BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
LONDON CIRCUIT COMMERCIAL COURT (QBD)
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
SITTING AS A JUDGE OF THE HIGH COURT
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WINLINK MARKETING LTD |
Claimant |
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- and - |
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THE LIVERPOOL FOOTBALL CLUB & ATHLETIC GROUNDS LTD |
Defendant |
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Mr Robert Anderson QC and Mr Theo Barclay (instructed by DLA Piper UK LLP) for the Defendant
Hearing dates: 8-11, 15 June 2020
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Crown Copyright ©
HH Judge Pelling QC:
Introduction
i) Mr Jonathan Kane, LFC's Director of International Business Development at the relevant time and Mr Dixon's principal contact at LFC;ii) Ms Raffaella Valentino, a marketing executive who entered employment by LFC in 2016 having previously been employed by Targeted Regional Marketing Limited ("TRM"), where she had also had a role in negotiating BetVictor's sponsorship of Chelsea Football Club ("Chelsea"). LFC's factual case is that Ms Valentino was exclusively responsible for securing the sponsorship agreement with BetVictor by reason of the long standing and strong commercial relationship that she had developed with BetVictor's then Chief Executive Officer Mr Meinrad; and
iii) Mr William Hogan, LFC's Managing Director and Chief Commercial Officer. He explains that both Mr Kane and Ms Valentino reported to Mr Olly Dale. Mr Dale was not called as a witness however, nor was Mr Meinrad.
Background
" Manchester United priced its front of shirt partnership at £64 million in 2014 and again in 2020. For the same years, its training kit partnership was c£15 million, and its betting partnerships started at approximately £3 million. Liverpool was a little cheaper, but still towards the top of the market. Its front of shirt partnership was £20 million in 2014 and £40 million in 2020. Its training kit partnership went from £3 million in 2014 to £9 million in 2020. And its betting partnerships went from c£1.5 million in 2014 to c£5 million in 2020. To give a third example, Everton's combined front of shirt and training kit partnership was priced at £4 million in 2014 and £9 million in 2020."
Generally, a sponsor will be prepared to invest sums of this magnitude because sponsoring a sporting rights holder that is prominent either globally or in particular regional markets is thought likely to enhance the market recognition of the sponsor, thereby attracting business that it would or might not otherwise attract. Generally sponsorship agreements with football clubs run for the duration of a football season (July to June in England) or multiples of such seasons. It follows that generally sponsorship agreements will have to be finalised well before the start of the first season to be sponsored, not least so that the promotional material on which the sponsor's name is to be displayed can be designed, approved and manufactured.
The IA
"PARTIES
l. LIVERPOOL FOOTBALL CLUB AND ATHLETIC GROUNDS LIMITED incorporated and registered in England and Wales with company number 035668 whose registered office is at Anfield Road Liverpool L4 0TH (LFC).
2. WINLINK MARKETING LIMITED incorporated and registered in England and Wales with company number IE493008 whose registered office is at Floor One, Block One Quayside, Business Park Dundalk Colouth Ireland (Introducer).
3. Background
A. The Introducer has a large number of contacts, and can meet further contacts who may be interested in purchasing the Sponsorship Rights from LFC.
B. The LFC wishes to be introduced to such contacts, and is willing to pay the Introducer a commission on the terms of this agreement if such contacts purchase services from it and the Introducer is willing to effect these introductions in return for this commission.
AGREED TERMS
l. INTERPRETATION
1.1.2 Commencement Date: has the meaning given to it in clause 7.
1.1.3 Commission: has the meaning given to it in clause 4.2.
1.1.4 Introduction: the provision to LFC of the contact details of a Prospective Client who knows one or more individuals at the Introducer and is of sufficient seniority to authorise or recommend the purchase of the Sponsorship Rights from LFC. Introduce, Introduces and Introduced shall be interpreted accordingly.
1.1.5 Introduction Date: for each Prospective Client, the date during the term of this agreement on which the Introducer first Introduces such Prospective Client to LFC.
1.1.6 Net Income: the payments actually received by LFC for the Sponsorship Rights under a Relevant Contract less any value added tax or other sales tax on them.
1.1.7 Prospective Client: means each of Bet Victor, Stan James and Betfred only.
1.1.8 Relevant Contract: a legally binding agreement for the grant of Sponsorship Rights entered into during the Introduction Period between LFC and a Prospective Client who was Introduced by the Introducer.
1.1.9 Sponsorship Rights: means rights of sponsorship of LFC to be granted by LFC to a Prospective Client pursuant to a Relevant Contract, the particulars of which shall be notified by LFC to the Introducer but provided that the Introducer acknowledges that the precise rights granted to a Prospective Client under a Relevant Contract following negotiation may differ from those notified to the Introducer.
2. INTRODUCTIONS
2.1 LFC appoints the Introducer on a non-exclusive basis to Introduce the Prospective Clients to LFC on the terms of this agreement.
2.2 The Introducer shall:
2.2.1 serve LFC faithfully and diligently and not to allow its interests to conflict with its duties under this agreement;
2.2.2 use its best endeavours to make Introductions of the Prospective Clients and in any event shall ensure that it has introduced LFC to at least one Prospective Client within 30 days of signature of this Agreement;
2.2.3 not approach any party other than the Prospective Clients with a view to making an Introduction without the prior written consent of LFC;
2.2.4 report in writing to LFC from time to time on progress made with Prospective Clients; and
2.2.5 comply with all reasonable and lawful instructions of LFC.
2.3 The Introducer shall have no authority, and shall not hold itself out, or permit any person to hold itself out, as being authorised to bind LFC in any way, and shall not do any act which might reasonably create the impression that the Introducer is so authorised. The Introducer shall not make or enter into any contracts or commitments or incur any liability for or on behalf of LFC, including for the provision of the Sponsorship Rights or the price for them, and shall not negotiate any terms for the provision of the Sponsorship Rights with the Prospective Clients.
2.4 The Introducer must disclose to each Prospective Client that it represents LFC and that it has no authority or ability to negotiate or vary the Sponsorship Rights or the terms of a Relevant Contract or enter into any contract on behalf of LFC.
4. COMMISSION AND PAYMENT
4.1 The Introducer shall be entitled to Commission if a Prospective Client Introduced by the Introducer enters into a Relevant Contract.
4.5 LFC shall within thirty (30} days of receiving the corresponding payment for the Sponsorship Rights send to the Introducer a written statement setting out, in respect of such Relevant Contract:
4.5.1 the Commission payable to the Introducer;
4.5.2 the payments for Sponsorship Rights received and details of any sums due which have not been received; and
4.5.3 how the Commission has been calculated, including details of all deductions made in determining Net Income.
4.6 The Introducer shall invoice LFC for the Commission payable as per LFC's statement submitted pursuant to clause 4.5, together with any applicable VAT and LFC shall pay such invoice within 30 days of receipt.
4.13 Termination of this agreement, howsoever arising, shall not affect the continuation in force of this clause 4 and LFC's obligation to pay Commission to the Introducer in accordance with it.
5. OBLIGATIONS OF LFC
5.1 LFC must at all material times act in good faith towards the Introducer.
5.5 The LFC shall be under no obligation to:
5.5.1 follow up any Introduction made by the Introducer; or
5.5.2 enter into a Relevant Contract.
7. COMMENCEMENT AND DURATION
This agreement shall commence on the date when it has been signed by all the parties (Commencement Date) and shall continue, unless terminated earlier in accordance with clause 8, until either party gives to the other party written notice to terminate.
8. TERMINATION
8.2 LFC shall be entitled to terminate this agreement for any other reason by giving not less than thirty (30) days' notice in writing to the Introducer.
9. CONSEQUENCES OF TERMINATION
9.1 Other than as set out in this clause, neither party shall have any further obligation to the other under this agreement after its termination.
9.2 The following clauses shall continue to apply after the termination of this agreement: clause 1, clause 3, clause 4, clause 6 and clause 9 to clause 18 (inclusive).
9.3 Termination of this agreement, for any reason, shall not affect the accrued rights, remedies, obligations or liabilities of the parties existing at termination.
11. ENTIRE AGREEMENT
11.1 This agreement constitutes the entire agreement between the parties and supersedes and extinguishes all previous drafts, agreements, arrangements and understandings between them, whether written or oral, relating to its subject matter.
11.2 Each party acknowledges that in entering into this agreement it does not rely on, and shall have no remedies in respect of, any representation or warranty (whether made innocently or negligently) that is not set out in this agreement. No party shall have any claim for innocent or negligent misrepresentation based upon any statement in this agreement.
12. VARIATION
No variation of this agreement shall be effective unless it is in writing and signed by the parties (or their authorised representatives).
This agreement has been entered into on the date stated at the beginning of it."
The only copy of the IA in evidence is dated 1 October 2013 and I find that the agreement took effect as and from that date.
Introduction of BetVictor to Liverpool
"Mark Dixon 6 December 2013 at 16:14 To: Jonathan Kane, Karl Riley . Magnus Grinneback
Hi chaps ,
As discussed let's do a call at 1130 (UK or CET?) on Tuesday.
Karl please can you confirm time and call details.
Many thanks
cheers
Mark"
All parties agreed that a call could take place as proposed. WML's case is that this is the first time when Mr Dixon put Liverpool (acting by Mr Kane) and Messrs Riley and Grinneback of BetVictor into direct contact and was the "Introduction" for the purposes of clauses 1.1.4 and 4.1 of the IA. On 10 December 2013 the planned call took place between Mr Kane and Ms Crump (for LFC), Mr Riley and Mr Grinneback (for BetVictor) and Mr Dixon (for WML).
"On 1 February 2015, Andreas Meinrad joined BetVictor as CEO. I knew from emails with Mr Grinneback in late January 2015 that he was interested in a "big club betting partner angle". I reminded Mr Grinneback that I had sent him details for Arsenal, Chelsea and Manchester United, adding that for the moment "Liverpool as we know unavailable". I had positive meetings with Mr Meinrad on 11 March 2015 at Cheltenham and then on 24 March 2015 in Gibraltar over lunch. He signalled his interest in a partnership with a Premier League club for the exposure in Asia and UK. He instructed me to keep on dealing with Mr Grinneback on this, but made it clear that he was also going to take a personal interest in any opportunities which arose. It was clear to me that, if anything, BetVictor's next sponsorship bid in the Premier League would be bigger than its first offer to Liverpool."
"I've spoken again to Magnus and am on with finding three to four clubs for LED partnership. Given the 666bet demise it may be that West Brom will do an immediate deal to include next season; I'll come back to you and Magnus on all this as well as intel on the bigger clubs fyi."
" Mr Grinneback instructed Mr Dixon to make offers for LED advertising to both Liverpool and Manchester City. Mr Dixon emailed and then telephoned Mr Kane to offer £880,000 for a package for the 2015/2016 season on behalf of BetVictor. Mr Kane declined, saying that the price had risen since 25 March 2015."
Contrary to what Mr Dixon said in paragraph 99 of his first statement quoted earlier, this offer was not materially "bigger" than that made in 2014 and was focusing on LED advertising. I explained the nature of this advertising service earlier. Mr Dixon reported back to BetVictor in terms that were consistent with him treating BetVictor as his principal and which made clear that BetVictor's proposal had been rejected by LFC. Mr Dixon's email was in these terms:
"HI Magnus
I spoke to both clubs today.
They both politely declined your offer.
They both said that things change by the day so I will keep talking to them every day.
Where they are at:
Liverpool
Talking to Betfair. Marathonbet and ANother (think it's probably Databet or PokerStars) plus their Asia partner incumbent 188bet. Recent positive talks with these now mean that only an offer of $1.3m for 3 mins LED would be worth discussing! Or maybe slightly less but then a commitment for 2016/17 at £2m + for exclusive Global partner with 516 mins LED.
Man City
Talking to Marathonbet and ANother (as above think it's Dafabet or PokerStars) as well as incumbent 188bet. Recent positive talks suggesting that they are confident of Global partner at £1.5m +; with 3 mins LED.
So as I say I'll keep talking to them both but unless something significant changes looks like we are a long way away.
Might be worth seeing where West Brom are but really I need an offer of some sort from you e.g. £5500k 10 mins plus Asian co-operation etc...let me know.
Plus I'm chasing Bournemouth.
And doing the rounds..."
"Hi Mark,
This email is to clarify that there is no relationship between BetVictor or any of our companies and yourselves (Bettorlogic, you or any other representative of your company). We will immediately cease any existing discussions between you and all our staff (if any are in progress) and we want to underline that you are not representing us in any commercial discussions.
Please confirm receipt of this email.
Many thanks,
Magnus"
Mr Dixon responded by email on 5 October 2015 in these terms:
"Hi Magnus
l'm acknowledging receipt of your recent email but I have to say I'm completely dumbfounded by all this. I'm also really upset that my great working relationships with yourself and so many at BetVictor including Neil Joyce and Paul Louis have been terminated in this way. I'm really struggling to see where I've gone wrong. As you know over a number of years I brought a number of deals to you/BV. l was clear to you during a number of discussions, and in writing, that the clubs had agreed to pay me a percentage of any of those deals, if terms were agreed between the club & BV. This meant that I wasn't going to be invoicing you for anything such as fees, expenses or commissions. Chelsea were obviously one of those clubs. Pre and post our meeting with Steve Cumming at Stamford Bridge, Chelsea confirmed an agreement to pay me if BV signed a betting partnership deal, and I am asking them to now honour that agreement. I'm not asking BV to pay me anything here - even though Chelsea are telling me that they have agreed with BV that BV pay us!
I can only think that Steve Cumming did not properly communicate the arrangement he made with me - and obviously Steve leaving Chelsea has caused confusion. The good news is that Christian Purslow at Chelsea has now reached out and asked for a meeting. I hope and expect that this can all be resolved amicably at that imminent meeting. But it would leave me very sorry if you & I could not continue working together."
Notwithstanding this, relations were not restored and I find that the relationship between WML and BetVictor came to an end from the end of September 2015.
"You will see I have put my boss' contacts - Olly Dale, he is our Commercial Director and based in London with me, so if you are interested we can all meet up when you are over and/or we can come to see you in Gibraltar in the next few weeks."
The reference to "my boss" leads me to conclude that the reason she used her private email account was in order to conceal the fact that she was in effect working for LFC prior to the end of her period of gardening leave.
"BetVictor: went as well as it could. From a "no" to T[raining]K[it] over text, now he's taken away both proposals and will consider them both. Positives are that he decides quickly, he IS the decision maker, and that he said he could look to do a small deal with CFC and a bigger one with us. So we will know week after next latest - I think he MAY make an offer, just not sure it will meet our ask"
"I have officially started at LFC now, and IN CONFIDENCE, have these performance stats by Marathon Bet with us, I told you they loved the partnership!
Please PLEASE keep these confidential and don't share, but for you to view:
UK Sponsorship numbers:
LFC were responsible for 53% of all new registrations that were directly linked to tracked UK sponsorship campaigns in 2015
LFC were responsible for 51% of all new first time depositors that were directly linked to tracked UK sponsorship campaigns in 2015
To put that into perspective, Man Utd who are the other Club they sponsor (for £3m+) numbers are 9% and 4%
UK numbers in general:
LFC tracked campaigns made up for 8.3% of all UK first time depositors in 2015 across all channels
Registration to FTD conversion:
53% of LFC fans that signed up for an Marathonbet account then went on to place a deposit.
To give you other comparisons, LFC were responsible for 53% REG and 51% FTD whereas Man Utd ONLY 9% and 4%.
We're miles ahead in terms of our KPIs, which is great news as next season we can look at extending UK customer lifetime and global account acquisition (particularly in Asia).
Do let me know when you have feedback on what I left with you : Match Day Live - Principal Partnership £4.5m or Training Kit £6m.
Please consider the Interview backdrops are JUST for Principal partners and we are offering you Principal Partner type rights (LED, backdrops, digital etc) for a fraction of the price. Principal partners are only New Balance, Standard Chartered (shirt).
The only way to get Marathon Bet off is to be "Principal" - they are on £2m+. and with Man Utd they pay £3m+.
You've seen the CSM stats, if Asia is important, NO ONE performs like Liverpool, and as you see above, no one
performs like LFC in UK too.
Let me know when you are back and can talk!"
The first sentence is consistent with Mr Meinrad being aware that prior to 18 February Ms Valentino was working for LFC when she should not have been and is an acknowledgement by Ms Valentino that she had been working for LFC in January 2016 when she should not have been.
"Hi Billy, Olly and Jo,
GREAT start to the weekend and hope you return safely from China to this good news.
BetVictor want to leave CFC and partner with us.
Everyone internally at BV is convinced about the switch and he said there was no comparison between the pitch we did vs how Christian and CFC presented.
Feedback on the offer:
- He feels he can trust and will be better looked after at LFC
- He will appoint 2ppl on his team to purely work on LFC
- ASIA and Jurgen are big factors in switching
- Our activity and major impact we have in China is key
- CFC put forward a similar proposal (because he had to send them what he wanted, which he didn't like, he constantly had to chase them for a proposal!) and the rights are therefore similar for £4.5m but with no TK
- Investment proposed: He knows its £5M per annum for 3 years. He said "look CFC put forward 4.5m, I don't want to negotiate, I leave it up to you if there is anything you can do to help us here, we are a small/growing business, so if there is ANYTHING you could do I would appreciate it"
- Another big factor is Michael Owen. Ideally they would like him to be exclusive with them, they know he has other betting deals can we help there?
- They are SUPER excited to be working with us
- He said he constantly had to chase Christian, and now that the fee is 4.5m (on a proposal Andreas had to send him), copying ours, he now chases him all day!
NEXT STEPS:
- He has a Shareholder Call on Tues NIGHT where he has to present the £15m investment with LFC. He doesn't foresee any problems
- Asked if we can start working on the contract in super confidential matter. He needs to inform CFC of his decision so if we could put a neutral name in the contracting party until he has spoken to CFC/Shareholder that would help
- He'd be keen to wrap it up soon as I know from first-hand experience 'time kills deals' so I would encourage prioritising this Principal deal with our legal if possible
- Possible request in the contract from them will be that IF China shuts down for betting or there is a massive regulation block to betting, because that is 60% of his business, if there is language to renegotiate terms or terminate etc.
- Jo, I pull together a Deal Brief first thing Monday ok?
Having done 2 x deals with him (bwin at MU and BetVictor at CFC) and you have met him, he gets stuff done and is reliable. And will get it done quickly.
FOR US TO THINK ABOUT:
- Should we worry about Christian suing or something because he's come to LFC? In fairness Andreas asked me, and I've known him for years. I don't know why but I am paranoid about CP and consequences as he's a bad loser
- Should we now ask Andreas for the new BetVictor logo for New Balance?
Let me know your thoughts, surely we can start drafting the contract and get ahead of ourselves even if we need to hear from Hankook?"
The points that emerge from this email are firstly that the impact of Asia was a major factor in the decision making but not the only one that led to BetVictor's decision and secondly that Ms Valentino was a major driving force for the transaction. This is apparent from the fact that Mr Meinrad informed her rather than any of the more senior executives at LFC (whom he had met at a meeting in late March 2016) of BetVictor's decision to accept LFC's proposal, from the apparently sincere effusive congratulations from the various addressees of the 8 April email, from Ms Valentino's concern about the reaction of "Christian" (the Managing Director of Chelsea), her unforced comment that it was "Andreas" (i.e. Mr Meinrad) who approached her initially and from the fact that ultimately LFC paid Ms Valentino a substantial bonus in respect of the transaction.
"Hi Fintan,
Nothing to do with me I'm afraid.
It was a deal struck between my colleague Raffaella Valentino and the new CEO at BetVictor Andreas Meinrad. Raffy used to work at Man Utd and did their betting deal with BWIN through Andreas so they have history.
Jonathan"
Whilst that letter viewed on its own and isolation from what had gone before might be characterised as self-serving, in fact it is entirely consistent with the tenor of the internal LFC material to which I have referred above. WML maintains however that I should conclude that notwithstanding what he says in this email, Mr Kane provided behind the scenes support to Ms Valentino, particularly by suggesting she emphasise the Asia synergy that WML maintain it had identified as a basis for introducing Mr Riley and Mr Grinneback to Mr Kane in December 2013. I return to that issue when considering the factual issues relevant to LFC's effective cause defence. Whilst the confidential commercial information that Ms Valentino supplied to Mr Meinrad referred to earlier could only have come from senior officials within LFC, there is no evidence that it was obtained from or provided by Mr Kane.
The Out of Time Defence
"21. The terms of the Alleged Agreement fall to be construed in light of its commercial purpose and the Alleged Agreement as a whole. In particular:
a. recital 3B makes clear that [WML] is to be remunerated, if specific contacts that it introduces subsequently purchase services from LFC;
b. clause 2.1 makes clear that [WML] is to be appointed on a non-exclusive basis as an Introducer; and
c. [WML] stood to receive significant levels of Commission under clause 4.2, if the introduction of its contacts subsequently resulted in a Relevant Contract.
22. A "Relevant Contract" is defined, pursuant to clause 1.1.8, as "...a legally binding agreement for the grant of Sponsorship Rights entered into during the Introduction Period..." (emphasis added). Paragraph 21 above is repeated. Further, the reference to the "Introduction Period" in clause 1.1.8 falls to be construed in light of the expectation of the parties that Introductions would be made promptly, as reflected in clause 2.2.2.
23. By using the words "Introduction Period", in the specific context of the Alleged Agreement, the parties evinced a mutual intention that Commission should only be payable if there was a reasonable nexus in time between the date of the Introduction and the date of a legally binding agreement for the grant of Sponsorship Rights. The Sponsorship Agreement was entered into almost two and a half years after the Introduction. It is denied that the Sponsorship Agreement was entered into during the Introduction Period, because a period of almost two and a half years is not a reasonable time period after the Introduction. For that reason, the Sponsorship Agreement does not amount to a Relevant Contract and no Commission is payable."
Contractual Construction The Relevant Principles
i) The court construes the relevant words of a contract in its documentary, factual and commercial context, assessed in the light ofa) the natural and ordinary meaning of the provision being construed,b) any other relevant provisions of the contract being construed,c) the overall purpose of the provision being construed and the contract in which it is contained,d) the facts and circumstances known or assumed by the parties at the time that the document was executed, ande) commercial common sense; butf) disregarding subjective evidence of any party's intentions see Arnold v. Britton [2015] UKSC 36 [2015] AC 1619 per Lord Neuberger PSC at paragraph 15 and the earlier cases he refers to in that paragraph;ii) A court can only consider facts or circumstances known or reasonably available to both parties that existed at the time that the contract was made see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 21;
iii) In arriving at the true meaning and effect of a contract, the departure point in most cases will be the language used by the parties because the parties
a) have control over the language they use in a contract; andb) must have been specifically focussing on the issue covered by the disputed clause or clauses when agreeing the wording of that provision see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 17;iv) Where the parties have used unambiguous language, the court must apply it see Rainy Sky SA v. Kookmin Bank [2011] UKSC 50 [2011] 1 WLR 2900 per Lord Clarke JSC at paragraph 23;
v) Where the language used by the parties is unclear the court can properly depart from its natural meaning where the context suggests that an alternative meaning more accurately reflects what a reasonable person with the parties' actual and presumed knowledge would conclude the parties had meant by the language they used but that does not justify the court searching for drafting infelicities in order to facilitate a departure from the natural meaning of the language used see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 18;
vi) If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other see Rainy Sky SA v. Kookmin Bank (ibid.) per Lord Clarke JSC at paragraph 21 but commercial common sense is relevant only to the extent of how matters would have been perceived by reasonable people in the position of the parties, as at the date that the contract was made see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 19;
vii) In striking a balance between the indications given by the language and those arising contextually, the court must consider the quality of drafting of the clause and the agreement in which it appears see Wood v. Capita Insurance Services Limited [2017] UKSC 24 per Lord Hodge JSC at paragraph 11. Sophisticated, complex agreements drafted by skilled professionals are likely to be interpreted principally by textual analysis unless a provision lacks clarity or is apparently illogical or incoherent see Wood v. Capita Insurance Services Limited (ibid.) per Lord Hodge JSC at paragraph 13 and National Bank of Kazakhstan v. Bank of New York Mellon [2018] EWCA Civ 1390 per Hamblen LJ at paragraphs 39-40; and
viii) A court should not reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight, because it is not the function of a court when interpreting an agreement to relieve a party from a bad bargain - see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 20 and Wood v. Capita Insurance Services Limited (ibid.) per Lord Hodge JSC at paragraph 11.
Construction Discussion
The Effective Cause Issue
Implied Terms General Principles
i) Terms are to be implied only if to do so is necessary in order to give the contract business efficacy or to give effect to what was so obvious that it goes without saying and only if and to the extent that without the terms contended for the contract would lack commercial or practical coherence;ii) It is a necessary but not a sufficient requirement that the term that a party seeks to have implied appears fair or is one that the court considered that the parties would have agreed if it had been suggested to them;
iii) The terms to be implied must be capable of clear expression and not contradict the express terms of the contract concerned; and
iv) In most, possibly all, disputes about whether a term should be implied into a contract, it is only after the process of construing the express words is complete that the issue of an implied term falls to be considered because it is only after the construction exercise has been undertaken that the necessity question and the allied question whether the terms sought to be implied contradict the express terms of the contract concerned can be answered see the judgment of Males LJ in Equitas Insurance Limited v. Municipal Insurance Limited [2019] EWCA Civ 718; [2019] 3 WLR 613.
As was made clear by all the judgments in Marks and Spencer Plc v. BNP Paribas Securities Services Trust Co (Jersey) Limited (ibid.) and emphasised by Lord Hughes in Ali v. Petroleum Company of Trinidad and Tobago (ibid.) at paragraph 7, the " concept of necessity must not be watered down. Necessity is not established by showing that the contract would be improved by the addition. The fairness or equity of a suggested implied term is an essential but not a sufficient precondition for inclusion." As he also added: " if there is an express term in the contract which is inconsistent with the proposed implied term, the latter cannot, by definition, meet these tests, since the parties have demonstrated that it is not their agreement." or as Fancourt J put it in UTB LLC v. Sheffield United Limited (ibid.) at paragraph 203: " the principle [is] that (as restated in the Marks and Spencer case) no term may be implied into a contract if it would be inconsistent with an express term".
Ascertaining Whether a Commission Agreement is subject to an "Effective Cause" Provision General principles
"Article 57 of Bowstead and Reynolds on Agency (18th edition) states that, at least usually, "where the remuneration of an agent is a commission on a contract to be brought about, he is not entitled to such commission unless his services were the effective cause of the transaction being brought about". The implication of such an "effective cause" term in an agency contract appears to have been first raised by Henn Collins MR in the relatively briefly reported case of Millar Son & Co v Radford (1903) 19 TLR 575. However, while such a term will relatively readily be implied into an estate agency contract, it was made clear by Viscount Simon in Luxor (Eastbourne) v Cooper [1941] AC 108 at 119 that, where there is an argument whether or not such a term is to be implied, the issue should be resolved by reference to the normal rules relating to implication of terms."
The "normal rules" applicable to the implication of terms are those I set out at the start of this section of this judgment. All I would add is that applying those general principles it is necessary first to decide whether as a matter of construction the contractual terms agreed between the parties include an effective cause provision and if not whether there is any express provision that is inconsistent with the implication of an effective cause term and whether the implication of such a term is necessary in order to give the contract concerned commercial or practical coherence.
i) whether, as a matter of construction, the IA is to be construed as including an "Effective Cause" requirement ("Issue (i)"). If the answer is affirmative then it is necessary to move to Issue (iv) below;ii) If the answer to Issue (i) is negative, it is next necessary to decide whether, again as a matter of construction, the IA includes any provision that would be contradicted by or inconsistent with the implication of an "Effective Cause" term ("Issue (ii)"). If the answer is affirmative then that is the end of the effective cause issue because applying general principles the implication of an effective cause term would be impermissible in those circumstances and WML would be entitled to payment;
iii) If the answers to Issue (i) and (ii) are both negative, the next stage is to decide whether the implication of such a term is necessary in order to give the IA commercial or practical coherence ("Issue (iii)");
iv) Finally, if it is concluded that either as a matter of construction or by necessary implication the IA is subject to an effective cause provision it will be necessary to decide whether as a matter of fact WML was the or an effective cause of the agreement entered into by LFC with BetVictor in May 2016 ("Issue (iv)").
The general principles applicable to the construction aspects of this exercise are those set out earlier.
"Q. Now, the agreement in this case between Liverpool and Winlink was non- exclusive, do you recall? We can turn it up if you like. Your agency was not an exclusive or sole agency?
A. Absolutely. I recall that from the agreement, yes .
Q. Very good. So -- sorry, this is obvious, but forgive me -- so other agents, a Pitch or a SportQuake, it doesn't matter -- other agents could also introduce deals to Liverpool with BetVictor, Stan James or Betfred?
A. Yes, from that agreement, yes."
Mr Sutcliffe submits that in fact LFC did not have to pay two commissions. This is immaterial since the issue that I am currently concerned with must be judged by reference to the facts and circumstances known or assumed by the parties at the time the IA was executed.
"A. The Introducer has a large number of contacts, and can meet further contacts who may be interested in purchasing the Sponsorship Rights from LFC.
B. The LFC wishes to be introduced to such contacts, and is willing to pay the Introducer a commission on the terms of this agreement if such contacts purchase services from it and the Introducer is willing to effect these introductions in return for this commission."
Recital B emphasises that LFC was willing to pay commission " if such contacts purchase services from it ". The phrase " such contacts " is a reference back to those referred to in Recital A that is to contacts of WML to which LFC wished to be introduced as expressly stated in the opening phrase of Recital B. Whilst the recitals are silent as to whether an introduction need be an effective cause of the contact purchasing services by reference to which commission becomes payable, in my judgment construing them subject to such a requirement reflects what a reasonable person with the parties' actual and presumed knowledge would conclude the parties had meant by the language they used. The alternative that LFC wished to pay commission for introductions that were not an effective cause of the purchase by reference to which commission was to be paid makes no commercial sense, is unreasonable to a high degree and would have made no commercial sense to either party at the time the IA became binding between them.
i) In 2013, LFC and WML enter into the IA and in 2014, WML introduced A, the then marketing director of LFC to X, then the managing director and sole shareholder in D Limited;ii) In 2016, X sold his shares in D Limited to Y and Z was appointed managing director of D Limited in place of X;
iii) In 2017, C was appointed marketing director of LFC in place of A; and he appointed E Limited on similar terms to those set out in the IA without knowing of the existence of the IA;
iv) In 2018, C and Z are introduced to each other by the CEO of E Limited and Z and C then agree a Relevant Contract between D Limited acting by Z and LFC acting by C with support from E Limited as necessary; and
v) LFC then paid commission to E Limited in accordance with the contract between LFC and E Limited.
That a commission would be payable (or could have been intended by either WML or LFC to become payable) to WML in such circumstances is obviously a very unreasonable outcome when viewed from the perspective of the parties to the IA down to the date when it became effective between them, is contrary to business common sense, not least because it exposed LFC to the requirement to pay commission even though the Introduction had no causative link with the Relevant Contract and because of the obvious risk of having to pay two commissions by reason of WML having been appointed from the outset on a non-exclusive basis and is not what a reasonable person would have understood the IA to have meant at the date it became binding between the parties. This is so on the assumption that the IA had not been terminated but applies with equal force where as I have concluded, the parties had entered into an agreement that included an anti-avoidance provision that enabled WML to claim commission for Relevant Contracts that were entered into after termination following an Introduction that took place prior to termination.
Issue (ii) does not arise given my conclusions on Issue (i). However, it necessarily follows from what I have said above concerning Issue (i) that there are no express terms within the IA that contradict or are inconsistent with the implication of an effective cause term. The contract is simply silent on the issue that arises, if I am wrong to have concluded Issue (i) as I have done. Mere silence does not does not give rise to inconsistency unless there are other provisions within the agreement that make clear an intention that commission would be payable irrespective of whether the introduction was an effective cause of a transaction that otherwise triggers the payment of commission see by way of example Sadler v Whittaker (Unreported, 15 October 1953). As I have said there are no such provisions within the IA.
This issue does not arise in light of the conclusions set out in relation to Issue (i). However, I set out my conclusions on Issue (iii) in brief in case I should be wrong in the conclusions that I reached concerning Issue (i).
WML submits that whether or not the IA is to be construed as subject to an effective cause qualification or is subject to an implied term to that effect takes LFC nowhere because on proper analysis WML was the or an effective cause of the 2016 sponsorship agreement between BetVictor and LFC.
"In this connection I am impressed by two citations to be found in Bowstead and Reynolds under art 59. One is a passage from the judgment of Barwick CJ in L J Hooker Ltd v W J Adams Estates Pty Ltd (1977) 138 CLR 52 at 58, cited for the submission that the word 'effective' may be more important to stress than either the definite or the indefinite article: 'The factual inquiry is whether a sale is really brought about by the act of the agent.' The other is the definition of effective cause from the American Law Institute's Second Restatement of Agency (1958) para 448, to this effect:
' an agent is an "effective cause" when his efforts have been sufficiently important in achieving a result for the accomplishment of which the principal has promised to pay him, so that it is just that the principal should pay the promised compensation to him.'
The learned editor comments that this definition is open to the objection that it begs the question. It is, but on the whole it seems to me to be none the worse for that. It articulates the thought that the decision on causation is a matter of common sense informed by its context and designed to produce a just result." [Emphasis supplied]
The debate concerning the use of the definite or indefinite article may be material in some cases it may be for example where the claim concerns two agents each claiming a commission in respect of the same transaction. However, that is not the issue that arises in this case. In summary, I accept that the factual issue to be determined is that identified by Mr Sutcliffe in paragraph 82(1) of his closing submissions - that is whether the agent or intermediary "brought about" the transaction - as long as (a) it is borne in mind that " where an agent is asking for commission upon a certain transaction he has got to show that he was an efficient cause of the transaction coming about. It is not enough to show that he was the introducer of the two parties because that is merely a causa sine qua non and may not be the efficient cause " see McNeil v. Law Union & Rock Insurance Company Limited (1925) 23 Lloyds Rep. 314 per Branson J at 316 following earlier Court of Appeal authority to similar effect; and (b) that the issue is approached in the manner identified by Rix J in the emphasised part of the extract from his judgment in Harding Maughan Hambly v CECAR (ibid.) set out above.
"On 28 April 2015, Mr Grinneback rang me from Asia (I think it was Kuala Lumpur or Singapore). We discussed Liverpool and he instructed me to make an offer of £880,000 for a betting package including 3 mins LED. He said that Mr Meinrad was happy with this. He also instructed me to make an offer to Manchester City on the same telephone call.
105. I then sent an email to Mr Kane:
"hi mate, Betvictor - how much LED could they get for c £800k - £1.2m; under what designation?"
106. I then spoke to Mr Kane and said I was delighted to make an indicative offer on behalf of BetVictor of £880,000 dependent on 3 minutes LED advertising. Mr Kane thanked me but suggested that there was now more interest than there had been at the end of March when he had sent me the latest proposals for BetVictor; and that there was now a minimum ask of £1.3 million per season."
This is significant because (a) it shows as I have said earlier that at this stage WML were acting for BetVictor not LFC and (b) that the approach to LFC from Mr Dixon was confined to LED advertising rights. This was materially different from the subject matter of the 2016 agreement between LFC and BetVictor, which was as I have explained resulted in BetVictor becoming a principal sponsor of LFC and paying very substantially more for that role than was in contemplation in 2013-5.
"109. Mr Kane subsequently informed me on a call that Liverpool had concluded a partnership deal with Marathonbet for the 2015/16 season.
110. This left BetVictor without any partnership for the upcoming season, so Mr Grinneback asked me to look at other options, including reviving the conversation around a global betting partnership with Chelsea. I contacted Steve Cumming, the Commercial Director at Chelsea, and this led to more meetings, emails and calls to discuss detail.
111. Initially I was involved in that dialogue between Chelsea and BetVictor but then Rafaella Valentino, who knew Mr Meinrad from when he was at Bwin and she was at Manchester United, joined the Chelsea commercial team, as (I believe) a Sales Consultant. In the event I understand Mr Meinrad personally negotiated final details of the deal directly with Ms Valentino and Christian Purslow, Head of Global Commercial Activities and later Managing Director.
112. BetVictor and Chelsea signed the deal in June 2015 for the 2015/16 season, and in December 2015 we were paid commission for it.
113. Following this, Mr Meinrad decided that BetVictor would deal directly with the clubs they were considering. I like all agents am used to this happening with operators. Once they are engaged in speaking with the rightsholders, the day-to-day need for the introductory agent diminishes. We had been of great service to BetVictor for over two years, informing them of numerous different rights opportunities and a number of clubs. That had resulted in a deal with Chelsea, and two near misses with Liverpool."
"Hi Mark,
This email is to clarify that there is no relationship between BetVictor or any of our companies and yourselves (Bettorlogic, you or any other representative of your company). We will immediately cease any existing discussions between you and all our staff (if any are in progress) and we want to underline that you are not representing us in any commercial discussions.
Please confirm receipt of this email.
Many thanks,
Magnus"
Thus in summary: Initially in 2013, LFC retained WML in relation to its search for a betting partner for the 2014/5 season. Although WML introduced LFC to BetVictor pursuant to the IA, no Relevant Contract was concluded. Thereafter during 2014/5 WML maintained a commercial link with BetVictor and in that capacity offered LFC on behalf of BetVictor a LED advertising arrangement. That offer was rejected by LFC and thereafter WML introduced BetVictor to Chelsea FC, BetVictor then terminated its relationship with WML and a one year agreement was made between Chelsea acting by Ms Valentino and BetVictor acting by Mr Meinrad.
"Q. The point is this, you buried this email. You did not disclose it because you could see it looked bad for Winlink to have been dismissed months before the 2016 deal was even contemplated. That's why you didn't disclose it?
A. It's not actually. The reason we didn't disclose it is we didn't think it was relevant to Liverpool and our agreement with Liverpool. We thought -- I thought it was relevant to my relationship with BetVictor and it was all to do with the -- as I think everyone has seen now -- the case with Chelsea. So at the time it was a decision that it wasn't relevant and would lead into other avenues I suppose which we didn't think relevant to the matter with Liverpool.
Q. Mr Dixon, that cannot be right, with respect. You are aware that it is Liverpool's case that if you are to be paid commission, you must be the effective cause of the deal that was done in 2016 between Liverpool and BetVictor. You know that's Liverpool's case, don't you?
A. Yes, I ...
Q. It's a simple question. You know that Liverpool's case is that for you to be paid commission, you had to be the effective cause of the contract that was concluded in 2016; yes?
A. I've heard those words " effefective cause" bandied around a lot, yes, so ...
Q. You must surely know in your claim for c1.125 million what Liverpool's defence is. Liverpool's defence is you had to play an effective part in the deal. You know that, don't you?
A. Right, yes.
Q. In those circumstances, are you telling his Lordship that you did not think it relevant that one of the two contracting parties had said, "We have no relationship with you. You must not negotiate on our behalf"? Is that your evidence to his Lordship?
A. Sorry, when I was doing this , I was, I guess, thinking of the case and our case -- and my thoughts are always about -- this is all about the introduction. So ...
Q. I'm not sure how much further I can take this with you, but I'm afraid disclosure isn't just about your case and the documents that you think assist you. It's right, isn't it -- do you now accept? -- you ought to have disclosed the document, the email, at page C4/1078? Do you accept that?
A. In hindsight, yes. At the time there was a discussion -- you know, we were concentrating on our case with Liverpool and the relevance of it. That's all I remember from that discussion."
"Q. It seems from that email that -- contrary to what you say in paragraph 48, it seems you did speak to Mr Grinneback on at least one occasion in early March 2016. Do you recall having seen this document?
A. Yes, obviously I must have done because it's in the email, but I -- at the time of my statement I didn't realise it was the same Magnus, I suppose. It's very common, my Lord, that in sponsorship deals the decision -maker would of course involve his marketing team to evaluate or run the numbers, also because they will be the ones responsible for activating and then measuring the partnership , and frankly in the same -- and I remember passing in fact the Chelsea deal to Magnus and Ed Connick on the Chelsea side -- Ed was the partnership management director -- then to activate the partnership, and I suppose this would have absolutely made sense at the time, to have had a call with the BetVictor marketing team. I suppose, when I say that I don't have any communication with anyone else, BetVictor is more, I suppose, on the negotiating side. But, yes, apologies for that mistake."
"I didn't know that BetVictor had a relationship with Mark and I didn't know that Mark and Steve Cumming had dealings as such.
Q. You see, if you didn't know anything about Mr Dixon, why didn't you say that in your reply to Mr Meinrad, which is at the top of the page? In fact you refer to that and say you need to solve it together, that problem.
A. I mean, I didn't know Mr Dixon and today I don't know Mr Dixon. This is a relationship he had with Steve Cumming. As I said,"
These answers (and there were others that were similarly off the point) were not convincing or persuasive.
"(i) Liverpool was under "tremendous pressure" to sell the training kit in 2016; (ii) this was the reason for cutting the sponsorship from £7 million to £6 million and then to £5 million; (iii) the commercial team was 7 or 8 months past the deadline originally set by New Balance for confirming the logo for the training kit, and so almost out of time by early 2016; (iv) failing to secure a training kit partnership would have had "significant" revenue implications, would have damaged credibility, and potentially the ability to negotiate on price with sponsors in the future; so (v) that by early 2016 this was essentially a "distressed sale of the training kit rights"."
"Q. -- so I'm suggesting that there was every prospect of you getting the same favourable response from BetVictor as Ms Valentino got. Do you agree?
A. I disagree.
Q. And how do you say you wouldn't have got the same deal with BetVictor?
A. I suspect that Mr Meinrad in the first instance probably wouldn't have picked up the phone to me, let alone got to a stage where I was offering him terms.
Q. Put simply, Mr Kane, you were just as capable of closing this deal as Ms Valentino, weren't you?
A. I disagree. When you say "deal", deal specifically as in the BetVictor deal or deal as in the training kit deal? Because I think there's a difference.
Q. The training kit deal, the deal that was done at 5 million a year, you were just as capable of closing that deal as Ms Valentino, weren't you?
A. Well, I had been trying and failing for a significant period of time until Ms Valentino came along and managed to secure that deal, so I disagree.
Q. Hang on, Mr Kane. That's not a very clever response, if I may say so, because the training kit deal had only become available when Garuda ceased to be your training kit partner and it was now, at that time, that I'm suggesting either you or Ms Valentino could have closed the same deal.
A. The deadline for the deal was set by New Balance, August 2014, in order to be provided with a logo to apply to the training kit. So we were already at this stage --
Q. Sorry to interrupt you. Do you mean August 2016?
A. Sorry, August 2015, should I say, so seven months before these emails were exchanged, because there's a significantly long process where we need to submit the logo to the training -- to the kit supplier. They need to complete the design, they need to produce and distribute and get the product into retail before it can be sold, and we should have really been gearing up to start selling the training kit at this time. So you could say that we were in a bit of a distressed sales situation. So when you ask if I could have done that deal, that's why I responded I tried and failed. I had an iron in the fire with Hankook, but -- I've used the term before in the emails -- Ms Valentino was our knight in shining armour and did an incredible job in a very short space of time to close this deal."
A little later in this same section of his cross examination, Mr Kane said this:
"Q. I just want to give you a chance once again to answer and I appreciate it' s a hypothetical question, Mr Kane, but nonetheless it' s one you can answer -- there is no reason why you couldn't have closed the deal once Mr Meinrad got in touch?
A. What do you mean by "once Mr Meinrad got in touch"?
Q. In the January 2016.
A. He didn't get in touch. He was halfway into a first year of a Chelsea deal so I wouldn't have thought he'd have any interest in getting in touch with any other football clubs.
Q. Well, we know that he said he was interested when Ms Valentino told him that she was going to Liverpool, and Mr Dale, had he told Ms Valentino to refer Mr Meinrad to you, you would have been able to close that deal just as well as she did, wouldn't you?
A. I don't think so. That deal was predominantly done on the strength of Ms Valentino and Mr Meinrad's relationship. I can't see why he would have looked elsewhere, only being a couple of months into a deal with Chelsea, had it not been for Ms Valentino."
" we wouldn't have been having the conversation with BetVictor without Ms Valentino. There was no conversation -- it wasn't like somebody just needed to come and pick up the BetVictor account and have the conversation with them, there was no engagement with them whatsoever. And if we hadn't had the text message from Ms Valentino to Mr Meinrad letting him know that she was coming to Liverpool, none of these conversations would have happened. So there' s no scenario in a hypothetical that would make sense to talk about whether Mr Kane could have landed this deal. The deal and the conversation simply would not have happened."
When pressed again by Mr Sutcliffe to concede the point that Mr Kane could have concluded a similar agreement on similar terms with BetVictor if he had been asked to do so by Mr Dale, Mr Hogan said:
"No, that' s -- I mean, first of all it's completely hypothetical. Secondly, we don't know how the conversation would have progressed because Mr Meinrad didn't have years of trust built in somebody that he was negotiating with. A negotiation like this takes typically months and months and months. This, as we can see, took somewhere in the neighbourhood of two and a half to three months to close. That's incredibly quick and you're right, it's down to the value. But that is principally down to the conversation that Ms Valentino and Mr Meinrad had and the relationship that he had and the trust that he had in her. So I think, had Olly asked Jonathan to pick up the conversation with BetVictor, even though Andreas has a relationship with Raffy, to have somebody else call him, first of all, just would have been odd and secondly they don't have a relationship. He has, to my knowledge, never met Mr Meinrad. They don't have history so I don't know where that conversation would have ended up."
I accept this evidence.
" I am in the middle of a complete reforecasting exercise for the business which I will have done by April 8. by then I need to take the decision about increased sponsorship. your 5m offer translates into 7m including vat and activation (unless we find a solution) and this would be the single biggest ever investment into one asset BetVictor has ever made (even bigger than biggest tv commitment)
if ok with you I would answer no latest than April 8. you know I am very interested and want to make this happen."
And as Mr Dixon accepted in his oral evidence:
"Q. And then the BetVictor logo printed on the front of all Liverpool match day programmes. Can I suggest to you in terms that this is a completely different -- a deal of a completely different magnitude to that which you had looked at two and a half years earlier.
A. Look, you're absolutely right. "
"27. Olly (who left LFC in August 2019) and I had sole discretion over the decision to award a payment under the LFC Rewards Policy. It was without question (or challenge), that the LFC/BetVictor Deal was secured solely by Raffy on behalf of LFC and, pursuant to the LFC Reward Policy, she received a bonus of 1% of the annual deal value. Given that Raffy had only recently started at LFC and had secured us such a big deal, it was a significant achievement.
28. As a result of the dates on which Raffy was on maternity leave, combined with the dates on which the first instalment from BetVictor was received, in accordance with LFC's Reward Policy, I recall Raffy receiving commission in 2017 and 2018 but no commission in 2019, as she ceased to be an employee of LFC.
29. Save for Raffy, no other LFC employee received any reward/payment for the LFC/BetVictor Deal, nor did any other employee seek to receive any commission as a result of the LFC/BetVictor Deal."
I accept this evidence. Although Mr Sutcliffe criticises Mr Hogan for not agreeing that the 17 March 2016 meeting (when Mr Meinrad met Mr Dale and Mr Hogan for the first time) was an important part of the negotiations, I do not think that criticism is merited. As is plain from what I have said already, the negotiations had been conducted throughout by Ms Valentino with Mr Meinrad. Plainly it is was necessary that he be introduced to LFC's senior corporate managers in the course of the negotiation. That was all part of LFC getting BetVictor " closer to YES on Training Kit deal" see the email of 14 March 2016 from Mr Hogan to Mr Ian Ayre. However, that does not detract from the central point, which is that the 2016 sponsorship " deal was predominantly done on the strength of Ms Valentino and Mr Meinrad's relationship ". As Mr Hogan put it:
"Q. And there often is, for these sorts of pre-meetings, there would have been a written agenda for your meeting with Mr Meinrad which you could have worked through in advance, I suggest?
A. I don't know. Not always. Again this was really sort of a cup of coffee, chance to get to know him. I'm not sure there was a formal agenda."
In this regard, I accept Ms Valentino's evidence that arranging a meeting with LFC's senior corporate management was part of the way in which transactions of this sort are negotiated see T2/170-171. I do not consider that this meeting altered the fundamentals of how the negotiations were being conducted. That much is apparent from what happened thereafter. That Mr Hogan and Mr Dale were content to leave the negotiations to Mr Valentino even after this meeting is entirely consistent with her being perceived as the only person within LFC who could deliver a sponsorship agreement with BetVictor.
Conclusion