A SENIOR judge has ordered administrators of Rangers to pay £3.4m in compensation over “breach of duty” after deciding that Ibrox and Murray Park should have been put up for sale after the club collapsed.
Lord Tyre has made a judgement after former club administrators Paul Clark and David Whitehouse of Duff and Phelps were accused in court of a seriously flawed strategy in raising money for thousands left out of pocket by the club’s financial implosion in 2012.
The award is a fraction of the £47m liquidators of Rangers oldco BDO were claiming from Mr Whitehouse and Clark over the way they handled the insolvency of the club.
Evidence provided to the Court of Session revealed that while the business and Rangers assets such as Ibrox, the Murray Park training facility, trademarks and the players were bought by the Charles Green-fronted Sevco for £5.5m, a fair value assessment to the group carried out on the day of the Sevco purchase was put at nearly five times that – £27.2m.
It further emerged that while just ten of the star players including striker Steven Naismith, goalkeeper Allan McGregor, midfielder Steven Davis, and defender Steven Whittaker were valued at £21.35m after the club went into insolvency – they ended up being bought for just £2.75m as part of Sevco’s £5.5m purchase. BDO’s representatives described that as “some way short”.
The price of the Rangers brand, including valuable trademarks used in all the club’s merchandising was zero – while the assessment put their value at £16m.
Ibrox and Murray Park were snapped up for £1.5m in the deal, but a fair value assessment, carried out by an independent valuer was £6.5m.
But Lord Tyre has found in favour of BDO saying ‘breach of duty’ compensation was due to the loss of a chance to lease and sale of Ibrox (£750,000), and a loss of a chance to sell Murray Park (£850,000).
Further compensation was paid for a loss of a chance to sell forward Steven Naismith (£827,000) and other marketable players (£977,000).
Lord Tyre said that in deciding whether the administators ought to have pursued sale or lease and sale options in respect of Ibrox Stadium and Murray Park he was influenced by the fact that in the agreement for sale of the business and assets to Sevco the amount attributed to them was only £1.5m.
“It ought, in my view, to have been apparent to the respondents at least from the time when indicative bids of around £10 million were being received, that there was a likelihood that a sale of the entirety of the business as a going concern would not maximise the return for creditors,” said Lord Tyre in his 125 page judgement.
“Exploration of other options would have lengthened the period of the administration, with cost implications, but in the predicament in which the respondents found themselves, it seems to me that it was something that had to be done, and that the respondents were in breach of their duty in failing to do so.”
But he said he considered that there was a 10% chance of achieving a successful sale of Ibrox Stadium subject to a lease in favour of someone carrying on the business of the football club was at the “lower end of the scale of likelihood” and calculated the compensation award accordingly.
The court action comes nine years after the Rangers business fell into administration and then liquidation leaving thousands of unsecured creditors out of pocket, including more than 6000 loyal fans who bought £7.7m worth of debenture seats at Ibrox.
Creditors also ranged from corporate giants such as Coca-Cola to a picture framer in Bearsden and a lady called Susan Thomson who ran a face-painting business and was owed £40.
Mr Whitehouse and Mr Clark defended the action by BDO claiming the liquidators expected a “bonkers” strategy of a ‘fire sale’ of Rangers which would have “effectively shut the club down for good”.
The liquidators are argued that the administrators did not cut enough costs over the insolvency and should have raised more money for creditors.
Mr Clark and Mr Whitehouse recently agreed an estimated £24m settlement after Scotland’s senior law officer the Lord Advocate agreed there was a malicious prosecution in connection with the collapsed club fraud case.
The liquidators have said the action was taken because of questions over the strategy used by Mr Clark and Mr Whitehouse in the administration process after the club plc went into financial meltdown in February, 2012 under Craig Whyte’s stewardship.
Sevco 5088 Limited led by former club chief executive Charles Green ended up buying the assets in June, 2012 as Rangers were consigned to liquidation.
The administrators had been criticised over their handling of the situation with some saying they ought to have made swift cuts to the playing squad and made large scale redundancies similar to that experienced in previous insolvencies involving Motherwell and Dundee.
London-based Peter Hart of Duff and Phelps said the idea was to present “a functioning working club” and to rescue it as a going concern so that it could be sold to prospective purchasers.