London Underground v Freshfields; Herbert Smith

London Underground Ltd v (1) Freshfields Bruckhaus Deringer; (2) Herbert Smith

October, 15-20 days, Commercial Court

For the claimant LUL:

4 New Square’s Justin Fenwick QC leading Stephen Midwinter of Brick Court, instructed by Ince & Co partner Charlotte Davies

For the defendant Freshfields:

One Essex Court’s Laurence Rabinowitz QC to lead Sa’ad Hossain, instructed by Mayer Brown partners Ian McDonald, Sean Connolly and of counsel Ruth Malone

For the defendants Herbert Smith:

Fountain Court’s Tim Dutton QC to lead James McClelland of the same set, instructed by Herbert Smith partner Martin Bakes

Laurence Rabinowitz QC
Laurence Rabinowitz QC

It is rare for a top-flight City firm to go into battle in the High Court and rarer still for two firms to do it at the same time.

In October Freshfields Bruckhaus Deringer and legacy Herbert Smith will join together to fight a £140m claim brought against the two firms by London Underground Ltd (LUL). 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.

One Essex Court’s Laurence Rabinowitz QC is due to appear for Freshfields alongside Fountain Court’s Tim Dutton QC, drafted in for Herbert Smith.

They will face negligence heavyweight Justin Fenwick of 4 New Square, who is taking a break from his usual defendant stance to act for the claimant LUL.

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.