Everton’s points deduction appeal: clarity on sanction proportionality

This article was co-authored by Heather Lynch, Trainee Solicitor.

Everton FC’s 10-point deduction for breaches of the Premier League’s Profit and Sustainability Rules (the Rules) has been reduced to 6-points following its appeal of the decision made by an independent Commission. Whilst the reduced sanction might offer some mild comfort to Everton fans, some may consider it bittersweet as Everton braces itself to respond to a second complaint relating to a breach of the Rules, due to be heard this month.

The long awaited appeal decision published on 26 February 2024 (the Appeal Decision) provides clubs and practitioners with greater clarity as to what constitutes an appropriate and proportionate sanction for breaches of the Rules as well as transparency over the Premier League’s guidelines governing points deduction.

Although Everton is currently under the spotlight, other clubs are facing similar charges for alleged breaches of the Rules including Nottingham Forest FC and Manchester City FC. The Appeal Decision provides a helpful and timely precedent which we summarise below.

Everton’s appeal

The background to Everton’s appeal is discussed in our earlier article. In summary, a complaint brought in March 2023 led to Everton being investigated by an independent Commission (Commission) for alleged breaches of the Rules for the period ending season 2021/2022. Whilst Everton accepted that it had breached the Rules, it argued that its breach was £9.7 million over the £105 million threshold, and not £19.5 million as alleged by the Premier League.

The Commission agreed with the Premier League’s calculation, and on 17 November 2023, Everton were handed an immediate 10-point deduction (the Decision). Everton appealed the sanction received, but did not appeal the amount that it was found to have breached the Rules by.

In its Grounds of Appeal, Everton argued that the 10-point deduction was “flawed, unduly harsh, disproportionate in all the circumstances and lay outside the range of reasonable sanctions”. Everton structured its appeal into nine grounds of appeal, seven of which primarily related to how the Commission dealt with various mitigating and aggravating factors (the Mitigating and Aggravating Grounds).

The Appeal Decision

On 26 February 2024, an independent Appeal Board (the Appeal Board), comprising a judge and two King’s Counsel, overturned the Decision and directed that the 10-point deduction be substituted with a 6-point deduction.

The Appeal Board refused the appeal on the Mitigating and Aggravating Grounds, concluding that the Commission’s approach to those issues was correct and that its conclusions were supported by the evidence.

However, it held that the Commission made material “legal errors” in respect of two grounds, as follows:

i. “less than frank” and a failure to act in the upmost good faith

The Commission was wrong to find that Everton had been “less than frank” and that it had failed to act in the utmost good faith when representing the position on the financing of its new stadium.

The Appeal Board was concerned with phrases used by the Commission in its Decision, including “less than frank” [1] and “not wholly straightforward” [2] when it referred to Everton’s representations to the Premier League on the funding of its new stadium in August 2022. The Appeal Board commented that although the term “less than frank” is not a legal term, it insinuates “obfuscating the true position or being disingenuous or less than straightforward”. It found that it was not for the Commission to make findings of this type as there was no pleaded case that Everton had knowingly misled the Premier League.

The Appeal Board concluded that as it was not open to the Commission to suggest Everton has been “less than frank”, a breach of the duty of utmost good faith could not be automatically assumed. It therefore held that this finding by the Commission was procedurally unfair to Everton [3].

ii. Available benchmarks

The Commission should have taken into account available benchmarks, set by previous English Football League (EFL) cases, when considering the point deduction it intended to impose.

The Appeal Board found that the Commission made a material error by failing to consider the precedent set in other cases where a points deduction was imposed. The Appeal Board considered that, had the Commission done so, a less severe point deduction would have been imposed.

For example, the Appeal Board considered the decision of the EFL Disciplinary Commission in the case of Sheffield Wednesday FC [4]. In that case, Sheffield Wednesday exceeded the EFL upper loss threshold by 46.7% (equivalent of a £49 million overspend in the Premier League, compared with Everton’s overspend of £19.5 million) and it received only a 6-point deduction [5].

Notably, the Appeal Board deemed the 10-point penalty given to Everton “internally inconsistent within the framework of the PL Rules” [6], on the basis that the deduction for an event of insolvency under the Rules is lower at 9-points [7].

Commentary

The direct and straightforward tone of the Appeal Decision indicates that the Appeal Board has tried to distance itself from the controversy caused by the Decision. A cornerstone precedent has now been set for the Rules, and more broadly, has brought to the fore the need for more proportionate and well-reasoned sanctions for financial breaches within football.

With increasingly loud whispers surrounding the plans for the government to independently regulate football, we anticipate there may be more serious questions asked about financial regulation.

 

Read other items in Commercial Brief - March 2024