McKinsey, the management consultancy, has lost a long-running lawsuit over the payment of property charges on its former central London offices.
The High Court ruled against McKinsey on Thursday in a case brought by its former landlord, Criterion Buildings Ltd, over the Piccadilly premises where the consultancy had office space before moving in 2019.
Criterion claimed McKinsey had failed to pay service charges under its lease — fees levied by the landlord for the cost of maintaining the building. These included charges for lifts and a “sinking fund” — a fund earmarked for the costs of maintenance and the replacement of equipment in the building.
McKinsey had claimed that no money was owed and defended the lawsuit, which was heard by the High Court in October.
It argued that its share of service charges for the whole building at One Jermyn Street was “not fair” and had been too high a percentage for the share of floor space it occupied. It claimed the way in which the service charges had been split favoured another tenant of the building, the Criterion theatre and restaurant.
In his ruling Judge Paul Matthews said McKinsey “fail on all the points that they raised by way of defence to this claim”, which means the company must now pay £2.2m to Criterion. It can decide to appeal the ruling.
Andrew Sell, head of asset management for Criterion Capital, said his firm felt “vindicated” after bringing the dispute, which has been ongoing for at least three years. “Naturally we are pleased that the court found entirely in our, the landlord’s favour. It is a shame that McKinsey adopted such a dogged position, which has prevailed since 2016.” he added.
McKinsey did not respond to a request for comment.
McKinsey, which has positioned itself as a trusted adviser to the world’s largest companies, moved from Piccadilly in 2019 and now occupies 100,000sq ft in the Post Building, a former Royal Mail sorting office in London’s so-called knowledge quarter in Holborn that includes a cluster of scientific and media organisations such as Google.
At the time the consultancy said the move would help it expand its reach from traditional strategy consulting into areas such as digital transformation. Its new building is equipped with a gym, wrap-around terraces and relaxation rooms.
The High Court ruling comes after McKinsey issued a new code of conduct and strengthened its internal controls following a series of reputational scandals. These have included repaying $40m in fees to South Africa in December after a judicial inquiry uncovered evidence of irregularities in contracts that the consultancy firm had with a local partner. Last month it paid $574m to settle legal claims by various US states that its advice to pharmaceutical companies had contributed to the opioids crisis.