Slater & Gordon faces its third shareholder action after it announced yesterday that it had been served with a letter before action.
The embattled business – which has been on the slide since buying Quindell’s professional services division two years ago – said it had received correspondence from fellow Australian law firm Johnson Winter & Slattery Lawyers on behalf of a shareholder, Babscay Pty Ltd, which asserted an intention to start proceedings.
The announcement described it as a “potential class action proceeding”.
“While full details of the proposed claim have not been provided, the letter from JWS sets out that the claim will be based on allegations that the company’s financial statements in each of the financial years ended 30 June 2013, 2014 and 2015 contained misleading representations.”
Notably, these dates precede the Quindell deal, the disastrous impact of which on S&G’s share price is the focus of the first action to be filed last October. From being around A$8 in March 2015, the shares are now trading at 9c.
Australian law firm Maurice Blackburn said at the time that “in light of the amount of lost shareholder value, the compensation sought is expected to be of very significant magnitude”.
The second action has been intimated by fellow Australian law firm ACA Lawyers but not yet formally started.
According to reports in the Australian media, the ACA action – while similar to the one brought by Maurice Blackburn – proposes to investigate claims of misleading and deceptive conduct over a longer period of time.
Bruce Clarke, co-founder and principal at ACA Lawyers, told Business News Australia: “While we identify the Quindell purchase in the UK as having an important part to play, we say that there has been a number of significant failings in the way in which Slater & Gordon applied its accounting standards.”
ACA alleges that shareholders were not properly informed of Slater and Gordon’s choice to change its accounting standards, nor of the consequences the change could have on the company’s earnings per share and general profitability.
ACA also alleges that Slater & Gordon failed to recognise the impact of regulatory changes in the UK.
S&G has pledged to fight all legal actions, while last month it started its own claim against Quindell (now called Watchstone Group) on the grounds that, but for fraudulent misrepresentation, it would not have entered into the deal in the first place.