In December 2011 the Court of Appeal handed down its judgment on the latest instalment of the long-running dispute between Wayne Rooney and his former management company, Proactive Sports Management Limited, in relation to an image rights agreement entered into between them in 2003.

In addition to the key legal questions (which focused primarily on whether the agreement in question was a "restraint of trade"), the Court of Appeal's judgment also touched on a number of fundamental issues that should be taken into account by both agencies and players when they are negotiating image rights arrangements. Those points, as well as some guidance for agents and players considering similar arrangements in future, are set out in this note.

Background

• In 2003, Wayne Rooney's image rights company, Stoneygate Limited ("Stoneygate"), entered into an Image Rights Representation Agreement with Proactive in relation to the exploitation of Wayne Rooney's image rights.
• Wayne Rooney was 17 at the time, the contract had an 8 year term and, although his family was actively involved, he was not being advised by a lawyer.
• Proactive was appointed as the sole and exclusive representative of Stoneygate and was entitled to 20% of the sums payable to Stoneygate from the exploitation of Rooney's image rights. The wording was as follows:
  
  [Clause 6.2] "20% of the gross sum payable under any contract or arrangements for the promotion, endorsement or advertisement of [Stoneygate]...and/or the exploitation of the Intellectual Property and/or products, goods or services to which [Stoneygate]...is a party"
• The contract between Stoneygate and Proactive was silent on whether Proactive should continue to receive that commission after its expiry or termination.
• Although no written agreement was in place, Proactive was also acting on behalf of Coleen Rooney's image rights company, Speed 9489 Ltd ("Speed") and receiving a commission of 20%.
• In October 2008 the relationship broke down. Both Rooneys took their business to a new agency, "Triple S", and sought to terminate the agreement and stop paying commission to Proactive.
• Proactive sued on the grounds that the Rooneys were in breach of the agreements between them and claimed for commission arrears. The Rooneys argued that Proactive should not be entitled to post-termination commission and, in any event, the agreement was unenforceable because it was an unreasonable "restraint of trade".

The Decision

Should Proactive be entitled to post-termination commission?

• The Court of Appeal disagreed with the earlier High Court decision and found that there was a right to the payment of commission post-termination. A key factor was the absence of any restriction on the word "payable" in Clause 6.2 (e.g. it does not say "payable during the term of the contract").
• It was held that "it was the procuring of endorsement contracts that gave rise to the right to commission, and not the ongoing provision of services". In other words, the "procurement" triggered the payment and, therefore, the commission should be payable as a result of that procurement, whether or not the representation contract continues.

Was the agreement unenforceable on the grounds that it was in unreasonable restraint of trade?

• The Court confirmed the High Court's earlier decision that the agreement between Wayne Rooney's image rights company and Proactive was an unreasonable restraint of trade. This was largely because it imposed extensive restraints on Rooney's freedom to exploit his earning capacity: (1) over a very long period of time; (2) on terms that were not customary; and (3) which were not the product of a negotiation between "equals" (relevant issues included the fact he was 17 and did not receive legal advice). It did not matter that the exploitation of Rooney's image rights was not his primary trade and the fact that Rooney was still making a significant amount of money from the deals sourced by Proactive did not override the fact that the terms of the deal were one-sided and oppressive.
• Because the contract was an unreasonable restraint of trade, it was unenforceable and Proactive could not rely upon the agreement to recover any sums which would have fallen due to it under the agreement (i.e. its 20% commission due after the term of the contract), or sue for breach of contract.

If the agreement is unenforceable, should Proactive be remunerated for services provided that have not yet been paid for?

• As noted above, because the agreement was deemed unenforceable, the unpaid commission due under the agreement was no longer recoverable by Proactive. However, Proactive was found to be entitled to an alternative remedy, namely a restitutionary payment called "quantum meruit", for the services provided under the agreement (which, broadly speaking, would be a fair and reasonable payment for the services received based on general market rates).
• Whilst that may appear to be a positive outcome for Proactive, the High Court Judge and the Court of Appeal both rejected its contention that the quantum of any such compensation should be measured by reference to the 20% commission which would have been payable under the agreement, holding that the amount to be awarded should be decided at a further hearing.

Was there an agreement between Coleen Rooney's Image Rights company and Proactive and, if so, what were the terms?

• Regarding Coleen's company, the Court found that an agreement could be inferred from the conduct of the parties, under which Proactive was to provide services similar to those which it provided for Stoneygate, on essentially the same terms.
• Therefore, it was deemed to follow from the above that the terms giving rise to the right to commission, and in particular the trigger for the 20% commission which resulted in commission continuing to be payable after termination, were the same.

What can we learn from the Case?

1. Agree Post-Termination Commission at the Outset
   
   Whether acting for a player or an agent, ensure that your contract clearly states the agreed position in relation to post-termination commission on deals procured during the term of the arrangement. The fact that the Court of Appeal disagreed with the High Court's position on that point in this case demonstrates that such matters can create a significant amount of legal uncertainty, which in turn could mean significant legal costs if it becomes necessary to seek a definitive decision from the courts.
   
2. "Contract? What Contract?"
   
   Do not presume that the lack of a written contract means that you are not subject to legally binding obligations. As was the case here, courts are willing to imply them by conduct and, in those circumstances, you are potentially allowing others to determine the terms you have "agreed".
   
   In addition, be aware of the concept of "quantum meruit". Receiving services in the absence of a contract does not mean that you are not required to pay for them. Conversely, it would be dangerous for an agent to provide services without a contract and presume that they would be entitled to its standard commission for those services. This judgment is clear that any quantum meruit entitlement will not automatically be based on a standard contractual commission.
   
3. Try to play fair (and to appear to play fair in your contract)
   
   Resist the temptation to be too oppressive or one-sided in your image rights representation contracts in order to avoid the risk of it being deemed an unenforceable "restraint of trade". If you feel that your contract might go too far in comparison with commensurate arrangements (e.g. if it has a particularly long duration, is overly restrictive on the player and/or contains uncommon terms), it would be wise to seek legal advice. In addition, it would be prudent to encourage the other party to do the same, especially if they are young or inexperienced. The lack of independent legal advice was a crucial factor in this case and simply putting a clause in the contract that says a party has sought independent legal advice is unlikely to be sufficient.
   
   It is also wrong to presume that a contract will not be a restraint or trade because everyone is making a lot of money under the arrangement. If the terms of the contract are too onerous and oppressive, there could still be a risk.

20 January 2012