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Lessons from the Sports Pges…

Background

The Administration of Rangers Football Club PLC has been gripping reading for the general public, let alone Insolvency Practitioners. Suddenly the “Insolvency World” inhabited by only a few subject specialists, is of interest to the general public. The public will be less interested in the detail of Lord Hodge's decision in Clark and Whitehouse v Ticketus LLP and another, which arose out of the Administrator's application for directions in how to deal with Rangers' contractual arrangements with Ticketus. However, beyond the fact specific headlines this decision is important reading for anyone involved in Scottish Corporate Insolvency.

The Issues

A full treatment of the issues in this case is beyond the scope of a briefing such as this. However, in short the Administrators asked the court to rule on whether they were bound by existing contractual arrangements Rangers had entered into with Ticketus, in terms of which they had sold the rights to future seasons' season ticket sales. Guidance was fundamental, the Administrators said, in allowing them to proceed with a sale of the business (if the Ticketus deal had to be observed by the Administrators the purchase price would be severely affected, 60% of the club's revenue being made through season ticket sales).

Amongst other issues Lord Hodge made important observations about various matters: (1) Although the English Courts had jurisdiction in relation to the contract, the Scottish Courts were the forum to determine what type of right was created; (2) The rights Ticketus obtained were personal not real (ie no security was created); and (3) It was right for Administrators to seek directions and a court should direct, but without full information (here the commercial details of competing bids had not been disclosed) only general guidance could be given.

Lord Hodge summarised his guidance as follows: “(i) an administrator must perform his functions in the interests of the company's creditors as a whole (subject to the qualification in paragraph 3(4) of Schedule B 1...; (ii) where the company in administration is insolvent, an administrator may have to decline to perform a contractual obligation of the company in pursuit of the statutory objective or objectives in his proposals if that is in the interests of the company's creditors as a whole; (iii) should he do so, the court would not, absent exceptional circumstances, force the company to perform those contractual obligations to the detriment of the creditors as a whole; (iv) the court has power to interfere under paragraph 74 of Schedule B1 if the administrator's decision is conspicuously unfair to a particular contractor or creditor; but (v) treating unsecured creditors in accordance with their legal rights in an insolvency would not of itself involve such unfairness.”

Advice

The court has helpfully set out its views on disapplying contracts. Scots Law now seems to be diverging from English Law of Equity (here in relation to contracts with future obligations) which IP's need to be aware of. The approach Lord Hodge took should also encourage IP's to apply for directions if any doubt subsists. At risk of repeating the advice above, this is a decision IP's should read and discuss with their legal advisers!

BBM Solicitors specialise in advising IP's in both contentious and non-contentious matters (including transactional work). Contact: Eric Baijal () or Alasdair Baijal (). This briefing note is current 23 March 2012 and is our understanding of the position described at that date. Legal advice ought to be taken before relying on its terms (particularly to ensure the law has not changed).

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