Australian class-action firm faces potential action after share slump
SYDNEY – Australia’s biggest class-action law firm Slater & Gordon Ltd could itself become the target of a class action after its expansion into Britain resulted in a profit downgrade and the collapse of its share price, a rival firm said on Wednesday.
Law firm Maurice Blackburn said it had “carefully monitored the events surrounding the precipitous decline” in Slater & Gordon’s share price – down 90 percent in eight months – and had started taking registrations for a potential class action.
“You’ve got to start asking serious questions about the quality of governance and internal accounting systems,” Maurice Blackburn principal Jacob Varghese told reporters in Melbourne.
Slater & Gordon made headlines as the world’s first listed law firm in 2007, and a suit would make it the first class-action firm to be the defendant in a class action pertaining to its disclosure obligations to shareholders.
It would be an especially uncomfortable milestone for the one-time employer of former Australian prime minister Julia Gillard, since its shares were trading at eight times their A$1 issue price as recently as April.
In March, Melbourne-based Slater & Gordon said it was paying 637 million pounds ($944 million) for the professional services unit of British insurance firm Quindell Plc, making it one of that country’s biggest law firms. Soon after, Quindell was accused of accounting irregularities, leading to fierce selling in Slater & Gordon shares.
Then in November, Britain raised the threshold for personal injury claims, a move expected to affect Quindell’s business. Slater & Gordon confirmed its profit guidance on Nov. 30, only to withdraw the guidance on Dec. 17, leading to further selling.
Maurice Blackburn’s Varghese said his firm, also based in Melbourne, would question Slater & Gordon’s decision to give earnings guidance on Aug. 28 “in the circumstances of such a chaotic year” then repeatedly confirm the guidance until a week ago.
It would also question whether Slater & Gordon’s disclosures of risks surrounding the Quindell acquisition were “as fulsome as they ought to have been”. More than seven complainants were expected to register, the minimum number required for a class action in Australia.
Slater & Gordon shares were down 6 percent at 93 cents on Wednesday, giving it a market capitalisation of A$326 million, down from A$2.8 billion in April. In a statement, Slater & Gordon said it has not been notified of any legal proceedings and it will monitor the situation. -Reuters