Posted by Nicola Radcliffe, Senior Associate
Former Arsenal shareholder brings negligence claim against law firm over shares sale
Nina Bracewell-Smith has filed a claim for £11.6 million for professional negligence against law firm Linklaters LLP and accountants Deloitte. She alleges the firms neglected to advise her of the tax liabilities she would incur for selling her Arsenal shares to US businessman, Stan Kroenke.
In 2011, Bracewell-Smith sold her 15.9% shareholding to Kroenke Sports & Entertainment (“KSE”). As a result Kroenke’s company became the majority shareholder of the club, holding 67.09% of the shares. Alisher Usmanov’s Red and White Holdings became the second largest shareholder with 30.04% of the shares. KSE and Usmanov have continued to struggle over the ownership of the club in the intervening years and it is well known that Bracewell-Smith has expressed regret after selling out and allowing KSE to take control.
Evidently, the problems didn’t stop at the football politics caused by the transfer. In her particulars of claim, the former shareholder alleges that her solicitors gave negligent advice on loan notes she received as payment for her shares causing her to face a substantial tax bill that she was not advised could have been mitigated. She claims that the firm failed to advise her properly on the tax she would incur as a UK citizen selling bonds situated outside of the UK. The claim states that her shares “would be liable to capital gains tax (CGT) on a remittance basis in the event that the disposal took place in exchange for non-qualifying corporate bonds sited outside the UK”.
The claim also states that but for the mistakes of Linklaters she would not have sold her Arsenal shares to KSE but rather would have sold them to Alisher Usmanov in 2011 or another shareholder, resulting in different leadership of the club. Bracewell-Smith states that she was not straightaway told of the error as to the tax consequences of the sale, despite the firm becoming aware of the error at an earlier date. The firm subsequently failed in its efforts to convince KSE to take steps to reduce her tax liabilities. She consequently moved to Monaco in order to reduce her tax exposure although her re-location was said in itself to have cost over £1.2 million. Her claim includes losses for the errors resulting in the extortionate tax bill, the costs of her move to Monaco and general damages for distress and inconvenience.
Although this is a high profile claim given the parties and sums of money involved, it serves as a timely reminder for all law firms and accountants that they should exercise extreme caution when advising clients on the sale of assets and cross-jurisdictional tax issues.
The claim, issued nearly seven years after the shares were sold, has evidently not been resolved through mediation or other forms of dispute resolution. It will therefore be interesting to see how the claim progresses from now; if it makes it to court, the litigation will be long, complicated and expensive and will no doubt require expert opinion on the advice provided by the allegedly negligent solicitors.
Our team of dispute resolution specialists have extensive experience of claims against solicitors, accountants and other professionals. If you feel that you or your business has suffered as the result of negligent professional advice please contact the Dispute Resolution team for independent specialist advice:
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