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UPDATED: Nature of injunction might explain why Giedo van der Garde dropped Sauber attack

MELBOURNE , AUSTRALIA – MARCH 14 : Swedish Marcus Ericsson #9 from the Sauber F1 Team spins out during the Saturday Free Practice 3 session at the Rolex Australian Formula 1 Grand Prix, Albert Park, Melbourne, Victoria Australia (Photo by Asanka Brendon Ratnayake/Anadolu Agency/Getty Images)

On the eve of the 2015 Formula 1 season in Melbourne, the Twitter feed of the Supreme Court of Victoria was enlivened with news of a heated battle off the Albert Park track.

Formula 1 driver Giedo van der Garde had sued his racing team, Sauber. He wanted an injunction enabling him to drive for the team in the opening race of the season.

He obtained that injunction (Judgment here), which was shortly affirmed by the Court of Appeal.

In the face of an apparent attempt by Sauber to race on without him, Mr van der Garde then filed contempt proceedings with the Court. This would enable him to seize Sauber’s assets in Australia, including the vehicles themselves.

Yet with Sauber seemingly at his mercy, Mr van der Garde dropped his case. This likely bewildered some people, including Mr van der Garde’s own social media followers.

A close look at Justice Croft’s judgment granting the injunction illustrates how one can win the battle but potentially lose the war. This is not to suggest at all that van der Garde was in a losing position. However, the warning signals were there to apply the brakes when he did, so he could improve his negotiating position overall.

Background

It is fair to say Mr van der Garde’s international arbitration against Sauber does not feature in the ‘History’ page of the team’s website.

Instead we learn that the three high points in the team’s history occurred in 2001 when Sauber secured a partnership with Credit Suisse, came fourth in the Constructors’ World Championship, and launched its own wind tunnel.

2014 is recorded as a much leaner year. “Test and reserve driver” Giedo van der Garde does at least rate a mention (although he is not listed as a current driver elsewhere).

Otherwise, the sobering result of zero championship points for the year is bluntly attributed to: “Insufficient performance, lack of reliability, mistakes by the pit crew and or the drivers.”

And so the assessment concludes: “Time for a new beginning”.

The new beginning Sauber had in mind was unlikely to involve litigation.

Joe Saward’s F1 blog provides excellent context to the dispute. In short, it is apparently not unusual for drivers to pay for their “seats” courtesy of their own financial backers, as Mr van der Garde had done. Mr van der Garde’s father in law, Marcel Boekhoorn, is reportedly the source of his financial support.

Mr Boekhoorn is a Dutch investor and entrepreneur with wealth rumoured to be more than $1 billion euros.   Other pay drivers in the Sauber team are said to be Marcus Ericsson and Felipe Nasr.

However, it is all very well to pay for one’s seat, but the question becomes: “How much is enough?” In the midst of an apparent cash flow crisis, Sauber was required to play favourites to secure its financial future. Mr van der Garde found himself outside the circle of trust.

It is likely that, at this point, he examined the fine print of his contract with Sauber and called in the lawyers.

This led to an international arbitration governed by English law. On 2 March 2015, the arbitrator, Todd Wetmore, made an Award in Mr van der Garde’s favour.

Injunction

Mr van der Garde sought to have the Award enforced in Australia to permit him to race at the Australian Grand Prix, the opening Formula 1 event of the season held on 15 March 2015.

For the purpose of this analysis, do the unthinkable and imagine you are a lawyer. This is because most lawyers love words.

The starting point is therefore to consider what the Award meant. It grants an order requiring the Respondent, Sauber Motorsport AG, to —

refrain from taking any action the effect of which would be to deprive Mr. van der Garde of his entitlement to participate in the 2015 Formula One Season as one of Sauber’s two nominated race drivers”.

The order is not in the form of a ‘mandatory’ injunction. It does not require Sauber to do anything proactive. Instead, it is framed negatively, perhaps because mandatory injunctions are often considered harder to obtain. The Courts are often unenthusiastic about forcing people to do things.

The upshot is that the language is a bit tortured; one can sense the square peg trying to fit into the round hole.

It results in a conundrum. Sauber cannot do anything depriving Mr van der Garde of his entitlement to race. However, the language does not suggest it should take active steps to help him.

The judgment also reveals some telling comments from Justice Croft.

First, acknowledging the prospect that the parties would debate what the order actually meant, Justice Croft offered the Court’s services if needed:

This Court’s Arbitration List is available for this purpose — at all times and at all hours, seven days a week. It is, of course, the case — both in an arbitration context and more generally — that the Court is “concerned to preserve the integrity of its process, and to see that it is not abused.” However, this is not a situation in which these considerations arise”.

Justice Croft later added that “any practical issues or problems with respect to enforcement of the Orders may be the subject of an application to this Court for assistance, as indicated previously”.

Secondly, in relation to the safety, training, insurance and other issues of concern raised by Sauber (as to why it could not just parachute a fresh driver into one of its finely tuned cars), Justice Croft stated:

“[N]obody, certainly not the Court, would contemplate that compliance with the Orders would involve compromising safety, training, insurance or other like requirements.”

Thirdly, Justice Croft reminded the parties that the Award was on foot for the whole 2015 Formula 1 Season, “not just in relation to the coming few days in Melbourne for the Australian Grand Prix”.

POTENTIAL IMPACT OF Justice Croft’s comments ON strategy

Mr van der Garde later complained that Sauber had failed to honour the Award. Reasons reported in the Herald Sun included:

  • The team refused to recognize Mr van der Garde as one of the nominated drivers.
  • The team did not facilitate Mr van der Garde obtaining a licence to drive.
  • The team refused to tell the sport’s Contract Recognition Board that its contract with Mr van der Garde was valid.
  • The upshot was that Mr van der Garde was unable to secure a Super License to race.

Sauber’s failure to take proactive steps appears to be the basis for complaint. Yet having regard to the Award’s language, it might not have required that they be taken.

At this point, one is entitled to question the practical effect of the language of the Award.  One can see a ripe argument about whether the Court should enforce the substantive impact of the Award (so that Mr van der Garde races), even if the Award’s language is not perfect.

Mr van der Garde’s contempt application raises further questions. The Telegraph reported the dramatic developments. However, as these are unverified, let us remain in the world of supposition.

Contempt proceedings require a judge’s ruling. Mr van der Garde could not simply phone the Sheriff, direct him to ‘Garage 3, Pit Lane, a few doors down from Ferrari’ and tell him or her to take away the couple of F1’s in the Garage (‘you can’t miss them, they’re blue like the colours of Sauber’s Principal Sponsor, Chelsea FC’).

Instead, the Supreme Court of Victoria would need to decide whether or not there was a breach of the Award.

One would not be surprised by an exchange between barrister and Justice Croft like this: “I told you to come back if you had an argument about the Award. Why are you filing contempt proceedings?”

To avoid anticipated criticism from a judge, lawyers sometimes file an urgent application in the Practice Court of the Supreme Court, which is available to hear urgent matters. I have no idea if this happened here, nor am I recommending that lawyers adopt this approach!

Then, there remains the question of whether Sauber has breached the Award or not. In particular:

  • Could Sauber circumvent the Award if it avoids proactive steps?
  • Do health and safety issues provide a basis for exclusion?

These issues remained unresolved.

Mexican Stand Off

With (open) hostilities called off for the time being, the parties will be alive to Justice Croft’s observation that the Award remains on foot for the 2015 Formula 1 Season.

Presumably, Mr van der Garde does not wish to go to Court in every country the Grand Prix participates in to ensure the Award is enforced.

For plaintiffs there is always the risk of a pyrrhic victory, and presumably that risk remains alive for Mr van der Garde as well. The longer this goes on, the greater the risk Sauber will have no money to pay him compensation for any breach of contract.

Settlement Confirmed

After reports of an imminent settlement following the intervention of Bernie Ecclestone, the reaching of a settlement has now been confirmed.

Mr van der Garde has released a statement on Facebook which, amongst other things, thanks his Australian lawyers King & Wood Mallesons.  [Sorry, as a KWM alumni I felt compelled to mention this!]

Under the hashtag #LetsRaceNotFight, Sauber then released its own statement:

From a review of the comments posted in relation to each statement, the scoreboard appears to look like this:

– Mr van der Garde: overwhelmingly positive reaction

– Sauber: #MixedReaction. [But a nice try with the hashtag]

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