SCOTLAND'S most senior law officer has admitted malicious prosecution of the former administrators of Rangers in connection with the collapsed club fraud case.

In an unprecedented development the Lord Advocate has also admitted a breach of human rights in the investigation which has led to the former administrators conducting a multi-million pound damages claim to clear their names.

It came in a fast-tracked lawsuit by David Whitehouse and Paul Clark who are suing both the Lord Advocate and the Chief Constable.

Mr Whitehouse and Mr Clark, who were joint administrators at the Ibrox club in 2012 following its takeover by Craig Whyte, have been awarded a huge interim expenses award of £350,000 and £250,000 respectively by Lord Tyre.

Iain Ferguson QC for Mr Clark described the government's actions in pursuit of the men as "nothing short of a disgrace".

The case comes three years after 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.

Mr Whitehouse and Mr Clark from Duff and Phelps faced criminal proceedings with others 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.

Mr Whitehouse, of Cheshire, subsequently brought a damages claim against the Lord Advocate James Wolffe QC and the former chief constable of Police Scotland, Phil Gormley, for £9m. Mr Clark, of Surrey, sued for £5m.

HeraldScotland: The case against the former administrators of Rangers Paul Clark (right) and David Whitehouse is continuing

Mr Whitehouse and Mr Clark

Their actions stemmed from their alleged treatment by the police and prosecution authorities.

It is claimed that at no stage was there any justification for their detention, committal or prosecution and that the Crown never had sufficient evidence for any of the charges it brought.

Mr Whitehouse and Mr Clark won a ruling from a specially convened bench of five judges at the Court of Session in Edinburgh last year that the Lord Advocate did not have absolute immunity from a civil damages claim in such circumstances.

Now Gerry Moynihan QC, for the Lord Advocate, says the Lord Advocate's "preferred solution" was now to "mediate the claims".

Mr Ferguson said:"Frankly, it is nothing short of a disgrace that the government has behaved in this fashion to private citizens who it now accepts should never have been prosecuted. It is only because of the determination of Mr Clark and Mr Whitehouse to clear their names that this situation has come about and the bottom line is that less wealthy individuals would never have reached this point.

"That is completely unacceptable."

Roddy Dunlop QC, for Mr Whitehouse said in court: "We now see that the Crown did maliciously and without probable cause prosecuted both of these gentlemen. The acceptance is welcome."

The development comes four years after London-based legal firm Holman Fenwick Willan, who were acting for Duff and Phelps, 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 the failed Rangers fraud case.

HeraldScotland:

It emerged earlier this month that former Rangers director Imran Ahmad was to receive a public apology from the head of Scotland's prosecution service and significant damages after he was wrongly pursued prosecution on fraud charges.

He initially wanted £2m in damages but it is understood he is now claiming tens of millions of pounds.

Former Rangers chief executive Charles Green is also suing Police Scotland for wrongful arrest after charges against him were dropped.

In October, last year Scotland's senior judge, the Lord President, Lord Carloway, overturned a previous court decision that the Lord Advocate was immune from the legal action by Mr Whitehouse and Mr Clark.

"Privilege is not a defence to malicious prosecution," he said.

The Lord Advocate and chief constable had been contesting the actions.

Mr Moynihan confirmed that the Lord Advocate had conducted a "fundamental and comprehensive review" of the case after Lord Carloway's ruling.

"That has culminated in a minute of amendment that admits liability for a malicious prosecution...," he said.

"Secondly it admits a breach of Article 5 [of the European Convention on Human Rights] in relation to the period in custody of the police following the expiry of the statutory detention period.  And finally it admits a breach of Article 8 [of the ECHR] with the respect of the publication of a press circular in February, 2016."

He also said that he would admit "a lack of probable cause".

Mr Moynihan also said it "cannot be said... that the Lord Advocate has been unreasonable in his conduct of this case".

In June, last year, the Herald revealed the Crown Office paid compensation estimated at £80,000 to Mr Whitehouse and his wife over the granting of a restraint order over his assets which Scotland's chief legal officer admitted was "wrongful".

The Whitehouses had said that the granting of a restraint order in connection with the Rangers fraud case, which was eventually reversed, led to a loss in a particular investment opportunity, issues with making financial transactions and that they suffered a "loss of reputation, anxiety and distress".

A judgment by Lord Brodie over the release of papers involved in the case, revealed that the Lord Advocate admitted that actions in applying for the restraint order against the Whitehouses in 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". The Lord Advocate at the time was Lord Mulholland.

Lord Glennie, one of Scotland's senior judges reversed the granting by Lord Clarke of a Proceeds of Crime restraint order over the assets of Mr Whitehouse and his wife.

In his ruling, Lord Glennie said the court were previously not told that there had been a period of 13 months of suspicion-free activity while Mr Whitehouse, who was Manchester-based managing director with Duff and Phelps, was subject of the Rangers fraud investigation.

He 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 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.

Lord Glennie in his judgment had 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.

The claims case has been adjourned for two weeks.