IN THE HIGH COURT OF JUSTICE CLAIM No: HC12F0 3282

CHANCERY DIVISION Royal Courts of Justice

Rolls Building7 Rolls Building

London EC4A 1NL

Before:

MASTER MARSH ---------------------------

Between :(1) TICKETUS LLP

(2) TICKETUS 2 LLPClaimants

-and-

(1) CRAIG THOMAS WHYTE(2) THE RANGERS FC GROUP LIMITED

(3) LIBERTY CAPITAL LIMITEDDefendants

----------------------------------JUDGMENT

------------------------------------

Matthew Collings QC and Ben Griffiths (instructed by Michelmores LLP) for the Claimant Mark Watson-Gandy (instructed by Law Management Solicitors) for the first Defendant

Judgment handed down on Friday 5th April 2013

…………………………………Master Marsh

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1. Theses proceedings relate indirectly to the takeover of the Rangers Football

Club Plc (“Rangers”) on 6th May 2011. Rangers went into administration on 14th

February 2012 and is now in liquidation. It is not a party to this claim. The first

defendant (“Mr Whyte”) was the moving force behind the takeover of Rangers, the

second defendant was the bid vehicle and the third defendant is a company controlled

by Mr Whyte and the sole shareholder in the second defendant.

2. The claimants (together “Ticketus”) are involved in the business of advance

purchasing of tickets for sports, entertainment and other events. The tickets are

purchased at a discounted price relative to the face value of the tickets. In the case of

football, the club acts as agent for Ticketus and agrees to sell the tickets purchased by

Ticketus to the general public and account to Ticketus with the full face value of the

tickets. The difference between the discounted price and the full face value is

Ticketus’ profit on top of any fees paid in respect of the transaction.

3. In December 2009 and August 2010 Rangers entered into a number of

agreements with Ticketus relating to the purchase, onward sale and marketing of

Rangers’ season tickets. Those agreements are part of the background to this claim,

but are not directly relevant.

4. On 9th May 2011, Ticketus entered into a series of agreements with Rangers

(“the Ticket Sale Agreements”) relating to the sale and purchase of Rangers season

tickets at the Ibrox Stadium for the 2011/12 to 2014/15 football seasons. Mr Whyte

and the two other defendants each executed Deeds of Guarantee and Indemnity at the

same time as the Ticket Sale Agreements. The Deeds of Guarantee and Indemnity are

described in the particulars of claim as the “Covenant Guarantees”.

5. Ticketus’ primary claim is under the Covenant Guarantees against all three

defendants. The claim is for £26,711,856.81 as liquidated damages and £541,003 by

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way of expenses Ticketus claim to have incurred in taking steps to enforce their

rights. However, Ticketus has an additional claim against Mr Whyte alone. It is said

that Mr Whyte fraudulently, or alternatively negligently, made certain representations

which induced Ticketus to enter into the Ticket Sale Agreements. Under this heading,

Ticketus claims damages of £18,224,341.

6. Ticketus has made an application for summary judgment against Mr Whyte

under CPR Part 24.2 in relation to the misrepresentation claim. That application was

heard by me on 22nd February 2013, when I reserved judgment. The procedural

history of the claim leading up to that hearing is relevant and can be summarised

briefly. Following pre-action correspondence, the claim was issued on 22nd August

2012 and served shortly afterwards. On 26th September 2012, a short defence was

served on behalf of all three defendants with a statement of truth signed by Mr Whyte.

Ticketus took the view that the defence was deficient and issued an application to

strike it out. The application came before me on 29 th November 2012. The orders

made on that occasion were:

(a) that the defendants should serve a draft amended defence by 21st

December 2012 and pay Ticketus’ costs of the hearing; and,

(b) a case management conference should take place on 22nd January 2013.

7. The intention behind the order was to give Mr Whyte, and the other

defendants, an opportunity to re-plead the defence and for an application for

permission to amend the defence to be dealt with at the case management conference.

A draft amended defence in a much more substantial form than the original version

was duly served by solicitors acting for Mr Whyte on 21st December 2012. The draft

defence was settled by Mr Watson-Gandy (who appeared for Mr Whyte at the hearing

on 29th November 2012 and the hearing of the Part 24 application). The second and

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third defendants served draft amended defences essentially adopting Mr Whyte’s draft

defence.

8. Ticketus issued the Part 24 application against Mr Whyte on 7 th January 2013

and it was listed for hearing at the same time as the case management conference on

22nd January 2013. The application is supported by 5 witness statements. The day

before the hearing, Mr Whyte made a short witness statement in which, amongst other

things, he said he had not been able to reply to Ticketus’ evidence in the time

available and requested an adjournment. Ticketus agreed to that request and the

hearing of the Part 24 application and the case management conference were re-listed

for hearing on 22nd February 2013. Mr Whyte then served a witness statement in

reply to the claimants’ evidence dated 15th February 2013. Ticketus has served brief

evidence in reply.

9. I make two observations arising from this procedural history:

(a) Mr Whyte has had an adequate opportunity to plead his defence and

has had the benefit of assistance from experienced counsel in so doing;

and,

(b) Mr Whyte has also had an ample opportunity to provide his witness

statement in response to the Part 24 application. He says he has had

difficulty obtaining evidence from other witnesses who will support his

position. That is a point to which I will return later in this judgment.

10. In order to succeed on their application, Ticketus have to show that Mr Whyte

has no real prospect of successfully defending the misrepresentation claim and there is

no other compelling reason why the case should be disposed of at trial. The principles

underlying an application for Part 24 judgment have been a subject of judicial

observations in a large number of cases. They were helpfully summarised by

Popplewell J in F G Wilson (Engineering) Limited –v- John Holt & Company

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(Liverpool) Limited [2012] EWHC 2477 (Comm) (at paragraph 20) in the following

way:

“(i) The court must consider whether the defendant has “realistic” as

opposed to a “fanciful” prospects of success: Swain-v-Hillman [2001]

2 All ER 1991.

(ii) A “realistic” defence is one that carries some degree of conviction.

This means a defence that is more than merely arguable; ED & F Man

Liquid Produces –v- Patel [2003] EWCA Civ 472 at [8]

(iii) In reaching this conclusion the court must not conduct a “mini-trial”:

Swain-v-Hillman.

(iv) This does not mean the court must take at face value and without

analysis everything that the defendant says in his statements before the

court. In some cases it may be clear that there is no real substance in

factual assertions made, particularly if contradicted by

contemporaneous documents: ED & F Man Liquid Produce –v- Patel

at [10].

(v) However, in reaching its conclusion the court must take into account

not only the evidence actually placed before it on the application for

summary judgment, but also the evidence that can reasonably be

expected to be available at trial; Royal Brompton Hospital NHS Trust-

v-Hammond (No.5) [2001] EWCA Civ 550.

(vi) Although a case may turn out at trial not to be really complicated, it

does not follow that that it should be decided without the fuller

investigation into the facts at trial than is possible or permissible on

summary judgment. Thus the court should hesitate about making a

final decision without a trial, even were there is no obvious conflict of

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fact at the time of the application, where reasonable grounds exist for

believing that a fuller investigation into the fact of the case would add

to or alter the evidence available to a trial judge and so affect the

outcome of the case; Doncaster Pharmaceuticals Group Limited-v-

Bolton Pharmaceuticals Co 100 Limited [2007] FSR 63.

(vii) On the other hand it is not uncommon for an application under Part 24

to give rise to a short point of law or construction and, if the court is

satisfied that it has before it all the evidence necessary for the proper

determination of the question and that the parties have had an

adequate opportunity to address it in argument, it should grasp the

nettle and decide it. The reason is quite simple: if the respondent’s

case is bad in law, he will in truth have no prospect of succeeding on

his claim or successfully defending the claim against him, as the case

may be. Similarly, if the applicant’s case is bad in law, the sooner that

is determined, the better. If it is possible to show by evidence that

although material in the form of documents or oral evidence that

would put the documents in another light is not currently before the

court, such material is likely to exists and can be expected to be

available at trial, it would be wrong to give summary judgment

because there would be a real, as opposed to a fanciful, prospect of

success. However, it is not enough simply to argue that the case

should be allowed to go to trial because something may turn up which

would have a bearing on the question of construction: ICI Chemicals

& Polymers Limited-v-TTE Training Limited [2007] EWCA Civ 725.”

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11. Reference was also made to Lord Hobhouse’s speech in Three Rivers District

Council and others-v-Governor and Company Bank of England (No 3) [2003] 2 AC 1

at pages 282C:

“The important words are “no real prospect of succeeding”. It requires the

judge to undertake an exercise of judgment. He must decide whether to exercise the

power to decide the case without a trial and give summary judgment. It is a

“discretionary” power, i.e. one where the choice whether to exercise the power lies

within the jurisdiction of the judge. Secondly he must carry out the necessary

exercise of assessing the prospects of success of the relevant party. If he concludes

that there is “no real prospect”, he may decide the case accordingly. I stress this

aspect because in the course of argument counsel referred to the relevant judgement

of Clark LJ as if he had made “findings” of fact. He did not do so. Under RSC order

14 as under CPR Part 24, the judge is making an assessment not conducting a trial or

fact finding exercise. Whilst it must be remembered that the wood is composed of

trees some of which may need to be looked at individually, it is the assessment of the

whole that is called for. A measure of analysis may be necessary but the “bottom

line” is what ultimately matters”.

………….

“The criterion which the judge has to apply under Part 24 is not one of

probability; it is absence of reality. The majority of the Court of Appeal used the

phrases “no realistic possibility” and distinguished between a practical possibility

and “what is fanciful or inconceivable… Although used in a slightly different context

these phrases appropriately express the same idea.”

12. After referring to decisions of the Court of Appeal in Swain-v-Hillman and

Sinclair –v-Chief Constable of West Yorkshire, Lord Hobhouse went on to say (at

page 293C):

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“There is no point in allowing a claim to proceed which have no real prospect

of success, certainly not in proceeding beyond the stage where their hopelessness has

clearly become apparent.

160. The difficulty in the application of the criterion used by Part 24 is that

it requires an assessment to be made in advance of a full trial as to what the outcome

of such a trial would be. The pre-trial procedure gives the claimant an opportunity to

obtain additional evidence to support his case. The most obvious of these is discovery

of documents but there is also the weapon of requesting particulars or interrogatories

and exchange of witness statements may provide a party with additional important

material. Therefore the courts have in the present case recognised that they must

have regard not only to the evidence presently available to the plaintiffs but also to

any realistic prospect that that evidence would have been strengthen between now

and the trial.”

13. Mr Watson-Gandy says there are compelling reasons why this case should not

go to trial regardless of the “no real prospect of succeeding” test. He drew attention

to the Court of Appeal in Bank fur Gemeinwirtschaft-v-City of London Garages

Limited [1971] 1 All ER 541 and the observations made by Cairns LJ at page 548.

Although the case was decided before the CPR came into force, he says these

examples are helpful illustrations of the sort of consideration the court might consider

to be compelling.

“It is not difficult to think of other circumstances where it might be reasonable

to give leave to defend although no defence was shown, e.g. if the defendant was

unable to get in touch with some material witness who might be able to provide him

with material for a defence; or if the claim were of a highly complicated or technical

nature which could only be properly understood if oral evidence were given; or if the

plaintiff’s case tended to show that he had acted harshly and unconscionably and it

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was thought desirable that if he was to get judgment at all it should be in the full light

of publicity.”

14. Before summarising the claim made against Mr Whyte, it is necessary to say

something about how Ticketus operate and their relationship with Octopus Investment

Limited (“Octopus”). Octopus is an FSA regulated fund management company and is

responsible for sourcing, organising and managing investment opportunities on behalf

of Ticketus (amongst other entities). Ticketus have no employees themselves. Mr

Ross Bryan, who has provided the principal witness statements for Ticketus, was

employed at the material time by Octopus as an investment manager within its

specialist finance team. He describes the standard approach adopted by Octopus in

relation to ticketing transactions as involving the following stages:

(a) The investment manager would carry out some preliminary work and

hold discussions with his counterparty;

(b) Non-binding heads of terms would be agreed;

(c) An initial submission would be made to Octopus’ “Investment

Committee”;

(d) If approval was obtained in principle from the Investment Committee,

any pre-conditions would then be resolved, due diligence undertaken

and lawyers instructed;

(e) The transaction would then be put before the Investment Committee at

a more mature stage for final approval.

15. At the material time the Investment Committee was chaired by Mr Mario

Berti. He has provided a witness statement as have the other members of the

investment committee, Mr Hulatt, Mr Oliver and Mr Seabright.

16. In October 2010 negotiations were commenced with Mr Betts, an associate of

Mr Whyte. Ticketus say that Mr Betts and Mr Whyte knew they were dealing with

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Ticketus with Octopus acting as Ticketus’ agent. This is denied by Mr Whyte who

says that he was unaware of the identity of Ticketus at the material time.

17. On 13th October 2010, Mr Bryan sent an email to Mr Whyte with the heading

“Octopus meeting follow up”. The second paragraph reads as follows:

“I look forward to making progress on the transaction and, I hope, building a

relationship which sees Octopus becoming a partner in your long term funding

strategy.”

18. Paragraph 4(c) of the email also refers to Octopus. The email does not

mention Ticketus at all. However, the email refers to three documents being attached,

including a “revised term sheet”. If the term sheet had by then been revised, it is

likely to have been under consideration between the parties previously but there is no

evidence about this. The copy email exhibited by Mr Bryan does not include a

marking indicating what, if any, documents were attached to it and Mr Whyte asserts

that there were, in fact, no documents attached.

19. The revised term sheet makes Ticketus’ involvement completely clear

because:

(a) The first page and the following two pages are headed “Ticketus” and

the footer shows the documents as being from “Ticketus LLP”.

(b) The first sentence of the term sheet reads:

“….I would like to confirm the terms upon which Ticketus 2

LLP, a trading company of Octopus Investments (“Ticketus”), would

be willing to purchase…”.

(c) The expression “Ticketus” is used thereafter approximately 18 times.

20. On 20th October 2010 Mr Betts sent an email to Mr Bryan saying he and Mr

Whyte were expecting to receive a term sheet. That suggests they had not received

the document by then. Mr Bryan replied the same day saying the term sheet was

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attached to the email dated 13th October 2010 which itself was attached to the email.

It is not clear whether the whole email with attachments, or only term sheet, or no

documents at all were re-attached as the copy email bears no clue about this.

21. On 21st October 2010, Mr Bryan sent an email to Mr Whyte saying the

“signed term sheet” was attached to his email. The term sheet signed by Mr Bryan

and dated 21st October 2010 has been exhibited to his statement. It is substantially in

the same form as the draft version Mr Whyte claims not to have received.

22. Mr Bryan’s evidence is that (i) he made clear to Mr Whyte and Mr Betts from

the outset the contracting party would be Ticketus and (ii) the draft term sheet, and

signed version, were attached to the respective emails. Although Mr Whyte’s draft

defence says the identity of Ticketus was not known to him, he does not deal with this

point in detail in his witness statement. However, his witness statement does contain

a general statement at the outset saying that he failed to address any specific issue it

should not be taken as an admission of those matters.

23. Mr Bryan’s evidence, supported by that of Mr Berti, states that on 28th October

2010 the Investment Committee considered the proposed transaction for the first time

and gave approval in principle to the purchase of £20million worth of season tickets

with completion following the acquisition of Rangers by Mr Whyte and two fellow

promoters. He says the investment committee had reservations about the individuals

concerned, or some of them, and the approval was only given in principle. It was:

“…subject to final approval requiring further information to be provided by

Ross Bryan to the investment committee on a number of matters including the

identity and acceptability of the individuals concerned”.

24. Mr Bryan says that concerns expressed by the Investment Committee about

the individuals involved in the bid for Rangers were allayed when one individual

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dropped out and another was confirmed as having only a peripheral interest. This

information was, he says, reported to the Investment Committee.

25. On 16th December 2010, Mr Bryan sent Mr Betts a Directors Questionnaire for

Mr Whyte to complete as part of the due diligence process. However, the Rangers

takeover had by then stalled and it did not revive until early February 2011. On 7 th

February 2011 Mr Bryan sent a long email to Mr Whyte and Mr Betts under three

headings. The first dealt with the “timeline”, the second with “the paperwork and

diligence required to get us there” and the third “docs to produce or shared to close

the deal”. Under the second heading the email refers to a Director’s Questionnaire

being attached. On this occasion it is not disputed that the questionnaire was attached

and I note that, in the same way as the earlier emails, there is no marking on the copy

of the email Mr Bryan has exhibited recording the attachments.

26. By 28th February 2011, Mr Whyte had not completed the questionnaire or at

least had not returned it to Mr Bryan. At 11.21 on that day, Mr Bryan sent an email to

Mr Whyte, the crucial paragraph of which reads:

“Craig – I don’t have your director’s questionnaire. Much of it would be n/a I

imagine, but most relevant are:

(a) Have you ever been disqualified as a director

(b) Has a company you were involved with been investigated or inspected

by the LSC, FSA or other financial regulatory body”.

27. Ticketus relies on the reference to particular questions in the questionnaire and

especially to Mr Bryan having highlighted the importance of the question relating to

director’s disqualification.

28. At 15.03 the same day Mr Whyte replied to Mr Bryan. The material part of his

email reads:

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“I have attached the directors questionnaire. I’m not near a scanner right

now so it’s unsigned.

Let me know if you need anything else.”

29. Again, there seems to have been no difficulty about the questionnaire arriving

with Mr Whyte and, like earlier emails, the copy email exhibited by Mr Bryan does

not have any marking to confirm whether there was an attachment.

30. The Director’s Questionnaire has a sub-heading:

“For completion by: Craig Whyte, Andrew Ellis”

“This questionnaire has been prepared in connection with the proposed

provision of funds via a ticket purchasing mechanism to a BidCo controlled by Mr

Craig Whyte in relation to the acquisition of Glasgow Rangers FC (“the Company”).

It forms part of the exercise undertaken by Octopus Investment Committee to assess

whether each company is an appropriate recipient of funds. It is an important

document and you should therefore answer all questions truthfully and without

omission.”

31. There is then a heading “Instructions” followed by three directions. The first

is an instruction to answer all the questions and if the question is answerable in the

negative to answer “No”. The questionnaire concludes, above the place for signature,

with the following words:

“I hereby declare that the answers to the above are true, complete and not

misleading in any way.”

32. The material questions for present purposes are questions 6. 3 and 6.6. The

questions read as follows:

“6.3 Have you at any time, in connection with the formation or

management of a company, partnership or unincorporated association or business in

the United Kingdom, or elsewhere, being accused of any fraud, deception,

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misfeasance, breach of trust or other misconduct or impropriety towards such a body

or towards any members of such a body?

If yes, please provide full particulars.

6.6 Have you at any time been disqualified from working as director (or

being involved in the management) of a company?

If yes, please provide full details”.

33. The answer “No” appears against each question. However the following facts

in the particulars of claim are admitted by Mr Whyte:

“19.1 In or about 1998 claims had been brought against Mr Whyte by the

liquidator of a company named Vital UK Limited for misfeasance, breach of duty and

negligence, which claims were apparently subsequently settled for a sum of £150,000;

19.2 In or about 1998, disqualification proceedings had been brought

against Mr Whyte in which Mr Whyte had been accused of the misapplication of the

assets of two companies to the detriment of their creditors and have failed to co-

operate with the investigations of the Official Receiver into one of those companies;

19.3 In or about June 2000 Mr Whyte had been disqualified from acting as

a director by order of the High Court for a period of 7 years.”

34. Mr Bryan’s evidence is that he relied upon the answers given by Mr Whyte in

the director’s questionnaire and relying on them he recommended the transaction to

the Investment Committee. He says that had accurate answers been given he would

have decided not to go ahead with the transaction at all, but it is possible that he

would have felt it appropriate to consult Mr Berti before reaching that decision.

35. Mr Berti’s evidence is that Mr Bryan reported to the Investment Committee

about the proposed deal and the due diligence enquiries. He says that had he known

the position about Mr Whyte’s history he would have not authorised the transaction to

proceed. Similar evidence is provided by the other members of the Investment

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Committee. Mr Watson-Gandy points out that they each say they did not have

knowledge about Mr Whyte having been disqualified as director “for a significant

period”. He suggests the emphasis on the disqualification being for a significant

period means that the members of the committee were unconcerned about

disqualification as such. It was the substantial period of disqualification which was of

concern. In my judgment, the language used in these witness statement is clear. The

members of the committee are merely reporting that Mr Whyte had been disqualified

for a significant period. They are not suggesting that a lesser period would not have

been of concern.

36. Ticketus says the answers given to questions 6.3 and 6.6 in the Director’s

Questionnaire by Mr Whyte were representations upon which Ticketus relied and that

Mr Whyte knew the representations were false, or did not believe them to be true, or

was reckless, not caring whether they were true. Alternatively, the case against Mr

Whyte is put in terms of a negligent misrepresentation and Ticketus says Mr Whyte is

unable to discharge the burden placed on him by section 2(1) of the Misrepresentation

Act 1967. Ticketus says they were induced to enter into the Ticket Sale Agreements

relying upon the representations and, but for the representations Ticketus, would have

not entered into those agreements.

37. The transactions had two stages. The first occurred on 9th May 2011 when the

deal was completed. The second stage took place on 22nd September 2011. This

second stage is described as the “rollover” and included season tickets for 2014/15.

Ticketus says they were unaware of full details of Mr Whyte’s disqualification and

the misfeasance claim until June 2012 when Private Eye published full details of the

disqualification and its background following an application made by Private Eye to

the High Court to obtain an order that the relevant documents be released. It is,

however, common ground that in October 2011 partial information emerged about the

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disqualification as a result of investigations made by BBC Scotland. By then Ticketus

was fully committed to the transaction and had advanced all the money due to

Rangers under the Ticket Sale Agreements.

38. Ticketus also rely on the length of the Mr Whyte’s disqualification. The

disqualification was for a period of 7 years and therefore at the lower end of the

middle “Sevenoaks” bracket. The authors of Director’s Disqualification: Law and

Practice say:

“As a rule of thumb, if there was at least some evidence of deliberate

dishonest or self serving contact this may either of itself fall within the middle bracket

or take what is otherwise a minimum bracket case up into the middle bracket.”

Ticketus say that the length of disqualification, and the bracket into which it fell,

make it very unlikely they would have wanted to enter the Ticket Sale Agreements

had they known the true position. In other words, a disqualification of 7 years was

obviously material due to the serious conduct it implies.

39. I have already referred in part to the evidence of Mr Whyte and his case.

There is no dispute that the Director’s Questionnaire contained false information but

Mr Whyte denies having made a false representation, or representations, to Ticketus.

He says:

(a) The Director’s Questionnaire was prepared by his solicitors and

he did not check it before sending it to Mr Bryan. He says this was not

surprising as he expected his solicitors to ensure it was accurate.

(b) The Director’s Questionnaire was an unsigned “travelling

draft” (or a “rough draft”) and as such he paid less attention to it than if it had

been a final document.

(c) It would have been absurd for him to mislead Ticketus/Octopus

as his disqualification was a matter of public record which could have been

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revealed by a simple search at Companies House. He would have expected

due diligence carried out by Ticketus to reveal it.

(d) The Director’s Questionnaire was directed to Octopus and was

not intended to be for Ticketus’ use and benefit.

(e) The Director’s Questionnaire was provided for a different deal

to that which was concluded. The questionnaire was directed to a deal

involving finance been provided to Mr Whyte’s BidCo whereas the deal

entered into involved payment direct to Rangers.

(f) The statements in the Director’s Questionnaire were not relied

upon by Ticketus. It did not induce Ticketus to enter into the transaction.

(h) There was a failure to mitigate loss by Ticketus. The

information provided by Mr Whyte could easily have been checked.

(i) Mr Whyte has a counterclaim which he is entitled to set off

against Ticketus’ claim. He says that he was induced to enter into the Ticket

Sale Agreements by a representation made by Ticketus “… that in the event of

any reorganisation or administration of Rangers the First and Second

Defendants and Octopus would support and assist [Mr Whyte]…” to ensure

that he retained or recovered control of ownership and/or management of

Rangers.

40. The Director’s Questionnaire was plainly intended to be an important

document. Indeed, the heading on the first page describes the document as such. Mr

Whyte was directed to answer all questions “truthfully and without omission”. It

included a declaration that all the answers are “true, complete and not misleading in

any way”. That final statement appears above the signature clause and Mr Whyte did

not sign the questionnaire. But the absence of his signature is not determinative one

way or the other. The questionnaire was completed by Mr Whyte in that he answered

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every question and the terms of Mr Whyte’s email which accompanied the completed

questionnaire were unequivocal: “I have attached the questionnaire”. It is also of

significance that Mr Bryan’s email sent on 28th February specifically directed Mr

Whyte’s attention to the question relating to disqualification which he described (with

one other question) as being the “most relevant”.

41. Mr Whyte’s claim that the answer to the questionnaire was compiled by his

solicitor is a surprising one as a considerable number of the questions could not have

been answered without direct input from Mr Whyte. How could solicitors, for

example, know about Mr Whyte’s medical history or his potential conflicts of

interest? Furthermore, and more significantly, director’s disqualifications do not

remain registered at Companies House after the period of disqualification has expired

and there is no searchable public record of accusations of fraud, deception and

misfeasance. It follows that when the questionnaire was answered, the information

requested at questions 6.3 and 6.6 was not in the public domain. But even if Mr

Whyte left completion of the questionnaire to his solicitors and sent it to Mr Bryan

without checking the contents, he adopted the answers in it by sending it to Mr Bryan

without any reservation about its content or its status.

42. In a claim for deceit, it is not necessary to establish that the defendant

positively knew statements were false. It suffices that Mr Whyte suspected his

statement might not be accurate or that he neglected to enquire into its accuracy -

(Reese River Silver Mining Co Limited-v-Smith [1869] LR4 (HL) at 79-80 per Lord

Cairns). In the case of negligent misrepresentation, the burden is on Mr Whyte under

section 2(1) of Misrepresentation Act 1967 to demonstrate that he had reasonable

grounds to believe and did believe up to the time the contract was made that the facts

represented were true.

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43. It is not easy to think of the Director’s Questionnaire as a travelling draft. The

concept of a travelling draft of the document is understandable as between Mr Whyte

and his solicitors, if they were involved in drafting it, but once Mr Whyte sent it out

its travelling nature ended. A document of that type, as between the parties to a

transaction, is essentially unilateral in nature rather than a bilateral document

negotiated between the parties. Indeed, the very purpose of requiring answers to a

questionnaire is to enable the recipient to receive information which it would not

otherwise be able to obtain easily, or at all. Unlike many other documents in a

commercial transaction, a questionnaire is not a document which the recipient would

expect to be negotiated or varied. And had the questionnaire been a draft, I would

have expected Mr Whyte to say so in his email.

44. Mr Whyte points to the reference in an email dated 14th April 2011 to a

director’s questionnaire. He says it shows the questionnaire he provided to Mr Bryan

was not in a final form, even by that date. However, when seen in its context, it is

plain that the “Director’s Questionnaire” referred to in the 14th April email was the

one prepared for a flotation of the second defendant on the PLUS market and not the

one provided by Mr Bryan to Mr Whyte.

45. Mr Whyte is right to point out that the heading to the Director’s Questionnaire

states it was prepared in connection with the provision of funds to a BidCo controlled

by Mr Whyte in relation to the acquisition of Glasgow Rangers, whereas the

transaction was later structured in a different way. Instead of funds been provided to

the BidCo, the shares in Rangers was acquired for £1 by the second defendant and the

funds provided by Ticketus went direct to Rangers itself, as had occurred with the

previous Ticket Sale Agreements. Despite this change to the overall structure of the

deal, the funding provided by Ticketus was an essential part of the bid mechanism by

which control of Rangers was obtained. The fact there was a change to the structure of

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the deal is not, in my judgment, of any significance. The answers to the questions in

the questionnaire were provided in connection with Mr Whyte’s takeover of Rangers

and that takeover was indirectly funded by Ticketus.

46. Mr Whyte says that Ticketus’ identity was not known to him at the material

time. The emails to which detailed reference has already been made in this judgment

show dealings between Mr Whyte and Mr Bryan of Octopus. In my judgment it is

fanciful to suggest that Mr Whyte was unaware of Octopus acting as agent for

Ticketus. None of the emails exhibited to Mr Bryan’s statement contain markings

showing that there were documents attached, but the suggestion that the term sheet, in

draft or in final form, did not reach Mr Whyte is not believable. As I have pointed

out, Mr Whyte does not deny receiving Mr Bryan’s email dated 28th February 2011

with the Director’s Questionnaire attached. That email had no attachment marking.

Even if it is correct that Mr Bryan omitted to attach documents to his email dated 13th

October 2010, which seems very unlikely, it is simply unrealistic to consider that,

when prompted by Mr Betts’ email of 20th October 2010, he failed again to attach

them. There is no suggestion in any email that this occurred. Furthermore, on 21st

October 2010 Mr Bryan sent an email to Mr Whyte with the “signed term sheets” and

it is impossible to accept that Mr Whyte would have proceeded with the transactions

without any written confirmation of the deal from Octopus (on Mr Whyte’s case).

47. Aside from the issues of fact raised by Mr Whyte, I do not consider, even if he

is correct on the facts, his defence is good in law. Chitty on Contract (31st Edition)

paragraph 6-031 suggests, there may be three types of representee:

“First, persons to whom the representation is directly made and their

principals; secondly, persons to whom the representor intended or expected

the representation to be passed on, and thirdly, members of a class which the

representation was directed.”

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Even assuming the statements made in the Director’s Questionnaire were understood

by Mr Whyte to be made to Octopus, Ticketus were plainly, as the ultimate

counterparties to the ticketing arrangements, persons to whom it was intended or

expected by Mr Whyte the information contained in the Directors Questionnaire

would be passed.

48. I have already summarised the evidence provided on behalf of Ticketus in

relation to reliance upon the representations. Mr Whyte makes a number of points

about reliance:

(a) He draws attention to the answers to the questionnaires

provided by Mr Betts and that he has put an N/A rather than Yes or No to

some of the questions. No complaint was made about this and Mr Whyte

therefore suggests that the answers were unimportant;

(b) Mr Whyte says that Ticketus and/or Octopus have dealt with

individuals with worse business records than his. He points to one individual

who had a conviction for a criminal offence in the past.

(c) There were conversations between Mr Betts and Mr Bryan after

the 2011 BBC programme referred to Mr Whyte’s disqualification. At that

stage Mr Bryan did not seem unduly concerned about the position.

49. I do not find these arguments to be at all persuasive. They have to be put

against the clear and unequivocal evidence from Mr Bryan, Mr Berti and the other

members of the Investment Committee. That evidence has not been the subject of

challenge by cross-examination but the evidence overall is clear that the Director’s

Questionnaire was an important part of the diligence process and Ticketus considered

the answers to be important. That evidence is unsurprising. Contrary to Mr White’s

suggestion, the key information sought at questions 6.3 and 6.6 was not available in

the public domain and was information of real significance in a substantial transaction

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of this type, particularly given the public profile of a transaction with a football club

such as Rangers. Mr Whyte had good reasons for concealing it. Even if Mr Whyte is

correct that at a later stage Octopus and Ticketus did not express concern about Mr

Whyte’s disqualification, by then (October 2011) the transaction was complete with

the rollover funding having been provided in September 2011. The approach adopted

by Mr Bryan from October onwards is not, in any event, necessarily indicative of the

approach which would have been adopted by the Investment Committee had the true

position been revealed in the questionnaire.

50. Furthermore, there is in any event a presumption of inducement. It is put in

Chitty at paragraph 6-039 in the following way:

“Once it is proved that a false statement was made which was

“material” in the sense that it was likely to induce the contract, and the

representee entered the contract, it is a fair inference of fact (though not an

inference of law) that he was influence by the statement, and the inference is

particularly strong where the misrepresentation was fraudulent.”

51. Unlike an oral representation made in the course of negotiations, Ticketus

relies upon representations made in response to a formal questionnaire which strongly

suggests by its wording that the answers were intended to be relied upon. The

questions asked were the sort of questions to which the answers were likely to be

material and the question about disqualification had been highlighted by Mr Bryan as

being material. Even stepping back from the statements provided on behalf of

Ticketus, it is right to draw the inference that Ticketus and Octopus relied upon the

representations.

52. The evidence provided on behalf of Ticketus and Octopus is that they did not

know the full facts about Mr Whyte’s history until an article was published in Private

Eye. It appears to me that Mr Whyte did not ‘come clean’ when BBC Scotland

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published a story about him in October 2011 as his initial approach was to deny the

facts. He did not then reveal to Ticketus the full story relating to his disqualification. I

do not see anything in the contentions put forward by Mr Whyte about Mr Bryan’s

behaviour from October 2010 (assuming Mr Whyte is correct about it) that

undermines what Ticketus’ witnesses say.

53. In my judgment, the inescapable conclusion on the evidence is that Mr Whyte

knew his answers to questions 6.3 and 6.6 were false. But, even if I am wrong about

that, he was reckless about whether the answers were accurate, and provided them not

caring whether they were true. Alternatively, he was negligent in failing to check the

accuracy of the questionnaire before passing it on and has failed to discharge the

evidential burden on him under section 2(1) of the Misrepresentation Act.

54. Mr Whyte says Ticketus have failed to mitigate their position. He refers to a

passage in Chitty at paragraph 6-040 where it is said:

“It is possible, however, that relief might be denied if it was

unforeseeable that the victim of a non-fraudulent misrepresentation would not

check the accuracy of his statement for himself before entering the contract.”

There are two points that arise. First, I have concluded that the representations were

fraudulent in this case. Secondly, even if that is wrong, it was simply impossible for

Ticketus to check the accuracy of the answer to questions 6.3 and 6.6 in the Director’s

Questionnaire. In particular, a director’s disqualification is not a matter of public

record after the period of disqualification expires and, in any event, the answer to

question 6.3 was not capable of been checked.

55. Mr Bryan has provided evidence of the net loss suffered by Ticketus as a

result of entering into the transaction. The figure provided in his calculation is the net

loss, without a profit element and without VAT, and amounts to £17,683.338. That is

the net amount paid by Ticketus to Rangers for the tickets. There is also evidence of

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Ticketus having paid £541,000.03 by a way of costs in seeking to enforce their rights

under the Ticket Sale Agreements against Rangers.

56. Mr Whyte pleads a set off and a counterclaim in the draft amended defence

and counterclaim. He relies upon a collateral warranty which is summarised in

paragraph 15 in the following manner:

“At the time of and in consideration of the 1st Defendant and Group

entering into the Covenant Guarantees on 9th May 2011 at Collyer Bristow’s

offices in London, the (sic) both Ross Bryan and Clark Wilmott acting for and

on behalf of the 1st and 2nd Claimants orally agreed with and warranted to the

1st Defendant and Group as an agreement collateral to the Covenant

Guarantees… and with intent that the 1st Defendant and Group should rely

thereon that in the event of any re-organisation or the administration of

Rangers that the 1st and 2nd Claimants and Octopus would support and assist

the 1st Defendant and/or Group in any steps to ensure that the 1st Defendant

and/or Group retained and/or recover control of the ownership and/or

management of Rangers.”

57. Mr Whyte says that Ticketus and/or Octopus were in breach of that collateral

warranty on the basis of the facts pleaded in paragraph 17 of the draft amended

defence in counterclaim. He seeks to set off loss and damage arising from that breach

against his liability under his Covenant Guarantee. He claims loss under a number of

headings including:

(a) He has been prevented from abating or mitigating liability

under the collateral warrantees;

(b) He has lost the opportunity to profit from control of Rangers;

(c) He has suffered foreseeable reputational harm;

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(d) The rescue and retention of control of Rangers would have

enhanced his reputation.

58. There are a number of legal difficulties with Mr Whyte’s set off and

counterclaim not least that it is directed to Mr Whyte’s liability under the Covenant

Guarantees. However, the Part 24 application proceeded on the basis that Mr Whyte

may be entitled to assert a set off against his liability for misrepresentation. There is

however a basic factual issue which remains unresolved. The collateral warranty is

said to arise from statements made on 9th May 2011 at the offices of Collyer Bristow

by Mr Bryan and Clark Wilmott. However, Mr Bryan’s unchallenged evidence is that

there was no meeting at Collyer Bristow’s office in London on that date. Completion

of the transaction on that date was effected by telephone exchange between the

parties’ respective solicitors. Furthermore, Mr Bryan denies that either he or

representatives of Clark Wilmott ever gave warranties in the terms suggested by Mr

Whyte. Surprisingly, Mr Whyte simply fails to deal with this important factual issue

in his statement at all. Paragraph 3 of his witness statement is not sufficient to help

him. On this basis alone I do not consider that there is a real prospect of successfully

arguing that a collateral warranty was provided.

59. The loss claimed in connection with the profit to have been made on the

transaction is said by Ticketus to be reflective loss, namely loss suffered by Rangers

and/or the second and third defendants. Mr Watson-Gandy relies on a passage from

the speech of Lord Millett in Johnson-v-Gore Wood & Co [2002] 2 AC 1 (at 62 C to

E):

“ Where the company suffers loss as a result of a wrong to the

shareholders but has no cause of action in respect of its loss, the shareholder

can sue and recover damages for his own loss, whether either in capital or

income nature, measured by the diminution in the value of the shareholding.

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He must, of course, show that he has an independent cause of action of his

own and that he has suffered personal loss caused by the defendant’s

actionable wrong. Since the company itself has no cause of action in respect of

its loss, its assets are not depleted by the recovery of damages by the

shareholder.

The position is, however, different where the company suffers loss

caused by the breach of a duty owned both to the company and to the

shareholder. In such a case the shareholder’s loss, insofar as this is measured

by the diminution in value of his shareholding or the loss of dividends, merely

reflects the loss suffered by the company in respect of which the company has

its own case of action.”

60. Mr Watson-Gandy submits that the claim by Mr Whyte is a stand-alone claim

and not reflective of loss suffered by any of the relevant corporate entities in respect

of a claim which such entities might have pursued. I do not consider that contention

is correct. It seems to me that any claim which Mr Whyte may have arising out of the

loss of opportunity to profit from the Rangers transaction is as much a loss of the

second and third defendants (and possibly Rangers itself) as Mr Whyte. It is therefore

not a head of loss which is an exception to the reflective loss principle.

61. Mr Whyte also claims loss in relation to foreseeable reputational harm and his

inability to enhance his reputation. Such damages are not generally recoverable, but

Mr Watson-Gandy points to Malik -v-Bank of Credit and Commerce International SA

[1998] AC 20. He says it is well understood that the acquisition of football clubs has

long been seen as a ‘vanity purchase’ by wealthy businessman and therefore loss of

the type claimed by Mr Whyte is recoverable under the Malik principle. In my

judgment, Mr Whyte is not able to establish that this claim for loss of reputation and

the loss of ability to enhance his reputation creates a head of loss which can properly

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be claimed. There is a considerable distance between damages for loss of future

employment prospects resulting from the stigma of former employment and the claim

for loss of reputation made by Mr Whyte. I do not consider that such a head of loss

has a real prospect of success.

62. Considerable care is needed to avoid conducting a mini-trial on an application

under Part 24. On the other hand, the court does not need to be credulous when

examining the defendant’s evidence. Mr Whyte says that if this case is not allowed to

go to trial it will cause him substantial injustice and he should be allowed to cross-

examine Ross Bryan and other members of the Investment Committee. He says that

that the attitude of those individuals in relation to his disqualification should be

examined and the issue of reliance/inducement is a matter which requires cross

examination. He says cross examination and disclosure “might be illuminating”.

63. In addition, he says that he has been hampered in providing a full defence to

the claim on the Part 24 application because he has not been able to obtain evidence

from Mr Betts or from his solicitors without a witness summons being served. I am

not satisfied that Mr Whyte has made any real effort to obtain evidence from Mr Betts

or from his lawyers. There is no indication in his witness statement of the steps he

has taken, if any. He has not exhibited, for example, emails or letters with the

individuals concerned asking them to help and no particulars are given about their

refusal to assist. The difficulties he has put forward cannot be established by his bare

assertion of them.

64. In addition, Mr Whyte says that Ticketus has chosen not to produce copies of

reports made by Mr Bryan to the Investment Committee and minutes of the

Investment Committee meetings. I do not consider that the complaint assists Mr

Whyte. Both set of documents were expressly referred to in the witness statement of

Mr Bryan. It would have been open to Mr Whyte to give notice under CPR 31.14 and

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to have inspected those documents as of right. He cannot rely on his own failure to

take that step.

65. The second limb of CPR 24.2 requires the court to consider whether there is a

compelling reason why the case should go to trial even though the court may have

formed the view that the defendant has no real prospect of successfully defending the

claim. Mr Watson-Gundy suggests that a case of this type, where this is an allegation

of fraud, and, as he contends, Ticketus has acted in a harsh and unconscionable

manner, should go to trial. On the other hand, applying the requirements of the

Overriding Objective, the court should deal with claims in way that saves expense,

and expeditiously and fairly (to both parties). In my judgment, it would not be right to

require this claim to go to a full trial when Mr Whyte has no real prospect of success

simply to permit him the luxury of cross examining Ticketus’ witnesses in the hope

that ‘something will turn up’. I do not consider that there is a real prospect of that

happening. Mr Whyte has had a more than adequate period of time in which to

prepare his case and the material he has placed before the court is wholly

unconvincing.

66. Ticketus has made a claim for £541,003 by way of expenses it has incurred.

Although, in principle, loss under this head is recoverable, I do not consider that the

quantum of this head of damages has been adequately made out on the evidence

placed before me. Further evidence is needed in order to demonstrate that this loss

flows from reliance upon the misrepresentation and the quantum of the loss claimed.

67. I accept Ticketus’ calculation of the principal loss they have suffered.

Judgment will therefore be entered in favour of Ticketus for £17,683,338, plus

interest, and I will direct an inquiry into the expenses incurred by Ticketus that may

be recoverable as damages.

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