Slater & Gordon feels class action squeeze

Slater & Gordon has called on rival firm Maurice Blackburn to stand aside from a $100m shareholder class action.

Embattled listed law firm Slater & Gordon has called on rival labour lawyers Maurice Blackburn to stand aside from a $100 million Federal Court shareholder class action due to a financial conflict of interest. The class action is against Slater & Gordon.

The move came ahead of a bid by Maurice Blackburn yesterday to get details of Slater & Gordon’s insurance because a restructure currently being negotiated is likely to leave no assets behind for class members except for the company’s insurance.

Maurice Blackburn is also considering adding Slater & Gordon’s directors to the case as defendants, so it can claim against their policies.

In an email sent to Maurice Blackburn’s Josh Hunt on Friday, Slater & Gordon’s solicitor Leon Zwier, of Arnold Bloch Leibler, said that “if for example Slater & Gordon fails or stalls Maurice Blackburn will gain a significant financial advantage in the marketplace”. This was because the two firms are leaders in the personal injury law market, he said.

“Maurice Blackburn should consider ceasing acting in this class proceeding because of the apprehended conflict between duty to clients and self-interest,” Mr Zwier said.

The email is an exhibit to an affidavit sworn by Mr Zwier on Sunday as part of the class action proceedings, in which shareholders are seeking compensation for the all-but-complete destruction of the value of their stakes in the company following its disastrous $1.3 billion purchase of part of British company Quindell in 2015.

Mr Zwier has been leading negotiations with Slater & Gordon’s banks, led by NAB and Westpac, to swap the company’s crippling $700m debt pile for equity.

NAB and Westpac have been reluctant to take an ownership share in the labour-aligned Slater & Gordon, but there are options under consideration to allay their concerns such as issuing them with convertible notes.

A counter-proposal from the lenders is due on March 17.

Yesterday, Mr Zwier told the court allowing Maurice Blackburn to have a say in Slater & Gordon’s recapitalisation “would be like asking Channel Seven to play a role in the reconstruction of Channel Nine”.

However, counsel for Maurice Blackburn, William Edwards, hit back by pointing out Arnold Bloch Leibler “acted as a significant adviser to Slater & Gordon in the capital raising back in 2015”.

A scheme of arrangement agreed to by senior lenders can bind junior creditors, such as class action litigants, without their agreement. However, Mr Zwier said it was premature to give Maurice Blackburn access to insurance policies because the matter was not urgent.

If Slater & Gordon struck a deal with its lenders this would take at least three months and would involve public court hearings, he said. Judge John Middleton adjourned the case to March 17.

He told the court that given Slater & Gordon debt was changing hands at between 30c and 40c in the dollar, “the senior lenders have all the equity in the enterprise at the moment, and that there is very little left”.