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A hollow victory: Former KWM client wins negligence case but takes home only 5% of damages claimed

King & Wood Mallesons (KWM) has been ordered to pay its former client Commodities Research Unit International (CRUI) damages of £118,125 after facing a professional negligence claim at London’s High Court.

KWM was accused of professional negligence by former client CRUI after it advised on the departure of the company’s chief executive. After mediation, CRUI paid out £1.35m to the former chief executive and then blamed KWM, seeking that amount plus £800,000 it incurred defending the proceedings, as well as compensation for management time.

In the London High Court  Justice Dingemans heard evidence from KWM’s former European head of employment Nicola Kerr, who since moved to Brown Rudnick in October 2015 and Catherine Briant, and received written evidence statements from Carl Richards and James Darbyshire, as the solicitors working for the firm at the material time.

In a decision handed down last Tuesday (5th April), the judge determined that ‘when [the firm] provided advice about the employment settlement agreement the solicitors acted in breach of duty in failing to identify the existence of the conditions of service and by failing to ask for the conditions of service, which would have meant the payment in lieu of notice clause would have been identified.’

However Dingeman J held that he did not consider the £800,000-plus costs paid by CRUI in its action a sum that can be claimed from KWM and that the client’s expenditure of legal costs was not caused by any negligent advice given by the solicitors.

Instead he awarded damages of just £118,125, significantly less than the £2.15m originally claimed, constituting just 5% of the total sum. This was because the judge felt there was a 35% chance that CRUI could have avoided paying the final 25% of the chief executive’s long term incentive plan had the advice not been negligent.

It follows an earlier decision in January that saw KWM win a key argument over document disclosure in the case and access to certain communications between CRUI and its counsel Norton Rose Fulbright in the underlying suit.

Hailsham Chambers’ Michael Pooles QC and 11 King’s Bench Walk barrister Nigel Porter were instructed by RPC for the defendant while 4 New Square silk Nicholas Davidson QC and 7 King’s Bench Walk barrister Michael Ryan were instructed by City firm Fox for the claimants.

In a statement, KWM said: ‘We have been vindicated by the court on all of the major allegations that were made against us. 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.’