The problem of gambling within professional football is well publicised, with recent cases hitting the press regarding the troubles faced by Sandro Tonali of Newcastle FC and Ivan Toney of Brentford FC. Former player and current pundit Paul Merson’s addiction troubles are also well-documented, and he has called the bans inflicted on each player “a disgrace”, highlighting it is an illness that requires urgent help. It appears we are just at the tip of the iceberg; this silent plague is reportedly ‘ravaging’ our beautiful game. However, is there more responsibility on the clubs, and are they doing everything they can to unearth these issues at the outset?

It was recently reported by BBC Sport that Newcastle FC were “unsure if AC Milan knew about the betting charges facing their former player Sandro Tonali”[1] after they sold him for £55 million last summer.

Although precise facts have not been disclosed, Dan Ashworth’s (Newcastle’s sporting director) comments to Sky Sports point to a potential lack of appropriate due diligence being undertaken: “You look at yourself. Could we have known? Should we have known? You look at your processes.”[2]

These ‘processes’ that Ashworth is alluding to centre around the basis of “caveat emptor” (let the buyer beware). This principle is a fundamental concept in the field of contract law, particularly in the context of the sale of goods. It places the responsibility on the buyer to exercise due diligence and caution when purchasing a product or entering into a contract. i.e. if the appropriate questions are not asked of the seller, for example on our facts, “are you aware of any outstanding or pending disputes, claims or disciplinary investigations relating to Sandro Tonali”, AC Milan might not be under an obligation to divulge that information voluntarily. 

These same ‘caveat emptor’ principles apply in a typical commercial property transaction - the seller/ landlord will provide the buyer/ tenant with replies to CPSEs (commercial property standard enquiries), and, frequently, replies to additional enquiries. 

If a seller provides inaccurate information in their responses to enquiries (or elsewhere) that the buyer depends on when determining whether to proceed with the contract and the buyer incurs losses as a result of entering into the contract, the seller can be held accountable for misrepresentation. A misrepresentation is a false statement of fact made by one party to another which is not a term of the contract but which induces the other party to enter into the contract. For misrepresentation to apply, the false statement must be significant and relied upon by the buyer. It is not necessary to demonstrate that the misrepresented information was the sole factor in the buyer's decision to enter the contract; liability can arise even if the misrepresented information is only part of what the buyer relied on. 

Fraudulent misrepresentation arises when the provider of information fails to make enquiries to check whether the information is false. There need be no dishonest motive but this type of misrepresentation cannot be proved if the seller honestly believes the statement is accurate.

The statement must be made:

1. knowingly or without belief in its truth; or

2. recklessly and carelessly as to whether it is true or false

In McMeekin v Long, the seller, in replies to enquiries, informed the buyers that no disputes had arisen in respect of the property or its use and stated that the neighbours were ‘good and friendly’. However, there had been a long-running dispute with a neighbour over the use of an access road.

Following completion, the buyers became embroiled in arguments with the same neighbour over the use of the access road. The trial judge considered that the existence of the long-standing dispute was exactly the sort of information that the buyers were entitled to receive. He held that the sellers were liable for fraudulent misrepresentation. The answer given in replies to enquiries was not given in error; it was a fraudulent answer to enable the sale of the property to complete unhindered. It is inconceivable to consider AC Milan would knowingly divert Newcastle’s attention away from the issue but worth considering they would be on the hook if they did.

As a general rule, (and established in Smith v Hughes), silence does not amount to misrepresentation and a party has no duty to correct another party if they have failed to understand the information correctly. Yet there is a duty on the seller to disclose the truth when a statement becomes false due to a change in circumstances. If a seller becomes aware before exchange of contracts that a statement given in replies to enquiries has become false, they should correct the position, as in Schyde Investments Ltd v Cleaver. 

Indeed, in Morrell v Stewart, the sellers were found liable for fraudulent misrepresentation as they had failed to disclose to the buyers problems with the foul drainage on the property. It did not matter that the buyers had failed to carry out a survey. If they had been aware of the issues, they would have carried out a survey, whereas they had decided that it was not worth the expense of having a survey on the basis of the information provided by the sellers. If they had been aware that any substantial remedial costs would be required in connection with the drains, they would not have proceeded to buy the property at all.

Perhaps AC Milan knew that Tonali was under initial police investigation as the transfer neared completion but did not disclose those facts. It can be assumed that if Newcastle FC had been informed of this, they would certainly have probed further and possibly pulled out of the deal.

If AC Milan are found to be absolved from any fault or wrongdoing, Newcastle FC may be able to pursue Tonali for breach of contract and pursue damages and Ashworth has admitted this is a possibility (although any potential legal action has since gone quiet). An example of this is the enigmatic Italian, Mario Balotteli, who had his contract terminated by Brescia FC for failing to attend training. The scenario that appears to have since developed is a wage reduction for Tonali; a harsh lesson learnt for Newcastle FC and striking the lawyer who dealt with the due diligence off the Christmas card list!


 

[1] https://www.bbc.co.uk/sport/football/67313204#:~:text=He%20joined%20Newcastle%20from%20Milan,charges%20when%20they%20sold%20him.

[2] https://www.skysports.com/football/news/11678/12999527/dan-ashworth-newcastle-internally-investigating-sandro-tonali-transfer-after-massive-shock-at-betting-breaches