The Rangers fans, however, threw a spanner into the works. They did not approve of Sports Direct's involvement with the club and, in particular, they took the view that Sports Direct had a significant influence over Rangers' commercial operations. From December 2014 a group of Rangers fans boycotted the sale of Rangers' replica kit and other products by Sports Direct. That boycott was accompanied by David King and other Rangers directors calling for the renegotiation of its relationship with SDIR.
By 2016 the fan boycott hadn't ended and was having a significant impact of RRL's business. Rangers decided to terminate the agreement with SDIR on the grounds of repudiatory breach of contract. SDIR raised derivative proceedings seeking declaratory and injunctive relief and damages for breach of contract against Rangers and was, by a judgement given on 6 April 2017, given permission by the High Court in London to continue its claim. Rangers subsequently concluded a deal with Elite/Hummel for kit sales. However, it did so without giving SDIR the opportunity to match the Elite/Hummel agreement which it was entitled to have the chance to do in terms of its own agreement with Rangers. SDIR amended their claim to include this additional breach of contract by Rangers.
The High Court decided this issue on Monday. The court heard evidence from a number of witnesses including Justin Barnes, a consultant at Sports Direct; James Blair, Rangers' company secretary; Stewart Robertson, Rangers' managing director; Neil Friar, chairman of Elite; and Mark Underwood, the managing director of Elite. The Judge, Lionel Persey QC, described the evidence (with the exception of that given by Mr Underwood) as "unhelpful and unsatisfactory". Mr Barnes evidence was said to have consisted of "argument, assertion and inadmissible opinion evidence regarding the meaning to be given to the agreement" and that "he did not have a good grasp of events or of the matters about which he was purporting to give evidence". Mr Blair was said by the court to have given evidence about his intentions and what the understandings of the parties were when concluding the contract, all of which was inadmissible. Mr Robertson was said by the court simply to be "a mouthpiece for Rangers" and Mr Friar was "somewhat defensive in his evidence and appeared reluctant to answer some quite straightforward questions".
The Judge, however, didn't think that the evidence was important in resolving the dispute. Rather, the dispute turned on the proper construction of the contract between the parties. The court provides a brief but helpful overview of the principles involved in contractual interpretation citing Arnold v Britton [2015] UKSC 36; Wood v Capita Insurance Services Limited [2017] UKSC 24 and The Ocean Neptune [2018] I Lloyd's Rep.654 as being of particular assistance. It reiterated (particularly in light of some of the evidence given) that the subjective intentions of the parties were not relevant. In a warning to solicitors in this sort of claim the Judge held that "The witnesses should not have entered into the arena in this way. Nor should their legal teams have allowed them to do so".
The two construction points themselves were relatively short ones with the High Court having no hesitation in coming down on the side of SDIR. Rangers also contended that the contract should be subject to two implied terms. The Judge applied Marks & Spencer plc v BNP Paribas Securities Services [2016] AC 742 and reiterated the well understood principles that any terms must (1) be reasonable and equitable; (2) necessary to give the contract business efficacy; (3) so obvious that it goes without saying; (4) capable of clear expression; and (5) must not contradict any express term of the contract.
One of the implied terms contended for was a term to the effect that there was an implied term of "good faith". In that regard, Rangers relied on a body of case law relating to so-called "relational contracts" such as distribution, franchise or joint venture agreements. However, the Judge was not to be persuaded. He said that "considerable care needs to be taken before implying a term of good faith into a commercial contract" and referred to Globe Motors Inc & Ors v TRY Lucas Varity Electric Steering Limited [2016] EWHC Civ 396 in which Bick LJ said that "…There is in my view a real danger that if a general principle of good faith were established it would be invoked as often to undermine as to support the terms in which the parties have reached agreement. The danger is not dissimilar to that posed by too liberal an approach to construction, against which the Supreme Court warned in Arnold v Britton…" On that basis he rejected the proposed term and then disposed of the second proposed term in two brief paragraphs saying that "the less that was said about [it], the better".
In terms of the relief sought by SDIR, Rangers accepted that damages should follow for breach (and they will be assessed in due course). However, they opposed the grant of an injunction on three grounds. First, that Rangers would lose significant revenue and will be exposed to a damages claim from Elite. Secondly, that the club, players and fans will be unable to secure kit and other products; and finally, that Rangers ability to function as a football club would be impaired.
The Judge was not persuaded on any of these points. He was not convinced that Rangers would lose significant revenues given that the way the injunction operated meant that it would still receive revenue for the 2019/2020 and 2020/2021 seasons. The fact was that any losses and indeed claims from Elite were just the consequence of Rangers' breach of contract. Kit and products would be available for the coming season and so, as the Judge put it, there was no risk that "fans will be deprived of the opportunity to spend their hard-earned money on purchasing the forthcoming season's kit". Finally, there was no risk that Rangers' ability to function as a football club would be impaired.
