Archive | October, 2010

Its not just footballer players that can’t manage on £400,000pa

October 29, 2010

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Paul Smith v. Chelsea Football Club Plc [2010] EWHC 1168 (QB)

The full case report can be found here: http://www.bailii.org/ew/cases/EWHC/QB/2010/1168.html

This case concerns Paul Smith, former Group Business Affairs Director of Chelsea Football Club, who having been dismissed by the Club, brought a case against them at an Employment Tribunal.

The background to the claim is that Smith was appointed by Peter Kenyon on 16th September 2003 to act as a ‘consultant’ marketing commercial director to the Board of Directors, as Peter Kenyon had been placed on “gardening leave” by Manchester United prior to being released to join Chelsea. At the end of October 2003, the claimant was given a draft contract stating his salary would be £300,000pa, with additional bonus entitlements as appropriate. As the contract contained confidentiality and non-competition clauses, the claimant refused to sign it and instead invoiced the club £25,000pm until he was put on the payroll four months later. His salary later rose to £330,000 in July 2004 and again to £400,000 when a new contract was drafted on 27th February 2007, making him the second highest-paid executive director at the club.

On 27th July 2007 however, the claimant was told by Peter Kenyon that his role was redundant.

The claimant took the club to an Employment Tribunal in October 2007, however while the tribunal found that the club had failed to comply with the requirements of section 4 of the 1996 Act when it increased the claimant’s salary in July 2004 and February 2007 by not giving a written statement containing particulars of this change; it also found that despite not signing either the 2003 or 2007 draft contracts, the claimant “did not act in any other way inconsistent with it” [16]. As such there was no enforceable agreement ever reached in respect of bonus or any employment benefits [18] that the claimant could use to support his claim for unpaid salary or bonuses. The tribunal found that even if there had have been an agreement, the club was within its rights not to exercise its discretion to operate the scheme [21(2)].

The club later admitted that it did not follow the statutory dismissal and disciplinary procedures and awarded the claimant the maximum compensatory award of £60,600 and a basic award of £1,395.

The claimant now seeks in the High Court:

1)      A declaration as to his terms and conditions of employment with the defendant pursuant to s.11 of the Employment Rights Act 1996

2)      Compensation for unfair dismissal

3)      An award for alleged unlawful deductions from his wages, pursuant to s.30 of the 1996 Act

 The claimant argues that the money owed to him is due to either an implied term of the contract or on a quantum meruit for the work actually performed [32], neither of which arguments were pursued at the employment tribunal. In a somewhat cheeky and money-grabbing manner, the claimant also argued that in the absence of any signed contract, “the question of what he should reasonably have been paid for the true worth of his services remains at large” [48].

The Court however rejected this argument as entirely artificial and more akin to statutory construction than a holistic view of what the tribunal was determining. Because the claimant could also quantify the exact amount of the sum claimed, it did not matter whether the claim was brought as an implied term or a quantum meruit, the fact it was essentially the same as the claim brought before the Employment Tribunal, prevented it from being argued again (issue estoppel) and therefore the claim being made in the present case constituted an abuse of process [66].

News Reports from 2008:  http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/2791266/Paul-Smith-in-1m-fight-with-Chelsea-Football-Club-over-sacking.html

Ironically, Peter Kenyon was himself dismissed in 2009: http://www.dailymail.co.uk/sport/football/article-1214017/Chief-executioner-Peter-Kenyons-Chelsea-fate-sealed-Luiz-Felipe-Scolari-row.html

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BASC makes sport shooting possible

October 29, 2010

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Last year, we covered the case of British Association for Shooting and Conservation Ltd (BASC) and their dispute with the tax authorities over the status of membership subscriptions: http://sportslawnews.wordpress.com/2009/03/18/bacs-do-not-have-to-become-arms-dealers/

This case has now been reheard by Mr Justice Colin Bishopp in British Association for Shooting and Conservation Ltd (BASC) v. The Commissioners for Her Majesty’s Revenue and Customs [2010] UKFTT 268 (TC). The full case can be read at: http://www.bailii.org/cgi-bin/markup.cgi?doc=/uk/cases/UKFTT/TC/2010/TC00562.html

I don’t propose to repeat the facts again in this posting (they can be found in the original article), but essentially the Tribunal needed to determine whether BASC’s subscriptions fees were connected to politics or sport

The correct test for whether an item received an exemption from tax due to sport, is contained within Item 3 of Group 10 of Sch.9 to the Value Added Tax Act 1994:

“The supply by an eligible body to an individual, except, where the body operates a membership scheme, an individual who is not a member, of services closely linked with and essential to sport or physical education in which the individual is taking part.”

and essentially has five conditions (recognised in Canterbury Hockey Club v. Revenue and Customs Commissioners (Case C-253/07) [2008] STC 3351):

1)      The supply must be made by a non-profit making organisation [tick! BASC is a non-profit making organisation]

2)      The organisation must make a supply of services [tick! BASC makes a supply of services]

3)      Those services must be supplied to persons taking part in sport [ partial tick! The Court stated at [5] that the shooting of game is a sport, although some animal rights supporters might question this, disagreement over the supply to persons taking part]

4)      The services must be closely linked to sport  [disagreement]

5)      The supply must be essential to the transactions exempted [disagreement]

What changed in this judgment is that BASC provided additional evidence [7] as to how its activities support sport:

  • Organisation of three deer stalking schemes (two in England, one in Scotland)
  • Preservation of game habitats
  • Web service for members to identify and contact landowners who offer stalking
  • Negotiation of rights of access, and the formulation of codes of conduct for coastal wildfowling
  • Provision of training courses for coaches, range officers, school teachers, young people and its own members
  • Lobbying and educating ministers, MPs, Chief constables and others about the sport, in particular the securing of an amendment to the Hunting Act 2004

 

And Mr Justice Bishopp clarified at [14] that BASC did not have to exclusively supply all sport shooters with membership and services, and the fact that members could obtain some of the services themselves or through competing organisations did not affect the exemption analysis, although the court did add later that paragraph that BASC was unique.

Given that clarification, the Court accepted that the previous test was too high and that the test should not have been whether BASC’s suppliers were essential  to make sport physically possible (through the provision of land, game or guns), but rather whether the omission of its supplies would materially lessen the quality of the sport [15].

On this point, while the evidence was unanimous that if BASC or an equivalent did not exist, there would be significantly greater restrictions of shooting and that any available facilities would be of a much poorer quality [16], the defendants tried to challenge the decision on the grounds that BASC wider social and political functions beyond that of just sport prevented BASC’s services from being an essential supply (part 5 of the test) [19].

This argument was however rejected, as once the test had been satisfied that BASC’s supplies were closely linked to the sport of shooting and added (significant) value to the sport , the fact that other people and organisations also benefitted from them was irrelevant [20].

 Youtube, “Shooting Politics”, episode 9, 9th December 2009 (including a debate about Shooting and the 2012 Olympics):

Youtube, “Shooting Sports Trust”

 

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Moore Winter Sports accidents

October 25, 2010

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Emma Moore v. Hotelplan (T/a Inghams Travel) & Mr Adriano Tantera [2010] EWHC 276 (Ch)

This case concerns an accident while undertaking winter sports, more particularly an organised evening snowmobile (‘skidoo’) ride at the Italian ski resort of Passo Tonale in January 2007. The claimant was a 37yr old personal trainer on a group skiing holiday organised by the defendant operator (Inghams). The company subsequently joined a third party (Mr Tantera) to the action as he provided the skidoos and instructed the party as to their use.

The action arose when the claimant lost control of the skidoo as the group was descending down the mountain. The claimant collided at speed with a parked car at the foot of the slope causing spinal injury and paralysis at T5 (mid-chest).

The action was for:

  • breach of contract,
  • breach of tortuous / delictual duties owed under Articles 2050 and/or 2043 of the Italian Civil Code
  • Negligence

The case was made more complicated by the fact that the defendant denied responsibility for the activity and blamed the third party entirely, to the extent that it claimed any actions of the Ingham representative on site were merely as an agent for Mr Tantera.

The Court at [7] identified five key questions:

  1. What were the contractual arrangements for the skidoo trip?
  2. What instructions were given to the claimant as to the control of the skidoo, and in particular was she instructed in the use of the engine cut out, the cut off button?
  3. What was the cause of the claimant’s loss of control of the skidoo?
  4. Would the operation of the cut-off button have prevented the accident?
  5. Was there contributory negligence on the part of the claimant?

Taking each in turn,

Although the holiday was booked by another member on behalf of the group four months previously and purported to exclude liability for any subsequent third party excursions, the Court held at [28] that Mr Tantera operated this excursion on behalf of Inghams through a contract signed in 2002, and viewed the party as Ingham customers [16]. The Court also relied on the fact that the Skidoo’s were advertised in an Inghams’ welcome pack [11], the party paid Inghams for the trip [12], received a receipt on headed Inghams notepaper [12], were not told that the onsite representative (Ms Hodges) was acting for a third party [13], had to exclusively book the excursion through Ms Hodges [24] and had to sign disclaimers (that were subsequently not relied on as they were for a different vehicle) on behalf of Inghams [14]. Given these findings, the contract for the supply of the skidoo excursion was also impliedly subject to the original liability clause meaning that Inghams was liable for any injuries and consequent losses “caused by the lack of reasonable care and skill” on the part of Mr Tantera [29].

Having established potential liability, the next question was to establish whether the defendants through Mr Tantera had breached their duty to the group in failing to give clear operating instructions for the Skidoos. The Court heard a number of mechanical arguments relating to the Skidoos (Polaris 550 Fun Sport Edge 136 Touring snowmobiles), but essentially this section can be summarised as a factual discussion of the safety briefing. The Court heard that all members of the group chose to wear helmets, despite the fact that this was non-compulsory [33], and that several members of the group were complete novices. The party also stated unanimously that the safety briefing took 30 seconds each [34-39], and that no-one was shown what or where the cut-off switch was. This contradicted Mr Tantero’s evidence that he spent 2-3 minutes with each person and that his usual practice was to give such an instruction [41]. The most damning bit of evidence though came from Ms Hodges who described Mr Tantera’s briefing in her witness statement as:

“When he briefs each driver he first asks (in English) if it is their first time on a skidoo, then he switches on the engine himself, they are not allowed to do this. He then tests the accelerator, which is on the right, and says “this is the throttle-accelerator; it is an automatic clutch, no gears”. He then shows them the brake on the left-hand side and says “this is the brake”. Stay in line, five to six metres separation, no overtaking, no slalom.” [40]

 Unsurprisingly the Court preferred the evidence of the party and held that Mr Tantero had not shown the group the cut-off switch, thereby breaching his duty to the claimant.

 The Judge held that the accident occurred when the Skidoo was going too fast on the downhill return leg of the journey, 45mins into an otherwise uneventful trip. Although the Court heard from two expert witnesses, it preferred the defendant expert’s view that an examination of the skidoo after the accident had shown no defects with the mechanical operation of the vehicle, suggesting driver error was to blame for the accident. In particular the Judge held that the claimant most probably drove too close to the skidoo in front of her, swerving to avoid it and in her panic hitting the accelerator rather than the brake [65].

The causation question of whether an application of the cut-off switch could have prevented the accident was comparatively straightforward and the Court held at [74] that it would have done.

The only question remaining was whether the claimant was contributory negligent. At [80], the Court found that there were two errors the claimant made that materially contributed to the accident, the first was driving too close to the skidoo in front, the second was in applying the throttle rather than the brake (although the Court was careful to suggest that she should not be judged too harshly for her confusion in the ‘heat of the moment’). The Court however rejected the argument that the claimant should have noticed and applied the cut-off switch.

In summary, the Court suggested that “the Claimant created the emergency, but as a consequence of the negligence on the part of Mr Tantera in failing to instruct her as to the use of the cut-off button in an emergency, she did not have the means of dealing with it in a manner that would have avoided the accident”, although Mr Justice Owen did award 30% contributory negligence.

There are two other interesting elements to the case that are worthy of consideration, the first is a scathing judgment on the quality of the evidence from one of the defendants experts’ (a Mr Christopher Exall). At [75], the Court suggested that there were: “a number of gravely disquieting features of his evidence, culminating in the assertion in his third report, made under an expert’s declaration of truth, that he had had discussions with a Mr Michael McDowell of Polaris UK, an assertion that, as he was forced to concede in cross-examination, was subsequently untrue. I do not propose to set out the other actions on his part which on any view were indefensible for a witness under an obligation to the court to give impartial and objective evidence. But there can be no doubt that he took on the role of an advocate for the defendant. He did not give impartial evidence, and was wholly discredited as a witness. I could not place any reliance on any part of his evidence.”   Ouch!

The other comment interesting part of the judgment relates to insurance. At [17], the Court quoted from the Defendant Reps Manual Winter 06/07 which contained the following paragraph under the heading ‘Snow-mobiling’: “You will find that snow mobiling and ski-doo’s are offered in many of our ski resorts but the normal holiday insurance cover does not include any liability cover for damage, injury or death caused to third parties. The liability cover held by the operator and included in the price or offered as an extra, is unlikely to be anywhere near adequate in the event of an accident causing serious injury or death to a third party…..”

I don’t know about you, but while the Court did not comment on this paragraph, I think it is worth pausing a few minutes to reflect on it. Essentially isn’t Inghams saying they know that not only is their insurance cover excluded by the holiday contract, but that the operator’s own insurance cover is inadequate, even if purchased as an add-on extra! In fact it makes me so worried, that on my next skiing holiday, it would be perhaps be better if I Skidon’t and we stick to the planks of wood (or fibreglass!).

Youtube clip of a skidoo jump:

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Angling for the liability of Route Notes in Rallying

October 24, 2010

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Munro v. Sturrock (T/a Scotmaps) [2010] CSOH 16

This case concerns a rally accident during the “The Little the Jewellers Speyside Stages 2004” rally in Scotland. The pursuer (claimant) was an experienced racer and double Scottish Champion. On the day in question, he was driving a Subaru Impreza, while his co-driver Heather Connon (now MacKenzie) navigated. The claim results from a crash that occurred on the 7th junction during the 6th of the 9 rally stages, just outside Clashindarroch, when the car ran wide at the bend and onto the offside banking, damaging the car and allegedly causing psychiatric injuries to Munro.

Munro later brought a case alleging that the description of the corner in question in the route notes had been negligently compiled  and it was this failure that caused the accident.

The Court heard plenty of evidence regarding the status of route notes, in particular their inherent subjectivity and the fact that one driver made these notes for 120 other drivers of differing ability [39]. Indeed, the reliance placed on these notes can be demonstrated by the fact that the organisers of the Speyside rally had prohibited reconnaissance runs by competitors under pain of disqualification. Instead for £100, the defendants provided route notes and an accompanying DVD “describing the road and bends accurately, including any hazards that are known at the time” [2]. This description consisted of an abbreviated angle (40 degrees=4), a direction (eg L or R) and any additional information relevant to the correct line to take around the corner (eg “In” [take a tight line], or “Cut” [the corner]).

The Court later heard at [13] that route notes had three main purposes:

  1. To reduce the advantage gained by cheats using other notes
  2. To reduce the advantage of those with local knowledge
  3. To make the rally safer, by providing drivers with a shorthand description of what the road was doing

The main thrust of the pursuer’s argument was that the corner should not have been designated as 4Lin, but rather as 7, as it had been previously described in 2001. Had the corner been described differently, the pursuer states that he would have approached it much slower than the 70mph and fifth gear in which he attempted it.

Initially his case seemed to be supported by a “smoking gun” email written in haste by Andrew Kelly (who helped check the route notes):

“On the basis of your information it would appear that Bill [Sturrock] has made a massive error in his route notes. As you know I’m the one that checks notes with him on the day and therefore, if this is correct, I must accept some degree of responsibility… I have no idea how I could have got this corner wrong as even in the Volvo I would have thought I would have noticed such a difference. I feel really bad about this and I am extremely disappointed in my own ability as a so-called rally driver.” [34]

At trial however, Mr Kelly couldn’t have navigated faster away from this email though and he was supported by the expert witnesses who, in the main, suggested that mathematical measurements proved the corner was 30-40 degrees. The judge (Lord Uist) agreed and seemed particularly unsympathetic to the fact that previous route notes may have contained different descriptions as this was not the accident being discussed at the trial [44]. Unfortunately for us, this conclusion also meant that the route notes were accurate and therefore the case could be disposed of without any discussion of how the standard of care test would have been applied. This is a a shame as a liability discussion would have been very interesting given that the Court would have needed to balance the obvious reliance placed on the notes by the drivers and navigators, with the subjective and scientifically unsupported nature of the instructions.

Youtube Clip of another WRC rally accident which captures the inherent risks involved in racing:

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When is a coach liable for the injuries of their athlete?

October 17, 2010

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Davenport v. Farrow [2010] EWHC 550 (QB)

Read the full case here (http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/QB/2010/550.html&query=davenport&method=boolean)

The case concerns a claim by Richard Davenport (24yr old GB track athlete) against his former coach David Farrow (a top-level UK Athletics L4 coach). Davenport claimed damages for personal injury, consequential loss and damage caused by Farrow’s:

  • Negligence
  • and/ or breach of contract
  • and/ or breach of statutory duty

The personal injuries alleged were stress fractures of the spine (bilateral spondyloses at L5) which prevented him from training or competing from 2005-2007. Essentially the claim turned on when these fractures occurred – during an intensive training camp as alleged by the claimant, in which case, issues arose as to what if any steps should have been taken to investigate and/or manage them; or prior to 2001 as alleged by the defendant in which case, no duty would arise and the claim would fail.

Although both parties called expert medical witnesses in support of their case, it was impossible to state with any certainty when the injury occurred and the nature of the evidence was that both conclusions could be supported by the symptoms described.

The Court however concluded that it was more than likely that the stress fractures occurred at an earlier stage than Oct/Nov 2004, as Davenport had claimed. Mr Justice Owen gave the following reasons in support of this finding:

  • The claimant could not describe with any clarity when the symptoms came on, despite detailed and accurate records being kept of his high-performance training [58]
  • The level and intensity of the training camp in 2004 was not markedly different from the previous year’s training and was considered to be an acceptable practice for an athlete of Davenport’s ability and aspiration [60]. This was important as Farrow was a volunteer coach and designed and managed the training regime.
  • During 2004, Davenport was treated for a number of leg injuries, in South Africa, the UK and at competitions and despite referrals to a number of independent medical professionals, no complaint was made about any back injury [60-65]
  • While the claimant suggested that Davenport thought that the claimant lacked motivation, had an attitude problem and was lazy [32], and as such did not take his complaints seriously, an independent witness gave evidence that the claimant’s parents shared Farrow’s view [66].
  • If an athlete had been suffering from acute spondyloyses in Oct / Nov 2004, he would not have been able to have continued to have trained at the level and intensity that he was running at [67]

Given these conclusions, the claim failed.

 Arguably though, the most interesting part of the judgment was in an area not explored in any real depth by the Court, namely the role of a High Performance coach and the dynamics of that coach-athlete relationship. On 11th January 2004, Davenport and Farrow formalised their coaching relationship by a written contract [7]:

4. THE COACH/MANAGER’S OBLIGATIONS

4.1 The Coach/Manager shall provide coaching and advice to the Athlete (retaining the right to coach other Athletes). Such coaching is to include advice on fitness, health, diet and training schedules, strength and track training schedules, mobility work, injury prevention and rehabilitation, race tactics and strategy, advice on a programme of events to participate in, to accompany the Athlete to events and make himself available to the Athlete at all reasonable time and upon reasonable notice for the purposes of consultation and advice pertaining to the Athlete’s career, both competitive and commercial.

5. PERFORMANCE, FITNESS AND INJURIES

5.1 The Athlete undertakes that other than pursuant to his/her obligations under this Agreement he/she shall not during the term of this Agreement participate in any professional or other sporting activity or practice that may endanger his/her fitness or ability to compete without the prior permission of the Coach/Manager.

5.2 The Athlete undertakes that he/she shall at all times during the Term compete to the very best of his/her ability and he/she shall make all reasonable endeavours to maintain his/her form and health so as to be available for regular competition.

6. THE ATHLETE’S OBLIGATIONS 

6.1 The Athlete will, during the Term but subject to the Athlete’s obligations in his/her education:

(a) make himself/herself available for all competitions and for training and for other duties … as and when required by the Coach/Manager … unless prevented from doing so by his/her obligations under any agreement relating to his/her participation in an international team or by illness, injury or accident or other cause which the Coach/Manager agrees so prevents him.”

What was left unanswered was whether the fact that there was a written contract increased a coach’s obligations towards their athlete? Or was it simply a good practice management of everyone’s expectations?

Farrow also deterred his athletes from playing other sports because of the potential injury risks these activities represented [5] and at: http://www.telegraph.co.uk/sport/4775917/Schools-Sport-Contact-games-taking-toll-on-athletes-says-coach.html. Did he have a point? Or should athletes only specialise much later in their careers? Indeed can athletes gain additional skills and experience from taking part in unrelated activities?

The final area of contention related to the degree of control a coach should have over an athlete. Although a number of other athletes also gave evidence though to suggest that they did not agree that Davenport was unduly domineering or imposed unreasonable demands given the level of commitment to their sport that was expected of them, in the Court case [27], it was suggested by the claimant and another former Farrow Protégé (Emily Pidgeon) that Davenport was:

“a forceful and controlling personality who demanded a high level of control over the young athletes whom he coached. He gave evidence that the defendant wanted a say in all aspects of his life. The defendant would telephone on an almost daily basis, and would question his mother about what she was feeding him, wanting to control his diet. As he grew older the defendant would check on what he was doing outside training, wanting to know if he had gone out, and whether he had got back at a reasonable time. The claimant’s evidence was supported by that given by his mother who said that as the years went by, the nature of her contact with the defendant changed from brief discussions to detailed inquisitions into the claimant’s routine outside training. Although she found it surprising, she accepted that that was how professional coaches operated.”

So what control should a coach exert over an athlete? And how would this relationship affect liability?

POSTSCRIPT

Richard Davenport has now re-recorded his personal best at an athletics meet in the summer: http://www.thisisgloucestershire.co.uk/news/Davenport-races-fantastic-PB/article-2361854-detail/article.html

In 2007, David Farrow was stripped of his UKA coaching licence for five years following an alleged abuse of trust with a senior athlete he was coaching: http://www.telegraph.co.uk/sport/othersports/athletics/2309581/Coach-guilty-of-abuse.html

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Proactive Sports Management Ltd v. 1) Wayne Rooney, 2) Coleen Rooney (formerly McLoughlin), 3) Stoneygate 48 Limited, 4) Speed 9849 Limited [2010] EWHC 1807 (QB)

October 16, 2010

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Proactive Sports Management Ltd v. 1) Wayne Rooney, 2) Coleen Rooney (formerly McLoughlin), 3) Stoneygate 48 Limited, 4) Speed 9849 Limited [2010] EWHC 1807 (QB)

The case essentially concerns the image rights contract between Wayne Rooney and his former agents (Proactive Sports Management Ltd). Proactive were seeking unpaid commission and invoices totalling between £1-3m against Wayne and over £200,000 against Coleen.

At 821 paragraphs long though, it is a truly mammoth judgment. Below is a précis of the most important points. (You can read the full case report at: http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/QB/2010/1807.html&query=rooney&method=boolean)

Why was the case brought?

Essentially Rooney signed an Image Rights Representation Agreement (IRRA) with Proactive Sports Management Ltd, to represent him in his commercial affairs for the next 8 years. Midway through this contract, when his agent (Paul Stretford) was fired from Proactive and set-up a new sports agency, the Rooney’s followed him across and purported to sever links with Proactive on the 18th December 2008. Proactive sued Wayne and Coleen for liquidated damages and commission that they felt continued to be owed to them on the various sponsorship contracts negotiated on their behalf by Proactive.

The Rooney’s successful counter-claim against Proactive was based on their view that any contract between them is ‘void, invalid, unenforceable and of no effect’ as the 8yr term represents a restraint of trade.

Aren’t there rules governing Player Contracts?

On-field representation agreements are comparatively well regulated by the FA: they are limited to a maximum term of two years and must be in writing. Essentially these contracts are dependent on a player’s skill and given this, an agent would normally take an average fee of 5% to represent their one-off role in negotiating the contract.

By contrast however, contracts governing off-field activities (such as image rights) are wholly unregulated by both the FA and FIFA, although the Inland Revenue is now looking into this area closely (see http://www.dailymail.co.uk/sport/football/article-1311210/Wayne-Rooney-facing-crisis-taxman-gets-set-chase-1million.html). Unlike on-field agreements, these commercial contracts need constant servicing and brand protection / management, therefore agents will usually charge an average fee of 20% to reflect the additional work undertaken. It was this type of contract that formed the basis of the case.

  • 17th July 2002, Rooney signed an 8yr, on & off field agreement with Proactive (this was later varied on the 16th Jan 2003 to strip out off-field components)
  • 19th September 2002, Rooney again signed an 8 yrs agreement, however this was quickly  torn up and replaced with Dec  version (below)
  • 14th December 2002, Rooney signed a 2yr on & off field agreement with Proactive, which was renewed in 2004 and 2006. Critics have suggested that this was only signed so a copy of the contract could be lodged with the FA.
  • 16th January 2003, Rooney signed over his commercial rights to Stoneygate. Stoneygate in turn signed an 8yr representation agreement with Proactive.
  • 1st Feb 2003, Rooney signed a playing contract with Everton FC (actually executed on  or about 15th Feb 2003)
  • 23rd August 2004, Rooney transferred to Manchester United FC in a £27m deal (the MUFC Image Rights contract was later varied to extend the contract to 30th June 2012)

 

Who was involved in the case?

Essentially, there were five main companies involved to some degree:

  • Proform Sports Management Ltd is the agency that Wayne was signed to as a 15 yr old by Peter McIntosh. This agreement was later held to be unenforceable (Proform Sports Management Ltd v. Proactive Sports Management Ltd [2006] EWHC 2903 (Ch)).
  • Proactive Sports Management Ltd is the agency that Wayne moved to at 17 and remained with for the majority of his professional career.
  • Stoneygate 48 is the limited company set-up to manage Wayne’s Image Rights
  • Speed 9849 is the limited company set-up to manage Coleen’s commercial affairs (Harper Collins, OK! Magazine etc). Although there was no formal contract between Coleen and Proactive, the Court implied this from past conduct [775] and calculated commission on the basis of a 20% rate.
  • Triple S Ltd – is a new company informally appointed July 2009 to act as Stoneygate’s Agent in relation to image rights following Paul Stretford’s move from Proactive.

And a number of key people:

  • Paul Stretford – formerly chief executive of Proactive until late 2008, Stretford is a Director of Stoneygate and his firm acts as Rooney’s on-field and off-field agent. While Mr Justice Hegarty QC found Stretford to be a highly able and effective agent, he was criticised in court for his failure to be a truthful or reliable witness [311].
  • Mel Stein – a solicitor and football agent who acted as key witness for the claimants
  • Gordon Taylor OBE – Chief Executive of the Professionals Football Association (PFA) who acted as key witness for the defendants

 

So what are Image Rights?

The Court defined these rights as:

“Image Rights means the right for any commercial or promotional purpose to use the Player’s name, nickname, slogan and signatures developed from time to time, image, likeness, voice, logos, get-ups, initials, team or squad number (as may be allocated to the Player from time to time), reputation, video or film portrayal, biographical information, graphical representation, electronic, animated or computer-generated representation and/or any other representation and/or right of association and/or any other right or quasi-right anywhere in the World of the Player in relation to his name, reputation, image, promotional services, and/or his performances together with the right to apply for registration of any such rights.”  [187]

Once at Manchester United, Rooney was restricted to signing only 5 sponsorship agreements and 5 merchandise agreements. There were two main reasons for this restriction, the first was to avoid diluting the Rooney Brand, the latter was to ensure that Rooney had enough time to focus on his football rather than the demands of sponsors. At the time of the case, the main sponsors were:

  • Nike, unusually this was a 10 yr contract to take advantage of Rooney’s potential growth
  • Coca Cola (4 yr contract)
  • EA Games (3yr contract)
  • Manchester United FC
  • Asia Pacific Breweries Ltd (2yr contract to promote Tiger Beer)
  • Big Blue Tube
  • Pringles Crisps

 

How did Proactive argue their case?

The first attempt to derail the Rooney case was to cast doubt on the credibility of Paul Stretford. Earlier in 2008, Stretford had been charged with various FA disciplinary offences relating to the 2002 Agreement and terms. These related to making false or inaccurate statements at Warrington Crown Court during the trial of John Hyland, Anthony Bacon, Christopher Bacon for offences of obtaining money by deception (by demanding money from Mr Stretford in connection with Wayne’s move from Proform to Proactive). In Court, Stretford denied Rooney had signed any footballing representation agreement prior to 12th Dec 2002 (even though he knew Rooney had signed two agreements in July and Sept 2002), although he did acknowledge there was an IR agreement. When the truth was later discovered, the Crown decided it could no longer rely on Stretford’s evidence and withdrew its case, while the Jury entered formal verdicts of not guilty for the three men. Subsequently the FA Regulatory Commission commenced disciplinary proceedings against Stretford and decided on 9th July 2008 to fine him £300,000 and suspend him from acting as a player’s agent for 18months (with the final 9 suspended). Although Proactive paid the fine, Stretford later resigned as a director of Proactive on 20th May 2008.

Post-Termination Commission

The main debate in the case was in relation to any right to Post-Termination commission payable at the end of a contract. Essentially the question before the court was if an agent negotiates a sponsorship and is then replaced or fired, are they still entitled to receive 20% commission over the life of that contract, even if the player is represented by a new agent?

[469].….“On the one hand, it might be said that the legitimate commercial interests of the agent could only properly be protected if he was entitled to receive post-termination commission on contracts which he had negotiated. Otherwise, it might be said, he might find himself in a situation in which he had successfully negotiated a highly lucrative, long-term commercial sponsorship agreement just before the end of his contract only to find that his client immediately transferred his business to another agent, thus depriving the original agent of any proper remuneration for the work which he had done.

 [470]. On the other hand, it might be said that if an agent was entitled to post-termination commission notwithstanding that a new agent had been appointed in his place, it would mean that he would continue to receive substantial sums by way of commission without having to provide any further services to his client. By the same token, in those circumstances, the new agent might have to service the inherited contracts without payment or the client might, in effect, have to pay double commission.”

 After very long and at times technical legal arguments, the Court decided that a right to commission in this instance was dependent on a service being provided – no service provided by an agent, no commission [553]. One other factor helped in reaching this decision, that the right to post-termination commission was not explicitly drafted within the contract and this was essential particularly where there was an imbalance between a contract professionally drafted by solicitors (Proactive) and commercially unsophisticated parties without any independent legal advice (Rooneys) [554].

Termination Clause within the contract

Most of the arguments made by both parties in relation to the validity and effect of the termination clause within the contract were rejected by the Court. In particular, the Court was not persuaded by the estoppels arguments raised by claimants, or the mistake argument raised by the defendants [600]. The Court also rejected the argument that the contract was ‘affirmed’ by Mr Stretford passing on any knowledge and risks of the unenforceability of the IRRA due to his prior knowledge as a Proactive Director, as he would have been under a duty of confidence not to disclose privileged legal advice [678]. The case therefore effectively turned on the question of Restraint of Trade.

Restraint of Trade (RoT)

“Any contract or contractual stipulation which is in restraint of trade is Prima facie unenforceable unless it is reasonable having regard to the interests of the parties and the public.” [621]

While it is often possible to sever offending RoT clauses from the rest of the contract, this was not possible on this occasion. The Court felt that a number of factors needed to be taken into account, in particular, the fact that there was:

  • No meaningful negotiation
  • A Flat fee of 20% was payable on each sponsorship opportunity regardless of the amount of the contract
  • The Rooney family had no commercial experience and were utterly unsophisticated in financial and contractual matters
  • The Rooney family never took any independent legal advice
  • The Image Rights Representation Agreement was unique in the industry in many respects including its long duration (The Court did however note that a 2-5yr term could have been acceptable  [723])
  • The IRRA imposed substantial restrictions on Rooneys freedom to exploit his earning ability
  • It was irrelevant whether any restriction on earning ability was partial or total
  • The cost of termination represented a significant disincentive to exit and was essentially penal rather than attempt to quantify the damages payable

 Once this RoT conclusion had been reached, all that was left was to conclude was that Proactive were entitled to quantum meruit (a restitutionary award based on objectively valuing the services they had actually provided) for any contract payments falling due before the relationship had terminated. But importantly, nothing after this termination.

 

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New Sports Sponsorship Report released

October 6, 2010

3 Comments

Simon Rines from IMR Publications has kindly allowed us to reproduce the following extract from their new Sports Sponsorship Report, which seems to confirm our earlier findings about the importance of addressing Ambush Marketing at sports events:

Recent incidents or allegations involving the Pakistan cricket team, Wayne Rooney and cricketer Kevin Pietersen amongst others might well have caused sponsors to give further thought to their sponsorship contracts. So far most sponsors have stood by those that they have endorsed, although sports goods manufacturer BoomBoom has suspended its sponsorship of Pakistan cricketer Mohammad Amir following the allegations of match-fixing in the Test series. A new report, Sports Sponsorship & the Law, published by IMR Publications, shows that the need for clarity in morality clauses is stronger than ever if sponsors are to minimise the impact on their brand of the bad publicity that often comes with allegations of misconduct of one kind of another. “Sponsors need to be very clear about what type of behaviour they consider might damage their brand,” says report editor Stefan Fabien.

Warren Phelops of K&L Gates LLP, who contributed the morality clause section of the report, points out that there are further complex issues that both sponsors and rights holders need to be aware of. “Behaviour that can be considered to be morally dubious, yet not illegal, or which is alleged, but unproven can be a grey area. This is particularly so where the contract simply states that such behaviour must cause damage to reputation before it comes within the scope of the clause.”

Care also needs to be taken that sponsors’ rights are not inadvertently waived.  “Should action not be taken quickly, or not taken in response to an earlier similar indiscretion, then it might be reasonable to assume such inaction results from the behaviour not affecting brand reputation.” says Phelops.

Even in cases where the morality clauses appear watertight, it can be possible for the sponsor to find it lacks protection. “Many athletes choose to conduct their sponsorship deals through personal service companies (usually for tax purposes) rather than in an individual capacity,” says Phelps. “Where this happens, the contract’s morality clauses must cover the individual rather than the company.”

The report also emphasises the need for sponsors to ensure that contracts are specific to the relationship, rather than use templates. “The terms that would be appropriate to one athlete might not be so to another,” says Fabien. “For example, a footballer losing his temper and perhaps being sent off in a match could be very different to a tennis or snooker player acting in a similar manner. When Andy Roddick verbally abused a line judge in the US Open, it made headline news in sports pages around the world. Footballers, however, harangue match officials almost as a matter of course. It is therefore important for sponsors to be very clear about what behaviour is acceptable to them and also to evaluate what would be damaging to their brand.”

The Full report can be accessed at: http://www.imrpublications.com/

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Ambush Marketing: It’s all about perspective

October 5, 2010

1 Comment

The CMO Council just published an article Kris and I wrote entitled, ‘Ambush Marketing: It’s all about perspective’ in its Doing Away With Foul Play Report. Here are a few excerpts:

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How one sees ambush marketing depends upon the eyes of the beholder. Much like the famous perception test designed by Harvard psychologist Edwin Boring where some viewers see a young woman while others see an old woman, how ambush marketing is viewed depends upon what side of the fence you sit. Some marketers may view it as illegal and unethical, while others see it as a necessary and sufficient practice in an increasingly competitive marketplace.

How marketers and lawyers view ambush marketing is ultimately a matter of perspective. Marketers see opportunity and seek to exploit it, to get as close as possible to the line without crossing it. Lawyers, in turn, are on the lookout for marketing campaigns that get too close to the line. It is the duty of inhouse lawyers to rein in their marketers when they get too close for comfort, and it is the corresponding responsibility of Crown counsel and lawyers for the competition to detect when the ambush marketer crosses the line and is in breach of the law.

Given the complex relationship between marketing and the law, as well as some companies’ preparedness to capitalize upon unauthorized associations with mega-events, it should come as no surprise that some of the world’s largest companies – including Puma, Kodak and Pepsi – have been both on the giving and receiving end of an ambush.

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The full article is here

The link to the full report is http://www.cmocouncil.org/resources/form-foulplay.asp

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Foolish or Foolproof: Risk Management at the Commonwealth Games

October 4, 2010

3 Comments

Yesterday, New Delhi staged a spectacular and successful opening of the XIX Commonwealth Games. The lead-up to the Games has been an interesting exercise of risk management, realpolitik, and public relations. Many countries adopted a wait-and-see approach to ensure the safety and security of their participating athletes. What was understated, however, is that international sporting federations were backed into a corner to make a last minute decision as a result of India’s dithering, indifference and intransigence.

This is no way to manage risk with sports teams.  The approach thus far was almost carnivalesque.  An Ottawa Citizen editorial ended with the comment that ‘Commonwealth Games Canada should feel confident in the level of safety, health and security before it brings any athletes to Delhi. These are, after all, only games’ (read editorial here).

Countrys’ participation in the XIX Commonwealth Games should not be based upon the false premise “The show must go on” but on whether a rational assessment of the risk shows it is safe to do so.

A recently published letter to the editor of mine in The Vancouver Sun was edited which essentially made the same point (see letter here).

It must be noted that India’s Interior Ministry issued a security advisory for all states to go on high alert and a UK-based firm Control Risks has advised its clients to avoid tourist attractions, public places and government buildings, and not to travel by public transport and warns that there is a relatively high likelihood of attacks occurring (read statement here).

In the pressure cauldron which was the lead-up to the Games, it is difficult to say that it was even possible for such an assessment to be made. It seems risk management was playing second fiddle to politics and economics. Let’s be mindful that India’s Minister for Commerce and Industry, Shri Anand Sharma, issued a veiled threat suggesting economic retaliation against those countries who backed out and withdrew from the Games (read quote here).

Sport has always been linked to politics but this is taking it to a whole other level.

Countries were forced into making a decision and being told that sufficient safety margins were built up in the Games’ final days of preparation. A Reuters article warns that last minute preparations for the Games has meant that security forces may have cut corners (read article here).

Bad things happened when decisions are based upon timelines rather than reason. The Space Shuttle Challenger disaster taught us that.

I wish the best for New Delhi but – under the circumstances – would not be surprised if even a security blanket of 100,000 police and surface-to-air missiles do not offer the foolproof security promised by Interior Minister P. Chidambaram.

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