High Court rejects £63m claim over S&G’s acquisition of Quindell

Slater & Gordon: Information had no impact on price it paid

The High Court today rejected a £63m claim that accountancy firm PwC used confidential information to reduce the amount Slater & Gordon (S&G) paid for Quindell’s legal division in 2015.

Mr Justice Jacobs found that no confidential information was passed from PwC partner Ian Green, who at the time was advising Quindell, to Gareth Davies, a corporate finance adviser at Greenhill & Co for S&G, at a meeting in January 2015.

He held that the claim also failed on causation, ruling that the negotiations were “not impacted in any way by any information which had allegedly been passed to Mr Davies by Mr Green”.

“There was also, in my view, no real or substantial chance of a higher offer than the one that was made, and certainly none that can be causally related to any of the information allegedly passed at the 15 January 2015 meeting.”

S&G spent around £645m to buy Quindell’s professional services division, a deal that, as the judge observed, “proved financially catastrophic for S&G”. The firm subsequently had to write off the goodwill of £558m completely.

Watchstone – the name Quindell later adopted – claimed breach of contract, breach of confidence, breach of fiduciary duty, and unlawful means conspiracy against PwC. It said it could have secured an extra £63m from the sale but for this.

The judge had to determine what had happened at the meeting and whether an email Mr Davies sent to colleagues at Greenhill soon after was an accurate reflection of it.

Mr Davies was not called to give evidence and so his email was central to Watchstone’s case. This recounted Mr Green saying that Quindell was due to run out of cash by mid-2015 and also that there had been “aggressive” accounting in relation to hearing loss claims.

The email ended: “Bottom line hearing loss drives everything – cashflow, business plan, future growth, but huge uncertainty / opportunity / risk.”

Jacobs J concluded that the email was not a reliable record of what Mr Green had said.

“In my view, the email contains a large number of statements which are plainly inaccurate, and which it is most unlikely that Mr Green would have made.

“I also consider it probable that other information in the email would have been outside Mr Green’s knowledge, and was therefore most likely derived from other people with whom Mr Davies was in contact.

“Overall, I consider that there are such serious doubts as to the accuracy of the email, as a purported record of what transpired at the meeting, that I do not consider that I can place any reliance upon it.”

This was “reinforced” by the fact that Mr Davies “acted, on any view, improperly and with a lack of integrity in seeking to elicit confidential information from Mr Green”.

There was also evidence that Mr Davies was “prone to exaggeration and considered himself to be a maverick”.

By contrast, Mr Green, who was called as a witness, was “a responsible and honest former accountant who gave clear evidence as to the background to the meeting, and what occurred at it. There was no suggestion that Mr Green had any history of acting with professional impropriety”.

Watchstone failed to prove that any of the information contained in the email was in fact imparted by Mr Green to Mr Davies, Jacobs J said.

“Furthermore, I do not consider that there is, in these circumstances, any reason to reject the evidence of Mr Green as to how the meeting progressed.”

The case on causation failed on “multiple levels”. Watchstone failed to prove that most of the information in the email was in fact passed to S&G or that Ken Fowlie (at the time S&G’s chief executive in Australia) recognised such information that he did receive was important – or that he passed it on.

“They have failed to prove that any of that information had any impact on the negotiations which took place, and which reached fruition.

“And they have failed to prove that, but for the alleged breach of confidence, there was a real and substantial chance of a higher offer by S&G than the one that was finally made and agreed upon.”

The judge added that, in the light of the course that negotiations that took place after the meeting, “there is nothing which suggests that… S&G had the upper hand, or was in a position to ‘boss’ the negotiation”.

Watchstone only learned about the meeting from disclosure in an earlier claim in deceit and breach of warranty that S&G had brought against it.

This settled on the eve of trial in 2019 for just £11m, or less than 2% of the value of the claim.

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