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).

The 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 on dividends paid to non-resident parent companies, with AMC instructing Wragges to act on a group claim against HMRC.

Last week's ruling saw Mr Justice Steel uphold AMC's claim that Wragges failed to give appropriate advice and had acted without authorisation when it accepted £9.4m 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 – £17.1m – from HMRC if compound interest had been applied.

Wragges must now pay the difference – equating to £7.65m. Farrer & Co advised AMC on its claim, instructing Four New Square's Ben Hubble QC and Scott Allen. Barlow Lyde & Gilbert acted for Wragges, instructing Justin Fenwick QC and Graham Chapman, also of Four New Square.

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."