Proactive Sports Management Limited v Rooney and Others [2011] EWCA 1444
When Wayne Rooney had just turned 17, his image rights company (Stoneygate) entered into an agreement with Proactive. The original agreement, which was for an eight year term, covered both on-field representation (i.e. in relation to Wayne Rooney's playing contracts) and off-field representation (sponsorship deals etc), although that agreement was subsequently varied to separate the two forms of representation. The image rights agreement continued to be for a term of eight years.
The main point of contact for Wayne Rooney within Proactive was Paul Stretford, a company director and an FA licensed football agent. In 2008 there was breakdown in the relationship between Paul Stretford and Proactive ending with Mr Stretford's dismissal from the company. Mr Stretford established his own company and took Wayne Rooney's business with him. Stoneygate refused to pay invoices raised by Proactive and sought to terminate the image rights agreement, which Proactive accepted as a repudiatory breach of contract. Proactive claimed the 20% commission as set out in the agreement. Stoneygate defended the claim on the grounds that the agreement was void for mistake (dismissed straight away by the Judge) and on the grounds that it was unenforceable as being in restraint of trade.
The High Court gave judgment in favour of Stoneygate. He noted that FIFA regulations imposed a limit of two years for on-field representation for professional footballers. This agreement was for eight years which made it not merely unusual, but unique. He found that the agreement imposed significant restrictions on Wayne Rooney's freedom to exploit his talents as he could not enter into contracts with any firms which were Proactive's competitors. It was relevant that Rooney was only 17 at the date of the agreement and that the eight years would cover approximately half his football career. The Judge further considered the following: that there was a flat 20% commission, irrespective of the amount of business generated: that the terms of the agreement were dictated by Proactive without Wayne Rooney having any legal representation; and the agreement was not in standard form. The Judge dismissed Proactive's arguments in justification of the agreement: that: in paying Wayne Rooney £75,000 upon entering into the Image Rights Agreement, there was a risk that it would not recover its initial financial investment (risk held to be minimal); there would be further investment as a result of Proactive's obligation under the Image Rights Agreement to use best endeavours in its representation of Stoneygate (held to add nothing in commercial reality); and a long term agreement would enable Proactive to take a strategic approach (whilst four or five years even might have been regarded as reasonable, eight years' exclusivity is not). The Judge did however award Proactive a restitutionary remedy in quantum merit for services already provided.
The High Court decision was appealed. The Court of Appeal dismissed the appeal in relation to restraint of trade:
- the agreement was unenforceable as an unreasonable restraint of trade. Proactive had argued that the agreement was a means of obtaining extra income over and above that received from his trade as a footballer. The agreement did not restrict his earning potential. The Court of Appeal rejected the challenge. It made no difference that a person's activity was ancillary to his main activity. The public policy considerations were the same, namely the manner in which a person could properly realise his potential, not only for the good of that individual but for the economic benefit of society generally. The endorsement of goods encouraged the purchase and consumption of goods, and the court was entitled to assume that it was in the interests of the public that image rights should be fully realised for this economic purpose. Also, the exploitation of image rights was almost always going to be an ancillary activity. The fact that the activity was ancillary might be such as to make the restriction on trading insubstantial and thus justifiable under the doctrine of the restraint of trade. However, the fact that the activity was an ancillary one was not a reason for disapplying the doctrine altogether. The High Court Judge was entitled to come to the conclusion that he had.
- this meant that once Rooney withdrew from the contract, the contract was unenforceable and that Proactive's only remedy was in restitution for quantum merit.
The quantum merit hearing had not yet taken place – but the judgments indicate that the appropriate commission rate will not necessarily be the 20% rate set out in an agreement which had not been the subject of negotiation with legal advice.
The case shows that the doctrine of restraint of trade is still alive and kicking. It serves to underline the importance of (i) ensuring that a weak party is legally represented and (ii) not including terms that are onerous compared with the standard.
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