Rangers and Ticketus

I am loath to add more to the blog posts, the web comments, the newspaper stories, and the television and radio reports on yesterday’s case of Clark and Whitehouse (administrators of Rangers FC plc) as applicants seeking directions from the court in the context of the agreement between Ticketus and Rangers but there are one or two points that are worth making.

The deal between Rangers and Ticketus involves two transactions: a sale of rights to season tickets; and an agreement (on the premise that the sale was valid) appointing Rangers agents to sell the season tickets and to put the proceeds of sales into a ring-fenced account operated by Rangers for Ticketus. Under English law Ticketus – on paying Rangers on conclusion of the sale – would have a right in the seats the season tickets related to. This right would prevail over unsecured creditors (such as the taxman) in the insolvency of Rangers. This results from equity – a device of English law which appears to an outsider to be there to reward ineptitude. If you don’t do everything you’re meant to do equity steps in to protect you anyway with a shrug, and a “well you must have meant to do it so we’ll treat it as if you have done it”. The agreements between Rangers and Ticketus were written under English law and it appears Ticketus assumed that that was an end of things. The imperialist nature of English law assumes that its court orders and law can apply worldwide (see blog posts passim) – scant thought (if any) seems to have been given to one crucial factor.

I appreciate this may come as news to some readers versed in english law, but Ibrox stadium is in Glasgow. And Glasgow is a city in Scotland. The seats in the stadium are by a remarkable coincidence also found in Scotland. Any debts that arise in relation to the season tickets arise in scotland. Now, scots law doesn’t have an odd system of equity which steps in to offer temporary protections. Scots law recognises two primary types of right: personal rights; and real rights. A personal right is in summary a right against a person allowing you to sue that person and is accompanied by an obligation on the part of that person. A typical example would arise from a contract. Consider, for example, a contract of loan. If I lend money to Ted, Ted has an obligation to pay me the money back, and I have a right to sue Ted for the money. Now, personal rights are only as strong as the person that owes the obligation. If I have a right to sue Ted, and Ted goes bust I am not necessarily going to get my money back. A personal right gives a creditor no entitlement to the debtor’s assets. It only gives the creditor a right to sue the debtor. And in insolvency that resolves itself into a right to claim in the insolvency of the debtor for the unpaid amount – along with every other punter who is owed money by the debtor.

Personal rights can be compared with real rights. Real rights were created by roman law centuries ago. Real rights are rights in assets. Your ownership of an asset is a real right. But there are others. For example, in Scotland, a tenant holding under a lease has a real right. Or a creditor in a standard security (the technical Scottish term for what punters refer to as mortgages) has a real right. To explain that one, in the example above assume that I loaned Ted money but was worried that Ted wouldn’t pay me back. I could have said to Ted (as banks typically say to people borrowing substantial sums of money from them) – I will not lend you the money unless you give me a right in your house. This right in the house is a standard security. Now, how is that better than a personal right? Well a real right is a right in a specific asset. Thus, if Ted buggers off and sells his house I would still have the security in the house, whoever the new owner was. Additionally, the real rights have priority in the event of the insolvency of the debtor. So if Ted goes bust that has no impact on the real right. It remains as powerful as it was before. If that real right is a security (such as a standard security) the creditor typically has power to sell the asset without having to involve any other creditor, and if the asset is sold during insolvency the real right ensures that the creditor gets first cut when the proceeds of sale are divided out. In summry then being a right in an asset a real right is stronger than a personal right.

Scotland, like much of western Europe, accepts real rights. The terminology seems unfamiliar in English law (although you see some commentators using it, it doesn’t seem to appear in the case reports – other than where a judge disparagingly queries how rudimentary the system is in comparison with the genius of English law, ignoring the fact that the bulk of western economies operate just such a rudimentary system which offers certainty and avoids superfluous litigation). However, Scotland only recognises a limited number of real rights. These real rights, funnily enough, don’t include rights held by season ticket holders on an irregular basis when football matches happen to take place.

Much to the astonishment of no-one yesterday then Lord Hodge held that Ticketus do not have a real right in the seats. If they don’t have a real right at best they have a personal right – a contractual right to use the seat. This contractual right is pretty worthless if Rangers go into liquidation – because all that Ticketus will be left with is a claim for damages for what they have lost (ie the flipping great wadges of cash they paid on the assumption that English law solved all their problems).

So with no rights in the seats themselves (which they magically would have had under English law) what did Ticketus get. Well they have bought season tickets that do not yet exist. Now there’s one problem with buying something that doesn’t exist. How do you get ownership of it? You can’t get ownership of it (at the earliest) until the thing exists. Ticketus then do not have ownership of any of the future season tickets that don’t exist yet. But what are these season tickets? – the season tickets are rights to occupy the seats exercisable against Rangers and these rights only arise when the season ticket is issued. Now in English law the magic of equity would appear to provide that the instant these tickets came into existence they would be immediately owned by Ticketus and the agency agreements would allow Rangsers to sell them. Trouble for Ticketus is that while they entered all of their agreements under English law we’re not in England. The season tickets arise under Scots law. And in Scots law there are difficulties (a) with selling future rights at all (because the sale of a right requires notification to the debtor to be effective, and we don’t know who the debtor is until the right exists; and (b) with creating trusts over future rights (which is what the agency agreement purports to do). You can only transfer an asset into the trust (and therefore validly create the trust) when the asset comes into existence.

So Ticketus only have a contractual right against Rangers. This will give them only a claim in insolvency if Rangers go into liquidation.

Now hidden away in an early part of Lord Hodge’s judgment is a suggestion that the agreement between Ticketus and Rangers might be struck down because under company law agreements are void if a company provides financial assistance in order to buy its own shares. However, this is a bit of a red herring to some extent. if the contract survives, and Rangers do not go into liquidation, then Rangers will have to implement that contract in future, or breach and risk liability in damages. If the contract is struck down then the money Ticketus paid will become immediately recoverable from Rangers because Rangers will have received money with no legal basis for receipt (in legal terms Rangers would be unjustifiably enriched). In the event of liquidation of Rangers whether or not the Ticketus contract is valid is completely irrelevant. (note)

These are just some rough thoughts on the first half of the judgment. No doubt others will look at the first half and the second half in much more detail elsewhere.


(note at 5.13 pm – after an interesting discussion on twitter with James Connolly, Glasgow Caledonian University, worth noting that where a contract is struck down for illegality there are issues about whether any claim can be made at all. Scots law on this is not as clear as it might be. The courts look at whether there is “turpitude” on the part of the parties. The nuances of unjustified enrichment, illegal contracts and the like are for another blog, or another day.

About loveandgarbage

I watch the telly and read when not doing law stuff and plugging my decade and a half old unwatched Edinburgh fringe show.
This entry was posted in Uncategorized. Bookmark the permalink.

20 Responses to Rangers and Ticketus

  1. Carntyne says:

    Reading the court ruling was heavy going.
    The above, although lengthy, (for me!) makes things a lot easier to understand.


  2. Excellent analysis – detailed, thorough, intelligible and concise – four qualities I struggle to attain!
    A straightforward explanation which sadly the press have not managed to replicate.

  3. pat quinn says:

    that is a great piece of work there. thanks for sharing.

  4. Timabhoy says:

    yes a great peice of work , but im still confused
    but a little clearer ,in the end is LIQUIDATION still
    on the cards.

  5. Bobby Carroll says:

    To Paul McConville. You are / were a solicitor and yet, by your own admission, you were unable to produce anything as concise or as understandable as this. Like Rangers Tax Case and the agenda ridden paranoid, chip on the shoulder little cabal you seem to be a part of then, your criticism of the press is nonsensical. You’re like a mechanical engineer who sneers at sports journalists for failing to understand how to design and build a bridge.

    • I have to say I think this is uncalled for. Paul’s posts have tried to explain some complex legal concepts (as the post above has) as well as complex factual situations. I think he’s done a great job.

      I am concerned about some aspects of the reporting of the administration (as some of my earlier satirical posts indicate) because I do not think the journalists understand the complexities of the legal position and therefore are not reading the judgments, or situations, accurately.

      I hope the post above has been helpful in explaining some of the issues here.

    • Richboy says:

      Totally uncalled for and clearly shows there is only one person here with an “agenda”. Why don’t you head back to Rangers Media forum where this type of paranoia is loved.

      Paul mcConville’s blog (and RTC) have shone the light where sycophantic main stream journalists have tried to cast shadows while being fed succulent lamb morsels from a previous owner of a football club in Scotland.

  6. The Battered Bunnet says:

    Thank you for taking the time to discuss this and share it with the rest of us.

    It is clearly a complex contract that straddles competing systems of Law, and we can only sit back, read your views, scratch our napper and see how it all plays out, both commercially and legally.


  7. Thank you Bobby for your kind words.

    I have now realised, thanks to your gracious intervention, that I am part of a paranoid “cabal”. If it wasn’t for the fact that I write to amuse myself (and follow writers such as loveandgarbage in an effort to do what I do better), and not for payment, and the press are paid for what they do, then I might agree that you could have a scintilla of a point. However, as your thesis is unfounded in fact, you don’t.

  8. RayCharles says:

    Thanks for your insight.
    You, and Paul, are akin to legal babelfish.

  9. Pingback: Rangers’ Administrators Want to Rescue the Club with a Share Issue – Why It Won’t Work | Random Thoughts Re Scots Law by Paul McConville

  10. Bobby Carroll says:

    Paul, for what it’s worth I am a regular reader and admirer of your work. On reflection, my intemperate language was uncalled for and I apologise. To explaining inadequate fashion, It truly is staggering to me that people who clearly have specialist knowledge of these subjects expect football writers to share that extremely detailed knowledge of tax and legal matters and then slate them when they don’t – as the otherwise excellent Rangers Tax Case and, to a far lesser extent, you have done. I would fully agree and accept that the Craig Whyte saga was far from the finest hour of the Scottish press. Their credibiliy has been shot to bits and they know it. They were bullied and cowed far too easily by Carter Ruck’s threats and obnoxious tactics right at the start. since then however the Record and Mail have carried interesting and valuable exposes which have taken the story forward substantially. They are at least trying to make up ground. I believe journalists must embrace the online community and work with them. There has been a mean spirited lack of credit for the supeeb work done by yourslf and RTC. This can be simply explained, however, by the constant and unnecessary jibes and attacks on the character and integrity of every MSM journalist- as evidenced once again by RTC this morning. It’s unnecessary, it demeans the message they are putting across and leads to those under attack ignoring it. Why talk up the language of a blogger who accuses your ENTIRE industry of being corrupt and dishonest after all? That’s damning talk which damns every honest journalist – many of whom are intelligent Celtic supporters – with a fairly sweeping brush. This xplains, but by no means excuses, my earlier post for which I wholeheartedly apologise. I was guilty of the kind of behaviour I deplore in others.

    • My own problem with the approach of some journalists is not that they don’t understand but that a number are professing understanding when they demonstrably don’t understand it. For example, this post was prompted yesterday by reports in the two quality Scottish newspapers that summarised the Ticketus case in a manner directly contradicting the one thing that Lord Hodeg definitely did decide. If you do understand the jargon and what has gone on, such pieces can be frustrating reading. In relation to the journalists it is better surely to admit ignorance and ask someone that does understand it. And if like me yesterday you’re fed up with reading another misleading piece you try to write something that you hope explains it.

      I should stress that as things go on I am becoming conscious that the media are aware of their limitations. I was cheered this week, for example, when Newsnight Scotland finally had on an insolvency practitioner who explained what an administrator will be doing – and how they will be contacting every creditor. This gave the lie to the comments of some that suggest HMRC would not be speaking to the administrator, but also gave a sense of realism about the strength of the bargaining position held by particular creditors.

    • Thanks Bobby.
      As L&G says, the complaint is that the media generally seems not to seek expert views, whether from within their own ranks or from outside. The best coverage of the Rangers issue in the press seems to have been from Gerry Braiden of the Herald, who is the Local Govt Correspondent. It shouldn’t be beyond papers to bring in a business or legal correspondent to contribute in their field of expertise.

      • Bobby Carroll says:

        Interesting way of looking at if. It has been bizarre the way business journalists have not taken the lead in all of this. They have the knowledge, sports writers palpably don’t. The truth is – and I’m sure they would agree- the sports hacks are out of their depth with this stuff. They know it, we know it.

  11. ian lewis says:

    Thank you for this -I could never understand why Ticketus appeared to put up the dosh without security -now I realise it was because they didn’t know what they were doing-quite heartening in a strange way.One small thing was the contract with Whyte or his company before he was a Ranger and did Rangers then adopt the contract?

  12. It’s the last comment that raises the issue I’m most interested in now. Did Ticketus think that because the agreements had some kind of choice of law clause that the English law of trusts, of insolvency, of real rights and of equity would just be given effect to by our courts? You’d need more than a standard “construed in terms of English law” for that, I’d have thought.

    BTW, this was my attempt on Saturday at giving an accurate run-through of the decision. Given the comments above, I should say that I meant no criticism of individual reporters at all.


    • Thanks for that.

      I am conscious that in other areas English lawyers sometimes forget that Scots law is a separate system (and given the cases on floating charges predating the 1961 introduction in Scotland they may have felt if before the court in England the security would be given effect to). However, the lex situs rule for creation and enforcement of securities is so well-established I have no idea what they were thinking.

  13. Neil C says:

    Great analysis.

    I’ve only just got around to fully reading the opinion. It raises some great issues.

    One issue which nobody has particularly mentioned, although I presume must have happened, is that although the 2012 onwards season ticket income was not in existence and so could not be conveyed into the trust, presumably the 2011-2012 season ticket income (which was/is in existence) was conveyed into the trust and is sitting there for Ticketus to intimate to the debtors and take? Much like the normal procedure for invoice discounting.

    The second issue that I can’t get my head around is why Ticketus didn’t hedge their bets and also take a floating charge over the future income streams. Would it have helped? I’m not sure.

    Lord Hodge’s directions for administrators breaking contracts look to be quite useful, although they do strike me as common-sensical and I do wonder whether administrators don’t already break some contracts using the “for the aim of acheiving the objectives of the administration” reasoning. Still useful to have clarification though.

Leave a Reply to Neil C Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s