£25m fees paid to experts handling Rangers collapse - as creditors lose over £90m

One leading expert in legal costs and budgets said the level of fees was "absolutely outrageous" and said it showed the Scots legal system was not set up to protect the general public.

So far insolvency firm BDO, the liquidator of 'oldco' Rangers, has reported distribution of over £3m to those owed money.

It means that, barring any success in outstanding legal claims, the maximum creditors would get right now would be a third of that taken by those responsible for handling the fallout of the Rangers meltdown.

The cost of handling the club's financial implosion covers the ten years since it fell into administration under former owner Craig Whyte.

Mr Whyte paid a token £1 to purchase the club from Sir David Murray in May, 2011 while promising to wipe out its £18 million debt but amid concerns by board members about his ability to invest sufficient funds. Legal firms acting for the liquidators of 'oldco' now renamed RFC 2012 plc have received £13.6m, while the liquidators bill stands at £6.13m million by December.

Before BDO took on the liquidation in October, 2012, Duff and Phelps amassed £3.484 million in fees plus £1.326 million in legal fees over the eight months they acted as joint administrators.

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The legal bill includes the £353,757 cost of employing counsel in the failed fight to convince the Supreme Court that the club's use of Employee Benefit Trusts to pay players and staff were loans that were not liable for tax.

The insolvency is expected to have left a final debt of just under £100m, and has left thousands of unsecured creditors out of pocket.

They ranged from corporate giants such as Coca-Cola to a picture framer in Bearsden and a lady called Susan Thomson who ran a face-painting business and was owed £40.

Four months later, the company's business and assets were sold to the Sevco consortium fronted by former Rangers chief executive Charles Green for £5.5m Among those who lost out from the financial collapse were 6,050 fans and holders of bonds who were owed over £7.7m by the club.

BDO has said that claims totalling just £1.571m were received – just 20% of what was expected.

The liquidators told bondholders in February, 2020 that they have no further right to make a claim because they are out of time.

When Rangers went into administration some fans urged bondholders to waive the sum due to them because it might help with the club's survival – but that was before it was plunged into liquidation.

It was in 1990 that Rangers turned to fans to help finance a multi-million-pound reconstruction and refurbishment of the main stand at Ibrox.

The then Premier League champions offered 6,807 bonds, costing between £1000 and £1650, to their supporters and the business community to raise more than £8.5m towards the £12.5m cost of the new three-tier stand development.

The changes were aimed at making Ibrox all-seated, to comply with new legislation coming from Lord Justice Taylor's report into the Hillsborough disaster.

Costs lawyer, Jim Diamond Leading legal costs expert Jim Diamond said the level of fees charged by lawyers and accountants are "absolutely outrageous in comparison to the pathetic returns to the creditors".

He added: "I have raised concerns about the Scottish legal system in regards legal costs and costs information for a number of years as frankly it is not set up to protect the general public.

"The chances of the Scottish Law Society and the Faculty of Advocates dealing with a complaint over legal fees, quickly, efficiently and most importantly with transparency are slightly above 0%."

One creditor said the levels of fees being paid out were at the expense of those owed money.

"It cannot be right that those owed money either lose out or get a few pence for every pound owed but the lawyers and consultants seem to rake it in. It is unbelievable that this is allowed to happen."

According to BDO records, an interim dividend of 3.91p in the pound was declared five years ago, with a distribution of £1,357,696.59.

A second interim dividend of 3p in every pound owed was paid two years ago to those with agreed claims amounting to £1.593m with a further £1.049m kept back pending resolution of the remaining claims.

Papers reveal that £8.4m of the legal fees including "outlays" which are solicitors' expenses have so far gone to London-based legal firm Stephenson Harwood and were mostly over the settlement of a claim against London-based Collyer Bristow the solicitors involved in the controversial takeover of the club by Mr Whyte. The liquidators banked £24m from that claim.

BDO said £5.4m of the Collyer Bristow fees were the result of it being "necessary to instruct" the company on a "no win, no charge" conditional fee arrangement basis.

That deal meant that Stephenson Harwood were entitled to their costs plus an extra 75% to 100% to "compensate them for the risk that they would not get paid if the litigation failed".

Edinburgh-based Shepherd and Wedderburn have had £1,549,417 and £1,130,505 in outlays so far while Brodies solicitors have had 1,572,586 in fees and outlays of £685,323 and Levy and McRae have had £84,051 and £17,044 outlays.

BDO say it has recouped £4.7m from the joint administrators of Rangers to go into the creditors' pot after a senior judge ruled there was a "breach of duty" in not putting Rangers assets such as Ibrox and Murray Park up for sale after the club collapsed.

Lord Tyre has made a judgement after former club administrators Paul Clark and David Whitehouse of Duff and Phelps were accused in court of a seriously flawed strategy in raising money for those out of pocket by the club's financial implosion.

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But the award is a fraction of the £47m BDO were claiming from Mr Whitehouse and Clark over the way they handled the insolvency of the club.

Lord Tyre found in favour of BDO saying ‘breach of duty’ compensation was due to the loss of a chance to lease and sell Ibrox (£750,000), and a loss of a chance to sell Murray Park (£850,000).

Further compensation was paid for a loss of a chance to sell forward Steven Naismith (£827,000) and other marketable players (£977,000).

Naismith, a Scotland international was subject to several bids, the final one being worth £1.7 million, during the administration period, but eventually signed for Everton for free.

Mr Whitehouse and Mr Clark - who were employed by financial services firm Duff & Phelps - were appointed by the Court of Session as administrators after the taxman took Rangers to court for £18m of unpaid tax.

Mr Whitehouse and Mr Clark went on to sell the business and assets of the old company that ran Rangers to Charles Green's consortium for £5.5m.

But just months later a judge approved a Duff and Phelps motion to hand over what remained of the old company to liquidators BDO.

Mr Whitehouse and Mr Clark defended the action by BDO claiming the liquidators expected a “bonkers” strategy of a ‘fire sale’ of Rangers which would have “effectively shut the club down for good”.

Their legal team claimed that they did not want to sell players on, make redundancies, or sell assets as they feared these moves would put off potential buyers.

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BDO argued that the administrators did not cut enough costs over the insolvency and should have raised more money for creditors.

Mr Whitehouse, Mr Clark and Mr Green were later among seven indicted over fraud allegations relating to Rangers - before the case against them was dropped in June 2016.

Both Mr Whitehouse and Mr Clark were successful in a multi-million pound malicious prosecution action against the police and prosecutors last year.

Prosecutors also admitted that Mr Green, who was also arrested during the probe and eventually acquitted, was wrongfully taken to court - and that the prosecution against him was malicious.