Wragges ordered to pay £7.65m to compensate for negligent advice

The High Court has ordered Wragge & Co to pay £7.65m to former client Amalgamated Metal Corporation (AMC) for negligently failing to advise it on how to deal with a group litigation order (GLO) against HMRC.

According to Mr Justice Steel, Wragges acted outside its authority when it accepted a £9.4m settlement deal from HMRC on behalf of AMC in April 2003.

Wragges had originally been instructed by AMC to act in the GLO, which related to advance corporation tax (ACT) owed to the company by HMRC.

The litigation arose after the European Court of Justice (ECJ) ruled in 2001 that arrangements set up to allow UK companies with UK-resident parent companies to avoid the payment of ACT by making a group income election infringed EU law.

The 2001 Metallgesellschaft decision meant that UK companies with non-UK resident parent companies that had been unlawfully required to pay ACT were entitled to compensation.

AMC successfully argued that the basis upon which Wragges settled its claim against HMRC had been wrongly calculated.

The claimant’s counsel, 4 New Square’s Ben Hubble QC, told the court that had compound interest been applied to the settlement then its total settlement would have been £17m, £7.65m more than it received.

The defendant, who was represented by 4 New Square’s Justin Fenwick QC, countered that its former client had wanted to settle the matter to avoid escalating legal costs.

Upholding the claim, Steel J stated in his judgment: “Given my conclusion on want of authority it’s not necessary to do more than state my conclusion that Wragges negligently failed to advise AMC as to the issues in the GLO and in particular the nature and merit of the quantum issues.”

Farrer & Co litigation partner Adrian Parkhouse instructed Hubble to lead Scott Allen also of 4 New Square for the claimant.

Wragges appointed Barlow Lyde & Gilbert partner Richard Harrison instructed Fenwick to lead Graham Chapman also of Four New Square.