Leeds Rugby Ltd v Harris [2005] EWHC 1591 (QB)

Leeds Rugby Ltd v Harris & Anor [2005] EWHC 1591 (QB)

The High Court upheld a contractual option allowing Leeds to require Iestyn Harris to return for one year if he left Cardiff early. The option formed part of the bargain under which Leeds released him to play rugby union. The court decided preliminary questions about the agreement’s validity, rather than the final claims for damages.

The transfer and return option

Harris was a leading rugby league player for Leeds. His contract, renewed in December 1999, ran until 30 November 2003. He wanted to switch to rugby union and play for Wales. Leeds agreed to release him as part of four interlocking agreements made on 9 August 2001.

Those agreements covered his release from Leeds, employment by Cardiff, arrangements involving the Welsh Rugby Union and his participation in the Welsh national side if selected. The Welsh Rugby Union paid Leeds a £750,000 transfer fee and provided a hospitality box at the Millennium Stadium for two seasons. Harris’s four-year Cardiff contract began on 1 September 2001 and allowed him to leave on its third anniversary by giving the specified notice.

Clause 5 of the Leeds release agreement applied if Harris exercised that early termination option. Leeds could then require him to enter a 12-month playing contract. His remuneration had to be no less favourable than that provided by the Cardiff contract as at 9 August 2001. He could still be released to play for Wales, and standard Rugby Football League terms otherwise applied.

Clause 6 contained a separate option for a shorter loan period in 2004. In March 2004, Harris granted Bradford an option to employ him, and in July he announced that he had signed for Bradford. Leeds sought damages from Harris for breach of contract and from Bradford Bulls Holdings Ltd for inducing that breach.

What the court was asked to decide

The trial concerned three preliminary questions: whether clause 5 was void as a restraint of trade; whether clauses 5 and 6 were void for lack of consideration; and whether clause 5 was void for uncertainty. Although the restraint question initially mentioned clause 6, this was an error: the defendants did not challenge that clause as a restraint of trade.

Mr Justice Gray therefore examined the enforceability of the contractual provisions. He was not deciding at this stage whether Harris had breached the agreement, whether Bradford had induced a breach, or what damages might follow.

Was the remuneration term too uncertain?

The defendants argued that the promise of remuneration “no less favourable” than under the Cardiff contract was insufficiently precise. The Cardiff package included a £200,000 annual salary, bonuses, expenses and insurance. Rugby union and rugby league involved different competitions, making some benefits difficult to compare.

Gray J held that the obligation was conceptually clear. It required a basic salary of at least £200,000, unless any shortfall was made up through another element of remuneration, together with expenses and insurance no less favourable than Cardiff’s. The package also had to reflect the bonus element; otherwise it would be less favourable overall.

Calculating the appropriate financial equivalent might be difficult, but that did not make the promise meaningless or merely an agreement to agree. The uncertainty argument concerned the remuneration Harris would receive under the return contract, rather than the assessment of damages for breach.

Was there consideration for the options?

Bradford argued that the transfer fee was the price of Harris’s release and that the options lacked separate consideration. The judge rejected that attempt to divide the bargain.

Leeds gave up the benefit of a valuable existing contract with an outstanding player. That release was a significant detriment to Leeds and a significant benefit to Harris, allowing him to pursue rugby union and international opportunities. The return options were part of what Leeds obtained in exchange. Leeds did not need to make an additional payment to Harris specifically for those promises.

Why the restraint was reasonable

Gray J held that clause 5 did restrain trade. If Harris left Cardiff early and Leeds exercised its option, he could not freely choose another rugby league club or continue playing rugby union elsewhere. Describing the clause as a conditional employment agreement did not remove that restriction.

The question was whether the restraint was reasonable between the parties; no argument was advanced that it was unreasonable in the public interest. This was an unusual release arrangement made at Harris’s request and for his benefit. It could not be assessed simply as a conventional restriction protecting an employer’s trade secrets or customer connections.

Leeds reasonably wished to preserve the possibility of recovering its former star’s services for one year. The judge rejected the suggestion that the option was merely a disguised addition to the transfer fee. Harris had an agent and solicitor, and both knew about the proposed option during negotiations. The judge did not attribute Harris’s own limited understanding to concealment from his advisers.

The clause operated only if Harris chose to leave Cardiff early. It provided employment for a limited period, substantial remuneration and terms designed to leave him no worse off financially than under the specified Cardiff contract. Viewed alongside the freedom Leeds had given him to leave a contract with two years remaining, the restraint was reasonable for both parties.

Decision

The court answered all three preliminary questions in the negative. Clause 5 was not void for uncertainty or restraint of trade, and neither clause 5 nor clause 6 failed for lack of consideration. The judgment did not award damages or finally determine Leeds’s claims against Harris and Bradford.

Judgment: Leeds Rugby Ltd v Harris & Anor [2005] EWHC 1591 (QB).