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Withers to appeal £1.6m negligence finding as former client also appeals point of judgment

Leading private client firm Withers has confirmed it will appeal a recent High Court decision that ordered the firm to pay £1.6m in damages after upholding a professional negligence claim, while the claimant Wellesley Partners (WP) has said it also intends to appeal a finding of the judgment.

Heard over a nine-day trial in October 2013, the dispute arose after Withers acted for executive search company WP in relation to the admission of new partners into the partnership, which subsequently required the drafting of a new LLP agreement. As part of the agreement, Bahraini bank Addax Bank was to make a significant capital contribution (about £2.5m) and acquire a 25% interest in the partnership.

This subsequently required the drafting of a new LLP agreement, which was completed on 14 May 2008. It was agreed between WP’s founder Rupert Channing and Addax that the latter should have an option to withdraw half its capital contribution. The LLP agreement allowed Addax to exercise that option at any time during the first 41 months of the agreement.

However WP alleged that its instructions to Withers were that Addax’s option should only kick-in after 42 months (as an earlier draft had provided) and that Withers altered this provision without any instructions to do so. Withers’ defence was that it made those changes on Channing’s instructions.

Relying on telephone call records between Channing and Withers, Mr Justice Nugee held that Withers must have either misunderstood the instruction or noted it down wrong or misremembered when it came to redrafting the clause agreement.

He went on to dismiss three other claims of negligence against the firm. The damages awarded were broken down for US loss of profits (£1,057,290); London loss of profits (£430,023) and ‘diversion of Mr Channing’s time’ (£125,000). He added that he was not in a position to rule on costs and this should be referred to a costs judge if the parties are unable to agree.

Withers has now been given permission to appeal the judgment, although no official date has been set.

WP has also announced its intention to appeal the judge’s finding that Withers was not negligent in its handling of events when the alleged error came to light.

Atkin Chambers’ Fiona Parkin QC and Mischa Balen (instructed by Enyo Law partner Simon Twigden and associate Charlie Morris) are representing the claimant while Hailsham Chambers’ Michael Pooles QC and 2 Temple Garden’s Charles Dougherty QC (instructed by RPC partner Paul Castellani) are acting on behalf of the defendant.

WP initially filed a claim to damages totalling £13m which was reduced to £8m. In relation to the award, Withers said last week: ‘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.’