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Mis-Drafting of Partnership Agreement Leads to £1.6 Million Award

A leading firm of solicitors has been ordered to pay more than £1.6 million in damages for professional negligence after a busy lawyer misunderstood or misremembered his client’s instructions when drafting a partnership agreement.

The law firm had been retained to advise a headhunting business on a refinancing package that involved a Middle Eastern bank taking a 25 per cent stake in the limited liability partnership for £2.5 million. The agreement, as executed, gave the bank an option to withdraw half of its capital at any time within the first 41 months of the deal.

After the bank exercised that option, the business’s chief executive complained that a fundamental mistake had been made when drafting the agreement. He said that his instructions to the law firm had been that the bank’s option would only be exercisable after 42 months, rather than during the first 41 months.

In upholding the business’s claim, the High Court found that the draftsman must have misunderstood, misremembered or mistakenly noted down the instructions that the chief executive had given him. Other allegations of negligence against the law firm were dismissed; however, it was ordered to pay £1,612,313 to reflect the business’s loss of profits and the diversion of the chief executive’s time in coping with the consequences of the error.