Monday 21 October 2019 2:06 am

Watchstone shares jump 40 per cent after it settles Slater & Gordon fraud claim

Insurance firm Watchstone and law firm Slater & Gordon have settled a long running fraud claim just hours before a nine-week High Court trial was due to begin.

Watchstone’s shares jumped 45 per cent today to 156p after the settlement was announced.

The claim dates from listed Australian law firm Slater & Gordon’s acquisition of the professional services arm of Aim-listed Quindell, now Watchstone, for £637m in 2015.

The acquisition was a disaster, with Slater & Gordon writing down AU$814m (£450m) in the value of the business within a year.

Slater and Gordon sued Watchstone for breach of warranty and fraudulent misrepresentation in connection with the sale in June 2017.

Read more: Watchstone accuses Slater and Gordon of using ‘illicit back channel’ during disputed Quindell deal

Watchstone hit back with a counterclaim last month, alleging it had discovered an “illicit back channel” Slater & Gordon’s corporate finance adviser Greenhill & Co used to access confidential information about the company from PwC, then Watchstone’s group restructuring adviser, during negotiations for the deal.

Today, the two sides agreed to settle the claims without admission of liability by either party.

The settlement provides for £11m of £50m being held in escrow to be released to Slater & Gordon with the balance of £39m and accrued interested being released to Watchstone.

Neither side will apply for costs.

Watchstone does not accept that there was a proper basis for Slater & Gordon’s claims, and Slater & Gordon does not accept that there was a proper basis for the counterclaim.

Read more: Slater and Gordon swings to a AU$1bn loss

The failed deal sent Slater & Gordon to the edge of insolvency, with the firm being acquired by its lenders led by distressed asset hedge fund Anchorage Capital, in late 2017.

The UK subsidiary is no longer part of its listed Australian parent – although the Australian business did retain an interest in the Watchstone claim.

Richard Rose, Non-executive Chairman of Watchstone said: “Whilst Watchstone remains firmly of the view that the legal action commenced by the other side was without merit, the board believes that a settlement at this level is in shareholders’ interests as it brings certainty. 

“It also releases a significant cash sum that has been locked in escrow and unavailable to us for some considerable time. The decision was made with consideration of the costs of pursuing the Company’s defence and counterclaim at trial and to the inherent uncertainty of the outcome of any legal process.”

Slater & Gordon chief executive David Whitmore said: “We can confirm that Slater & Gordon and Watchstone have reached a settlement. We are pleased this matter has drawn to a conclusion.

“As a business, we have not been distracted by this case – we have new management, new expectations, new processes to support our staff, partners and customers and new technology to make our work more efficient and effective. We look forward to the opportunities that lie ahead.”