Morrison & Foerster's (MoFo's) UK arm has successfully countered a £1.4m professional negligence claim brought against the firm by energy investment company Petrochemical Resources.

The claim was dismissed earlier this month by Exchange Chambers' Mark Cawson QC, who sat as a deputy judge of the Chancery Division, after the hearing ended in late June.

The case centred around convertible loan notes issued by Petrocapital and held by two shareholders, who had given undertakings in 2008 not to exercise the conversion rights conferred by the notes issued to them.

Petrocapital alleged that MoFo London corporate partner Edward Lukins had acted in breach of retainer and negligently in advising during 2010 that the undertakings were no longer irrevocable, and that it was in Petrocapital's best interests to compromise with the two shareholders by paying out £1.45m in satisfaction of their loan notes.

The investment firm claimed that it had suffered a loss of £1.41m in paying £1.45m to redeem the convertible notes, rather than the £40,000 it could have paid prior to 31 July 2009 to prevent the shareholders from exercising their conversion rights.

In his judgment, published earlier this month, Cawson stated there were "a number" of difficulties in Petrocapital's way in establishing any claim for damages.

He added: "I do not consider that I can be satisfied on the balance of probability that if the relevant advice had been given, the relevant sums would have been paid. I do not find any of the claims of breach of retainer or negligence […] to be established or made out."

After the judgment was handed down, MoFo was granted a freezing order on Petrocapital's assets.

Lukins said: "We are very pleased with the judge's decision; clearly we would have settled a claim of this size if it had had any real merit. Further to the handing down of judgment we made an ex parte application to the trial judge for, and were granted, a freezing order on the claimant's assets.

"Clearly the evidence given in this case by the claimant's witnesses was sufficient to justify the granting of such an order in the circumstances."

Both parties to the dispute were advised by silks from 4 New Square, with Clyde & Co disputes partner Fergal Cathie instructing 4 New Square's Patrick Lawrence QC and Anneliese Day QC for MoFo, while Memery Crystal disputes partner Harvey Rands instructed Justin Fenwick QC and Michael Ryan.