Tag Archives: Carter-Ruck

What Has Happened to Craig Whyte’s Threatened Court Action against the BBC?

 

The Sunday Mail today has reported that the BBC has refused to apologise to Craig Whyte in connection with the “Inside Story” programme last month. They report that Mr Whyte had earlier ordered his solicitors, Carter Ruck, to sue on his behalf, and that, as they have no right of audience in Scotland, they have engaged Bannatyne Kirkwood France to pursue the matter in this jurisdiction.

 

I find it very interesting that no action has yet been raised by Mr Whyte, despite the threats to do so immediately. As he was quoted as saying to Tom English in the Scotland on Sunday three days after the programme, “It’s outrageous. I actually can’t believe that they went with the allegations they went with. We told them. We sent lawyers letters all week, warning them that these things aren’t true and warning them what would happen if they ran with these allegations.” There was also comment from a spokesman for Mr Whyte that action was being raised immediately.

 

Interestingly, when Martin Bain won his arrestment order against Rangers, a Rangers spokesman was quoted as saying that they would be immediately appealing this “outrageous” decision. Nothing happened.

 

In connection with the Rangers dispute with former solicitors, Levy & McRae, Collyer Bristow (the London law firm in which Gary Withey, Rangers company secretary, is a partner) lodged a complaint with the Scottish Legal Services Commission on Rangers’ behalf. Levy & McRae alleged that this was done deliberately ignoring significant evidence produced by them to Collyer Bristow to the effect that they were perfectly entitled to act for Mr Bain, despite previously acting for Rangers, this being advice from two QC’s and from the Head of Professional Practice at the Law Society! Mr Whyte, in the same discussion with Mr English last month said, “Levy & McRae acted for Rangers previously and under Law Society rules they shouldn’t be acting against their client so when they represented Bain we complained about them to the Law Society…” This is despite Levy & McRae, about two months ago, asking the Court of Session to overturn the SLCC decision even to accept the complaint as irrational. Rangers, despite clearly being a party to the case, as the complainer, have not entered appearance and therefore, despite Mr Whyte’s noises, do not seem to be pursuing this issue now.

 

As far as the libel proceedings against the BBC go, Carter-Ruck has a well earned reputation as one of the most aggressive, and best, plaintiff’s firms. They generally do not wait prior to raising court action. One demand for a retraction or apology and then they are off to court. Indeed, with the rights of privacy under the Human Rights Act, there is often a case for seeking an interdict or injunction to stop publication of the article or programme complained of in advance.

 

As this is a case where, according to Mr Whyte the BBC knew his complaints prior to broadcast, then once the credits had rolled, one would have expected a writ to follow by return. In addition, there would have been no doubt that this action would have been raised in the High Court in London. People with even the most tangential connection with England try to get their cases heard at the High Court in London. They are known as “libel tourists”. Notorious cases where publications with only minuscule circulations in England have been successfully sued there have led to demands to change the laws, and in the USA for example, moves to make English libel awards unenforceable there. Why is England a good place to sue for libel? Firstly, even though awards of damages have been restricted from years past, they are still much higher than in other jurisdictions, including Scotland. Secondly, it makes far more financial sense for the client, and for his lawyers, to pursue a libel case in London, rather than a defamation action in Edinburgh. The BBC programme was shown, or was available to be seen, in England, and the BBC is based in London. There is no jurisdictional reason not to pursue the case in London.

 

High Court libel proceedings in London are far more costly than defamation proceedings in the Court of Session. Although presently subject to review, “no win-no fee” agreements are very common in libel cases in England, and Carter Ruck are one of the main users of them.  No win no fee agreements save the client funding the claim up front, and also protect them against costs if unsuccessful. The successful lawyer can also recover an enhanced fee from the defendant, increasing their recovery by up to 100%.

 

In Scotland, cases can be pursued “no win, no fee”.  The costs payable to the successful lawyer are far less, and whilst there can be uplifts of fees; they are far less than in English cases. There is little point in pursuing a defamation case in Edinburgh, if you can sue in England. Firstly any damages awarded will be higher, and secondly the greatly inflated costs make it far more likely that the defendant would settle.

 

He clearly has the best advice he can get, but it seems an interesting tactic to look to sue in Scotland. If the case goes ahead, there might be some interesting discussions about the jury. (In Scotland a defamation case is normally heard before a jury of 12 members in the Court of Session in Edinburgh.) After the verdict in John Wilson’s trial for allegedly assaulting Neil Lennon, there was some cynical comment about Scottish juries. One can only imagine what would be said about a jury which found in favour of Mr Whyte or one which found against him.

 

The Sunday Mail quotes his spokesman as saying “This legal action against the BBC is not about money.” I was told a long time ago that if a client tells his lawyer “It’s not about the money” you should run away very fast! The courts deal with monetary damages, not fixing reputations. And clients who say it is not about the money when a case starts become very concerned about it when the case ends unsuccessfully.

 

The Carter-Ruck website still states that they are “advising” both Mr Whyte and Rangers in connection with the programme. I’m not aware of any criticism of Rangers per se in “Inside Story”.

 

As far as the no win, no fee arrangement is concerned via Carter Ruck they state that the following are the factors they consider:-

  • The claim needs to be of a sufficient value or involve a fundamental right or important principle;
  • We need to be satisfied as to the merits of the potential claim; and
  • We need to be satisfied as to the opposing party’s ability to pay any damages and/or costs orders.

If we do not feel able to offer a CFA, we may be prepared to consider offering a differential fee arrangement, whereby we will charge reduced hourly rates as the litigation progresses and enhanced rates if, and only if, the case is won.

 

Presumably Mr Whyte’s solicitors think the claim is worth enough money – after all, accusations of criminality against a prominent businessman would seem to be material. In addition, the BBC can pay an award of damages.

 

Does this suggest therefore that Carter Ruck is not satisfied as to the merits of the claim? As I have commented before, the programme seemed to me to be framed very carefully, making accusations against Mr Whyte which come from public documents, such as court records. In addition, as far as accusations such as that of being a “shadow director” go, this appears to have come from court documents concerning the winding up of Re-Tex Ltd, and qualified privilege applies to reporting of court matters without malice. Proof of malice is extraordinarily difficult.

 

To conclude, does this look at the history of Mr Whyte’s threatened litigation since he took charge at Ibrox, show a pattern emerging of threats and bluster, but no concrete action?

 

 

 

 

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Filed under Bain v Rangers, BBC, Courts, Damages Claims, Football, Rangers

Craig Whyte’s Disqualification from Acting as a Company Director – Was it on a “Technicality”? Maybe a Big Technicality?

 

Introduction

Mr Whyte has stated that his disqualification as a company director, in June 2000, for seven years, was a result of a “technicality”. Whist I do not wish to dispute what he says, as clearly he knows the circumstances, I would comment that such a period of disqualification would seem extraordinarily severe for commission of a “technicality”.

Perhaps the passage of time has dimmed Mr Whyte’s recollection of what took place?

The Insolvency Service issue regular guidance on this issue. They state that the purpose of the disqualification of directors is:-

To maintain the integrity of the business environment. Those who become directors of limited companies should:

  • carry out their duties with responsibility; and
  • exercise adequate skill and care with proper regard to the interests of the company’s creditors and employees.

The majority of directors do this effectively, but the CDDA is a powerful tool against those who abuse the privilege of limited liability. The CDDA applies not just to persons who are formally appointed as directors but to those who carry out the functions of directors.”

 

Craig Whyte being reminded of his disqualification in 2000


Mr Whyte’s Disqualification

In all of the coverage of Craig Whyte prior to last night’s BBC Inside Story documentary, I was not aware of any mention by him, or anyone else, that he had been disqualified from holding a post as a company director for seven years on 13th June 2000.

This revelation was stunning, casting doubt on the business acumen of the person labelled as a “billionaire” when he first came on the Rangers scene.

Mr Whyte’s interview with STV, shown on Thursday night, just before the BBC programme, was recorded when he knew about the allegation that he had been disqualified. However, he failed to mention it at all, even though that might well have been his chance to get his explanation in first.

Today (Friday) STV revealed that the Insolvency Service had confirmed the seven year disqualification. It was also confirmed on Mr Whyte’s behalf that this had happened, but it was explained by his spokesman that this was due to a “technicality”.

Details of the disqualification are not clear, but is it possible that a director would be suspended for seven years for a “technicality”?

 


The Company Directors Disqualification Act 1986.

The Act lays down certain circumstances in which a director can be disqualified.

Section 2 states that a person can be disqualified if “convicted of an indictable offence (whether on indictment or summarily) in connection with the promotion, formation, management, liquidation or striking off of a company, with the receivership of a company’s property or with his being an administrative receiver of a company”.

If the conviction is in a summary court, the maximum disqualification is five years, and in any other court, fifteen yes.

 

Section 3 states that appears a director can be disqualified if “he has been persistently in default in relation to provisions of the companies legislation requiring any return, account or other document to be filed with, delivered or sent, or notice of any matter to be given, to the registrar of companies”.

Subsection 2 defines “persistent” by stating that “the fact that a person has been persistently in default in relation to such provisions as are mentioned above may … be conclusively proved by showing that in the 5 years ending with the date of the application he has been adjudged guilty (whether or not on the same occasion) of three or more defaults in relation to those provisions”. (Emphasis added)

Subsection 3 defines being adjudged guilty as being convicted in a criminal court or being subject of a default order for failure to comply with companies legislation.

The maximum period of disqualification under Section 3 is five years.

 

Under Section 4 a person can be disqualified if, in the course of a winding up, it appears that the person has been guilty of fraudulent trading or fraud or breach of duty, whether convicted in a criminal court or not.

The maximum period of disqualification under Section 4 is fifteen years.

 

Under Section 5 a court can disqualify a person convicted of “a contravention of, or failure to comply with, any provision of the companies legislation requiring a return, account or other document to be filed with, delivered or sent, or notice of any matter to be given, to the registrar of companies … where during the 5 years ending with the date of the conviction, the person has had made against him, or has been convicted of, in total not less than 3 default orders and offences counting for the purposes of this section; and those offences may include that of which he is convicted as mentioned in subsection (2) and any other offence of which he is convicted on the same occasion”.

The maximum period of disqualification under Section 5 is five years.

 

Section 6 is headed “Duty of court to disqualify unfit directors of insolvent companies”.

The section states as follows:-

“(1)The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied—(a)that he is or has been a director of a company which has at any time become insolvent (whether while he was a director or subsequently), and(b)that his conduct as a director of that company (either taken alone or taken together with his conduct as a director of any other company or companies) makes him unfit to be concerned in the management of a company.

(2)For the purposes of this section and the next, a company becomes insolvent if—(a)the company goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up,(b)an administration order is made in relation to the company, or(c)an administrative receiver of the company is appointed; and references to a person’s conduct as a director of any company or companies include, where that company or any of those companies has become insolvent, that person’s conduct in relation to any matter connected with or arising out of the insolvency of that company.” (Emphases added)

Under Section 6, the minimum disqualification is two years, and the maximum fifteen yes.

 

Section 9 directs us to Schedule 1 Part 1 of the Act as regards the factors to be considered in determining “unfitness” to be a director.

I have summarised the relevant part of the Schedule below.

Part I – Matters applicable in all cases (that is, whether the relevant company has become insolvent or not):

  • (i) Misfeasance or breach of duty.
  • (ii) Misapplication of company money or property.
  • (iii) Transactions defrauding creditors.
  • (iv) Failure to comply with the Companies Act 1985 (maintenance of books, records, etc.)
  • (v) Accounts – failure to discharge obligations.

Part II – Matters applicable when the relevant company has become insolvent:

  • (vi) Causes of failure and insolvency (director’s responsibility, conduct after insolvency),
  • (vii) Consumer prepayments (treatment of deposits, etc.)
  • (viii) Transactions at an undervalue, preferences (giving someone an improper advantage), disposition of property (dispositions after the start of a liquidation).
  • (ix) Whether the director carried out his duties in regard to putting the company into liquidation.
  • (x) Statement of affairs – obligations in regard thereto.
  • (xi) Co-operation with the office holder and the handing over of company property.

The maximum period of disqualification under Section 10 is fifteen years.

 

Can We Determine What the Disqualification was For?

It cannot be the case that Mr Whyte was disqualified for:- being convicted in a summary court of an indictable offence; persistent default in following companies legislation; or repeated offences of failing to comply with companies legislation as regards submission of returns etc, as all of these have a maximum five year disqualification.

We can also rule out Section 2 for non-summary convictions, as I am sure that the BBC would have reported any relevant criminal conviction.

That leaves us with the following misdemeanours for which the maximum disqualification is 15 years.

1                    In a winding up, the court considered that the person was guilty of fraud or “fraudulent trading” (Section 4).

2                    Unfit director of a company (Section 6)

3                    Wrongful trading (Section 10)

Again, if it were the first or third one would assume that the BBC would have identified the specific court declaration. (Whilst the BBC made mention of certain actings alleged to have been carried out by Mr Whyte which could have been seen as fraudulent, these were alleged by the Insolvency Service in connection with a later business (whilst the disqualification was in place)).

This leaves us, by a process of elimination, with Mr Whyte being unfit to be a director. Now of course, such a declaration is not necessarily fatal to a businessman’s career. After all as regards Robert Maxwell a DTI Report in the early 1970’s stated notwithstanding Mr Maxwell’s acknowledged abilities and energy, he is not in our opinion a person who can be relied on to exercise proper stewardship of a publicly quoted company.” Robert Maxwell, prior to his demise, succeeded in building a very successful business empire.

The late Robert Maxwell - please note nothing derogatory should be implied as regards Craig Whyte by use of this picture

(For the avoidance of doubt, whilst I am aware that Mr Maxwell died on the point of it being discovered he had committed fraud on a massive scale, there is no suggestion, nor should any be taken as implied, that Mr Whyte has committed any illegal acts.)

So we are left with the implication that Mr Whyte was found to have been responsible for at least one, and possibly more, of the matters mentioned in Schedule 1 Part 1 above.

The DTI considered it serious enough to ask the court for a disqualification order of seven years or indeed more. The court granted an order for seven years. This might have been by agreement with Mr Whyte, or after hearing the case and determining that that was the correct disqualification.

As we have seen though the period of ban under Section 10 is to be between two and fifteen years. Mr Whyte is toward the middle of that range. That might suggest that either his “technicality” was not seen as such by the court, or that there were a lot of “technicalities” which the court determined added up to justifying a seven year ban.

Mr Whyte had the chance to challenge his disqualification in court. He either failed to do so, or did it unsuccessfully.

 

Conclusion

I am not suggesting that Mr Whyte is less than 100% honest in his explanation of the disqualification. I do not have the detailed information, and the presence of Messrs Carter-Ruck, Solicitors, acting for Mr Whyte ensures that anyone writing about him does so with discretion.

However, as I have shown, it seems unusual that such a significant disqualification was imposed upon a businessman guilty only of a “technicality”.

It would be possible for Mr Whyte to clarify this for us, or for the media to ask him or his lawyers to do so.

For now, I think it is fair to say that, if it had been known in the run up to the takeover that Mr Whyte had been disqualifies as an unfit director, it may have changed the views of some of the parties involved.

If I was a creditor of Rangers now, I would be very concerned by the matters raised about the Club’s solvency and the revelation about Mr Whyte would only heighten those fears.

It may well be that he is, and has been, able to allay any anxieties amongst his suppliers and creditor. He is clearly a persuasive and successful businessman, but, as is often the case in this saga, there are more questions than answers.

 

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Filed under BBC, Civil Law, Football, Rangers, The Company Directors Disqualification Act 1986.