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

October 29, 2010


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

The full case report can be found here:

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:

Ironically, Peter Kenyon was himself dismissed in 2009:

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About Kris

Associate Professor in Sports Law, Staffordshire University; British Gymnastics Senior Coach

View all posts by Kris

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