Legal Business

Slater and Gordon’s long-running £637m Quindell action settles for paltry sum as office closures continue

The long-running saga around Slater and Gordon’s (S&G) invidious Quindell acquisition settled on the eve of trial this week for a slither of the initial claim.

A tough week for the national firm was then compounded by the closure of its Leeds office and consultation over a further closure at its Watford call centre.

S&G and Watchstone Group’s dispute over the former’s ill-fated Quindell acquisition in 2015 settled with S&G receiving £11m, less than 2% of the original £637m claim the firm filed in June 2017 for breach of warranty and/or fraudulent misrepresentation for the whole amount paid. The trial was due to begin in the High Court on Monday 21 October.

The settlement was agreed with no admission of liability from either party, and resulted in the release of the £50m that had been held in escrow, which has now been split between the pair. Watchstone received the lion’s share, with £39m and interest going to the group.

S&G chief executive David Whitmore commented: ‘We are pleased this matter has drawn to a conclusion.’

The meagre sum granted to S&G will come as a disappointment to the firm but marks a significant victory for Watchstone. The turning point was when Watchstone was granted permission in September to pursue a counterclaim, alleging an ‘illicit back channel’ S&G corporate finance adviser Greenhill & Co had used to access confidential information about the company from PwC, Watchstone’s restructuring adviser.

The dispute saw S&G’s representative CMS Cameron McKenna Nabarro Olswang partner Jeremy Mash instruct Simon Salzedo QC of Brick Court Chambers while Tim Maloney and Matthew Blower of Dorsey & Witney, who were representing Watchstone, instructed Tim Lord QC, also of Brick Court Chambers.

However, the difficult week did not end there after S&G revealed it is shutting its Leeds office at the cost of 29 jobs, while a consultation with approximately 100 staff in its Watford office is ongoing. The closure of the Leeds office follows previous closures in Chester, Wrexham, Milton Keynes, Sheffield, Preston and Fareham. Should the Watford centre also close, S&G will be left with offices in Birmingham, Edinburgh, Cardiff, Cambridge, Liverpool, London and Manchester.

Regarding the closures, S&G commented: ‘We have introduced new technology and processes that allow us to work more efficiently and provide a better experience for our customers. Consequently, we are closing our Leeds office and relocating the work to other locations.’

Legal Business

Slater and Gordon’s £637m Quindell claim to be heard in October

The saga of Slater and Gordon’s (S&G) ill-fated Quindell acquisition is set to intensify with the national firm’s £637m claim headed to court in October.

The case against Watchstone, formerly Quindell, sees S&G seeking to recoup the cost of acquiring the professional services division in 2015. S&G issued its claim in June 2017 for breach of warranty and/or fraudulent misrepresentation for the whole amount paid.

Watchstone said in a statement to the London Stock Exchange yesterday (3 June) that a trial was expected to start in October. Its legal costs have risen to £8.2m, reflecting a ‘determination to robustly defend the action.’

It added: ‘Our position remains that Slater and Gordon’s allegations of deceit and the associated breach of warranty claim are wholly without merit and should never have been advanced.’

The development is the latest in an ongoing dispute between the parties. In June of last year, the Solicitors Regulation Authority hit S&G with a £80,000 financial penalty for disclosing confidential client information in relation to the buyout. KPMG was also fined £3.15m after admitting to misconduct in handling the financial statements of Quindell.

The turbulent relationship between S&G and Quindell began shortly after the acquisition, when S&G began running into financial difficulties, posting a $958m loss for the six months ending 31 December 2015. The loss was primarily due to a considerable write-down on the Quindell deal, and S&G later saw its share price plummet and an exodus of senior management.

Watchstone told the stock exchange that £50m of the sale consideration is currently retained in a joint escrow account until a settlement is reached or the claim withdrawn.

For more on Slater and Gordon’s rise and fall, read ‘The Icarus Syndrome’ (£).

Legal Business

Slater and Gordon fined £80,000 for Quindell disclosure breach involving more than 7,000 files

In another chapter to the ongoing story of Slater and Gordon’s (S&G) troubled Quindell buyout, the firm has been hit with an £80,000 fine for disclosing confidential client information.

The Solicitors Regulation Authority (SRA) today (29 June) imposed a £40,000 financial penalty on both S&G and Quindell Legal Services, now Slater Gordon Solutions, for disclosing un-redacted confidential information and documents from 7,087 client matter files to other firms. The pair were also ordered to pay the SRA’s costs of £26,000.

According to the SRA, the breaches took place between December 2014 and February 2015, shortly before S&G’s troublesome £637m acquisition of Quindell’s professional services division.

A spokesperson for S&G said: ‘We take our obligations relating to confidentiality extremely seriously. It is important to stress the SRA concluded there was no evidence that clients’ data was released outside of firms regulated by the SRA. However, we accept the SRA’s conclusion that a breach took place in relation to the due diligence process during this complex business transaction.’

Shortly after the Quindell professional services division was bought by S&G the firm ran into financial difficulty, posting a $958m loss for the six months ending 31 December 2015. This was primarily due to a hefty write-down on the Quindell deal. S&G is pursuing a fraudulent misrepresentation claim against the seller, Watchstone Group (the renamed Quindell). Watchstone denies fraudulent misrepresentation and is defending the claim.

In an effort to put its turbulent relationship with Quindell behind it, S&G announced in May that it would roll its legal and former Quindell divisions into a single corporate entity and invest £30m in new technology. The unification brought its own troubles however, with the firm’s offices in Fareham and Sheffield being shut in order to focus on larger regional hubs.

The firm also appointed a new-look management team, with ex-managing director of Sainsbury’s Argos Financial Services, Martyn Beauchamp, taking on the newly-created role of chief customer officer. Emma Holt, previously the firm’s head of personal injury, was appointed chief risk officer.

To read more on S&G’s rise and fall, read ‘The Icarus Syndrome’.

Legal Business

Slater and Gordon to launch new corporate entity alongside plans for £30m legal tech investment

Revamped personal injury specialist Slater and Gordon (S&G) is set to roll its legal and former Quindell divisions into a single corporate entity and has earmarked £30m for investment in new technology.

The battle-worn firm today (11 May) announced plans to unify the two entities – Slater and Gordon Lawyers and Slater Gordon Solutions (SGS) – via an alternative business structure (ABS) in the coming months.

SGS is the rebranded name of the Quindell professional services division, which S&G bought in an ill-fated £637m deal in March 2015. The firm ran into financial difficulty shortly after the buyout, and is currently pursuing a fraudulent misrepresentation claim against the seller, Watchstone Group (the renamed Quindell).

Recently-appointed chief executive David Whitmore commented: ‘Unifying the Slater and Gordon group as one ABS means we can operate more efficiently and consolidate expertise across the group, enabling us to improve our customer experience even further. This is a key component of our strategy to strengthen our position as the number one consumer law firm in the UK.’

The unification plan spells bad news for the firm’s regional offices however, with S&G planning to close its Fareham and Sheffield outposts and move work to its larger regional hubs. S&G confirmed it has begun consultations with staff in both offices.

S&G’s combination follows last year’s major severance, when a June 2017 recapitalisation plan saw the firm’s UK operation split from its Australian parent. As part of the plan, senior lenders took control of 95% of the firm’s equity.

In addition to the new corporate structure, S&G revealed it would be financing a £30m tech drive. In a statement, the firm said ‘a significant proportion’ of the money would be put towards ‘digitising legal services, automating processes and introducing the latest back end technologies.’

S&G is also seeking to grow the practice areas of employment, residential conveyancing and family law.

The firm is keen to wipe the slate clean after a turbulent few years which saw regulatory investigations and near financial ruin. S&G was the subject of an Australian Securities and Investments Commission (ASIC) investigation in July 2015 over its accounting practices, and for the six months ending 31 December 2015 the firm posted a $958m loss, primarily due to a hefty write-down on the Quindell acquisition. 

The significant tech investment and fusion of its two divisions is a step in the right direction for S&G, as its new-look management team. Last month the firm announced that ex-managing director of Sainsbury’s Argos Financial Services, Martyn Beauchamp, would take on a newly-created role of chief customer officer. Emma Holt, who was previously the firm’s head of personal injury, was appointed chief risk officer in the shake-up.

To read more on Slater and Gordon’s rise and fall, read ‘The Icarus Syndrome’

Legal Business

The Icarus syndrome – the highs and lows of Slater and Gordon

Pride before a fall. Everything was going well when the world’s first listed law firm, Slater and Gordon, announced another blockbuster UK buyout in early 2015.

‘In getting to this point, we undertook a very extensive due diligence process,’ said the firm’s managing director, Andrew Grech. ‘The business we are buying is of high quality with robust infrastructure and systems, and good people. This move will accelerate and consolidate our position in the UK market, and bring benefits to the clients and staff of both businesses.’

Legal Business

Slater and Gordon to close four UK offices amid further upheaval

Capping off a challenging year, Slater and Gordon (S&G) is to close four of its UK offices as it seeks to consolidate its operations.

S&G, which saw its UK revenues for 2017 decline by 17%, told staff on Monday (27 November) that it plans to relocate employees from smaller regional outposts to the firm’s larger UK offices. The firm’s branches in Chester, Wrexham and Milton Keynes will be closed, while S&G’s Preston office will close when the lease on the premises runs out next summer. The firm currently has 14 offices in the UK.

In a statement, S&G said: ‘We have assessed our geographic footprint with a view to bringing it in line with our vision of delivering our services from strategic centres of excellence.

‘We are considering a plan to consolidate a number of our smaller offices into our larger regional hubs, where colleagues can share their outstanding knowledge and expertise across a range of legal fields. We will work closely with the colleagues impacted during the consultation period.’

The announcement caps off an eventful period in the wake of S&G’s troubled £637m acquisition of professional services division of Quindell (now known as Watchstone Group) in March 2015. Quindell later became subject to both Financial Conduct Authority (FCA) and Serious Fraud Office (SFO) investigations. For the six months ending 31 December 2015 S&G posted an A$958m loss, primarily due to a hefty write-down on the Quindell acquisition.

S&G announced a major recapitalisation plan this June that will see its senior lenders take 95% of its equity. The recapitalisation is set to split the listed Australian parent from the UK operation when it competes in the new year.

BLM has expressed an interest in September in taking on S&G’s business legal services division, with BLM confirming that conversations were in the ‘early stages’. Personal injury competitor Irwin Mitchell also looks like a potential suitor, and the firm announced it was hiring a three-partner court of protection team from S&G’s Manchester office in November.

Legal Business

Watchstone Group files defence as war of words with S&G over Quindell continues

The ongoing Slater and Gordon (S&G) saga shows no sign of abating, as the Watchstone Group (formerly Quindell) in October denied fraudulently misrepresenting itself over the sale of its professional services arm to the beleaguered law firm.

The £637m buyout in May 2015 proved to be the beginning of a downward spiral for S&G as, following the deal’s completion, the Serious Fraud Office launched a probe into Quindell’s accounting practices. As a result, S&G’s shares tumbled.

Legal Business

Five years on from pioneering S&G acquisition of Russell Jones, Aussie pioneer splits from UK business

Another chapter in the turbulent story of Slater and Gordon (S&G) has unfolded, with the beleaguered listed legal pioneer today (31 August) announcing the splitting off of its UK business from its Australian parent.

S&G’s UK arm will change into a new holding company, called UK HoldCo, which will be owned by the firm’s senior lenders, in a separation agreed as part of a recapitalisation programme linked to its ill-fated acquisition of the Quindell professional services business.

The move effectively splits S&G from the legacy Russell Jones & Walker, the top 100 UK law firm that the Australian business acquired in 2012 in a ground-breaking £53.8m deal.

In a statement to the Australian Stock Exchange (ASX), S&G said: ‘The company believes the separation of the UK operations provides the best option to enable both the Australian and UK operations to succeed in their own right and will enable the company to focus its management’s time and resources on the Australian business.’

The separation follows a hugely turbulent period for S&G, which has been wrestling with debts incurred largely thanks to its £637m acquisition of the Quindell business.

S&G announced in June that group managing director Andrew Grech had stepped down as part of a recapitalisation which saw the entire board replaced.

The recapitalisation agreement was reached with S&G’s main lenders, New York private equity house Anchorage Capital.

S&G also this week announced its financial results for the year ending 30 June 2017, with the firm incurring a loss of A$546.8m for the period, largely due to a write-down on the Quindell acquisition.

S&G became the first law firm to go public by listing on the ASX in 2007, and subsequently acquired personal injury specialist Russell Jones in 2012 to enter the UK market in what was touted as a hugely symbolic move under the incoming Legal Services Act regime.

S&G had made a series of acquisitions in recent years before attempting by far its largest deal with Quindell two years ago in a move that almost immediately went sour. In June this year, S&G issued a £637m claim in London’s High Court against Quindell (now called Watchstone Group), alleging the company fraudulently misrepresented itself during the purchase.

The latest episode in the S&G saga is another reminder of how little of the fanfare attached to the deregulatory ‘big bang’ of the Legal Services Act has yet to be justified, more than five years since the most radical elements of the legislation came into force.

As Legal Business noted recently, the other big hope to shake up the global legal sector – the big four accountancy firms – are likewise yet to live up to their own sales pitch.

Legal Business

Slater and Gordon managing director Grech steps down amid major recapitalisation plan

Andrew Grech, Slater and Gordon (S&G)’s group managing director has stepped down with immediate effect today (29 June) as part of a recapitalisation deal replacing the firm’s entire board, in an attempt to shore up financial resources.

Grech will remain a non-executive director of Australian-headquartered S&G for a short period until a successor is named. S&G Australia chief executive Hayden Stephens and UK chief executive Ken Fowlie will continue in their roles.

The beleaguered firm has entered the recapitalisation agreement with its main lenders, Anchorage Capital, a New York private equity house. Together, the lenders represent over 75% of the company’s debt by value.

S&G said that the recapitalisation ‘is intended to provide the company with a sustainable level of senior secured debt and a stable platform for its future operations in both Australia and the UK,’ in a statement released today to the Australian Stock Exchange.

The plan means that all existing directors of the firm will resign ‘in due course’. Once completed in October, the deal grants S&G’s lenders 95% ownership of the company’s equity. Existing shareholders will be left with less than 5% equity. The lenders have already committed to providing the firm with A$40m working capital facility, with a potential three year A$30m senior debt facility for future financial flexibility. 

Grech’s exit announcement follows the service by S&G’s UK subsidiary of a £637m London High Court claim form on Watchstone Group earlier this month. The claim alleges that the UK-headquartered technology company, then known as Quindell, fraudulently misrepresented its finances during S&G’s buyout of Quindell’s professional services arm in 2015.

S&G claimed that Watchstone also breached its warranties relating to the sale. S&G maintain that the purchase would not have occurred had Watchstone properly represented its position.

S&G is in a troubled financial position, posting a 34% drop in total revenues in February this year. The figure fell from A$487.5m to A$322.7m.


Legal Business

Slater and Gordon serves £637m claim form on Watchstone for misrepresentation on sale

Slater and Gordon (S&G)’s UK subsidiary has served a £637m claim form on Watchstone Group in London’s High Court, for fraudulently misrepresenting the company on its 2015 buyout.

The Australian law firm told the Australian Stock Exchange (ASX) on 14 June that it had served the claim, after confirming its intention to do so last month.

The claim relates to S&G’s purchase of Watchstone’s professional services arm. S&G alleges the technology services company misrepresented itself and breached its warranties, maintaining that the purchase would not have taken place had the company, then known as Quindell, properly represented its position.

S&G UK is represented by CMS Cameron McKenna Nabarro Olswang LLP.

UK-headquartered Watchstone confirmed receipt of the £637m claim and said that it would defend the action ‘robustly.’ Watchstone expects to file its defence in a month’s time, Legal Business understands.

Describing S&G’s claims as ‘groundless and without merit’ a Watchstone spokesperson said in a statement that S&G has ‘continuously refused to disclose key relevant evidence in its possession’ and that it would ‘intend to seek its disclosure at the earliest possible opportunity,’ following the claim’s service.

In May, Watchstone also dismissed the merit of S&G’s claim, citing the findings of an independent barrister who estimated that the claim lacked 50 per cent prospects of success.

S&G purchased the professional services division of Quindell after it generated revenues of nearly £180m in just the first half of 2014. The alternative business structure (ABS) covers legal services mostly relating to personal injury but also included marketing and motor services.

The firm, which made 80% of its UK revenue from personal injury claims, lost half its stock value in November 2015 after the UK government unexpectedly announced plans to limit the number of personal injury claims.

In 2016, S&G told ASX that £50m of the purchase price for the acquisition would be held in escrow against warranty claims that might arise under the share purchase agreement. In January 2016, S&G’s lenders it appointed investigative accountants for an internal review.

S&G is in a difficult financial position. In February S&G posted a 34% fall in total revenues, the figure falling from A$487.5m to A$322.7m.