The Commercial Court (Burton J) has dismissed a claim that Baker & McKenzie acted negligently in providing advice to Symrise, a German food flavourings maker, in relation to tax affairs in Mexico.
The law firm had been retained to advise on various acquisitions and post-acquisition restructuring plans (notably debt pushdown) involving Symrise’s predecessor in title in a number of countries, including Mexico. Symrise was formed by way of a merger between two companies coordinated by a private equity firm. C. €125m of debt were then pushed down to the Mexican arm of the Symrise business. Following a challenge to the pushdown scheme by the Mexican tax authorities, Symrise paid £11.2m in tax by way of settlement. Symrise argued, inter alia, that Baker & McKenzie had been negligent with regard to its tax advice.
Burton J held as follows:
- Whether Baker & McKenzie was negligent in its tax advice had two elements: whether the advice that the pushdown did not contravene Mexican tax law was incorrect, or alternatively whether a warning that it might so contravene should have been given. Symrise ran the first case. The evidence before the court showed that the pushdown did not contravene the relevant tax statute provision. In any case, the particular provision of the Mexican tax statute was not applicable here.
- On whether the tax settlement entered into by Symrise had been reasonable, the steps taken by the company had not been in reasonable mitigation. “Symrise acted unreasonably in abandoning the proceedings [in the Mexican tax courts] which they had a very good chance of winning (and in the event would have won), and giving up the very good prospect of a recovery which would have avoided the tax losses. The Claimant’s tax recovery claim therefore fails”. Symrise was ordered to pay Baker & McKenzie’s costs.
Symrise A.G. and another v. Baker & McKenzie and another [2015] EWHC 912 (Comm), 31 March 2015
