National firm Slater and Gordon is braced for a courtroom battle later this year over the fallout from the biggest acquisition ever seen in the UK legal profession.

Watchstone plc, formerly operating as Quindell, confirmed this week that a trial is expected to start in October to hear the £637m claim.

Slater and Gordon is seeking to recoup the cost of acquiring the Quindell professional services division in 2015. Slater issued a claim in June 2017 for breach of warranty and/or fraudulent misrepresentation for the whole amount paid.

In a statement to the London stock exchange yesterday, Watchstone confirmed its legal costs provision has now risen to £8.2m, in addition to the £2.9m incurred during the 2018 accounting year. The level of costs, the company said, reflects its ‘determination to robustly defend the action’.

The statement added: ‘Our position remains that Slater & Gordon’s [sic] 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.’

The deal to buy the Quindell legal services section created a huge stir in the profession, with many observers questioning the sums involved. At the time Slater and Gordon – then owned by its listed Australian parent – insisted it had carried out extensive due diligence. Court papers have since stated that Slater and Gordon spent £31.7m on the ‘most rigorous’ due diligence over five months.

However, the acquisition, which was expected to bring in 90,000 RTA cases a year, heralded an era of extreme turbulence at Slater and Gordon. The firm’s share price plummeted, senior management departed and the firm was eventually sold.

Two accountancy firms have been fined for failings related to the scrutiny of Quindell’s accounts before the acquisition. Slater and Gordon, meanwhile, was fined £80,000 by the SRA over the disclosure to other firms of unredacted confidential information and documents from 7,087 client matter files. KPMG has also been fined £3.15m after admitting to misconduct in handling the financial statements of legal services provider Quindell.

Watchstone said it remains the case that £50m (plus interest) of the sale consideration is 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 Slater and Gordon litigation remains unresolved. The company also warned that contingent liabilities could still include damages or potential fines from adverse outcomes. These could include fines that may be levied by the Serious Fraud Office as part of its ongoing investigation or potential damages from the action brought by Slater and Gordon and a purported class action litigation.

There have been no further developments on a threatened (but not commenced) shareholder class action first announced in September 2015. The group said it has received no communication regarding class action litigation since mid-2016.