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Forsters defeats professional negligence suit over Siberian oil deal

Forsters has successfully defended a £70m professional negligence claim taken against it by businessman Rupert Galliers-Pratt at London’s High Court.

A member of the Cayzer investment banking family, the dispute arose after Galliers-Pratt alleged that Forsters acted negligently and in breach of its contractual duties after he found defects in the share purchase agreement used to buy stakes in three Russian oil companies. Galliers-Pratt has instructured Forsters to execute a deal for the 49% stake in Yugra Balt Invest (YBI) owned by Interguarantee in 2010.

Having brought the damages claim through Khanty-Mansiysk Recoveries, of which Galliers-Pratt is director and sole shareholder, the company argued that Irtysh Petroleum lost the opportunity to develop and sell recoverable oil reserves of 70m barrels and prospective and possible reserves of a further 112m barrels as a result of having ‘lost its interest in the licence holders’ of the three Siberian oil blocks. Jeremy Whiteson, Forsters’ former head of corporate who is now at Fladgate, was the partner instructed by Irtysh Petroleum to handle the transfer.

The claim was around double the revenue of Forsters, which in the last financial year saw income rise 13% to £46.7m.

Heard in early March and presided over by Sir Bernard Eder, who is no longer a High Court judge but as an arbitrator or mediator at Essex Court Chambers, the court found in favour of Forsters because there had been a prior settlement agreement.

In his judgment, Eder said the dispute between the parties concerned only the quantum of the invoice – specifically the propriety of including certain time billed and the amount of time billed; and that prior to the execution of the settlement agreement, no allegation had been raised that Forsters had failed to carry out its duties with reasonable skill and care still less that it had failed to carry out certain duties at all.

Further, Eder added that no damages claim by Irtysh ‘of any kind had been intimated let alone the kind of damage now claimed, relating to the failure to complete the registration of Irtysh’s ownership of YBI.’

‘I did not understand [respondent’s counsel] to dispute any of the foregoing and, for present purposes, he was prepared to concede that Irtysh and RGP had no actual knowledge of any lack of proficiency of Forsters’ work on the project at the time of the settlement agreement.’

Such [a] proposition is corroborated by Forsters’ professional duties towards Irtysh because if Forsters had had any reason to believe that it had negligently or in breach of contract caused damage to Irtysh it would have had a duty to tell Irtysh and advise it to seek independent advice; that the fact that Forsters did not do so leads to the conclusion that there was no reason for the parties to believe that Forsters had negligently caused damage to Irtysh.’

Eder declared that the claimant was ‘caught’ by the settlement agreement and that Forsters are entitled to a declaration to such effect. Counsel have been asked to draft an order for approval including costs as well as further directions.

London litigation boutique Humphries Kerstetter served as counsel for the claimant with former Linklaters duo, Mark Humphries and Kristopher Kerstetter, taking the mandate. They retained Simon Davenport QC of 3 Hare Court to act as counsel. Bond Dickinson instructed 4 New Square duo Jamie Smith QC and Anthony Jones for the respondent. Forsters declined to comment on the matter.