Here, Richard Forth, MD of Forths Forensic Accountants, talks about the weightiest evidence in Loss of Earnings cases for sportspeople.
There are any number of situations in which a Loss of Earnings case may prove more complicated than a standard “take clients current income, multiply by working life, add likely modifications for promotion and/or inflation, achieve figure” model. The self-employed, entrepreneurs and entertainers are all examples of clients whose earnings may vary wildly from one period to the next. One situation where this can become even more complex, however, is when professional sportspeople find their career curtailed by an injury.
One of the main complications with sportspeople, particularly those who compete in more physically demanding disciplines, is that they have a shorter than average working life. Their period of earning is truncated, and they have to try in a limited period – typically between the ages of around 18 and 35 – to absolutely optimise their earnings.
Of course, you could argue that this is the case for all the potential clients we’ve just mentioned – an entertainer is unlikely to join the next big boy band in his 50s, while even the most swashbuckling entrepreneurial spirit may become increasingly risk-averse when family and a degree of comfort have entered their lives. Nonetheless, a TV actor or musician, because their earnings aren’t directly linked to their physicality to the same degree as a sportsperson, could still reasonably expect to achieve valuable earnings across the whole of their career.
One of the main complications with sportspeople, particularly those who compete in more physically demanding disciplines, is that they have a shorter than average working life.
When it comes to sportspeople, you have the very real issue of having maybe a maximum of 17 years at the top of professional sport to make the bulk of their career earnings. The margin of error for those kinds of people in terms of calculations is a lot slimmer, and the biggest difficulty comes about because every sportsperson has a unique profile, and therefore their potential to succeed at their chosen sport is equally unique.
This difficulty is even more pronounced when dealing with a sportsperson at the beginning of their career who has had an accident. It is often more straightforward for older and more established sportspeople, because the balance of probabilities is a lot more certain. When you're dealing with a 17-year-old whose career is ended by an accident, and he “was going to be a Premiership footballer,” there are so many uncertainties – primarily “would he have made it?”
If you are representing someone who's already got themselves through to, say, a Championship football side at 24 or 25, they have a profile of earnings and a lot of the uncertainty is taken out of the equation. It becomes a lot more certain, especially with the likelihood of a much shorter potential claim of 10 years or so working life remaining.
But even this isn’t set in stone. If someone's older and established then yes, it is more straightforward, but you still need to consider whether people might be late starters. Look at someone like Jamie Vardy or Jack Grealish. Grealish, for instance, is now clearly a big star at Manchester City, but he came to the big time relatively late. Vardy is possibly an even better example – he was playing non-league football until the age of 25, yet now he’s a Premier League winner, an England regular, and one of the country’s top strikers. There’s always scope for improvement, and the same sort of questions must be asked, but the starting point is a lot more straightforward with an older player.
Returning to a younger player’s injury, perhaps we’re talking about someone who is going to be in professional sports from 18 or 19. They've maybe gone through the Academy at a particular club and then move into the professional arena. In many ways, the assessment of these kind of losses are necessarily arbitrary, because ultimately you’re dealing with a situation that is uncertain.
We can work with specific percentages, but these percentages are often little more than guesses. We look at potential earnings levels and then we apply percentage chances to it; the maths is fairly straightforward. You can get all the information in terms of the average weekly wage for, for example, a premiership defender, relatively easily. There's a 10% chance of him reaching the Premier League and achieving this bracket, for example; a 20% of Championship and that bracket, 40% of League One and that bracket etc.
There may be things that we need to take into account such as image rights, but that's only really for the top 5% or so of players. Cristiano Ronaldo may do very nicely from his image rights deals, but for every Ronaldo there are likely another 50 players that no one would be able to name in a line up unless they’re a fan.
In fact, image rights is often quoted as a really important part of these kind of claims, and I admit it can be, but it’s simply not applicable to everyone, or indeed the majority.
"Cristiano Ronaldo may do very nicely from his image rights deals, but for every Ronaldo there are likely another 50 players that no one would be able to name in a line up unless they’re a fan."
Firstly, it’s an issue that’s only relevant for certain, extremely popular, sports – primarily football in this country, but others to a lesser degree too.
Secondly, it's determined by someone's image, so you have to have that image element. It's not just about you being absolutely at the top of the tree, but also the image that goes with that, and that image being something big commercial organisations want to invest in.
So if you discount that and say it's only relevant for a few, you’re actually into a fairly simple situation for an accountant: you're looking at what someone would earn on a pay-as-you-earn basis as a footballer, the trajectory of that, and the decline of that to the end of their career. They will probably be someone who has an ability to have four or five years right at the top of the game before it starts petering out.
What’s incredibly important to recognise in these situations though, and the thing that will ultimately decide the overall level of claim and decision from the judge, is often not the evidence of the traditional financial or legal experts we might expect to see take the stand in a loss of earnings case, but rather the “lay” evidence of those who are respected in the sport.
There was a case some years ago of a young Manchester United player who suffered a significant leg injury during the Ferguson era. Sir Alex Ferguson’s opinion of this player’s potential was the most significant piece of evidence in the case. He said this youngster had the potential to be up there with the club’s most successful players. That sort of weighty evidence around the career potential is incredibly important and who that evidence comes from even more so. While getting evidence from Alex Ferguson that x individual would have done y has weight, the same evidence from Barry who coaches the local Sunday league team doesn’t hold as much gravitas.
So one of the major points around this is the availability of lay evidence around a career trajectory, and it's the career trajectory that creates the value in this kind of claim. As financial experts, we work very closely with different subject matter specialists to present the picture of how a person would have progressed ‘but for’ the accident.
Often the power of that is not about what we do, but about people in the know (and the higher their profile the better) putting their name to paper to say “unfortunately they will never play again due to this injury but this is where we genuinely think they would have gone.”