On Friday, Lord Hodge determined the application by the administrators of Rangers Football Club PLC (Rangers) to receive directions from the court regarding the Ticketus deal and whether the administrators (D&P) could get out of it, without being tangled up in litigation.
He declined to give D&P carte blanche to rip up the Ticketus deal on the basis that he did not have sufficient information about how that would affect the bids for Rangers to do so. It was left, after a general re-statement by the court of the principles under which an administrator has to operate, that D&P would need to give more detail to the court about the effects on the generality of creditors should the Ticketus deal be breached by D&P, thus making Ticketus a creditor.
The trade off for oldco Rangers would be that repudiation of the contract with Ticketus would give Rangers access to its full season ticket income, but at the expense of adding a sum close to £40 million to the creditors.
Ticketus’ claim against oldco Rangers would, in those circumstances, be for (a) the money paid for the tickets and (b) the lost profit from the deal, less (c) anything paid to them so far. It is very hard to see how the addition of such a large sum to the pool of creditors helps D&P achieve the purposes of administration, especially in light of the huge deficit which still exists.
As I suggested in an earlier post, I do not believe that there is any hope for oldco Rangers to avoid being wound up.
Therefore the second option considered by D&P is “a sale of the business and assets of Rangers … combined with a CVA”.
How Would a Sale of the “Business and Assets” Work?
If Rangers was a “normal” business, then it is almost certain that administrators would immediately have got rid of the high earning staff to see if the business could be sold as a going concern, perhaps to a competitor with an interest in taking over the shell of oldco.
The nature of a football club renders the matter worthy of very different considerations.
I believe that D&P have deliberately kept their first option, that of a share issue, alive so as (a) to keep up the spirits of the fans and (b) to keep alive the hope that HGMRC, for some bizarre reason, might approve a CVA contrary to its own published principles.
Realistically however, I think their goal must be to raise funds by way of a sale of the business and assets, and in these circumstances the suggestion of a CVA is a fig leaf.
If Rangers’ assets are sold off, will this generate enough to pay (a) the fees of D&P; (b) the secured creditor, if any; (c) HMRC, for all liabilities claimed to be due; (d) Ticketus (if D&P breach the contract); and (e) everyone else.
Will there be enough for a CVA to work, in those circumstances?
Even if there were, what would be “saved”? A football team with no ground and no players and no money and no prospect of getting out from under the debt burden.
There would not be a “Rangers” worth saving, if the assets, and maybe even the right to the name, have been sold off to someone else.
Short of some munificent fan appearing out of the blue, D&P can’t even say that the business could be run with the same players at break even. Therefore there is no real value to D&P, other than PR, in keeping matters rolling along, except, as far as I see it, for this.
The best, and indeed only, way for D&P to get some cash in to pay towards Rangers debt is to get to the transfer window in the summer. At that time any player not nailed to the floor could be sold, and the proceeds put in the pot for the creditors.
If Ibrox and Murray Park can be sold off too, this would create some funds to go to the creditors, but leaves oldco homeless. In reality of course, in the present circumstances, the sale of the business and assets to a newco Rangers necessarily spells the end of oldco.
D&P might justify the administration process continuing as winding up or liquidation now simply causes the players’ registrations to revert to the football authorities. Nothing would be generated for creditors from player sales.
What could go wrong with this plan?
In one way, nothing can go wrong with it.
The plan seems to accept, although D&P are reluctant to say this openly, that oldco Rangers cannot survive. Either the business and assets are sold off by D&P as part of the administration, and somehow the rump oldco gets an acceptable CVA or the business and assets are sold off and the oldco wound up.
In fact, the worst thing for ”Rangers” would be for the business and assets to be sold, and then a CVA agreed! In those circumstances oldco would retain the SPL share, but would have no ground, training facilities or players!
So Did Lord Hodge Decide Anything Which Affected Ticketus?
Yes he did. His determination, as expertly spelt out by Love and Garbage, that the deal created no “real rights” for Ticketus and only a “personal right” against Rangers means that the stadium could be sold and Ticketus have no claim on sales by any newco. If they had succeeded in their argument they would have had such a right, it being attached legally to the seats.
It is possible that Ticketus might wish to appeal the decision of Lord Hodge, or to sit, poised for D&P to break the contract or for Rangers to exit administration, and then pounce with its own court action.
The sums of money at stake make it worth Ticketus’ while to appeal, especially where the “Blue Knights” seem to be less keen on its help now.
Ticketus might even be looking already about getting this dispute to the UK Supreme Court, on the basis that the panel of judges would not be exclusively Scottish and the “sensible” provisions as regards equity might be applied via the back door. However, it could be a couple of years or more before any challenge to Lord Hodge’s decision reached judgment stage in the Supreme Court. This could leave matters in legal limbo for a lengthy period.
How did Ticketus get it “wrong”?
On one hand they fell victim to a problem caused by the uncertainty of the law. The specific point dealt with by Lord Hodge had not been considered previously here. However, wise people, such as the aforementioned Love and Garbage, had predicted that his Lordship would take the line which he did, this being consistent with the principles of Scots law long extant.
As L&G said, perhaps the lawyers who advised Ticketus failed to realise that Ibrox Stadium was in Scotland, or else thought that the “exclusive jurisdiction” clause rendered the matter subject to English law and the English courts.
In any event, I would expect that the lawyers who acted for Ticketus would be notifying their Professional Indemnity insurers.
If Ticketus do not get their money from Rangers, then they can seek to activate any security from Mr Whyte or his companies. Once their losses are crystallised, then one would expect them to pursue their own lawyers. After all, getting the law wrong, at such a cost, is likely to lead to the PI insurers settling the claim on a compromise basis, even if confident that there was no negligence.
A PI claim for £24-40 million? Even with insurance, that kind of claim can bankrupt a firm.
The fact that the deal was drawn up in an effort to create a “real right” might suggest in fact that this was in the contemplation of Ticketus, or its lawyers. That seems to have backfired.
So Who Won?
To use a football analogy, whilst the match was a scoring draw, Ticketus was at home so D&P have the advantage under the away goals rule.
By that I mean that neither party got what it wanted, but what Ticketus failed to get, namely a declaration that they had “real rights” not personal ones, was more of a setback to them than what D&P failed to get was for the administrators. D&P were told that they could not, based on what they had put before the court, get the court’s authority to cast Ticketus aside.
However, the judge reiterated that the administrators could act, and indeed must act, in the interest of all creditors.
If Ticketus are not involved with any bidders, then some of the difficulties D&P had disappear and more info could be given to the court re the bids and bidders.
Will The Ticketus Case be back in Court?
I would be very surprised if it did not trouble the courts again. There are various forms in which such a case could be heard.
However, disputes about £24 million tend to go through every legal stage possible before a conclusion is reached, and Ticketus may well have deeper pockets than Rangers Football Club PLC (In Administration).
Posted by Paul McConville