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In UK 🇬🇧 PwC accused of leak during Quindell deal talks
High Court hears of ‘shocking breach’ of professional duties by Big Four firm
A senior PwC partner is alleged to have divulged commercially sensitive information to an investment banker during deal negotiations © Getty Images
PwC has been accused of a “shocking breach” of its professional duties in a £63mn lawsuit by its former client Quindell, which alleged that the Big Four consultancy disadvantaged it during deal negotiations by leaking confidential information.
PwC has been accused of a “shocking breach” of its professional duties in a £63mn lawsuit by its former client Quindell, which alleged that the Big Four consultancy disadvantaged it during deal negotiations by leaking confidential information.
Quindell, once valued at £2.7bn, claimed that a senior PwC partner had divulged commercially sensitive information about its financial position and deal strategy to an investment banker in 2015. The software group, now known as Watchstone, said that investment bank Greenhill & Co then shared the information with its client Slater and Gordon, resulting in it gaining leverage to submit a lower bid for part of Quindell’s business.
PwC denied liability on the first day of a High Court trial in London that is expected to run until mid-February. On Thursday, the court was told that beginning in 2014, PwC had been paid £5mn to conduct “project Goldfish”, a review into Quindell’s finances, and offer restructuring advice following negative publicity about the insurance group’s accounting practices. “It’s hard to think of a more important or sensitive assignment for PwC than this,” said Tim Lord KC for Watchstone. At the time, Quindell was trying to sell its professional services division.
It sold the business to Australian law firm Slater and Gordon for about £637mn in 2015. Watchstone’s case centres on what it calls a “secret meeting” between Ian Green, who was then PwC’s UK head of restructuring and working on project Goldfish, and a banker from Greenhill, which was advising Slater and Gordon on its bid. The court was told that following the meeting, the banker had sent an email to colleagues outlining what Green had told him, including that the insurance group would run out of cash in “mid-2015”. PwC denies that the note is an accurate account of the meeting.
The details allegedly disclosed were the type of information that “would likely move the dial” in price negotiations, Lord said. Green’s meeting with the Greenhill banker had given the bank and its client Slater and Gordon an “inside track” and an “authenticated inside [the] tent view” of Quindell’s business handing it leverage to submit a lower bid than it otherwise would have done, he said.
He rejected Green’s evidence that he had been “ambushed” by the Greenhill banker. Green could and should have said “[I] can’t talk about Quindell, let’s talk about the rugby”, said Lord. Green is expected to appear as a witness next week. PwC denied conspiring with Greenhill or Slater and Gordon. It said it did not breach its duty of confidence or professional obligations towards Quindell.
It argued that Green did not disclose confidential information to Greenhill, and even if he had done so there was no evidence that the investment bank had then shared this with Slater and Gordon. In written arguments, it said “the alleged breach of duty had no effect whatsoever on the price for which Quindell was willing to sell . . . or on the price which [Slater and Gordon] offered to pay.” Richard Handyside KC for PwC said documents from the time showed Quindell’s advisers told the company Slater & Gordon had offered a “very good price”.
PwC has in turn claimed that if it loses the case, Slater and Gordon should be held responsible for a portion of the damages. In written submissions at Thursday’s hearing, Slater and Gordon said the deal had been “financially catastrophic” for it, with goodwill of £558mn ultimately written off.
There was no evidence that the meeting between Greenhill and PwC influenced the deal and “the evidence points clearly to the contrary”, it said. Slater and Gordon will be insulated from any findings against it because Watchstone has indemnified the law firm against any financial liability they could face as a result of its claim against PwC.
The indemnity was part of a 2019 settlement of an earlier lawsuit under which Watchstone paid £11mn to Slater and Gordon, which had sued it for £637mn alleging breaches of warranty and fraudulent misrepresentation over the deal. Watchstone had launched a counterclaim after the details of the “secret meeting” emerged. The court case is likely to be among the final episodes in Quindell’s downfall, which began with a shortseller attack and a subsequent share suspension in 2015, followed by a Financial Conduct Authority investigation.
The company later restated its accounts by hundreds of millions of pounds to rectify “aggressive” accounting practices. It subsequently sold off its trading businesses and is now seeking payouts in a number of court cases and to return the cash to shareholders. In November it settled a negligence claim against its former auditor KPMG for £5mn.