A former director of national firm Slater and Gordon instructed advisers to find a ‘back channel’ to ascertain the true financial status of a business it wanted to buy, a court has heard.
Ken Fowlie made a handwritten note of the instruction following a meeting with the group managing director Andrew Grech and members of the firm’s corporate financial adviser Greenhill in December 2014. It sought information from the bankers for Quindell, which would eventually sell its professional services division to Slater and Gordon for £637m.
The note was produced in court today as part of a conspiracy and breach of contract claim by Quindell (now called Watchstone plc) against its former adviser PwC, which had been brought on board to deal with the company’s distressed finances. It is alleged that the information secured from a meeting between Greenhill and a PwC partner in January 2015 wiped £63m from the price that Slater and Gordon was prepared to pay for the Quindell legal business.
Slater and Gordon, which is now under different management, is engaged as a Part 20 defendant under a full indemnity provided by Watchstone. Watchstone’s claims are all denied.
The court heard today that Fowlie and his fellow directors had been ‘frustrated’ by not receiving a full picture of the Quindell finances during the period of due diligence at the time.
Emails were exchanged between Greenhill and Slater and Gordon’s banking adviser Citi which was ‘best placed’ to contact for information about Quindell. One such email said this information was ‘highly sensitive and needs to be a back channel discussion’, and that the ‘script should not reference our client or the state of negotiations explicitly’.
In cross-examination, Tim Lord KC, for Watchstone, said these emails showed that contact was being initiated with Quindell’s banks – of which Quindell would not approve.
‘That is what it appears, yes,’ said Fowlie.
Lord said Fowlie’s note also referencing a ‘back channel’ contact was him ‘discussing getting access to PwC and their views’.
Fowlie agreed this was a discussion about seeing the PwC report on Quindell, adding: ‘It is pretty plain from the note I am talking about the fact that banks are aware of the transaction and the fact we have an interest.’
Lord said the exchanges prior to the meeting between the respective Greenhill and PwC representatives, Gareth Davies and Ian Green, showed it was ‘plain that what Slater and Gordon were driving at was to understand what is going on inside Quindell’.
Fowlie replied: ‘I don’t agree with the breadth of your characterisation.’ He added it was a ‘little bit difficult to get underneath’ Quindell but that the company was carrying out due diligence to address that.
The court heard that Davies had planned to ask Green about Quindell’s cash position and liquidity, the quality of the underlying business and what plans the company had.
Asked if he would have expected its adviser to pass on relevant information, Fowlie said: ‘It is right we would expect Greenhill, if it obtained any information on any topic, to pass it on to Slater and Gordon to consider whether it useful.’
Following the meeting, the court heard Davies had emailed colleagues to say information would be ‘sent to Ken [Fowlie]’ and to stress it should not be passed on. Fowlie said he did not see any such report until the emails and documents were disclosed as part of separate litigation in 2019.
The hearing continues.
