06:49, June 15 449 0

2017-06-15 06:49:07
Watchstone gears up for £637m legal battle with Slater & Gordon

Watchstone is bracing for a High Court battle against Slater & Gordon after the latter confirmed it had served a claim worth £637m over its acquisition of the company’s professional services arm in 2015.

In a statement to ASX, Australia’s primary securities exchange, Slater & Gordon said its UK subsidiary had legally notified Watchstone of the claim.

The law firm claims that the former CEO of Quindell, which has since been renamed Watchstone, overstated the worth of the division when there were talks for S&G to acquire it two years ago.

Shortly after the acquisition the FCA launched an investigation into Quindell’s official profit figures, resulting in what Slater & Gordon says was a £493m loss in the first six months of the 2015/16 financial year.

Watchstone released a statement in May when it became aware of Slater & Gordon’s intentions to sue, that read: “Further to its announcement on 30 November 2016, Watchstone Group has now received further correspondence from a firm of solicitors acting for Slater & Gordon stating that it intends to issue proceedings by the end of this month. Its letter states that SGH intends to make a claim for a total amount of approximately £600m on the basis that but for fraudulent misrepresentation it would not have entered into the transaction at all.

“A groundless claim for fraudulent misrepresentation was dismissed by the independent barrister in respect of the warranty escrow process relating to the sale of the Professional Services Division in November 2016 (“Opinion”). The Opinion, which was formed on the basis of evidence provided by both SGH and Watchstone, stated that a misrepresentation claim was not a bona fide claim with a better than 50 per cent prospect of success.

“Watchstone denies any misrepresentation in the strongest terms and remains satisfied that neither the warranty claim nor a misrepresentation claim have merit and will defend such claims robustly if proceedings are brought.”

The firm has suffered significant financial trouble since 2016. In November of that year, chairman John Skippen apologised to shareholders for the firm’s poor financial performance and announced further UK office closures.