Mercato Sports (UK) Ltd v The Everton Football Club Company Ltd

JurisdictionEngland & Wales
JudgeEyre
Judgment Date12 July 2018
Neutral Citation[2018] EWHC 1567 (Ch)
Docket NumberCase No: E30MA025
CourtChancery Division
Date12 July 2018

[2018] EWHC 1567 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS IN MANCHESTER

BUSINESS LIST (Ch D)

Manchester Civil Justice Centre

1 Bridge Street West

Manchester M60 9DJ

Before:

HIS HONOUR JUDGE Eyre QC

(sitting as a Judge of the High Court)

Case No: E30MA025

Between:
1) Mercato Sports (UK) Limited
2) Mark McKay
Claimants
and
The Everton Football Club Company Limited
Defendant

Jonathan Crystal (instructed by Mason & Co) for the Claimants

Paul Gilroy QC (instructed by Centrefield LLP) for the Defendant

Hearing date: 28 th March 2018

HH JUDGE Eyre QC:

Introduction.

1

AB is a professional footballer. In 2017 he entered an employment contract with the Defendant. The Claimants say that they brought AB to the attention of the Defendant and that by so doing they enabled the Defendant to obtain the player registration of AB and to enter the employment contract with him. In the light of that the Claimants seek payment for their services either pursuant to an implied contract of retainer or by reason of the unjust enrichment of the Defendant. The Defendant does not accept that there is any such liability.

2

The Defendant has applied under CPR Parts 11 and 62.8 seeking a stay of the proceedings pursuant to Section 9 of the Arbitration Act 1996. The Defendant invokes the Football Association's “Rules of the Football Association Ltd 2017 – 2018” (“the Rules”) and contends that Rule K thereof operated as an arbitration agreement between the Claimants and the Defendant in relation to the subject matter of the dispute. Although the Claimants accept that the Second Claimant was bound by the Rules they make no such concession in respect of the First Claimant and contend that the Defendant is not entitled to a stay of that claimant's claim.

The Arbitration Act 1996.

3

The relevant parts of Section 9 of the Act provide that

“(1) A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.

(4) On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed.”

4

Section 5 of the Act provides that an arbitration agreement must be in writing. However, it was common ground between the parties that Rule K would operate as an agreement in writing for these purposes if the First Claimant was bound by it and if it took effect as an agreement between that claimant and the Defendant.

5

The parties were also agreed that the approach which I was to take was that laid down by Aikens LJ in Joint Stock Company Aeroflot Russian Airlines v Berezovsky & others [2013] EWCA Civ 784, [2013] 2 Lloyd's Rep. 242, at [72] – [74] namely:

“72. It is necessary first to analyse the structure of section 9(1) and (4) of the AA 1996, to see where the burden lies and what standard of proof is required when there is an application for a stay of proceedings because one side asserts that two parties are bound by an arbitration agreement to submit the disputes being litigated to arbitration and the other side asserts that there was no concluded arbitration agreement or it is ‘null and void’. Section 9(1) and (4) are based on Article II of the New York Convention 1958. That stipulates that each Contracting State ‘shall’ recognise arbitration agreements in writing and it further obliges a court of a

Contracting State to refer the parties to arbitration if requested to do so by one of the parties in the context of an action in a matter which is the subject of an arbitration agreement, unless the court ‘finds that the said agreement is null and void, inoperative or incapable of being performed’.

73. That has been translated into the terms of section 9(1) so as to give a party the right to apply for a stay of proceedings ‘in respect of a matter which under the [arbitration] agreement is to be referred to arbitration’. Therefore, it seems to me in principle that there is a burden on the party asserting that there is (a) a concluded arbitration agreement as defined in the 1996 Act, and (b) that it covers the disputes that are the subject of the court proceedings, to prove that this is the case. This is borne out by the authorities.39 If the party seeking a stay cannot prove both (a) and (b), then there is no jurisdiction to grant a stay under section 9(1) and (4) of the AA 1996. However, if the court considers that it cannot decide those issues for itself in a summary fashion on the written evidence, it has two other options, as this court made clear in Al-Naimi (t/a Buildmaster Construction Services) v Islamic Press Agency Inc. 40 It can direct an issue to be tried, pursuant to CPR Pt 62.8(3), or it can stay the proceedings (under its inherent jurisdiction) so that the putative arbitral panel can decide the issue of the existence of the arbitration agreement, pursuant to section 30 of the AA 1996. If the court decides that it will and can determine whether or not there was a concluded arbitration agreement on the written evidence before it, then, in my view, the authorities establish that it is for the party asserting the existence of the concluded arbitration clause to prove it on a balance of probabilities. As I point out below, the position appears to be different if the court decides, on an application for a stay, that it cannot, on the materials before it, determine whether there was a concluded arbitration agreement.

74. Under section 9(4) the court ‘shall grant a stay’ unless ‘satisfied’ thatthe arbitration agreement is ‘null and void, [or] inoperative …’. This means, in my view, that once the first party has established the existence of an apparently concluded relevant arbitration agreement and that it covers the matters in dispute in the proceedings, it is for the party resisting a stay to ‘satisfy’ the court that the apparently existing arbitration agreement is ‘null and void’. That was the position under the old law, i.e. section 1 of the Arbitration Act 1975, which provision first gave statutory effect in English law to the New York Convention.42 This court has said that this remains the position under the AA 1996, albeit without elaborating on its reasoning….”

6

In the circumstances of this case that meant that the Defendant had the burden of establishing that Rule K of the Rules bound the First Claimant and operated as an arbitration agreement between the Defendant and the First Claimant. It was not contended that the Second Claimant was not bound by the Rules nor that Rule K did not create an arbitration agreement between him and the Defendant. In addition the First Claimant did not suggest that if Rule K did take effect as an arbitration agreement between it and the Defendant then such agreement was in any way null, void, inoperative, or incapable of performance.

The Factual Background.

7

The transfer of professional footballers from one club to another can generate fees which are often substantial. The Football Association has laid down rules in respect of such transfers. The transfers often involve agents of various kinds acting on behalf of players and on behalf of football clubs. To regulate those dealings the Football Association has a system of registered intermediaries. There is no dispute that the Second Claimant is a registered intermediary. The Claimants' case at the time of the hearing before me on 28 th March 2018 was that the First Claimant was not so registered and, indeed, that it could not be. The Defendant's case was that the First Claimant was “inextricably linked” with the Second Claimant and was thereby bound by the Rules and was a party to an arbitration agreement in the same way as the Second Claimant was. Alternatively the Defendant asserted that the First Claimant was bound by the Rules by virtue of its participation in professional football. It was only in the course of the hearing that it was noticed that the First Claimant's invoice bore a number relating to the First Claimant and which appeared to be the registration number of an intermediary registered with the Football Association. This raised the question of whether in fact the First Claimant was a registered intermediary. It was not possible to resolve this factual issue at hearing. The matter was then put off for further evidence and for written submissions and I will set out the effect of those below.

8

The relevant parts of the Rules provide as follows:

Rule 2 sets out definitions and defines “Intermediary” and “Participant” thus:

“Intermediary” shall have the meaning ascribed to the term within The Association's Regulations on Working with Intermediaries.

“Participant” means an Affiliated Association, Competition, Club, Club Official, Intermediary, Player, Official, Manager, Match Official, Match Official observer, Match Official coach, Match Official mentor, Management Committee Member, member or employee of a Club and all such persons who are from time to time participating in any activity sanctioned either directly or indirectly by The Association”

Rule K is headed “Arbitration” and “Agreement to Arbitration”. Rule K (1)(a) provides that:

“Subject to Rule K1(b), K1(c) and K1(d) below, any dispute or difference between any two or more Participants (which shall include, for the purposes of this section of the Rules, The Association) including but not limited to a dispute arising out of or in connection with (including any question regarding the existence or validity of):

(i) the Rules and regulations of The Association which are in force from time to time;

(ii) the rules and regulations of an Affiliated Association or...

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