31/05/2011 301 Comments
Rangers’ previous board, and its new owner, made much of the expert legal opinion they have received assuring them that they would win their appeal against the £24m underpayment, £12m interest, and £18m penalty assessments from HMRC. For almost a year, Alastair Johnston deflected and denied, but beginning on 1 April of this year, he began to signal that things were less certain for Rangers. Once Craig Whyte had secured funding for his takeover (from sources unknown), Johnston and other directors began to sound the alarm about the consequences of Rangers’ new owner being unable to pay these bills. Craig Whyte’s retort, and only comment on the tax case, was to dismiss the possibility of losing the case based upon the legal advice received.
In a previous blog post, we discussed the source of Rangers’ original legal advice on Employee Benefit Trusts (EBTs), Paul Baxendale-Walker. We showed that Mr. Baxendale-Walker is a colourful character who runs one of Britain’s largest pornography production firms. More relevant is the fact that Baxendale-Walker has been struck off by The Law Society of England and Wales: he lost his ability to practice law related to malpractice involving a company that used one of Baxendale-Walker’s EBTs to loot its own pension fund. (Baxendale-Walker gave a character reference to a bank for a “person” who did not in fact exist).
Mr. Baxendale-Walker is an ebullient chap and not someone to take such a professional insult lying down. When you have one of the greatest legal minds in history, it would surely be a waste of your genius to allow lesser mortals to deprive the world of your brilliance. So Baxendale-Walker launched his counter offensive. He took The Law Society, Deloitte & Touche (the accounting firm), and several individuals who were involved in the case against him to court. The outcome can be found here: http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/QB/2011/998.html&query=Taylor&method=boolean
The link above provides more details than most would care to read, but the short version is that his claims were dismissed as being without foundation. For those with an hour to spare, the link is worth a read. It is like a plot from a bad spy novel. The number of judges who seem to find that Baxendale-Walker’s statements lack credibility is quite remarkable. In the face of rules that prevent lawyers from paying commissions to those to find clients for his EBT schemes, Paul Baxendale-Walker appears to have just formed a company that was held in trust, but acting on his behalf, to get around the restrictions. The courts looked through this device and saw it for what it was: a sham. Most bizarrely, Baxendale-Walker took to pretexting. He pretended to be an HMRC investigator in emails and phone conversations with those who were ‘persecuting’ him to try to get them to make damaging admissions. (According to the court papers, pretending to be a representative of HMRC is possibly a crime in itself). A sound recording expert witness gave testimony that at least one of the conversations taped by Baxendale-Walker had been deliberately altered. However, the important bit is the outcome. Eight of the nine defendants sought to get a dismissal. On reviewing the evidence in the case, The Honourable Mr Justice Supperstone found in their favour and dismissed the case against them on a number of grounds, but principally “The claims against each of these Defendants should be struck out on the basis that they have no real prospect of success”.
Rangers have never specified who is giving them this advice; that there is no risk of having to pay anything on the tax assessments. While Baxendale-Walker’s co-author on a book on EBTs, Rangers’ own counsel in the current tribunal process, Andrew Thornhill QC is also known to be gregarious character never afflicted with self-doubt, Baxendale-Walker admitted last year (in an interview with Phil MacGiolla Bhain) that he had recently completed some work for Rangers. (I hope that this was general consulting work and that he was not giving legal advice, as he is not authorised to do so). It is just an educated guess, but I suspect that Baxendale-Walker will prove to be the “expert legal opinion” on which Rangers are using as the tissue behind which they can hide their admissions of the risks the club really faces.
Anyone taking the time to read the court papers in the Baxendale-Walker case will gain a detailed insight into precarious legal status of EBTs, the findings against those who have been blatantly misusing them, and the value to place on expressions of confidence from Paul Baxendale-Walker on a favourable outcome.