The Rangers Football Club Plc v Collyer Bristow LLP & Anor

I have before me an application by the joint administrators of Rangers Football Club plc (“the Club”) for expedition of various proceedings which I will describe shortly. The background is one of some complexity and I will summarise it as briefly as I can. The Club is, of course, the well-known football club based in Glasgow.

For present purposes the story begins with the appointment of the joint administrators on 14 February 2012. The records obtained and examined by the joint administrators included a number of documents relating to the acquisition of an 85.3 per cent stake in the share capital of the Club by a company now called Rangers FC Group Ltd (“Group”) on 6 May 2011. The documents relating to that transaction include two documents which are central for present purposes. The first is a Share Purchase Agreement dated 6 May 2011 between, among others, Murray MHL Ltd, which was the vendor, and Group. That agreement provided for Group to invest in the Club a sum in excess of £9.5 million. That sum was made up of £5 million for the acquisition of players, the subject of clause 6.4 of the Agreement; a little over £2.8 million for discharge of a tax liability of the Club, the subject of clause 6.7 of the Agreement; and £1.7 million for capital expenditure, the subject of clause 6.8 of the agreement. All of those moneys were provided by the agreement to be held by Group’s solicitors, Messrs. Collyer Bristow, on an undertaking to pay the sums in due course to the Club. Collyer Bristow duly entered into an undertaking in a letter of the same date to pay the sums in question to the Club for the purposes identified in the SPA.

It appeared to the joint administrators that a large amount of the money in question should still be in Collyer Bristow’s client account in accordance with the undertaking. In particular, one of the documents they received was a letter from Collyer Bristow to Murray MHL Ltd’s solicitors of 3 January 2012 stating that the £5 million for expenditure on the acquisition of players had not yet been required and that the sum of just over £2.8 million for a tax liability was still being held in the client account.

There was subsequently correspondence between the joint administrators’ Scottish solicitors and Mr. Gary Withey, the responsible partner at Collyer Bristow, about the moneys. Mr. Withey produced two reconciliations. The first was a reconciliation produced on 17 February 2012, showing the sum of a little over £24.3 million received from Ticketus LLP and showing various expenditures out of that sum, leaving a balance in Collyer Bristow’s account of £260,544.14. The second reconciliation produced on 23 February 2012 showed in addition receipt of moneys from Merchant Turnaround plc of £1 million and from the Trustees of the Jerome Group plc Pension Fund of a little over £2.9 million. The second reconciliation showed a balance of just over £3.9 million remaining in Collyer Bristow’s account.

On 29 February 2012 the joint administrators obtained a letter of request from Lady Smith sitting in the Court of Session addressed to this court, asking for assistance. On the same day Collyer Bristow paid the sum of £260,544.14 that was identified in the first reconciliation to the joint administrators. The balance of the sum of just over £3.9 million showed on the second reconciliation that is to say somewhat over £3.6 million, continued to be held in Collyer Bristow’s account. Subsequently that money was paid over to the joint administrator’s solicitors for safekeeping pursuant to an order of Floyd J of 1 March 20 12.

It became clear to the joint administrators from the documents that they had received, not least the two reconciliations, that the Club might well face competing claims to the sums in the Collyer Bristow account (“the Fund”) from the Jerome Pension Fund, from Merchant Turnaround, from Ticketus and from HMRC. Accordingly, the joint administrators made an application which came before Warren J on 8 March 2012 seeking an expedited trial of all those parties’ claims to the Fund. Warren J agreed that the trial of those claims should be expedited. He ordered a very accelerated trial indeed of those claims starting on 30 March 2012, and he gave directions to achieve that.

In accordance with those directions, points of claim were filed by the joint administrators, by Jerome Pension Fund, by Merchant Turnaround and by HMRC. Ticketus and Collyer Bristow both confirmed that they did not maintain any proprietary claims to the Fund.

Subsequently it became apparent to the joint administrators that the matter was even less straightforward than it had appeared at the time of Warren J’s order. I take the following account of matters from the skeleton argument prepared by counsel for the joint administrators, but emphasising that this merely represents the joint administrators’ case based on their current understanding in the light of the documents to which they have had access thus far.

As it presently appears to the joint administrators, the situation in the first quarter of 2011 was that the Club owed substantial debts to a number of creditors, including approximately £16 million to Lloyds Banking Group which subsequently rose to approximately £80 million. In addition, there was the tax liability to HMRC to which I have already referred, and the Club required investment for capital expenditure and acquiring players. In those circumstances Mr. Paul Murray, who was one of the directors of the Club, proposed that the Club should raise funds by issuing some £25 million worth of convertible preference shares. Mr. Murray had apparently identified an underwriter who was prepared to underwrite the share issue in full.

At around the same time, however, a Mr. Craig Whyte was seeking to acquire a majority stake in the Club through his company, which is the company that became Group. Collyer Bristow acted as Group’s solicitors and, as I have already indicated, Mr. Withey was the Partner in Collyer Bristow who dealt with Group’s involvement in the takeover. It appears that Mr. Whyte knew that the Board of the Club was considering the proposal made by Mr. Murray for a share issue to raise £25 million. It appears, therefore, that he appreciated that he would have to offer something better than that in order to persuade the independent directors' committee of the Board to consent to the proposed takeover. Accordingly, he represented that Group would invest in the Club a total amount of more than £27.5 million. That would enable the payment of £18 million to Lloyds, and a sum in excess of £9.5 million to Collyer Bristow to cover the three sums I have already mentioned, namely £5 million for the acquisition of players, the tax liability of £2.8 million and £1.7 million for capital expenditure.

It is the joint administrators’ case that the representations made by Mr. Whyte were false because Group had no ability to provide the necessary funds in accordance with those representations. Furthermore, it is said that Mr. Withey was privy to the deception and participated in a conspiracy with Mr. Whyte. To that end, it is said that Mr. Withey sent emails to the solicitors acting for the vendor on 22 April 2011 and 26 April 2011 representing that Collyer Bristow had received £27.5 million from Group and that Mr. Withey had performed all necessary anti-money laundering checks to satisfy himself as to the source of the funds. Yet further, Mr. Withey sent the letter of 3 January 2012 to which I have already referred.

The reality, so the joint administrators contend, was otherwise. Instead of Group raising the money, what had happened was that sums had been obtained from Merchant Turnaround, from the Jerome Pension Fund and from Ticketus. In the case of Merchant Turnaround, it appears that a sum of £1 million was paid on or around 30 March 2011 in anticipation of a potential investment by Merchant Turnaround in the Club. In the case of Jerome Pension Fund, it appears that a sum of a little over £2.9 million was paid to Collyer Bristow on or around 7 April 2011 in anticipation of a loan. I pause to observe at this stage that both Merchant Turnaround and Jerome Pension Fund contend that neither of those transactions completed. Accordingly, they contend that they have proprietary claims to the sums that they advanced to Collyer Bristow. Finally, the sum of £24.3 million received by Collyer Bristow from Ticketus in around mid-April 2011 was in anticipation of a sale by the Club to Ticketus of season tickets to be issued in future by the Club. All of those sums were advanced pursuant to the undertaking given by Collyer Bristow, so it is said.

The exercise that was undertaken by Mr. Whyte and Mr. Withey is characterised as a “show of funds” exercise, in other words, one to give the appearance that Group had the funds necessary to complete the takeover without that appearance being backed up by the reality.

In those circumstances there are, as I have indicated, competing proprietary claims by the Club, by Merchant Turnaround, by Jerome Pension Fund and by HMRC to the Fund. In addition, however, there are claims now made against Collyer Bristow under a variety of heads. I will concentrate for present purposes upon the claims made by the joint administrators on behalf of the Club, although there are also claims made by other parties as well.

So far as the Club’s claims are concerned, on 16 April 2012 the Club commenced proceedings by way of a Part 7 claim form, for a number of heads of claim of which the first is a claim for damages of at least £25 million for unlawful means conspiracy. The joint administrators on behalf of the Club contend in short that Mr. Whyte and Mr. Withey conspired together with intent to injure the club by unlawful means. The principal purpose or objective of the alleged conspiracy was the acquisition by Group of the majority stake in the Club. It is said that Mr. Whyte and Mr. Withey knew that the share issue proposed by Mr. Murray and the takeover being engineered by Mr. Whyte were mutually exclusive alternatives which the board was considering as a means of raising funds, that the success of the conspiracy would necessarily prevent the fully underwritten issue of £25 million of convertible preference shares, and accordingly that it would cause a loss to the Club of at least £25 million. In furtherance of the conspiracy it is alleged that Mr. Whyte and Mr. Withey employed unlawful means, including fraudulent misrepresentations and arrangements which the joint administrators contend involved the provision of unlawful financial assistance, in short the use of the Club’s own money to buy its shares. As a result of the conspiracy it is contended that the Club has suffered loss and damage in the sum of at least £25 million.

Secondly, a claim is advanced against Collyer Bristow under the undertaking, alternatively for breach of the undertaking. That is put, as I understand it, both on the specific terms of the letter of undertaking given by Collyer Bristow and so far as necessary on the SPA itself.

Thirdly, there is a claim against Collyer Bri stow for negligence or breach of duty. In short, reliance is placed on the fact that Collyer Bristow became the solicitors acting for the Club on or around 20 May 2012. In the usual way the retainer will have included an implied term that Collyer Bristow would exercise reasonable skill and care. It is contended by the joint administrators on behalf of the Club that Mr. Withey was under a duty to inform the Board that Group had failed to pay the amounts for acquisition of players, the tax liability and the capital expenditure amount to Collyer Bristow and/or that Group was in breach of the SPA, and that he failed to do so. Accordingly, there is a claim for loss and damage.

Fourthly, there is a claim against Collyer Bristow for equitable compensation for breach of trust. This in particular relates to the position regarding the funds received from Ticketus. The joint administrators say that, if the agreement with Ticketus became valid and effective in accordance with its terms, the sum of £24.3 million received from Ticketus became beneficially owned by the Club and Collyer Bristow accordingly held the same on trust for the Club. However, following completion of that agreement Collyer Bristow used much of the money to make payments on behalf of Group and/or Mr. Whyte, including payments to discharge Group’s liabilities to Collyer Bristow and KiN Financial Advisers LLP in connection with the takeover.

Against the background of those matters appearing to the joint administrators, the joint administrators applied to Sales J on 23 March 2012 for directions. He concluded that it would not be satisfactory for the various proprietary claims to be tried in isolation without reference to the wider dispute. Accordingly, he vacated the trial that had been listed for 30 March 2012, and directed that any party who wished to make a personal clam against Collyer Bristow should do so by 16 April 2012. He further directed that the parties to those claims should take steps to have them case managed and heard together with the proprietary claim. It is pursuant to that order that claims have subsequently been commenced by the Club, Merchant Turnaround and Jerome Pension Fund. That then is the background to the present application by the joint administrators.

This being an application for expedition, I should remind myself of the principles applicable to such an application which were summarised by Lord Neuberger of Abbottsbury in WL. Gore & Associates v Geox SpA [2008] EWCA Civ 622. In short, there are four factors to be considered: first, whether good reason for expedition has been shown, secondly, whether expedition would be contrary to the good administration of justice, thirdly, whether expedition would prejudice the other parties; and fourthly, whether there were any special factors involved.

Considering those factors in turn, the first question is whether good reason for expedition has been shown. So far as that is concerned, the joint administrators rely in part upon the evidence that was before Warren J on the occasion of the application before him, and in part on some updating evidence.

Considering the first category of evidence, that primarily consists of a first witness statement of Mr. Paul Clark, who is one of the two joint admin istrators. In that statement he said at para. 23 that the administrators sought a trial in the week commencing 21 May 2012. That, of course, was a trial of the proprietary claims and, in the event, Warren J was prepared to give those claims an even greater degree of expedition. Returning to Mr. Clark’s witness statement, the reason he gave for that was as follows:

Now have evidence from Mr. Neil Smyth of the joint administrators’ solicitors in a witness statement dated 20 April 2012. He deals with the reasons for expedition in paras. 13 to 28 of that statement. As he records, the joint administrators have been able to deal with the company’s financial position in the current SPL season by making cost savings. In para. 18 of his statement Mr. Smyth refers to the position after the end of the current season as follows:

Against that background, the joint administrators seek to directions for an expedited trial on the first available date after 2 July 2012 and before 30 July 2012, with a time estimate of two weeks. The application for expedition is supported by Merchant Turnaround, Jerome Pension Fund and HMRC, but none of those parties advances any independent grounds for expedition. Accordingly, while they support it, they cann ot add anything by way of justification for expedition beyond that offered by the joint administrators.

Counsel for Collyer Bristow, who is the principal respondent to this application (Group not appearing or being represented before me), submits there is no sufficient justification advanced by the joint administrators for expedition, still less for such a degree of expedition as is sought by the joint administrators’ application. He submits that this is simply a case of a party wanting its money as soon as possible and in that respect the case is no different to many others that come before the courts.

If one considers the various time periods involved, it is plain that the Club’s position in the present season will not be affected one way or the other, given that a trial is only sought in July and the present season will end in mid-May this year. Likewise, so far as the summer break is concerned, given that the new season starts on or about 4 August 2012, it is highly unlikely that expedition would assist the Club with regard to that period. Even on the footing that there is a trial some time in July, it seems to me to be very unlikely that a judgment will be available - still less enforceable prior to the beginning of the new season. Insofar as the Club faces difficulties as a result of the reduction in income due to the absence of gate receipts during the summer period, it seems to me that that is a difficulty which will not be alleviated by expedition, even of the degree sought. To the extent, therefore, that expedition will assist the Club; it will assist it only with regard to its position in the new season.

So far as that is concerned, however, it seems to me that some justification for expedition has been demonstrated. Clearly, the joint administrators need to put the Club on to a stable financial footing as soon as possible. On the evidence, some degree of stability has been achieved at least in the short term. Longer term, a resolution by way of a CVA or a sale of the Club as a going concern must be achieved. I accept that, with a view to achieving either of those outcomes, it would be desirable to have a judgment of the court at the earliest possible date.

As I see it, however, there is no critical difference between a judgment becoming available in, say, September 2012 and a judgment becoming available in, say, November 2012. While in circumstances such as these it is plain that everybody wants to know the answer as soon as possible, there is no evidence before me which suggests that a delay of two months during that period would be critical. Accordingly, my conclusion so far as the first factor is concerned is that justification has been shown for an expedited trial, but not such a degree of expedition as is sought by the joint administrators.

I turn next to consider the second factor, the good administration of justice. Good administration of justice involves really two aspects. The first is consideration of the interests of the various parties before me, and the efficient disposal of their various competing claims. The second aspect involves those parties who are not before the court, that is to say other litigants who would be prejudiced if these claims are given expedited treatment in preference to theirs.

So far as the first of those aspects is concerned, counsel for Collyer Bristow has submitted that a possible solution would be to expedite the proprietary claims to the Fund, that is to say those claims that were originally the subject of Warren J’s order, perhaps together with other limited claims, such as the breach of trust claims, and to try those claims in advance of the wider claims now made by the joint administrators on behalf of the Club against Collyer Bristow, and in particular the claims of dishonest conspiracy. He submits that a possible advantage to that course would be that it would enable the competing claims to the £3.9 million (or the remainder that is left of that sum, the £3.6 million) to be sorted out at a relatively early date. Those claims are relatively simple by comparison with the dishonest conspiracy claims, and therefore could be dealt with more quickly. Furthermore, he submits that, while there is some degree of connection between those various claims, the degree of connection is not so great as to make it impossible to have separate trials.

Every other party before me has contended, however, that all the claims are inextricably bound up with each other, that the underlying facts of the dishonest conspiracy claims are closely connected with the facts of the other claims, and that it would be quite inefficient to have separate trials of those various claims. I agree with that assessment. It seems to me to be plain, as it would appear it seemed to Sales J on the occasion of the application before him, albeit that at that time the claims had not been formulated in the way that they have now, that really the most efficient way forward is for all these claims to be tried together at one go. Accordingly, I consider that it would be contrary to the good administration of justice to have a first trial of the proprietary and breach of trust claims, and a second trial of the remaining claims.

Turning to consider the interests of other litigants, this is really the obverse of the question of whether there is a good reason for expedition. The greater the degree of expedition that is ordered for these claims, the greater the degree of potential prejudice to other litigants. That is particularly so if there is an attempt made, as sought by the joint administrators, to shoe horn a two week trial into the month of July. It is notorious that July is a very busy month in these courts and shoe horning a two week trial in at this short notice would be likely to cause a significant degree of prejudice to other litigants. By contrast, if the trial is expedited so as to be heard in the month of October, that is going to be considerably easier to accommodate without undue prejudice to other litigants.

Turning to the third factor, prejudice to other parties, as I have indicated, Merchant Turnaround, Jerome Pension Fund and HMRC all support the application for expedition. Accordingly, it can be taken as read that none of them consider that an expedited trial in July of this year would be prejudicial to them. Collyer Bristow’s position, however, is quite different. Counsel for Collyer Bristow submits that requiring a trial of the broad claims now made by the various parties, but in particular by the joint administrators on behalf of the Club, would prejudice Collyer Bristow in its ability to prepare properly for trial. So far as that aspect of the matter is concerned, there are a number of points to be made.

The first is the position of Mr. Withey. It will be appreciated from my account of the history that Mr. Withey is a potentially central witness so far as these claims are concerned. As I understand it, from what I have been told, Mr. Withey has instructed solicitors, but thus far appears to be keeping his own counsel, understandably. It is not yet clear to what extent he will be prepared to co-operate with either side. It may be, so far as I know, that he will not co-operate with any of the parties, in which case they will have to consider whether any steps should be made to compel him and, if so, what.

The second matter is the position of Group. I have already referred to the fact that Group does not appear and is not represented before me today, despite the fact that it, too, has instructed solicitors. Group’s attitude, so far as I can see from the materials before me, presently appears to be one that can colloquially be described as stone-walling. They appear to be making no constructive contribution. They are, however, so far as I understand it, asserting privilege in respect of various classes of document held by Collyer Bristow. If Group maintains that attitude that is inevitably going to make preparation for trial, in particular by Collyer Bristow, rather less straightforward than it would otherwise be.

Over and above those two factors, one needs to have regard to the issues raised by the joint administrators’ claims on behalf of the Club and the directions that are proposed. So far as the issues raised by the joint administrators’ claims on behalf of the Club are concerned, some of those issues appear at present to be relatively straightforward. For example, there are issues as to construction of the undertaking which should lie within a relatively narrow compass. Other issues, however, are much more wide-ranging, in particular the issues raised by the dishonest conspiracy claim. I should pause to observe that it is not clear at this stage exactly how far the issues will extend, given that as yet no defences have been served to any of the Part 7 claims. Even so, it seems clear that the dishonest conspiracy claim in particular will involve a factual investigation as to the dealings between Mr. Whyte and Mr. Withey and as to their respective knowledge and states of mind at the various relevant dates. It will also involve investigation of the degree of reliance placed upon representations that they made. In particular, it will involve an investigation, which will be very important with regard to the question of causation, of what the impact of the representations made was on the independent directors’ committee decision with regard to the takeover as compared to the share issue proposed by Mr. Murray. I would add this, that as if those issues were not enough, there were also sundry other issues that I have not yet mentioned, such as the fact that a letter dated 11 August 2011 apparently signed by Mr. Whyte is alleged to have been a forgery in the sense that that Mr. Whyte’s signature was forged by Mr. Withey rather than it being a genuine signature of Mr. Whyte.

As a result of all these issues, the directions that are proposed by the joint administrators are for defences by 14 May, replies by 21 May, disclosure by 28 May, witness statements by 18 June and experts’ reports from both forensic accountants and handwriting experts by 18 June. In my view, those proposed directions place a very, very significant burden indeed upon Collyer Bristow as defendants to the Part 7 claims and, in particular, the dishonest conspiracy claim made by the joint administrators on behalf of the Club. It will be observed that those directions allow for only seven days for disclosure after service of the reply, for witness statements to follow just three weeks later, and for experts’ reports to be filed at the same time as witness statements. That really is asking an awful lot of Collyer Bristow and its representatives. It is a timetable that allows absolutely no margin for error. It makes no allowance for the difficulties that could be caused by Mr. Withey and Group, which I have already related. It also makes no allowance for the fact that Collyer Bristow will, of course, have to consult its insurers in respect of the claims made against him at each relevant stage. It makes no allowance whatsoever for the difficulties of obtaining and preparing experts’ reports, particularly from the forensic accountants, in circumstances where the forensic accountants on this timetable would be required to prepare their reports without sight of the witness statements, which causes obvious difficulties.

All in all, it seems to me that this is a timetable which borders on the unachievable. It is certainly not a timetable which is justified by the factors supporting expedition relied upon by the joint administrators. By contrast, if the matter is listed for trial in October, the extra couple of months, even allowing for summer holidays, will enable the case to be prepared in a much more realistic way and will allow for the potential difficulties of Mr. Withey and Group to be accommodated. It will also allow for a more sensible approach to the preparation of expert evidence and, in particular, for experts’ reports to be prepared and exchanged after witness statements and not at the same time.

I turn to consider whether there are any other special factors. I do not believe that there are any other than the ones to which I have already referred in the course of this judgment.

For all of those reasons, my overall conclusion is that all these claims should be tried together, that they should all be expedited, but they should not be expedited to quite the extent requested by the joint administrators. Rather, they should be expedited so as to be heard in a trial window starting on 1 October and ending on 31 October, and I will make directions to that end.

Finally, I turn to a subsidiary aspect of the joint administrators’ application before me, which has been the subject of some argument, which is that among the directions sought by the joint administrators as part of their expedited trial application is a direction for specific disclosure to be given by both Group and Collyer Bristow. The proposed order seeks specific disclosure of three classes of document on the same date as standard disclosure. To my mind, this is not an appropriate order for a number of reasons.

First, I see no point in ordering specific disclosure before standard disclosure has taken place. In particular, I see no point in ordering specific disclosure to take place on the same date as standard disclosure.

Secondly, it seems quite plain that the main argument between the parties is going to be an argument not with regard to disclosure, but with regard to inspection. As I have already indicated, Group is asserting privilege in respect of documents held by Collyer Bristow. That is not an issue that will be resolved by disclosure. It is an issue that will fall to be resolved on an application for inspection once disclosure has been given. There may also be an issue with regard to documents that are not the subject of privilege, but are asserted by Group to be confidential. Again, that is a matter that falls to be dealt with by way of an application for inspection, not on disclosure.

Thirdly, it seems to me to be impossible to say at this stage that the classes of document sought by way of specific disclosure are all discloseable classes of documents. As I have indicated, at this stage the defences have yet to be served. Accordingly, at this stage the ambit of the issues is not known. As at present advised, it seems to me to be at least arguable that the classes of documents are too widely defined, but I am not in a position to make a concluded judgment one way or the other on that point: that is a matter which can only be determined after service of the defence or defences.

Accordingly, for all of those reasons, I decline to make any order for specific disclosure at this stage. I make it clear, of course, that that does not debar the joint administrators, on behalf of the Club, from making an application for specific disclosure at a later stage.

I have to summarily assess the costs of the joint administrators on their application as against Group for the costs of an application for delivery up of the title deeds which, in the event, was conceded. Costs must plainly follow the event. The schedule totals £13,829 as amended. Various points are raised by way of criticism of it. First, the hourly rates, which are over the guideline rates, although that is, as counsel for the joint administrators points out, not conclusive. Secondly, there is a suggestion of duplication, which I accept is not particularly well-founded. Thirdly, criticism is made of the brief fees of counsel and of the fees of Scottish counsel for preparing a note. Taking all of those points into consideration, and considering what is a reasonable and proportionate sum given the nature of the application, I will summarily assess the overall costs in the sum offJ1,000[sic].