RANGERS FOOTBALL CLUB PLC

Summary of the Opinion issued by Lord Hodge

In an urgent application to the court by the joint administrators of Rangers Football Club plc for directions under the Insolvency Act 1986, Lord Hodge issued an opinion today.

The administrators asked to be given directions on whether they could be prevented from terminating the contracts which Rangers entered into in May 2011 with two limited liability partnerships (“Ticketus”) by which Rangers sold large numbers of season tickets for matches at its Ibrox stadium in each of the seasons from 2011-2012 until 2014-2015.

The directions which the administrators sought were first:

“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 asked 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.”

Having heard argument from counsel over several days, Lord Hodge declined to give a direction on the first matter as he considered that the court had not been given sufficient information to allow it to make such a ruling.

On the first alternative direction, having heard submissions as to whether Scots law or English law determined whether a trust had been created in the income from the season tickets, Lord Hodge held that Scots law was the governing law.  He directed that under Scots law Ticketus’ interests in seats at the Ibrox stadium, the tickets and the sale proceeds of those tickets were purely contractual rights and were not trust rights which would prevail over ordinary creditors in an insolvency.

On the second alternative direction Lord Hodge declined to state a test to be applied in all circumstances but discussed the circumstances in which the courts might order an administrator to perform a contract.  He summarised his views 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 which is not relevant in this case); (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.”

The full Opinion is available here.

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