Saracens judgment is a spectacle of a sport robustly applying its rules

Two main thoughts were prompted by the thunderous 35-point penalty, and £5.36m fine, imposed on Premiership rugby champions Saracens for spectacular breaches and overpayments of the sport’s agreed salary cap.

Related: Saracens docked 35 points and fined £5m for salary cap breach

The first was that for all Saracens’ protests and self-justifying explanations – and rugby union’s historic wobbliness about enforcing its salary cap – this is a spectacle of a sport robustly applying its rules, regardless of a club’s power and pedigree. Saracens provided eight players for England’s World Cup squad led by the captain Owen Farrell, and those weary warriors were barely home from the airport when this blow landed. The second was that clever ways of paying players very often turn out to be not as well-advised as they must seem when conceived.

Premiership Rugby’s rules do not require full reports of disciplinary panels to be published; its summary merely said Saracens had “failed to disclose payments to players” and “exceeded the ceiling for payments to senior players” in the past two seasons when they finished champions, and in 2016-17.

What is the salary cap? Premiership Rugby introduced the salary cap in 1999 with the aims of ensuring a level playing field and maintaining a competitive, growing and financially sustainable league, preventing the clubs from the pitfalls of over-spending. The cap was increased from £6.5m to £7m before the 2017-18 season and will remain at this level until the end of the 2019-20 season. The ceiling includes dispensation for academy and injured players and effectively raises the possible spend to around £9m.

What have Saracens done? Premiership Rugby responded to allegations of a salary cap breach by carrying out a nine-month investigation. An independent panel was appointed in June. They have found Saracens failed to disclose payments to players in each of the last three seasons and that the club exceeded the ceiling for payments to senior players in that time.

What did the panel look into? Premiership Rugby’s investigations were thought to have centred around owner Nigel Wray’s involvements in companies such as VunProp Ltd (Mako and Billy Vunipola), Faz Investments Ltd (Owen Farrell), Wiggy9 Ltd (Richard Wigglesworth) and MN Property Solutions Ltd (Maro Itoje). Wray has in the past argued that “investment is not salary” and likened the arrangements to his public support of coffee and brewing companies set up by players.

What happens now? The club say they are 'shocked and disappointed' and will lodge an appeal. The case is set to go to Sports Resolutions. PA

It was Saracens who confirmed at the heart of the charge was their owner Nigel Wray’s practice of “co-investing” in businesses with the club’s players and that the disciplinary panel had found against the club’s argument that such “co-investments” should be seen sympathetically as part of its commitment to players’ welfare, not included in something as basic as the total money they were being paid.

In March, Wray went public with a long plea for these business partnerships to be considered acceptable, after they had first drawn attention and the indignation of other clubs.

“First and foremost I am an advocate of entrepreneurialism and independent spirit,” he said, presenting the co-investments as part of Saracens “really caring for people” and providing for players’ education, welfare and post-career planning. “How do you look out for your family?” he asked, rhetorically.

Along with educational opportunities and business secondments, Wray listed the dizzying support or investment provided to senior players’ businesses including captain Brad Barritt’s Tiki Tonga coffee company; Chris Wyles’s and Al Hargreaves’s Wolfpack Lager; a table business, gin company, a cocktail venture founded by Mike Ellery and Tim Streather, and “Sanderson’s Puddings, run by Alex Sanderson’s mum”.

Not included in that long statement, however, were Wray’s investments in companies with Farrell, Richard Wigglesworth and Billy and Mako Vunipola.

Faz Investments, which Farrell and Wray own jointly, was stated last month to be dormant, but Vunprop, owned by Wray equally with the Vunipola brothers, has an investment property valued in the most recently published accounts at £1.54m. Wiggy9, of which Wigglesworth is the sole director and Wray a 30% shareholder, owns a property valued at £875,000 in Lewisham, south-east London.

Related: Saracens salary-cap breach stamps an asterisk on a great club and the game | Robert Kitson

In its response to the panel’s findings the club said it “steadfastly maintains that player co-investments do not constitute salary” and promised it will “continue to vigorously defend this position”.

Premiership Rugby pointed out that the salary cap was introduced 20 years ago – by agreement of the clubs – to try to maintain clubs’ financial sustainability in a professionalised sport with inevitably escalating players’ wages and to keep the league competitive between the richer and less well off.

The regulations clearly plan for the possibility that players might not receive all their money in a monthly standing order with PAYE deducted. “Salary” is defined very widely as “any salary, wage, fee, remuneration, compensation, match fee, per diem, royalty, gratuity, profit, perquisite, reward, emolument, earnings, incentive, retainer, loyalty payment, preferred payment or any other sum”.

The panel constituted by the dispute-determining organisation Sports Resolutions and chaired by Lord Dyson, a former president of the court of appeal, appears to have decided that Wray’s and Saracens’ many investments in players’ businesses did indeed count in that catch-all of pay the cap seeks to limit. The enormous, season-wrecking points penalty is set in the rules for a breach of over £650,000 in any salary cap year. The financial penalty is £3 for every £1 over the £350,000 permitted, suggesting that Saracens were paying their players £1.78m above it.

Saracens have pledged to appeal, which according to the rules must be to another panel constituted by Sports Resolutions. There they will argue that the salary cap itself should be judged anti-competitive and invalid and that Lord Dyson got the law wrong. That appears to present something of a challenge – as will getting these tangled affairs into order, and dealing with a 35-point penalty if, as must be expected, this thumping judgment stands.