Admission – Liability – Withdrawal

Berg v Blackburn Rovers Football Club & Athletic plc: Chancery Division, Manchester District Registry: 29 April 2013

The claimant was employed by the defendant football club as club manager. The terms of his contract of employment were contained in a service agreement signed in November 2012. The service agreement was signed on behalf of the club by its managing director, S. Clause 3.1 of the service agreement provided that it would continue until 30 June 2015. In December, the club terminated the claimant's employment. The claimant claimed that the sum of £2.25m was due to him under clause 15.3 of the service agreement as a result of its early termination. In March 2013, the club admitted liability to pay the sum claimed. The club subsequently applied to withdraw that admission pursuant to CPR 14.1(5).

The issues were whether it was at least realistically arguable: (i) that clause 15.3 was a penalty and as such was unenforceable beyond the sum that represented the claimant's actual loss; and (ii) that S did not have usual authority to enter into the service agreement on behalf of the club by reason of his appointment as managing director. The application would be dismissed.

The correct way of approaching such an application was to start by asking whether the defendant had demonstrated that if permitted to withdraw its admission it would have a realistically arguable defence. If it had not then clearly it would not be necessary to consider other factors because a summary judgment application would be bound to succeed if permission to withdraw the admission was granted and, accordingly, no useful purpose would be served by giving the permission sought (see [31] of the judgment).

In the instant case, the contention that clause 15.3 of the service agreement was a penalty was not realistically arguable. Under the terms of the service agreement, the termination of the claimant's employment prior to the expiry of the fixed term did not constitute a breach of contract, whereupon a sum of money became payable by the club to the claimant. Payment became due on the occurrence of an event other than a breach of contract. That being so the law relating to penalty clauses was not engaged and the contention by the club to the contrary effect was not arguable.

Further, in the circumstances, the club's case that S did not have implied or usual authority to sign the service agreement was unarguable. Accordingly, neither of the club's asserted defences were realistically arguable. On that basis no useful purpose would be served by permitting the admission to be withdrawn (see [33], [43], [45] of the judgment). Campbell Discount Co Ltd v Bridge [1961] 2 All ER 97 applied; Sowerby v Charlton [2005] All ER (D) 343 (Dec) considered.

Per curiam: 'On 1 April 2013, the Overriding Objective was radically amended. It now places emphasis not merely on the need to deal with cases justly but to do so at proportionate cost, expeditiously, to enforce compliance with the Rules and orders and to allot to each case an appropriate share of the court’s resources. This amendment of the overriding objective is likely to have a significant impact on the approach to be adopted to applications of this kind, which will now be approached by courts much more rigorously than perhaps has been the practice in the past, particularly where formal admissions are made on behalf of parties represented by experienced and specialist professional advisors.' (see [29] of the judgment).

Paul Gilroy QC (instructed by Slater & Gordon (UK) LLP) for the claimant; Neil Berragan (instructed by IPS Law LLP) for the club.