Monthly Archives: January 2012

More Problems for Craig Whyte – Tixway UK Ltd Threatened With Striking Off

Tixway UK Ltd is the company of which Mr Whyte is director, having taken up that position on the expiry of his director’s disqualification. The company had been formed by his now estranged wife, and Mrs Whyte had been the sole director until she stepped down and her husband took over.

Tixway UK Ltd has been busy in Glasgow Sheriff Court recently defending an action raised against it by One Stop Roofing Supplies Ltd.

Mr Whyte gave evidence in court. It could be thought that perhaps he has memory problems, as he told counsel for One Stop that he could not recall, without seeing the paperwork, why he was banned for seven years in 2000 from being a company director.

Another sign of forgetfulness is indicated by a document which has just appeared on the Companies House website.

This relates to Tixway UK Ltd and can be viewed here – Tixway strike off.

As can be seen, it is the warning that, under s1000 of the Companies Act, the company will be struck off the Companies Register in 3 months and dissolved, unless cause to the contrary can be shown.

S1000 deals with situations where the registrar “has reasonable cause to believe that a company is not carrying on business or in operation”. A letter is sent to the registered office asking for confirmation of the position. If, after one month, there is no reply, a further letter is sent. In the absence of a response within one month to the second letter, the letter referred to above is sent.

Interestingly, this is the third consecutive year that the striking off procedure has been put into process for Tixway UK Ltd. On the previous 2 occasions, dissolution was prevented close to the deadline.

If nothing more is done to prevent striking off, then any assets of the company will be declared “bona vacantia” and paid over to the Scottish Consolidated Fund, effectively the Scottish Executive’s bank account. Perhaps, in view of the sums involved, this is Mr Whyte’s way of making sure that tax paid in Scotland stays in Scotland

Bearing in mind that Tixway UK Ltd’s last accounts, dated January 2010, disclosed that the company held over £2.5 million worth of assets, then I am sure Mr Whyte will want his administrative colleagues to get the finger out and to reply to the Registrar! tixway–Annual-Accounts

Perhaps these things simply slip his memory, as did the reason for his disqualification.

It constantly amazes me that, for all of his undoubted business and entrepreneurial skills, Mr Whyte’s grasp of administration and time limits laid down by law seems to be so lacking. Alternatively, his administrative systems require a substantial overhaul.

Of course, if the assets have been used, and there is nothing in Tixway UK Ltd any more, the striking off process might result in One Stop, if successful in their court action, receiving nothing. I am sure however that Mr Whyte would not seek to make deliberate use of this procedure to have his company avoid paying debts due by it.

Sadly, as the company has not lodged any accounts since those for year ended January 2010, it is impossible to say what might have happened to the £2.5 million in assets which existed then.

 

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Filed under Companies Act 2006, Craig Whyte's Companies, One Stop Roofing Supplies Ltd v Tixway UK Ltd, The Company Directors Disqualification Act 1986.

The Rangers Update Part 3a. The Big Tax Case & How Melchester Rovers fell foul of Hector

 

The tax issues are the most important parts of the Rangers mess at present.

Anyone looking for detailed information about this issue ought to be looking at the Rangers Tax Case Blog.

However, as a service to my reader, I thought I would do a potted summary. Here goes.

(As always, I am happy to be corrected and enlightened regarding the issues here. Feel free to comment below.)

 

The Big Tax Case  

Who would have thought that the initials EBT would become so common in football discussions? The Employee Benefit Trust was a mechanism used by some businesses to pay their employees and contractors in a “tax efficient” way.

Put very simply (as this is a very complex area) the employer set up or contributed to a separate Trust. Legitimate use of an EBT allows employees to approach the Trustees for a loan or similar payment. As long as this payment could not be identified as a contractual right, (ie what HMRC refers to as “disguised remuneration”) then neither Income Tax nor National Insurance need be paid on it.

To make a scheme legitimate therefore, there would need to be no evidence that the employee was entitled to anything from the EBT, and in addition, it would be prudent if, every so often, the Trustees were to reject an employee’s application for funds.

The “loans” to the beneficiaries of the trust would be non-repayable or repayable on such lengthy terms that they were in fact never to be repaid. The jargon term used was “lend and forget”.

In the late 1990’s there was a surge in the use of these EBT’s. Many were marketed by a company owned by Paul Baxendale-Walker. He had written a book on the topic with eminent tax QC Andrew Thornhill, a name which will re-appear below.

Mr Baxendale-Walker has some extreme views on tax. As he said in a BBC Money Programme episode in 2006:-

“I’m actually helping to cure people of various ills, various cancers,” says Mr Baxendale-Walker. “Because tax is a cancer that will kill your business if it’s not treated. So I see myself as a doctor too.”

 

A Fictional and Fictitious Example

It is often best to look at an example to see how the scheme might work, and how it could have gone wrong.

As an example of the benefits, let us take a football team – Melchester Rovers. The manager, Roy Race, has decided that his team needs an influx of top quality players. Sir Sam Barlow, the Chairman, is conscious of the need to pay economic wages. How can this be done?

Sir Sam, who made his fortune in the international liquorice markets, meets Mr Baxendale-Walker who extols the virtues of the scheme to him. Sir Sam signs up Melchester Rovers for one of these “off the peg” schemes – the “Melchester Rovers Tax Efficient Trust” is set up, and he goes shopping for players, after having paid Mr Baxendale-Walker’s firm a lot of money for the scheme.

Sir Sam sits down with the Signor Clemenza, the agent for a couple of Italian star players. They each want paid £1 million per year to sign for Melchester Rovers, and, as Ruud Gullit is reputed to have told Ken Bates regarding his salary demands when Chelsea manager, it is to be paid “netto”.

Sir Sam quickly works out that, to pay each player £1 million “netto” it will cost Melchester Rovers around £1.75 million each, taking account of tax and NI.

But Mr Baxendale-Walker’s scheme gives the answer.

If each player, Luigi and Roberto, has a contract which pays him £100,000 per annum gross, then the tax and National Insurance payable on this, including the employer’s contribution, will be around £55,000. If it is agreed, with a nod and a wink, that the players will each be able to receive £955,000 per annum from the Trust as “loans” which will never be repaid, then Melchester Rovers have just saved themselves almost £1.5 million per annum in tax and NI, and Luigi and Roberto each are getting their £1 million “netto”.

As the payments to the Trust by Melchester Rovers do not count as wages, then they do not reduce the profits, and therefore might lead to an increased liability for Corporation Tax, but, as Melchester have lost millions of pounds over the years in the pursuit of success, they have huge accumulated losses to set against any profits, and therefore that consideration is irrelevant.

There is only one problem. Clemenza is not stupid. How, he asks, will his players be assured that they will be given the “loans” and more importantly, what if the Trust asked for them back?

Here Sir Sam makes the fatal mistake. He, along with Roy Race, Blackie Gray and other executives, have already been benefiting from the Trust. As the Trustees are their best friends from the golf club, and as Sir Sam is a Trustee of other schemes run by his friends, they know that the Trust will never look to get this money back. Clemenza points out that he does not trust anyone, unless they are Family.

Sir Sam comes up with the solution, but without asking Mr Baxendale-Walker, or anyone else. He provides Clemenza with a letter for each of the players on Melchester Rovers notepaper, confirming that the loans will never have to be repaid, and that, if they are ever called upon to repay them, Melchester Rovers will refund the Trust. Clemenza is happy, as are his players, and he persuades the “sweetie billionaire” that, with the money he has saved, he could actually afford another of his players, Wilhelm, an experienced Dutch international.

As the years pass, Melchester Rovers remain hugely successful, and fulfil Barlow’s boast that, for every ten pounds spent by their archrivals, Melborough, Melchester will spend twenty.

These schemes are so effective and efficient that a number of top quality players sign for Melchester over the years, and everything is rosy.

However, a fateful error occurs. I print below the text of an Internal HMRC Memo detailing what happened.

“HMRC Memo – Mildly Secret – Only to be read by Executive Officers and Maintenance Engineers

From Hector, the Inspector

To Lecter, the Collector

Hi Hannibal!

I wanted to report on my visit to Melchester Rovers. I know that ever since you took over the EBT department in Tax Towers, you have wanted to nail Melchester and Sir Sam Barlow, especially as you want to see Melborough win the league from your seat in the directors’ box. Well, good news!

We were in for a routine inspection, or as you said, “lift every carpet in the place till you find something”. You won’t believe it! In the “Personnel” filing cabinet in their office we noticed a folder labelled “HMRC MUST NOT SEE THIS FOLDER”.

We thought nothing of it until, as we were about to leave, the Director of Finance at Melchester said “You’re all done? Glad you didn’t look at the secret folder!”

I therefore thought this might be worth investigating. Lo and behold, the folder contained 37 separate letters, all on Melchester notepaper and signed by Sir Sam himself. Each letter tells the player to whom it is addressed that “Don’t worry about the wages we are paying you through the Trust as a loan – we confirm that you will never have to pay it back.”

I suspect this might be useful in showing that the EBT has been operating improperly.

Kind regards,

Hector.”

From that point the walls of Mel Park come tumbling down. HMRC demand settlement of millions of pounds in unpaid tax and National Insurance, together with interest and penalties. Sir Sam’s letters are the “smoking gun” proving that the Trust “loans” were “disguised remuneration”. It is not known if Melchester Rovers’ Director of Finance “sleeps with the fishes”.

 

Back to Reality

It is alleged that Rangers players and perhaps officials too may have benefited from the relevant EBT by receiving what was truly taxable income through it.

Whilst the Trust in question was set up covering a number of companies in the Murray International Holdings empire, assessments of tax regarding Rangers employees would come to Rangers.

The interests of Rangers are being represented by Mr Thornhill QC. As part of the terms of the takeover or Rangers by Mr Whyte, the control of the appeal lies in the hands of Murray International Holdings, not Mr Whyte and Rangers.

As the case progressed, there were various references to “favourable” legal advice.

Often legal advice and the “spin” placed upon it, depends on the question asked.

If Mr Thornhill was asked if Rangers would “win” the appeal, then it all depends on what one means by “win”.

For example, on one view, a decision which reduced Rangers’ liability by £1 would be a “win” (though a Pyrrhic one). Some might view a “win” as being Rangers escaping with no liability at all, and any sum having to be paid as being a “defeat”.

There has been a “win” so far, as Rangers have been able to continue operating, and spending, whilst this potential bill hangs over the Club.

When the issue arose, and assessments of tax were issued by HMRC, these were appealed to the First Tier Tribunal (Tax). This Tribunal has considered the case over a lengthy period, with many adjournments, before the case concluded just over a week ago (on 18th January).

The Tribunal was held in private, possibly on security grounds, but it is expected that the judgment will be published, and even though the hearing was private, it is not necessarily the case that the judgment would be anonymised. A decision is expected in March or April 2012.

The case took so long, it is understood, because each individual payment from the Trust would have had to be looked at. Rangers appeal is against an assessment totalling around £36 million pounds in unpaid tax and interest and a later hearing would be needed, in the absence of agreement, to establish penalties. Penalties can run to 100% of the unpaid tax in particularly heinous examples. Speculation has been that, in Rangers case, penalties might run at about 50%.

 

What Happens After the FTT(T) Decision?

If the FTT(T) finds that any tax is due by Rangers, they can appeal, but only on a point of law, to the Upper Tribunal. However, appealing solely to delay payment is not possible. On a decision of the FTT(T) the tax assessed by the Tribunal is payable. If the Upper Tribunal finds that the amount assessed is too high, then the taxpayer can be refunded. It is up to HMRC if it wants to push for payment pending an appeal. Standing how it appears Rangers, particularly under new ownership, have treated the taxman, I find it hard to see how any leeway will be extended to them.

As far as settlement goes, there has been some speculation that a “cosy” deal, allowing Rangers to repay the tax over a number of years, might be out in place. I see no possibility of that. HMRC’s own guidelines permit repayment of unpaid tax over a maximum of 1 year, as long as all other tax affairs are fully up to date, and there is no history of defaults or delays. That would not seem to be the case with Rangers, and even if they were allowed say three years to repay a sum in excess of £30 million, how could they possibly do so, stranding their owner’s comments about the multi-million pound “black hole” in their finances without the tax case!

 

What Does HMRC Really Think of EBT’s?

The Government published a detailed look at the issues of “Disguised Remuneration” prior to changes in the 2011 Finance Act to clamp down on what the tax authorities see as abuse.

As the document says:-

In many cases, these third party arrangements allow an employee to enjoy the full benefit of a sum of money paid or assets provided while arguing that, because of the structure of the arrangements, there is no legal right to the money or assets. This argument is used to support a proposition that income tax and national insurance contributions (NICs) are due (if at all) only on the use of the money or assets during the period of the employee’s employment and not on their full value.”

 

So even “legitimate” use of EBT’s to reduce tax liabilities has ended.

 

The Government estimates that these measures will increase tax revenues by around £500 million per annum. It was thought that there were around 5,000 employers and 50,000 employees benefiting from these schemes.

 

As the consultation document stated:-

 

“The objective of this legislation is to prevent the avoidance or deferral of income tax and NICs on employment income. It will impact on employers and intermediaries who use trusts or loans to reward employees with a view to avoiding or deferring paying tax and NICs. The data which HMRC has on known arrangements suggests that there is a broad range of employers who have implemented these arrangements – around 5,000. The type of businesses thought to be involved ranges from large employers in the financial services industry to single-employee limited companies.”

 

 

Conclusion

 

The Big Case, at least stage 1, has ended. Judgment is awaited.

 

From all that has been publicised, it seems inevitable that Rangers will be left with a substantial bill to pay. At that stage, will Mr Whyte and his cohorts be able to extend matters further?

 

Perhaps Mr Whyte could offer HMRC something from his massive personal wealth as security for the debt, thus allowing Rangers to continue on their way to a 55th League title?

 

NB Please note that many of the characters mentioned in the above piece have been created for literary and comedic purposes, and no similaity with any person living or dead should be implied.

 

 

 

 

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Filed under Alleged Humour, Football, HMRC v Rangers, Rangers

Rangers Update – Mr Ellis & Mr Hughes, Wavetower Ltd, and the “Fit & Proper” Test

I picked a good night for an early bed! The Rangers Tax Case Blog burst into life with frenzied debate re a new issue and an ongoing matter. As is my wont, I started to post a comment, then realised that it would be better to put the comments here, with a link on the RTC blog.

 

Andrew Ellis and Barry Hughes

This week we saw the resignation from the board of Rangers Football Club plc of Mr Phil Betts, and his replacement by Mr Ellis. Andrew Ellis is already a director of the parent company, Rangers FC Group Ltd. He was in fact rumoured to be looking to take over Rangers himself prior to Craig Whyte’s public involvement.

Mr Ellis was referred to by Mr Whyte in the press release by Rangers on the PLUS SX newswire as follows:-

“Andrew is already a director of the Rangers 
FC Group and his previous experience in 
football will be a benefit to the Club 
as we look to the future.”

Mr Ellis attended Ibrox yesterday for his first match as a director of the Club. As he walked along the road to the ground, in the company of another gentleman, he was photographed by Willie Vass.

Mr Vass is an excellent sports photographer who generally snaps Rangers matches, and events surrounding them. His website can be found here.

However, from looking at his archives, he does not generally seem to wait outside Ibrox on a cold and wet match day to take pictures of people walking towards the ground.

Accompanying Mr Ellis as he walks to the ground is Barry Hughes. Mr Hughes is a well-known figure in the West of Scotland. He was the first boxer to be simultaneously licensed to box, promote and manage. He was a successful boxer, and has managed world champions.

He is a very successful businessman too.

However, in recent years he has been subject to some less than positive coverage, and in view of ongoing matters I propose to say no more about that. However, in light of the baggage he is metaphorically believed to carry, what message is being sent out by Mr Ellis in allowing the photos referred to to be taken?

I should say that I have had met Mr Hughes on a number of occasions over many years. I have always found him to be charming, pleasant and courteous individual. The man described in the press does not match the man I have spoken to. (For the avoidance of any doubt, none of my discussions with Mr Hughes have been in the role as his professional adviser, and therefore I am not breaching any confidentiality by referring to this.)

Did Messrs Ellis and Hughes just happen to bump into each other as they walked to the ground? Was Mr Hughes there as a guest of Mr Ellis? Do they have a business connection of any kind? Did someone tip off Mr Vass that there might be an interesting photo opportunity outside the ground?

The RTC discussion last night wondered if the flurry of comment, especially on Rangers fans’ message boards about the pictures of Mr Ellis and Mr Hughes, would be picked up in the press. It appears from what was being reported that these comments were negative in nature.

I suspect the press will not run with the story (if indeed there is a “story”) on the basis that, as certain issues are ongoing, there is a risk of the newspapers falling foul of the Contempt of Court Act. Safety first is probably going to be the watchword.

Mr Hughes is, in the eyes of the law and words of that great legal scholar Billy Joel, “An Innocent Man” and that he remains until a court declares otherwise.

The juxtaposition of Messrs Ellis and Hughes however has resulted in all sorts of rumour and innuendo. Until shown otherwise, I believe that they happened to bump into each other as they made their way to the ground, and Mr Vass, being a very good snapper with an eye for a great picture, just happened to catch them as he too made his way to the front door.

On the other hand, bearing in mind Mr Hughes’ current situation, it might be in Mr Ellis’ interests, as an example of openness, to confirm that he simply met Mr Hughes on the road. That would silence the inaccurate speculation.

I would guess that Rangers’ excellent PR team at Media House will take steps to make sure that the correct message goes out, as it is clearly not a good thing for people to be discussing openly alleged connections between reputable company directors like Mr Ellis and “less savoury” characters. (For the avoidance of doubt, I am NOT referring to Mr Hughes as such a character.)

 

Wavetower Ltd

This is the original name for the company formed on 17th September 2010 to be the vehicle for the takeover of Rangers.

It was an “off the shelf” company formed by Jordans. Jordans is a business which helps by dealing with the paperwork for incorporation of bespoke companies, and provides already created companies, like Wavetower Ltd, to people who want to be “up and running” straight away.

The first substantive steps with Wavetower therefore were registered at Companies House on 22nd October 2010 when the “pre-installed” director and Secretary resigned, to be replaced as director by Mr Ellis. At the same time the registered office of the company was changed to that of Collyer Bristow, the lawyers engaged by Mr Whyte, and one of whose partners is Gary Withey, now Company Secretary for Rangers Football Club plc.

Messrs Whyte and Betts only came on board (please pardon the pun) as Directors registered with effect from 8th March 2011.

After the takeover Wavetower changed its name to Rangers FC Group Ltd, which I will refer to as “Group” from now on.

This week the Directors of “Group” changed the accounting reference date for the company to bring it forward to 30th April. This has the effect of requiring them to prepare the first accounts for the business, formed for the purposes of taking over Rangers, as discussed above, earlier than first needed. But there is an additional consequence of the move, which seems, from commercial confidentiality purposes, to be a very good one.

This was brought to my attention by “Corsica”, a poster on RTC. The effect, perhaps deliberate, and perhaps not, of the change is that the first mention of the takeover in “Groups” published accounts will be for the year ended 30th April 2012. These accounts need not be lodged with Companies House until 31st January 2013!

One suspects that, because of the tax bill being considered by the Tribunal now, there might not be a “Rangers” owned by “Group” by that stage, but we must wait and see.

Companies House records, having checked using its Webcheck service 5 minutes ago, has not registered Mr Betts’ resignation yet, nor Mr Ellis’ appointment. Hopefully they will remember to do so within the 14-day period required by the Companies Act, which they missed regarding the resignations of Messrs Greig and McClelland in October.

It will be interesting to see (as I have not yet seen confirmation either way) if Mr Betts remains involved with “Group” or if he has left the scene entirely.

 

The “Fit and Proper” Test

To be approved as a director of a Scottish football club, one needs to pass the SFA’s “fit and proper” test.

Mr Whyte’s eligibility under this is being investigated by the SFA in connection with him having failed to declare his previous director disqualification.

Some have suggested that Mr Betts’ resignation might, in some way, be connected with a desire to play a part in a newco, formed after a Rangers insolvency event. It is said (to paraphrase)that, if a person has been a director of a Club suffering an Insolvency Event, then that will mean that they would fail the “fit and proper” test.

That however is not my understanding. It would be a reason for such a failure but, as with all of these issues, would be subject to the “discretion” of the SFA.

If a director of an insolvent club could satisfy the SFA that they were not implicated in the insolvency, then they could still pass the “fit and proper” test, unless there was some other impediment, like a formal disqualification.

One scenario suggested for Rangers which would allow Mr Whyte and his colleagues to be part of a newco would have been for the Club to be brought to Insolvency by the decision from the Tax Tribunal. In these circumstances Mr Whyte may well have argued that he had valiantly tried to keep HMS Rangers afloat, at great personal coat to himself, but that the holes left in the hull by Cap’n Murray and his crew were just too great, and despite all the bailing out by Wavetower, the ship had gone down. On that basis, a newco, subject to a myriad of other factors of course, would have been entitled to have Commodore Whyte at the helm.

 

 

Some more thoughts re “sources of funds” and UEFA Licences and “overdue” bills to follow

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Filed under Contempt of Court, Football, Rangers

The New “Offensive Behaviour at Football” Act Comes Into Force on 1st March – Oh Dear

The Act has now received the Royal Assent. The Scottish Executive has indicated that it will lay regulations before the Scottish Parliament to bring it into force on 1st March.

The first raft of fixtures after that date takes place on 3rd March, when Celtic travel to Aberdeen, Rangers entertain Hearts, and some other games are played which will not be subjected to the scrutiny of those two.

The Scottish Executive website publicised this yesterday here.

I have planned a couple of pieces looking in depth at the Act and what I think is wrong with it, but I thought a few comments were relevant now.

The first thing I would say refers to the subtitle on the Scottish Executive news headline page – Approval for important new religious hatred legislation. (Emphasis added)

The focus in the debates on the Bill, both in Committee and in Parliament, was on the various different types of “hatred” which were to be stamped out. The “cancer” as Alex Salmond called it, of “sectarianism” was to be rooted out.

However, the point which politicians miss, either deliberately or accidentally, is that “religion” is not really the root of these problems, I think – unless one is going to treat Rangers and Celtic as religions (and interestingly a wise man pointed out to me this week that, as far as matters of orthodoxy, heresy and schism are concerned, there are certain similarities between religions and the following of football teams).

There is no doubt that there is “religious hatred” in Scotland. However the lazy assumption which appears to be made by politicians is that Celtic = Roman Catholic and Rangers = Church of Scotland.

I accept that, amongst the fans who bellow insults at each other at Old Firm matches, there might be an assumption (notice I did not use a capital letter) that the fans in opposing colours represent the “opposing” faith.

The famous, though probably apocryphal, story about Bertie Peacock, the Celtic player from the 1950’s, illustrates the point. During a Celtic v Rangers game, he is said to have complained to a teammate that the opposing fans were calling him a “Fenian b@%&#+d”. When re-assured that the other players got that all the time, Mr Peacock, a proud Ulsterman and not a Roman Catholic, is believed to have said “Aye! But you all are!”

I imagine that similar conversations, from the other side of the divide might have taken place involving some of Rangers’ recent foreign players who have been adherents to Roman Catholicism.

The focus of the various pieces of legislation regarding “hate speech” (an Orwellian phrase if ever there was one) is on the view of the offender. So, if someone had shouted and sworn at Pope Benedict on his visit to Scotland, and told him that “I hate all you @&%$£#* followers of Shinto!” Then this would have been libelled as an aggravated breach of the peace, even although, as is well known, the Pope is a Catholic.

Whilst it might be expecting too much to think that the fans whose main pleasure at games seems to be to bait the opposition would appreciate that football teams and religious belief are not synonymous, then surely the politicians are wise enough to see past that? Sadly not.

Minister for Community Safety and Legal Affairs, Roseanna Cunningham made the following comments, with my observations below each paragraph:

 

“These new laws will give Scotland’s police and prosecutors the additional tools they have asked for to extract poisonous songs of hatred from Scottish football and threats of harm being posted on the internet.”

First of all, as Graeme Pearson, MSP, said in the Committee stages of the Bill, the police have never been known to turn down new powers. Mr Pearson would know, having served with distinction as a police officer for 38 years, ending his career as Director General of the Scottish Crime and Drug Enforcement Agency, before turning to politics.

Ms Cunningham seems to be taking the view that, if the police and prosecutors want new powers, then they shall have them. That is surely a dangerous position. I intend no criticism of the present Lord Advocate, Frank Mulholland, nor of his immediate predecessor, but (and this is a point to be expanded upon in another piece) the fact that both of them are life-long prosecutors necessarily means that their views will have been impacted by the prosecutorial work they have done. Prior to the appointment of Eilish Angiolini as Lord Advocate, the appointment was usually politically based, but the job went to an experienced Advocate, who had the breadth of experience to come to the Crown Office with a view, in theory, from above the prosecution v defence fray.

As a headline, “Prosecutors and police want more powers” is up there alongside “Dog bites man”!

Ms Cunningham then states that the Act will be used “to extract poisonous songs of hatred from Scottish football”. The summary at the bottom of the press notice I have referred to above indicates of course that the new offence is far wider than simply “poisonous songs of hatred”.

I have, as may not surprise my reader, a great deal to say about the precise offences created under the Act.

However, the existing law of breach of the peace covered these matters exactly, which was one of the beauties of that offence as it had evolved. But even more so, the Criminal Justice and Licensing (Scotland) Act 2010 introduced a statutory offence of “threatening or abusive behaviour” in section 38.

As was repeatedly pointed out in the debates re the Bill, there had been no time to assess whether the creation of this new offence had been successful in clamping down on such conduct.

Usually it is the critics of legislation who are accused of coming up with ever more convoluted scenarios to show its ineffectiveness. Here though, the Minister and the Lord Advocate were the ones presenting the pretzel-contorted situations where neither s38 nor breach of the peace would apply.

In addition, despite the fact that the “Threatening Communications” part of the Act is not exclusively football-related, the fact that the Minister lumps both parts together, and that the Executive webpage re this story is illustrated with a football, seems to be saying, incorrectly, that it is.

And as far as the “Threatening Behaviour” part of the new Act goes, I find it hard to see how something might be caught by the new rules, but would have been legal under s38, for example.

 

“The passing of this Act sends out an important message about the kind of Scotland we want to live in and tells the bigots in no uncertain terms that this behaviour will not be tolerated in a modern Scotland.”

This sentence is the key, I think, to the whole matter. A message is being sent out. As the saying goes, “Something must be done, therefore we are doing something.” It is proper for legislation to be used to “send a message”. The court system does so every day. I recall the late and greatly missed Sheriff Fitzsimons at Dumbarton regularly telling a person in the dock that a message needed to go out. This, I am sure, was his cue to make sure that the reporter from the local paper made a careful note, and that the front-page story for the next edition was on its way!

But the problem is that, the more precisely offences are defined, the more risk there is for confusion in the minds of judges, and much more likely, juries. We simply need to recall how, apparently due to the, in my view, unnecessary addition of a religious aggravation to the charge of assaulting Neil Lennon, Mr John Wilson found himself acquitted of an assault carried out on live TV!

Already supporters of each side of the divide pore over law reports to find which word has been criminalised. The danger is that, should there be a high profile case under the new Act, and at least at first all such cases will be high profile, then a decision made on the facts of the case regarding a particular word, phrase, chant or song will be treated, by media, police and opposing fans, as having set a cast-iron precedent.

In the case of William Walls v PF Kilmarnock, Donald Findlay QC attempted to argue that Mr Walls’ references to “Fenian  b@%&#+ds” at a Kilmarnock v Rangers match (!) was a political comment. As Lord Carloway put it, “The Court does not accept that the appellant was referring to members of the American brotherhood formed in the 1850s.

No one wants bigots, but, in a free society, how far should the State go in preventing people being “offended”? That debate seemed to be ignored in the rush to “do something”.

 

“By all means enjoy the banter and passionate support for your football teams, even passionate opposition of other football teams – it is the lifeblood of football. But sectarianism and other expressions of hate are not acceptable and it is time for it to stop. Those engaging in it will face the full force of the law.”

In the Walls case referred to, Lord Carloway made similar comments. He said, “The Court has no doubt that the conduct of the appellant did amount to a breach of the peace, even in the context of a football match where at least shouting and singing, or hearing shouting and singing, are undoubtedly part of the match experience expected by all attending the stadium. As a generality, a complaint of someone shouting and singing could not ground a complaint of breach of the peace at a football match, as it might at other locations. Equally, occasional standing up and even leading communal singing are unlikely to amount to conduct severe enough to threaten serious disturbance. However, presence inside a football stadium does not give a spectator a free hand to behave as he pleases. There are limits and the appellant’s conduct went well beyond those limits.”(Emphasis added)

This case was an example of the sensible approach of the judiciary to these matters, even before s38 came into force. The more prescriptive the rules, the less discretion open to the courts.

In addition, the strict line taken by Crown Office on matters of this nature, including the insistence on going to trial and not accepting lesser pleas, means that there will undoubtedly be wasted court time, and unnecessary costs caused by prosecutions which, as Sheriff Cusine recently pointed out on stepping down from the Bench, should never have been initiated at all.

Finally, the timing of the introduction of the Act is interesting. In Committee last year, there was an initial effort to rush the Bill through in time for the start of the football season. As the Minister put it, the Act needed to be in place in time for the police to be trained in how to deal with it, and so that there was no confusion for police and for the fans caused by the law changing mid season. This necessity of course could only apply to the Offensive Behaviour part of the Act, as the Threatening Communications part is not exclusive to football.

Here we have situation where the new Act comes into force mid season, and therefore one would expect there to be a different attitude from the police and prosecuting authorities – after all, the existing law was repeatedly stated to have been inadequate.

The Lord Advocate published his draft guidance in connection with the Bill, as it was proceeding through Parliament. Ironically, this, together with police guidance to its officers, will be more important in what can, and cannot, be done by football fans, than the Act itself, and the guidance was not subject to debate.

I foresee many cases coming under the new Act, and a clear conflict arising in relation to the rights of free speech enshrined in the European Convention on Human Rights as opposed to the restrictions envisaged in the Act and the guidance.

As the guidance puts it:-

“The offence WILL NOT

 Criminalise singing national anthems in the absence of any other aggravating, threatening or offensive behaviour

 Criminalise making religious gestures in the absence of any other aggravating, threatening or offensive behaviour

 Criminalise football banter or bad taste in the absence of any other aggravating, threatening or offensive behaviour

Officers should have regard to proportionality, legitimate football rivalry and common sense when assessing whether the conduct would cause offence to the reasonable person.”

Therefore, singing national anthems, making religious gestures and “banter and bad taste” can be offences if there is other “aggravating, threatening or offensive” behaviour. The Minister referred in Committee to people “aggressively making the Sign of the Cross.”

On that basis, if a police officer, and then a fiscal, have the same view as Roseanna Cunningham of such an event, an accused would be tried for breach of the new Act.

In addition, as the Lord Advocate’s guidelines state, “Where there is evidence that an offence has been committed the accused should be reported in custody. Only in extenuating circumstances should an accused be liberated subject to an undertaking to appear at court.”

I suspect that the cells might find themselves rather full on 25th March, after the Rangers v Celtic game that day.

And, as we have seen with the Twitter Joke case, a prosecution for what most people saw as a joke has resulted in a criminal conviction, and loss of employment, for the accused.

I fear that the Scottish justice system faces appearing ridiculous very soon.

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Filed under Criminal Law, Football, Human Rights, Offensive Behaviour at Football and Threatening Communications (Scotland) Bill

Craig Whyte and Rangers Round-up- Part 2b – Court Actions and Threats

 

To follow on from my post re the Tixway case, which concluded yesterday, and regarding which I will pen a few more thoughts later, I wanted to write about the other personal court actions in which Mr Whyte is involved or has threatened.

 

The BBC

I have mentioned this issue before.

However, almost three months after the BBC Inside Story programme about Mr Whyte, and his threats to sue, it does not appear that any action has been raised.

As Mr Whyte said to Tom English in Scotland on Sunday following the programme in October:-

“I’m suing and maybe the BBC are going to be paying the (HMRC) tax bill.“

One assumes the second half of the quote was intended in jest, or was that the master plan?

All of his public utterances were to the effect that a writ was heading to Pacific Quay (BBC Scotland HQ) immediately.

As I mentioned in the piece linked to above, I see no reason why he would sue in Scotland, if his intent were to win compensation for damage to his reputation. That suggested to me (and I accept this deduction may be entirely wrong) that he had received advice to the effect (a) that there was, in reality, no case at all or (b) the prospects of success were such that his lawyers, Carter-Ruck, were not prepared to act on a “no win, no fee” basis. Looking to pursue a claim like this on that basis is not a sign of impecuniosity on the part pf the claimant by the way; many rich and famous claimants have pursued libel actions under those rules, the reason being that, if successful, the client keeps most, if not all, of the damages, and the defendant has to be an inflated fee to the successful lawyers (inflated but in accordance with the rules).

However, these cases are expensive and on that basis, if a client has to funs d it himself, that can be a significant drain, even on a Billionaire’s resources!

One of the main reasons for campaigns for reform of the law of libel in England, as there seems little pressure to change Scotland’s defamation laws, is the way in which rich and powerful people use court actions, or the threat of them, to cow the media.

Notorious litigants, such as the late Robert Maxwell and Jeffrey Archer, were known for their hair-trigger response to negative stories, or even hints thereof. Carter-Ruck,  as it was generally that firm acting for the plaintiff, would fire off a writ or a letter threatening court action.

In many cases the threat alone would work – the article would not be published and the lawyers would have again been successful in heading trouble off at the pass.

Media companies do not have the time, and do not wish to risk the resources, in contesting these claims, unless very sure of their ground. Papers like the News of the World, and in a different way, Private Eye, viewed litigation s an occupational hazard. The NotW had deep pockets, and viewed litigation sometimes, I am sure, as a way of keeping its name in the headlines.

Private Eye, on the other hand, whilst not having deep pockets, was prepared to face up to legal “bullying” and to deploy the reply given in Arkell v Pressdram (NB the link is from the excellent Jack of Kent Blog – well worth a read re legal and related matters.)

Most other organisations would fold. The editors did not want their reporters having to spend time closeted with lawyers preparing a defence and executives were always looking at the cost argument. It was easiest to move on to something else, and if a story had been published, to print a small apology and spike any follow up planned.

The above is not to say that Messrs Maxwell and Archer, amongst others were never libelled – of course they were, but biographies of Mr Maxwell make it clear how he viewed these writs as a way of successfully gagging the whole press.

Therefore, if a writ, or the threat of one, is floating about in the air, it would not be surprising, especially now when newspapers are far less profitable than before, if indeed at all, for an editor to ignore a story and move on.

Whether by accident or design, the threats by Mr Whyte to raise an action, and repeated mentions by his spokesman of the threat, and indeed on one occasion mention of “ongoing proceedings” has successfully gagged the main stream press from looking too far into various issues about Mr Whyte, or at least publishing them.

Therefore, whilst some nuisances like me point out that the promised “immediate” court action is becoming rather stale, it has actually been a very economical way of stifling discussion (as I said, whether by accident or design). It is a lot cheaper to make a threat, and to use PR spokesmen to keep the threat visible, than to pay a lawyer to raise proceedings!

There are rumours that the BBC still expects to receive a writ. I cannot see the point of it being raised now, and if proceedings are commenced, then this, bizarrely, gives the press more right to discuss the story. Fair reporting of court proceedings is allowed, and therefore media outlets who just now do not want to delve too far into the details of Mr Whyte’s phoenix like rise from the ashes, would be allowed to report on the BBC allegations, and further matters put up in their defence, which they are reluctant to do now.

Will this action ever be raised? I very much doubt it!

 

The Matrimonial Case

As I mentioned recently Mr Whyte has been taken to court by his estranged wife.

Mr Whyte is represented by Harper MacLeod, one of the most eminent Scottish law firms. One assumes that, with Rangers’ recent history of litigation by unpaid solicitors, Mr Whyte has paid them a substantial sum to account (which might be an entirely unfounded comment, and if so, I apologise to him).

As I mentioned before, this is only of interest to me in the context of how the financial aspects of the case affect Mr Whyte and Rangers.

In November 2010 the Daily Record reported that “Whyte, 39, has split from his wife Kim – who still stays in the Highland village in a mansion bought for her by the wealthy financial investor.”

Last week the Sun reported that the action was not a divorce, but instead an action for aliment. Aliment is the Scottish term for maintenance. One wonders how matters between the estranged spouses have reached the stage where Mrs Whyte is suing for maintenance, especially if it is true, as the Daily Record said in November 2010, that Mr Whyte had bought his wife her home in Grantown-on-Spey after the separation, at a price believed to be in excess of £400,000.

The case is listed on the court rolls for 26th January before Lord Tyre.

LORD TYRE – L Sexto, Clerk

Thursday 26th January

Family Action

In terms of Rule 49, a proof has been allowed in the following action

1 F145/11 Kim Whyte v Craig Whyte bto Harper MacLeod  

 

This is purely procedural. It simply means that the court has put in train the procedures to be followed for parties to get to a final hearing of evidence. Very few aliment actions ever make it to a hearing – settlement is the order of the day.

Why is such an action relevant to the matters I am looking at? A large part of the decision regarding aliment relates to the respective resources, in terms of income and capital (where the capital is capable of generating income) of the parties.

Mr Whyte’s present income therefore from Rangers and his various other successful companies, could fall under scrutiny if no agreement is reached.

As Mr Whyte said in the Tom English interview:-

Good effort but I’m not going to name the companies because that’ll create a level of scrutiny for them and I don’t want to have that.”

If bto, who act for his wife, come looking for details of the companies, and Mr Whyte’s income from them, he will not get away with the same answer he gave to Mr English.

One of the interesting legal connections between Mr and Mrs Whyte (other than the rather important one of them being married) is that she was the director of Tixway UK Ltd on their return from Monaco, until after his director disqualification ended. In such circumstances, an inference could be taken, unfairly, that the disqualified director might have been a “shadow director” until legally allowed to step in. However, as Mr Whyte is an experienced man in corporate affairs, one would doubt very highly that he would have made such an error in full knowledge of the position.

If a divorce action were to follow, then this too would have the potential for forcing disclosure of details of Mr Whyte’s background which for business reasons and modesty he prefers to remain silent about.

Aliment actions are only in respect of the spouse, and not the children. Should there be any issue about maintenance for children in a separation, and this cannot be resolved by agreement, then the courts cannot decide that point. Instead the Chills Support Agency is tasked with obtaining declarations from the parents of their respective financial positions and deciding on maintenance accordingly. Unlike the court proves which, in general, would be in public, and CSA dealings are private, only becoming public where a party fails to abide by the order made by the CSA in which case the Child Maintenance and Enforcement Commission can take steps to recover sums due in court and to, effectively, punish the non-payer.

There is no suggestion that the CMEC is involved in this particular case, nor would I expect any issue to get within a million miles of its front door, but I thought a little bit of background might be useful.

 

The Insolvency Service

In the Tom English interview in October Mr Whyte had this exchange:-

“Question – They had a government official – Robert Burns, head of investigations at the Insolvency Service – saying that you could, potentially, have faced a two-year jail sentence for your involvement in a company, Re-tex Plastic Technology while disqualified. Is that true?

Answer – I’m not going to comment on specific allegations other than to say on the basis of what I’ve heard the Insolvency Service said last night, I’m looking into the possibility of suing them personally.

Question – Another law-suit?

Answer – For what he [Burns] said, he deserves to be sued personally. Because it’s a lie. If he said what I’ve been told he said, it’s a lie. The question to be asked here is if I’m being accused of something then why didn’t they pursue it, why didn’t they do something about it? The reason is because it’s not true.”

I am not aware of any court action having been raised against either Mr Burns or the Insolvency Service to date.

Carter- Ruck, in its statement on its website stating that it was advising Mr Whyte and Rangers FC “in connection with the BBC programme”. That does not exclude reference to a case against Mr Burns or the Insolvency Service, but it does not specifically say that it was going to happen either.

As with the BBC, if the allegations made are contained in court records, as was implied by the reporter, Mark Daly, holding a bundle of court documents during the programme, then as long as these are reported fairly, and without malice (and malice in a legal context is very hard to prove) then there is immunity from court action.

Mr Whyte did tell the Vanguard Bears supporters group at the end of October that he was:-  still being advised by Carter Ruck with regards to allegations made on the BBC Programme “Rangers – The Inside Story”, its researchers and contributors. Those who have repeated said allegations may also be pursued.”

I am unaware of any action having been taken against researchers, contributors or people who have repeated the allegations.

I suspect too that these threatened actions will not see the light of day either.

 

Other Threats

Along with the above, there were murmurings about action being taken against HMRC regarding the alleged leaking of confidential information regarding Rangers’ tax affairs. No such action has been taken, or at least publicised.

As Mr Whyte discussed with the Vanguard Bears:-

I decided when I took over the club, that while I would address media imbalance, I would start with a clean slate, and expect the same in return. After seeing Mr Spiers’ involvement in the BBC Documentary, we were considering whether to withdraw all press privileges, but decided against it, as we were of the view that his influence and readership is not significant enough to trouble us. That said, when we took that decision we only considered “The Times’” reach in Scotland, not their reach in England and beyond.

It is too late to reverse that decision. If Mr Spiers appears on our radar again for the wrong reasons, we will take a more holistic view. In football terms he’s on a retrospective yellow card.”

This goes alongside the bans on the Herald and the BBC for their alleged unfair reporting.
 

To End, A Case Which Will Never Be Needed

It is always good to end on a positive note.

On Twitter recently, there was some speculation about whether or not Mr Whyte’s PR representatives, Media House, with the redoubtable Jack Irvine at the helm, might find themselves left short, should there be an insolvency event at Ibrox.

Mr Irvine himself was kind enough to chip in to reassure readers that there would never need to be a case of Media House v Rangers or Whyte.

Or as the man himself put it:-

“Jack always gets paid!”

 

More to come re Companies Issues etc etc

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Filed under BBC, Courts, Football, Rangers, Whyte v Whyte