Professional Negligence Claim Brought By The Former Owners Of Sheffield United Football Club Against Their Former Solicitors

Daniel Brumpton

The decision in the negligence case brought by the former owners of Sheffield United Football Club against their former solicitors has been published. Mrs Justice Bacon dismissed the negligence claim potentially worth £150m on the basis that none of the breaches of duty caused the former owners any loss.

Cutlers Holdings Ltd & Anor v Shepherd And Wedderburn LLP [2023] EWHC 720 (Ch)

Background

Sheffield United Limited (SUL) – renamed Cutlers Holdings Limited – issued proceedings against Shepherd and Wedderburn LLP over advice given in relation to its agreement to sell the club and its assets to HRH Prince Abdullah bin Mosaad bin Abdulaziz Al Saud of Saudi Arabia (via his company UTB).

The firm was instructed to draft an Initial Investment Agreement (ISA) between Kevin McCabe (the de facto controller of SUL) and UTB. The firm also drafted various option agreements relating to properties including the ownership of Bramall Lane (the stadium where Sheffield United FC play their home games). It was intended that in the event of the sale of the remainder of SUL shares to UTB, the properties (including the stadium) would also be included.

In 2017 the Prince exercised a call option under the ISA. He could not, however, afford to pay for SUL’s shares and the properties. As such, his lawyers found a solution in the form of two “devices”. The first being, the creation of a new company under his control call UTB 2018 which received 40% of the shareholding of Sheffield United (“Device 1”). The second being, an instruction that SUL transfer its shares (upon purchase) to other individuals as opposed to SUL (in effect meaning SUL did not own 75% of the shareholding meaning it/the Prince did not have to purchase the properties) (“Device 2”). This led to a dispute concerning the wording of the ISA which was heard at trial in 2019 before Mr Justice Fancourt in which the Judge found largely in favour of UTB.

As a result, Mr McCabe sought to bring a claim against his former solicitors, amongst other things, on the basis that:

  1. They had drafted the ISA and property option agreements which had been exploited by the Prince/UTB;
  2. They failed to advise SUL in 2017 of the risk that UTB might try to use Device 1 as an option to avoid purchasing the properties; and
  3. They failed to advise on a self-interest conflict, having continued to act for SUL in the litigation.

In addition to bringing a claim against the firm, Mr McCabe also brought a claim against two partners personally for alleged breaches of personal duty of care.

Decision

In the negligence claim, Bacon J found that the firm had breached its duties:

  1. In the drafting of the ISA as it allowed the Prince to use Device 1 and Device 2;
  2. By failing to warn SUL of the risk from that wording would allow the use of Device 1 or to suggest alternative drafting; and
  3. By failing to advise on the self-interest conflict.

However, Bacon J went on to say that in terms of causation, these breaches made no material difference and the subsequent litigation would have happened anyway. For example, it was “very likely” that the Prince would have agreed to amend the offending clause in the ISA had he been asked in 2013, but he would still have used, and indeed did use, Device 2 to avoid the 75% share issue.

Furthermore, in relation to the firm’s failure to advise on the risk that UTB might try and use Device 1 to avoid the property options Bacon J said that even if properly advised, “SUL would most likely have made exactly the same decision”. As such, the litigation would have ensued anyway.

Claims against the individual partners were also dismissed.

How can we help?Cutlers Holdings v Shepherd And Wedderburn

Daniel Brumpton is a Partner in our Dispute Resolution team, specialising in professional negligence and commercial litigation.

For more information on the subjects discussed in this article, please contact Daniel or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or contact us via our online enquiry form.

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