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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Lichtenstein v Clube Atletico Mineiro [2005] EWHC 1300 (QB) (29 June 2005) URL: http://www.bailii.org/ew/cases/EWHC/QB/2005/1300.html Cite as: [2005] EWHC 1300 (QB)

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IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION

		Royal Courts of Justice Strand. London. WC2A 2LL
		29/06/2005

Mr. Justice Jack:

Introduction

1. Gilberto Silva is a professional football player who came to particular prominence when playing for the successful Brazilian team in the World Cup of 2002. On 25 July 2002 an agreement was made between the Arsenal Football Club PLC of Highbury, London, and Clube Atletico Mineiro of Belo Horizonte, Brazil, for the transfer of Gilberto Silva from Atletico Mineiro to Arsenal. The fee to be paid by Arsenal to Atletico Mineiro was US $7 million payable in two instalments. In this action the claimant, Jacques Lichtenstein, claims from Atletico Mineiro a 10% commission on the monies received by the club. Mr Lichtenstein is a players' agent licensed under the Licensed Players' Agents Regulations made by FIFA, the Federation Intemationale de Football Association. He makes his claim under a written agreement made by Atletico Mineiro on 3 July 2002.
2. The defences which have been raised are as follows:

1. the circumstances relating to the transfer are not such to make commission payable under the agreement;

2. misrepresentations inducing the making of the agreement;

3. mutual mistake;

4. construing the agreement in the light of FIFA regulations, it could only be performed by Mr Lichtenstein personally, which it was not.

The events

3. Mr Lichtenstein has a business relationship with Mr Ronny Rosenthal who describes himself as a professional football consultant. Mr. Rosenthal is not registered with FIFA as a players' agent. Their relationship was described as a partnership. There is no written agreement between them. Mr Rosenthal stated that they had worked together on many transfer deals and that they reached agreement as to the split of fees on a case by case basis. Since 1999 they have been responsible for the transfers of about 15 players. Mr Rosenthal is based in London. He has a company, Football Services Limited, which he uses, at least on occasion, as the vehicle for his business. He is a former player and played for a number of well-known clubs in England and Europe. He was also capped 62 times for Israel. In his present capacity he has relations with a number of figures in the management of English clubs. At Arsenal he is known to Mr Arsene Wenger, the First Team Manager, to Mr David Dein, the Vice Chairman, and to Mr Steve Rowley, the Club's Chief Scout. Thus in his evidence Mr Dein said that he had known him for many years and that they had a good working relationship. Mr Wenger said that they had spoken many times about players. Mr Lichtenstein is based in Brussels.
4. The 2002 World Cup took place in June. Mr Rosenthal believed that Arsenal was looking for a midfield player or a defender. He identified Gilberto Silva as one player who might meet Arsenal's requirements. Through his contacts he was able to find out whom he should speak to at Atletico Mineiro. He was also able to ask Gilberto Silva's agent, Mr Angelo Pimentel, if Mr Silva would be prepared to play in England, which, Mr. Pimentel said he would. Mr Rosenthal had some conversations with Mr Alexandre Kalil, the President of Atletico Mineiro's Conselho Deliberativo, and with Dr Ricardo Guimaraes, the Club's President and Chief Executive Officer. They were interested in a transfer if the price was right. In the same period Mr Rosenthal was speaking to Arsenal.
5. The conversations which Mr. Rosenthal had on his British Telecom land line appear on his bill. He may have had others on his mobile phone, the bills for which are no longer available. The first calls which it can now be seen that Mr Rosenthal made were to Mr Rowley on 18 and 19 June. On 28 June he spoke to Mr Kalil for six minutes and soon after he spoke to Mr Rowley, also for 6 minutes. He then spoke with Mr Wenger for 5 minutes. Following that he spoke to Mr Kalil for 3 minutes and later for 14 minutes. The World Cup Final between Brazil and Germany was on 30 June. On 1 July Mr Rosenthal spoke to Mr Kalil three times, and also to Mr Pimentel. He spoke to Mr Dein for 17 minutes on 2 July and half an hour later spoke to Mr Kalil for 9 minutes.
6. As well as speaking to Arsenal about Gilberto Silva Mr Rosenthal also spoke to Aston Villa, where he was known to the manager, Mr Graham Taylor. Mr Taylor had been manager of Watford when Mr Rosenthal had played for the club, and they had a good relationship. Mr Taylor had seen Gilberto Silva play in the World Cup and he had him on a list of players in whom he was interested. He did not know how to approach either the player or his club. When Mr Rosenthal spoke to him he expressed interest.
7. On 1 July Mr Rosenthal prepared a draft agreement to be entered into by Atletico Mineiro and Mr Lichtenstein, which he sent by fax. It was necessary for him to do this because once he had told Atletico the names of the clubs whom he had interested in Gilberto Silva he could have been cut out from any negotiations which followed. The agreement was prepared in the name of Mr Lichtenstein because he was a FIF A agent and Mr Rosenthal was not. By it Atletico Mineiro was to authorise Mr Lichtenstein to interest two clubs in the United Kingdom in Gilberto Silva for a 10 per cent commission of the transfer amount if a sale resulted. The agreement provided for it to be signed by Atletico Mineiro with the names of the clubs in blank. The draft excluded Middlesborough, because Atletico Mineiro had already had an approach from that club. The names of the two clubs were to be inserted after the agreement had been signed and faxed back. That, however, did not occur. Mr Kalil told Mr Rosenthal that if he could arrange meetings with the two clubs he would come to England. Mr Rosenthal said he would provide him with a business class ticket. Mr Kalil responded that he would then sign the agreement before the meetings.
8. Mr Rosenthal had then to arrange the meetings. A meeting was arranged with Mr Dein of Arsenal for 3 July. That can only have occurred with Mr Dein's knowledge. I have mentioned the 17 minute telephone conversation between Mr Rosenthal and Mr Dein on 2 July. That conversation was plainly the forerunner of the meeting. Mr Rosenthal also arranged a meeting with Aston Villa for 4 July.
9. On 2 July Mr Kalil left Brazil to fly to London. Mr Rosenthal had paid for his ticket, using his company, Football Services Limited. It appears from the travel agent's notification that the booking was made on 2 July, the day of the flight. Mr Kalil was accompanied by Dr Guimaraes. Mr Kalil speaks some English, but Dr Guimaraes is reasonably fluent. A return flight for Mr Kalil had been booked by Mr Rosenthal leaving at 9.35 pm for 4 July.
10. Mr Kalil and Mr Guimaraes brought the draft agreement faxed by Mr. Rosenthal to

London with them. They arrived on 3 July and were met by Mr Rosenthal. After taking them first to their hotel Mr Rosenthal took them to his home in London. They first signed the faxed version of the agreement with the names of Arsenal and Aston Villa written in. Mr Kalil had refused to sign it without the names. Then a second version was prepared typed by Mrs Rosenthal on Atletico Mineiro paper brought from Brazil. The body of the agreement provided:

Atletico Mineiro FC authorise exclusively Jacques Lichtenstein to interest 2 football clubs in the United Kingdom for the player GILBERTO SILVA.

The two clubs are: 1 Arsenal 2 Aston Villa

In case that Atletico Mineiro agree to sell the player to this clubs, Jacques Lichtenstein will receive 10% (commission) of the transfer amount.

Atletico Mineiro irrevocably will pay the agent immediately after reception of the transfer funds in Atletico Mineiro Bank Account.

11. Mr Rosenthal, Mr Kalil and Dr Guimaraes then went to Highbury for the meeting with Mr Dein. There is a conflict as to what occurred at the meeting. Mr Rosenthal said that on arrival Mr Dein said that he would like to meet with Mr Kalil and Dr Guimaraes alone. That was acceptable to him. He said that after about 30 minutes they came out and Mr Dein said he would be in touch the next day. Mr. Rosenthal said that Mr Kalil and Mr Guimaraes reported to him that Arsenal were interested in the player but had suggested a loan agreement, which was not of interest to them. They told him that Mr Dein had requested to see them the next day because he wanted to speak to Arsene Wenger.
12. It was the evidence of Mr Kalil that he had been told by Mr Rosenthal that he had a club interested at a fee of $20,000,000 and that an agreement had already been practically arranged, and that was why he had come to London. He did not say that he asked whether this was with Arsenal or Aston Villa. He said that at the meeting on 3 July with Mr Dein he and Dr Guimaraes put forward a figure of $16 million, and Arsenal made no counter offer. They were surprised that Mr Rosenthal was excluded from the negotiation. Dr Guimaraes also said that they had been led to expect $20 million.
13. Mr Dein's evidence was that he was surprised to see Mr Rosenthal and asked him what he was doing coming to the meeting and was told that he was 'driving them [the Brazilians] around'. He said that he excluded him from the meeting because he had no role to play. When I asked him what actually happened at the meeting he said that Mr Kalil and Dr Guimaraes were ready to sell and he took it as far as he could at the time. He only recalled that their expectation was a lot higher than Arsenal's valuation of the player. He said later that he thought their opening shot had been $18 to $20 million, and he would have said half of that.
14. It is necessary at this point to take a step back in time and fill in the picture on Arsenal's side. Mr Arsene Wenger saw Gilberta Silva play in the World Cup and became interested in him. This must have been in the earlier rounds. He asked Mr Dein to find out about him. For this Mr Dein used the services of Mr Richard Law. Mr Law is an international sports consultant who in his witness statement gave a Brazilian address. When he gave evidence he gave his address as Forth Worth, Texas. He is not registered as a players' agent with FIFA. I found him a careful and reliable witness. He said that he was telephoned by Mr Dein and asked to find out what club Gilberto Silva played for and who his agent was. Mr Law did that and sent the names and contact information to Mr Dein. Mr Dein then telephoned to say that Mr Wenger wanted to secure Mr Silva's transfer to Arsenal and asked how they should proceed. Mr Law suggested that he contact Mr Silva's agent, Mr Pimentel, and find out whether his player would be interested in a transfer to a European club and on what terms. Mr Law was not authorised to disclose the name of Arsenal. He then contacted Mr Pimentel who said Mr Silva would be interested in a European transfer but before going further he would need to know the name of the club. Very close to the World Cup finals (the final was on 30 June) Mr Dein telephoned Mr. Law again to say Arsenal were very interested in Mr Silva and asked him to contact Atletico Mineiro to enquire about a transfer. Again he was not authorised to identify Arsenal. The outcome was a meeting at the Antiquarius restaurant in Sao Paulo between Mr Law, Mr Kalil and Mr Guimaraes. Mr Law already knew Mr Kalil from sitting with him on committees. At the meeting Mr Kalil and Mr Guimaraes indicated that the club would be interested in a transfer at the best price possible. When asked by Mr. Law as to their expectation, they said they were interested in hearing an offer. In his oral evidence Mr Law said that they had referred to $16 or $18 million. This took place in the latter part of June and therefore before the meeting at Arsenal arranged by Mr Rosenthal. It was not until after their return from London that Mr Law contacted Mr Kalil and Dr Guimaraes again. He had known of their journey but had not known whom they were going to see.
15. I am satisfied that on 3 July Mr Dein knew very well why Mr Rosenthal accompanied Mr Kalil and Dr Guimaraes to Highbury. It was to discuss the transfer of Mr Silva as had been arranged between them on the telephone the day before. He knew that Mr Rosenthal's involvement was an agent hoping to make a commission on any deal. He knew that the involvement of Mr Rosenthal was to Arsenal's disadvantage because a commission would reduce the amount retained by Atletico Mineiro and the club would be likely to seek a higher transfer fee in consequence. In short, there was a very real possibility that any commission payable to Mr Rosenthal would be funded by Arsenal. So it was in his interest to cut Mr Rosenthal out if he could. He was already pursuing Mr Silva through Mr Law and he could understandably have refused to meet Mr Rosenthal. But it might not have been in his interest to refuse to meet the agent for Atletico Mineiro. It is possible that he thought he should have the meeting while making sure that the discussions in London in early July went nowhere leaving him to pick up negotiations through Mr Law in Brazil.
16. I have no firm basis on which to form a conclusion as to any figures mentioned at the meeting on 3 July. I think it very probable that Mr Dein did raise the question of Arsenal taking Mr Silva on loan. That is what Mr Taylor said in his witness statement that he was told on about 11 July by Mr Rosenthal. There is no reason to question Mr Taylor's evidence.
17. On 4 July Mr Rosenthal travelled with Mr Kalil and Mr Guimaraes to Aston Villa. They met with Mr Ellis, the Chairman, and with Mr Taylor. Mr Rosenthal had previously indicated to Mr Taylor a price of about £6 million or slightly less. The price suggested to Mr Taylor by Mr Ellis was £1.5 million. Mr Taylor therefore made no bid and in the circumstances it must have been impossible to have any meaningful discussion. I can understand that Mr Kalil and Mr Guimaraes felt that the meeting had been a waste of time; that all that had happened was they had exchanged pleasantries and had been given a tour of Aston Villa's impressive stadium.
18. While the three men were returning to London Mr Rosenthal received a call from Mr Dein asking them to meet them at the Radisson Hotel, Portman Square. They went there and Mr Dein spoke with Mr Kalil and Dr Guimaraes for 20 minutes in the lobby. One matter raised in the conversation was that Arsenal wanted to see videos of Gilberto Silva to be sure that he could play in both defence and midfield.
19. After Mr Kalil and Dr Guimaraes returned to Brazil Mr Dein told Mr Law that Arsenal wished to make an offer to the player and to the club. He received instructions from Arsenal and put forward their proposals. There came a point when Mr Dein suggested that a face to face meeting in London would be productive. Mr Kalil, Mr Pimentel and Mr Law travelled together to London on about 23 July. Agreements were reached on 25 July.
20. Meanwhile in mid July Mr Dein asked Mr Rosenthal to come to meet him at Highbury. He wanted to know the terms of Mr Rosenthal's agreement with Atletico Mineiro. Mr Rosenthal told him that they were between him and the club.
21. After this Mr Rosenthal spoke to Mr Kalil on 19 July (twice) and 22 July (twice, the second time for 18 minutes). There were also some further calls between Mr Rosenthal and Arsenal, but they were of no significance. On 23 July Mr Dein telephoned Mr Rosenthal to say that Mr Kalil was coming to London the next day (which Mr Rosenthal already knew) and that he, Mr Rosenthal, should be available to come to Highbury to discuss commission. On 24 July Mr Rosenthal met Mr Kalil, Mr Law and Mr Pimentel at the Marriott Hotel. Mr Kalil said Arsenal were offering $8 million out of which Atletico Mineiro had to find the commission and asked if he would agree a reduction to enable the deal to proceed. Mr Rosenthal said that any gap could be bridged with goodwill on all sides. Mr Kalil, Mr Law and Mr Pimentel then left for Highbury. Later that day Mr Rosenthal received a call to come to Highbury. Mr Dein first suggested to him that he should accept a commission of $150,000. After telephoning Mr Lichtenstein Mr Rosenthal said that he was prepared to compromise but not at that figure. Mr Dein then offered $300,000. Mr Kalil told him Atletico Mineiro could not accept the $8 million being offered by Arsenal if he had to pay $800,000 commission. Mr Kalil also said to him at one point he would only sign at $8 million if Arsenal gave Atletico Mineiro a guarantee for any commission the club had to pay. Mr Rosenthal again discussed the position with Mr Lichtenstein, and then refused to accept $300,000 but said he would take $600,000. Mr Dein told him that in that event he would get nothing: they (Arsenal and Atletico Mineiro) would say that nothing was due because Mr Rosenthal and Mr Lichtenstein had nothing to do with the deal. After some hours at Highbury Mr Rosenthal left.
22. The agreement reached between Arsenal and Atletico Mineiro provided for the payment of $3.5 million when certain conditions such as a medical examination were satisfied and $3.5 million on 22 July 2003. It was agreed that the 20 per cent of the transfer fee due to Mr Silva should be dealt with separately between Arsenal and Mr Silva, and that Atletico Mineiro should have no responsibility for it. Arsenal paid Mr Pimentel's lawyer $1.4 million. The lawyer paid $100,000 to Mr Law. That was Mr Law's fee for his work on the transfer. On 26 July Mr Dein reported to the Arsenal Board that Mr Silva's transfer had been effected at a total cost of $8.4 million. So it appears that Mr Silva's 20% was covered by the payment to the lawyer of his agent.

Were the circumstances such that commission became payable under the agreement?

23. The question could also be phrased: has payment under the agreement been triggered?

Under the terms of the agreement Mr Lichtenstein was authorised 'to interest' Arsenal and Aston Villa in Gilberto Silva. If he did that, then if a transfer resulted, the commission would be payable. Mr Jonathan Crystal and Mr Andrew Green for Mr Lichtenstein and Atletico Mineiro respectively were agreed that the activity of interesting Arsenal had to be 'an effective cause' of the transfer. I note that Article 59 of Bowstead on Agency, 17th Edition, refers to 'the effective cause', though 'an effective cause' is mooted in the commentary. Mr Green did not submit that simply because Arsenal were already interested in acquiring Gilberto Silva before the meeting of 3 July the claim failed. He accepted that Mr Rosenthal's efforts and in particular the meeting arranged by him on 3 July could have generated an increase in interest, which could have generated a right to commission. Prior to 3 July Arsenal were interested in Gilberto Silva both in the sense that Mr Wenger had formed a view that he would like him to come to Arsenal and in the sense that this interest had been put into action through Mr Law. They were in the early stages of a transfer process. After the meetings on 3 and 4 July the process being conducted through Mr Law continued. What contribution did those meetings make? Atletico Mineiro knew they were dealing with Arsenal, which they had not known through Mr Law. The meetings brought Mr Dein face to face with Mr Kalil and Dr Guimaraes. This may have accelerated the process. But, save that the parties found they were a long way apart, the discussions on 3 and 4 July achieved very little. The strong probability is that if Mr Rosenthal had not intervened, the negotiations between Arsenal, Atletico Mineiro and Mr Pimentel would have taken much the same course as they did in fact take. I conclude that Arsenal's existing interest in Gilberto Silva was not affected by what Mr Rosenthal did: it was not created by what he did, nor was it materially increased by what he did. It was not an effective cause of the agreement reached on 25 July 2003. The outcome is, therefore, that the claim for commission fails.

24. I should say that I do not think that the attitudes taken by Mr Dein and Mr Kalil to the claim for commission on 24 July are inconsistent with this conclusion. All sides knew that Mr Lichtenstein had an agreement with Atletico Mineiro. Mr Dein may still not have known its terms. Nobody could be sure how the wording of the agreement applied to the situation. It was understandable that they took a commercial view and offered Mr Rosenthal what they regarded as a reasonable amount, but when that was refused, said they would fight the claim.

Misrepresentation

25. In his closing submissions Mr Green invited me to hold that four representations were made by Rosenthal prior to the signing of an agreement on behalf of Atletico Mineiro. They and my findings in respect of them are as follows:

(a) That Mr Rosenthal had 'a very good relationship' with Arsenal. Mr Rosenthal accepted that he had said this. I am satisfied that Mr Rosenthal did have a good relationship with Arsenal. If he telephoned, Mr Wenger and Mr Dein would take his calls. They were ready to discuss players with him. They had and have a respect for him. If the 'very' is a matter of dispute, it is to be regarded as a puff, an exaggeration, which cannot be relied on.

(b) That Mr Rosenthal could make a transfer deal to Arsenal happen. Again Mr. Rosenthal accepted that he had said this. I am satisfied that he had that ability. He had done it before. It was not, and was not relied on as, a contractual promise that he would make it happen.

(c) That, unless Atletico Mineiro signed a contract with Mr Lichtenstein, Arsenal would not enter negotiations with Atletico Mineiro. I am satisfied that no such representation was made. What Mr Rosenthal did say was to the effect that, unless they signed, he would not introduce them to Arsenal. This may have been misunderstood.

(d) That Mr Rosenthal had negotiated with Arsenal a transfer price in the order of $20 million. I find that no such representation was made. I wholly reject Mr Kalil's evidence that he understood that a deal at that price was effectively done before he had left Brazil.

26. These alleged representations may be compared with those pleaded in paragraph 6( d) of the amended defence. It is of importance that prior to the proceedings Mr Kalil and Mr Guimaraes never asserted that they had been duped by Mr Rosenthal and in particular they made no complaints to him following the first meeting at Highbury. They remained on good terms.

Mutual mistake

27. The mutual mistake which is relied on is as to Arsenal's pre-existing interest in Gilberto Silva. As Mr Green accepted that that interest was not by itself a bar to the success of the claim, it cannot be a mutual mistake such as was stated might avoid a contract in Bell v Lever Bros [1932] AC 161. I do not consider that it is a matter which can give rise to the avoidance of the contract: it is something to be taken account of in ascertaining whether commission is payable under the contract.

The FIF A Regulations

28. Article 13 of FIFA's Licensed Players' Agent Regulations provides:

A players' agent may organise his occupation as a business as long as his employee's work is restricted to administrative duties connected with the business activity of a players' agent. Only the players' agent himself is entitled to represent and promote the interests of players and/or clubs with other players and/or clubs .......

The Article thus forbids the use of another to carry out the agency work itself such as negotiation on behalf of a club. It was contrary to the Regulations for Mr Rosenthal to approach Arsenal because he was unlicensed and it was contrary to Article 13 for him to do so as the agent of Mr Lichtenstein. Mr Lichtenstein accepted the effect of Article 13. Somewhat surprisingly Mr Rosenthal said he was unfamiliar with the Regulations.

29. It was not contended that the breach of the Regulations made the contract illegal. For the FIF A Regulations are not part of English law. Mr Green's submissions was that the Regulations were part of the matrix in which the contract was made and so the authority given by the agreement was to be construed as an authority given to Mr Lichtenstein as an individual and limited to him. In a situation where the evidence showed that the intention of the parties was that an agreement should be performed in compliance with the Regulations, the submission might have force, either in support of a term to be implied into the agreement or as a matter of construction. But where both parties know that the licensed agent is acting by another to conduct dealings with a club, here Arsenal, that cannot be so. Mr Green submitted that it was irrelevant that they knew Mr Rosenthal was to perform the contract because they did not know that it was a breach of the Regulations. No evidence was adduced as to the knowledge, or lack of knowledge, of Mr Kalil and Dr Guimaraes of the FIF A Regulations, or whether they gave any thought to them. The important point in my view is that they knew that it was Mr Rosenthal who was dealing with Arsenal. Mr Green also relied on the contra proferentem rule. This would apply if the contract was ambiguous. I do not see that there is an ambiguity. A commercial contract of this general nature can be performed through the actions of another: it is not personal in the sense that a contract with an artist is. I should also mention that Mr Green relied on the word 'exclusively'. In my view its meaning was that Atletico Mineiro should not authorise another agent to deal with the named clubs.

The amount of any commission

30. As I have held that no commission is payable, I will deal with this shortly. I do not think that Mr Lichtenstein would have been entitled to commission on any amount that was paid by Arsenal to satisfy Mr Silva's right to 20 per cent. That was not received by Atletico Mineiro. It was not shown that the transactions were structured as they were with a view to diminishing the commission otherwise payable. Mr Green accepted that the discounting of the deferred payment with a bank should not diminish the amount Mr Lichtenstein was entitled to.