Whyte: The legal position

I’ve tried to summarise the key legal issue regarding Whyte’s takeover of Rangers below.

The battleground on which the actions against the club will be fought is the legal doctrine of identification (otherwise known as “attribution”).

In order for the actions of an individual to be attributed to a company, that individual must be the “directing mind and will” of the company. The rules setting out the circumstances in which such an attribution can be made are drawn from a line of judicial reasoning that begins with the case of Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd as far back as 1915.

The principles set out in Lennard’s were refined by Lord Denning in 1957 in the case of H L Bolton (Engineering) Co Ltd v T J Graham & Sons Ltd. Denning stated:

Some of the people in the company are mere servants and agents who are nothing more than the hands that do the work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and will of the company, and control what it does. The state of mind of these managers is the state of mind of the company and is treated by the law as such.

Denning’s judgment was quoted by Lord Justice Reid in Tesco Supermarkets Ltd v Nattrass – one of the most important cases regarding the doctrine of identification/attribution.

In order to attribute a state of mind to a corporate entity, therefore, it is necessary to identify a directing mind and will which had the required state of mind.

Now, the issue we are presented with is whether Whyte could be said to have been the directing mind and will of Rangers while CEO.

I understand that our counsel argued before the SFA committee that Whyte was not in fact the directing mind and will of Rangers, but was actually a “lone wolf” or renegade. His actions (non-payment of tax bills, failure to disclose director ban etc…) ought not, therefore, to have been attributed to Rangers. Rangers did not bring football into disrepute through the actions of Whyte – Whyte’s actions were unconnected.

The SFA Appellate Committee rejected this argument. Rangers were subsequently punished, albeit unlawfully (as the Court of Session made absolutely clear).

The criminal investigation into Whyte’s takeover casts considerable doubt, however, on the safety of the SFA’s actions against Rangers. If it is established that Whyte’s takeover was fraudulent in some way (and I outline what I think the biggest issue is below).

Whyte’s agreement with Ticketus has received no small amount of attention over the last few months. The key issue is whether Whyte used cash provided by Ticketus to pay off Lloyds and inherit the floating charge over the assets. This was the condition of purchase – aside from the nominal sum of £1 for Murray’s shares. If Whyte did purchase the company with Ticketus’ cash – he’s got major problems.

Pursuant to the Companies Act 2006 it is illegal to purchase a company with that company’s assets. The cash advanced by Ticketus was secured on season ticket revenues which would be generated in future seasons. This revenue was, and is, Rangers’ asset. It is therefore quite possible that Whyte engaged in illegality (financial assistance) when he took over the club.

Whichever way Whyte’s takeover may have been illegal, if it can be shown that he did break the law – his actions must be seen in a completely different light. He did not own the club legally, he is a fraudster.

I cannot for one moment think that the sanctions against Rangers can be in anyway fair if it is shown that Whyte purchased the club by illegal means. I’m trying to get to the bottom of this thorny issue, but there are a few big questions:

1. Can the Whyte takeover be reversed?
2. If so, what happens to the money/D&P?
3. If too much water has already flowed under the bridge, what is the legal position regarding Green’s “ownership” of Rangers’ assets? I say “owned” as I’m convinced that he doesn’t own them himself.

I’m on the case – watch this space.