Scoring an own goal

Football has been beneficial to the construction industry: new stadiums, new training grounds, transport links, and so on. And every so often it produces a legal case of some interest to the industry. The last time I wrote about football was in relation to Luis Suárez and his less than agreeable behaviour. When you look at the facts in the recent case of Pulis vs Crystal Palace [2016] you might think more of the same. Flattering or complimentary to Mr Pulis it is not. Of some application and relevance to construction, it is.

Tony Pulis is a well known, dare I say, old school, football manager who, by November 2013 was employed as manager of Crystal Palace Football Club. His contract provided for a bonus of £2m if he succeeded in keeping the team in the Premier League at the end of the season and stayed in his position as manager until 31 August 2014. I suspect to most of us the former requirement sounded more onerous. However, Pulis managed that without too much trouble. The matter of staying until 31 August proved more difficult and he walked out on 13 August. By then the bonus was in his bank account.

Given the tribunal’s conclusions, Pulis might have wanted to keep the benefit of confidentiality. Instead, he decided to challenge the arbitrators’ decision

In the run up to the date requirement of 31 August 2014, Pulis told the club chairman that he “urgently needed the money” to proceed with a purchase of land. He also committed to the club. The club agreed to pay the bonus early. Then on the eve of the new season, a day later, Pulis walked out. He claimed that his reasons for leaving were caused by discussions at a “heated” players’ meeting on 12 August, coincidentally the day he received his early bonus. The club took action to recover the bonus. The form of that dispute will be familiar to the industry: arbitration. One of the benefits of arbitration is that it is a confidential process, so if things have not gone well and/or there are publicity sensitivities, arbitration has a notable benefit. For reasons that will become clear, that benefit was lost in this case.

The dispute went before the Premier League Manager’s Arbitration Tribunal. They concluded that Pulis had intentionally deceived the club into paying his bonus early. They awarded damages for deceit in respect of the bonus, and awarded the club damages to reflect the gross sums it had paid out in connection with the bonus, not only the net sum paid to Pulis, but also the connected tax and National Insurance payments of over £1m. The arbitrators also held that Pulis had repudiated his employment contract, and since he had left to join another club, he was liable to pay liquidated damages of £1.5m to Crystal Palace. In total, Pulis was ordered to pay the club the sum of £3,776,000 in damages. Even in the heady world of football management, that is a lot of cash, especially after paying your own legal costs.

One issue crucial in the tribunal reaching its decision was the date of the “heated” players’ meeting. Pulis said this was 12 August, the day he received the early bonus. The club said it was on 8 August. It was fundamental because Pulis said that the heated meeting was why he had decided to leave, despite telling the chairman he would stay when seeking the early payment. The arbitrators found there was objective evidence the meeting took place on 8 August. Further the tribunal found that regrettably this was not “an honest difference in recollection”. Another issue which is difficult for Pulis was the land deal. He said he needed the bonus cash to purchase some land for his children. The tribunal found there was “no imminent property transaction” and that they were “unimpressed” with his evidence on that.

The case went to the High Court and out of the window went the confidentiality. The court did not have much time for Pulis’ complaints

At this point you could be forgiven for thinking that this should have been the end of the matter and, given that it was an arbitration and confidential, no one outside those directly involved would be any the wiser. Given the tribunal’s conclusions, Pulis might have wanted to keep the benefit of confidentiality.

Instead, he decided to challenge the arbitrators’ decision under S68 of the Arbitration Act 1996. This provides for “challenging the award: serious irregularity”. Pulis said the tribunal failed to meet its duties under section 33 of the 1996 act and failed to deal with the issues that were put before it. He claimed the arbitrators failed to consider the oral evidence of two witnesses, who claimed the players’ meeting was on 12 August, despite the objective evidence which was described as “fatal” to his credibility. He also argued that arbitrators failed to consider at all the tax consequences if the payment of the bonus was fraudulently induced.

So the case went to the High Court and out of the window went the confidentiality. The court did not have much time for Pulis’ complaints. It threw out his challenge, emphasising that the courts will strive to uphold arbitral awards wherever possible and that the threshold to make a challenge under the Arbitration Act 1996 is high. Once the case was in the High Court it is in a public forum and could be reported, and it was.

So whatever the moral of this tale, remember, arbitration has advantages but those can quite easily be lost. If you want a dispute on a project to stay under wraps, accept an arbitration panel’s decision and move on or be ready to face the consequences as a matter of public record.

James Bessey is a partner in the construction team of Blake Morgan