Introduction
Facts
Court of Appeal decision
In December 2011 the Court of Appeal handed down its judgment on the latest instalment of the long-running dispute between footballer Wayne Rooney and his former management company, Proactive Sports Management Limited, in relation to an image rights agreement into which they entered in 2003.
In addition to the key legal questions, which focused primarily on whether the agreement in question was a restraint of trade, the Court of Appeal's judgment also touched on a number of fundamental issues that should be taken into account by both agencies and players when negotiating image rights arrangements. Those points, as well as some guidance for agents and players considering similar arrangements in future, are set out in this update.
In 2003 Rooney's image rights company, Stoneygate Limited, entered into an image rights representation agreement with Proactive in relation to the exploitation of Wayne Rooney's image rights. Rooney was 17 at the time, the contract had an eight-year term and, although his family was actively involved, Rooney was not advised by a lawyer.
Proactive was appointed as the sole and exclusive representative of Stoneygate and was entitled to 20% of the sums payable to Stoneygate from the exploitation of Rooney's image rights. The wording was as follows:
"Clause 6.2 20% of the gross sum payable under any contract or arrangements for the promotion, endorsement or advertisement of [Stoneygate]... and/or the exploitation of the Intellectual Property and/or products, goods or services to which [Stoneygate]... is a party."
The contract between Stoneygate and Proactive was silent on whether Proactive should continue to receive the commission after its expiry or termination.
Although no written agreement was in place, Proactive was also acting on behalf of image rights company Speed 9489 Ltd - the image rights company used by Rooney's wife, Coleen - and receiving a commission of 20%.
In October 2008 the professional relationship broke down. The Rooneys both took their business to a new agency, Triple S, and sought to terminate the agreement and stop paying commission to Proactive.
Proactive sued on the grounds that the Rooneys were in breach of the agreements between them, and claimed for commission arrears. The Rooneys argued that Proactive should not be entitled to post-termination commission and that, in any event, the agreement was unenforceable because it was an unreasonable restraint of trade.
Proactive's entitlement to post-termination commission
The Court of Appeal disagreed with the earlier High Court decision and found that there was a right to the payment of commission post-termination. A key factor was the absence of any restriction on the word 'payable' in Clause 6.2 (eg, the clause did not say 'payable during the term of the contract').
It was held that "it was the procuring of endorsement contracts that gave rise to the right to commission, and not the ongoing provision of services". In other words, the procurement triggered the payment. Therefore, the commission should be payable as a result of that procurement, whether or not the representation contract continued.
Unreasonable restraint of trade
The Court of Appeal confirmed the High Court's earlier decision that the agreement between Rooney's image rights company and Proactive was an unreasonable restraint of trade. This was largely because it imposed extensive restraints on Rooney's freedom to exploit his earning capacity:
- over a very long period;
- on terms that were not customary; and
- on terms that were not the product of a negotiation between equals - the relevant issues included the fact that Rooney had been 17 at the time and had not received legal advice.
It was irrelevant that the exploitation of his image rights was not Rooney's primary trade. Moreover, the fact that Rooney was still making a significant amount of money from the deals sourced by Proactive did not override the fact that the terms of the deal were one-sided and oppressive.
As the contract was an unreasonable restraint of trade, it was unenforceable and Proactive could not rely on the agreement to recover any sums which would have fallen due to it under the agreement (ie, its 20% commission due after the term of the contract), or to sue for breach of contract.
Proactive's entitlement to remuneration
If the agreement was unenforceable, should Proactive be remunerated for services provided that had not yet been paid for? The court found that as the agreement was deemed unenforceable, Proactive could no longer recover the unpaid commission due under the agreement. However, Proactive was found to be entitled to an alternative remedy - namely, a restitutionary payment called 'quantum meruit' - for the services provided under the agreement (which, broadly speaking, would be a fair and reasonable payment for the services received, based on general market rates).
Although this might appear to be a positive outcome for Proactive, the High Court and the Court of Appeal both rejected its contention that the quantum of any such compensation be measured by reference to the 20% commission which would have been payable under the agreement, holding that the amount to be awarded should be decided at a further hearing.
Agreement between Speed 9489 Ltd and Proactive
Regarding Coleen Rooney's company, the court found that an agreement could be inferred from the conduct of the parties, under which Proactive was to provide services similar to those which it provided for Stoneygate, on essentially the same terms. Therefore, it was deemed to follow that the terms giving rise to the right to commission, and in particular the trigger for the 20% commission which resulted in commission continuing to be payable after termination, were the same.
For further information on this topic please contact Paul Groves at Harbottle & Lewis LLP by telephone (+44 20 7667 5000), fax (+44 20 7667 5100) or email ([email protected] ).