For months, we have been awaiting the conclusion of a legal battle between Slater and Gordon (S&G) (UK) Limited and Watchstone Group plc (formerly Quindell), which arose out of the Australian-listed law firm’s futile acquisition of the insurance group’s Professional Services Division, in 2015.
Of course, Slater and Gordon’s UK operations were broken off from the Australian parent company as part of a recapitalisation deal with its creditors, in August 2017 – for more information on the impact of S&G’s dramatic fall in share price, read our articles (here and here).
We initially reported, in edition 276 of BC Disease News (here), that S&G’s claim (that ‘but for fraudulent misrepresentation’, the takeover would not have occurred), valued at £637 million, had been listed for trial beginning 21 October 2019 (this Monday).
In a material development, published in September (here), we revealed that the High Court (Queen’s Bench, Commercial Court) had granted permission to hear S&G’s claim for breach of warranty, deceit and fraudulent misrepresentation, in conjunction with Watchstone’s £63 million counterclaim for breach of confidence, inducing breach of contract, and unlawful means conspiracy.
This was based on the discovery of an ‘illicit back channel’, which ‘unlawfully obtained [confidential] information pertaining to Watchstone's wider group’ and gave S&G an ‘unfair advantage’ leading into sale negotiations.
Despite growing anticipation of a judge-made ruling, however, the 9-week trial did not proceed as anticipated, with the dispute having been settled out of court.[i]
The settlement figure was £11 million, equivalent to just 1.7% of the total value of claim.
In a statement to the London Stock Exchange, Watchstone publicised that:
‘Under the settlement, which is made without admission of liability by either party, all of S&G’s claims or potential claims ... have been unconditionally withdrawn’.
Having dropped its counterclaim and with neither side planning to pursue costs from the other side, it is understood that Watchstone will make use of £50 million, retained in an escrow account [to cover the potential proceeds of noise-induced hearing loss (NIHL) claims that S&G bought as part of the deal], to pay the settlement figure, which will likely line the pockets of their creditors.[ii]
The Non-Executive Chairman of Watchstone and the Chief Executive of S&G both expressed their ‘pleasure’ with the resolution of proceedings, which brings ‘certainty’. However, one would have to assume that Watchstone will be the happier party.[iii]
In accordance with this assumption, Watchstone’s shares rose by 45% to 156p, on Monday.[iv]
Meanwhile, S&G (UK) confirmed the closure of its office in Leeds, last Friday, less than 1-year since committing to preserve its city presence.
[i] Neil Rose, ‘S&G settles Quindell action for less than 2% of claim value’ (21 October 2019 Legal Futures) <https://www.legalfutures.co.uk/latest-news/sg-settles-quindell-action-for-less-than-2-of-claim-value> accessed 23 October 2019.
[ii] Michael O’Dwyer, ‘Watchstone soars after ending legal battle with Slater & Gordon’ (21 October 2019 The Telegraph) <https://www.telegraph.co.uk/business/2019/10/21/watchstone-soars-ending-legal-battle-slater-gordon/> accessed 23 October 2019.
[iii][iii] John Hyde, ‘Slater and Gordon's Quindell claim settles on steps of court’ (21 October 2019 Law Gazette) <https://www.lawgazette.co.uk/practice/slater-and-gordons-quindell-claim-settled-on-steps-of-court/5101866.article> accessed 23 October 2019.
[iv] James Booth, ‘Watchstone shares jump 40 per cent after it settles Slater & Gordon fraud claim’ (21 October 2019 City AM) <https://www.cityam.com/watchstone-and-slater-gordon-settle-fraud-claim-on-brink-of-high-court-trial/> accessed 23 October 2019.