Slater & Gordon (S&G) has announced that it is taking legal action against Watchstone Group – formerly Quindell – over its £637m purchase of Quindell’s professional services division last year.
S&G’s share price has tanked as a result of the acquisition, and it has had to renegotiate the terms of its debt with its lenders.
In a statement overnight to the Australian Stock Exchange, S&G said it had advised Watchstone that it intended to bring the claim under the share purchase agreement. It did not provide any more detail on the claim.
But it added: “SGH [Slater & Gordon Holdings] has previously informed the ASX that £50m of the purchase price of the acquisition would be held in escrow against warranty claims that may arise under the share purchase agreement.
“If claims made under that agreement cannot be resolved prior to the release date of the escrow (currently 29 November 2016), and subject to compliance with threshold requirements under the share purchase agreement, including a merits assessment by an independent barrister, part or the whole of that amount may be retained in the escrow account subject to resolution of the claim.”
In response, Watchstone said in a statement it did not believe that there were grounds for a claim and pledged to defend it “robustly”.
It continued: “Watchstone conducted a professional and transparent disposal process of the professional services division, assisted and advised by leading specialists. In addition, Watchstone allowed SGH the opportunity to complete an extensive and detailed due diligence process with the assistance and advice of a similarly specialist team.”
Regarding the escrow account monies, the statement said: “Following 29 November 2016, monies will be released to Watchstone from the warranty escrow unless, inter alia, Watchstone receives an opinion of a senior independent barrister stating that a given claim is more likely to succeed than not.
“The opinion will also quantify what such claim, if successfully brought against Watchstone, would be valued at and this amount would then be retained in the warranty escrow until the purported claim was resolved with any excess up to the £50m released to Watchstone.
“Prior to the giving of an opinion, Watchstone will have the opportunity to make submissions in respect of such matters.”
S&G is being sued in Australia by investors hit by the fall in the share price, while Your Legal Friend, also known as Camps Solicitors, is putting together a similar group action on behalf of investors in Quindell.