West End firm Finers has agreed to pay more than £8m in an out-of-court settlement of a negligence claim by a former client, South Australian Asset Management Corporation.
The company - formerly the State Bank of South Australia - claimed that when it made a series of commercial property loans to another Finers client, the firm failed to point out discrepancies between the property valuations for the bank and the actual purchase price of the properties.
The bank was claiming for breach of contract, breach of trust, negligence and also for breach of fiduciary duty.
David Swede, the managing partner at Finers, which is insured against the claim, said the matter had been hotly contested and that he had settled on the "excellent advice of lead counsel and Reynolds Porter Chamberlain".
He said the matter was "intricate and troubling, which raised issues of great importance to the profession". In particular, he contrasted the differences in standards expected of solicitors in the late 1980s and early 1990s to those expected today and the "standards expected of lenders when committing themselves to substantial lending".
Jonathan Ross, the litigation consultant at Denton Hall, who handled the claim for the bank, said that the case was both complex and also "strenuously contested". He added: "The case centred around the duties of solicitors to advise lenders as to matters affecting the value of their security and the credit-worthiness of the borrowers.
"In particular, it was alleged that the defendants should have drawn attention to the discrepancies between the valuations relied upon by the bank and the actual purchase prices of the security properties."
A matter of days before the High Court trial was due to start, Finers made an "acceptable offer" and a compromise was reached.