Quindell gives Slater & Gordon a case of indigestion

As Australia’s biggest class action law firm, Slater & Gordon should be well acquainted with the principle of caveat emptor. But it must have forgotten its Latin after its shares were suspended owing to an accounting headache linked to the takeover of the controversial British firm Quindell.

Slater & Gordon, which swallowed Quindell for £675m last year, may have been left poisoned by the group after it said it needed more time to work out how much it will have to write down the value of Quindell.

The company, led by chief executive Cath Evans, asked Australian regulators to suspend trading in shares because impairments related to the UK business “are not yet finalised … The company has sought a voluntary suspension, rather than a trading halt”, it said.

Slater & Gordon shares, which have lost 80 per cent of their value since their peak last March, are expected to start trading again on Monday. It became the first law firm in the world to float on the stock market when it listed in 2007; it snapped up the remnants of Quindell, which had been plagued by scandal and short selling attacks from hedge funds, after raising money from shareholders.

The move to suspend shares reflects the difficulty in working out Quindell’s accounts. Quindell, now known as Watchstone Group, is under investigation by the Serious Fraud Office. Since striking the deal last March, Slater & Gordon’s own accountancy practices have also come under scrutiny from Australian regulators.

“There are certain material items in the half year results which are not yet finalised, including, as foreshadowed in December, testing and assessment of the goodwill values for impairment of the UK business,” Slater & Gordon said. Quindell was once a UK stock market darling and briefly flirted with the FTSE before questions were raised by anonymous short selling outfit Gotham City Research accusing the group of being a “country club built on quicksand”. The business won a libel victory following the attack, but the unravelling of the firm means the judgment was a Pyrrhic victory.