Slater and Gordon Used ‘Illicit Back Channel’ to Buy Quindell Division at Undervalue, Counterclaim Divulges

In edition 276 of BC Disease News (here), we reported that Slater and Gordon (S&G) UK Limited’s claim against Watchstone Group plc (formerly Quindell) had been listed for trial, on 21 October 2019.

The claimant personal injury firm is seeking £637 million in damages, on the basis that Quindell ‘fraudulently misrepresented’ the value of its Professional Services Division, which it would not have proceeded to take over, ‘but for fraudulent misrepresentation’.

In a turn up for the books, Watchstone issued an announcement to the London Stock Exchange, a matter of days ago, revealing that the High Court (Queen’s Bench, Commercial Court) had granted permission, firstly, allowing amendments to its defence, and secondly, allowing a £63 counterclaim against S&G (plus exemplary damages, interest and costs), which will be will be heard at the same time as S&G’s claim.[i]

Mr Justice Bryan, at a 1-day application hearing, on 28 August 2019, deliberated that Watchstone had a ‘real prospect of success’, both in respect of the counterclaim and other proposed amendments.

Newly permitted documents were filed and served on Thursday of last week.

What is the Basis of the Counterclaim?

It alludes to breach of confidence, inducing breach of contract, and unlawful means conspiracy, arising ‘from the recent discovery via third party disclosure of an illicit back channel that Greenhill & Co ("Greenhill"), a corporate finance adviser to S&G, procured during the period of due diligence and negotiation with Watchstone's then group restructuring and technical accounting adviser, PricewaterhouseCoopers ("PwC")’.

It goes further, alleging that ‘... at S&G's behest and/or on its behalf and/or with its knowledge [the] 'back-channel' ... unlawfully obtained information pertaining to Watchstone's wider group which was, and which it knew to be, confidential’.

Fundamentally, the AIM-listed company claims that S&G gained an ‘unfair advantage’ before entering into negotiations that led to the acquisition of Quindell’s Professional Services Division.

The upshot of this ‘exploitative’ conduct, it argues, is that Watchstone sold the Professional Services Division at a lower price than would otherwise have been paid and suffered ‘significant loss’.

What About Defence Spend?

On Wednesday of this week, Watchstone published its Half-Year Report.

Within the Report, it was disclosed that ‘additional amounts’, up to the value of £2.7 million, have been set aside to cover legal costs, ‘as the scope of the work ... required’ has ‘broadened’ in the run-up to trial, which is expected to last a total of 9-weeks.[ii]

 

[i] ‘Counterclaim against Slater & Gordon (UK) 1 Ltd’ (29 August 2019 London Stock Exchange) <https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/WTG/14205602.html> accessed 6 September 2019.

[ii] ‘Half-year Report’ (4 September 2019 London Stock Exchange) <https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/WTG/14212721.html> accessed 6 September 2019.