Freshfields faces £68m claim over Department for Transport advice

Freshfields Bruckhaus Deringer is facing a potential negligence claim worth more than £68m from the Department for Transport (DfT) for advice it gave the organisation in 2006 in relation to a rail franchise agreement with Stagecoach South Western Trains (SSWT).

The firm received a letter before action from the Employment, Commercial and Companies Division of the Treasury Solicitor’s Department, dated 13 June 2011, which accuses the firm of negligently deleting a clause in the agreement that resulted in the DfT having to pay out £66.9m to SSWT, as well as £1.3m in costs incurred dealing with the dispute and arbitration proceedings.

The dispute centred on the period over which revenue shortfalls at SSWT should be assessed and the amount of revenue support compensation receivable from the Government. The letter alleged that Freshfields’ deletion of the clause was spotted by SSWT’s lawyers, Herbert Smith, with the company subsequently claiming revenue support compensation from the Government.

The letter stated: “Negligently and in breach of contract Freshfields deleted the Antidote Provision from the Revenue Support Provisions contained in the Franchise Agreement and/or failed to give the claimant any or any adequate advice in this regard… By contrast, Herbert Smith immediately spotted the deletion and explained the potential consequences of this to their client.”

It continued: “Had Freshfields not acted negligently and/or in breach of duty, the deletion of the Antidote Provision would never have been proposed by Freshfields, alternatively would have been rejected by the claimant if proposed and its true implications explained to it. The antidote provision would thus have remained in the franchise agreement thereby preventing SSWT from recovering an unintended retrospective windfall.”

A Freshfields spokesperson said: “In 2006, the firm acted for the Department for Transport on the negotiation of a regional rail franchise agreement with South West Trains. Some aspects of this mandate are currently under discussion but we are confident that this work was done correctly at that time.”

Mayer Brown is advising Freshfields on the matter.