Wragge & Co has been ordered to pay more than £7.5m after a judgment in the High Court ruled that the firm gave negligent advice to former client Amalgamated Metal Corporation (AMC).

A High Court judgment issued last Friday (8 April) found Wragges liable for professional negligence in relation to advice it gave when AMC settled a tax dispute with HM Revenue & Customs (HMRC) in 2003.

At that point AMC was one of a number of companies claiming against HMRC for advance corporation tax (ACT) paid on dividends paid to non-resident parent companies, with AMC instructing Wragges to act in relation to a group claim brought against HMRC by a number of companies.

Last week's ruling, which followed a hearing in February, saw Mr Justice Steel uphold AMC's claim that Wragges failed to give appropriate advice and had acted without authorisation when it accepted £9.413m in compensation from HMRC.

AMC alleged that it had not approved the settlement and that it should have been entitled to almost twice as much in compensation – £17.068m – from the Revenue if compound interest had been applied.

Wragges must now pay the difference, with Steel stating: "In my judgment, AMC has clearly satisfied the burden of proof imposed on it to establish that the settlement of the quantum issues in respect of pre-limitation utilised ACT was made by Wragge without AMC's authority… It follows that AMC's claim must succeed in the sum of £7.65m."

Farrer & Co litigation partner Adrian Parkhouse and disputes associate Michael Patrick advised AMC on its claim, instructing Four New Square's Ben Hubble QC and Scott Allen.

Barlow Lyde & Gilbert professional and commercial disputes partner Richard Harrison and associate Niya Phiri acted for Wragges, instructing Justin Fenwick QC and Graham Chapman, also of Four New Square.

Parkhouse said: "We're very pleased that our client's position has been found to be correct."

In a statement, Wragges managing partner Ian Metcalfe said: "We are extremely disappointed with the outcome of the case, which we defended based on the advice of those representing us, including leading counsel. We are proud of our reputation for providing high-quality legal advice and will do what is necessary to ensure that this is maintained."

Wragges would not comment on whether it would appeal the sum.