Walter Smith and the Scottish Football Association were last night embroiled in a bitter war of words as the Scotland coach was installed as manager of Rangers.

The SFA said legal proceedings would be undertaken against Smith for breach of contract and against Rangers for inducing it.

The cases for the defence and for the prosecution were made forcefully as Smith and David Taylor addressed news conferences at Murray Park and Hampden respectively.

Within minutes of his unveiling, alongside the management team of Ally McCoist and Kenny McDowall, Smith condemned Taylor and John McBeth, the president, for "posturing" and attempting to curry favour with the Tartan Army by looking like "hard-nosed businessmen".

Smith hinted at a two-faced approach from his previous employers during negotiations this week but revealed the situation could have been avoided had the SFA offered him a new contract last year.

His original deal included a clause, at the SFA's behest, which enabled them to negotiate an early termination at the end of Scotland's European Championship qualification campaign in November.

He expected to be replaced in the event of Scotland failing to make it to Euro 2008 in Austria and Switzerland, and, with Rangers offering a three-year contract, he admitted employment security was a factor in his decision.

He also insisted his principles would have prevented him accepting the offer from David Murray, had the SFA given him a deal that would have taken him to the end of the qualifying campaign for the World Cup in 2010.

"If I had signed a new contract, I wouldn't have left but, as it was, I could have been unemployed by November," he said. "That was a circumstance, but the main one was I wanted to accept this job.

"If I had signed an extension, I wouldn't have, and couldn't have, walked away. It would not have been possible and, in my eyes, it would have been wrong.

"How many people would knock back the opportunity of three years' employment with Rangers over a job with Scotland that could end after November if we don't qualify for the European Championships?

"If we didn't reach Euro 2008, they would have come to an agreement for me to leave, like they did the last four managers.

"I agreed to the clause and knew myself that, if we didn't get to Euro 2008, then that might have been the end of it. That was the reality. I was asked if I wanted to enter discussions but I was quite happy with the situation the way it was. That didn't stop them from offering one, though."

Taylor insisted there had been discussions with Smith over an extension and denied the manager had expressed disquiet about the deal.

"An extension was talked about with Walter," said Taylor. "He was happy with his contract as it was and said that to me on a number of occasions. You may remember there was a flurry in the media about this in October.

"We spoke about it and agreed there was no problem. To come along now and say it was an issue is not, I think, a particularly important point."

Murray castigated the SFA for the amount of compensation they were seeking.

"They the SFA started off at a figure which was ludicrous and unbelievable," said Murray, "but I hope we can sort it out amicably. It is stupid that a member club should be arguing with the SFA over what is now not a lot of money compared to what they were asking for before. At least they the SFA have now lowered their bar a little. Martin Bain has been working on the issue."

Asked whether Rangers had been guilty of "tapping-up" Smith or illegally inducing him to leave the Scotland job, the Rangers chairman seemed hesitant and unclear while making his denial.

"Walter is a friend of mine: he comes to my house and I go to his house," said Murray. "It's not as if I tapped him at a party. We did not . . . we spoke to the SFA at the same time. We've done everything correctly. I don't think there has been anybody who has indicated that we've done anything wrong."

Taylor, though, described as "a very interesting development" comments from McDowall, the new Rangers first-team coach, which appear to strengthen the SFA's hand.

McDowall was quoted on a meeting with Smith to discuss his post at Ibrox, before the manager handed in his resigna-tion letter yesterday.

Even without that unwise admission, the SFA are confident in their case for a substantial settlement.

"There will now be legal proceedings against Walter for breach of contract and Rangers Football Club for inducing that breach of contract," said Taylor, a former lawyer.

"It is done with regret. We tried very hard to get an agreement - I worked on it until 10.30 last night - but the figures on offer from Rangers were not acceptable. Football should try and resolve these matters internally but, if we have to, then we will go to court.

"The SFA feel wronged and there is a clear breach of contract. We are the injured party. It is up to others to make any further offers. If they come back with an acceptable offer, then that would be the end of the matter and stop all proceedings."

The SFA will continue negotiations with Bain, the Rangers chief executive, to find a resolution but Smith feels his two-year association with the national team has been soured by having to submit his resignation. He believes the situation could have been avoided had the SFA shown a willingness to co-operate, and was staggered by the mixed messages in private meetings and public statements from Taylor.

"What disappoints me is that, when I have met them on a couple of occasions, they have been cordial towards me yet, when I walk away, there are indications through the media that they are indignant," he said. "The thing that disappoints me about their stance is that they have a right to compensation, but I didn't want to leave the Scotland job anything but amicably.

"The president and chief executive were smuggled out of football grounds in the back of motors with people calling for their heads. They have made it look as if they are making it as difficult as possible to leave. I have a lot of regret but what did I do that was bad to Scotland? What did I do to the SFA to make them so awkward with me? I believe it is posturing on their part.

"They say I have left Scotland at a critical time; I took over at a diabolical time."

Taylor said: "I think we've been good for Walter and he's been good for Scotland. If you remember, he was largely out of work for a couple of years before taking the job. Yes, he has done very well for Scotland. But that doesn't excuse any breach of contract. In fact, that rather bolsters our case to get a realistic compensation figure."

Smith did thank the game's governing body for affording him the opportunity to restore the fortunes of the national team and his reputation, after being sacked by Everton.

"They allowed me to get on with the job and backed me," he said. "There were one or two problems along the way but what irks me is them trying to make it look like I'm the baddie.

"They could have let me leave with a bit of goodwill and it would have taken a bit of pressure off them. They decided it would be ongoing and I had to resign, which I didn't want to do. If that makes them feel like hard-nosed businessmen and makes them look better then that's fine, but it was not my wish."