Kevin Keegan’s acrimonious departure from Newcastle United could lead to a bitter court battle after the club signalled their intention to pursue their former manager for £2 million in compensation. It is understood that Keegan had a clause in his contract stipulating that such a sum would be payable to whichever party terminated their 3½-year deal. Keegan blinked first by resigning yesterday after losing a power struggle with Dennis Wise, the executive director.

Keegan has also instructed his lawyers after four days of talks failed to come close to producing a negotiated financial settlement and is believed to be ready to mount a case for constructive dismissal. The 57-year-old issued a vitriolic parting shot at the club after ending his second spell in charge, insisting that he had no option but to bring the curtain down on a turbulent 34 weeks in the job.

Gustavo Poyet, the Tottenham Hotspur first-team coach, who enjoyed a successful partnership with Wise at Leeds United, is the favourite to become Newcastle’s fifth manager in less than three years. Wise is expected to take temporary charge of first-team affairs.

Mike Ashley, the club’s billionaire owner, and his allies are steeling themselves for a venomous backlash from supporters. Plans to boycott Ashley’s Sports Direct business and stage a stay-away protest when Newcastle play Hull City at St James’ Park in the Barclays Premier League tomorrow week are gathering pace, while several senior players are planning to register their own objections, although it is not known what form this will take. For the time being, though, the owner would be well advised to end his habit of sitting with the fans at matches.

Newcastle are ready to fight Keegan all the way, however, with a source close to the board pouring scorn on his managerial ability, especially his lack of knowledge of emerging players and the transfer market. It was claimed that Keegan was only interested in signing world-class players, presenting the board with a wish list of signings valued at more than £200 million, including Ronaldinho, Thierry Henry and Frank Lampard.

Keegan’s relationship with Derek Llambias, the managing director, was also believed to be at breaking point. When his demands to remove Wise so that he could take full control over transfers met with a cool reaction, Keegan knew he was, in managerial terms, a dead man walking.

Keegan, a former Newcastle forward, returned to the club in January in typically ebullient mood, claiming that he was at one with the Geordie footballing public. What he could not understand was the way that he was expected to operate within a labyrinthine management structure.

“I’ve been working desperately hard to find a way forward with the directors,” Keegan said in a statement issued through the League Managers Association. “Sadly that has not been possible.” He leaves with a record of six victories in 21 games, a day after Alan Curbishley resigned from West Ham United citing similar misgivings.

Sources at St James’ Park claim that they did all they could to persuade Keegan to stay. “We are sad and disappointed that Kevin has resigned,” the club said in a statement. “Over the last few days the club has devoted itself to the discussions it has held with Kevin and as a result we had put together a set of practical suggestions for how to move forward.”

The uneasy working relationship between Keegan and Wise collapsed on Monday after the revelation that the club were willing to sell Michael Owen and Joey Barton without Keegan’s consent. There was also the arrival before the transfer window closed of Ignacio González and Xisco, players from La Liga barely known to the manager. James Milner had already been sold against his wishes, while Keegan’s call for a swift resolution to Owen’s contract impasse also went unheeded.

“It’s my opinion that a manager must have the right to manage and a club should not impose on any manager any player that he doesn’t want,” Keegan — who could yet make a personal appearance in support of Barton at a Football Association disciplinary hearing today, when the midfield player could be suspended for up to 15 matches after admitting a charge of violent conduct — said last night.

“It remains my fervent wish to see Newcastle United do well in the future and I feel incredibly sorry for the players, the staff and most importantly the supporters,” he added. “I’ve been left with no choice other than to leave."