Rangers ‘not contractually bound’ to pay Charles Green’s legal fees in criminal proceedings

The Inner House of the Court of Session upheld a decision of the Lord Ordinary, who ruled that Rangers International Football Club plc were not “contractually bound” to pay any reasonable professional costs and expenses incurred by Charles Green in respect of his defence, after he and four others including Craig Whyte had been indicted on charges relating to the takeover of the company in 2011 and the subsequent purchase of the business and assets from administrators in 2012.

The Crown deserted the indictment against Mr Green and three other co-accused pro loco et tempore prior to trial and only Craig Whyte remained on the indictment; and following Mr Whyte’s acquittal the decisions now been published.

Compromise agreement

Lady Dorrian, sitting with Lord Bracadale and Lord Malcolm, heard that the reclaimer and four others had been indicted in the High Court of Justiciary on charges including “conspiracy” to acquire control of the assets of The Rangers Football Club plc for a “discounted consideration”, favouring their own financial interests to the “prejudice” of the respondent’s creditors.

Mr Green raised an action seeking declarator that, in terms of a compromise agreement between himself and the company dated 24 April 2013, his former employer had an obligation to pay for the costs of his defence to the proceedings.

Clause 8.3 of the agreement, which was in similar terms to a clause in Coulson v News Group Newspapers EWCA Civ 1547, provided: “The Company will pay any reasonable professional (including, without limitation, legal and accounting) costs and expenses properly incurred by the Employee after the date of this Agreement which arise from having to defend, or appear in, any administrative, regulatory, judicial or quasi-judicial proceedings by a third party as a result of his having been Chief Executive of The Rangers Football Club or the Company.”

The Lord Ordinary ruled that the clause did not cover criminal proceedings with any connection, however slender or incidental, with the performance of his duties as chief executive irrespective of the nature of the charge.

Lord Doherty concluded: “Sensible businessmen in the position of the parties at the time of contracting could not have intended that the clause should have such a meaning. Such businessmen would not have contemplated the defender being required to indemnify the pursuer in respect of the costs and expenses of defending criminal proceedings where the criminality alleged involved the pursuer and co-conspirators having acted to advance their personal interests rather than the interests of the companies of which the pursuer had been chief executive. Such a construction would flout business common sense.”

Newco

On appeal, it was argued that the reference to “Chief Executive of The Rangers Football Club” was a reference to the reclaimer’s time as chief executive of Sevco Scotland Limited/The Rangers Football Club Limited (the “Newco”), which had become a wholly owned subsidiary of the respondent, thus extending the indemnity to the pursuer’s duties as chief executive of that company as well.

In the context of clause 8.3 “the Rangers Football Club” could only reasonably mean the “Newco” and it was the actings of the Newco which were the obvious source of any anticipated litigation, specifically from the reclaimer’s dealing with Craig Whyte; and from the perception that assets of Oldco had been acquired at an undervalue.

The clause would not entitle the pursuer to recover the costs of a defence where the criminal conduct charged was separate from his duties as chief executive, but these charges arose from the manner of executing those duties and were thus “within the scope of the clause”.

On that basis, it was submitted that such a construction made “commercial sense”, since, in the event of conviction, the defender might anticipate the prospect of wronged parties seeking redress from them.

Decision

However, the appeal judges were in “complete agreement” with the Lord Ordinary.

Delivering the opinion of the court, Lady Dorrian said: “We consider that the Lord Ordinary was correct to proceed on the basis that the agreement entitles the pursuer to indemnity while attempting (i) to perform his duties as chief executive of the defender or of Newco, and (ii) to advance the interests of the relevant company. We agree with the Lord Ordinary that this is a construction which accords with the language of the clause and with business common sense. It also accords with the approach of the Court of Appeal in relation to the very similar clause in Coulson.

“Dishonest extortion of money, for expenses not genuinely incurred or incurred for a purpose not related to the employment, is not an attempt to do the job at all. That is not to say that only lawful activities would come within the scope of the indemnity. The Lord Ordinary properly held otherwise, and as the Court of Appeal pointed out in Coulson, to say otherwise would deprive the indemnity of much of its practical use. However, as in Coulson, the indemnity would extend only to the manner in which he carried out his duties as chief executive. In Coulson the offences were described as suggesting a complicity in telephone hacking in a misguided attempt to fulfil his duty to “obtain accurate and authentic information upon all matters and questions dealt with by the News of the World.”

The Lord Ordinary noted that much of the reclaimer’s involvement was said to pre-date his taking up office as chief executive of either Newco or the respondent. More significantly, the charges could not be characterised as a breach of the law whilst attempting to carry out his duties in either of those offices.

Lady Dorrian added: “In distinction to the position in Coulson, we are unable to characterise the alleged actings of the reclaimer as constituting misguided efforts to pursue his duties as chief executive of either Newco or the respondent…We will therefore adhere to the interlocutor of the Lord Ordinary and refuse the reclaiming motion.”