Farnan v Sunderland Association Football Club Ltd  EWHC 3759 (QB)
Claims of unfair dismissal and for unpaid bonus were both dismissed.
The claimant was dismissed for gross misconduct, namely breach of confidentiality. He claimed that he had been wrongfully dismissed and that his bonus payment had not been paid - in total the damages claim came to almost £1m.
The claims were dismissed. The court held that the claimant had committed serious and repeated breaches of the Service Agreement in disclosing confidential information. Also, the court ruled that the claimant did not have any claim to a bigger bonus than he was in fact paid in September 2012, to reflect the preceding season. Specifically, he had no entitlement to 20% of one of the sponsorship deals.
Neutral Citation Number:  EWHC 3759 (QB)
Case No: A90MA167
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Liverpool Civil and Family Courts
35 Vernon Street, Liverpool 2, L2 2BX
Mrs Justice Whipple
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Michael Farnan (Claimant)
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Sunderland Association Football Club Ltd (Defendant)
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Paul Gilroy QC (instructed by JMW Solicitors LLP) for the Claimant
David Reade QC & Alexander Robson (instructed by Muckle LLP) for the Defendant
Hearing dates: 24, 25, 26, 27, 30 November, 1 and 3 December 2015
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I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mrs Justice Whipple
Mrs Justice Whipple:
- This is a claim for damages for wrongful dismissal brought by Mr Michael Farnan against his erstwhile employer, Sunderland Association Football Club Ltd ("SAFC"). Mr Farnan also claims payment of unpaid bonus due (he says) under his contract of employment. SAFC defends this claim on grounds that it was entitled to dismiss Mr Farnan without notice, and nothing is now due to him by way of damages or bonus.
- Employment Tribunal proceedings have been commenced in parallel with this action and are currently stayed. The parties agree that the issues before me are purely contractual in nature. There is a dispute about the extent to which issues of process, procedure and fairness of the manner of Mr Farnan's dismissal, all of which are the subject of the ET proceedings, are relevant to this contractual claim. I will deal with those aspects, to the extent I consider them relevant, later in this judgment.
- For the Claimant, I heard evidence from the Claimant himself, as well as from Stephen Pearson, James Wright, Dale Agar, Moses Mwangi and Frank Devoy. David Miliband and another witness, Trevor Birch, had provided witness statements which the Defendant agreed, meaning that neither needed to be called.
- The Defendant had filed and served witness statements from eight witnesses, of whom four were called: Margaret Byrne, Claire Cogdon, Angela Lowes and Clare Wilson. The Claimant by his Counsel, Mr Paul Gilroy QC, complained that the other four witnesses had, at the last minute, been stood down. Those other witnesses were Niall Quinn, former Chairman of SAFC, Amanda Goulden, head of HR who wrote the Claimant a letter notifying him he was dismissed, Gary Hutchinson, commercial director of SAFC who took over much of Mr Farnan's job when he was dismissed, and Peter Weymes, Facilities Manager, who chaired the disciplinary hearing on 23 May 2013 and also wrote to the Claimant following that hearing, notifying him that he had been summarily dismissed.
- It is for the parties to call such witnesses as they wish in support of their case. If the Defendant only chooses to call four witnesses, that is a matter for the Defendant. I shall determine this case on the evidence which was before me, and shall not speculate about other evidence which might have been heard.
Scope and nature of Mr Farnan's employment
- Mr Farnan has been involved in the sports marketing industry for many years. In the past, among his many roles, he has worked in the corporate environment as Managing Director of Manchester United International, and Executive Director at Sheffield United. He has also held senior roles at Jordan F1 and AC Parma.
- Immediately prior to joining SAFC he was involved in a sports marketing agency called Red Strike Marketing Ltd ("RSM"). Mr Farnan's wife was the director of RSM, but Mr Farnan was the driving force behind RSM. RSM's main client was Macron, a sports kit manufacturer. RSM's role for Macron was to introduce Macron to sporting teams and try to secure technical kit contracts and sponsorship deals for Macron.
- In around June 2010, Mr Farnan met Niall Quinn, then the Chairman of SAFC, a football club then (as now) playing in the English Premier League. Mr Farnan and Mr Quinn discussed, in general terms, SAFC's sponsorship profile. They met again in May 2011, when Mr Quinn invited Mr Farnan to work at the club. Mr Quinn explained changes which were to be made to the management of SAFC, which would see Mr Quinn remaining as Chairman, supported on the Board by Margaret Byrne, who would become CEO and Angela Lowes who would become Finance Director. Also on the board would be Per-Magnus Andersson, who represented the club's owner, Ellis Short, and David Miliband MP who would be non-executive vice-chairman. Mr Farnan accepted an offer of employment with the club, and a contract was drawn up (which I shall detail below). Mr Farnan's job title was "International and National Marketing Director". He was to sit on the executive Board of SAFC, as a statutory director with responsibilities under the Companies Act 2006. In evidence, Mr Farnan described his intended role as follows: "It was to develop an international sponsorship strategy and attract a better quality of sponsors than those SAFC had attracted historically". I accept that broad description. SAFC wanted to raise its international profile and increase its sponsorship revenue. Mr Farnan had extensive experience in the sports marketing industry, which SAFC wanted to employ, with a view to developing an international sponsorship strategy.
- Mr Farnan's employment started on 17 August 2011. He entered into a Service Agreement (the "SA"), the key terms of which are set out in the Appendix to this Judgment. He was employed on a salary of £190,000 per annum. He was entitled to a discretionary bonus in addition, according to the criteria at Appendix 1 to the SA. He was also entitled to life assurance, personal medical assurance and a car. The notice period was one month. The SA contained provisions for termination of the contract without notice. He was to work in three places: SAFC's offices at the Stadium of Light in Sunderland, his own home, and Mr Short's offices in London.
- Mr Quinn ceased as Chairman of SAFC in October 2011, but remained on the Board for some months, while Ellis Short, the club's owner, took over the Chairmanship. Mr Quinn left the club in February 2012.
The conclusion of engagement with RSM
- Mr Farnan was to devote himself exclusively to SAFC during his employment. He gave assurances that he would cease his role with RSM. There was an exchange of emails on 11 August 2011 between Mr Farnan and Ms Byrne, the CEO, in which Mr Farnan confirmed that he would cease his activities with RSM immediately on joining SAFC, but he noted that his wife would continue to be the sole shareholder and director, and that various colleagues would continue to manage the RSM client list after Mr Farnan had disengaged from the business. Ms Byrne accepted that.
- Mr Farnan was at this stage using his RSM email address to correspond with SAFC. His SAFC email address was not set up and functional until September 2013. Ms Byrne emailed Mr Farnan on 5 September 2013 asking him to use his SAFC email address from now on.
Tullow Oil/Invest In Africa
- Mr Farnan joined SAFC just as the 2011/12 football season was commencing. SAFC had an existing shirt sponsor for that season. But a shirt sponsor was needed for the next season (2012/13), and this was an issue high on Mr Farnan's agenda on joining SAFC.
- Mr Quinn used his existing contacts to gain an introduction to Aiden Heavey, CEO and founder of Tullow Oil, an oil company with extensive interests in Africa. During November 2011, Mr Farnan was introduced to Mr Heavey too, and a discussion took place about marrying Tullow's corporate social responsibility ("CSR") ambitions in Africa with some of the work SAFC was doing in the UK. The proposal was discussed at a Board meeting on 17 November 2011. Mr Quinn led that discussion. He described the proposal as "ground-breaking" for the club, because it would involve the club assisting in health and education programmes in Ghana, and would build a legacy for SAFC; he was noted to feel passionately about it. At that meeting, Mr Farnan delivered his commercial and marketing report, in which he mentioned a number of contacts with other corporates with a view to sponsorship of various types; he also raised the issue of naming rights for the stadium.
- On 24 November 2011 Mr Farnan emailed Ms Byrne to report back on negotiations with Tullow, in which Mr Farnan was now involved. He said he would produce a document for Tullow, which would set out the programme which would be badged under Tullow's CSR initiative, Invest in Africa ("IIA"). It would involve Tullow underwriting the project for the first year (at a cost of £6 million) with the hope of attracting other partners with business interests in Africa each of whom would pay £1 million. Mr Farnan concluded that email by saying that Mr Quinn was "like a dog with a bone" who "would not let Aiden off the hook". I understand this to mean that Mr Quinn was intent on securing the deal with Tullow, because it was something Mr Quinn felt passionately about and was committed to.
- Mr Farnan took the Tullow Oil proposal forward. He tasked Clare Wilson, his assistant, to draw up a presentational document entitled "Invest in Africa". Much of that document was generic SAFC material which was in the public domain; some parts of it, specific to the IIA project, were based on information provided by Mr Farnan, which Ms Wilson incorporated in the document. She circulated that document for comment on 1 December 2011. Mr Farnan and Ms Wilson went to Korea that week, to speak to a number of corporates about sponsorship; in an email dated 9 December 2011, after the Korea trip, Mr Farnan spoke of IIA as "Niall's suggestion".
- Ms Byrne then drew up a Memorandum of Understanding for discussion with Tullow in anticipation of a meeting with Tullow's representatives, an agency called WSM. Mr Farnan was to attend that meeting with Mr Quinn. She circulated this on 12 December 2011. The meeting went well, and it seemed that Tullow was interested in progressing the deal. Mr Short met Mr Heavey on 19 January 2012, and they agreed to do the deal. To cut a long story short, the deal with Tullow was subsequently signed, and IIA became SAFC's shirt sponsor for two years, with a break clause after one year. The value of that deal was £1.5 million per year, a total of £3 million.
- There is an issue about the break clause which was inserted in the Tullow Oil agreement. Mr Farnan was adamant that he had advised against it; but I was shown no document in which such advice was contained. Ms Byrne could not recall Mr Farnan ever suggesting that there should not be any break clause included, and noted that the clause was inserted at the express request of Mr Short. I prefer Ms Byrne's evidence on this point. If Mr Farnan had advised against the break clause, with the strength of view he now asserts, it is inconceivable that he would not have recorded that view in writing, at some point. If he did have concerns about the break clause, I conclude that he chose to keep them to himself.
- As things turned out, IIA was the sponsor only for one season, because Tullow invoked the break clause after one year. Thus, the existence of the break clause did turn out to be financially disadvantageous for SAFC who were faced with having to find a replacement sponsor for the following season.
- By September 2012, it was clear that IIA would not renew for a second season. Mr Farnan was already talking to Bidvest, a South African conglomerate, about sponsorship. He now started to engage with them to become the shirt sponsor for 2012/13 and beyond. The chief executive of Bidvest was Brian Joffe. Mr Farnan travelled to South Africa on a number of occasions to meet Mr Joffe and negotiate sponsorship for SAFC.
- In the event, and after a long period of negotiation (detailed further below), Mr Farnan secured this sponsorship, bringing in a total of £3 million over two years. The deal was signed on 2 May 2013, and became active when SAFC avoided relegation on 14 May 2013.
Paulo Di Canio appointment
- By the end of March 2013, SAFC was in the relegation zone. SAFC's manager at that time was Martin O'Neill. Mr Short had started to consider replacing the manager, and had been in contact with Paulo Di Canio, an Italian manager who had the previous season managed Swindon Town, who also had experience in the Italian league. This contact had been very secret, with only Mr Short and Ms Byrne from SAFC knowing of it, and initially had been aimed at sounding out Mr Di Canio to take over at the end of the 2012/13 season.
- On Wednesday 27 March 2013, Mr Short instructed Ms Byrne to seek to agree terms with Mr Di Canio; but importantly, and I accept Ms Byrne's evidence on this point, Mr Short had not at that time made his mind up, he wanted to wait and see what happened at the match against Manchester Utd the following Saturday 30 March 2013. On 27 March 2013, Mr Miliband announced that he would be moving to New York to take up a position with the International Red Cross, but he would remain a director of SAFC. Mr Miliband did not know about the talks with Mr Di Canio at this stage.
- Ms Byrne flew to Italy on the evening of Thursday 28 March 2013, and met with Mr Di Canio. On Friday 29 March 2013 they met and agreed terms in principle. SAFC lost to Manchester Utd on Saturday 30 March 2013. Mr Short had discussions after the game, and at approximately 7.30pm that evening told Ms Byrne of his decision to sack Mr O'Neill and replace him with Mr Di Canio.
- There followed a media storm in which SAFC was criticised for appointing Mr Di Canio, who had in the past expressed strong right wing views. Ms Byrne was picked out for criticism in the Press. This was the start of an extremely difficult few days for SAFC. Reading the contemporaneous evidence, including the press coverage, it is clear that the appointment of Mr Di Canio provoked a strong reaction. This was a crisis period for SAFC.
- On hearing of Mr Di Canio's appointment, Mr Miliband decided to resign as director of SAFC, which he did on Sunday 30 March 2013.
- The appointment of Mr Di Canio caused real difficulty for Mr Farnan, who was contacted by a number of colleagues and journalists questioning his appointment. Mr Joffe of Bidvest was unhappy at the appointment, and he too contacted Mr Farnan expressing his concerns. Bidvest had not at this stage signed a sponsorship agreement, although a lot of time and effort had been invested in negotiations over the preceding months. If Bidvest pulled out at this stage, that would significantly disadvantage SAFC, because time was by then short to find a suitable replacement in time for the next season.
- On Tuesday 2 April 2013, Mr Farnan had a discussion with Mr Joffe, and summarised that discussion in an email to Ms Byrne timed at 8.10pm. This was a frank appraisal of where things stood between SAFC and Mr Joffe; in particular, it noted Mr Joffe's view that SAFC had failed adequately to scotch the suggestion that Mr Di Canio held fascist views, and that Mr Joffe wanted Mr Di Canio to address that suggestion specifically in a public statement. This is the "Joffe email" which I will refer to further below.
- SAFC prepared to issue a press statement to quell the rising tide of criticism. Mr Farnan emailed Ms Byrne with suggestions for the press statement, and how it could read better, specifically to include an apology (which suggestions had in fact come from Mr Bowen – see later in this judgment).
- There was then a curt exchange of emails between Ms Byrne and Mr Farnan. At 1.47pm on 3 April 2013, Ms Byrne emailed, dismissing Mr Farnan's proposed changes to the statement:
"He has already said that on camera twice. They are not interested, all they want is the word "fascist" to appear".
- Mr Farnan emailed back at 2.02 pm:
"All I can do is give you my opinion I have no political agenda here you're the boss its your call.
I am a business man with a lot of commercial experience I have only given you best advise and advise that people have given me personally in the interest of this club.
- Ms Byrne emailed back at 02.06:
"Mike I have tried to call and I want you in the office tomorrow and Friday please. When you are not here, in the midst of it, something is clearly not working.
Also, I am not communicating with you on issues like this via email. I have tried calling twice.
- This exchange has a quite different tenor from other exchanges between Mr Farnan and Ms Byrne which had gone before. I asked Ms Byrne when she gave evidence whether it marked a watershed in her working relationship with Mr Farnan: she said it did not, and that after a difficult few days following the Di Canio appointment, everything got back to normal at SAFC, including her working relationship with Mr Farnan.
- Mr Farnan did not see it that way. He was already feeling ostracised by Ms Byrne, to which end he cited a number of problems in the months preceding (which were trivial). But matters came to a head with this exchange on 3 April 2013. For him, this was a watershed moment. A short time later that afternoon, he forwarded Ms Byrne's email to Mr Miliband, under cover of his own email saying:
"Looks like my time is up I done my best.
Thanks again for all your support."
- Later that evening, he emailed Robert Segal, a football agent and colleague, setting out in short his career highs (at Manchester United and then at Jordan F1), and attaching a presentation prepared while at SAFC (more of which later). In evidence, Mr Farnan accepted that this was an email sent for personal reasons: he was looking for work. The following morning, he contacted Frank Devoy, another colleague, again attaching the SAFC presentation in a bid to find work. After 3 April 2013, he started "banking" larger numbers of SAFC documents at home, using his wife's email address, because he was concerned that he would have to challenge SAFC about his bonus and ultimately about his job (more of that later, too).
April to May 2013
- On 10 and 11 April 2013, Mr Farnan went to the Soccerex trade exhibition in Manchester. While he was there, he was contacted by a journalist he knew, Tariq Panja. They had an "off the record" conversation which was, very unfortunately, then reported by Bloomberg. This is the subject of one of the allegations of breach by SAFC and I will deal with it further below.
- While at Soccerex, Ms Byrne emailed Mr Farnan to say he could not go to Florence the following week for an Italian FA event hosted by Michele Uva. Mr Farnan's email to Mr Uva, explaining that he could not attend, is the subject of another allegation of breach, and is dealt with further below. Towards the end of April 2013, Ms Byrne stopped Mr Farnan from going to a sports awards dinner in London. At the end of April 2013, Ms Byrne stopped Mr Farnan going to South Africa as he had planned.
- Ms Byrne's evidence for all of this was that she needed Mr Farnan in the office, because SAFC was close to relegation, and there was no shirt sponsorship deal in place. That may be so. But Mr Farnan had, up to that point, had a fairly free rein and would justifiably have sensed that he was being treated differently.
- Unknown to Mr Farnan, Ms Byrne had become concerned on 3 May 2013 that Mr Farnan was sending emails on his SAFC account to his wife on her "lovepoppy" email address (see further below). Ms Byrne, herself, then reviewed Mr Farnan's emails, by going into his email account. She found a number of emails which upset her because they made comments which she considered to be personal to her. She accepts that she "became rather emotional about it" so referred the matter to Ms Goulden. She did not act on these emails immediately because she recognised that an investigation was needed, and meanwhile, the club was fighting to stay in the premiership, and Ms Byrne and her staff were very busy. The problems with Mr Farnan were put to one side.
- On 7 May 2013, Mr Farnan contacted his lawyer. In his witness statement he says that things were by now "unbearable".
- On 9 May 2013, Ms Byrne sent Gary Hutchinson, commercial director, and Mr Farnan, an email, saying she had spoken to Mr Short, and was attaching recent board minutes. She asked for a report setting out why SAFC was down on budgets for the year. She said:
"I know that your staff sometimes help with report writing but I must stress that this document is keep confidential please. Please prepare on an individual basis."
- Later that day, Mr Farnan sent Ms Byrne two documents, one a narrative of the season and the issues from a sponsorship perspective, which Mr Farnan wrote himself; and another one page document headed "shortfalls". This was based on information previously provided to the Board in a document prepared by Clare Wilson. Mr Farnan asked Ms Wilson to amend that document before it was sent to Ms Byrne.
- Mr Farnan's planned trip to Malta on 8 to 10 May 2013 was cancelled at Ms Byrne's request.
- On 11 May 2013, Mr Farnan wrote to his doctor saying that "stress not good".
- On Tuesday 14 May 2013, the relegation battle was won, when Wigan lost to Arsenal, which meant that Sunderland retained Premier League status. This also meant that the Bidvest contract became unconditional and that (at last) the Bidvest shirt sponsorship was confirmed.
- On 15 May 2013, the next day, Mr Farnan went to the office. He was met by Ms Byrne and Ms Goulden (head of HR) who told him he was being suspended for gross misconduct. He was escorted off the premises.
- Mr Farnan made an appointment to see his GP, but could not get an appointment until 21 May 2013. Mr Farnan was feeling physically and mentally exhausted.
- On the evening of 20 May 2013, SAFC delivered a letter and some papers to Mr Farnan's home, for a disciplinary hearing on Thursday 23 May 2013. Mr Farnan saw his GP the following day, and she signed him off work for 14 days. The papers for the disciplinary proceedings advanced a number of allegations of misconduct (28 in all), each of which was backed by emails and other communications extracted from Mr Farnan's email account and phone. The paperwork would have been substantial (75 pages, according to Mr Farnan). Mr Farnan's solicitors asked for an adjournment of the hearing, but SAFC refused, and the hearing went ahead on 23 May 2013 in Mr Farnan's absence.
- The hearing was conducted by Peter Weymes, Facilities Manager of SAFC. Mr Weymes found the disciplinary charges to be proven. Mr Farnan was summarily dismissed by letter from Mr Weymes of the same date, and received a second, similar letter from Ms Goulden of the same date.
- By letter dated 30 May 2013, Mr Farnan's solicitors indicated his wish to appeal against his dismissal. The appeal hearing was set for 7 June 2013. But Mr Farnan only received the minutes of the disciplinary hearing on 5 June 2013 together with more documents. Mr Farnan's solicitors asked for more time to prepare his appeal. By letter dated Friday 7 June 2013, SAFC allowed Mr Farnan until 3pm on the following Monday, 10 June 2013, to file his grounds of appeal. The appeal hearing was set for 13 June 2013.
- Mr Farnan was not present for the appeal, because he had insufficient time to prepare. The decision to dismiss him without notice was confirmed by SAFC by letter dated 14 June 2013.
- On 20 May 2014, Mr Farnan issued a claim form seeking damages for (1) wrongful dismissal and (2) unpaid bonus (the latter claimed to total £964,300). By the time the Defendant came to lodge its Defence on 20 June 2014, it had dropped 6 of the 28 original allegations, leaving 22. The Defendant denied the claim.
APPLICATION TO AMEND
- Just before trial SAFC applied to amend its Defence in two ways. First, it sought to include up to date figures reflecting the value of various sponsorship deals. Those values were not available when the Defence was initially pleaded. The revised figures were set out in the witness statement of Angela Lowes which was served in August 2014. They come as no surprise to Mr Farnan or his legal team. Mr Farnan (by Mr Gilroy QC) resisted this element of the application, on the basis that the application was made late, on the Friday before the trial commenced the following Monday. While it is regrettable that an application to amend was not made earlier, there was no prejudice in the figures being included in the Defence. There is a positive advantage in having the correct figures pleaded and those figures could not have been known at the time the Defence was originally served. I allowed this amendment which I considered to be straightforward.
- By the second amendment, SAFC sought to introduce another allegation of misconduct by Mr Farnan, relating to emails he sent on his SAFC account attaching an e-card showing what SAFC considered to be an offensive image. SAFC (by Mr Reade QC, with Mr Robson) argued that this allegation had only come to SAFC's attention during the process of preparing for trial, when a fuller sift of Mr Farnan's emails had been undertaken, and that was why the application was made late.
- Mr Reade showed me CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd  EWHC 1345 (TCC), which summarises the approach to applications for late amendments, at paragraph 19. Mr Reade also relied on Boston Deep Sea Fishing and Ice Company v Ansell (1888) 39 Ch D 339, which confirms that an employer can rely on conduct which is discovered after the dismissal to justify it.
- Mr Gilroy resisted this amendment, suggesting it was highly prejudicial. I could not agree with that, because Mr Farnan was going to be giving evidence anyway, and could deal with this further allegation. I indicated on the first day of hearing that I was minded to allow this amendment, so long as any prejudice to Mr Farnan could be mitigated, specifically, by his (i) serving a supplemental witness statement to deal with this allegation; and (ii) serving other evidence about SAFC's attitude to sexism in the workplace more generally, so as to rebut this allegation. A supplemental witness statement was indeed served by Mr Farnan, and the rebuttal materials on which Mr Farnan wished to rely were produced (mainly consisting of press cuttings). Accordingly, I allowed this amendment too.
THE SERVICE AGREEMENT
- Both aspects of the Claimant's claim fall to be determined under the SA. The key clauses of the SA are set out in the Appendix to this Judgment.
- Three clauses are particularly important. Clause 4 set out Mr Farnan's duties, including an obligation to comply with any rules, policies or procedures set out in the Staff Handbook (clause 4.3). The Staff Handbook was a lengthy document, which was updated from time to time, which was available to Mr Farnan. The particular parts of the Handbook which are relevant to this claim are, in summary:
a) The policy on Confidentiality, requiring staff not to divulge Confidential Information to any person or otherwise make use of it.
b) The policy on Communication with the Media which prohibited staff from having any contact with the media without first directing the matter to the Media and Communications Department.
c) The Acceptable Use of club resources, including email, which prohibited the dissemination of any material which are or might be considered to be indecent, obscene, or offensive, abusive or distasteful.
- A breach of the policies set out in the Staff Handbook was capable of giving rise to a breach of clause 4 of the SA.
- Clause 16 of the SA related to Confidential Information (as defined in the SA), and prohibited use or disclosure of Confidential Information to any person, unless that disclosure is "authorised by the Board…" (clause 16.2.1).
- Clause 20 of the SA provides for Termination without Notice (and with no liability to make any further payment) in eleven circumstances. Three of the listed circumstances are material to this case:
a) Gross misconduct (clause 20.1.3).
b) Any "serious or repeated breach or non-observance of any of the provisions of this Agreement or [if the Director] refuses or neglects to comply with any reasonable and lawful directions of the Company or Board" (clause 20.1.4).
c) If the Director "was guilty of a serious breach of any rules issued by the Company from time to time regarding its electronic communications system" (clause 20.1.11).
- In assessing whether a breach is "serious" within clause 20.1.4, all relevant circumstances should be taken into account, including the nature of the contract, the nature of the contractual term that has been breached, the nature of the breach, and the consequences or potential consequences of the breach.
- The reference to "repeated" breach in clause 20.1.4 must be construed, in context, and objectively, as requiring some gravity in the individual breaches, even if they are repeated. It is only if the repeated breaches collectively amounted to something serious, that this clause could be invoked by the employer. A breach that is trivial, even if repeated, is insufficient.
- The reference to a refusal to comply with directions in clause 20.1.4 must also be construed in context and objectively, to require that both the direction and the refusal are of some gravity or seriousness, before a breach in this regard can be considered capable of justifying termination without notice.
- Mr Gilroy invited me to conclude that the whole of clause 20 should be construed as providing different articulations of "gross misconduct". I do not accept that. Clause 20 provides alternatives, each of which stands in its own right and must be construed separately. So, for example, conduct which falls short of being gross misconduct, but which is nonetheless properly to be characterised as a serious breach of the SA, would provide grounds for summary dismissal under clause 20.1.4.
- Mr Reade invited me to consider, in addition to the SA, Mr Farnan's duties as a statutory director as prescribed by ss 170-177 of the Companies Act 2006 and at common law; and his implied duties pursuant to the relationship of mutual trust and confidence, within which exists the "last straw" doctrine justifying termination of a contract even in the face of a relatively minor act, if it is the last in a longer sequence of offending conduct (see, for example Kearns v Glencore Ltd  EWHC 3697 (QB) § 77). Whilst accepting that Mr Farnan had statutory duties and was subject to implied duties at common law, those additional duties do not contribute much to the resolution of this case, which turns on the application of the SA to the facts as I find them. I approach this case by looking to see, simply, if grounds existed for termination within clause 20 of the SA.
WRONGFUL DISMISSAL CLAIM
- Mr Farnan claims that he was wrongfully dismissed. The Defendant defends this claim on the basis that he was dismissed without notice in accordance with the terms of the SA. The particulars of breach relied on by the Defendant are set out at paragraph 29 of the Amended Defence under the following headings: (a) breach of confidentiality; (b) making of derogatory comments; (c) provision of false information; (d) enjoyment of outside interests and abuse of position; (e) forwarding an obscene Christmas card from an SAFC email address. I will deal with them in that order.
Defendant's Grounds for Summary Dismissal
(a) Breach of Confidentiality
- The bulk of the allegations against Mr Farnan fall under this head. I have grouped them under the following sub-headings: (i) emails to Mrs Farnan; (ii) David Miliband communications; (iii) Job-seeking communications; (iv) Sam Bowen; (v) Bloomberg and (vi) prospective sponsors.
- SAFC alleges that Mr Farnan breached the confidentiality he owed to SAFC by sending emails to his wife, Nikki Farnan. Most of these were sent to her "lovepoppy" address (this being the name of the jewellery business she runs with her daughter), but some were sent to other email addresses belonging to her.
- Mr Farnan explained that Mrs Farnan helped him when he worked at home, which he did for a substantial amount of the week while employed by SAFC. He was not technically minded, and often forwarded emails to his wife's email address to enable him (or her on his behalf) to print those emails out when he got home, because the printer at home was hooked up to the computer which received emails on that address. He also forwarded emails to his wife if she needed to know what was in them, for example, travel plans.
- I accept that Mr Farnan depended on his wife for administrative support at home. This explains a number of emails to Mrs Farnan attaching documents forwarded for printing, or containing travel details, or similar. This is not something to which SAFC can reasonably object, particularly given SAFC's agreement that he should work away from SAFC's offices for much of his time. Further, Ms Byrne accepted in evidence that there are circumstances in which it is permissible to use a private email address for business purposes (she had used her own personal email address to send one important email to the Board, and she routinely communicated with Mr Miliband on his personal email address). It was not unreasonable for Mr Farnan to send these sorts of emails to his wife, whom he trusted, and who helped him to do his job. These emails were not sent in breach of the SA.
- But the emails forwarded to Mrs Farnan went beyond mere administrative support. Some seemed to involve Mr Farnan letting his wife know what was going on at work and at times seeking her view on an aspect of his work. One example of this is the email exchange dated 23 April 2013 where Mrs Farnan offered a comment on an email her husband was about to send to Ms Byrne about the Bidvest deal structure. The fact that discussions about Mr Farnan's work took place at home is unsurprising. By emailing Mrs Farnan with work details and at times obtaining her input, I am not persuaded that Mr Farnan was straying beyond the bounds of what was reasonable. If this was a breach of the SA, it was trivial even if repeated.
- However, there are other emails from Mr to Mrs Farnan which call for a different analysis. Over the course of his employment, Mr Farnan "banked" SAFC documents and emails at home. This became a particularly pronounced practice after 3 April 2013, when he feared that his employment would be terminated by SAFC; but it appears that the practice was started much earlier, when he was advised by Mr Quinn (some time in the winter of 2011/12) in the following terms (from his witness statement, § 31)
"I was advised by Mr Quinn to carefully file or "bank" all proof of the work I had done in procuring the IIA sponsorship for safekeeping in anticipation of this situation arising, which I did… I took to forwarding any e-mails or attachments I wished to secure to my wife's personal e-mail addresses".
- One significant example of this category of "banked" documents is the email dated 9 May 2013, forwarded by Mr Farnan to the lovepoppy account, containing an email from Ms Byrne which itself enclosed two sets of SAFC Board Minutes. These Board Minutes were confidential to SAFC, and were very clearly "Confidential Information" as defined in the SA. Mr Farnan banked them because he wanted to have to hand the Board discussions about the naming rights for the stadium, if, as he anticipated, he was going to have a battle with SAFC about his job or about his bonus.
- Mr Farnan suggested that this "banking" of Confidential Information for personal purposes, to protect his own interests in the event of a dispute with SAFC, was permitted under the SA, because it had been authorised by the Board under clause 16.2.1 of the SA. That authorisation, he argued, was given by Mr Quinn (in the terms set out above), when Mr Quinn was a director of SAFC.
- I reject Mr Farnan's suggestion that the banking was authorised under the SA. It was not. The SA prohibits the use of Confidential Information for non-business purposes. The SA reflects the detailed policy in the Handbook, which also prohibits personal use. Nothing said by Mr Quinn lifts that prohibition: first, Mr Quinn left SAFC in February 2012, at the time that the IIA sponsorship deal was being negotiated, and this conversation appears to have related only to that deal: it was not on any view a blanket authorisation to bank all and any documents on any subject, regardless of when they arose or what they were about. Secondly, it was, at highest, a piece of advice from a colleague, and Mr Farnan cannot reasonably have understood it to be a "direction" from the Chairman or a co-director of SAFC, as to how Mr Farnan should go about doing his job for the club. Third, and in any event, Mr Quinn was plainly not telling Mr Farnan to breach his contract with SAFC, by compiling a personal databank at home, when this was in clear breach of the SA and the Handbook. At most, Mr Quinn was advising Mr Farnan to have the relevant documents to hand, in his office, in case the question about IIA sponsorship arose. Fourth, and in any event, I fail to see that Mr Quinn's advice, given on an informal basis, by a single director (or even the Chairman, alone) could ever amount to an "authorisation" by the Board: it was not.
- The Courts have confirmed that the possibility of future litigation with an employer does not justify an employee in transferring or copying specific confidential documents for his own retention: see Brandeaux Advisers (UK) Ltd v Chadwick  All ER 235 per Jack J, and more recently, Tokio Marine Kiln Insurance Services Ltd v Ms Yi Yang  EWHC 1948 (QB), per Coulson J:
"As a matter of common sense, it cannot be right for a defendant to retain information in breach of contract simply to bolster its claim in the Employment Appeal Tribunal. If there are documents to be disclosed in that dispute, they will be disclosed in the normal way. This sort of pre-emption is not therefore valid".
- I cannot know which emails sent by Mr Farnan to his wife's email address were "banked" documents (as opposed to emails falling in one or other of the "innocent" categories outlined above). But I conclude that there were a sizeable number of "banking" emails. The rate of despatch increased in April and May 2013, after Mr Farnan had sensed that his time was up at SAFC.
- Mr Farnan had no authorisation from the Board to build up a private bank of Confidential Information at home or on his or his wife's personal email accounts. Doing so was a breach of the SA. In my judgement, this was a serious breach.
- David Miliband MP was vice-chairman of SAFC until he resigned on 30 March 2013. SAFC complains that Mr Farnan continued to correspond with Mr Miliband, even after Mr Miliband resigned as a director, and continued to share Confidential Information with him in breach of the SA. The first occurred when Mr Farnan forwarded the Joffe email dated 2 April 2013 to Mr Miliband. The Joffe email contained Confidential Information as defined in the SA: it related to the business and affairs of SAFC, in relation to its business dealings.
- I have found this a difficult episode to analyse: I confess I was initially troubled to see Mr Farnan emailing a former director in this way. But Mr Farnan told me in evidence that he was only trying to secure the Bidvest deal, in the best interests of the Club. Moreover, the witness statement of Mr Miliband, which was not disputed by SAFC, makes clear that Mr Miliband had offered his services to help persuade Bidvest to become a sponsor of SAFC, and that he "was prepared to speak with Mr Joffe to try and explain my continuing view of the integrity and decency of the Club and its commitment to fight racism (and fascism)." I accept that Mr Miliband could be trusted to do the best he could for the Club, even after he had resigned. I also bear in mind that this occurred right in the middle of the Di Canio crisis, a very difficult time for SAFC and for Mr Farnan personally.
- In all the circumstances, therefore, and on reflection, I conclude that Mr Farnan sent that email to Mr Miliband because he was doing his level best in very difficult circumstances to keep the Bidvest deal on track and so promote the best interests of SAFC. I do not consider this episode to be sufficiently grave, when considered in context, to amount to a breach of the SA.
- The other instances of Mr Farnan disclosing information to Mr Miliband are less serious than the Joffe email. On 3 May 2013, Mr Farnan texted Mr Miliband saying "Pop Robson was released today…Bidvest signed yesterday…". This text gives rise to two allegations. First, SAFC says that the departure of Mr Robson, the club's talent scout, was Confidential Information. I have been shown press coverage from the same time, which shows that the press was itself questioning Mr Robson's future. I conclude that this story was largely in the public domain so this did not constitute the disclosure of Confidential Information; but even if it did, it was a minor indiscretion and can be disregarded. The second allegation is that Mr Farnan should not have told Mr Miliband that the Bidvest contract was signed. But given Mr Miliband's assistance in securing the Bidvest deal, I can readily understand why Mr Farnan wanted to let him know that his efforts had paid off. I approach this allegation in the same way as the earlier Joffe email – it does not amount to a breach within clause 20.
- SAFC point to two emails which it says breached Mr Farnan's contract by sharing Confidential Information with third parties. The first was an email to Rob Segal on 3 April 2013 at 21.04. Mr Farnan emailed Rob Segal attaching three documents: one concerning the work Mr Farnan had done for Manchester Utd, one concerning his work for Eddie Jordan and F1, and the third, a presentation headed "SAFC in Africa" which he described as "the SAFC document which shows the work I am doing with Sunderland". That document had been compiled in October 2012, to summarise SAFC's Africa initiative, once it had lost Tullow Oil/IIA as sponsor. One page set out "How the Strategy is Already Working", with details of contacts SAFC had already had with the Tanzanian authorities and other potential partners in the project.
- The timing of this email is significant. Earlier that same day Mr Farnan had emailed Mr Miliband saying that he thought his time with SAFC was about to end. Mr Farnan admitted that this email was not sent for SAFC's purposes, but for Mr Farnan's own personal purposes in an attempt to secure work from Mr Segal.
- Mr Farnan would not accept when questioned that this was Confidential Information. He suggested that this information was generic, alternatively it was already in the public domain, and therefore he was at liberty to send it to a third party. I reject Mr Farnan's evidence on this point. The document was Confidential Information. It was not generic, because it contained details of the club's new initiative, SAFC in Africa, including details of the steps the club had taken to progress that initiative with third parties. This information was not in the public domain. The fact that the presentation had been sent to a number of corporates (as part of SAFC's efforts to persuade them to invest in the initiative), and to some agencies (which were bound by a confidentiality agreement in relation to it), did not put it in the "public domain"; to the contrary, it had been sent to a number of carefully chosen correspondents, in order to promote the initiative.
- Ms Byrne explained her fears about this presentation going to Mr Segal, a well-known football agent with extensive contacts with other clubs. She was concerned that if Mr Segal knew about SAFC's Africa sponsorship initiative, there was a risk that he would discuss it with other clubs, and that other clubs might follow suit and try to do the same thing; at the time, this was a novel initiative, of a type that no other Premier League club was entertaining, and for other clubs to start similar initiatives would damage SAFC. I accept and understand her point of view and consider it to be entirely reasonable. But Mr Farnan refused to acknowledge that there was anything confidential at all in this presentation, or that there was any problem in his sending it to his personal contacts for personal reasons. Mr Farnan demonstrated a real lack of insight, by this episode and by his evidence about it, into SAFC's business interests, and his obligations under the SA to protect Confidential Information.
- The second alleged breach occurred when Mr Farnan sent this presentation to Mr Devoy, who is a business contact of Mr Farnan's, on 4 April 2013, again attaching the presentation. Mr Devoy gave evidence at the hearing. He denied getting this email (there were two versions of the email: one with an incorrect email address and another with Mr Devoy's correct email address). Mr Devoy also asserted that all the information in this presentation was generic and he had seen it before, when he co-presented a paper with Mr Farnan at a conference in Jeddah previous year (2012). Under cross examination, Mr Devoy conceded that the Jeddah conference pre-dated SAFC's adoption of the SAFC in Africa initiative, and so it cannot have been that specific presentation which was given in Jeddah; and that anyway, Mr Devoy was not really concentrating at the conference on what Mr Farnan said to the audience. Overall, Mr Devoy's evidence was of very little assistance to me. I conclude that Mr Farnan's email to Mr Devoy was received, and did contain Confidential Information. This email was sent for personal reasons, and not in SAFC's interests.
- I reject Mr Gilroy's submissions that these communications with third parties, attaching SAFC's Confidential Information, can be justified as part of an employee's right to plan for his future whilst still employed (citing Khan v Landsker UKEAT/0036/12/DM, 24 May 2012). The proposition that an employee could disseminate Confidential Information with a view to promoting his or her own future plans was expressly rejected in Laughton v Bapp Industrial Supplies  ICR 634, a decision cited by the EAT in Khan v Landsker.
- I conclude that both of these emails constituted serious breaches of the SA.
- On 3 April 2013, in the midst of the Di Canio crisis, Mr Farnan was contacted by Sam Bowen, an employee of the Outside Agency, which was a public relations agency retained by SAFC to promote SAFC's business interests, and specifically to raise the public profile of Ms Byrne. Mr Farnan sent Mr Bowen a copy of a draft press statement; Mr Bowen came back with some suggestions on its content. SAFC's complaint here was, initially, that this was breach by sending out Confidential Information to a third party. But in evidence Ms Byrne confirmed that the Outside Agency did have a confidentiality agreement with SAFC because it was retained by SAFC. Therefore, in contacting Mr Bowen, Mr Farnan was not risking a leak of Confidential Information.
- Ms Byrne criticised Mr Farnan for seeking help from Mr Bowen. As I understood her evidence, the real problem was that Mr Farnan had asked for outside help on a footballing issue, which the club prefers to handle internally; and Mr Farnan had not sought authorisation from Ms Byrne or anyone else before doing so. The context is important. At this point Mr Farnan was fighting to save the Bidvest deal, and to do so, he had to be able to show Mr Joffe a strong statement from SAFC and Mr Di Canio rejecting some of the concerns being voiced in the press. The content of any statement released by SAFC was just as important to Mr Farnan as it was to anyone else at SAFC. I do not accept Ms Byrne's criticism of Mr Farnan in relation to this episode. There was no breach of the SA. But even if there was, it was a minor and technical breach, which was amply justified by the circumstances. Clause 20 is not engaged.
- On 10 April 2013, Mr Farnan was approached by Tariq Panja, a journalist he had known for many years, who worked for Bloomberg. The pair had what Mr Farnan understood, he says, to be an "off the record" telephone conversation. Mr Panja wished to discuss reports that SAFC was pulling out of the Tullow Oil and IIA sponsorship contract because of problems in Uganda; Mr Farnan gave the true story, which was that the sponsorship deal was ending for other reasons and that SAFC was talking to another "blue chip" African investor about a shirt deal. The next day Bloomberg published a story, including snippets from a "telephone interview" with Mr Farnan, who was named in the piece. This prompted an angry email from IIA, complaining that this interview had not been agreed. IIA then issued its own statement, and SAFC prepared a statement in response. All of this was unplanned, and in response to the Bloomberg piece.
- Ms Byrne emailed Mr Farnan on 11 April 2013 asking for an explanation of "this mess", and asking why the discussion, even if "off the record" included information confidential to the club's business. Mr Farnan responded angrily to what he saw to be a question as to his "integrity and professionalism". He told Ms Byrne that Mr Panja had apologised (which he had).
- SAFC argues that Mr Farnan had no business talking to any journalist "off the record" without first clearing this through the Media and Communications Department.
- Mr Farnan argues that he was faced with a difficult situation, because the journalist was asking for information, and without a correction would have further published the (incorrect) reports about why the deal with Tullow and IIA was ending; he judged it "safe" to speak to a trusted contact off the record, and concluded that to do so was in the best interests of SAFC.
- The Handbook is quite clear on how such media inquiries are to be handled. Mr Farnan did not follow the Handbook on this occasion; instead he chose to do his own thing. It is impossible for me to know what exactly was said between Mr Farnan and Mr Panja, and whose fault it was that the "off the record" nature of the conversation was misunderstood. But the reason SAFC has such a clear direction to its staff in the Handbook is precisely to avoid mistakes like this occurring. Mr Farnan's conduct cannot be excused: the context in which this breach occurred was not the same as the week before when the club had been engulfed in the Di Canio crisis, when difficult judgments had to be made under pressure. This was an enquiry about why the Tullow/IIA sponsorship deal was ending. That was a different matter altogether, and the context was not particularly pressurised, being a phone call from an old colleague. I conclude that Mr Farnan acted in breach of the SA by having a conversation with Mr Panja. This was serious, as is demonstrated by the consequential action that had to be taken by Tullow and SAFC in issuing statements.
- The Defendant complains of two emails which were sent to prospective sponsors, each of which is said to contain Confidential Information and thereby to breach the SA. The first is an email from Mr Farnan to Nissan South Africa dated 29 April 2013 informing them "in confidence" that Brian Joffe had just put off a trip for a week or two because he wanted to announce the Bidvest sponsorship at a press conference in Johannesburg. That email went on to invite Nissan to join in as sponsor, to be announced at the same time. This email was inaccurate (Mr Joffe had not just put off a trip, and was not intending to make any announcement by press conference). But more importantly, the sponsorship agreement with Bidvest was confidential; although that deal had been signed, the sponsorship contract contained provisions relating to the way it was to be announced on a date approved by Bidvest, and that it was to be kept confidential in the meanwhile. This email was sent in clear breach of the SA. It disseminated Confidential Information to a third party.
- The breach is made the more serious by the fact that it was not the first time Mr Farnan had breached a confidence in his dealings with Nissan South Africa. I heard evidence from Clare Wilson who worked as Mr Farnan's assistant at SAFC. She said that Mr Farnan had disclosed to Nissan in January of 2013 that Bidvest were to be SAFC's shirt sponsors (even though the Bidvest deal was not at that date concluded). Although she was challenged on it, I accept that Ms Wilson was present at that meeting, and that Mr Farnan did say that SAFC would be sponsored by Bidvest for the following season. A leak of this information was potentially damaging for SAFC. The confidentiality of the Bidvest deal should have been respected.
- The second email was from Mr Farnan to Mr Price of Sheffield Forgemasters dated 8 May 2013 informing him "in strictest confidence" that United Telecoms Ltd ("UTL") were part of SAFC's partner programme and would be a platinum partner next season. In fact, this was not true, UTL were not engaged as a sponsor. That email went on to suggest that Forgemasters should speak to UTL (and the Tanzanian government, also mentioned). I am less concerned about the Forgemasters email, which can be read, reasonably, as a bit of salesman's "puff".
(b) Derogatory comments
- Ms Byrne confirmed that when she started to look back through Mr Farnan's emails on 3 May 2013 she became emotional. This was because of what Mr Farnan had written in some of those emails, about her in particular. I have considered objectively whether these various emails, characterised by SAFC as "derogatory", provide a basis for summary dismissal, considered individually or cumulatively with other allegations of breach.
- Two of the suggested instances appear to me to be unimportant and can be disregarded straight away. The first is that Mr Farnan emailed Mr Joffe of Bidvest on 3 April 2013 saying that he (Mr Joffe) had "helped me drive some common sense into these people". This email was part of a much longer exchange which started with Mr Farnan sending Mr Joffe the club's statement released on 3 April 2013. It is clear that this had been a difficult day: Mr Farnan mentions having a migraine and "more grey hairs". Bearing in mind that Mr Farnan's main concern, which I consider to be a legitimate one, was to keep the Bidvest contract on the tracks, and given Mr Farnan's (by now) personal relationship with Mr Joffe, it was not unreasonable for Mr Farnan to express himself as he did. I do not consider this exchange to be derogatory, in a manner which could amount to a breach of contract.
- The second instance is the reference in Mr Farnan's email to Dr Moya on 11 May 2013 that "Mags has been very difficult with us all". Ms Byrne frankly agreed that this was trivial. What was said was the truth as Mr Farnan saw it, in an email to his own doctor, to explain why he needed an appointment. There is nothing to cause concern here. This does not amount to a breach of contract.
- I was at one point troubled by Mr Farnan's email dated 24 April 2013 to Jim Wright, about the proposed deal with UTL. He said: "let's go with it, I will deal with Mags". Ms Byrne had directed that this deal should not be progressed while UTL was still subject to due diligence; a failure of due diligence on potential sponsors could have serious consequences for SAFC. But, having considered this exchange carefully, I conclude that Mr Farnan was only instructing Mr Wright to continue to investigate this potential deal – not to finalise it – so as to give Mr Farnan time in the meanwhile to speak to Ms Byrne further to explain the deal to her and bring her round to it. Mr Farnan was conscious that the opportunity to close this deal would slip away if not exploited quickly. That was a legitimate concern for Mr Farnan, in the best interests of the Club. I do not consider Mr Farnan's actions to amount to a breach of contract.
- Finally, Mr Farnan sent an email to Michele Uva of the Italian FA on 12 April 2013 saying that he could not come to the conference arranged in Florence. He forwarded an email to him from Ms Byrne, and explained in his own cover email that there was a "huge problem". The obvious inference to be drawn from Mr Farnan's email is that the huge problem is his boss, Margaret Byrne, who has refused to let him attend the conference in Florence as planned. (Mr Farnan suggested in evidence that his email had been misunderstood, and he intended to say simply that there was a huge problem because he could not come; that may be, but the natural inference to draw from his email is that his boss has stopped him from coming.) This email was met with a frosty reply from Mr Uva, who expressed disappointment at the stance taken by Ms Byrne and the fact that Mr Farnan would not be attending. This email was highly unprofessional. But in the end, I do not consider it to be a breach of contract. It lacks the necessary gravity to engage clause 20.
- (The irony is, that Mr Farnan had brought this problem upon himself by accepting the invitation to attend the conference in Florence without clearance from Ms Byrne: she had expressly told him some weeks earlier that his ability to attend would depend on whether SAFC had a shirt sponsor deal signed; and that had not in fact occurred by this date.)
(c) False Information
- These allegations were not pressed by SAFC. I need not address them.
(d) Enjoyment of Outside Interests and Abuse of Position
- There are three allegations pleaded under this heading. The first relates to an email forwarded to his RSM email address. This is part of the larger issue about emails sent to non-SAFC addresses, which I have addressed above. I am not persuaded, on the evidence, that Mr Farnan was seeking to promote RSM's business in sending this email.
- On 19 April 2013, Mr Farnan emailed Dr Steve Price of Sheffield Steel. Mr Farnan's email was prompted by a request from Mr Farnan's son, Stefan, who worked for a logistics company in business development, and wanted an introduction to Sheffield Steel. Mr Farnan asked Dr Price to an SAFC match, and also asked him to do a favour for Stefan by lining up introductions. There was clearly an advantage for SAFC in entertaining Dr Price, the head of a big business such as Sheffield Steel; Mr Farnan knew Dr Price from pre-SAFC days, and in one sense therefore Mr Farnan was bringing his business contacts to SAFC, just as he was employed to do. I do not consider that Mr Farnan breached his contract by this email, even taking account of the personal element to the invitation. SAFC's interests were not in any sense jeopardised. This was not a breach of contract.
- On 23 April 2013, Mr Farnan was in email contact with Mr Dale Agar. Mr Agar emailed seeking an introduction to RSM in order to investigate Macron sponsoring Ospreys (a rugby team). The pair arranged to meet up the following day; but in fact (so I was told by both Mr Farnan and Mr Agar) that meeting never happened and the introduction never occurred. Mr Farnan asserted in evidence that the email from Mr Agar came out of the blue; but it is quite clear that this email followed a conversation about Macron and RSM and did not come out of the blue at all: that much was confirmed by Mr Agar when he came to give evidence. The real issue in relation to this exchange, however, was whether Mr Farnan was looking to introduce Mr Agar to RSM in order to develop RSM's business and ultimately make money himself, on the side, while he remained employed by SAFC. That would be a serious matter, because it would be a clear and significant breach of the SA. I am not persuaded that anything untoward occurred in this exchange, although I regret the fact that Mr Farnan was not more transparent in his evidence about his dealings with Mr Agar.
(e) The Christmas Card
- The allegation added late to the Defence was that Mr Farnan had breached the SA in sending a lewd Christmas card from his SAFC address. The Christmas card was sent on 30 November 2012. It was sent to Mr Gavin Horwell (Ms Byrne's husband; in fact it never reached him, for reasons which are unclear); Mrs Farnan; Mr Stefan Farnan (Mr Farnan's son) and Mr William Hill (a friend of Mr Farnan's). There are two aspects to this allegation. The first relates to the image on the card, which SAFC argues to be offensive. The card itself showed ten women with their breasts exposed, wearing Santa Claus hats, with the words "Breast wishes for Christmas" written below. Cards like this are on sale openly in shops on the high street. The card is not at the extreme end of the scale, and it could not reasonably be characterised either as either "indecent" or "obscene". Perhaps some would consider it offensive, but, reasonably, only mildly so. The second aspect of the allegation relates to the fact that Mr Farnan used his SAFC email address to send this email out. SAFC argues that constitutes a breach of contract, because it offends the acceptable use requirement in the employer's handbook.
- The two aspects complained of are connected, and the starting point is to establish the context: what is offensive in one group, or one workplace, is not necessarily considered so elsewhere. To understand the particular SAFC work environment (or context), Mr Gilroy invited me to consider a number of other incidents where SAFC was said to have displayed a tolerant attitude towards offensive behaviour. A number of these incidents involved footballers who were permitted to play for SAFC despite being subject to criminal investigations or prosecutions relating to sex offending. I told Mr Gilroy at the time, and I repeat here, that I do not consider SAFC's attitude towards its players, whose selection or not may be subject to very different considerations and determined by different individuals, to be helpful in resolving this allegation about a director's conduct. More relevant, in my judgment, are two episodes where SAFC took a relaxed attitude in the context of offensive communications by senior football executives.
- The first such episode related to Richard Scudamore, chief executive of the Premier League, whose secretary found emails on his private account which she disclosed to the press in May 2014, causing a storm of publicity. Wherever Mr Farnan's Christmas card is to be rated on the scale, the content of Mr Scudamore's emails was much more offensive. Although initially reluctant to do so, Ms Byrne accepted that Mr Scudamore's comments were both inappropriate and sexist. Yet SAFC (along with other clubs) voted in favour of Mr Scudamore's continued tenure as chief executive of the Premier League, and Ms Byrne issued a press release quickly afterwards saying that she was "delighted that common sense has prevailed". In her evidence before me, Ms Byrne fixed on the fact that Mr Scudamore's indiscretions had been discovered by an unscrupulous employee who had accessed his private email address without authorisation. She insisted that this difference justified her taking a different view of Mr Scudamore (whom she excused) than of Mr Farnan (whom she considered to have committed a serious breach of contract by using his SAFC email to distribute the card). I agree with Mr Gilroy, that this response smacked of double standards: while accepting that the use of an employer's email might exacerbate the problem, the key issue is the extent to which the communications are themselves offensive, and Mr Scudamore's emails were much more offensive than Mr Farnan's.
- The second episode involved an email sent by a co-director of Mr Farnan's on 1 February 2013 (from his SAFC email address) to Mrs Farnan wishing her "Happy birthday all the breast". Ms Byrne said that she had spoken to the relevant director, who had claimed this was a typographical error, and he meant to say "best"; Ms Byrne had told him to be more careful in future. Ms Byrne is a clever woman, I cannot accept that she believed the explanation she was given. What I infer, is that she was relatively relaxed about this episode. She marked her disapproval with a conversation with the person concerned, but thereafter she let go. I daresay she felt she had more important things to be getting on with.
- Based on her own track record of responding to similar issues, I conclude that if Ms Byrne had discovered, at any time before the May 2013 investigation, that Mr Farnan had sent this Christmas card on his SAFC email address, she would have had a word with him, and told him to be more careful in future. She would have let it go. She would have concluded that on the scale, this card was not serious and did not warrant further action. Ms Byrne's common sense would have prevailed.
- This case is materially different on its facts from Williams v Leeds United Football Club  EWHC 376 (QB) where Mr Justice Lewis characterised images forwarded on the club's email by an employee as obscene and pornographic; those images included pictures of women's genitalia and simulated sexual contact. Those images were markedly more extreme in their offensive content than the single image forwarded by Mr Farnan.
- In the circumstances, and judged by context, I do not accept that the Christmas card constituted a breach of contract by Mr Farnan, or if it did, that it was sufficiently serious to warrant any further action (and certainly not to warrant, alone or in combination, summary dismissal).
Summary on Wrongful Dismissal
- In summary, I have found that Mr Farnan committed serious and repeated breaches of the SA in disclosing Confidential Information. The breaches consist in:
a) His banking of Confidential Information for private purposes using his own or his wife's email address.
b) His communications with Mr Segal and Mr Devoy for his own purposes in securing employment, attaching the SAFC Invest in Africa presentation.
c) His discussion with Mr Panja of Bloomberg, without authorisation and in the course of which he disclosed the termination of the Tullow / IIA sponsorship deal.
d) His disclosure to Nissan South Africa of the sponsorship agreement with Bidvest.
- I reject the other allegations of misconduct or breach of contract by Mr Farnan, or find that to the extent they are established, they are insignificant or trivial.
- On the basis of the established breaches summarised above, SAFC was entitled to invoke clause 20.1.4 of the SA and to dismiss Mr Farnan without notice.
- A common theme emerges from the established breaches, namely Mr Farnan's breach of SAFC's confidence. I accept that confidentiality was a very important issue for SAFC, specifically addressed with detailed provisions in the SA (read with the Handbook). Taking an overview, and acknowledging the common theme at the heart of Mr Farnan's misconduct, I also conclude that SAFC was entitled to terminate his contract under 20.1.3, as gross misconduct.
CLAIM FOR BONUS
2011/12 Bonus: Contract Analysis
- The second limb of Mr Farnan's argument is that he is owed money by SAFC for his bonus, which remains outstanding. The mainstay of his case is that he is entitled to a bonus of 20% of the value of the Tullow / IIA shirt deal, applying Appendix 1 to the SA, which provides that for Season 2011/12, he is entitled to: "20% of the shirt deal that the International and Marketing Director secures for the Club, with the approval of the Board; …"
- Mr Farnan says that he secured the Tullow / IIA deal for SAFC and was owed 20% of the value of that deal, pursuant to Appendix 1 of the SA. SAFC, by Ms Byrne, disputes that, and contends that Mr Quinn "secured" the Tullow Oil deal because without him and his initial contact, the deal would not have happened.
- The SA does not define "secures" in Appendix 1. But by Appendix 1, SAFC was agreeing to pay Mr Farnan a very substantial bonus, equating to 20% of the value of the deal (and on any view that deal was going to be in the millions of pounds), if he secured a shirt deal, on top of his salary and commission for other deals (at a more modest percentage). On an objective construction of this provision, "securing" the shirt deal meant finding and concluding it: Mr Farnan had to be the individual responsible for getting that deal.
- Mr Farnan was not the individual responsible for getting the Tullow / IIA deal. Mr Quinn was the individual who got the deal, if any one person had to be identified as having "secured" it.
- I therefore agree with SAFC that Mr Farnan was not entitled to the 20% bonus in Appendix 1, as a matter of contract. Therefore, issues as to the effect of subsequent correspondence, and whether it had the effect of varying the SA, simply do not arise: Mr Farnan was not entitled to a 20% shirt deal bonus for 2011/12, and any bonus which he did negotiate to reflect his contribution to the shirt deal was additional to the SA, and not a diminution of it.
- The SA contains no explicit provisions for how the bonus in subsequent years was to be calculated; it is clear that Appendix 1 applies only for the first year of employment, 2011/12. Therefore, there is no claim to a bonus of 20% of any subsequent year's shirt deal, at least not pursuant to the SA.
2011/12 Bonus: Negotiated Agreement
- I am reinforced in my view of the contract provisions by seeing the exchanges between Ms Byrne and Mr Farnan following the signing of the Tullow Oil deal. Ms Byrne emailed Mr Farnan on 23 January 2012, just after the Tullow Oil deal was confirmed, saying "Please don't feel disheartened by the iia issue. I know you are working really hard to get someone in and it may be for 2013 if this doesn't take off. Also, naming rights is your baby!" This email is entirely consistent with my analysis of the SA, because it confirmed Ms Byrne's (accurate) understanding that Mr Farnan would not be getting a 20% bonus on the Tullow/IIA shirt deal.
- It is notable that Mr Farnan did not at any point write back and demand payment of 20% of the Tullow/IIA shirt deal. Instead, he met with Ms Byrne on 7 February 2012 **to discuss his bonus for the 2011/12 season. Ms Byrne produced a short note in advance of that meeting. Following the meeting, Ms Byrne wrote to Mr Farnan (letter dated 8 February 2012) under the heading "Amendment to Service Agreement", setting out the agreement, which comprised (i) a revised notice period of six months; (ii) bonus arrangements, providing for Mr Farnan to be paid £250,000 in September 2012 if he secured five IIA partners, with £100,000 payable as a guaranteed fallback if the five partners were not signed up by then; (iii) bonus for stadium naming rights of £250,000, in stages over the first four years of any such sponsorship deal; (iv) further discussion in September 2012 relating to all remuneration by that stage brought to the club, to include a discussion of strategy and bonus for the next season.
- Mr Farnan did not reply. In evidence before me, he contended that he was very unhappy with Ms Byrne's proposal, which he felt was presented as an ultimatum which he had to accept. He maintained that he was entitled to the 20% shirt deal with Tullow/IIA, as part of his contract, and that SAFC had simply reneged on their contractual obligation.
- It is clear to me that Mr Farnan did agree, readily, to the proposed changes to the SA (on notice period) and the bonus arrangements (above and beyond his contract). The former was something he particularly wanted, and he negotiated Ms Byrne up from three months (her first offer). In relation to the latter, he was not entitled to 20% of the Tullow/IIA shirt deal, and was for that reason willing to discuss his bonus arrangements for that season. He sent Ms Byrne an email on 1 June 2012 which set out his recollection of what was agreed, first under the heading "Original signed contract", the second under "Amendment to contract signed 8 February 2012". Under the latter heading, he set out in bullets all the terms contained in Ms Byrne's 8 February 2012 letter. This plainly reflected his understanding of what had been agreed. In an email dated 5 August 2012 to Ms Byrne, Mr Farnan openly acknowledged the 8 February 2012 terms, referring to them as "an agreement".
- In the end, and because the sponsorship deals anticipated in Ms Byrne's 8 February 2012 letter did not eventuate, Mr Farnan reopened his 2011/12 bonus negotiations with Ms Byrne. He was offered, and accepted, £190,000 as his bonus for the 2011/12 season. This was confirmed by Ms Byrne's letter of 3 September 2012 and he was paid, as agreed. There is no protest recorded at any point.
- In evidence to me, Ms Byrne was able to explain her thinking throughout this negotiation, from February to September 2012, and could point to emails and other correspondence and notes, which documented that thinking. At each stage, she cleared her proposals with Mr Short. She wanted to incentivise Mr Farnan. She did not want him to be down-hearted or feel short-changed. I accept Ms Byrne's evidence (and to the extent necessary, reject Mr Farnan's evidence to the contrary), that the revised terms were negotiated in good faith, and without pressure, to meet the fact (as was commonly understood at the time, and was correct) that Mr Farnan was not entitled to a bonus for the Tullow/IIA shirt deal under the SA.
- Mr Farnan advances two further arguments. First, he says that Mr Quinn told him, at some time in late 2011, that Mr Short and Ms Byrne would try to "muddy the waters" in relation to his contractual bonus. But Mr Quinn ceased being Chairman in October 2011, and left the club in February 2012. It is not necessary for me to reach any conclusions about the conversations between Mr Farnan and Mr Quinn, because of the findings I have made about the content of Mr Farnan's bonus negotiations for 2011/12 with Ms Byrne. I conclude that during those bonus negotiations, and regardless of what Mr Quinn might have said at an earlier point, Mr Farnan recognised that he was not in a position to demand a 20% bonus for the Tullow/IIA deal. He was therefore happy to accept what was offered to him.
- Secondly, Mr Farnan argues that he was induced to agree a smaller 2011/12 bonus by a false promise that he could earn a large future bonus for selling the stadium naming rights. His complaint is that it turned out that naming rights were not, in fact, available for sale. Mr Farnan points to the Board Minutes for September 2012 when naming rights were discussed: Mr Miliband expressed opposition to the idea, while Mr Short was recorded as saying he could see both sides of the argument but did not think that Bidvest was the right stadium sponsor. Mr Farnan appears to have taken this as a signal that the naming rights were not for sale.
- However, Ms Byrne was able to point to emails from Mr Short confirming the offers she made during the 2012 bonus negotiations, including the large promised bonus for selling the naming rights. I am satisfied that the bonus arrangements agreed, finally, on 3 September 2012 (including naming rights) was authorised by Mr Short and was not based on any deception. Mr Short was fully supportive of the idea of selling naming rights. But naming rights were always going to be the subject of discussion at Board level, and Mr Farnan must sensibly have understood this in the context of the discussions he had with Ms Byrne. It was important that the right "name" was found for the stadium. Mr Short did not at the September 2012 Board Meeting say that he did not wish to sell the naming rights; only that the name had to be the right one. I do not detect any change in his basic position in the minutes of this meeting.
- I therefore cannot accept Mr Farnan's argument that Ms Byrne's representations in respect of naming rights constituted "negligent, alternatively reckless, alternatively fraudulent misrepresentation" (Reply, paragraph 10.6). If Mr Farnan had secured a sponsor (and one agreed by the Board), he would have been entitled to the agreed substantial bonus. As things turned out, he had not secured such a sponsor before his contract was terminated.
- It follows from the above that I do not consider Mr Farnan has any claim to a bigger bonus than he was in fact paid in September 2012, to reflect the preceding season. Specifically, he had no entitlement to 20% of the Tullow/IIA deal.
- Clause 20 of the SA provides that on termination without notice, SAFC has no liability to make any further payment to the Director. What is more, clause 9 provides that any bonus payment is "discretionary" and shall not form part of the contractual remuneration under the SA.
- In light of these provisions, Mr Farnan cannot claim any bonus for the season 2012/13. He was summarily dismissed, at which point no further payment was due to him, regardless of what he might have expected as a bonus if his employment had continued: it did not.
- I have found that Mr Farnan was not wrongfully dismissed. But I do accept, to an extent, Mr Farnan's complaint that the case against him was trumped up by SAFC. Of the many allegations which he faced at his disciplinary hearing, I have found that only a handful were sufficiently serious to constitute breaches to justify summary dismissal.
- It was a pity that SAFC chose to pursue so many allegations against Mr Farnan at the disciplinary hearing and at this trial: many were trivial or, on examination, not established as breaches at all.
- It was a pity that SAFC did not see fit to accommodate Mr Farnan's period of illness and fix his disciplinary hearing for a time when he could attend, allowing him sufficient time to prepare. There were a very large number of allegations presented to Mr Farnan, many of which came out of the blue - the product, no doubt, of the trawl of his email account undertaken by SAFC as part of the investigation. If Mr Farnan had been given more time, and if he had felt able to attend his disciplinary hearing, it is likely that a large number of these allegations would have fallen away, leaving only the core allegations standing. This would have led to each party having a better understanding of the real issues in this case. This trial, if needed at all, would have been shorter.
- On the other hand, I reject Mr Farnan's case that Ms Byrne was intent on squeezing him out of SAFC and was "out to get him". She was not. I reject the propositions which are at the heart of Mr Farnan's case (as it was opened before me, at least) that Ms Byrne reneged on the contractual terms by refusing to pay him a bonus for the 2011/12 season, that she unfairly misrepresented that he would be paid a bonus for securing stadium naming rights, and that she contrived allegations of misconduct to get Mr Farnan sacked. In the end, Mr Farnan was the author of his own misfortune by breaching his SA by disclosing Confidential Information to third parties.
QUANTUM OF CLAIM
- Given my conclusion that Mr Farnan was not wrongfully dismissed, it follows that no issues of quantum arise because SAFC was entitled to terminate his employment without notice. However, if I had been required to consider quantum, I would have concluded, first, that Mr Farnan was entitled to six months' notice agreed with Ms Byrne on 8 April 2012 (by way of agreement collateral to the main SA); and secondly, and as outlined above, that Mr Farnan had no entitlement to any bonus at the time that he left, because (i) the 2011/12 bonus had been paid in full; and (ii) any 2012/13 bonus was discretionary, and Mr Farnan had no contractual entitlement at all.
- I dismiss this claim.
- I thank both Counsel for their skilful presentation, and specifically for their mastery of the extensive papers, in this case.
KEY TERMS OF THE SA
1.1 The definitions and rules of interpretation in this clause 1 apply in this Agreement.
Information (whether or not recorded in documentary form, or stored on any magnetic or optical disk or memory) relating to the business, products, affairs and finances of the Company or any Group Company for the time being confidential to the Company or any Group Company and trade secrets including, without limitation, technical data and know-how relating to the business of the Company or any Group Company or any of their business contacts, including in particular (by way of illustration only and without limitation);
a) customers and potential customers of, or suppliers and potential suppliers to, the Company or any Group Company and any other information obtained by the Company in relation to those customers or suppliers;
b) new products or services to be sold or supplied or proposed to be sold or supplied by the Company or any Group Company;
c) the Company or any Group Company's pricing policies and terms of business relating to its sponsors, suppliers and customers;
d) the dealings or transactions or other business affairs of the Company or any Group Company, their finances or management accounts;
e) any information which the Company or any Group Company has access to only by virtue of a duty of confidence to any third party;
f) any information relating to the affairs or personal details of any employee, shareholder, director, sponsor, supplier or customer of the Company or any Group Company;
The Company's staff handbook as amended from time to time;
- Term of Appointment
2.1 The Appointment shall be deemed to have commenced on the Commencement Date and shall continue, subject to the remaining terms of this Agreement, until terminated by either party giving the other not less that one months' prior notice in writing.
4.1 The Director shall serve the Company as International and National Marketing Director.
4.2 During the Appointment the Director shall:
4.2.11 comply with all reasonable and lawful directions given to him by the Company or Board;
4.2.16 comply with any electronic communication systems policy that the Company may issue from time to time.
4.3 The Director shall comply with any rules, policies and procedures set out in the Staff Handbook, a copy of which has been given to the Director. The Staff Handbook does not form part of this Agreement and the Company may amend it at any time. To the extent that there is any conflict between the terms of this Agreement and the Staff Handbook, this Agreement shall prevail.
- Place of Work
5.1 The Director's normal places of work are his home address from time to time and when deemed necessary, either Black Cat House, Stadium of Light, Sunderland, SR5 1SU or in London at a London office. The Company reserves the right to require the Director to travel on the business of the Company and to carry out his duties at any other location for any period of time which the Company may reasonably require for the proper performance and exercise of his duties. The Director is required to inform the Company as soon as possible if he plans to change his home address. The Director confirms that he is not in breach of any covenant or agreement in doing work at his home.
7.1 The Director shall be paid an initial salary of £190,000 per annum (inclusive of any fees due to the Director by the Company or any Group Company as an officer of the Company or any Group Company).
9.1 The Company may in its absolute discretion pay the Director a bonus of such amount, at such intervals and subject to such conditions as the Board may in its absolute discretion determine.
9.2 Any bonus payment to the Director shall be purely discretionary and shall not form part of the Director's contractual remuneration under this Agreement. If the Company makes a bonus payment to the Director in respect of a particular financial year of the Company, it shall not be obliged to make subsequent bonus payments in respect of subsequent financial years of the Company.
9.3 The Company may alter the terms of any bonus arrangements or withdraw them altogether at any time without prior notice.
9.4 The Company bonus arrangements for season 2011/12 are detailed in the attached Appendix 1 and will be payable as detailed per appendix.
- Outside Interests
15.1 Subject to clause 15.2, during the Appointment the Director shall not, except as a representative of the Company or with prior written approval of the Board, whether paid or unpaid, be directly or indirectly engaged, concerned or have any financial interest in any capacity in any other business, trade, profession or occupation (or the setting up of any business, trade, profession or occupation).
- Confidential Information
16.1 The Director acknowledges that in the course of the Appointment he will have access to Confidential Information. The Director has therefore agreed to accept the restrictions in this clause 16.
16.2 The Director shall not (except in the proper course of his duties), either during the Appointment or at any time after its termination (however arising), use or disclose to any person, company or other organisation whatsoever (and shall use his best endeavours to prevent the publication or disclosure of) any Confidential Information. This shall not apply to:
16.2.1 any use or disclosure authorised by the Board or required by law;
16.2.2 any information which is already in, or comes into the public domain other than through the Director's unauthorised disclosure; or
16.2.3 any protected disclosure within the meaning of section 43A of the Employment Rights Act 1996.
- Payment in Lieu of Notice
19.1 Notwithstanding clause 2, the Company may, in its sole and absolute discretion, terminate the Appointment at any time and with immediate effect by paying a sum in lieu of notice (Payment in Lieu) equal to the basic salary (as at the date of termination) which the Director would have been entitled to receive under this Agreement during the notice period referred to at clause 2 (or, if notice has already been given, during the remainder of the notice period) less income tax and National Insurance contributions. For the avoidance of doubt, the notice payment shall be one month's salary and any bonus if so owed in accordance with Appendix 1.
- Termination Without Notice
20.1 The Company may also terminate the Appointment with immediate effect without notice and with no liability to make any further payment to the Director (other than in respect of amounts accrued due at the date of termination) if the Director:
20.1.3 is guilty of any gross misconduct affecting the business of the Company or any Group Company;
20.1.4 commits any serious or repeated breach or non-observance of any of the provisions of this Agreement or refuses or neglects to comply with any reasonable and lawful directions of the Company or Board;
20.1.11 is guilty of a serious breach of any rules issued by the Company from time to time regarding its electronic communications systems.
- Obligations on termination
23.1 On Termination (however arising) or, if earlier, at the start of a period of Garden Leave, the Director shall:
23.1.4 irretrievably delete any information relating to the business of the Company or any Group Company stored on any magnetic or optical disk or memory and all matter derived from such sources which is in his possession or under his control outside the Company's premises.
No variation or agreed termination of this Agreement shall be effective unless it is in writing and signed by the parties (or their authorised representatives).
International and National Marketing Director's Bonus Arrangements
• 20% of the shirt deal that the International and National Marketing Director secures for the Club, with the approval of the Board;
• 5% of all other new platinum level partners deals (this will not include any current partners).
All bonus payments are payable on receipt of contract revenue received by the Club, and will be calculated by the Finance Director.
Published: 22/12/2015 09:45