The award (found
here) was published in redacted form, due to the private nature of AM’s medical data.
The Dispute
Background
The clubs entered into a transfer agreement for the transfer of AM from Barnsley to Hull City on 31 January 2018 for a fee of £600,000, which contained certain warranties in Hull City’s favour, namely that Barnsley had:
- made a full and honest disclosure to Hull City of AM’s past and current medical history that could in any way affect his fitness and/or ability to play professional football for Hull City; and
- procured AM’s consent to provide copies of his medical records or, where applicable, would facilitate the release of copies of such records to Hull City from any relevant medical professionals.
In August 2019, AM was diagnosed with bowel cancer and was unfortunately only able to make a total of twenty-one appearances during his time with Hull City. He left Hull City on a free transfer after his contract had expired in August 2020.
The Claim
The arbitration was, in fact, initiated by Barnsley, who, in February 2020, served a notice of arbitration on Hull City claiming the unpaid third and final instalment of the transfer fee for AM, totalling £200,000 plus interest.
In its defence, Hull City asserted that it was entitled to withhold payment of this final instalment for Barnsley’s breach of the contractual warranties. Hull City also issued a counterclaim arguing that, had full and honest disclosure been made by Barnsley in respect of AM’s medical records, the club would not have signed him. Hull City, therefore, sought damages from Barnsley for the loss caused, to put the club back into the position that it would have been in prior to the transfer.
Breach
Having heard evidence from two medical experts, the Panel found that AM had previously had appointments with numerous consultants and medical specialists in the latter half of 2017 and January 2018, together with various diagnostic test results received in the same period, which were strongly indicative of a condition (later to be confirmed as bowel cancer) that could have impacted his ability to play for Hull City. These details were not disclosed by Barnsley (the club only disclosing “
minimal information” relating to AM’s medical history to Hull City) and therefore its contractual warranty to give full and honest disclosure had been breached.
Further, the Panel found that there was an absence of communication between Barnsley’s senior management and staff (who knew about the proposed transfer), and the club’s doctor (who did not), which went some way in explaining the failure to disclose the relevant medical information to Hull City. AM himself asked Craig Sedgwick – Barnsley’s Head of Physiotherapy – to provide any information to Hull City that would assist the medical process. Mr Sedgwick sent to Hull City the pre-signing information held by Barnsley in relation to AM’s transfer in 2016 from Torquay United FC, together with just a single e-mail received from a doctor in January 2018. Mr Sedgwick stated that he himself had never been provided with AM’s full medical history. For this reason, Barnsley breached its warranty to procure consent from AM by the time of the transfer agreement.
Loss
The Panel determined that, had Barnsley fulfilled its contractual duty in respect of medical disclosure, Hull City would not have signed AM.
Under the transfer agreement, Hull City was only entitled to be indemnified for its
net loss. That amount was determined by subtracting the “Actual Benefit” of the services actually received by Hull City during AM’s contract (in other words, the monetary measure of benefit of the services) from the gross costs paid by Hull City to obtain and retain the services of AM.
The calculation of the Actual Benefit was far from straightforward. First, the Panel took a ‘base value’ of AM’s services to Hull City, which were based on the assumption that he had no unusual medical issues, meaning his performance and availability during his contract with Hull City would have been subject only to the normal vagaries of injury and illness suffered by a professional footballer (the “
Benchmark Benefit”).
The Panel then took the Benchmark Benefit and applied four discounts to four different periods of AM’s contract with Hull City so as to reflect the degree to which AM’s performance and availability fell below that ‘normal’ level as a result of his illness. Using this methodology, the Panel found that the Actual Benefit totalled £1,090,093.
The calculation of the gross costs was less complicated. These included the transfer fee, AM’s basic wages and bonus payments, medical costs, Hull City’s national insurance payments and transfer intermediary fees. The gross costs did not include the final instalment of the transfer fee or VAT on the transfer on the basis that the former remained outstanding and the latter would be recovered in due course. Hull City’s gross costs totalled £1,567,752. Therefore, Hull City’s net loss was £477,659.
Barnsley was ordered to pay a total of £958,716.94, comprised of the net loss, legal costs and arbitrator fees, plus interest and other administrative fees.
Comment
Naturally, this case highlights the importance for a selling club to ensure that it complies with all warranties included in any transfer agreement. For purchasing clubs, it demonstrates the importance of obtaining the full medical history of any prospective signing before completing the transfer.
The case also underlines the importance of clubs having effective internal lines of communication in place (here, notably between the senior management and the medical department), so that a player’s consent for the release of medical records can be obtained in good time. This is of particular importance concerning transfers that take place close to the transfer deadline, as is increasingly common.
Author: George Cottle
Associate
