Court rejects intra/ultra vires distinction for reviewing errors of law

Businessman Mike Ashley has failed with his petition for judicial review of a decision by the Scottish Football Association that he was in breach of its articles of association through his nomination of one Derek Llambias as a director of Rangers FC.

Lord Brodie in the Court of Session rejected a challenge by the SFA to the court's jurisdiction, holding that any distinction in Scots law between alleged intra vires and ultra vires errors of law was no longer recognised either in private law or public law cases, but further held that none of the grounds of review succeeded.

The SFA had taken disciplinary proceedings against Mr Ashley, alleging breach of its article 13, which prohibited any person who was involved in, or had “any power whatsoever to influence”, the management or administration of one club, from being similarly involved at the same time with another club.

Mr Ashley controlled a company, MASH, which had interests in Newcastle United and then entered into a credit facility with Rangers which entitled it to appoint up to two directors to Rangers' board. Mr Llambias was allegedly nominated under this agreement. A disciplinary tribunal, upheld by an appeal tribunal, found the charge proved and fined Mr Ashley £1,000.

Before the court the petitioner argued that it was MASH and not he who had entered into the agreement, which was inconsistent with the complaint; that there was no evidence that Mr Llambias had been nominated by himself or MASH; and that appointing a director was not in itself being involved in the management of the club.

The respondents argued that the court had no jurisdiction: the decisions sought to be challenged arose from a private law relationship, and as under the respondents' articles the parties agreed not to take differences to court, the only issue that could be brought before the court was an alleged excess of jurisdiction.

Ruling that the court had jurisdiction, Lord Brodie said that the statement in Watt v Lord Advocate (1978) that the Court of Session had never had power to correct intra vires errors of law was based on a distinction that had not been upheld in later English cases, and Lord Hope in Eba v Advocate General (2012) had said that on this point Watt should no longer be followed. There was no reason to confine this to public law cases, as the SFA argued, and it was questionable whether it was practicable to do so.

“Accordingly,” he concluded, “the respondent’s plea of no jurisdiction is based on a distinction which has not been expressly recognised in the authorities and which relies upon a supposed dichotomy which is slippery at best and in practice has increasingly been ignored.”

However none of the three grounds of review could be upheld. First, the complaint gave fair notice that it was the actions of MASH, with the petitioner as controlling party, that were founded on as giving rise to the petitioner's breach of article 13. It was not a case of piercing the corporate veil, but of finding that the petitioner was acting through his associate MASH, which was expressly prohibited by article 13.

Secondly, there was evidence that entitled the tribunal to find, as a matter of inference, that Mr Llambias had been appointed or nominated by the petitioner or MASH.

Thirdly, in considering whether there had been a breach of article 13 the question of whether any power or influence was actually exercised, or whether that was for the benefit of the clubs involved, was not relevant. As stated by the appeal tribunal, the “very granting of the right to nominate directors in and of itself gave rise to the possibility of the petitioner influencing the affairs of two clubs”.

The petition was accordingly dismissed.

Click here to view Lord Brodie's opinion.