Football club 2 – 0 Commercial rights intermediary (and a lesson on disclosure)

Posted: 16/09/2020

His Honour Judge Pelling QC, sitting as a High Court judge, handed down judgment on 14 September 2020 in an interesting claim brought against Liverpool Football Club & Athletic Group Limited (Liverpool) by Winlink Marketing Limited (WML). WML is an intermediary specialising in introducing sports rights holders to commercial entities willing to sponsor the sports rights holder concerned. Liverpool needs no introduction.

The facts of this claim provide an insight into the types of commercial deals undertaken by elite sports rights holders. The judgment also contains a helpful discussion of contractual construction, implied terms and the rights of intermediaries to commission for introducing potential commercial partners to the holders of valuable sports rights.

The claim

The claimant’s claim was for commission following a significant sponsorship agreement between Liverpool and BetVictor in 2016. The claimant argued that it was entitled to this commission for introducing Liverpool to BetVictor in 2013 and commenced proceedings in the High Court for more than £1 million.

The dispute turned on the interpretation of a somewhat ambiguous contract entered into by Liverpool and WML in 2013. Having heard arguments over five days in June 2020, the court found that the contract did not give rise to the right to commission and dismissed the claim.

In 2016, Liverpool and BetVictor agreed a deal worth £15 million over three years for the sponsorship of Liverpool’s training kit and certain other sponsorship opportunities. WML played no active role in the negotiation of this multi million pound sponsorship deal which the court held was concluded following negotiations between a Liverpool employee and BetVictor.

The key issues for the court were whether, in order to give rise to the right for commission, the terms of the contract required that the introduction of BetVictor to Liverpool by WML was an ‘effective cause’ of the agreement and, if so, whether the introduction by WML was, in fact, an effective cause.

The judge was unimpressed with the clarity of the contract but held, as a matter of construction, that its express terms did require an introduction by WML to a third party to be an effective cause of a subsequent commercial deal in order to give rise to the right to compensation.

The judge also ruled that if he was wrong on the construction point, a term should be implied in the contract that there must be a causal link between an introduction by WML and a subsequent deal before the right to compensation arises.

Having decided this issue in favour of Liverpool, the court went on to consider whether the introduction by WML was an effective cause of the deal with BetVictor. The court weighed up the evidence from WML and Liverpool and decided that the introduction was not an effective cause of the agreement and the claim was dismissed.

Conclusion

Whilst this was a fact-specific decision, it is a useful reminder to sports rights holders and intermediaries of the importance of contractual certainty. Although Liverpool ended up on the winning side this time, it required a High Court trial and the investment of significant financial and commercial resources to reach that stage.

The same is true for intermediaries. A clear contractual term in favour of the intermediary could have given rise to the right to commission and avoided this costly defeat.

The claim also shows the importance of proper compliance with the duty of disclosure in English litigation. In his ruling, the judge criticised a witness for WML for failing to disclose critical (and damaging) documents at the disclosure stage. The relevant documents were, eventually, made available to the defendant by a third party but the court found that the failure to disclose these key documents at the proper time (and his explanations of that decision under cross examination) undermined the credibility of the WML witness. Although it may not have changed the course of this claim, the credibility of witnesses can be critical in many commercial disputes and a finding such as this can be the difference between winning and losing a claim.

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