We reported in edition 157 of BC Disease News that Slater and Gordon (S&G) is being sued in relation to its tumultuous acquisition of Quindell. It has been announced this week that Australian law firm, Maurice Blackburn Lawyers, has now filed a shareholder class action against S&G. It is the first firm to have done so on behalf of S&G shareholders since its share price plummeted earlier this year.[i]
Maurice Blackburn claim that the shareholders it represents lost 95% of their investment between April 2015 and February 2016, which has been put down to the £637m acquisition of Quindell’s professional services division (we have reported previously on this acquisition and its consequences in edition 131 of BC Disease News here). It has been suggested that S&G’s due diligence processes were inadequate throughout the acquisition and it failed to provide shareholders with accurate and reliable information about the risks of the acquisition and its value to shareholders.
Maurice Blackburn state that:
‘Shareholders also suffered heavy losses when SGH abruptly withdrew revenue and earnings guidance only weeks after it was emphatically re-affirmed, and further losses followed when SGH released financial statements which not only suggest that the acquisition was under-performing, but also indicate systemic problems across the company as a whole’.
The statement of claim alleges that S&G made false and misleading statements, engaged in misleading and deceptive conduct, and/or breached its continuous disclosure obligations to shareholders which prevented shareholders from being able to make informed investment decisions based on complete, accurate and timely information about the Quindell acquisition and the true state of the company’s overall financial position and performance. As a result, they state that:
‘…by this conduct SGH contravened various provisions of the Corporations Act 2001 (Cth), ASX Listing Rules, the Australian Securities and Investment Commissions Act 2001 (Cth), and the Australian Consumer Law, and that these contraventions caused the price of SGH shares throughout the period to be higher than would have been the case had the true state of affairs been known to the market. It is also arguable that, had the real risks and true value of the Quindell acquisition been adequately disclosed, SGH would not have been able to conduct the A$900 million capital raising, and the transaction would not have taken place’.
Elsewhere, however, S&G have already indicated their intention to sue Quindell, now known as Watchstone Group, arising from the purchase of Quindell. However, Watchstone Group has said that it does not believe there are grounds for such an action and it will defend it robustly.
We will continue to report on the progress of both these claims.
[i] John Hyde, ‘ Firm Files Slater and Gordon Shareholder Claim “Of Significant Magnitude”’ (The Law Society Gazette 12 October 2016)< http://www.lawgazette.co.uk/practice/firm-files-slater-and-gordon-shareholder-claim-of-significant-magnitude/5058250.article> accessed 13 October 2016.