A contempt of court row has blown up as ex-Rangers administrators Duff and Phelps sue Scottish prosecutors for £25m in legal action over a malicious prosecutions scandal.

The multinational company based in New York, whose employees were wrongfully arrested during a Rangers fraud investigation, has lodged a claim demanding compensation from the Crown Office for “reputational damage”.

Legal representatives for Duff and Phelps, say they were effectively accused of contempt of court over documents it needed in pursue of its claim against Scotland's most senior law officer, the Lord Advocate, who is both the head of the prosecution service and the Scottish government's chief legal advisor.

The company has instructed Roddy Dunlop QC, dean of the Faculty of Advocates, to pursue the action at the Court of Session believing it has lost significant earnings since their employees David Whitehouse and Paul Clark, who acted as administrators of Rangers, were wrongfully prosecuted.

The men, who have already secured a £24 million payout including costs in a malicious prosecution damages claim, were made administrators of Rangers in 2012 as the club were plunged into financial meltdown.

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Mr Whitehouse, Mr Clark and five others were subjected to detention and criminal proceedings in relation to fraud allegations in the wake of Craig Whyte's disastrous purchase of Rangers from Sir David Murray for £1 in May 2011 and its subsequent sale before a judge dismissed all charges.

HeraldScotland:

The fraud case arose after the club under Mr Whyte went into administration nine months after he bought it, with debts soaring over £100m while the team ended up relegated to the bottom rung of the Scottish football pyramid.

The New York-based firm claims it has suffered significant lost earnings since Mr Whitehouse and Mr Clark were wrongfully arrested.

A row has now blown up over the potential use of documents in relation to the case of Mr Whitehouse and Mr Clark to prove Duff and Phelps' argument.

And Roddy Dunlop QC for Duff and Phelps said that they had accused of effectively in contempt of court by representatives of the Lord Advocate in relation to legal restrictions over access to documents to prove their case - which they already had as a result of the Mr Whitehouse and Mr Clark case.

Mr Dunlop said an 'iomega type" procedure had already been used to share documents between various damages actions related to the wrongful prosecutions in the collapsed Rangers fraud case and to allow Mr Whitehouse to lodge complaints to regulatory authorities.

Mr Whitehouse earlier this year handed over a dossier that making serious allegations against police officers and Crown officials described as an iomega minute and was key to a documents release in his case and a future criminal probe.

"It's resisted, I'm told on the basis that there other ways of doing it. There should be a specification of documents, there should be some rather complicated procedure, whereby the Lord Advocate might give consent for the use of certain documents.

"The proposals that have been put forward would inevitably result in partial disclosure or partial permission. And the difficulty we labour under is you can't unknow that which you know and there would be an ongoing concern that if we have partial disclosure, partial permission, we inadvertently breach the implied restriction."

He said representatives for the Lord Advocate had already suggested "that we've already breached the implied restriction".

"It is a suggestion which I refute and I don't think is insisted in. But there we have it in the pleadings, there's a suggestion we're already effectively in contempt of court," he said.

"I do not want to be running this action under constant fear of finding myself in contempt of court.

"It is something I'd really rather avoid."

He suggested that Lord Tyre, who is hearing the case, should grant use of the iomega minute documents.

Lord Tyre said: "If I am reading it correctly, you're not actually asking for production of any documents that are not already in the hands of Mr Whitehouse?"

Mr Dunlop responded: "We just want to use that which we already have."

Gerry Moynihan QC for the Lord Advocate said there was a matter of "principal" at stake in that Duff and Phelps should only have access to documents that have relevance to the case.

"I acknowledge the fear, frankly is I think the correct term [Mr Dunlop] would use, that he and those with whom he works are in contempt of court by even suggesting particular documents might be required.

"The issue in relation to the iomega one is one of principal and is whether the pursuer is restricted to documents that have relevance to this case, or that the pursuer can simply say I want some and so I can simply access everything.

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"It's not just an issue in this case, it's a matter of principle, because otherwise documents produced in court could simply go the rounds. Pass the parcel."

But Lord Tyre said: "I wonder whether that's overstating it Mr Moynihan. This situation here is peculiar. We have a situation in which documents are in the hands of two partners of a firm of a company and it's the company which is asking to use them. I think it's exaggerating a bit to describe that as going the rounds."

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

The case is set to go to an initial mediation and the debate over the iomega documents has been adjourned till a later date to be fixed.

Five of the seven men charged in relation to Rangers fraud cases have been pursuing compensation complaints over wrongful arrest against either Police Scotland, the Crown Office or both with collective payouts and claims now standing at £100m.

Apart from Mr Whitehouse and Mr Clarke, Charles Green, whose Sevco consortium took over the club in June, 2012, also won a £6.4m payout.

Cases involving Duff and Phelps adviser David Grier, and Mr Green’s associate Imran Ahmad, are still ongoing.

In August, last year it was confirmed former Rangers director Imran Ahmad is to receive a public apology from the head of Scotland's prosecution service.

Mr Ahmad will also receive significant damages, and is pursuing an amount also believed to run to £30m, after he was wrongly prosecuted on fraud charges.

He was prosecuted in 2015 over the takeover of the Ibrox club in 2012 but all charges were dropped in 2018.

Court of Session judge Lord Tyre has also ruled that there was no “probable cause” to prosecute him Mr Grier, who is also seeking £5m damages from the Lord Advocate and £9m from Police Scotland.

Mr Whyte ended up being the last man standing in the fraud conspiracy case and was acquitted of taking over the club by fraud at the end of a seven-week trial.

Also charged in the conspiracy was Gary Withey, the Surrey lawyer with Collyer Bristow who advised Mr Whyte during his ill-fated takeover at Rangers ten years ago and who also saw charges dropped. He died two years Details of the malicious prosecutions scandal started emerging four years ago when the Herald revealed that 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.