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Some Thoughts Regarding Lord Hodge’s Bain v Rangers Decision – Not One Way Traffic!

Martin Bain v Rangers – Lord Hodge’s Decision Analysed

Today the written judgement of Lord Hodge was published following the hearing on 13th September.

The judgement can be found here

As it puts some meat on the bones of the verbal decision and the reporting of that hearing, I thought it was worth a detailed analysis.

It tells us far more than has been clear so far as regards the specific issues in dispute, and also publicly identifies time scales for further procedures.

Lord Hodge started by summarising what the case is about, stating that it arises from termination of Martin Bain’s contract with Rangers.

Mr Bain alleges that Rangers repudiated his contract of employment as its chief executive (i) by acts which amounted to a breach of a duty not to undermine the trust and confidence between employer and employee and (ii) by anticipatory breach of contract when Rangers’ new chairman, Mr Craig Whyte, stated to the press that “there was no way back” after Rangers had suspended him and that he would not be allowed to return to his duties. Mr Bain avers that he accepted those breaches of contract as a repudiation and rescinded the contract on 20 June 2011.

What Did Lord Hodge Need to Decide?

Lord Hodge detailed that “There are three tests which the court has to consider… when deciding whether to grant a warrant for diligence on the dependence. The burden of showing that those tests are met rests on the applicant for the warrant.” The tests are laid down in s15F of the Debtors (Scotland) Act.

These are (1) that the claimant has a prima facie case; (2) that there is a real and substantial risk that enforcement of any decree in this action would be defeated or prejudiced by reason of the defender being insolvent or verging on insolvency; and (3) whether it is reasonable in all the circumstances to grant a warrant, including the effect which that grant may have on any person having an interest.

Lord Hodge dealt with these points in turn.

The Merits of the Case

As regards the merits of the case, he noted an apparent difficulty for Mr Bain. In his case, Mr Bain states that his contract of employment, with effect from 29 September 2009, was for thirty nine months.  However “a long-term service contract of this length is prohibited under sections 188 and 189 of the Companies Act 2006 unless it is approved by a resolution of the members of the company. Mr Ellis QC, who appeared for Mr Bain, asserted that Mr Bain did not know whether the members of Rangers had approved the contract. I found that surprising as I would have expected the chief executive of a public company to be aware whether or not his employment contract had the needed shareholder approval.

One – nil to Rangers, perhaps? It is interesting that there was no comment about this, at least that I saw, in the press coverage on 13th September, although this might be one of the factors the judge did not mention in open court. It dents Mr Bain’s position if he was not aware if his contract had been legally approved.

However Mr Ellis, Mr Bain’s excellent QC, had a fall back position. “Mr Ellis pointed out that if the contract was in breach of sections 188 and 189, the statute replaced the offending provision of the contract setting out the term of the contract with a deemed provision that the company could terminate the contract at any time on giving reasonable notice. Mr Bain avers that reasonable notice in the circumstances of his position and employment history is twelve months. Accordingly, Mr Ellis submitted that Mr Bain had a prima facie case that he was entitled to damages on the basis that he had been deprived of the benefits which would have accrued to him in a twelve-month notice period.

The argument put forward in the “fall back” position was accepted as being a valid one by Rangers QC. This is an interesting example of the law denying an apparent agreement legal effect, but allowing something else to be substituted for it, rather than simply tearing it up.

One positive for Rangers though is that the fall back position would reduce the sum claimed to approximately £964,000, from the £1.3 million craved.

Mr Napier for Rangers said that they had a substantial counterclaim against Mr Bain for alleged breaches of fiduciary duty, but that this had not yet been developed, so he could not ask the judge to refuse the arrestment on that ground.

Lord Hodge decided that, as matters stand, there is a prima facie case.

How prepared are Rangers in this case? It is three months since Mr Bain left, and four since he was suspended. One would have hoped that, by this stage, at least a reasonable skeleton argument could have been put forward as regards the claim against him. But no.

The Possibility of Insolvency

As regards the second test, he noted that the law was clear.”First, in addressing this test the court has to look into the future to the time when a pursuer is likely to obtain a judicial determination of his case… Secondly …the notion of risk is crucial; it looks to the possibility of insolvency, not actual insolvency.

Mr Ellis laid out a number of grounds for there to be concern regarding Rangers’ solvency.

These were as follows:-

1                    that the “healthy balance sheet depended on the valuation of the company’s stadium and training facilities;

2                    that the accounts did not provide for the potential tax liability of £49 million in respect of the “big” tax case;

3                    that Mr Ellis relied on the terms upon which Wavetower Limited, controlled by Mr Whyte, had purchased the holding of 85 per cent of Rangers’ shares (further referred to below);

4                    that there was the “small” tax case, where HMRC had arrested £2.3 million in a bank account of Rangers and where Rangers had accepted its liability to pay £2.8 million and that it disputed only amount of the interest and penalties;

5                    that Rangers had paid a debt of about £35,000 to its former solicitors, Levy & McRae, only after they had sued when faced with delaying tactics; and

6                    that Mr Whyte had given an interview reported in an article in the Daily Record on the day of the hearing (13 September 2011) in which the reporter recorded Mr Whyte as stating that Rangers faced cuts in expenditure because it faced a £10 million black hole in its annual running costs.

On the basis of these details Mr Ellis asked the court to conclude that Rangers was already in a state of practical insolvency. In any event, if the “big” tax case was lost, Rangers would be practically insolvent unless it received sufficient outside support.

In reply, Mr Napier argued that Mr Bain had not shown that there was a real and substantial risk of insolvency as (a) there was no basis for challenging Rangers’ statutory accounts, which Mr Bain himself had signed, which showed a solvent company, (b) the outcome of the tax case was unknown and it was far from clear that Rangers would lose the case in the spectacular fashion which Mr Ellis suggested, and (c) the determination of the tax case was in any event a long way off.

He argued that the risk of insolvency must be reasonably proximate and it could not be said that it was so in this case. The court should not assume an adverse outcome to the tax case.

Lord Hodge stated that he was not persuaded that Rangers were presently insolvent. There are two types of insolvency – practical insolvency where a company cannot pay its debts as they fall due and absolute insolvency where a company’s total dent exceeds its total assets.

Lord Hodge then referred to Mr Whyte’s sworn statement lodged at court which, one assumes, asserted Rangers’ solvency.

He said, “In relation to the HMRC claim for £2.8 million and penalties, Mr Whyte’s affidavit suggests that HMRC have been able to arrest £2.3 million in Rangers’ bank account. Discussions are continuing between HMRC and Rangers in relation to the level of penalties imposed. In any event, the purchaser of Rangers has undertaken to pay the debt to HMRC. Thus, while the debt affects Rangers’ balance sheet, it does not of itself contribute towards any practical insolvency. The delayed response by Rangers in settling the claim for fees by Levy & McRae may have been coloured by a sense of grievance toward the solicitors that they should not be acting for Mr Bain when they had acted for the club. Accordingly I attach little weight to either claim as demonstrative of actual or impending insolvency.” (Emphases added)

It’s not made clear what form the undertaking to pay the HMRC bill takes. Have formal declarations been made to this effect? As most the money to do so has already been arrested, this is perhaps not as generous an offer as at first sight.

Another win for Rangers then?

No – as Lord Hodge goes on to discuss the arrangements by which Mr Whyte carried out the takeover.

What is more significant to my mind as an indicator of a potential difficulty in the medium term is the structure of the takeover deal which is recorded in the circular sent to shareholders of Rangers on 3 June 2011. That document disclosed that The Rangers FC Group Limited (formerly Wavetower Limited) (“Group”) had purchased 85.3 per cent of the shares of Rangers for the cash sum of £1 and had given certain undertakings. As part of the deal, Group took over Rangers’ indebtedness to the Lloyds Banking Group, which Mr Ellis informed me stood at about £18 million, and obtained an assignation of the Bank’s securities over Rangers’ assets. The summary of material terms of the acquisition disclosed that Group would waive this debt “if the Club has not suffered an insolvency event within 90 days of the Club’s appeal in relation to the tax claim brought against the Club by HM Revenue & Customs….”Group has undertaken to provide or secure the investment of substantial sums in Rangers but, until it waives the acquired bank debt, such further investment is to be treated as increasing Rangers’ debt to Group. Thus those funds will not improve Rangers’ balance sheet until the expiry of ninety days after the determination of the tax appeal.” (Emphases added)

Here we come to one of the keys of the whole deal. Mr Whyte’s “Group” will only invest, unconditionally, in Rangers once 90 days passes after the “big” tax case is decided. Till then, all investment is actually to be treated as a loan, thus, if Rangers did have an Insolvency Event, Mr Whyte’s “Group” would have an increased share of the debt, thus giving it greater power to resolve an administration type situation in its interests.

Lord Hodge goes on to say “In my view, this carefully structured deal, by which Group has (a) secured its existing investment, by which the bank was repaid, and its commitment to make or procure further investment in Rangers against the assets of Rangers by the assignation of the bank’s securities and (b) made the waiver of its loan to Rangers conditional upon the non-occurrence of an insolvency event in the ninety days after the determination of the appeal in relation to HMRC’s £49 million claim, shows an appreciation by Group of a risk of insolvency resulting from that claim.

In addition, when Lord Hodge asked Mr Napier to clarify Rangers’ position in relation to the HMRC claim for £49 million, “He was not able to assist as he had no instructions in relation to that matter. I must therefore treat Mr Bain’s assertions as to the extent of HMRC’s claim as uncontradicted, although I acknowledge that the claim itself is the subject of an appeal by Rangers.

We come again to the question of preparedness. Reasonably assiduous internet users can talk at great length regarding the tax issue. So why was Rangers’ QC not able to comment at all? Was this neglect on someone’s part, or a deliberate effort to keep as much as possible of the dirty linen out of court?

Lord Hodge noted that the HMRC appeal might still take some time to resolve and that Mr Bain’s case itself would probably not get to a full hearing before next summer, but he viewed the potential tax debt as more definite that a future trading event and as such,”I am not persuaded that the outcome of the HMRC claim is too remote in time for the court to form a view as to the existence of a risk. I am satisfied that there is a real and substantial risk of insolvency if the tax appeal were to be decided against Rangers in the sums which have been discussed. In reaching this view I emphasise that I am concerned with the statutory test which addresses the degree of possibility. I am not speaking of the actuality or even probability of insolvency.

Was It Reasonable to Grant the Order?

Turning to the third test, His Lordship noted Mr Ellis as arguing that Mr Bain had lost substantial benefits from his contract and an arrestment, if effected more than sixty days before insolvency, might confer a preference. Rangers’ tangible assets were subject to securities which had been assigned by its bank to Group, and Mr Bain could expect no benefit from those assets.

Mr Napier responded by alleging that the processes leading to the large HMRC claim had been in place when Mr Bain was an executive director of Rangers and the alleged liabilities incurred on his watch. He accused Mr Bain, by seeking to use the HMRC claim for tax and penalties to secure a warrant to arrest on the dependence, of taking benefit from his own irregularities and that was not reasonable.

However the particular scheme which gave rise to the “big” case was put in place and contributions into it started in season 200-2001 (according to the relevant Rangers Annual Report) but Mr Bain only became a Director in September 2001.

Lord Hodge commented “In reaching a view on this third test of reasonableness I take account of the assertion that the tax claim which has given rise to the possibility of insolvency is something which had occurred at least in part under Mr Bain’s stewardship. But that of itself does not make it unreasonable to give him some security for his claim. I am satisfied that Mr Bain has discharged the burden of showing that it is reasonable to grant warrant for arrestment on the dependence.

The Amount of the Arrestment and Court Costs

However he restricted the sum to be arrested to reflect “the fact that Rangers’ claim against Mr Bain exists and is likely to be developed over time. It would not be appropriate in my view to ignore Rangers’ allegation that Mr Bain has been in part responsible for its predicament.

He found Mr Bain successful as regards costs, but only for one half, to reflect his partial success.

Conclusion

Interestingly, following the verbal judgement there were commentators and commenters quick to say that Mr Bain had proved nothing, as the merits of the case are some way from being heard. I have already heard it said today that Lord Hodge’s last comments above in some way vindicate Rangers and establish that Mr Bain has a case to answer.

That is not the case. All that was offered to the court were imprecise assertions of Mr Bain’s potential liability, together with the very serious allegation of breach of fiduciary duty. Detailed allegations will need to be made, and Mr Bain will have the chance to answer.

The case still has a good distance to run, although both parties will be doing their best to put their cases together as quickly as possible. Mr Bain clearly has a substantial head start, and Rangers have a lot of catching up to do.

If the plan is for Rangers to suffer an Insolvency Event before next summer however, the arrestment will at least get Mr Bain some of his money!

We await the next exciting instalment!

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What Happens Next in The Bain v Rangers Case – Me at Scotzine

A bumper evening tonight here at Scots Law Thoughts Towers!

Over at Scotzine.com you will find some thoughts on Mr Bain’s case, including the possibility of Sir David Murray entering the witness box on Bain’s behalf, and how Craig Whyte might have opened a large can of worms for himself in the way he is fighting the case.

Head over to Scotzine.com via this link! Or by clicking on the logo below!

Comments are always welcome, whether there or here!

 

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Rangers Bring on the Subs And Change Lawyers – Why Are They Represented By Insolvency Experts?

Are Rangers Bringing on the Legal Substitutes?

After the deserved win by Rangers over Celtic on Sunday, last night’s loss to Falkirk will have cast a pall of gloom over the Ibrox support again.

Falkirk's 3-2 win will not have improved the Ibrox mood

Should the selection of their legal team, and the choices made by Craig Whyte since his takeover be of more concern than how long David Weir’s knees will hold out? Do they tell us something about Mr Whyte’s intentions regarding the football team, and its potential insolvency? Is it significant that the two most important lawyers acting for Rangers in defending them against claims are both corporate insolvency specialists?

There are Rangers’ fans already very concerned about the legal battering the club has been taking. Are there possible reasons for this?

Let’s see!

Rangers and Levy & McRae

We’ll start with Rangers’ dispute with Levy & McRae, about which I have written already.

Rangers over the years have used the services of different firms of solicitors to deal with various types of business. These cover matters such as employment issues, contracts with players and third parties, commercial enterprises, conveyancing, tax advice and finally disciplinary matters, both for players and for the club as a whole. This is common in large businesses and organisations. The maxim “horses for courses” applies.

Levy & McRae, which amongst its many strings to its bow is one of the top “fire fighting” law firms in Scotland, acted for Rangers for some years in connection with disciplinary matters. This culminated in the UEFA disciplinary hearing in April 2011 where Rangers were represented by Peter Watson,   the vastly experienced Senior Partner of the firm. Rangers’ penalty for being found guilty of their fans singing sectarian songs both at home and abroad was a fine, a ban on fans attending one away game, and a further suspended ban. Speculation beforehand that UEFA might insist Rangers played one or more home games behind closed doors, with a resultant huge loss of revenue for the club, proved to be off the mark. By all accounts therefore Levy & McRae had done their job, and done so very well.

Peter Watson of Levy & McRae

Just after this, Craig Whyte completed his takeover of the club. It appears that he had decided he wanted to make a clean break from the former regime. This included dispensing with the services of former advisers, such as Mr Watson’s firm. When there is a takeover of an ongoing business of a significant size, it is likely that the new ownership team will (a) have their own roster of trusted advisers already and (b) might want to make changes at the very top of the organisation.

So it might not have been unexpected that Rangers would choose new lawyers, although the nature of Levy & McRae’s work for Rangers meant that they would only be needed when disciplinary matters came up, and as such, Mr Whyte had no need to cut ties until the next case appeared. However, that did not happen and their services were dispensed with. Levy & McRae were closely connected to Martin Bain, in his role as Chief Executive at Rangers, and, as discussed later, Mr Whyte seems to have no time for anyone senior connected with Ibrox before his takeover.

 

Levy & McRae’s Action for Payment

Levy & McRae had been dropped. This seems directly to have set in motion Levy & McRae’s court action. Whilst lawyers might hold off from pursuing a bill with regular clients, to preserve the business relationship, there is no reason to do so if the firm is no longer instructed by the client.

Rangers refused to pay the £35,000 bill charged by Levy & McRae. Either they had no money to do so (and if Rangers could not afford £35,000 then this is an even bigger story) or, as would appear to be the case, they simply decided to bluff Levy & McRae, which has spectacularly back-fired on Mr Whyte.

Craig Whyte calmly considering his next move

Rangers found themselves at the receiving end of a Court of Session action for payment brought by their erstwhile solicitors. Whilst this could have been resolved by them paying before the matter needed any hearing, this did not happen. The case had to be called in court where Counsel for Levy & McRae pointed out the embarrassing facts regarding the late payment. At the cost of the full sum due to Levy & McRae, plus perhaps £10,000 of costs payable to them, and Rangers’ own legal expenses, the matter was resolved. But the shame factor and the extra costs involved seem a very high price to get this out of the way.

Bearing in mind that the new ownership team at Rangers might, though lack of information, have been unclear as to whether or not the specific sums were due, what could have been done about this? Scots Law has a procedure laid down for dealing with these cases where legal bills might be in dispute.

The Auditor of Court has the power to carry out what is called a Taxation (perhaps standing Rangers’ issues with HMRC, that word put them off). This involves the Auditor, who is independent, assessing the work done and determining the appropriate fee. It is normally a client’s right to insist on a Taxation, and indeed, especially where a business has changed hands, one would expect the lawyers to suggest taxation to re-assure the new owners that work done under the old regime was being properly billed.

However, as far as the time scales suggest, Rangers did not do this. Their Counsel suggested in court that Mr Whyte’s team were unaware of what had actually been done by Levy & McRae, and indeed whether they were actually instructed at all! (Which would suggest that Mr Watson and his team were sneaking uninstructed into UEFA disciplinary hearings for Rangers.)

No mention of taxation was made, for the simple reason that Rangers either decided not to do so, or that they did not understand what to do.

Rangers’ Complaint Re Levy & McRae’s Alleged Conflict of Interest  

So Rangers had been embarrassed by having their dirty linen aired in court by their former lawyers. Even worse, Levy & McRae were acting for Mr Bain in connection with his dispute with Rangers.

As I have mentioned before, at first sight this seems to suggest a conflict of interest, which is something lawyers are at pains to avoid. However, what might seem on a simple analysis to be a “conflict” i.e. Levy & McRae had acted for Rangers and were now being asked to act against them , is not so.

The Law Society of Scotland gives detailed advice regarding a conflict of interest. They say “There are three elements that need to be considered. First, if you would give different advice to different clients about the same matter there is a conflict of interest between them. It does not matter that the clients may be agreed about what they wish to do. Second, if your actings on behalf of one client would have an adverse impact on a matter you are dealing with for another client, there is a conflict, even if on the face of it the matters are unrelated. Third, if you are unable to disclose relevant information to one client because of a duty of confidentiality to another client there is a conflict of interest. This also means that if you cannot act for one of them you cannot breach confidentiality in telling them about that.”

The Law Society issues clear guidance regarding conflicts of interest

From an outsider’s perspective, how does the Bain/Levy & McRae/Rangers relationship stack up against these guidelines?

Firstly, Rangers were no longer clients of Levy & McRae, so they were not in the position of giving different clients different advice. Secondly, as Rangers were no longer clients, that consideration does not apply. Thirdly, as Levy & McRae had dealt only with specific disciplinary matters at Ibrox, and not with corporate issues, or in any way in connection with the takeover, they would not have had the “confidential” information from Rangers by that means to use against them.

Levy & McRae, in anticipation of this being raised as an issue, had taken the advice of two QC’s and of the Law Society. Despite this, the lawyers acting for Rangers have proceeded to lodge a complaint with the Scottish Legal Complaints Commission against Levy & McRae.

As Mr Watson was quoted as saying in the Herald on 15th September  “Levy & McRae are aware of this and have been in touch with the Scottish Legal Complaints Commission and Law Society of Scotland to draw their attention to the fact that Collyer Bristow, representing Rangers Football Club, were advised that no conflict of interest existed and that this was the opinion, not just of Levy & McRae, but also two separate Queen’s Counsel, and that the opinion, when reached by both QCs, was supported by Bruce Ritchie of the Law Society of Scotland. For some reason, it appears that Collyer Bristow failed to pass this information on to the SLCC and that has been brought to the SLCC’s attention and, if necessary, any procedure which is commenced will be challenged in the Court of Session. Collyer Bristow have been asked why this omission took place and so far have not replied.”

Whilst Counsels’ opinions might be subject to disagreement, the fact that, having obtained two such opinions, Levy & McRae had cleared the position with Bruce Ritchie, who is the fount of all knowledge regarding Professional Practice issues at the Law Society, would suggest that such a complaint will not go far. If indeed, as Mr Watson says, the lawyers acting for Rangers have complained anyway, and have failed to tell the SLCC about the answers they received previously from the firm, that must raise questions about the legal advice Rangers are receiving.

The complaint is a classic example, to use a football analogy, of going for the man and not the ball, and in these circumstances would suggest that Rangers are rattled.

Rangers’ Legal Team

It is very interesting to see who are lined up in the “blue gowns” for Rangers in these matters. Rangers Football Club is a Scottish company. It operates under Scots Law, and is presently engaged in litigation before the Court of Session in Scotland.

One would expect therefore that, in relation to Scottish Law matters, they would have a Scottish qualified lawyer leading the way.

However, that is not the case.

The lawyer quoted as acting for Rangers is Gary Withey of Collyer Bristow in London. That is a high powered London commercial firm, whose home page lists the types of high-profile clients for whom they have acted. In addition, they proudly announced their involvement with Rangers on completion of the deal on 19th May which included the statement that Mr Withey would take up the post of Company Secretary to the Club. That is a perfectly normal step. There is no requirement that a Company Secretary be a lawyer, let alone one qualified in the country where the company is based.

From l to r: David Grier, Gary Withey, Craig Whyte and Phil Betts

However, if Mr Withey’s firm is seeking to lead the defence of the litigation, and to pursue the complaint against Levy & McRae, this seems odd, and perhaps will ultimately assist Mr Bain’s case. I do not intend to cast any aspersions on Mr Withey or his firm. I merely offer comment on what appears to be the situation and am happy to be corrected should I make any incorrect assumptions.

It is of note that Mr Withey’s profile, linked to above, describes his areas of Experience as “Public company, AIM, Plus Markets, M&A. Insolvency and Financial Services Enforcement Actions.” Bearing in mind the speculation about Rangers’ financial future, especially if the HMRC case goes against them in two months’ time, it seems that Mr Whyte has been prudent in appointing as Secretary and legal adviser an expert in Insolvency!

As disclosed in the press, and indeed on the Scottish Courts website Rangers’ defence in court was in the hands of Warners an Edinburgh law firm. It should be noted that in Court of Session cases, where the principal solicitor is based outside the capital, an Edinburgh form will, normally be engaged to assist with the case. For example, Levy & McRae’s Edinburgh correspondents are Balfour & Manson, one of the most eminent firms in Scotland.

Warners

The fact that Warners were engaged, apparently by Collyer Bristow, took some in the legal community by surprise. Whilst Warners is a respected firm, a number of lawyers with whom I have spoken wondered why one of the traditional “heavy hitters” had not been engaged. It may well be that Mr Whyte or Mr Withey have had excellent results from that firm, and I am in no position to offer any comment upon what advice, and the standard thereof, given to their clients. Their choice did seem an odd one though.

This became even more so after the recent hearings in the Levy & McRae case and that of Mr Bain. In the latter, Mr Bain’s team were successful in being given authority to arrest a substantial sum of money in Rangers’ hands pending resolution of the case. This was a significant setback for Rangers as it required the judge, Lord Hodge, to determine that there was a risk of insolvency at the club.

Brian Napier QC

Eyebrows were raised too at the choice of Brian Napier QC to act for Rangers in the hearing on the arrestment. Mr Napier has an outstanding reputation in the fields of Employment Law and Discrimination. However, on the “horses for courses” principal mentioned above, what might have been better was a tough Commercial Court practitioner, ready to fight tooth and nail over the issues of solvency and arrestment. Whilst this is an employment case brought by Mr Bain, issues of employment law were secondary at that hearing to those of “debt collection”. Mr Bain’s QC, Nick St John Ellis, is well known as one of the top Court of Session commercial litigators. Rangers were unsuccessful at that hearing.

Nick St John Ellis QC

Bringing On a Substitute?

As far as concerns about Rangers’ legal team go, these seem to have been justified by the news, which has been floating around the internet since the hearing before Lord Hodge, that Rangers, or Mr Withey, have dispensed with the services of Warners and Mr Napier.

It is understood that they have, perhaps  belatedly, gone to one of the heavy hitting firms, Anderson Strathern. Matters are now being dealt with there, it is believed, by Katrina Lumsdaine who is a Solicitor-Advocate rated in the Legal 500.

Interestingly, she heads up Anderson Strathern’s Insolvency and Restructuring Team. She is referred to as specialising in insolvency matters. Her profile states that “Katrina’s insolvency practice is focused on corporate insolvency and corporate recovery. She acts primarily for banks and for insolvency practitioners, as well as advising companies in financial difficulty. Her experience ranges from restructuring, including schemes of arrangement, company voluntary arrangements, through to formal insolvency processes including liquidations, receiverships and administrations, including pre-packaged administrations.”(Emphases added)

Katrina Lumsdaine of Anderson Strathern

So Rangers are now represented principally by their Company Secretary, who is an Insolvency expert, and apparently their Edinburgh solicitor is also an expert in corporate insolvency.

None of the above of course may have any significance as far as Rangers’ future is concerned, but it might be the case that Mr Whyte is doing what any prudent businessman would do by seeking as far as possible to protect his investments.

What Does This All Mean?

So far, from an outside perspective, Rangers’ handling of these legal cases appears inept. It may not be – that is how it looks to me.

1          The have been dragged into court for not paying their own former lawyers, apparently missing the chance to have the bill looked at independently and the matter resolved without a court action at all.

2          They have mounted a direct challenge to those layers alleging a conflict of interest, despite, apparently, having been told, and given evidence, that there was no such conflict. Perhaps the English guidelines for conflict of interest are different, but, as Mr Withey might need to be told “We’re not in Kansas any more, Toto!” It would be en elementary mistake, and I am sure one Rangers have not made, to have their main legal adviser one who is not qualified in the law applicable to the dispute.

However, and I am sure these are matters Levy & McRae will have considered as soon as they were aware the complaint had been made, has Mr Withey placed himself in difficulty with his own actions – if, as alleged, he has made a complaint, and a very serious one, and has failed to tell the body to whom he complained anything about the responses he had received? This would either appear to be a bad mistake, or something worse. Again, I am not casting aspersions on Mr Withey, nor on his firm, and should not be taken as doing so. However, it does appear an odd combination of circumstances.

3          Mr Bain has been successful in his arrestment of funds. Rangers’ dirty linen regarding their alleged possible insolvency has been aired in court, and accepted, to some degree, by the judge. It may well be the case that the original choice of lawyer has started them off on the back foot.

When dealing with a firm like Levy & McRae, and standing the situation which appears to pertain to the case itself, as I will discuss in my next piece, Rangers might already have left a gap in this vase which they cannot close.

Martin Bain in happier times

4          There has been a great deal of speculation about Mr Whyte’s plans for Rangers. He says he is in for the long haul and there is no reason to doubt what he has to say. However, matters are not in his hands. If HMRC succeed in the so-called “big tax case” then might the shutters be coming down at Ibrox? As I have suggested before, I think not.

However the appointment of a corporate insolvency expert as Company Secretary, and now the engaging of a similar expert to handle the Bain case suggests that possible insolvency and how to deal with it are matters which were close to Mr Whyte’s mind from before the takeover took place in May. Is it his intention to have the company go in and out of administration in a “pre-pack” deal? If the tax case goes wrong for Rangers, then administration and worse are definitely on the agenda.

 

Interesting times at Ibrox and I am sure about to become more so!

 

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The Ibrox Legal Battles – In and Out of Court – Me at Scotzine.com

 

Now over at Scotzine.com – some more thoughts re the disputes between Rangers and Messrs Levy & McRae and Mr Bain.

 

 

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