You can’t win anything with kids

12 December 2006

Max Duthie, Luke Arbuthnot

Poor old Wayne Rooney. When he’s not on the back pages, he’s on the front pages. And now his name keeps cropping up in the legal reports as well.

In a decision reported by The Times on 13 November 2006, the High Court gave summary judgment in favour of Rooney’s current agents (Paul Stretford and his firm, Proactive) against his former agents (Proform).[1] Proform had claimed that Rooney was poached from them, and so they sued Proactive and Stretford for inducing Rooney to breach his representation agreement with Proform. Proactive and Stretford applied for (reverse) summary judgment and the judge (HHJ Hodge QC) held in their favour, finding that Rooney’s agreement with Proform had been voidable (due to Rooney’s age at the time) and that as a consequence Stretford and Proactive could not be liable for inducing a breach of that agreement. And now agents across the country are nervously wondering if their star young clients are going to be picked off by their rivals.

First some background. In December 2000, Rooney (then 15 years old and on Everton FC’s books) entered into a two year representation agreement with Proform. He later had second thoughts and in September 2002 notified Proform that he was terminating the agreement. He said he was entitled to do this since he was a minor and the agreement was therefore voidable. Later that month, Rooney signed a representation agreement with Proactive. (Curiously, two months earlier, in July 2002, Rooney had already entered into a representation agreement with Proactive, and then three months afterwards, in December 2002, Rooney entered another -- by then his third -- representation agreement with Proactive).

By the time the claim made it to court for the summary judgment application in July 2006, Stretford’s relationship with Rooney had already exercised the minds of various members of the judiciary. In October 2004, Stretford was the key prosecution witness in criminal proceedings brought in Warrington Crown Court against a number of individuals charged with demanding money with menaces. Stretford’s evidence was that, following Rooney’s decision to leave Proform and sign with Proactive, three men had tried to force Stretford to agree that Proactive would pay to Proform half of all its earnings from Rooney for the following ten years. But the case collapsed when it was claimed that Stretford had made false statements to the court about his approaches to Rooney and was considered by the prosecution to be an unreliable witness.

Then in June 2005 the FA brought disciplinary proceedings against Stretford, charging him with breaching FIFA’s Players’ Agents Regulations and the FA’s own rules in connection with his dealings with Rooney (and his conduct during the criminal proceedings in Warrington).[2] In September 2005, Stretford applied to the court for declarations that the disciplinary proceedings did not comply with Article 6 of the European Convention of Human Rights and the Human Rights Act 1998, that one of the rules he was alleged to have breached was an unlawful restraint of trade, and that the charges relating to his evidence in the Warrington criminal proceedings were contrary to public policy.[3] The FA claimed that Stretford’s application had to be brought under arbitration, and not in the courts, relying on the arbitration clause in FA Rule K. The court agreed and Stretford’s case was stayed.[4]

All in all, by the time of Stretford’s summary judgment application in July 2006, the parties were well versed in the relevant facts. There were a number of legal issues to be decided in the summary judgment case, but at the heart of the matter were two questions. The first: could Stretford/Proactive be liable for inducing Rooney to breach his agreement with Proform if that agreement was voidable? The second: was Rooney’s agreement with Proform in fact voidable?

The first issue: inducing breach of a voidable contract – is that a tort?

The arguments were essentially this. Stretford and Proactive said it was settled law that where a contract can be terminated lawfully by one of the parties, then a third party can incur no liability for inducing that party to so terminate. And, they said, it must follow that where a contract is voidable, and can therefore be avoided lawfully by one of the parties, a third party can incur no liability for inducing that party to exercise his right to avoid the contract. They relied on a passage from the 2006 edition of Clerk and Lindsell on Torts, along with an assumption made by Slade J in his judgment in Greig v Insole (the World Series Cricket case),[5] and two first instance decisions from the turn of the last century.[6]

In response, Proform argued that those authorities could be either distinguished on the facts, or disregarded on the basis that the specific point had not been considered by the respective judges involved. Instead Proform relied on a more fundamental premise: that unless and until a voidable contract has been avoided, it remains valid.

HHJ Hodge QC held in favour of Stretford and Proactive, stating that, “it follows logically from the proposition that where a contract is determinable, the defendant incurs no liability merely by inducing the contracting party to determine the contract lawfully, for there is then no breach, that it is no tort to procure the breach of a voidable contract, at least where the person induced is the party who enjoys the right to rescind.”

The second issue: Rooney’s contract with Proform – was that voidable?

HHJ Hodge QC then had to decide whether Rooney’s representation agreement with Proform had indeed been voidable, due to Rooney being a minor at the time. Essentially, the law provides that a contract with a minor will be voidable unless it is:

(a) a contract for ‘necessaries’, or analogous to a contract of employment, apprenticeship or education; and

(b) beneficial to the minor.

The question of whether a contract is one for ‘necessaries’ (or is analogous to a contract of employment, apprenticeship or education) has been considered a number of times by the courts in the past. Where a contract has been for teaching, instruction and employment, it has been held to be for ‘necessaries’ (for example, where a minor entered into a contract allowing him to tour as a professional billiards player).[7] Similarly, where a contract itself has enabled the minor to earn a living, it has been held to be for ‘necessaries’ (for example, where a minor entered into a contract with a publisher for the publication of a ghost-written biography of the minor,[8] or where a minor agreed to be bound by the regulations of the national boxing governing body, which allowed him to earn a living as a professional boxer[9]). And a contract between a group of under-age musicians and their manager/agent has been held to be analogous to a contract of employment.[10]

Conversely, in Shears v Mendeloff (see above), the court found that the contract (between an under-age professional boxer and his manager, in which it was provided that the boxer could not take any engagements under any other management for three years) was a trading contract, and not one for ‘necessaries’.

HHJ Hodge QC observed that Rooney was already with Everton FC at the time of entering into his agreement with Proform, and could not in any event, under the FA’s rules, sign a professional playing contract with a club until he turned 17. And although he would turn 17 in the last few months of his agreement with Proform, he did not need to enter into a professional playing contract in that period. Further, Rooney did not require the services of an agent to enter into a professional playing contract in any event.

So Rooney’s agreement with Proform did not enable him to earn a living or provide him with education or training (although, for what it is worth, Rooney’s agreement with Everton FC would probably have been different). Consequently, the judge concluded that Rooney’s agreement with Proform was more analogous to the contract in Shears, rather than those in Doyle, Chaplin or the Kinks case. The agreements in those three cases allowed the minors to generate their income (in the Kinks case by obliging the manager to organise matters essential to the business of the band). This was not the case for the agreement between Rooney and Proform. So, it was held not to be a contract for ‘necessaries’ (or analogous to a contract of employment, apprenticeship or education). It failed the first limb of the two-stage test for the enforceability of contracts with minors, and was therefore deemed to be voidable (there was therefore no need to consider the second limb, whether the agreement had been one for Rooney’s benefit). Accordingly, Stretford and Proactive could not be liable for inducing Rooney to breach his agreement with Proform. They had got their man, seemingly fair and square.

What now: open season for agents?

The judgment appears to give some comfort to agents who might wish to poach their rivals’ under-age star clients. But they ought to beware.

First, the circumstances of Stretford’s poaching of Rooney were quite specific, and the judgment is necessarily limited to the facts of the case. In particular, it was significant that Rooney was only 15 at the time of signing and that his agreement with Proform did not facilitate an income stream for the player. Had Proform actually negotiated a professional playing contract with a club, or had Rooney entered into the representation agreement when a little older (and closer to the age at which he was able to sign a professional playing contract with a club), the court might have found that the agreement was for ‘necessaries’ and the decision might have been different. Similarly, had the agreement provided that Proform were to source commercial endorsement and sponsorship deals for Rooney, the decision might also have been different.[11]

Second, regardless of whether it amounts to an actionable inducement to breach, if an agent induces a young star to breach his agreement with another agent, that is likely to fall foul of FIFA’s and the FA’s regulations, and the poaching agent will be liable to disciplinary proceedings (as Stretford is). The likely charges include failing to comply with a sense of fairness, failing to respect the rights of third parties and the contractual relations of professional colleagues, taking action that could entice clients from other parties, inducing a player to act in breach of his contract with his agent, approaching a player who has an existing representation agreement to effect a representation agreement with that player, and approaching a player under 16.[12] Indeed, in those circumstances, even the player himself might be charged with failing to respect the exclusivity granted to an agent.[13]

[1] Proform Sports Management Ltd v Proactive Sports Management Ltd and another, The Times (13 November 2006).
[2] In February 2006, two of the FA’s charges (those of improper conduct/bringing the game into disrepute based on the allegation that Stretford gave false statements in the criminal proceedings in Warrington) were suspended. This followed the decision in Meadow v General Medical Council [2006] EWHC 146 (Admin), which provided that witnesses in litigation enjoyed immunity in relation to the content of their evidence not just from civil suit but also from professional disciplinary proceedings (save where the judge in the litigation elects to refer the witness to his or her professional body, and the judge in the Warrington Crown Court had declined to refer Stretford to the FA). However, the GMC appealed the decision in Meadow, and in October 2006 the Court of Appeal held that a witness’s immunity did not extend to professional disciplinary proceedings: General Medical Council v Meadow [2006] EWCA Civ 1390. The FA might therefore consider reinstating the two suspended disciplinary charges.
[3] These were the charges that were subsequently suspended by the FA in light of Meadow (first instance), see above.
[4] Stretford v The Football Association Limited and Bright [2006] EWHC 479 (Ch). However, Stretford has appealed this decision to the Court of Appeal. That appeal is due to be heard in early 2007. Until then, any arbitration under Rule K, and the underlying disciplinary proceedings, are in abeyance.
[5] [1978] 1 WLR 302 at page 333.
[6] De Francesco v Barnum (1890) 45 Ch. Division 430 and Shears v Mendeloff (1914) 30 Times Law Reports 342.
[7] Roberts v Gray [1913] 1 KB 520.
[8] Chaplin v Leslie Frewin (Publishers) Limited [1966] Ch.71.
[9] Doyle v White City Stadium Limited [1935] 1 KB 110.
[10] Denmark Productions Limited v Boscobel Productions Limited (1967) 111 Solicitors Journal 715 (the Kinks case).
[11] In November 2006, it was reported that ManchesterCity’s fine young defender, Micah Richards, was about to be sued by his former agents (Team Associates), for defecting to another agent (Sports Entertainment Management) during the term of the agreement. Although Richards was 18 when he signed with SEM, he had been a minor when he signed with Team. If the case gets to trial, it will be interesting to see how the court compares Richards’ position with that of Wayne Rooney in the Proform case. And if it is found that Richards’ contract with Team was voidable as a result of Richards’ age, it might be that it subsequently became binding if Richards ratified it after turning 18 (see Chitty on Contracts, 29th ed., paragraph 8-039).
See parts III and IV of the Code of Professional Conduct annexed to FIFA’s Licensed Players’ Agents Regulations (a breach of which makes an agent liable to sanction under articles 8(2) and 15 of those regulations and Article 14.28 of the FA’s Football Agents Regulations, January 2006 version, and constitutes misconduct under FA Rules E1(d)). See also Articles 14.8, 14.10 and 18.2 of the FA’s Football Agents Regulations, January 2006 version. (A new version of the FA’s Football Agents Regulations was approved by the FA Council in November 2006 and is expected to come into force in time for the 2007 summer transfer window).
[13] Article 10.9 of the FA’s Football Agents Regulations, January 2006 version.