Law360, London (December 18, 2023, 7:27 PM GMT) -- The former owner of an English rugby team has sued Kennedys and one of its former partners for more than ?73 million ($92 million), alleging that bad advice caused a cascade of financial problems that led to the club's collapse.
Derek Richardson, who owned Coventry-based Wasps Rugby Football Club, said in a High Court claim made newly public that advice from Robert Dawbarn and Kennedys led him into an investment deal that encumbered him with almost ?1.5 million in fees, caused the value of his ?71 million shares to plummet and forced the club into administration.
Richardson said in the filing, dated Dec. 4, that Dawbarn failed to properly advise him of the risks of transferring his shares to a Maltese fund in a bid to raise money for the club. He claims that he would not have entered into the transaction had Dawbarn made the dangers clear.
Richardson said that the deal stripped him of control over the company and left the club unable to secure critical funding needed to pay creditors and its tax bill.
"Mr. Dawbarn breached his duties to exercise reasonable skill and care to be expected of a solicitor with particular knowledge and skill as a corporate and banking partner in a City commercial law firm, for which breaches of duty, Kennedys are liable," the claim says.
The former insurance broker is suing around a year after the 156-year-old club plunged into administration in October 2022. The team exited administration weeks later under new management and has announced plans to begin playing again in 2024 or 2025.
Richardson, who bought the Wasps in 2013, said in his claim that the club's downfall came as a result of a 2017 deal to raise funds by transferring his shares into a Malta-based collective fund in exchange for so-called investor shares.
He alleges that Dawbarn failed to advise him that the deal would transfer control of the club to the fund, which was run by his financial advisor.
"Any legal adviser acting with reasonable care and skill would not have allowed their client to believe that they retained ultimate beneficial ownership, such a legal adviser would have corrected any statements that conveyed this message," the claim says.
Richardson said that his financial advisor soon began making demands for fee payments, which eventually totaled almost ?1.5 million between 2017 and 2022, according to the claim.
He also contends that the club's connection with the Maltese fund meant that lenders, including a bank and two local authorities, would not provide loans of up to ?8.2 million needed to square the club's finances following the construction of a training ground.
Richardson ordered his financial advisor to shut down the fund after lenders expressed concerns that Malta existed in a money laundering compliance "gray zone," but that his advisor raised obstacles that delayed the move, the claim says.
Richardson contends that the delay meant the club was unable to pay creditors on time, refinance a ?35 million bond or pay its taxes, prompting HM Revenue and Customs ? the U.K.'s tax authority ? to petition for the club's winding up.
A spokesperson for Richardson told Law360 that the former club owner "has been let down and had no option but to issue proceedings."
"Pursuing this court action has not been a decision Mr. Richardson has taken lightly," the spokesperson said. "Mr. Richardson relied on Kennedys' and Mr. Dawbarn's professional advice to fulfil his instructions."
Always a Wasp
