Newcastle United’s relegation into the Championship did not come as a surprise to many observers of football even if it may have been unexpected within the higher echelons of that Club. Why else would the management not insist on relegation wage-cut clauses in player contracts? Many of Toon’s players reportedly earn more than £50,000 a week and their combined wages of £74.6m make a healthy contribution to the Premier League’s £1.2 billion wage bill last season.[1] With increasing numbers of clubs posting mind-blowing losses caused by a combination of high wages and huge transfer fees, it is perhaps not surprising to see increased calls for wage caps as well as limits on foreign players being articulated by powerful people in football. It remains to be seen whether Newcastle United will join the clamour for wage-restraint, but it is perhaps worth remembering the historical role Newcastle United have already played in the re-shaping of players’ rights.
George Eastham was an inside forward who played for Newcastle United in the late 1950s. Most professional footballers at that time had one year contracts with their clubs which contained clauses that the players agreed to be bound by FA and Football League[2] rules and regulations. One such rule was the ‘retain and transfer’ system whereby at the end of a season, a club not re-employing a player would either ‘retain’ but not re-sign the player and/or place the player on a transfer list. Two lists were therefore sent to the Football League at the end of the season. One contained the ‘retained’ players, the other a list of players who were for sale with a specified transfer fee. Any player who was not re-employed by their club or ‘listed’ was free to leave the club at the end of the season. If a player was placed on the transfer list, that player could appeal to the management committee of the football league if he felt that the transfer fee was set too high. The committee could either reduce the fee or even allow the player to leave a club for free.[3] A transfer listed player could not play for any other club within the 92 team football league although he was free to play non-league football. Under FA rules, a ‘retained’ player on the other hand would be paid a ‘minimum wage’ of £418 a year whilst retained. This was at a time when there was a maximum wage of £20 a week plus bonuses during the season and £17 per week during the off-season. A retained player could not play for any other football team in the entire world apart from in Australia or any non-FIFA affiliated country. A retained player remained the registered player of the retaining club. Exceptionally, a retained player could appeal to the council of the FA that there were special grounds for allowing him to leave.
In December 1959 Eastham asked to be placed on the transfer list. He was given no answer. At the end of the season, Newcastle decided to retain him, but not to place him on the transfer list. It would appear that there followed significant breakdowns in communication between the player and the club. Eastham issued proceedings in October 1960. A month later he was formally transferred to Arsenal. Why, then, did he continue with his proceedings?
It must be recalled that these proceedings occurred at the same time that professional footballers were becoming increasingly ‘unionised’ under the leadership of Jimmy Hill as head of the Professional Footballers’ Association. Whilst the proceedings were under way, Jimmy Hill successfully campaigned for the abolition of the maximum wage and in January 1961 his Fulham team-mate Johnny Haynes[4] became the first £100 a week English footballer. So despite the fact that Eastham’s transfer to Arsenal[5] had been agreed by the time his case came to trial and the fact that the maximum wage had been abolished, it can only be assumed that Eastham was encouraged to pursue this litigation (probably by the PFA) for the benefit of professional footballers across the land. This suspicion is fortified when it is noted that the remedy sought by Eastham was not primarily damages. Rather it was a declaration. And when it is noted that most of the costs orders were less than generous towards Eastham at the conclusion of the trial, it is to be hoped that the PFA also agreed to underwrite any adverse costs orders.
In short, therefore, although the case may at first glance look like litigation motivated by a personal vendetta against Newcastle United given the way they treated Eastham, the case was in fact a direct challenge to the rules and regulations of the governing bodies of football. In that challenge, Eastham was partially successful in that he obtained a declaration that the system of ‘retaining’ players operated as an unlawful restraint of trade. The transfer system, on the other hand, continued to operate as before until the Bosman ruling some thirty years later in 1995[6] despite Wilberforce J noting Eastham’s counsel’s submission that “the transfer system amounts in practice to a buying and selling of human beings as chattels and is accurately described as a relic of the Middle Ages.”[7] Wilberforce J skirted around the emotive description by stating “indeed, to anyone not hardened to acceptance of the practice it would seem inhuman, and incongruous to the spirit of a national sport … [but] in this case … all I have to decide is whether the plaintiff’s attack on the system as opposed to a recognised principle of English law can succeed.”[8]
Although Eastham did attempt to sue directors of Newcastle United for damages, he was unsuccessful. The reasons why he failed in that regard are set out from p.451 of the judgment. Of greater interest here are the arguments relating to the declaration sought. Eastham argued that the system of ‘retain and transfer’ was an unlawful restraint of trade as it restricted his ability, so long as he was retained, from plying his skill elsewhere. The Defendants argued that the system operated as a necessary ‘option’ to extend contracts of employment, and that options were not per se illegal. The problem with the Defendants’ argument, however, was that it seemed to be predicated on the idea that the option was contained within an extant contract and Wilberforce J correctly held that “when the retention notice has been given, the player is not, by the effect of it, re-employed by the club; the club has made him an offer and further action on his part is needed before he again becomes employed by the club – he must re-sign.”[9] And if that is the correct analysis, then the question becomes whether that system can be justified as protecting any legitimate interest the club or the governing bodies might have. Put another way, restraints of trade are not automatically unlawful but may be justified.
Whilst Wilberforce J noted that “regard must be had to the special character of the area in which the restraints operate – different from that of industrial employment – and to the special interests of those with the organisation of professional football”[10] he was not persuaded by the Defendants’ central argument that the system for retaining players was necessary to prevent all the best players from gravitating towards the better clubs. Their contention was dealt with briefly and succinctly: the way to prevent the best players from being snapped up by the richer clubs was by means of the simple expedient of giving players longer contracts.[11] Although there were other subsidiary points raised, none were sufficient by themselves or in combination to justify the restriction placed on players’ freedom to carry out their trade by the system of retention operated by the FA, the football league and the clubs. However, the transfer system was not as onerous as the system of retention because there was a system of appeal and players could play outside the league structure if they wished. In Wilberforce J’s words “…the system helps both money and players to circulate. Looked at in this way the system might be said to be in the interests of players themselves.”[12] But he did go on to say that the transfer system was “objectionable” when combined with the retention system and the fact that it, along with a system of player registration, was operative in all major professional football leagues, did not make it a good system. In a fairly extraordinary statement given the historical context, Wilberforce J noted that:
“The system is an employers’ system, set up in an industry where the employers have succeeded in establishing a united monolithic front all over the world, and where it is clear that for the purpose of negotiation the employers are vastly more strongly organised than the employees. No doubt the employers all over the world consider the system a good system, but this does not prevent the court from considering whether it goes further than is reasonably necessary to protect their legitimate interests.”[13]
Therefore, in all the circumstances, Wilberforce J held that the system of retaining players whether in combination with the transfer system or alone, did not operate as a legitimate restraint on trade.
As noted above, Eastman was not in fact seeking damages in respect of this unlawful restriction of his trade. Rather he was seeking a declaration. This raised the question whether the court had jurisdiction to give such an order in the absence of any other substantive relief. This sort of argument may be familiar to students of Equity as having been raised in relation to interim injunctions, for example, in the case of Chief Constable of Kent v V.[14] Yet again, Wilberforce J gave the Defendants’ contentions relatively short shrift as he referred to the case of Guaranty Trust Co of New York v Hannay[15] which was authority for the proposition that it was open to a court to give declaratory relief in the absence of any other claim for substantive relief such as damages.
On a more nuanced level, he FA then raised the argument that even if there was jurisdiction to order a declaration against Newcastle United, it was not possible to declare their rules and regulations unlawful as, they argued, Eastman was a “stranger” to them. In other words, although clubs were bound by the rules and regulations in order to field teams in the leagues governed by the FA, individual players were not ‘members’ in the same way as clubs were. Again, Wilberforce J met the contention head-on. First he relied on authority that showed that courts could declare void contracts between employers “on grounds on which such a contract would be declared void if it had been a contract between employer and employee”;[16] second, he asked “is it open to an employee to bring an action for a declaration that the contract between the employers is in restraint of trade? To my mind it would seem unjust if this were not so. The employees are just as much affected and, indeed, aimed at by the employers’ agreement as the employers themselves … In my judgment to grant a remedy by way of declaration to the persons whose interests are vitally affected would be well within the spirit and intent of the rule as to declaratory judgments.”[17] Therefore, the court had power not only to grant declaratory relief as between the actual employer and employee before the court, but also against the ’employers association’ (in this case, the FA) if the rules and regulations of that association placed ‘an unjustifiable restraint on the employee’s liberty of employment.'[18] A case where that employee was contractually bound by those rules, as Eastham was, would be even stronger.
Of course, this is not quite the end of the story because even if the court had jurisdiction not only to grant declaratory relief in the absence of any claim for substantive relief but also in favour of ‘strangers’, it must not be forgotten that the remedy sought is an equitable remedy and therefore discretionary. Wilberforce J therefore had to ask himself whether he ought to exercise his discretion in Eastham’s favour. One of the factors deemed to be relevant considerations included the fact that although Eastham had “freed himself from the chains imposed on him by Newcastle United, he remains firmly tied to the league and he still has an actual and present interest in establishing his freedom from their fetters.”[19] But Wilberforce J was also very live to the maxim that ‘equity will not act in vain’ and noted that neither the FA nor the Football League had any intention of changing the retain and transfer system, but even if they did, a declaration would not then in fact benefit Eastham personally: “The court does not grant declarations of purely academic interest.”[20] However, the judge took the view that this declaration was not purely of academic interest because the likelihood was that the FA and the League would ‘take notice’ of the judgment given and ‘do something about it’. In other words, although a declaration would do more than declare a rule unenforceable and would therefore only become relevant in the event that some other player challenged the offending rule, it was to be hoped that the governing bodies would in fact change their rules in the light of the judgment of the court. Wilberforce J was clearly acutely conscious of the potential regulatory function of legal judgments.
Eastham’s case therefore effectively ended the system of ‘retaining’ players and it would seem that the Defendants’ fears that removal of the system would lead to the richer clubs obtaining all the best players has not come to pass as a result. It may well be true that the richer clubs have a larger proportion of more skilful players, but this has little to do with the inability of clubs to retain their players and paying them a minimum wage but rather more to do with the fact that they can afford to pay higher transfer fees and wages. This despite Mr Justice Wilberforce’s suggestion that the way to preclude this was by offering players longer contracts. And although we may now bemoan the ludicrous transfer fees and wages that characterise the top leagues in the world, this may be marginally more preferable to the system that existed before Eastham. Clearly, the balance is some way off being achieved, but it must not be forgotten how significant Eastham and the PFA were in redressing the balance of power that existed in football up to 1961. Some may say the balance has tipped too far in the other direction, and that’s an ongoing debate.
[1] http://www.guardian.co.uk/football/2009/jun/03/english-premier-league-debt
[2] The Football Association (‘FA’) remains the governing body of all football in England & Wales whereas the Football League at that time controlled the 92 clubs playing in the top 4 divisions.
[3] Between 1956 and 1963, of 499 appeals, 259 players got a free transfer and 123 a reduced transfer fee. Eastham v Newcastle United Football Club and others [1964] Ch 413 at 418.
[4] Haynes, like Eastham, an inside forward, played a club-record 658 games and scored 158 goals for Fulham Football Club between 1952 and 1970.
[5] Eastham went on to play for Arsenal until 1966 scoring 41 goals in 207 appearances.
[6] Union Royal Belges des Sociétés de Football Association ASBL & others v. Jean-Marc Bosman; Case C-415/93, ECR I-4921.
[7] Eastham op.cit p.421.
[8] ibid. p. 427
[9] ibid p. 429
[10] ibid p. 433
[11] It would appear that although most professional footballers at the time were signed up for a season, it was possible to sign them up for up to two years. In more modern times, there does not appear to be any upper limit.
[12] Eastham p.438
[13] ibid p.438.
[14] [1982] 3 WLR 462
[15] [1915] 2 KB 536, CA
[16] Eastham p.442
[17] ibid. pp.442-3
[18] ibid p.446
[19] ibid p.448
[20] ibid. p. 450