A court has found Norton Rose Fulbright Hong Kong liable for HK$4.4 million (c.£445,000) for an IP partner's blunder.
Justin Davidson failed to take into account crucial legislation when advising a transferee of a business, which resulted in the client being saddled with huge debts when it took over a failing shop. Davidson's gaffe appears to have been the result of an unintended hospital pass from a colleague, who asked him to advise on an area of law outside his expertise.
In 2012 Norton Rose Australia was advising Dymocks Franchise Systems China (DFS), a company that grants franchises for businesses to run bookstores under the Dymocks brand. One of DFS' franchisees in Hong Kong failed to make its necessary payments, so DFS decided to explore the option of stepping in to take over the struggling shop. DFS asked Norton Rose Australia if there would be any "unexpected problems" in doing so.
The case was very much signposted for a franchise specialist. However Fiona Wallwork, a franchise lawyer at Norton Rose Australia at the time, passed the matter to Davidson, a Hong Kong partner specialising in, erm, intellectual property.
Presumably at a loss to conjure up a patent law angle, Davidson had a crack at franchising advice. Unfortunately, it was a steep learning curve and he failed to alert the client to vital legislation that imposed liability for past debts on DFS when it took over the bookshop.
A Norton Rose Fulbright partner having a stab at it, yesterday.
After DFS had the keys to the store, it was surprised to receive demands for outstanding debts owed by the previous owner, and found itself having to stump up significant sums to pay creditors and other lawyers to deal with the unexpected issues.
A disgruntled DFS sued NRF HK and, in a recently published judgment, a Hong Kong court held that the firm ought to have known and made its client aware of the critical legislation. It ordered the firm to pay damages of HK$4.4 million, but didn't mention that IP lawyers should stay in their lane.
A spokeswoman for NRF did not comment.