Australian firm explores investor action against Slater and Gordon

Topics: Alternative business structures

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An Australian practice has confirmed it is investigating a possible class action against listed firm Slater and Gordon.

Sydney-based ACA Lawyers said it is exploring whether the Australian and English giant misled the market over the capital raising to acquire Quindell’s professional services division and over its profit forecasting for the 2016 financial year.

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Slater and Gordon admitted last week it had downgraded its profit forecasts after experiencing slower case resolutions than expected.

The admission was made last Thursday, although in a fresh twist Slater and Gordon said yesterday that the revised results were circulated to group executives on 9 December and kept confidential for a week.

Slater and Gordon’s share price dropped by 17% following the profit warning. This year the price has fallen from A$6 (£2.90) a share to a low of A$0.83. The price has since recovered marginally, to A$0.98 per share.

Bruce Clarke, principal with ACA Lawyers, said shareholders can have ‘little confidence’ in the company’s projections.

‘What we are seeing at the moment is a company that appears to be unable to accurately provide the market with the information needed to make considered decisions on the value of Slater and Gordon,’ said Clarke.

‘If this is the case, and investors have not been fully informed, then Slater and Gordon could face legal proceedings, including a potential class action by investors who have purchased shares without all available information.’

A spokeswoman for ACA Lawyers said the firm has had ‘a lot’ of interest from investors but is yet to decide on whether to proceed with legal proceedings. Another Australian firm, Maurice Blackburn, has been linked with a similar action but has yet to respond to the Gazette’s request for information.

Any class action would have echoes of proceedings involving shareholders of Quindell, which once claimed to be the largest listed legal services provider in the world.

A firm representing 342 shareholders has sent a letter of claim following the UK company’s share price fall in recent years. Quindell has vowed to contest the action.

Slater and Gordon has admitted that while the first half of 2015 as a whole has been ‘difficult’, the performance of the UK business has been improving during the past few months and is ‘expected to contribute positively to cashflow’ in December and during the remainder of the financial year.

Speaking last week, managing director Andrew Grech said: ‘The trajectory of the UK business provides confidence that we will trade through this period to be in a stronger position by the end of this financial year.’

The firm said its financiers have been kept informed of the position throughout, and Slater and Gordon has more than A$100m ‘headroom’ within its banking facilities.

Readers' comments (12)

  • I must preface my comment by stating i do not know anything about Australian Law.

    There were reports of, loosely speaking, an expedited application on the fears that the company was technically insolvent and also that one of the directors had been dismissed.

    repeated merger & acquisition followed, integration difficulties followed by big shiny new offices, followed by market shock = collapse see Halliwells & etc & etc

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  • Sydney-based ACA Lawyers said it is exploring whether the Australian and English giant misled the market over the capital raising to acquire Quindell’s professional services division and over its profit forecasting for the 2016 financial year.

    But was this not the Law Society and SRA's plan, to allow capital to be raised for Legal 'Services' without limit?

    Without limit means usually without questions as to source (see Robert Maxwell in this era alone)..?

    ‘What we are seeing at the moment is a company that appears to be unable to accurately provide the market with the information needed to make considered decisions on the value of Slater and Gordon,’ said Clarke.

    "...[if] investors have not been fully informed, then Slater and Gordon could face legal proceedings, including a potential class action by investors who have purchased shares without all available information...."

    It seems that there is a real cause for honest solicitors after all. You couldn't have persuaded The Law Society, SRA and half the judiciary of that before The Legal Services Act 1998 however much you tried ...

    Oh well....

    Plus ça change, plus c'est la même chose ....

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  • "...slower case resolutions than expected..."

    I think S&G can thank Jackson LJ for that. All firms are suffering as a result of the slow down in litigation caused by costs budgeting. Add to that funding £10,000 court fees out of working capital and I suspect a lot of firms have cash flow issues at present.

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  • No, it's the crisis of integration, poor management and staff acting as rattus rattus and leaving the good ship S + G in droves.

    We've reduced our cycle time from inception to recovery of costs by 14% since April 2013 and this is against a back drop of the defendants running significantly more matters to hearings under the FRC regime.

    Does anyone else recall the hoary old chestnut 'this officer's men will follow him anywhere, but only out of a sense of morbid curiosity'.

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  • Does cutting "cycle time" (nice file velocity there!) have anything to do with accepting inappropriately low costs offers for the sake of meeting an arbitrary quarterly target?

    I was one of those officers' men. I would have followed them anywhere, right up until they all drank the Kool-Aid.

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  • Its nice to see this though Bob Smith, as the SRA and Claims Handling (Law) Society see very well now:

    "..Its the future stupid ..."

    (And we were demonstrably responsible for it)....

    I bet it will come back full circle. The UK do not like spiv infested lawyers like the US.

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  • Who'd have thunk it.

    You know I for one always thought that if you cobbled together a few third-rate scally PI outfits, doing portal whippy cases; add in a second rate costs draftsmen running out of an office on a seedy industrial estate, you'd end up with a business easily worth £750 million. [aka Quindell].

    And it was clear to all that the business was worth £1.2billion when the said business started advertising via its shady CMCs to all and sundry in the North of England saying "have you had a go at getting a free holiday by being in a car accident? Why not say you've worked in a noisy job in the 1980s - you'll get loads of cash for that"

    Because none of these cases would be statute barred, as we know, and none of them would be generally elderly people who worked in factories in the 1970s who would have age-related hearing loss anyway. Nosiree bob. And each was worth £15,000. We know that because the revenue for each case had already been booked two years ago! Kerching.

    So when Slater plus Gordon "loyers" paid £600million, it was a steal! The best corporate transaction this side of BCCI!

    Because had they not done that, now we have seen the restated accounts of Quindell PLC, we know that Quindell would have gone bust. As soon as the restated accounts showed that it had been loss making from the start and continuing in much the same (downward) direction, the banks would have pulled the plug. And we also now know that Quindell had no cash left (indeed of the £600 million from S+G, something like £100 million has gone down the drain already).

    So Slater plus Gordon loyers, if it really wanted the hearing loss claims, could have waited three months and bought it in a pre-pack administration for maybe £150 million.

    So it shows excellent strategy to have bought it for four times that sum three months earlier!!!! And it isn't that Slater plus Gordon didn't know all of the above - it did extensive due dilligence, had full access to the books, and Quindell's COLP joined s + G.

    Fair'd income!!!

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  • @Dominic Cooper23 December 2015 10:52 am:

    "....And it was clear to all that the business was worth £1.2billion when the said business started advertising via its shady CMCs to all and sundry in the North of England saying "have you had a go at getting a free holiday by being in a car accident? Why not say you've worked in a noisy job in the 1980s - you'll get loads of cash for that" ..."

    Bizarre, Dominic, but this sounds the kid of comment I would have put up.

    And I bet there are not a few ne claims handlers - cum 'lawyers' who won't be ahem feeling the over sensitive bladder a bit .....

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  • New claims handlers rather ......

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  • What about the poor firms previously swallowed up by the Ozzy behemoth. Most of the delayed earn out was in 'gold plated s and g shares' designed to purchase the goodwill and compensate for large remuneration cuts. The 'rats' can't desert the ship as they will be locked in the galley.
    Fast growth through acquisition only is always risky. I hope the cash starts flowing and they trade out 'off the rocks' for the sake of 100 of hardworking staff.

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