Lord Tyres decision in BDO v Duff and Phelps

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There has been the usual mix of rhetoric posted online following the decision below by Lord Tyre in the case of BDO v Duff and Phelps. The full 125 page findings can be read here:

shorturl.at/gjtHR

Lets be honest here. This is not and never has been the easiest thing to understand. If you had asked me back in February 2012 what “liquidation” would have meant, then I would have probably have said; “the end of the club”

This view is based on basically not looking at any situation prior to that as I had no reason to. It would just have been a feeling with no background or experience of a club going through it. But over time, as more came out, and by speaking to people involved in both the actual situation and auditors who knew about it, then I learned my view would have been incorrect.

It turns out. And this will confuse everyone as usual. It wasn’t a “liquidation” at all.

Yip. That’s right. Its true.

Lets get into the meat of it.

Duff and Phelps as administrators have a duty to the creditors of the Company to both manage the costs of the administration and obtain the best price possible in the circumstances for the business as a whole or for its heritable property.

In order to achieve this, there were 3 options with a ranking priority.

https://scotslawthoughts.files.wordpress.com/2012/07/rangers-fc-plc-report-by-duff-phelps-april-2012.pdf

OBJECTIVE and PRIORITY ONE = “Rescuing the Company as a Going Concern.”

“The first objective is to rescue the Company as a going concern. Given the levels of liability in the Company, both contingent and actual, this would most likely take the form of a CVA or a Scheme of Arrangement. A CVA or Scheme of Arrangement would enable the Company (legal entity) itself to continue to trade in the future. A CVA or Scheme of Arrangement would also require monies to be introduced to the Company which would be used in satisfaction of creditor claims. It is likely that funds would be made available by selling the assets of the Company to a purchaser or by shareholder investment.”

OBJECTIVE and PRIORITY TWO = “Achieving the better result for the Company’s creditors as a whole than would be likely of the Company were wound up (without first being in Administration)”

“Should a CVA or Scheme of Arrangement not be possible, the Joint Administrators would look to pursue the second objective which would involve a going concern sale of the business and assets of the Company. This would enable the business to continue, subject to approval by the relevant football authorities, under a different company registration number.

OBJECTIVE and PRIORITY THREE = “Realising property in order to make a distribution to one or more secured or preferential creditors. “

“the company would have been liquidated, the team disbanded, and Ibrox and Murray Park sold for alternative uses”

You will note from above the use of quotation marks. All of these quotes are DIRECTLY lifted from Duff and Phelps reports to all creditors (linked above) and to Lord Hodge after the sale had been concluded. Lord Hodge signed off on the documents as lodged on Companies House.

The final quote is taken directly from Lord Tyre in his findings in the recent case.

When the CVA failed, Paul Clark of Duff and Phelps confirmed how it would all work;

“Once we are finished our work as administrators, we will then get released from that position, the company will then be passed into liquidation but just to stress THE CLUB will already have been sold and moved out of the Company by then. Then BDO will be appointed as liquidators at some later date, that will be some weeks ahead. The history of the club will remain with the club, so the club moves from Rangers plc into the new company and all of the titles and all of the 140 year history will remain with the football club and that was very important part of the two stage process that we set up with Charles all those weeks ago to make sure the club itself will remain”

https://www.youtube.com/watch?v=ic7xxeu1KXA

Please not in the above video, Clark is not "the actual liquidator" He is a qualified "liquidator" but in this case he was the Joint Administrator.

In their final note to creditors and to the courts, Duff and Phelps confirmed the above and confirmed they had achieved the SECOND OBJECTIVE and PRIORITY outlined above and in their papers.

“As part of a wider agreement with the Joint Administrators which was finalised prior to the CVA meetings, Newco was obliged to purchase the business, assets, history and certain assets of the Company should the CVA fail. Accordingly a GOING CONCERN sale to Newco completed shortly after the meetings, which has resulted in the Joint Administrators achieving the SECOND OBJECTIVE identified on the previous page, as a better result for creditors has been achieved than if the Company had been wound up without first being in Administration.”

I have been highlighting this for months much to the hilarity of the Financial whizz kids from the other side of the howling moon. The Company was not placed into liquidation until 3 months after the sale of the Business had took place. The Business was not sold in Liquidation.

Lord Tyre, in his findings has confirmed exactly what i have been saying,

Essentially, Lord Tyre in the main confirmed that Duff and Phelps were diligent and did not breach their main duties. His main finding is that he feels that if Duff and Phelps had actually went down the road of “actual liquidation” then the following 5 things would have happened.

1) The business, undertaking and assets would NOT have been sold on a Going concern basis
2) "The company would have been liquidated"
3) "The team would have been disbanded"
4) "Ibrox and Murray Park would have been sold for alternative uses"
5) The brand would have been purchased separately as part of an "attempt to rescue the club", post everything above.

Not only did NONE of the above actually happen, Lord Tyre actually states in writing (Point 5) that EVEN in the event of a total liquidation (PRIORITY THREE) where the assets were sold off in parts, the Club could STILL BE RESCUED. Yip that’s right. Its there in black and white.

He also notes;

“Had the respondents sought appropriate advice, they would also have identified the risk of value being lost in the event of a;

1) sale of the business and assets or
2) a liquidation.

In either of these scenarios, players could decline to transfer to the new owners.”

I have restated the above quote to emphasise the 2 options available to Duff and Phelps once the CVA failed. And we know the end result was option 1, the sale of the business and assets.

In essence the 125 pages conclude that Lord Tyres award is purely based on there being a “Chance of a sale of players, Ibrox and Murray Park” whilst indicating, none of them were guaranteed and that there were no other breaches of duty.

In other words, if Duff and Phelps had NOT sold the business as a going concern, there was a CHANCE they could have made more by a liquidation and piece sale and for that reason, he is attaching a judgement of £3.4m

There were a few other references in his findings which confirmed a number of contentious issues.

Despite court evidence to the contrary, there are still Celtic fans who believe there was no TUPE. Its also evident that 99% of them don’t know what TUPE is. I don’t have an issue with that as not everyone is exposed to it, but please don’t preach to someone who has been involved in 30+ TUPE’s when you don’t have the first clue what it is.

To be clear, TUPE is a protection to employees when a business is taken over by a New Company. The incoming Company must offer every single employee 2 options under the LAWS of TUPE.

1) Continue in your role on your exact same salary, same pension rights, same continuous service and basically same everything.

2) Resign from your role with immediate effect. You are not required to work any notice period. Your new employer is not entitled to claim anything from you. Your new employer has no legal rights to control what you do with immediate effect.

TUPE in its very being is a CONTINUATION of a business and employment. If a business is liquidated, then TUPE does not apply. Its very simple. In this case, because the business was sold as a going concern and not as a liquidation, then TUPE was relevant. This was confirmed by Lady Stacey in her findings when she said;

“The claim arises from the SALE OF RANGERS FOOTBALL CLUB by the second respondent to the first respondent in June 2012. According to the claimant, and by concession of both respondents, that WAS A RELEVANT TRANSFER within the TUPE regulations”

https://employmentcasesupdate.co.uk/content/the-rangers-football-club-ltd-formerly-sevco-scotland-ltd-v-professional-footballers-association-scotland-anor-ukeats-0038-13-sm.150476e228214fcf8fc74594554ae89c.htm

Lord Tyre in his findings also confirms this when he stated the following about Naismith;

“If the members of the SPL had decided to allow the transfer of the company’s share to Sevco, he might have chosen to transfer under TUPE and REMAIN with Rangers”

And there we have the headshot

“REMAIN WITH RANGERS”

The sale has been completed. The vote has been held. Naismith could have decided to “REMAIN WITH RANGERS”

There is one final commentary from Lord Tyre that backs all of the above up and defines the view of his Lordship and the courts. When setting out the premise of the case, he defines Rangers FC as “the club”

“In late 2010 and early 2011, Mr Craig Whyte, a businessman and owner of Liberty Capital Limited, was in talks with the owners of the company, which owned and operated the football club known as Rangers FC ("THE CLUB")”

He then goes on to state;

“On 4 July 2012, the SPL member clubs voted to refuse to allow Rangers’ SPL share to be transferred to Sevco. (“THE CLUB”) was “ACCEPTED INSTEAD” into the third division of the Scottish Football League for the season 2012-13.”

So there we have it.

Wont stop them.

But it’s the facts.

Have a good weekend all.

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