ACA LAWYERS has issued a formal letter of demand to Andrew Grech (pictured), managing director of Slater and Gordon, in regards to the Melbourne-based firm's alleged misconduct which led to its billion-dollar fall from grace.
ACA has become the second firm to lay the foundations for a class action against Slater and Gordon, after Maurice Blackburn instituted its own proceedings on behalf of 3,000 aggrieved shareholders in October last year.
Bruce Clarke, co-founder and principal at ACA Lawyers, tells Business News Australia that his company's fresh suit against Slater and Gordon, while similar to the one brought by Maurice Blackburn, instead proposes to investigate claims of misleading and deceptive conduct within a wider time-frame.
Clarke says his firm has also identified several issues with Slater and Gordon's financial dealings, which are not necessarily related directly to its disastrous acquisition of Quindell in the UK.
"What we have done is to write to Mr Andrew Grech, and we have outlined that our claim differs from that which has been filed by Maurice Blackburn in two significant ways," says Clarke.
"The first is that the period we claim as the 'relevant period' is a longer one, from 12 August 2014 to 29 February 2016, which is slightly more than 18 months.
"Second, we have identified what we think are afurther set of significant issues relating to misleading and deceptive conduct in respect of the accounting processes used by Slater and Gordon.
"While we identify the Quindell purchase in the UK as having an important part to play, we say that there has been a number of significant failings in the way in which Slater and Gordon applied its accounting standards, the ones they had discussed during the ASIC review."
ACA alleges that shareholders weren't properly informed of Slater and Gordon's choice to change its accounting standards, nor of the consequences the change could have on the company's earnings per share (EPS) and general profitability.
According to Clarke, the clandestine nature of Slater and Gordon's practice dropped a number of bombs on the balance sheet.
"We say that there were a number of failures in that way, so that there were either overstatements or understatements of certain measures which had a significant impact on the public understanding of Slater and Gordon's true financial position," says Clarke.
"We say that during the relevant period there were breaches of the continuous disclosure rules and the ASX listing rules, and also that there was misleading and deceptive conduct under both the Corporations Act and the ASIC Act.
"What we have said is that throughout the relevant period, Slater and Gordon made some 22 disclosures to the ASX regarding financial results and profit guidance which contained errors, and those errors we have identified in very specific detail to Mr Grech."
The alleged errors include that Slater and Gordon had understated its amortisation result, failed to identify intangibles in its business acquisition and overstated its good will, broadcast earnings and EPS results.
ACA also alleges Slater and Gordon failed to recognise the impact of regulatory changes in the UK - changes which had been widely recognised as "affecting the legal landscape", and even touted in the British conservative party's own election manifesto.
"A number of these matters are very technical, so it's not helpful to try and make general statements about them, but we have sought to be as particular as possible," says Clarke.
According to Clarke, ACA chose to put its clients' grievances in writing directly to Grech, rather than launching heavy proceedings off-the-bat, to minimise costs and potentially maximise recoverable assets.
"Instead of undertaking full blown further legal action, we want to genuinely canvas cheaper ways of resolving the issues between our shareholder clients," he says.
"I just think in matters like this we have our duty which is to our clients but we take no pleasure in any company having found itself in difficulty.
"However, that having already occurred, we trust that people use proper common sense to resolve issues in a way that maximises any positive benefits that arise from the outcome."
ACA Lawyers will be keeping an eye on Maurice Blackburn's proceedings, and will wait to determine whether its own claim will run concurrently.
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