Sports Law

Second edition

by Mark James

Updates for Chapter 11: Regulating sporting relationships in English law

These updates were last reviewed in July 2013

Updates and Amplifications

11.2.2 Interpreting the terms of the contract

​In Berg v Blackburn Rovers Football Club and Athletic Plc [2013] EWHC 1070 (Ch), a dispute arose over the amount of compensation payable to the claimant on termination of his contract as manager of Blackburn Rovers FC. Under the agreement as negotiated between the claimant and the defendant’s Managing Director (MD), the club could terminate the fixed term employment contract at any time, provided that it paid the claimant his outstanding salary up to the end of the original contract term. After six months in post, Berg was sacked and claimed £2.25m in compensation as the amount owed on the remainder of the contract. The club subsequently argued that the sum claimed was an unlawful penalty and that Berg knew that the MD had no right to enter into an agreement of this nature without the specific authority of the club’s owners.

The High Court dismissed both of the club’s claims. There had been no breach of contract as it had been terminated lawfully according to its terms. Therefore, it was unarguable that the sum claimed was due under a penalty clause. Further, the MD was not operating the affairs of the club outside of the control of the owners, but was acting in accordance with normal practice within the football industry. Berg was entitled to consider that any terms agreed with the club’s MD were acceptable to both the club and its owners as it was reasonable to assume that the MD had the necessary authority to enter into employment contracts of this nature.

Although arising from a very different context, committing a football club to two ‘forward funding’ loans against sums due to be received from transfer fees and the Football League, a similar principle was applied in LNOC Ltd v Watford Association Football Club Ltd [2013] EWHC 3615 (Comm). The High Court held that a MD has implied actual authority to do all such things as fall within the usual scope of that office. Further, there is no need for there to have been a formal appointment to the role; provided that the board permits or authorises a director to act as the MD, then he has the normal authority vested in that office. If the MD honestly believes that he is acting in the best interests of the club, and in particular is not acting in bad faith or for personal gain, then he is acting within the scope of the necessary authority. In this case, a complex financing arrangement had been created in an attempt to ensure that the club was compliant with Football League Regulations 19, 44 and 48, breach of which could otherwise have resulted in a fine or points deduction. The club argued that these were transactions that were not in the best interests of the club, that the MD knew this and that it was, therefore, not required to make the outstanding repayments. In allowing LNOC’s claim, the Court held that the club was free to delegate wide ranging authority to its MD but that it must take responsibility for so doing. Watford, acting through its de facto MD, had borrowed money that it had failed to pay back. The Court ordered it to repay the outstanding £2.62m.

11.3.6 Unfair dismissal
Cases of unfair dismissal usually arise where an employer either has no good reason for dismissing an employee or where the employer has failed to follow its own disciplinary or dismissal process. Further, under Regulation 7 Transfer of Undertakings (Protection of Employment) Regulations 2006, a dismissal will be held to be unfair where it has occurred because of a transfer of the ownership of the relevant business, or is connected to such a transfer and is not for an economic, technical or organisational (ETO) reason necessitating changes in the workforce. Where a sports club has entered into administration, the administrators must ensure that they balance the rights of the employee to be retained and/or transferred to the new business against the need to ensure the on-going viability of the club in the period before any change in ownership takes place.

In Crystal Place FC Ltd, CPFC (2010) Ltd v Kavanagh and others [2013] EWCA Civ 1410, the administrator sacked 29 employees of the football club whilst negotiations for its sale to the second defendant were taking place. The club had no realisable assets, as it wanted to maintain its playing staff, leaving it little option but to sack the claimants in order to reduce its costs in the short term, thereby avoiding liquidation. In such circumstances, where the purpose of the sackings is to reduce the wage bill in order to continue the business, then this is an ETO reason, specifically an economic reason. However, if the real reason behind the sackings is that having a smaller workforce will make the club more attractive to a potential purchaser, then that is not be an ETO reason and the dismissals are unfair. The administrator justified the sackings as part of a necessary ‘mothballing’ of the club over the summer when its income was effectively zero, a move that would avert the liquidation of the club and enable negotiations for its sale to continue. The Court held that preserving the financial viability of the business is an appropriate ETO reason, the result of which was that liability for the dismissals remained with the first defendant. Discriminatory practices (race)
Gillingham FC’s appeal against the finding that it had acted unlawfully in dismissing one of its players was rejected in Gillingham Football Club Ltd and Scally v McCammon UKEAT/0559/12/DM and UKEAT/0560/12/DM. The EAT held that it was clear from correspondence between the parties that one of the reasons for dismissing McCammon for gross misconduct was his allegation of racism. As this is a ‘protected allegation’ the club was guilty of unfair dismissal on the grounds of unlawful racial victimisation (ss27 and 39(4)(c) Equality Act 2010). Although not key to its determination, the EAT also held that the Employment Tribunal was correct to find that there were a number of procedural problems with the disciplinary process followed by Gillingham, in particular that the player had not been given sufficient notice to answer the case against him and that the club’s chairman, Scally, should not have both carried out the investigation against McCammon and sat on the panel passing judgment on him.

11.5.5 Age discrimination
Straddling the intersection between sport and entertainment law, racing pundit John McCririck’s claim that he had been dismissed from Channel 4’s racing programmes on the grounds of age discrimination were rejected by the Employment Tribunal in McCririck v Channel 4 Television Corporation and IMG Media Limited 2200478/2013 (13 November 2013). The Tribunal held that the respondents had acted proportionately by not offering McCririck a new contract on the grounds that he was a pantomime character with unpalatable and bigoted views in trying to achieve the legitimate aim of making the revamped racing programmes attractive to a wider audience. As their decision was based on a desire to change the format and approach of the programmes and as they had commissioned audience research on the acceptability of various potential presenters, which found that McCririck had extremely low approval ratings, the respondents and not acted unlawfully or in a discriminatory manner in choosing not to employ him.