Deloitte and Linklaters play blame game over Arsenal sale lawsuit

16 March 2018 Consultancy.uk

Deloitte and Linklaters have pointed the finger at one another over a UK lawsuit relating to the sale of Arsenal Football Club. Fortmer shareholder Nina Bracewell-Smith is suing the two firms for alleged negligence, claiming advice from the corporate titans led to the legitimate taxation of the multi-million sale of her stake in Arsenal to current owner Stan Kroenke.

Arsenal Football Club has mostly made headlines for their on-pitch woes in recent months, as inconsistent form has seen the North London footballing institution dumped unceremoniously from the FA Cup, by Championship side Nottingham Forrest, and thumped mercilessly by Manchester City in the League Cup final in February. Despite a promising Europa League campaign still offering up a route back into the Champions League next term, this has still seen growing clamour amid fans for the club’s most successful manager, Arsene Wenger, to be sacked at the end of the campaign.

However, away from the turf, the Gunners have also made headlines thanks to a continuing legal saga surrounding their former ownership. In 2011, the Premier League club agreed to a £731 million take-over by US billionaire Stan Kroenke. With the club desperate to invest in its squad, following a then-six-year trophy droubt, Kroenke – who already owned close to 30% of the club, said he had offered £11,750 pounds per share, in a bid to rest full control of the club from its shareholders.

Kroenke, who also owns several major sports teams in America, took his stake in Arsenal to a 63% majority, by securing the backing of 16.1% shareholder Danny Fiszman and 15.9% shareholder Nina Bracewell-Smith. Bracewell-Smith was advised on the sale by Big Four professional services firm Deloitte and Magic Circle law firm Linklaters – having first engaged them when she was approached by Kroenke in 2011.

In since deleted tweets Bracewell-Smith recently said that she “deeply” regretted selling her shares in the club to Kroenke, however, and has since subjected both Deloitte and Linklaters to a high profile legal battle.

Bracewell-Smith filed court documents to sue the duo in the Summer of 2017. According to the papers, lodged at London’s Commercial Court on 31st July, Bracewell-Smith – opted to bring a professional negligence claim against Linklaters and Deloitte.

West End firm Gordon Dadds are acting for Bracewell-Smith in the claim, and the lawyers for Bracewell-Smith argued that negligent advice from the pair led to the siting of loan notes in the UK rather than overseas, opening their client up to capital gains tax liabilities. This prompted Bracewell-Smith to move to Monaco to avoid further taxation, with Bracewell-Smith claiming has incurred ‘losses’ of more than £10 million, on top of her £1,249,815 move to the city-state tax-haven, and more than £400,000 in adviser fees. Her claim also argued that if it was not for the allegedly negligent advice she received, she may have sold her stake in the club to current 30% shareholder Alisher Usmanov, “or some other purchaser."

Following these allegations, the two firms have both pointed the finger at one another for errors made in the sale, according to High Court documents examined by the UK press.

Linklaters, which is being advised by Clyde & Company, said that it was not responsible for the commercial terms or the tax aspects of the deal, arguing that they were the responsibility of Bracewell-Smith and Deloitte respectively. Returning fire, Deloitte in turn claimed that it “did not actually know that the loan notes would be sited in the UK and did not have any duty to check.”

The global professional services firm, which is being advised by Reed Smith, added that, “Linklaters knew or should have known … because they had been retained to advise her on the legal documentation relating to the sale of her shares.”