Proactive Sports Management Ltd v Rooney & Ors

Factual and Procedural Background

The case concerns a professional footballer of international repute ("Plaintiff") who, from a young age, was represented by various sports management companies and agents in relation to both his playing career ("on-field activities") and commercial exploitation of his image rights ("off-field activities"). Initially, the Plaintiff was represented by Company A under a two-year agreement which expired in late 2002. Subsequently, Company B (the "Claimant") entered into multiple representation agreements with the Plaintiff and a limited company ("Company C"), created to exploit image rights assigned by the Plaintiff.

Company B negotiated and managed lucrative sponsorship contracts with major commercial entities on behalf of Company C and the Plaintiff, including contracts with prominent companies in sportswear, beverages, and entertainment software. Over time, the relationship between Company B, the Plaintiff, and Company C deteriorated, culminating in disciplinary proceedings against Company B's key agent and director, leading to his resignation and eventual dismissal from Company B.

Following this breakdown, Company C purported to terminate the Image Rights Representation Agreement with Company B, which Company B treated as a repudiatory breach. Company B then commenced proceedings against Company C and related parties, seeking unpaid commissions, damages, and declaratory relief concerning ongoing commission entitlements. Company C denied liability, raised a counterclaim, and advanced defences including mistake and restraint of trade.

Legal Issues Presented

1. Whether the Image Rights Representation Agreement dated 16th January 2003 is valid and enforceable or void for mistake.
2. Whether the Agreement is in unreasonable restraint of trade and thus unenforceable on public policy grounds.
3. Whether Company B is entitled to commission payments already due and future commissions despite termination or repudiation of the Agreement.
4. The construction of the Agreement, specifically relating to the duration, termination rights, and the scope of commission entitlements.
5. Whether Company B is entitled to recover value added tax on commission invoices.
6. The nature and extent of any contractual or restitutionary rights between Company B and a related entity ("Company D") and the Plaintiff's spouse's image rights company ("Company E").
7. The effect of any affirmation or estoppel in relation to the restraint of trade defence.

Arguments of the Parties

Claimant's Arguments

• The Image Rights Representation Agreement was validly executed and is enforceable.
• Company B is entitled to commissions on all sums payable to Company C under contracts procured during the Agreement term, including sums payable after termination.
• Clause 8 of the Agreement provides for early termination on payment of liquidated damages, which Company C did not validly exercise.
• The restraint of trade defence fails as the Agreement is reasonable and necessary to protect legitimate commercial interests.
• Company C and related parties are estopped from denying the reasonableness of the Agreement, having confirmed independent legal advice was taken.
• Company B is entitled to value added tax on commission invoices irrespective of tax treatment between Company C and third parties.
• Company B has an implied contract or, alternatively, a restitutionary claim against Company E and Company D for commissions and services provided.

Defendant's Arguments

• The Image Rights Representation Agreement is void for mistake, specifically a common misapprehension that the earlier agreement covered only off-field activities and that clause 8 conferred a right of early termination.
• The Agreement is unenforceable as being in unreasonable restraint of trade due to its unusually long duration, high commission rate, and lack of termination rights.
• Company B's claim for post-termination commission is not supported by the express terms of the Agreement and would lead to double commission and unfairness.
• Company C did not receive value added tax on income from certain sponsors and is entitled to recover any such payments made to Company B.
• There was no formal contract with Company E or Company D; if any services were provided, Company B's claim is limited to restitutionary quantum meruit.
• Company C did not affirm the Agreement so as to preclude the restraint of trade defence.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court undertook a detailed factual and documentary analysis of the contractual arrangements between the Plaintiff, Company B (Claimant), Company C (image rights company), and related entities. It found that the Image Rights Representation Agreement dated 16th January 2003 was closely modelled on an earlier agreement dated 17th July 2002, which covered both on-field and off-field representation for a term of eight years.

The critical factual finding was that key individuals within Company B, particularly its director and agent, were aware or should have been aware that the 2002 Agreement extended to on-field activities despite assertions to the contrary. The Plaintiff and his family, though commercially inexperienced and without independent legal advice, were willing to accept the terms presented by Company B.

In relation to the Image Rights Representation Agreement, the Court found it was unique in its unusually long eight-year exclusive term and high flat-rate commission of 20%. The Agreement imposed significant restrictions on the Plaintiff's freedom to exploit his image rights exclusively through Company B for a substantial part of his career, with limited or no effective right to terminate early.

On the construction of the Agreement, the Court held that Company B's right to commission was linked to the provision of services under the Agreement and did not extend to post-termination commissions. The clause purported to provide for early termination payments was held to be a penalty clause and not a genuine right of early termination. The termination letter sent by Company C was a repudiatory breach which Company B was entitled to accept.

The Court rejected the defence of mistake, holding there was no common misapprehension as to the scope or enforceability of the Agreements. It also held that the Agreement was in restraint of trade and that Company B failed to discharge the burden of showing that the restraints were reasonable in all the circumstances.

Company B was not estopped from challenging the restraint of trade defence by virtue of the clause confirming independent legal advice, as public policy overrides such contractual estoppels. Similarly, the defence of common law affirmation was rejected as inapplicable to contracts unenforceable on public policy grounds.

Company B could not recover commission or damages under the unenforceable Agreement but was entitled to a restitutionary quantum meruit claim for the reasonable value of services provided, to be assessed at a later stage. The Court also found that Company B had an implied contractual relationship with Company E (Plaintiff's spouse's image rights company) and was entitled to recover commissions due prior to the breakdown of relations, but not thereafter.

The Court addressed specific invoice disputes, generally finding in favour of Company B, including entitlement to recover value added tax on commission invoices irrespective of tax treatment between Company C and third parties. It rejected Company C's counterclaim for repayment of VAT paid to Company B.

Holding and Implications

DISMISSED IN PART AND ALLOWED IN PART

The Court held that the Image Rights Representation Agreement is unenforceable as being in unreasonable restraint of trade and not void for mistake. Company B cannot recover contractual commission or damages under the Agreement but is entitled to restitutionary quantum meruit for the reasonable value of services provided. Company B's claim for post-termination commission is rejected.

Company B is entitled to recover commission due prior to the breakdown of relations and is entitled to recover value added tax on commission invoices. Company B has an implied contract with the Plaintiff's spouse's image rights company and is entitled to recover commissions due prior to the breakdown of relations.

The restraint of trade defence is upheld, with no estoppel or affirmation preventing its assertion. The case clarifies the limits of long-term exclusive agency agreements in the sports representation context and emphasises the need for reasonableness and fairness in such contracts, particularly when entered into by young and inexperienced clients without independent legal advice.

No new precedent is established beyond the application of established principles of contract construction, restraint of trade, and restitutionary remedies in the context of sports representation agreements.