Paul John Clark And David Ohn Whitehouse Joint Administrators Of Rangers Football Club Plc For Directions
| Jurisdiction | Scotland |
| Judge | Lord Hodge |
| Neutral Citation | [2012] CSOH 55 |
| Court | Court of Session |
| Year | 2012 |
| Published date | 23 March 2012 |
| Date | 23 March 2012 |
| OUTER HOUSE, COURT OF SESSION [2012] CSOH 55 | |
| P 229/12 | OPINION OF LORD HODGE in the Note PAUL JOHN CLARK and DAVID JOHN WHITEHOUSE, joint administrators of Rangers Football Club plc Noters: for Directions ________________ |
Noters: Sellar, Q.C.; Ower; Biggart Baillie LLP
Respondents: Clancy, Q.C.; O'Brien; Burness LLP
23 March 2012
[1] This is an application by the administrators of Rangers Football Club plc ("Rangers") under paragraph 63 of Schedule B1 to the Insolvency Act 1986 ("the 1986 Act") for directions. The Respondents are two limited liability partnerships registered in England, namely Ticketus LLP and Ticketus 2 LLP (hereinafter collectively "Ticketus").
[2] The administrators have applied for directions as to whether they can be prevented from terminating contracts which Rangers entered into with Ticketus by which it sold to Ticketus large numbers of season tickets for seats in the Ibrox stadium in each of the seasons from 2011-2012 to 2014-2015.
Background
[3] Rangers operates an association football club and is a member of the Scottish Football Association and the Scottish Premier League. It has encountered serious financial difficulties, including substantial claims by HM Revenue and Customs (HMRC"). As a result the Board of Rangers resolved that they should seek the appointment of administrators on the ground that Rangers was or was likely to be unable to pay its debts as they became due.
[4] When the initial appointment of the administrators was discovered to be invalid, Rangers applied to the court for a retrospective appointment and by interlocutor dated 19 March 2012 the court appointed the Noters as administrators of Rangers with effect from 14 February 2012, which was the date of their purported appointment. In its petition for the making of an administration order Rangers referred to a debt of over £9 million due to HMRC and stated that as at 14 February 2012 it was unable to pay its debts as they fell due for payment. When seeking the retrospective administration order on 19 March Mr Sellar QC for Rangers confirmed that that inability remained.
[5] In the petition seeking the administration order it was stated that the purposes of the administration are (a) rescuing Rangers as a going concern, or (b) achieving a better result for Rangers' creditors as a whole than would be likely if it were wound up without first being in administration. To achieve either of those purposes the administrators consider that two options are realistically open to them, namely (i) a subscription of new shares in Rangers and a sale of the present majority shareholding combined with a company voluntary arrangement between Rangers and its creditors ("a CVA") under Part 1 of the 1986 Act or (ii) a sale of the business and assets of Rangers, again combined with a CVA.
[6] Ticketus operates a business of buying and selling tickets for, among others, sporting events. The two contracts with Ticketus, which I discuss below, in summary involve the sale by Rangers to Ticketus of season tickets and an agency arrangement by which Ticketus is to receive the income flow from the sale of the season tickets. On or about 9 May 2011 Ticketus paid £20,300,912 for the first tranche of the season tickets which covered the seasons 2011-2012, 2012-2013 and 2013-2014. On or about 21 September 2011 Ticketus paid a further £5,075,213 for the second tranche of season tickets, which covered the seasons 2013-2014 and 2014-2015. I am informed that the expected income flow from the sale of the season tickets is likely to represent about 60% of the cash flow of Rangers in those seasons. Accordingly, the sale of that income flow is likely to have a significant effect on what interested parties may bid for the majority shareholding in Rangers or for that company's business and assets.
[7] The administrators issued a Memorandum of Offer inviting expressions of interest in acquiring either the majority shareholding in Rangers or most of its business assets. The Memorandum of Offer issued on 14 March 2012 invited interested parties to assume that "no future revenue needs to be committed to Ticketus" both in the context of a CVA and a trade sale of Rangers' business and assets. The administrators issued a revised Memorandum on 16 March 2012 which contained a third option of a CVA in which the arrangements with Ticketus continued to have effect.
[8] The administrators urgently seek the directions of the court to assist them in processing the responses to their Memorandum of Offer.
The directions sought
[9] Initially, the administrators in their Note invited the court to make one direction, which was:
"as to whether the administrators can be prevented from causing [Rangers] to terminate, albeit in breach of their terms, the [Ticketus agreements]."
After discussion in court they have amended their Note in order to ask the court, in the alternative, to give
"a direction as to the legal nature of the rights which the agreements confer on Ticketus in respect of (i) the Company's Stadium, and (ii) the proceeds of future sales of season tickets for that Stadium;"
and
"a direction as to the legal test which is to be applied by [the] administrators or by the court in determining whether those administrators can be prevented from causing the company to terminate the agreements, albeit in breach of their terms."
Legislative background
[10] It is not disputed that Rangers is insolvent and that an administration order could competently be made. Paragraph 11 of Schedule B1 of 1986 Act provides:
"The court may make an administration order in relation to a company only if satisfied -
(a) that the company is or is likely to become unable to pay its debts, and
(b) that the administration order is reasonably likely to achieve the purpose of the administration."
[11] When the Enterprise Act 2002 altered the statutory regime for administration it created a sequential hierarchy of purposes in paragraph 3 of Schedule B1 to the 1986 Act, which provides:
"(1) The administrator of a company must perform his functions with the objective of -
(a) rescuing the company as a going concern, or
(b) achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being put into administration), or
(c) realising property in order to make a distribution to one or more secured or preferential creditors.
(2) Subject to sub-paragraph (4), the administrator of a company must perform his functions in the interests of the company's creditors as a whole.
(3) The administrator must perform his functions with the objective specified in sub-paragraph (1) (a) unless he thinks either -
(a) that it is not reasonably practicable to achieve that objective, or
(b) that the objective specified in sub-paragraph (1) (b) would achieve a better result for the company's creditors as a whole.
(4) The administrator may perform his functions with the objective specified in sub-paragraph (1) (c) only if -
(a) he thinks that it is not reasonably practicable to achieve either of the objectives specified in sub-paragraph (1) (a) and (b), and
(b) he does not unnecessarily harm the interests of the creditors of the company as a whole."
[12] Paragraph 63 of Schedule B1 empowers the administrators to apply to the court for directions in connection with their functions. It is not disputed that this court, which has jurisdiction to wind up Rangers (section 120 of the 1986 Act), is the appropriate court to give such directions.
The Ticketus contracts
[13] The contractual arrangements between Rangers and Ticketus comprise two closely connected agreements, namely the Season Tickets Agreement ("STA") and the Agency Agreement, which are both dated 9 May 2011.
[14] The STA provided for the sale by Rangers to Ticketus of season tickets to seats in the Ibrox stadium for the four seasons (clause 2.1). It provided that the sale would take place in two tranches (clauses 4 and 5). The season tickets were defined thus:
"a ticket for the Season that grants the holder access to and the right to occupy a specific seat in the Stadium at all Matches without additional charges for such access or right."
Schedules 2 and 3 to the STA defined the general location of the seats in the stadium which were to be the subject of the sale of the season tickets, and specified the numbers of seats by reference to the part of the stadium, the tier and ticket category (i.e. adult, concession or juvenile). English law governs the STA and the Courts of England have exclusive jurisdiction over it (Clause 24).
[15] The Agency Agreement is an agreement by which Ticketus, on the basis that it was owner of the season tickets which were the subject of the STA ("the STA tickets"), appointed Rangers as its non-exclusive agent in the promotion and worldwide sale of the STA tickets. It obliged Rangers to sell the STA tickets in priority over other season tickets (clause 4.1). It imposed on Rangers the obligation to pay the proceeds of the sale of the STA tickets into a designated account with Bank of Scotland plc for the sole benefit of Ticketus (clauses 3.1.17 and 5). Rangers gave Ticketus a non-exclusive royalty-free licence to use its intellectual property for the purpose of promoting and selling the STA tickets (clause 11). English law also governs the Agency Agreement and the Courts of England have exclusive jurisdiction over it (Clause 30).
[16] The administrators' legal advisers have challenged the enforceability of the STA. It envisaged that Rangers would use the payment for the first tranche STA tickets to effect the repayment of its debt of about £18 million to Bank of Scotland plc. It was also proposed that Rangers would lend £16 million to Wavetower Limited (now called The Rangers FC Group Limited) to enable that debt to be repaid and that the bank's debt and its securities would be assigned to Wavetower Limited (Schedule 19). The administrators'...
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