On 22nd June Lord Hodge dealt with a hearing into the administration process of Rangers Football Club PLC (as it then was).
The issue over any possible conflict of interest was raised by Lord Hodge at a hearing about the administration process on Friday. The judge said he took no view about what the BBC had said, but wanted to know whether Duff and Phelps had obtained and acted on legal advice on the question of conflict of interest. Lord Hodge said he had done nothing until now because he did not want to hinder the process of Rangers seeking a creditors voluntary agreement (CVA).
But, he told the accountants’ lawyers: “There is considerable public interest in this jurisdiction in relation to the administration.”
Lord Hodge added: “I do not want the administration to come to an end without having received that report.”
The report demanded by Lord Hodge is expected to be ready in three weeks and a further court hearing is likely to be arranged after that.
(As a side issue, I will point out that “CVA” is not accurately described above by the BBC, but actually stands for Company Voluntary Arrangement.)
Since June, apart from the declarations at the time by D&P that they welcomed the investigation as being a chance to clear their name (I paraphrase) not much seems to have happened.
The 10 July report to creditors by D&P said:-
The corporate entity which remains under the control of the Joint Administrators i.e. the Company, will be placed into CVL once all outstanding issues have been attended to. It is likely to be several weeks before this occurs.
There have been certain unsubstantiated reports in the media, notably from the BBC regarding an alleged conflict of interest concerning the Joint Administrators and Duff & Phelps. Regrettably gross factual inaccuracies featured heavily in media reports. Following the broadcast of a BBC television program which made reference to this matter, Lord Hodge requested the Joint Administrators to provide information to the Court of Session regarding Duff & Phelps prior involvement with the Company and detailing the Joint Administrators’ conflict review procedures which were undertaken prior to the Administration. This report is in the process of being prepared.
A detailed letter setting out the same has also been provided to the Joint Administrators’ regulatory body.
It should also be noted that upon appointment the Joint Liquidators will review the conduct of the Joint Administrators. The Joint Liquidators are an independent accountancy firm nominated by the creditors of the Company.
The Joint Administrators have an ongoing responsibility to consider whether any conflict of interest exists. They are confident that the above processes will confirm that no conflict of interest existed in relation to the Administrators’ conduct.
The 24 August report to creditors by D&P said:-
The remaining issues relating to the Administration trading period are being finalised and will either be concluded by the Joint Administrators or during the Liquidation by the proposed Joint Liquidators, Malcolm Cohen and James Bernard Stephen of BDO Stoy Hayward LLP.
They also said:-
The Joint Administrators have provided a report to the Court of Session regarding Duff & Phelps’ prior involvement with the Company and detailing the Joint Administrators’ conflict review procedures which were undertaken prior to the Administration. A similar report has also been provided to the Joint Administrators’ regulatory body, the IPA.
So, in mid July, it was likely to be “several weeks” till BDO took over. Here we are ten weeks later with no news.
At first it was rumoured that Lord Hodge’s return from holiday was the determining factor regarding the scheduling of the hearing which would, it appeared, release the administrators and appoint the liquidators. However he has been back for some time now, and yet we have had no hearing and no apparent news.
Why could this be?
The administrators task is all but done. They have sold the “business and assets” of Rangers. All they are doing, it seems to the outside world, is counting the money as it dwindles due to costs, and deciding not to turn up at the SPL Independent Commission. Why is there a delay in BDO stepping in with the liquidation?
The important quote from Lord Hodge: “I do not want the administration to come to an end without having received that report.”
He has received the report, it would appear. Therefore the possibilities seem to me to be as follows:-
He is very busy, which he undoubtedly is, and has not yet had the chance to consider the report, even though this delay is causing additional costs to the creditors, as the administration continues.
He has considered the report and is satisfied that D&P are innocent of any wrongdoing. It has simply been impossible to have a hearing scheduled to finalise matters. The Court of Session vacation has been running for some time, and is now over, but I am sure a simple hearing could have been fixed.
The Insolvency Act 1986, Schedule B1, states at Para 79:-
79(1) On the application of the administrator of a company the court may provide for the appointment of an administrator of the company to cease to have effect from a specified time.
(3) The administrator of a company shall make an application under this paragraph if—
(a) the administration is pursuant to an administration order, and
(b) the administrator thinks that the purpose of administration has been sufficiently achieved in relation to the company.
(4) On an application under this paragraph the court may—
(a) adjourn the hearing conditionally or unconditionally;
(b) dismiss the application;
(c) make an interim order;
(d) make any order it thinks appropriate (whether in addition to, in consequence of or instead of the order applied for).
This would appear to be what has happened already, as the administration was pursuant to an administration order and D&P consider that the purpose of administration has been achieved.
On that basis Lord Hodge exercised his power under para 79(4)(a) to adjourn the hearing.
All of the above leads me to suggest that Lord Hodge has not been satisfied by the report (which is some way from saying that he thinks there has been a conflict of interest) and wants more clarification or explanation. In that event a hearing would need to be set down for argument and evidence, if required, and it is likely to be that which is causing additional delay.
I have not seen any comment from D&P after the 24 August report. I wonder if a journalist could ask them what the position is?
All of this could have a bearing on the SPL Independent Commission too. The issues raised in the fourth charge against Rangers, which is that they obstructed, or at least failed to co-operate with, the SPL investigation are serious. It is not the job of an administrator to “obstruct” a regulatory body in exercise of its duties. The obstruction, or delay, or failure to respond is treated often more seriously than the original matter, as I am very well aware.
In addition the imposition of a financial penalty on oldco, which is possible, might involve the liquidator, if then in place, fighting the matter to avoid further harm to creditors.
If BDO appear shortly, they might be forced to seek a delay in Lord Nimmo Smith’s Commission so that they can consider matters properly. At the same time D&P could find themselves in the position of having refused to engage with the proceedings as administrators of Rangers, but find it necessary to become involved to protect their own reputation!
So, where are we?
I suspect that we will shortly hear that Lord Hodge has set down a date for D&P, and probably Mr Grier of that company, to appear before him to explain matters. In addition it might be that Mr Whyte could be asked to appear as a witness, but I suspect that the thought of Edinburgh on a dreary Friday might persuade him to remain in Monte Carlo, or whatever fleshpot he has found himself in whilst contemplating his time at Ibrox.
On the other hand, Mr Whyte might believe that D&P took his shilling, and then reneged on the deal, as per the abortive fee cap. In that case, an appearance in court to lay out his position clearly would be very interesting – another day for selling tickets to the Outer House!
It is of course possible that the delay has been brought about simply as a result of there being extensive communications back and forth seeking to resolve the issue. If I was a creditor I would be asking, politely, what on earth is happening!
Posted by Paul McConville