Everton face the nightmare scenario of rival clubs suing them for tens of millions for breaching Premier League financial rules following the club’s unprecedented 10-point deduction.
It emerged on Friday that Leeds United, Nottingham Forest, Leicester City, Southampton and Burnley made an application in May to become party to disciplinary proceedings against the Goodison Park side, with a view to claiming compensation.
The rival clubs’ application was rejected by a Premier League commission in front of David Phillips KC, who nevertheless ruled they had “potential claims” if Everton were found guilty. That was confirmed on Friday with the club hit by the 10-point ban after an independent commission found Everton’s losses to 2021-22 amounted to £124.5m – above the £105m threshold over a three-year period.
Everton immediately expressed their fury and vowed to appeal the decision.
Phillips wrote wrote in his May judgment: “I am satisfied the applicant clubs have potential claims for compensation. Those claims and their validity depend on whether the complaint is upheld. They depend on factual circumstances concerning the causation of any loss and they depend on other factual issues.”
Any club seeking compensation was given 28 days to lodge a claim with the same independent commission which found Everton guilty.
Leeds, Leicester, Southampton and Burnley were all relegated during Everton’s breach; the former trio last season and the latter a year earlier before winning promotion. Premier League relegation is estimated to cost a club around £100 million.
Forest were in a relegation battle with Everton at the time of May’s hearing but stayed up and even finished above them. Forest and Southampton – who finished 11 points adrift of Everton last season and would not have benefited from a 10-point deduction – have reportedly opted not to pursue compensation claims. A source at one club said they are consulting their legal team before pressing ahead with a claim.
Leeds and Burnley first threatened to sue for damages at the end of the 2021-22 season, sending a letter warning they reserved the right to take legal action against the Premier League and Everton, and demanding details of what – if any – action or investigation had been started.
Leicester subsequently joined the fight in what threatens to become an even bigger legal battle between rival clubs than that which saw West Ham United pay Sheffield United £20 million compensation after being fined – rather than having a points deduction – in 2007 for breaching third-party rules while signing Carlos Tevez.
Everton are reeling after receiving the biggest points penalty in the history of the English top flight. The Premier League had recommended a 12-point deduction for the Merseyside club, as reported by Telegraph Sport.
Everton argued there were mitigating factors in these losses, citing stadium expenses, the impact of the war in Ukraine which affected their sponsorship deal with USM, and also the loss of value in players due to the Covid pandemic.
Club officials are shocked and bewildered that their mitigation was rejected and they club have vowed to appeal to the competition’s board.
One area of particular contention regarded the interest charges on the cost of the stadium. Prior to 2022 the rate hikes were permissible. That changed in the last set of accounts and contributed to the latest breach.
Everton also cited the loss of potential earnings from one high-profile and saleable player due to extraordinary and unforeseeable circumstances. That cost the club at least £10 million.
Having complied with the Premier League in consecutive years, Everton feel they have been treated harshly – especially when compared to the Manchester City case which is dragging on despite 114 more charges and accusations of a far less transparent process.
Everton’s financial difficulties are well-documented and in part due to a period of overspending by Farhad Moshiri. Over the past five years of accounts the club has announced losses of £44.7 million in 2022, £121.3 million in 2021, £139.9 million in 2020, £111.8 million in 2019 and £13.1 million in 2018.
Moshiri is in the process of selling the club to Miami-based investment company 777 Partners. The price of the club will depend on Everton’s Premier League status, which is now under serious threat despite a promising period on-field led by Dyche.
That takeover is currently being ratified by the Premier League and Financial Conduct Authority.