Freshfields Bruckhaus Deringer has turned to bar heavyweight Tony Grabiner QC of One Essex Court to lead the defence of a £140m professional negligence claim against it by London Underground.
London Underground launched the case against the magic circle firm in 2011, with the original claim valued at £178.5m (25 July 2011). The firm had originally turned to Grabiner’s set-mate, Laurence Rabinowitz QC, to defend the case. It is understood that Rabinowitz has since become engaged with another dispute, leaving Grabiner to take the case forward.
Legacy Herbert Smith was named as a joined defendant last year, with the firm turning to Fountain Court’s Tim Dutton QC to lead the defence (28 November 2012).
Ince & Co partner Charlotte Davies is acting for London Underground instructing 4 New Square’s Justin Fenwick QC.
It is understood that the parties will enter into a mediation over the case later this week, but it is likely to focus on case management rather than settling the dispute.
The battle is due to be heard over four weeks in October (7 January 2013). It is believed to be one of the largest professional negligence claims to have been launched against a firm and a raft of leading silks have been instructed to take on the fight.
At issue are claims by LUL that the firms were negligent in their advice relating to its 2003 PPP with collapsed transport company Metronet. In April 2003 LUL entered into a PPP with Metronet for the renovation of seven underground lines. Together they created special purpose companies so ownership of the lines would pass to Metronet when the work was complete.
When financing was agreed with the special purpose companies’ banks, LUL entered into put option agreements on the bonds issued as part of the fundraising. These agreements stipulated that if any of the special purpose companies were to become insolvent LUL would purchase their debt. When the companies went into administration in July 2007 LUL had to pay £1.74bn in respect of that debt.
LUL claims the sum would have been much lower if it had been allowed to repay the bonds at the market price. It says a drafting error approved by the firms without reference to LUL meant it had to pay out on the put options instead.