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Maxwell Batley has successfully defended a $70m (£45m) High Court claim, believed to be the largest negligence action against a law firm since the demise of the Solicitors’ Indemnity Fund (SIF)
The $70m claim posed a potentially serious financial threat to the 16-partner firm, as its professional indemnity insurance cover stood at just £20m at the time the claim was issued. The claim was issued by employment consultancy and actuarial firm Watson Wyatt, which itself was being sued for $70m by Belgian telecommunications company and Maxwell Batley client Sita. Sita was suing Watson Wyatt for mishandling the creation of an employee share scheme which resulted in Sita having to pay $58m (£37.1m) in social security charges. Watson Wyatt then tried to pass the claim on to Maxwell Batley, which remains Sita’s law firm, as it had drafted the legal documents for the share scheme. Shortly after Sita’s action against Watson Wyatt commenced, Watson Wyatt made a part 20 claim against Maxwell Batley for up to the full $70m. Then, in an unexpected twist, Watson Wyatt settled with Sita for $35m (£22.4m) this April. But the consultancy continued with its claim against Maxwell Batley, this time asking the firm to stump up the £22m it had paid out. This claim is understood to be the largest brought against a law firm since solicitors came onto the open insurance market in September following the collapse of SIF. “The partners were looking at being liable for the shortfall, as the original £45m claim would have exceeded their cover,” a lawyer involved in the case commented. Another lawyer close to the situation said: “The firm wasn’t facing imminent closure, but if the claim had succeeded, the knock-on effect on its insurance premiums would have had serious financial consequences.” Maxwell Batley head of litigation Philip Knights confirmed that the firm’s indemnity cover was lower than £45m at the time the original claim was notified. But he said the firm was not considering moving to a limited liability partnership (LLP), even after this scare. “We’re not considering LLP to protect us from professional indemnity claims, although we do cap liability with clients on a case-by-case basis,” he said. Maxwell Batley was represented by Barlow Lyde & Gilbert partner Richard Harrison and Justin Fenwick QC, head of chambers at Four New Square. Simmons & Simmons and Christopher Moger QC of 4 Pump Court acted for Watson Wyatt.