A High Court judge has ordered global firm King & Wood Mallesons to pay damages over negligent advice it gave to a commodities business intelligence firm – although they were only 5% of the sum claimed.
CRU Group was awarded £118,125 from KWM, after Mr Justice Dingemans (pictured) found the firm had acted in breach of its duty by failing to identify and ask for missing documents, leading it to give ‘incorrect advice’.
But in Commodities Research Unit International & Others v King & Wood Mallesons, Dingemans dismissed a further negligence claim against the firm. The award he gave was also substantially below the £2.26m in damages CRU originally claimed.
KWM said it had been 'vindicated’ by the court on all the major allegations made against it, and is considering an appeal in relation to the damages that were awarded.
The claim centred on advice that King & Wood Mallesons, then SJ Berwin, gave in 2007 and 2008 over the termination of CRU’s former chief executive's employment.
The claim focused on its advice over a ‘long-term incentive plan’ agreement, which made up part of the former chief executive’s remuneration. The agreement provided for payment of a percentage of the sale proceeds if CRU was sold for more than £11m.
CRU claimed KWM was asked to give advice about the incentive plan which, had it been given, would have led to an email being discovered that would have shown the chief executive had no entitlement under this agreement if he left the company prior to a sale being completed.
Instead the email was not discovered until October 2010. When the group notified the former chief executive of its existence and said it was not liable to pay the incentive, he started proceedings against the company.
As a result of the proceedings CRU agreed to pay £1.35m to the former chief executive, incurring legal costs of £838,567 and costs of wasted management time of £71,000. It claimed it should be awarded damages to cover this as it said the proceedings would have been avoided had the email been discovered earlier.
However the judge found that KWM had not given negligent advice in this area, as he said the firm was never instructed to advise on the agreement.
But he upheld a further claim that the firm should have advised CRU that it could terminate the chief executive's contract immediately. Instead the firm relied on a contract that said he was entitled to nine months' notice.
The judge found KWM breached its standards of care, as it did not identify that an essential document was missing when it was asked to give advice on ending the chief executive’s employment.
A spokesperson for KWM said: ‘The court reached a sensible conclusion of what a lawyer might reasonably be expected to do when faced with a request for urgent advice and found that we met the standard required of expert practitioners in their field. The plaintiff recovered only 5% of the sum they sought from us.
'We are considering an appeal in relation to that aspect.’