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S&G solicitors to proceed with £637m legal action over failed buisness acquisition

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S&G (Slater & Gordon) solicitors has confirmed that it will be proceeding with its legal action against Watchstone PLC over claims that its acquisition of legal services business Quindell was based on fraudulent misrepresentation, together with breach of warranties provided as part of the deal.

S&G purchase Quindell – now operating as Watchstone PLC – in 2015 for £637m. The deal, one of the largest seen in the UK legal services sector, raised many eyebrows at the time with many industry experts questioning the financial and viability aspects. Despite such widespread concerns, S&G insisted that appropriate due-diligence had been carried out, with over £31m being spent on such activities prior to the deal being agreed. S&G, who initially issued their claim in June 2017, is seeking to recover the costs of the acquisition, which was based around the acquisition of a regular supply of high-volume personal injury claims, particularly those involving road traffic accidents and hearing loss.

In defending the S&G claim, Watchstone recently revealed that its legal costs budget had reached £8.2m, in addition to £2.9m incurred during the 2018 accounting year. In a statement, Watchstone said that the level of costs reflected their determination to robustly defend the action. The statement also said:

Our position remains that Slater & Gordon’s allegations of deceit and the associated breach of warranty claim are wholly without merit and should never have been advanced…our preparation for trial is well advanced and it has been necessary to invest considerable financial resource to ensure we are fully prepared.”

Watchstone also confirmed that £50m - plus interest – from the S&G sale remains retained in a joint escrow account until settlement or withdrawal of a claim. Stefan Borson, group chief executive, confirmed to shareholders they will receive no distribution while the S&G litigation remains unresolved. Watchstone also warned that contingent liabilities could still include damages or potential fines from adverse outcomes, including fines that may be levied by the Serious Fraud Office as part of its ongoing investigation or potential damages from the action brought by S&G.

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