Ostensible authority of a Managing Director
Can a football manager who agrees the terms of a contract of employment with the Managing Director of the Club he is joining assume that the MD has authority to enter into that contract ? Not necessarily, argued the Defendant Club before the High Court in Berg v Blackburn Rovers FC.
Henning Berg, the ex-Manchester United and Blackburn player, who gained 100 caps for Norway, was appointed as Blackburn Manager on a 3 year fixed term contract in November 2012. He was dismissed after only 57 days in post. His dismissal triggered a clause in his contract under the terms of which he became entitled to a payment of basic salary (calculated on the basis of a set formula) for the balance of his fixed term. Initially, the Club admitted the claim and sought time to pay. It then applied to the High Court to withdraw its admission on two grounds, namely that the Managing Director who had agreed the terms of the contract only had authority to agree to a liquidated damages clause based on 12 months’ basic salary, and secondly that the clause in question constituted a penalty.
The High Court dismissed both arguments and ordered the Club to pay the full amount claimed.
1. In a lengthy judgment, the High Court said the following in relation to the issue of ostensible authority:
2. “(Blackburn’s) case is that Mr Shaw did not have actual authority to conclude the contract. At no stage was it suggested in the course of (pre-contract) discussions that approval would have to be sought before the contract could be signed or that if signed the contract could not take effect until such approval had been obtained”.
3. Blackburn’s case before the High Court was that by no later than 8 April 2013, the Club had concluded that Henning Berg’s contract had been entered into by Mr Shaw on its behalf in breach of express instructions given to him by Mrs Desai of the Club’s owners. This was despite the fact that on 9 April 2013 a news item was posted on the Club’s own website, which was in these terms:
4. “Following recent and misleading media speculation Blackburn Rovers FC would like to offer clarification on the situation concerning former manager Henning Berg. The owners wish to make it clear that the club’s lawyers are actively seeking agreement with Mr Berg on the settlement of his contract. They also wish it to be known that a £500,000 instalment has already been paid to Mr Berg. Additionally the owners would like to state that there is no investigation into this matter with regard to managing director Derek Shaw who continues to have their complete backing and support”.
5. The Judge held:
6. “In my judgment it is unarguable to suggest that the Managing Director of Blackburn does not have implied or usual authority to sign employment contracts on its behalf”.
7. Blackburn’s application for permission to appeal was dismissed.
8. One surprising feature of the case was recorded in the following terms in the Court’s judgment:
9. “It is Blackburn’s case that in effect Mr Shaw is operating the affairs of Blackburn outside the control of the owners. It is said that an aspect of this conduct was the posting of the press announcement referred to above, which it is contended was posted on the direction of Mr Shaw without the permission of the owners or any of them, and was not removed thereafter (and in the event not until the late afternoon of 24th April 2013) because Mr Shaw failed and refused to instruct Blackburn staff to do so”.
Notwithstanding the outcome, this case perhaps serves as a warning to employees to ensure, when agreeing the terms of any contract of employment, that the person they are dealing with on the employer’s behalf has authority to commit the employer to the terms of that contract.
Paul Gilroy KC, instructed by Slater & Gordon, appeared on behalf of Henning Berg.
Please see the final report and judgement.
Please also see below, reports from the national press.