Hammonds scores court victory against the Football League

Hammonds was celebrating last week (23 June) after winning the bulk of the £150m negligence claim brought against it by the Football League.

However, there was a late equaliser at the final whistle as Mr Justice Rimer awarded the league damages of just £4 in respect of two minor breaches of duty. The amount dates back to the 19th century, when 40 shillings was traditionally awarded as nominal damages.

The case was one of the biggest negligence claims ever to have hit the legal profession, and it is certainly the biggest claim to have fought all the way to judgment.

Aside from size, the case is a classic negligence claim. The Football League alleged that its losses were a result of Hammonds’ August 2000 merger partner Edge Ellison failing to give the correct advice on liabilities.

Rimer J dismissed that argument outright, asking in his judgment: “Is the solicitor supposed to review the whole range of commercial considerations that underlie a particular deal, work out which ones he is concerned the client may not have given sufficient thought to and remind him about them? In my opinion, the answer is no.”

In making the statement, Rimer J was following established case law, which has generally stated that businessmen should be capable of understanding commercial considerations without solicitors’ advice.

Following the decision, Hammonds’ managing partner Peter Crossley said: “This judgment confirms that the Football League’s losses on the collapse of ITV Digital were the result of its own decisions and conduct, not those of Edge Ellison.”

The case has been closely watched by the professional negligence community. Had Hammonds lost, the insurance industry would have taken the chance to raise indemnity rates for solicitors’ firms generally.

But Frank Maher, a partner at niche professional negligence firm Legal Risk, points out that the Football League case does demonstrate the dangers of merging with a firm and picking up its liabilities in the process. “It’s a stark reminder for firms that take over other practices,” Maher says.

The possibility of a claim against Hammonds was first mooted in August 2002, when The Lawyer revealed that the Football League was considering its options after losing its case against ONdigital owner Carlton Communications and Granada Media.

The league had entered into a broadcasting contract, known as the June Contract, with ONdigital, for matches played between 2001 and 2004. Under the terms of the contract, ONdigital was due to make two payments of £89.25m to the league, on 1 August 2002 and 1 August 2003.

The Football League was advised during its negotiations by Edge Ellison partner Richard Alderson and by Active Rights Management consultant and sports lawyer Stephen Townley. Townley’s eponymous practice Townleys was later to merge with Hammonds, but he has since left the firm.

In March 2002, ONdigital went into administration, and shortly afterwards Carlton and Granada filed a claim asserting that they were not liable for the payments. The Football League counter-claimed, saying that the companies were liable for ONdigital’s obligations.

In his August 2002 judgment, finding in Carlton and Granada’s favour, Mr Justice Langley said: “The undisputed fact is that no one representing the Football League even suggested, let alone requested, that the June Contract contain or be supported by any guarantee from Carlton or Granada.”

The decision prompted the Football League, instructing Mayer Brown Rowe & Maw partner Michele Freyne, to launch its claim against Hammonds in 2003. Hammonds and its insurers instructed professional negligence star Sarah Clover at Barlow Lyde & Gilbert to defend the case.

Clover later brought in Brick Court Chambers’ head Jonathan Sumption QC, a heavyweight – and expensive – choice, demonstrating the firm’s commitment to fighting the case. The Football League will be ruing that decision, faced with paying costs for a barrister who routinely commands more than £2m a year, but it proved to be a good one for Hammonds, whose bullish approach has been roundly vindicated.