Rathbones has spent £3.5 million on an ongoing courtroom battle relating to a Jersey legal claim filed against a former director.
The private client investment manager shelled out £2.7 million in legal fees during 2013, adding to the £0.8 million it spent in 2012.
The case is linked to a claim that was filed against a former director of Rathbone Trust Company Jersey (RTCJ), which Rathbones owned between March 2000 and October 2008.
In July 2012, Rathbones, headed by outgoing chief executive Andy Pomfret (pictured), issued proceedings to confirm that insurance cover on the excess layer of its civil liability, or professional indemnity policy, was in place to protect the company’s interests in the event of the claim being upheld.
In a judgement handed down in November following a trial in the Commercial Court in London, Justice Burton ruled in favour of Rathbones and the employee. However, he also ruled that the insurers should have a right of subrogation. This means the insurer could try to reclaim any insurance losses it incurs back from Rathbones, on the basis the employee’s indemnity was held through Rathbones and RTCJ.
In its full-year results, Rathbones said it, along with the former employee, had decided to appeal subrogation aspects of the judgment. Rathbones’ insurers have also decided to appeal coverage aspects of the judgment.
The hearing of those before the Court of Appeal is expected to take place in the second half of the year. The underlying Jersey claim is expected to come to trial towards the end of 2015.
Rathbones said in its results: ‘As with all disputes of this nature, the eventual outcome is uncertain and depends on the outcome of the Jersey claim, the outcome of the Court of Appeal hearing in the insurance proceedings, and on whether either or both cases are subject to a negotiated settlement at any stage.
‘There is a risk that the group’s insurance cover for the year in question will not be effective in relation to the Jersey claim or will prove insufficient to cover losses, in which case any obligation could be material.’
Having spent £3.5 million on the legal tussle so far, the board noted that while legal costs could prove ongoing, they expect that any final judgment in relation to the claims will result in no liability to the company. As a result, it has not made a provision in its consolidated financial statements.