Tuesday, April 30, 2013

Blackburn Rovers Pay The Penalty for Employing Henning Berg!

Blackburn Rovers FC have been involved in a "mini-league" within this year's Npower Championship, competing with Blackpool and Wolverhampton Wanderers to see who can get through the most Managers in a season.

One of the unfortunate office holders at the famous old Lancashire club this year was Henning Berg, a key part of their 1994-1995 Premier League title winning squad (at a time when success meant that their managerial turnover was not as great as it now is.)

Mr Berg's managerial career at Ewood Park was to prove significantly less illustrious than his playing era there and after less than 2 months in the job he was dismissed.

Following his dismissal he commenced High Court proceedings claiming the £2.25 million which he said he was entitled to under the terms of his contract, amounting to his salary for the balance of his contract (which was supposed to last until June 2015!) His contract said that Blackburn could terminate his contract with immediate effect if they paid him this sum as liquidated damages.

Blackburn's Solicitors filed an Admission with the Court asking for time to pay the debt by instalments over 5 months. Mr Berg's Solicitors applied (wrongly) for Summary Judgment rather than simply applying for Judgment on the Admission.

Blackburn then appointed new Solicitors who pointed this error out. Mr Berg was directed to apply for Judgment on the Admission (basically filling in a form stating the amount and that he wanted it in one go) and Blackburn were then to file any evidence they relied upon as to why they should be allowed to pay by instalments.

There was then to be a Hearing to decide the "time to pay" issue.

Bizarrely, Blackburn then decided it was going to argue that the money was not, in fact, due to Mr Berg.  They alleged that their Managing Director Derek Shaw had not had authority to agree a contract in such terms with him (their case was that it was supposed to be a 12 month contract and/or that any compensation for termination was supposed to be no more than 12 months' salary.)

They asserted that they had begun disciplinary proceedings against Derek Shaw although this was flatly contradicted by a press release which said that there was no investigation and he had their full confidence.

After close of business the night before the Hearing was due to take place Blackburn's Solicitors sent a draft application to Mr Berg's Solicitors, followed later by a draft, unsigned, Witness Statement in support, seeking to withdraw the admission of liability. On the morning of the hearing a materially different signed Witness Statement was served.

In addition to arguing that Derek Shaw did not have authority Blackburn alleged that the contractual provision was a penalty clause. Penalty clauses are legally unenforceable.

The matter was despite this unsatisfactory procedural history listed for a full hearing of the application but on the strict condition that Blackburn paid the outstanding balance into Court.

The Application was heard on 26th April and Judgment given on 29th.

The Judge began by deciding whether if permission to withdraw the Admission was granted there was any realistically arguable defence.

With regards to the penalty clause argument His Honour found that the law relating to these was irrelevant since the provision was not a penalty clause. It was not a payment for breach of contract. It was a payment to enable Blackburn to exercise a right it had under the contract , i.e. to terminate the contract early if it paid up the balance of the salary.

With regards to the authority argument, even if the Judge accepted that Mr Shaw only in fact had authority from Blackburn to agree to a 12 month contract/a contract with compensation capped at 12 months' salary he held that this was not relevant as between Blackburn and Mr Berg (as opposed to a claim by Blackburn against Mr Shaw for committing them to an excessive contract or a claim by Mr Berg against Mr Shaw for wrongly claiming to have authority.)

Mr Shaw was Managing Director of Blackburn. Mr Berg was entitled to believe that the MD of a football club has authority to negotiate a prospective manager's contract. As he was held out as having such authority and Mr Berg was never made aware of the alleged limits to his authority Blackburn were bound by the contract.

Given that there was no arguable defence there was no point in allowing the Admission to be withdrawn.
In short, Blackburn had to pay up.

All in all the litigation appears to have been something of a "dog's breakfast." This may not come as a surprise to fans of Blackburn Rovers, who have (to put it mildly) been underwhelmed by events since Venkys became their owners in 2010.

The message to employers - make sure any limitations on authority are made clear to the person you are negotiating with, make sure contracts are clear and make sure you can terminate without excessive cost if you realise early on you have made a mistake in your appointment.

Monday, April 22, 2013

Employee Resigns by Cake!

An employee of the UK Border Force has tendered his resignation by writing it in icing on a cake specially baked for the purpose, the BBC reports.

Chris Holmes was employed at Stansted Airport. He wanted to devote more time to his family and to other business interests and thought of a novel way of handing in his notice. The cake was apparently accompanied by a more conventional letter.
Sometimes contracts of employment, especially in the context of executives, will require notice to be given in a particular way (often in writing to the registered office.) Subject to that, as long as the intention is sufficiently clear there is no rule of law that a resignation or a dismissal has to be given in writing or even in formal language.

Where informal words are used there can often be ambiguity about whether there has been a resignation (e.g. does "I'm off" mean the person is not coming back at all or just leaving for the day because of the preceding row?) As such the case law tends to require there to be unambiguous words unless the intention is clear from the surrounding context (e.g. the person never comes back; the P45 is in the post the next day.) In addition because it is recognised that things can be said in the heat of the moment the cases suggest that if a hasty "resignation" or "dismissal" is taken back pretty much straight away then it will be deemed never to have existed - although this means minutes or hours, not that if you change your mind a day or two later (once you have taken legal advice?) that you can escape the consequences of your hasty words.

Whilst apparently this departure was amicable we shall await the first Unfair Dismissal case where the words "You're Fired!" are written in Alphabetti Spaghetti...