Scotland's chief law officer admits "wrongful" restraint order over former Rangers administrator

A four-year-old ruling seen by the Herald further reveals that Lord Glennie, one of Scotland's senior judges said the Crown were responsible for "a clear and very serious breach of the duty of disclosure and candour" in getting the restraint order.

The ruling criticising the Crown Office came a matter of months before legal firm Holman Fenwick Willan was awarded £500,000 costs after police and prosecutors were found by the High Court in London to have "abused state powers" by carrying out an illegal raid and seizing privileged documents in connection with their failed attempts to prosecute anyone in relation to alleged fraud over the purchase of the club in May, 2011.

Lord Advocate James Wolffe QC

The Lord Glennie judgment came two years before former Rangers owner Craig Whyte, who was the last man standing in the fraud conspiracy case, was acquitted of taking over the club by fraud at the end of a seven-week trial in June, 2017.

It was referred to as Mr Whitehouse, 53, who is suing Scotland's most senior prosecutor, the Lord Advocate James Wolffe QC, lost a battle over the disclosure of documents which he wanted to use as evidence to show that the Crown knew there was no justification for the restraint order. Lord Brodie decided that correspondence between a senior prosecutor and in-house lawyers at the Crown Office relating to proceeds of crime proceedings was protected by “legal advice privilege” and therefore exempt from disclosure.

Mr Whitehouse, who was in court today said the admission was a "significant development" as the damages case is due to go to a full hearing in June.

The restraint order case forms part of the ongoing multi-million claim by ex-Rangers administrators David Whitehouse and Paul Clark over wrongful detention over allegations of fraud. The Lord Advocate at the time was Lord Mulholland.

Mr Whitehouse and Mr Clark from Duff and Phelps faced criminal proceedings in the wake of Mr Whyte's purchase of Rangers from Sir David Murray for a £1 and its subsequent sale before a judge dismissed the charges. In the latest development, Lord Brodie described an "unusual action" which sees Mr Whitehouse and his wife Lisa sue the Lord Advocate for damages on the basis he made an 'ex parte' restraint application for the restraint order made under section 121 (2) of the Proceeds of Crime Act 2002 base on false allegations.

Lord Brodie said that Mr and Mrs Whitehouse aimed to prove that claims or averments in the restraint order petition "were entirely unsupported by evidence" and that prosecutors had evidence in their possession that undermined their case.

"Remarkable as these averments may be thought to be, equally remarkable is the fact that the defender (the Lord Advocate) effectively admits them," said Lord Brodie.

The ruling further reveals that the Lord Advocate admitted that his actions “in applying for and securing a restraint order against the pursuers (Mr Whitehouse and his wife) on 4 December, 2015 were wrongful in the respect of a failure to discharge the duty of disclosure and candour as found by the judge when recalling the order.”

Lord Glennie 'recalled' the Proceeds of Crime restraint order granted by Lord Clarke over the assets of Mr Whitehouse and his wife.

His ruling in the Lord Advocate's restraint order petition, was critical of the Crown Office and Mr Whitehouse says the order was granted based on "grossly misleading and false information and representations made to the court".

He said that if such an application was to be made without the respondent or his representative, there was a "very high obligation of candour on the party making the application" and it involved putting before the court any material that might be considered relevant, including counter-arguments.

Lord Glennie said there were "fundamental defects" with the arguments put to the court to allow the order to be granted.

Firstly there was no claim that there was any risk that unless an order was made, Mr Whitehouse or his wife would remove their assets.

He said there had been a long period between the initiation of criminal proceedings against Mr Whitehouse and the demand for a restraint order during which there had been no removal of assets.

He said with an "absence of any suspicious activities" the court would require to be told why there is suddenly a concern.

"There is absolutely none of that in the present case," he said. "The court would have no inkling that there had been a period of 13 months of suspicion-free activity. "That seems to me not only a failure to aver material facts, but to amount to a clear and very serious breach of the duty of disclosure and candour".

The Crown Office had claimed Mr Whitehouse had benefitted from the proceeds of crime having been paid personally £3.1m for the administration, and that he had had a share of the proceeds of MCR, a UK-based restructuring and turnaround firm which was bought over by Duff and Phelps, which had advised Mr Whyte on his controversial takeover.

One of the key tenets of the Crown case was Mr Whyte's scheme in advance of the takeover, to sell off rights to three years of future season tickets to investment firm Ticketus in a bid to raise £24 million and pay off debt as part of a share purchase agreement with Sir David Murray.

Mr Whitehouse is claiming the restraint order led to a loss in a particular investment opportunity, and he and his wife complained of having difficulty in their financial affairs, and having "suffered loss of reputation, anxiety and distress".

But Lord Brodie said that the Lord Advocate's "admission of (uncharacterised) wrongful conduct" does not extend to an admission that they suffered loss, injury and damage "as a result of the defender’s infringement of their rights under article 8 of the European Convention on Human Rights".

Mr Whitehouse and Mr Clark are continuing to sue the Lord Advocate, former Police Scotland Chief Constable Philip Gormley claiming alleged wrongful detention, arrest and prosecution based on breaches of articles 5 and 8 of the European Convention on Human Rights (ECHR).

The former administrators argue that the Lord Advocate initiated and pursued “a wrongful prosecution” and there was no evidential basis for the charges brought against them.

Mr Whitehouse, 52, of Cheshire, is seeking £9 million damages and Mr Clark, of Surrey, in excess of £5 million.

Lord Glennie said he had been shown documents by Mr Whitehouse's QC that make it clear administration fees were paid to his employer Duff and Phelps.

"It does not matter whether the Crown accept that," he said. "It seems likely the Crown knew that could be the contention advanced by David Whitehouse. Even if the Crown did not know that, it would not have taken much to ask internally what the position was, and to set out in the petition what the defence position might be. That is simply not good enough."

He said the same criticism applied over claims made over the MCR sale.

Two years ago Holman Fenwick Willan, which at the time acted as Duff and Phelps’ lawyers were awarded costs was awarded after police and prosecutors were criticised for carrying out an illegal raid which led to calls for a Scottish Government review of procedures.

Lord Justice Gross and Mr Justice Mitting in a case that they described as "out of the norm" ruled the search warrant was of "excessive and unlawful width" containing no provision for dealing lawfully with documents held that were subject to legal professional privilege (LPP).

"The search and seize operation was heavy handed and resulted in the seizure of both documents subject to LPP and irrelevant documents not covered by the warrant," the said.

"Taken in the round, which we are entitled to do, actions... were an abuse of state power."

The Crown Office declined to comment.