A Birmingham accountancy practice is facing a payout of more than half a million pounds after giving bad financial advice to one of its clients.

After a legal battle lasting more than four years, Haines Watts has been told by a court it is responsible for just under £600,000 to the Menirs, an Egyptian family who arrived in Britain as refugees and set up a successful company in Aston.

And the court action is continuing over costs that now amount to more than £1.1 million between the two parties.

The action was launched by Maurice Menir, his 79-year-old mother Rose Menir and Midland Packaging, the company set up by the Menir family on Cheston Road, north Birmingham.

It relates to tax avoidance advice given to the Menirs over a decade ago, after the company became too cash-rich and the family started looking for ways to limit its exposure to inheritance tax.

But a mix-up by the accountants of the domicile status of Ms Menir meant the family ended up paying more in tax than they should have.

Ms Menir arrived in the UK with her husband and family in 1957, and has been living here ever since, except for a seven-week period in 2005 when the family moved to Israel, where they considered emigrating for tax purposes.

The family said that if they had been given the correct financial advice, they would have emigrated years earlier.

The advice for the family was given by Nick Owen, described as the “technical tax partner” at Haines Watts. Mr Owen left the company before the legal action started.

Haines Watts is a national accountancy, auditing and tax advice company. It first dealt with the contract with the Menirs when it acquired the Edgbaston practice of Lucas Howard, whose acting partner Geoff Lucas had a longstanding business arrangement with the company and the family.

In court the company admitted it had failed to advise correctly on the option of emigration, and the problems with the advice were not spotted until a number of years after.

After a long-running dispute where the two parties disagreed on a large number of details in the case, Judge Brown QC delivered a verdict in the Mercantile Court earlier this year.

He ruled that Midland Packaging should recover £14,859.56 of fees paid to Haines Watts as well as £40,496 of overpaid corporation tax. Mr Menir was told he could personally recover £582,425 in lost investment. And Ms Menir was given an indemnity from inheritance tax on a sum of £5,460,709 passed on to the family in 2007.

Geoffrey Fairclough, director of Haines Watts, said: “We accept the judgment and are grateful for its clarity. We regret the advice given by a former partner who left seven years ago and relating to complex inheritance tax issues. Indeed, we acted immediately on learning of the error and provided our client with an alternative solution.

"We also credited our client with those fees relating to that advice and endeavoured to reach agreement on a settlement that would have resulted in this matter being resolved prior to now.

“As a firm, we are proud of our track record in providing clear, unambiguous and well structured advice on both corporate and personal matters.”

The legal action is still continuing over responsibility for costs. Haines Watts has racked up £350,000 in costs while the figure for the Menirs is close to £800,000.