Withers ordered to pay out £1.6m over negligence claim

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13 March 2014


High Court: three heads of claim failed

Leading London law firm Withers has been ordered to pay £1.6m in damages after the High Court upheld a claim of professional negligence over the drafting of an LLP agreement.

The court in Wellesley Partners LLP v Withers LLP [2014] EWHC 556 (Ch) also ruled that the absence of an attendance note does not necessarily count against a solicitor facing a claim.

In 2008 Withers acted for executive search company Wellesley Partners (WP) over the admission of a number of new partners to its LLP, including a Bahraini bank called Addax Bank, which was to invest about £2.5m to acquire a 25% interest in the partnership.

This required a new LLP agreement. It was agreed that Addax should have an option to withdraw half its capital contribution, which the new agreement said it could do at any time within the first 41 months. However, WP said its instructions to Withers were that the option should only be exercisable after 42 months, which was reflected in an earlier draft. Addax exercised the option after 12 months.

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Withers’ defence was that it made the change on the instructions of WP’s principal owner, Rupert Channing. Though the lawyer involved had no recollection or record of the conversation during which the firm claimed the instructions were given, he said he would not have changed the draft otherwise.

Mr Justice Nugee was urged to place weight on the failure to make an attendance note, but said: “I do not accept that as a general principle. It is of course good practice to make attendance notes, precisely because the absence of them makes it more difficult to establish what instructions and advice were given, but I do not accept that the absence of an attendance note in some way counts against the solicitor in forming a view as to where the truth lies.”

The judge had to reconstruct what happened during the telephone conversation and after. He found that there must have been some discussion of the clause, but said Mr Channing did not intend Withers to make the change, nor indeed did he understand that it had done so.

He ruled that the solicitor “must have either misunderstood the instruction, or noted it down wrong, or when he came to redraft [the clause] misremembered what he had been instructed”.

Nugee J went on to dismiss three other claims of negligence, however.

The damages mainly represented the loss of profit from not undertaking expansion that WP would have done had Addax not withdrawn its money.

In a statement, Withers said: “We respect the judgment of Mr Justice Nugee. We are pleased that he dismissed three of the four claims against us and, in relation to the fourth claim, acknowledged the uncertainty as to what instructions our client had given us.

“The amount of damages awarded is one-fifth of the amount claimed, and we believe our former client could have avoided incurring large costs had he accepted our settlement offer.”



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