The judge overseeing the Maurice Blackburn-led shareholder class action against Slater and Gordon that resulted in a $36.5 million settlement has signed off on additional costs for the law firm and the funder that backed the case.
Justice John Middleton on Friday approved nearly $1.4 million in further costs for Maurice Blackburn and an additional $3.5 million for International Litigation Partners.
In December, the judge approved the $36.5 million settlement reached in September on behalf of shareholders, and signed off on $4 million in costs for Maurice Blackburn and $4.5 million for ILP. In approving the deal, the judge said at the time that further costs would be assessed at a later date.
Under the settlement, insurers for Slater and Gordon will pay $32.5 million to the class, while hedge funds who bought Slater’s debt will pay another $4 million.
Maurice Blackburn’s national head of class actions, Andrew Watson, said in announcing the deal that it was the best possible outcome, given the “diabolical” alternative of insolvency for the firm, the first law firm in the world to be listed on a stock exchange.
Watson acknowledged that the form’s insurance policy limit was “unexpectedly low” but said Slater and Gordon had no assets to either fund a settlement or pay damages in the event the case proceeded to trial.
“Given the insurance policy limits, and the fact that Slater and Gordon’s defence costs for all actions also come out of the insurance, the proposed settlement will avoid further erosion of the available funds and return to class members as much of what remains under the policies as possible,” Watson said.
At the time the settlement was reached, Slater and Gordon was indebted to its senior lenders some $761 million. About half of that debt was drawn to partially fund the disastrous $1.3 billion acquisition of Quindell Plc, the professional services division of London-based Watchstone Group, in 2015.
Slater and Gordon has filed its own suit claiming $1.1 billion in fraud against Watchstone. The Quindell purchase led to the firm’s near bankruptcy and prompted the shareholder suits.
In August, it was announced that Slater and Gordon had entered into a restructuring deal to avoid insolvency.
“In comparison to insolvency, the recapitalisation provides a holistic restructuring of Slater and Gordon’s balance sheet. The recapitalisation will enable Slater and Gordon to pursue its mission to provide people with easier access to legal services, with a stabilised balance sheet and operating platform. Shareholders will retain the opportunity to participate in future value creation,” the firm told shareholders.
The firm said there was no feasible alternative to the recap plan, which would leave senior lenders with a 95% stake and shareholders just 5%.
The case is Matthew Hall v Slater & Gordon.
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