Debt-strapped Slater and Gordon is facing another dispute with the British company it bought legal cases from two years ago.
There is also hope that a deal could soon be reached between Slater and Gordon’s new debtholders that will pave the way for a structure of the financially troubled group.
Slater & Gordon is working on a restructure to appease its bankers. Photo: Jessica Shapiro
The developments come as lawyers for aggrieved shareholders participating in the Maurice Blackburn class action claim against the company have entered into mediation with the group in the hope of settling the $100 million claim.
Late last week, UK company Watchstone, which was previously known as Quindell, revealed it was in “active dialogue” with Slater and Gordon on a number of matters including the money it was supposed to receive as Slater and Gordon settled certain types of claims.
Slater and Gordon paid $1.3 billion in 2015 for the professional services arm of Quindell. Included in that acquisition was tens of thousands of noise-induced hearing loss cases.
Noise-induced hearing loss cases are a key type of personal injury claim and often linked to work in factories or other types of industrial workplaces.
Watchstone in its full year results for 2016 said it had also written down the value of a GBP50 million warranty set aside in case there were problems with its deal with Slater and Gordon. At the same time, Watchstone is planning to divest its businesses and effectively wind down.
“We remain in active dialogue with Slater and Gordon on a number of other matters [to the warrant] including the performance of the noise-induced hearing loss (NIHL) cases to which deferred consideration is due when and if, such cases are profitable. To date, no deferred consideration has been paid,” Watchstone said in its statement.
Slater and Gordon had agreed to pay 50 per cent of the earnings from the noise-induced hearing loss cases to Watchstone as they settled as part of the original agreement.
The portfolio of cases was valued at $77 million at the time Slater and Gordon bought Quindell. Slater and Gordon has previously warned that its UK operations were not operating as it had expected.
In regards to the warranty, Watchstone said the impairment on the value was not an admission that it owed Slater and Gordon the money.
Last November, Slater and Gordon obtained an independent barrister’s opinion that its claim against Watchstone was likely to be successful and any such claim would have a likely value of GBP53 million. As a result, Watchstone retained GBP50.1 million in the warranty escrow account until the claim was resolved.
“Whilst Watchstone’s view as to the lack of merits of the purported claim has not changed, on the basis of the opinion, we consider it appropriate that a provision for impairment be established in respect to the warranty escrow,” Watchstone said.
“This reflects the inherent uncertainty in valuation of the purported claim and is in no way a reflection of the group’s view on ultimate resolution, which is uncertain in both time and quantum.”
Slater and Gordon was contacted for comment.