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It is June 2000, the height of the digital television frenzy. The Football League is about to sign a rights deal with ONdigital (the precursor to ITV Digital), owned by Carlton and Granada, which will give its clubs £315m over five years.
There is probably a niggling feeling that the League is getting an incredibly good deal here; and the League's law firm, Edge Ellison, is under pressure to get the contract with Carlton and Granada signed quickly. An initial bid document is drawn up by partner Richard Alderson. Rather than labouring the point that Carlton and Granada should be liable for paying the £315m to the League should ONdigital default, Edge Ellison lawyers insert the following line into the contract: "ONdigital and its shareholders will guarantee all funding to the FL outlined in this document."
In just over two years time, that piece of drafting will come to be seen as the potential death knell for many of the League clubs.
Drafts of a long form agreement between the League and ONdigital were also circulated. None of these drafts contained a reference to Carlton and Granada providing a parent guarantee to the deal.
A year later, the television rights frenzy had abated. By November 2001 it transpired that ONdigital, renamed as ITV Digital, was in trouble and may be abandoned by Carlton and Granada. Press speculation that ITV Digital was on the verge of collapse was leading League insiders to question whether Carlton and Granada would cough up the remainder of the £315m owed to them.
And so in December 2001, Alderson, the Edge Ellison partner whose firm had in the interim merged with Hammond Suddards, wrote to ITV Network limited asking for parent company guarantees.
"Given all the paper talk about the alleged intentions of Granada and Carlton over the last few weeks, the future solvency of ITV Digital has become an issue and needs to be dealt with in the long form agreement. The Football League must now look for parent company guarantees from Granada and Carlton. This was envisaged in ONdigital's bid document and so will come as little surprise," Alderson wrote.
But then came the bombshell: instead of agreeing, Carlton and Granada responded with a short, sharp "no". The League was in trouble.
A few months later, at the end of March 2002, ITV Digital was placed into administration. The League started to make noises about suing Carlton and Granada - but by now, Hammonds was no longer on record as acting for the League. The firm had been replaced by Lawrence Graham.
In May 2002, Carlton and Granada went to court seeking a declaration of liability over ITV Digital's debts. And here comes the next crucial moment: Charles Flint QC, the joint head of Blackstone Chambers who had already been retained by Hammonds on this matter, told the League that there was a 50-50 chance of winning against Carlton and Granada and that the parent guarantees could stand. The League decided it wanted its day in court.
Nick Craig, in-house solicitor at the League, stated that any possible claim against Hammonds could not be considered at the same time as the League was starting the Carlton and Granada case. He said: "Our view was: if there was a parent guarantee, we win; if there wasn't a guarantee and we lose, we have to look at Hammonds and take a view on that."
The League lost the High Court case on 1 August 2002. In the weeks since that case, it was becoming increasingly apparent that the League was making Flint the fall guy. It owed him £45,000, but was not keen on paying up.
Yet Flint only gave the League a 50-50 chance of winning - hardly gung-ho advice. So why was the League reluctant to pay him?
According to reports from lawyers close to the case, on the Sunday before the hearing started, Flint rang Lord Grabiner QC, counsel for Carlton and Granada, to say that neither Granada chairman Charles Allen nor Carlton chairman Michael Green would be questioned. Flint's decision not to take the opportunity to question Allen in the witness box
was much resented by the League.
"The League was very miffed about Flint not calling Allen or Green up. This was always going to be a gladiatorial case," said a lawyer involved in the case.
Craig said: "The League was unhappy with the way the case went at trial. But I won't be drawn into discussions over payments."
Flint could not be reached at the time of going to press and a spokesperson for Blackstone Chambers declined to comment, citing client confidentiality.
However, a League source has told The Lawyer that the organisation will obviously end up paying Flint. The League instructed City firm Lawrence Graham on the case against Carlton and Granada and Flint's £45,000 fee will be a disbursement of Lawrence Graham's bill, which is believed to total around £300,000.
"We would not like to pay [Flint], but if we don't this will hurt Lawrence Graham, who we were very happy with," the League source said.
The source added that there was no intention to sue Flint and that there was no suggestion that the League was misled.
However, Hammonds is not out of the woods yet. Flint has been replaced by another barrister, whose name the League will not reveal. The new barrister will investigate whether there are grounds to bring a claim against Hammonds. The League is also doing the legal work on the Hammonds
matter in-house and has not retained Lawrence Graham, purely for financial reasons.
Craig said that the League was actively investigating whether a negligence claim against Hammonds should be brought. "The issue of [a] possible [claim for] negligence cannot be ignored," he said. If the League does sue Hammonds, the claim could be for around £130m.
The League has done a broadcasting rights deal with Sky for around £50m, which mitigates its £178m loss over ITV Digital.
The contract between the League and ONdigital was drawn up in June 2000 by Edge Ellison partner Alderson. Edge Ellison merged with Hammonds that very month. According to sources close to the firm, Hammonds was insured for £110m in June 2000 and Edge Ellison is understood to have been indemnified for less than that. Hammonds is now insured for £200m.
The Lawyer understands that around a month ago Hammonds managing partner Chris Jones informed all his partners that the firm was indemnified for that amount.
Hammonds was unable to comment on the claim it may be facing, but last month issued the following statement: "Hammond Suddards Edge is aware of the press comment concerning possible legal action by the Football League in relation to the ITV Digital media rights deal.
Hammond Suddards Edge has had no communication from the Football League or its advisers with regard to this matter. Naturally, Hammond Suddards Edge will continue to observe its obligations of client confidentiality." (The Lawyer, 4 August.)
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