Collyer Bristow defiant in face-off with Rangers administrators
7 Jan 2013
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Collyer Bristow speaks out about the Rangers FC case. By Sam Chadderton
Collyer Bristow has spoken for the first time about how it will fight the claims that are threatening to drag the firm’s name through the muddy waters of a Scottish football administration.
Following another week of negative headlines, the firm has spoken exclusively to The Lawyer to contest the mounting claims and hit out at the conduct of its accusers.
Collyer Bristow is accused of “deliberate deception” by Rangers FC’s administrators, Duff & Phelps partners Paul Clark and David Whitehouse, in relation to the advice former partner Gary Withey, who was also Rangers’ company secretary, provided on businessman Craig Whyte’s doomed bid for the club.
There is a tangible feeling of ‘us against the world’ behind the high walls of the Collyer Bristow camp at the moment. Its legal team is furious at its opponents’ turn of phrase, feeling that the administrators are courting the popular press and playing up to the passion of pulsating football fans, who are livid at the plight of their proud club.
There was much shaking of heads and muttering from the firm’s contingent in the High Court last week (24 April) as the full details of the negligence allegations were laid bare by the prosecutors.
A volley of accusations encompassing words such as ‘conspiracy’, ‘injure’, ‘unlawful’, ‘negligence’ and ‘reckless’ sent ripples of consternation through the packed Rolls Building courtroom.
But where such intense scrutiny on both sides of the border may force lesser firms to buckle, The Lawyer understands that the siege mentality made famous by one of Glasgow’s most decorated footballing sons, Alex Ferguson, has only served to stoke Collyer Bristow’s defiance.
The firm’s defence team – partner Richard Harrison and senior associate Nicole McKinnon from Clyde & Co and 3VB’s Cyril Kinsky QC and Matthew Hardwick – are remaining tight-lipped over exactly how they will “vigorously defend” the firm.
They do insist, though, that there will be a defence, despite the administrators’ counsel, South Square’s Mark Phillips QC, saying in court: “It’s extremely difficult to see what case Collyer Bristow can mount that the repeated statements of Gary Withey were anything but false. It’s incontrovertible that these statements are untrue. I find it fanciful that it needs a great deal of investigation.”
Withey has also now spoken out in response to the barrage of accusations laid against him by the administrators.
He told The Lawyer: “Those allegations are an outrage – they are groundless, they should not have been made, and at the appropriate time the true facts surrounding this matter will be brought to light. The solicitors representing me, namely Mayer Brown, and the solicitors representing Collyer Bristow, Clyde & Co, will be taking all appropriate steps to protect the interests of me and my former firm, respectively.”
Phillips admitted last week that there is “no evidence” that anyone else inside Collyer Bristow was involved in the alleged “deliberate deception”.
The firm is standing by its former partner. The assertion in court that Withey “did a runner” when Whyte’s Rangers FC Group’s £25m takeover was revealed to be built on sand, brings a bristling response from his former firm and its advisers.
The firm says Withey was receiving death threats from irate Rangers supporters and went to ground to shield his family from the worst of it. Suggestions that he fled prejudge his guilt, they say. They fear trial by press, feeding on scraps thrown from the administration process, which wants the same critics to see that it is doing a good job.
In court, Kinsky said the administrators’ conduct had created “maximum expense and inconvenience” for his clients.
“There’s been a great deal of press coverage surrounding Tuesday’s [24 April] court hearing,” says Collyer Bristow business development director Paul Newhall. “To date we’ve chosen not to comment on this in any detail, beyond restating our intention to defend vigorously the claims brought against us. From the outset it’s been the administrators’ deliberate strategy to conduct this case in the press. We have not and do not intend to do so. However, it’s now necessary to ensure that a more balanced understanding of the situation is reported.”
Newhall claims that the administrators have relied on “emotive” and at times “misleading” arguments, adding that the administrators were “fully aware” that Withey had not done a runner, but had removed himself from the public view in a bid to protect his family.
“Indeed, [Duff & Phelps’] Scottish lawyers expressed that they, and the administrators [themselves], were ‘appalled’ by this,” he adds.
Newhall says the firm did not put forward any substantive arguments against the administrators’ claims, as last Tuesday’s hearing was “essentially a case management conference, the main issues being the timing of the trial and an application for specific discovery”.
He continues: “The administrators seem to be suggesting that the club’s received little or no money since the takeover. That’s not correct. Approximately £28m was paid into our client account at or prior to completion of the takeover and thereafter nearly all of that money was paid out on behalf of, and for the benefit of, the club.
“More than £18m was used to repay the club’s longstanding problematic debt owed to Bank of Scotland. At the time of the administration £3.9m remained in our client account, of which £300,000 was paid to the administrators and the balance of £3.6m was paid over, to be held to the order of the court, while the competing claims to it are resolved.
“As heard in court, the administrators’ new headline claim is the alleged conspiracy on the part of Craig Whyte and Gary Withey to cause injury to the club. The allegations on which this claim is based are highly speculative and we’ve seen nothing that gives a credible basis to the claim or the £25m in damages being sought.”
Withey has since resurfaced at City boutique Segens.
The Lawyer understands that Withey is subject to an SRA complaint relating to his own action against Rangers’ former firm Levy & McRae, which he accused of having a conflict of interest, lodging a complaint to the Scottish Legal Complaints Commission. The watchdog found Withey’s claim “totally without merit” and Levy & McRae senior partner Peter Watson hit back with a claim of his own.
Withey has been quoted previously in The Daily Telegraph as saying he had “no day-to-day running of the club” and that he went to ground after receiving “a very serious and very specific” threat that he said was “deeply alarming”.
Withey is being represented by Mayer Brown, but is not a defendant in the case. He has been sent a list of questions by Taylor Wessing, representing the administrators, but Withey is yet to respond. Whether he will be called as a witness during the trial is also undecided.
At each turn the administrators have tried to expedite hearings with the sort of speed not seen since magistrates sat through the night to clear the police cells of London rioters.
They wanted March, then May, and this week were asking for July; but after representations from Kinsky they were stuck with an October trial date.
Their argument was that, with the summer months seeing a dramatic downturn in income, they would have liked to wrap up the £25m damages claim in time to secure the club’s future for the start of the next season. As it now stands there will be inevitable question marks over Rangers’ financial health way into the 2012-13 campaign.
“The club’s future is now in jeopardy […] Money’s tight and time is short,” argued Phillips.
The full allegations against Collyer Bristow and Withey relating to the firm’s advice on the takeover were contained in a skeleton argument document seen by The Lawyer.
Put before Mr Justice Arnold on Tuesday, the series of accusations was revealed in detail for the first time. Collyer Bristow stands accused of “deliberate deception”. The administrators are suing Collyer Bristow and Whyte’s takeover vehicle Rangers FC Group for at least £25m in damages. The firm is accused of conspiracy, breach of undertaking, negligence and breach of trust, with Withey named as being complicit in the allegations.
Phillips told the court there was no evidence that anyone else at Collyer Bristow was involved, but that as Withey had authority to act for the firm it is therefore “vicariously liable” for the losses flowing from his alleged “conspiracy”.
The court heard that Whyte’s majority-stake takeover offer in May 2011 pledged to pay off the cash-strapped club’s £18m debt to Lloyds Banking Group and invest £9.5m of ‘new money’ into the club – £5m for players, £2.8m to HM Revenue & Customs (HMRC) and £1.7m for capital expenditure.
That offer persuaded then-director Paul Murray and the board not to launch an alternative £25m share issue to generate the money needed to stabilise Rangers. Instead, the court was told, they agreed to Whyte’s takeover, with Collyer Bristow acting for his group. Murray perceived “a solicitors’ undertaking to be ‘as good as cash’ and Collyer Bristow promised unequivocally and unconditionally to pay these sums to the club”, the documents say.
The administrators were called in in February 2012 and various parties – including HMRC, private equity firm Merchant Turnaround and the trustees of the Jerome Pension Fund – lobbied to reclaim their stakes in Rangers.
Merchant urgently wants its £1m back and Jerome has £2.9m missing from its pension fund.
The ‘ticking timebomb’
As paperwork began to be exchanged between Collyer Bristow and the administrators, further questions were asked. Phillips fired a further broadside at the firm and its legal team, accusing them in court of “sitting on a ticking timebomb”.
He added: “The defendants are a firm of solicitors who’ve instructed a very able firm of solicitors and a very able chambers. They’re competent lawyers who would have known they were sitting on a ticking timebomb. I find it extraordinary that they didn’t know [Withey] had made dishonest representations.”
Documents provided to the court said: “Initially Mr Withey responded by stating that Collyer Bristow did not hold any money for the club. Then he changed his story and said that Collyer Bristow was holding only £260,544.14 for the club.
On 22 February 2012, however, Biggart Baillie [representing the administrators in Scotland] received an email from Jeff Roberts of Collyer Bristow to inform them that Collyer Bristow was in fact holding £3,918,106.54.
The situation then became even more peculiar. To use a colloquial expression, Mr Withey ‘did a runner’. From 24 February he was absent from Collyer Bristow’s offices and on 2 March 2012 he resigned as a member of the firm. It was clear that something was seriously wrong.”
£3.6m was then transferred to the administrators’ English lawyers Taylor Wessing for safekeeping and so that a court hearing could decide how to divide it up between various claimants. But, claims the skeleton argument, “things were not as they had seemed”.
“As a result of the joint administrators’ review of the documents provided to them by Collyer Bristow and others, they came to realise that things were not as they seemed, and that their initial understanding of the position had been based on a deliberate deception by [the Rangers FC] Group and Collyer Bristow,” ran the argument.
“Most importantly, although [the] group and Collyer Bristow has led the vendor and the board to believe that [the] group had paid a sum in excess of £9.5m to Collyer Bristow, and that Collyer Bristow had been holding this sum in its client account for the club at the time of the takeover, it is now clear that this story was untrue.”
The court heard that, instead, Whyte had used the club’s own potential income from future season ticket sales to show that he had the money. However, Phillips said money was spent on, among other things, paying Collyer Bristow for its legal advice on the takeover.
According to Phillips, the case against the former Rangers company secretary is that he wrote letters to other firms confirming that Collyer Bristow had received the takeover money and was holding it in its private client account, when in fact the group “never paid these sums to Collyer Bristow” and the firm “was not, and never had been, holding them”.
Withey is also accused of forging Whyte’s signature on one of the letters claiming to have the funds stashed away. In negotiating a date of trial, Phillips said a handwriting expert should be called to show that Whyte’s signature had been forged.
The suggestion of a forensic accountant to go through Withey’s ledgers was abruptly dismissed by Arnold J, who said: “Forensic accountants are the bane of courts in this country. They cost the earth, with all due respect, and this is probably a schedule that can be produced by junior counsel.”
Phillips continued: “Mr Whyte and Mr Withey conspired together with intent to injure the club by unlawful means. The principal purpose or objective of the conspiracy was the acquisition by [the Rangers FC] Group of the majority stake.
“Mr Whyte and Mr Withey knew that the share issue and the takeover were mutually exclusive alternatives […] and the success of the conspiracy would therefore cause financial detriment to the club in the sum of £25m. […] The club will therefore incite the court to conclude that they intended to cause loss to the club or were recklessly indifferent.”
The full two-week trial has been set for October this year.
Collyer Bristow’s court appearances
Following on from Collyer Bristow’s October 2012 court outing, the firm will be back in November in another dispute over its solicitors’ professional indemnity insurance cover.
The case came to light last summer in the run-up to another dispute being fought by the firm, the Innovator One case.
The firm and two ex-partners are joint defendants in that litigation, which was brought by 500 investors in a complex investment scheme known as Innovator One, which Collyer Bristow is alleged to have promoted. Enyo Law partner Michael Green instructed 4 New Square’s John Powell QC for the claimants.
The firm, however, alleged that Lockton Companies International was negligent when it arranged the firm’s insurance cover for the year affected by the Innovator One claim.
At a court hearing in July last year the firm formally requested an expedited hearing for the insurance dispute, the outcome of which, it claimed, could determine its financial future.
The firm’s counsel, 7KBW’s David Edwards QC, argued that Collyer Bristow could be at risk of collapse if the court did not grant it an expedited staged trial.
Edwards told the court: “As far as Collyer Bristow’s concerned, they regard the risk of bankruptcy and the demise of the LLP as very real and it’s a cause of discomfort and concern.”
Collyer Bristow contended that it would suffer a £50m shortfall should it lose its case against the broker, leaving it unable to indemnify the Innovator One claims. The difference in insurance cover is a low of £10m for a single event and £64m for 19 events.
Crown Office Chambers’ Michael Harvey QC, appearing as counsel for the broker, told the court that fears over the financial future of the firm were ill-founded.
“If there was a fear the guillotine was going to come down and [Collyer Bristow] was going to be made bankrupt overnight, there might be some justification for taking that unusual course [of expediting the trial],” he said.
Mr Justice Blair refused to expedite the dispute, leaving the firm to deal with Innovator One in October 2011 without knowing whether it could indemnify the potential loss.
The insurance dispute was originally intended to be heard in the spring, most likely April, but it has now been delayed until November. Any attempts to settle have failed.
Judgment in Innovator One, meanwhile, is expected before the end of May.
The legal line-up
Collyer Bristow:3VB’s Cyril Kinsky QC and Matthew Hardwick instructed by Clyde & Co partner Richard Harrison and senior associate Nicole McKinnon
Duff & Phelps partners Paul Clark and David Whitehouse: South Square’s Mark Phillips QC, Daniel Bayfield and Stephen Robins instructed by Taylor Wessing restructuring partners Nick Moser (pictured above) and Neil Smyth
Merchant Turnaround:MacRae & Co partner Julian Turnbull instructed Maitland Chambers’ James Clifford Jerome Pension Fund: Hazelwoods principal Sharan Hassett instructed Outer Temple’s David E Grant HMRC: In-house lawyer Ian Rees instructed South Square’s Lucy Frazer
Gary Withey (not a named defendant): Mayer Brown partner Will Glassey