of the agreement was that Mr Venables would be employed as head coach for a three year term. Among the terms of the agreement were:

 

i. an option for Mr Venables to extend the contract for two years (making five years in all);

ii. a right for Mr Venables to break the contract after one year;

iii. a right for Crystal Palace to terminate the contract but only on payment of one year’s salary by Crystal Palace and £300,000 by Mr Goldberg;

iv. an annual salary of £750,000 payable annually in advance, plus a pension contribution of 10 per cent of salary;

v. a car to the value of £65,000;

vi. a right for Mr Venables to have sole power to select players and “complete control on the decision which players to buy and sell”;

vii. a budget for buying players of £10 million in 1998/9, indexed for the following two seasons. This sum excluded proceeds of sale of players, which were also to be made available to Mr Venables.

Here was a self made millionaire pledging huge sums (in 1998 terms) to be spent on improving his team. As it transpired however, such investment did not take place.

 

Mr Morley, one of the directors, said that, at the July 1998 meetingMr Goldberg stated that he had paid one year of Venables’ contract in advance and that if we weren’t happy, we could get rid of Venables after 1 year, as there were breaks in his contract after 1 and 3 years. We were told that the house being purchased for him was costing around £200,000. It turned out to be £600,000.”

 

The judge continued “Mr Hume-Kendall in his affidavit says that information about the contract was provided either by Mr Goldberg or Mr McAvoy. He does not mention Mr Barnes at all. Mr Grimes says in his affidavit that information about the contract was given either by Mr McAvoy or by Mr Barnes. He accepts that Mr Goldberg  and Mr Withey said more than Mr McAvoy, but says that Mr McAvoy was present and did not correct anything that had been said. Mr Barnes does not deal with this meeting in his affidavit at all.

 

Terry Venables’ employment was a disaster too. As the Independent recorded in 2003, he spent seven months at the club, and claimed almost £1 million per month for his time there! He was the biggest creditor in Mr Goldberg’s personal bankruptcy.

 

Ron Noades had warned Mr Goldberg against engaging Mr Venables, predicting that “he will eat you alive, and you will go bankrupt”; but Mr Goldberg had been confident that he could keep Mr Venables under control.

 

The Financial Black Hole

 

It was known and accepted that the team had what could be termed a “black hole” in its books.

 

Prior to the takeover Mr Noades was apparently told Mr Goldberg that there was “an £11 million hole” in the accounts.

 

Mr McAvoy recognised that the team needed to raise at least £9 million by selling players and cutting the wages bill. In his letter of 2 March 1999 Mr McAvoy said: “I want no one to be in any doubt that Mark was made fully aware of the cash position of the club before he bought and on the consequences of the purchase on his personal cash position and that of his other business interests and commitments. I presented a number of cash flows that consistently set out a clear deficit position on both counts e.g. Crystal Palace needed to find £9m from player disposals and wage reductions.”

 

It was alleged that “Mr Goldberg and Mr McAvoy took unwarranted risks with creditors’ money, in allowing Crystal Palace to continue to trade between 4 June 1998 and 30 March 1999” and “Mr Goldberg and Mr McAvoy failed to ensure that the affairs of Crystal Palace were subject to proper financial control.”

The Grimes Loan

It was alleged that “Mr Goldberg and Mr McAvoy caused or permitted a loan made by Mr Grimes for the benefit of Crystal Palace (which was paid into MGI bank account) to be used for other purposes although Mr Grimes was expressly assured by Mr Goldberg that the money would immediately be transferred to Crystal Palace.“

 

In October 1998 Mr Goldberg proposed to Mr Larry Grimes that he consider a “further investment” in Crystal Palace. The terms were that he would advance £200,000 to Allowclear, as the holding company for Crystal Palace, against the issue of a convertible loan note by Allowclear, convertible into shares in Crystal Palace within three years. Mr Grimes replied on 19 October to the effect that he was willing to make £205,000 available to Crystal Palace for 2 years, on the basis that the loan was convertible into shares during that period. On 22 October, Mr Grimes’ solicitors wrote to Mr Withey at MGI. Their letter set out the terms on which Mr Grimes was willing to make a loan. They began by saying that Mr Grimes would make a loan of £200,000 “available to Crystal Palace”. Mr Goldberg was to “guarantee the Crystal Palace loan”. Mr Grimes also wanted a warranty that there was nothing unusual going on at Crystal Palace which is material to “someone investing the amount LG has in Crystal Palace”.

 

£202,037 was transferred into MGI’s bank account on 28 October 1998. The account was overdrawn at the time. On the following day substantial sums of money were transferred out of the account. The transferees included Newcourt Leisure (£40,000) and SMCG (£118,000).  In a letter to Mr McAvoy dated 2 November 1998 Mr Jeffreys, the senior manager at Lloyds Bank (who were MGI’s bankers) said: “My understanding was that the Grimes money received last week would well and truly restore order throughout the MG Investments group. This clearly has not been achieved and I have no knowledge of any debits which may be in the system and would worsen the picture.”

 

In his letter of 21 September 1999 Mr Grimes says that at first he demurred to paying MGI, but was assured by Mr Goldberg and Mr Mildwater that the funds would be immediately transferred to Crystal Palace. They never were.

 

Lewison J continued “I am prepared to accept that Mr McAvoy did not know of the specific assurances that Mr Goldberg had given Mr Grimes. However, in addition to having seen the letter, Mr McAvoy knew that there had been a sustained attempt to persuade others to invest in Crystal Palace. In Mr McAvoy’s graphic phrase, when Mr Goldberg put up £22 million to buy his shareholding in Crystal Palace: “he was happy to tell everybody that he had put his balls on the table and he was looking for other investors to follow him. Mr Grimes was one of those people I believe who followed Mr Goldberg’s vision.

 

As Lewison J said regarding Mr McAvoy “He knew also that Mr Grimes had been persuaded to make his loan on the strength of a document entitled “Equity Investment and Post-Acquisition Strategy Document.” A fair reading of that document shows that it is all about Crystal Palace apart from one reference to the holding company. I agree with Mr Newey that the message conveyed by that document is “please support Crystal Palace and do so by taking a convertible loan note from Allowclear.” Mr McAvoy also knew that Mr Grimes was a director of Crystal Palace and had already made a substantial loan direct to Crystal Palace. He must also have known that Mr Grimes had no reason to lend money to other companies under Mr Goldberg‘s control. I find that Mr McAvoy knew that Mr Grimes’ intention was that his money would be used for the benefit of Crystal Palace. It was not, as Mr McAvoy also knew. He had clearly told the bank that the money from Mr Grimes would go to the MGI group, which did not include Crystal Palace. If it is necessary to find a breach of duty, it seems to me that, in his capacity as a director of Crystal Palace, Mr McAvoy owed it a duty (at least) to use his best efforts to ensure that money intended for it benefit was applied as intended. He was a director and chief executive of MGI (which had the bank account) and Crystal Palace(the intended beneficiary of the money); and a director of Allowclear (the nominal borrower). In my judgment he could and should have ensured that the money went to Crystal Palace. This allegation is made out against Mr McAvoy.

 

Failure to Maintain Accounting Records

The allegation was: “Mr Goldberg and Mr McAvoy failed to ensure that Allowclear maintained and/or preserved adequate accounting records and/or they failed to deliver up such records.”

 

Mr McAvoy said initially that the records were handed to Mr Withey but that he does not know what became of them. In his second affidavit he said that the records may have disappeared as a result of a burglary in February 1999 in the course of which a server was stolen.

 

As regards Mr McAvoy’s oral evidence the Judge commented that “He seemed to me to resile from this, accepting that this information would not have been of any interest to a burglar. He initially said in his oral evidence that the dealings of Allowclear could be reconstructed from information in the primary documents underlying the few transactions into which it entered. He accepted that this information was not “entered into a record”. He agreed that Allowclear did not make entries from day to day of sums expended and received; but he said that the nature and number of the transactions in which it was involved justified that sort of day to day activity. But he went on to say that records were kept, in the form of a trial balance, but on no more than a couple of sheets of paper compiled in manuscript. He also says that the transactions into which Allowclear entered were all authorised by resolutions of the board. This last statement is not borne out by those resolutions that have survived.

 

“Correspondence from Mr Mildwater gives rise to a strong inference that Mr McAvoy’s first oral account, namely that there was information from which accounts could be prepared but no actual accounting records, is the correct one. Mr Marks, an insolvency practitioner who handled the liquidation of MGI, said in his affidavit that books papers and records of Allowclear were removed from the offices at 27/28 Albermarle Street. Those records, he says, were held by Mr Withey. Mr Marks did not become involved until late January 1999. He says the records were removed by Mr Mildwater in February 1999. So Mr Marks supports Mr McAvoy’s account to some extent. The liquidator of Allowclear made some investigations in the autumn of 1999 and he came to the conclusion that all Allowclear’s records were removed by Mr Goldberg from the company’s offices at Albermarle Street to his home. But he was not able to identify what the records consisted of.

 

The judge considered that this allegation was made out against Mr McAvoy.

Failure to File Annual Returns

Mr McAvoy conceded that his failure to file accounts and annual returns, in connection with various other companies in the group, was unacceptable.

As the court commented The making of annual returns, in particular, is not an onerous or time-consuming task.

 

 

Lewison J and His Comments Regarding Disqualification

 

Mr Justice Lewison considered in detail the basis for disqualifying directors.

With a view to considering the general issue of disqualification, I would draw his comments about certain specific matters to the reader’s attention.

He quoted from In re Lo-Line Electric Motors Ltd. [1988] Ch. 477, 486, where Sir Nicolas Browne-Wilkinson V.-C. said:

“Ordinary commercial misjudgment is in itself not sufficient to justify disqualification. In the normal case, the conduct complained of must display a lack of commercial probity, although I have no doubt in an extreme case of gross negligence or total incompetence disqualification could be appropriate.

Then, at p. 492, he said that the director in question:

“has been shown to have behaved in a commercially culpable manner in trading through limited companies when he knew them to be insolvent and in using the unpaid Crown debts to finance such trading.

In Secretary of State for Trade and Industry v. McTighe (No 2) [1996] 2 BCLC 477 the Court of Appeal accepted the Secretary of State’s submission that it was misconduct to pursue:

“the policy of not paying the debts of creditors who are not pressing when it is known that the company has insufficient reserves enabling it to trade except at the risk of such creditors.

As Sir Martin Nourse put it in Secretary of State for Trade and Industry v. Creegan [2002] 1 BCLC 99:

“In general, it is not enough for the company to have been insolvent and for the director to have known it. It must also be shown that he knew or ought to have known that there was no reasonable prospect of meeting creditors’ claims.

Lewison J in the McAvoy case commented:

“Section 226 of the Companies Act 1985 requires the directors to prepare a balance sheet and profit and loss account for each financial year. Section 234 requires them to prepare a report for each financial year. Section 242 requires the directors to deliver to the registrar of companies a copy of the company’s annual accounts together with a copy of the directors’ report and the auditors’ report on the accounts. Failure to comply with obligations as regards the filing of accounts and returns may also amount to unfitness.

Nicholls V-C observed in Secretary of State for Trade and Industry v. Ettinger [1993] BCLC 896:

“Those who take advantage of limited liability must conduct their companies with due regard to the ordinary standards of commercial morality. They must also be punctilious in observing the safeguards laid down by Parliament for the benefit of others who have dealings with their companies. They must maintain proper books of account and prepare annual accounts; they must file their accounts and returns promptly; and they must fully and frankly disclose information about deficiencies in accordance with the statutory provisions. Isolated lapses in filing documents are one thing and may be excusable. Not so persistent lapses which show overall a blatant disregard for this important aspect of accountability. Such lapses are serious and cannot be condoned even though, and it is right to have this firmly in mind, they need not involve any dishonest intent.”

He continued:

“The seriousness with which such conduct is to be viewed is shown by the provisions of the Disqualification Act itself. The extent to which a director is responsible for any failure to comply with the statutory provisions regarding accounting records and the preparation of annual accounts is one of the matters to which the court is required to have regard in determining unfitness to be concerned in the management of a company. Those who persistently fail to discharge their statutory obligations in this respect can expect to be disqualified, for an appropriate period of time, from using limited liability as one of the tools of their trade. The business community should be left in no doubt on this score. It may be that, despite the disqualification provisions having been in operation for some years, there is still a lingering feeling in some quarters that a failure to file annual accounts and so forth is a venial sin. If this is still so, the sooner the attitude is corrected the better it will be. Judicial observations to this effect have been made before, but they bear repetition.”

 

All of the above brings us back to the issue I raised before where I pondered the reason for Mr Whyte’s own disqualification. Sadly, even in court, Mr Whyte failed to recall the reason for his own 7 year ban.

As I have mentioned however, I am sure that Mr Withey has learned many lessons from Mr Goldberg’s travails, and these will be put to good use by Mr Whyte at Ibrox.

 

 

The Result and a Possible Celtic Connection

 

As a consequence of the evidence heard, Lewison J disqualified Mr James Flannagan McAvoy from holding company directorships.

However, he has served his ban, and is now back in business.

Jim Traynor reported on January 9, 1999, that a consortium of Jim Kerr, Kenny Dalglish, and Mr McAvoy had been in touch with Dermot Desmond in connection with the possible purchase of some or all of Fergus McCann’s shares.

As the report continued “The consortium hope now to have further negotiations with Desmond who is not seeking to take hands- on control and will need the right people in place at Celtic Park if the club is to move forward.  Dalglish, Kerr and McAvoy had said that their plan would have made available immediately pounds 20million for new players and also up to pounds 10million towards training facilities and a soccer youth academy.  Dalglish said: “Our idea was not simply to give Fergus McCann money for his shares but to invest heavily in the playing side.

“We have put our cards on the table but so far as I am concerned while I understand the business side of a football club has to be strong and correct the most important thing is getting it absolutely right on the pitch. We hear so much about shares and directors and chief executives but this game is still about playing football.”

 

Ironic that, over 12 years later, Craig Whyte and his team said very similar things when they took over Rangers!

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Filed under Craig Whyte's Companies, Crystal Palace, Football, Rangers, The Company Directors Disqualification Act 1986.

A Very Happy Christmas! Peace on Earth and Goodwill to All!

I started this blog for reasons which are now a little unclear – I think I was inflicting too much minute legal analysis on my poor wife, who was not quite as interested as I was in the minutiae of the determinations of the Scottish Courts.

I need to thank, as I have mentioned before, James Doleman whose Sheridan Trial Blog made me realise what writing for a wider group could do (though I am still a long, long way from getting anywhere near what James managed to achieve).

The case, and the subsequent News of the World shenanigans gave me the chance to look in depth in to some of the issues arising from a legal, rather than a news perspective, and I learned more each day about topics I thought I knew, or in some cases, vaguely remembered from long ago lectures.

Then along came the Rangers takeover. Mr Whyte has been a boon for those like me (and it may be a small field) who want to write about the legal aspects of football.

I don’t break news, unlike Phil Mac Giolla Bhain and the Rangers Tax Case Blog. I don’t have a huge group of active commenters, as Paul67 has at Celtic Quick News.

I till my little patch of soil here on the Internet, and have been amazed and astonished by the number of folk who have read what I have written, who have taken the time and trouble to comment – often with far better analysis and humour than I have managed, and with whom I have been in touch, face to face, over the phone and electronically, as a result of the blog.

I have already met many people as a result of the blog with whom I probably would not have made contact otherwise, and I am gratified that everyone has been kind about my witterings, and very well worth encountering.

I don’t intend this to turn into a Gwyneth Paltrow like thank you session, but I need to mention particularly the Black Knight, Brogan Rogan Trevino and Hogan, the Battered Bunnet, Henry Clarson, Garry MacInnes and Steven Doyle for their contributions and involvement, together with everyone else in touch thru the site and Twitter.

To all of the above, both specific and general;

To Craig Calcaterra and Joe Posnanski, for being the best sports blogger and writer respectively;

To all the excellent commenters on RTC, on whose coat tails I have ridden;

To Phil who has been right about Mr Whyte more than all the main stream media put together;

To Andy at Scotzine for allowing me to inflict my ramblings on a wider audience;

To the legal bloggers and Tweeters with whom I have become friendly electronically, and who have kept me amused, entertained and enlightened throughout the year – such as Charon QC, David Allen Green, the Peat Worrier and Love and Garbage – the last being top man for all scone pronunciation related news;

To John McGovern and Steven Raeburn for their keen sense of anything going awry in the law in Scotland;

To people I have met through the blog whose identities have to be kept secret (don’t worry Mr Whyte, your secret meetings with me will never be known);

To everyone who has asked “are you the Paul McConville with the blog?”;

To all my friends for being friends;

To the remarkable boldned for being a top pal; and

Finally to my wife and family.

I wish you all the very best this Christmas and into the New Year too.

I will sign off with two videos so that any readers will find one they like.

 

 

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Filed under Blogging, Personal, Uncategorized