It was a hot, happy August day in 1995 when Scottish Life Assurance signed a four-year title sponsor contract with Welsh Rugby Union (WRU).
Neither imagined three years down the line, they would be slugging it out in the High Court over claims of broken promises (MW July 30).
Late last month, Scottish Life Assurance filed a nine-page writ at the High Court alleging the WRU had failed to honour its 310,000 agreement. The deal signed three years ago entailed sponsoring Welsh home matches against Scotland in 1996 and 1998, and against England in 1997 and 1999.
Scottish Life claims only the first two matches went to plan. It goes on to claim this has cost the company 250,000 in lost promotional opportunities and loss of reputation. It is suing the WRU for damages “in excess of 50,000”.
The roots of the deal’s demise lie in the 1995 merger of banks Lloyds and TSB.
Lloyds TSB marketing director and rugby fan Ford Ennals thought the brand needed a high-profile, upmarket sponsorship to cement the merger publicly. He and his team came up with the idea of being the first title sponsor of one of rugby union’s oldest tournaments, the Five Nations.
Lloyds TSB and the Five Nations committee agreed sponsorship of the competition played between England, Scotland, Wales, Ireland and France. It was signed earlier this year and is worth 20m over three years (MW November 6 1997).
This deal was portrayed as a massive boost for the sport. But Scottish Life claims last October WRU board director Vernon Pugh phoned Scottish Life general marketing manager Ian Munro and asked the company to give up its sponsorship because it would clash with the impending Lloyds TSB Five Nations deal.
In the writ Munro said the company would consider giving up naming rights if Scottish Life received hospitality packages that ran beyond the original 1999 cut-off date.
On December 1, WRU chairman Glanmor Griffiths and another WRU member Dr Christine Stokes met Munro and Scottish Life marketing manager David Lawrence in Edinburgh. Scottish Life claims no new agreement was reached. Talks broke up. The next match that Scottish Life was due to sponsor, Wales versus Scotland, was on March 7 1998.
During the next two months both parties exchanged letters and faxes in an attempt to agree on compensation for Scottish Life. Hospitality packages for the Five Nations up to 2002 were discussed. But still no agreement.
Then on February 2, the WRU sent Scottish Life a package of hospitality tickets for the match marked “The Lloyds & TSB International”.
That same day the WRU faxed Scottish Life and told it as far it was concerned, title rights of the financial services company had been given up.
On February 3, Scottish Life chief general manager Malcolm Murray told the WRU his company had not agreed to relinquish any rights.
The Wales v Scotland game went ahead on March 7, and Scottish Life says Lloyds TSB was the main sponsor.
Kathleen Wilson, a partner for Scottish Life’s London solicitor Speechly Bircham, says litigation in sponsorship is becoming more common because more money is involved.
Chief executive of M&C Saatchi Sponsorship, Matthew Patten, says: “If you have a successful sponsorship another company will try to take it away from you. A company might invest a lot of money over time. Then a bigger company might come along and offer more for it.
“You need to think of ways to protect your contract. This means an understanding of your rights.”
One sponsorship agency says: “You would be surprised at the number of deals that are letters of agreement, not proper contracts.”
Contracts should be clear on options for broadcast and merchandising rights. The sponsor should be clear on how the deal will end. Renewals where the sponsor has the option to renew on similar terms, or where the sponsor has the right to match the offer of any other potential suitor, are common.
Scottish Life released this statement on the case: “We have taken substantial steps to give the WRU the opportunity to honour its obligations to Scottish Life. We are disappointed that we have been forced into taking this action but we are regrettably left with no alternative.”
And a belligerent WRU contends: “We will strenuously contest the action brought by Scottish Life.”
Clearly it is important for sponsors to insist on a contract and study all aspects of it, particularly the way both parties can end the deal.
The sponsorship industry will watch the outcome of Scottish Life’s split from WRU closely. It is a bitter divorce, the kind where each party blames the other and wishes they had never met.