The company fighting a £600m claim from national firm Slater and Gordon has more than trebled its legal budget.
Watchstone Group, formerly known as Quindell, told the London Stock Exchange today that it has increased the provision for legal costs in relation to the claim from £1m to £3.5m. The increase is designed to ‘reflect our determination to robustly defend the action’, the statement added.
The group was served with High Court proceedings in June, issued by Slater and Gordon in respect of the sale of Quindell’s professional services division (PSD) in 2015.
The law firm bought the PSD for £637m but seeks around £600m in damages for breach of warranty and what it calls ‘fraudulent misrepresentation’.
Watchstone, which now operates in the insurance, automotive and healthcare sectors, says it will file it defence to the litigation ‘imminently’.
The statement adds: ‘Watchstone denies any misrepresentation in the strongest terms and remains satisfied that neither the warranty claim nor a misrepresentation claim have merit and will defend such claims robustly.’
The outcome of the claim remains ‘highly uncertain’, although Watchstone says the verdict of an independent barrister was that the claim has less than 50% chance of succeeding.
A total of £50m of the PSD sale consideration is retained in a joint escrow account until settlement or withdrawal of the claim.
Slater and Gordon, which separated its UK and Australia businesses last month, reached a deal to settle class actions brought by disgruntled shareholders in July. The claimants had seen their assets plunge in value after the disastrous consequences of the Quindell acquisition.
The firm’s annual accounts confirmed last month that senior lenders have been issued interest-free equity entitling them to payment of any amount up to £250m from the proceeds of the Watchstone claims. The Australia company will have recourse to the first £24m of any proceeds that the UK business receives.