City firm challenges Canada hearing for negligence claim

Lawyers defending Clifford Chance against the £610 million action by four Canadian banks in the wake of the Canary Wharf collapse will argue in an Ontario hearing that the action should be fought in the UK.

The firm, which denies any liability, has not ruled out a counter claim against Canadian Davies Ward & Beck, the commercial practice understood to have originally instructed the UK firm and which acted for Canary Wharf developer Olympia & York.

The Ontario hearing, listed for two days at the end of May, will hear arguments from the banks' lawyers that the action, launched simultaneously in both jurisdictions, should be heard in Canada.

Insurance, or the lack of it, may be a major worry for Clifford Chance if the case is heard in Canada, said one senior City source. Indemnity insurance in the US is expensive and any sizeable litigation there, however strong the case, is “a risk”, said the source.

Michael Seymour, a top litigation partner at Lovell White Durrant and president of the London Solicitors Litigation Association, is acting for Clifford Chance. Ian Taylor, Freshfields head of litigation, is advising the four banks – Royal Bank of Canada, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and the National Bank of Canada.

The banks loaned £450 million as members of the banking syndicate financing the Canary Wharf development. They claim to have suffered losses from the project's collapse after parent company Olympia & York Developments became insolvent in 1992 and allege Clifford Chance negligently provided incorrect legal information in an opinion in 1989.

The banks bailed out the Docklands development and sold it to Olympia's Paul Reichmann and Saudi investor Prince al-Waleed bin Talal.

The bank's claim – that they controlled the completion and sale of Canary Wharf – was undermined by Clifford Chance's alleged negligence.

In a written statement, Clifford Chance said: “To date no evidence has been produced to us that any loss was incurred by these banks in relation to these loans following the collapse of Olympia & York as a result of any alleged negligence on the part of Clifford Chance.”

City lawyers were last week less than shocked by the latest writs against Clifford Chance, seeing them in the context of increasing 'deep pocket' actions against corporate lawyers.

One senior partner of a top ten firm said: “Plaintiffs in US-style litigation sue for the national debt, which bares no relation to reality.”

Another City partner said: “It seems to be another example of a trend that must be worrying the profession.”

In addition to the Canada litigation, Clifford Chance faces other actions from former client Zappia Middle East Construction Co, of Abu Dhabi, for allegedly pulling out of a $1.7 billion court case, and a negligence action by bankers BZW.