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Barrister acting for football club over dismissal claim must have known he was onto a loser
Spare a thought for Neil Berragan, the barrister instructed by Blackburn Rovers FC on its case with fired manager Henning Berg. His heart must have sunk when he realised the hopeless case he was being asked to submit on the club’s behalf.
The club, having parted ways with its previous manager in October 2012, was contacted by Berg, who offered his services as a replacement manager. Blackburn managing director Derek Shaw entered into negotiations with Berg that concluded with an offer letter and then a full employment agreement. This was for a fixed term until 30 June 2015, with Blackburn having the right to terminate it at any time provided it paid Berg a sum by way of liquidated damages equal to his annual salary for the remainder of the term at a rate of £900,000 per year.
Fifty-seven days into the job, Berg was fired. His lawyers issued a claim form seeking payment in respect of the remainder of the term. In response, Brabners Chaffe Street, acting on behalf of Blackburn, filed an admission of liability on Shaw’s instructions. Subsequently, IPS Law (taking over from Brabners), issued an application to withdraw that admission.
Berragan submitted two arguments in support of that application. First, that although Shaw as managing director had authority to negotiate and conclude a contract with Berg on behalf of the club, he did not have actual authority from the club’s owners to conclude a contract that contained the agreed termination provisions. It was alleged that Shaw only had authority from the club’s owners to conclude a contract with a 12 months’ notice provision. Although the High Court accepted that Blackburn had an arguable case that he lacked actual authority, that issue was “entirely immaterial” to Berg’s claim against the club. Instead, the sole issue was whether Shaw had implied or usual authority to conclude contracts on the club’s behalf and whether Berg was entitled to rely on such implied authority. It was, the High Court said, “unarguable to suggest that the managing director of Blackburn does not have implied or usual authority to sign employment contracts on its behalf”.
Blackburn’s other argument fared a little better. They submitted that the termination provision in the contract was in reality a penalty clause and therefore unenforceable beyond what would otherwise have been Berg’s actual loss. “Not realistically arguable” was how the High Court described the chances of this argument succeeding. It was clear from the contract that the payment of the sum was triggered by a termination of employment and that termination of employment did not constitute a breach of contract. Since the payment was not triggered by a breach, the penalty clause doctrine was not engaged.
Finally, if you think Berragan’s position was a difficult one, consider Shaw’s. Having instructed the first set of lawyers to admit liability, he then had to make not one but two witness statements in support of the club’s position that he was effectively a rogue director acting without authorisation in concluding the employment contract, while being threatened with disciplinary proceedings for having done so. Ouch.