Litigating London 2012: Allen & Overy sued by Olympic Stadium owners

October 25, 2020

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3 min read

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What's going on here?

The owners of the London Stadium are suing magic circle law firm Allen & Overy because of the advice they gave when West Ham secured a 99-year lease over the stadium.

What does this mean?

Allen & Overy (A&O) are being sued for professional negligence by the London Legacy Development Corporation (LLDC) – a government-backed company created to oversee London’s Olympics sites.

A person with knowledge of the situation commented that the case “will revolve around the drafting of the concession agreement, and the problems that this has caused”. These problems include a £3.1m conflict over stadium capacity and a dispute regarding the colour of synthetic grass around the field. LLDC are hoping to prove that A&O’s negligent structuring of the contract created confusion, ultimately costing LLDC £28.7m. For their claim to be successful, LLDC will have to prove that:

(1) A&O failed to perform their responsibilities to the required standard; and

(2) this caused LLDC to suffer a financial loss.

The claim has attracted significant public attention as financial reports published by accountancy firm Moore Stephens concluded that: “investment by the public purse [into the stadium] will never be recovered”.

What's the big picture effect?

LLDC’s case against A&O demonstrates that contracts and legal advice are now being reviewed in light of unforeseen circumstances. This is particularly the case in event-based sectors such as LLDC’s, where their main form of income (ticket receipts) is suppressed due to current coronavirus restrictions. As a result of this, law firms may now become cautious when drafting agreements that do not give their clients a “covid out”, as this could expose them to future claims of professional negligence. In this incident, LLDC’s claim could take up to five years to resolve, showcasing the damaging effects of such accusations.

Law firms making efficient use of resources has never been a higher priority. A recent study from the Law Society indicates that firms are forecasting a 10-20% drop in revenue for the 2020/2021 financial year. Consequently, firms will now have to scrutinise how resources are being used to offset the financial damage caused by coronavirus. A rise in professional negligence claims will also force insurers with litigious client bases to reassess the way they operate. This may lead to an increase in insurance premiums which will ultimately cost law firms more money in the long-term.

In practice, LLDC’s suit looks likely to fail. A large proportion of the financial damage caused by the lease agreement was due to Boris Johnson’s handling of the deal in 2011. A report commissioned by London mayor Sadiq Khan revealed that LLDC contracted on the basis of “incorrect financial estimates”. These estimates inevitably contributed to the substantial losses the company now faces and looks to redeem from A&O.

On the whole, LLDC’s claim may encourage undeserving and resource-draining claims to be filed against law firms. These types of disputes will only further drain resources which are already strained due to the Covid-19 pandemic. As a result, firms may now prefer to hedge their bets and invest in risk assessment checks to prevent the potentially catastrophic effects these claims can have on their bottom lines.

Report written by Luke Cuthbert

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