Britain's leading law firms are braced for the sort of negligence suits that have recently plagued accountants following the news that Clifford Chance is facing a C$1.3bn (pounds 610m) claim from four Canadian banks that suffered heavy losses in the collapse of Canary Wharf in London's Docklands.
The banks - Royal Bank of Canada, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and National Bank of Canada - allege that incorrect information from Clifford Chance, the City's largest firm of solicitors, put them at a disadvantage during the restructuring that followed the project's failure and placing into administration in 1992.
The claim, which is thought to be the biggest suit against a London law firm made public, is contained in writs filed simultaneously in Britain and Canada by Freshfields, another leading international law firm, and two Canadian firms, Tory Tory DesLauriers & Binnington, and Blake, Cassels & Graydon.
It arises from loans totalling pounds 450m made by the banks to Olympia & York Developments, the holding company for the Canary Wharf development. The banks allege that Clifford Chance advised them in 1989 that the company was a private limited company when in fact it had unlimited liability.
This meant, they add, that they were unable to exercise their rights over the money without becoming liable for the project's entire debt. As a result of not intervening they were excluded by the administrators from the restructuring project.
The banks' involvement ended late last year, when a consortium led by Paul Reichmann, whose family owned the collapsed Olympia & York, bought it. The claim against Clifford Chance was filed last June - before the sale was completed.
The administrators, Ernst & Young, would not comment. But Clifford Chance, whose senior partner is Keith Clark, released a statement saying it was "confident that there is nothing to worry about".
It added: "To date no evidence has been produced to us that any loss was incurred by these banks in relation to these loans following the collapse of Olympia & York as a result of any alleged negligence on the part of Clifford Chance. If the banks pursue the claim, they will have to provide evidence of the alleged loss."Reuse content