Mr Justice Buckley ruled in the High Court last week that the firm failed to notice a discrepancy in a share agreement signed by client IML, a UK clothing manufacturer, requ-iring it to invest £5.5m over five years in Russian clothing manufacturer Bolshevichka.
The Russian government had earlier stipulated such an investment should take place over three years. A Moscow arbitration declared the agreement invalid as a result and IML failed to gain approval from Russia's federal anti-monopoly committee.
Coudert associate John Sheedy handled the case, despite having little experience of such transactions, although he was supported by a London partner. Sheedy is now based in New York.
Litigation partner Simon Cockshutt said: “The judgment is disappointing. It relates to a matter nine years ago at the beginning of privatisation in post-devolution Russia, which was dominated by social and political uncertainty and an incoherant legal structure. We believe the judgment failed to give due weight to the circumstances.”
IML instructed Sheedy to view the privatisation documents before the share purchase agreement (SPA) was signed, but he did so only once, although he could have done so on other occasions.
Coudert did not inform IML it was placing a limit on the scope of its work and allowed the SPA to be signed without having done due diligence. The firm failed to inform IML of this.
Coudert was criticised for counselling IML not to rush into the SPA within the 30-day deadline. “Such investigation should have been neither particularly time-consuming nor expensive to a firm holding itself out as a specialist in this field,” the judge found.
Judge Buckley also found no client letter, no attendance note or document setting out what Coudert was to do, and no record of when the firm was instructed.
A mid-March hearing will determine whether IML, now known as Normans Bay, suffered loss of chance, followed by a damages assessment.