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Forsters has successfully defended a £70m professional negligence claim taken against it by businessman Rupert Galliers-Pratt at London’s High Court.

A member of the Cayzer investment banking family, the dispute arose after Galliers-Pratt alleged that Forsters acted negligently and in breach of its contractual duties after he found defects in the share purchase agreement used to buy stakes in three Russian oil companies. Galliers-Pratt has instructured Forsters to execute a deal for the 49% stake in Yugra Balt Invest (YBI) owned by Interguarantee in 2010.

Having brought the damages claim through Khanty-Mansiysk Recoveries, of which Galliers-Pratt is director and sole shareholder, the company argued that Irtysh Petroleum lost the opportunity to develop and sell recoverable oil reserves of 70m barrels and prospective and possible reserves of a further 112m barrels as a result of having ‘lost its interest in the licence holders’ of the three Siberian oil blocks. Jeremy Whiteson, Forsters’ former head of corporate who is now at Fladgate, was the partner instructed by Irtysh Petroleum to handle the transfer.

The claim was around double the revenue of Forsters, which in the last financial year saw income rise 13% to £46.7m.

Heard in early March and presided over by Sir Bernard Eder, who is no longer a High Court judge but as an arbitrator or mediator at Essex Court Chambers, the court found in favour of Forsters because there had been a prior settlement agreement.

In his judgment, Eder said the dispute between the parties concerned only the quantum of the invoice – specifically the propriety of including certain time billed and the amount of time billed; and that prior to the execution of the settlement agreement, no allegation had been raised that Forsters had failed to carry out its duties with reasonable skill and care still less that it had failed to carry out certain duties at all.

Further, Eder added that no damages claim by Irtysh ‘of any kind had been intimated let alone the kind of damage now claimed, relating to the failure to complete the registration of Irtysh’s ownership of YBI.’

‘I did not understand [respondent’s counsel] to dispute any of the foregoing and, for present purposes, he was prepared to concede that Irtysh and RGP had no actual knowledge of any lack of proficiency of Forsters’ work on the project at the time of the settlement agreement.’

Such [a] proposition is corroborated by Forsters’ professional duties towards Irtysh because if Forsters had had any reason to believe that it had negligently or in breach of contract caused damage to Irtysh it would have had a duty to tell Irtysh and advise it to seek independent advice; that the fact that Forsters did not do so leads to the conclusion that there was no reason for the parties to believe that Forsters had negligently caused damage to Irtysh.’

Eder declared that the claimant was ‘caught’ by the settlement agreement and that Forsters are entitled to a declaration to such effect. Counsel have been asked to draft an order for approval including costs as well as further directions.

London litigation boutique Humphries Kerstetter served as counsel for the claimant with former Linklaters duo, Mark Humphries and Kristopher Kerstetter, taking the mandate. They retained Simon Davenport QC of 3 Hare Court to act as counsel. Bond Dickinson instructed 4 New Square duo Jamie Smith QC and Anthony Jones for the respondent. Forsters declined to comment on the matter.

sarah.downey@legalease.co.uk

Forsters is defending a £70m professional negligence claim filed by businessman Rupert Galliers-Pratt in which he alleges the firm failed to execute a deal for three oil blocks in Russia.

A member of the Cayzer investment banking family, Galliers-Pratt alleges that Forsters acted ‘negligently and in breach of its contractual duties’ after finding ‘defects in the share purchase agreement’ used to buy stakes in three Russian oil companies. In court filings seen by Legal Business, the businessman is claiming damages of between $110m and $211m after instructing Forsters to execute a deal for the 49% stake in Yugra Balt Invest owned by Interguarantee in 2010.

However, Clifford Chance discovered in February 2013 that Galliers-Pratt and fellow shareholders in the investment vehicle, Irtysh Petroleum, hadn’t executed the deal under Russian law. The claim is around double the revenue of Forsters, which in the 12 months to 30 April 2015 saw income rise 14% to £41.4m.

Bringing the damages claim through Khanty-Mansiysk Recoveries, of which Galliers-Pratt is director and sole shareholder, the company argues that Irtysh Petroleum ‘lost the opportunity to develop and sell recoverable oil reserves of 70 million barrels and prospective and possible reserves of a further 112 million barrels’ as a result of having ‘lost its interest in the licence holders’ of the three Siberian oil blocks.

Jeremy Whiteson, Forsters’ former head of corporate who is now at Fladgate, had been instructed by Irtysh Petroleum to handle the transfer of Interguarantee’s 49% stake in Yugra Balt Invest in May 2010. Interguarantee was to be allotted 200,000 shares in Irtysh Petroleum in the exchange.

Whiteson informed Galliers-Pratt on 20 May that the share purchase had been completed and Irtysh Petroleum now owned Yugra Balt Invest. However, Galliers-Pratt argues that the deal was never completed as Interguarantee ‘had not entered a change in Yugra Balt Invest’s list of shareholders…to record that Irtysh was now the owner of the shares’ and ‘had not signed and completed a notarised application to the Unified State Register of Legal Entities (USRLE)’. It was upon checking the USRLE database that Clifford Chance discovered the error.

Galliers-Pratt also alleges that the share purchase agreement crafted by Whiteson was also ‘ineffective to impose an enforceable obligation on Interguarantee’.

The filing alleges that Forsters breached its contractual duty to Irtysh Petroleum on 13 occasions, including having ‘failed to ascertain what was required by Russian law to effect the transfer of shares in a Russian company…failed to recognise that it needed specialist advice from Russian lawyers…failed to appreciate that Interguarantee had not transferred the shares in Yugra Balt Invest to Irtysh’. It also rejected Forsters’ position that an earlier fee settlement in 2012 precluded Galliers-Pratt from any claims against it.

The filing, received by the High Court last Friday (23 October), lists London litigation boutique Humphries Kerstetter as counsel for the claimant. Former Linklaters duo, Mark Humphries and Kristopher Kerstetter, has been instructed, and has retained Simon Davenport QC of 3 Hare Court to act as counsel.

Forsters partner Guy Jordan said: ‘We maintain this is a speculative claim that we will defend robustly.  The claim is at an early stage and we are not currently in a position to comment further.’

tom.moore@legalease.co.uk