notice of filing - maurice blackburn · this document was lodged electronically in the federal...

NOTICE OF FILING

This document was lodged electronically in the FEDERAL COURT OF AUSTRALIA (FCA) on

12/10/2016 9:33:06 AM AEDT and has been accepted for filing under the Court’s Rules. Details of

filing follow and important additional information about these are set out below.

Details of Filing

Document Lodged: Statement of Claim - Form 17 - Rule 8.06(1)(a)

File Number: VID1213/2016

File Title: Matthew Hall v Slater & Gordon Limited

Registry: VICTORIA REGISTRY - FEDERAL COURT OF AUSTRALIA

Dated: 12/10/2016 5:27:48 PM AEDT Registrar

Important Information

As required by the Court’s Rules, this Notice has been inserted as the first page of the document which

has been accepted for electronic filing. It is now taken to be part of that document for the purposes of

the proceeding in the Court and contains important information for all parties to that proceeding. It

must be included in the document served on each of those parties.

The date and time of lodgment also shown above are the date and time that the document was received

by the Court. Under the Court’s Rules the date of filing of the document is the day it was lodged (if

that is a business day for the Registry which accepts it and the document was received by 4.30 pm local

time at that Registry) or otherwise the next working day for that Registry.

Filed on behalf of: Matthew Hall (Applicant)

Prepared by: Lee Taylor, Maurice Blackburn

Tel: (03) 9605 2772 Fax (03) 9258 9610

Email [email protected]

Address for service:

Level 10, 456 Lonsdale Street

Melbourne Vic 3000

Form 17 Rule 8.05(1)(a)

STATEMENT OF CLAIM

No. VID of 2016

Federal Court of Australia

District Registry: Victoria

Division: General

Matthew Hall

Applicant

Slater & Gordon Limited (ACN 097 297 400)

Respondent

TABLE OF CONTENTS

A. INTRODUCTION 5

A.1 The Applicant and the Group Members 5

A.2 The Respondent 6

A.3 Directors and officers of SGH 8

B. SGH 11

B.1 SGH‟s business 11

B.2 SGH UK 12

C. PI WORK AND UK PI WORK 14

C.1 The significance of PI Work to SGH 14

C.2 Types of UK PI Work 15

2

C.3 Reforms relevant to UK PI Work 15

C.4 Potential Impact of the RTA Claim Reform Programme as at 30 March 2015 17

C.5 Significance of the RTA Claim Reform Programme to SGH prior to 30 March 2015 22

D. SGH’S PROPOSED ACQUISITION OF PSD 24

D.1 The 30 March Publications 24

D.2 The Entitlement Offer 25

D.3 Completion of the acquisition of PSD 29

E. WHAT SGH SAID ABOUT THE ACQUISITION OF PSD ON 30 MARCH 2015 30

E.1 SGH‟s 30 March statements about the proposed acquisition of PSD 30

E.2 The 30 March Representations 39

E.3 Repetition of the 30 March Representations in April 2015 42

F. THE TRUE POSITION AS AT 30 MARCH 2015 46

F.1 PSD‟s True Regulatory Risk 46

F.2 PSD‟s True Revenue and EBITDA 51

G. WHAT SGH OMITTED TO SAY ABOUT THE PSD ACQUISITION ON 30 MARCH

2015 57

G.1 The 30 March Omissions 57

G.2 What SGH knew or ought to have known as to PSD‟s True Regulatory Risk 58

G.3 What SGH knew or ought to have known as to PSD‟s True Revenue 65

G.4 True characteristics of SGH‟s due diligence into PSD 67

H. SGH’S 30 MARCH CONTRAVENING CONDUCT 68

H.1 Continuous Disclosure Contraventions 68

H.2 Section 1041E Contraventions 72

H.3 Misleading or deceptive conduct 74

H.4 Continuing nature of the March Contraventions 76

I. THE JUNE EVENTS 78

I.1 1 June Announcement 78

I.2 The 24-29 June Announcements 79

I.3 Information disclosed in the 24-29 June Announcements 83

I.4 The price effect of the 25-29 June Announcements 84

I.5 SGH‟s June Conduct 85

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J. THE AUGUST/SEPTEMBER EVENTS 87

J.1 The 6 August Conduct 87

J.2 The 28 August Publications 89

J.3 The 7 September Statements 92

J.4 The Late August/Early September Representations 94

J.5 The repetition of the Late August/Early September Representations 96

K. THE TRUE POSITION AS AT 28 AUGUST 2015 100

K.1 SGH‟s true risk profile 100

K.2 The true reliability of SGH‟s FY2016 guidance 100

K.3 The true likelihood of 1H FY2016 negative cashflow 101

K.4 The true level of impairment of goodwill associated with the acquisition of PSD 102

L. SGH’S AUGUST CONTRAVENING CONDUCT 103

L.1 Continuous Disclosure Contraventions 103

L.2 Misleading or deceptive conduct 106

L.3 Section 1041E Contravention 107

L.4 Continuing nature of the August Contraventions 108

M. THE NOVEMBER EVENTS 109

M.1 The 20 November Publications 109

M.2 Information disclosed in the 20 November Publications 111

M.3 Price effect of the 20 November Publications 111

M.4 The 26 November Announcement 112

M.5 Information disclosed in the 26 November Announcement 114

M.6 The price effect of the 26 November Announcements 114

M.7 The November Conduct 115

N. THE TRUE POSITION AS AT 20-26 NOVEMBER 115

N.1 The ASIC Investigation 115

N.2 The likely goodwill impairment of SGH Australia 116

O. SGH’S NOVEMBER CONTRAVENING CONDUCT 117

O.1 Continuous Disclosure Contravention 117

O.2 Section 1041E Contravention 119

O.3 Misleading or deceptive conduct 119

O.4 Continuing nature of the November Contraventions 120

4

P. THE DECEMBER EVENTS 120

P.1 The 17 December Announcement 120

P.2 Information disclosed in the 17 December Announcement 121

P.3 The price effect of the 17 December Announcement 122

P.4 The December Conduct 122

Q. SGH’S DECEMBER CONTRAVENING CONDUCT 123

Q.1 The true state of SGH‟s bank facilities 123

Q.2 Misleading or deceptive conduct 123

Q.3 Section 1041E Contravention 124

Q.4 Continuing nature of the December Contraventions 125

R. THE POST 17 DECEMBER EVENTS 125

R.1 The 7 January Announcement 125

R.2 The January Conduct 126

R.3 The suspension of SGH Shares 126

R.4 The 29 February Publications 126

R.5 Information disclosed in the 29 February Publications 130

R.6 The price effect of the 29 February Announcement 131

S. CONTRAVENING CONDUCT CAUSED LOSS 131

S.1 Market-based causation 131

S.2 No transaction case in respect of the Entitlement Offer 137

S.3 Reliance 138

S.4 Loss or damage suffered by the Applicant and Group Members 139

SCHEDULE A 142

SCHEDULE B (DEFINED TERMS) 159

5

A. INTRODUCTION

A.1 The Applicant and the Group Members

1. This proceeding is commenced as a representative proceeding pursuant to Part IVA

of the Federal Court of Australia Act 1976 (Cth) by the Applicant on his own behalf

and on behalf of all persons who or which:

(a) acquired an interest in fully paid ordinary shares in Slater & Gordon Limited

(SGH Shares) (including entitlements to new SGH Shares to be issued as part

of the Entitlement Offer defined in this Statement of Claim) during the period

between 30 March 2015 and 24 February 2016 (Relevant Period);

(b) suffered loss or damage by reason of the conduct of the Respondent (SGH)

pleaded in this Statement of Claim;

(c) were not during any part of the Relevant Period, and are not as at the date of

this Statement of Claim, any of the following:

(i) a related party (as defined by s 228 of the Corporations Act 2001 (Cth))

(Corporations Act) of SGH;

(ii) a related body corporate (as defined by s 50 of the Corporations Act) of

SGH;

(iii) an associated entity (as defined by s 50AAA of the Corporations Act) of

SGH;

(iv) an officer or a close associate (as defined by s 9 of the Corporations Act)

of SGH;

(v) a judge or the Chief Justice of the Federal Court of Australia or a Justice

or the Chief Justice of the High Court of Australia; or

(vi) an officer or employee of, or other legal practitioner engaged by, Maurice

Blackburn Pty Ltd in relation to this proceeding,

(Group Members).

6

2. The Applicant acquired interests in SGH Shares during the Relevant Period on his

own behalf, and in his capacity as a trustee of the Hall Family Trust.

Particulars

i) Details of the particular acquisitions of SGH Shares by the Applicant are set out below.

Date Transaction type Number of

shares Capacity

20/04/2015 Purchase on ASX 10,000 Personal

29/04/2015 Exercise of rights

pursuant to Entitlement Offer

5,334 Personal


29/05/2015 Purchase on ASX 50,000 Trust




















3. Immediately prior to the commencement of this proceeding, the group, on whose

behalf this proceeding is brought, comprised more than seven persons.

A.2 The Respondent

4. The Respondent (SGH) is and at all material times was:

(a) incorporated pursuant to the Corporations Act and capable of being sued;

(b) a person within the meaning of s 1041H of Corporations Act;

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(c) a person within the meaning of s 12DA of the Australian Securities and

Investments Commission Act 2001 (Cth) (ASIC Act);

(d) a person within the meaning of s 18 of the Australian Consumer Law set out in

Schedule 2 of the Competition and Consumer Act 2010 (Cth), as applicable

pursuant to:

(i) s 12 of the Australian Consumer Law and Fair Trading Act 2012 (Vic);

(ii) s 28 of the Fair Trading Act 1987 (NSW);

(iii) s 16 of the Fair Trading Act 1989 (Qld);

(iv) s 6 of the Australian Consumer Law (Tasmania) Act 2010 (Tas);

(v) s 19 of the Fair Trading Act 2010 (WA);

(vi) s 14 of the Fair Trading Act 1987 (SA);

(vii) s 7 of the Fair Trading (Australian Consumer Law) Act 1992 (ACT);

and/or

(viii) s 27 of the Consumer Affairs and Fair Trading Act (NT),

(individually, or together, the ACL).

(e) included in the official list of the financial market operated by the Australian

Securities Exchange (ASX), and by reason thereof:

(i) SGH Shares are:

(A) ED securities for the purposes of s 111AE of the Corporations Act;

and

(B) able to be acquired and disposed of by investors and potential

investors in SGH Shares (Affected Market) on the financial

market operated by ASX;

(ii) SGH is and at all material times was:

(A) a listed disclosing entity within the meaning of s 111AL(1) of the

Corporations Act;

8

(B) subject to and bound by the Listing Rules of the ASX (ASX

Listing Rules); and

(C) obliged by ss 111AP(1) and/or 674(1) of the Corporations Act

and/or ASX Listing Rule 3.1 to, once it is, or becomes aware of,

any information concerning SGH that a reasonable person would

expect to have a material effect on the price or value of SGH

Shares, tell the ASX that information immediately (unless the

exceptions in ASX Listing Rule 3.1A apply) (Continuous

Disclosure Obligations); and

(D) obliged by ss 286, 292, 296, 302 and 304 of the Corporations Act

to prepare financial reports for a financial year and a half-year in

compliance with the accounting standards (as defined in s 9 of the

Corporations Act, including AASB 118 “Revenue” and AASB 136

“Impairment of Assets”), and by s 297 of the Corporations Act to

prepare financial statements and notes for a financial year which

give a true and fair view of the financial position and performance

of SGH (and of the consolidated group comprising SGH and its

controlled entities) (SGH’s Accounting Obligations).

A.3 Directors and officers of SGH

5. Andrew Alexander Grech (Grech) was appointed the Managing Director of SGH on

27 June 2001 and remained in that office throughout the Relevant Period.

6. Kenneth John Fowlie (Fowlie) was appointed an Executive Director of SGH on 1 July

2003 and remained in that office throughout the Relevant Period.

7. Ian Robert Court (Court):

(a) was appointed a Non-Executive Director of SGH on 22 March 2007 and

remained in that office throughout the Relevant Period; and

(b) the Chair of SGH‟s Audit, Compliance and Risk Management Committee in

FY2012, FY2013, FY2014, FY2015 and FY2016 up to 1 December 2015.

8. Raymond John Skippen (Skippen):

9

(a) was appointed a Non-Executive Director of SGH on 26 May 2010, and the

Chairman of SGH in 16 March 2012 and remained in those offices throughout

the Relevant Period; and

(b) was a member of SGH‟s Audit, Compliance and Risk Management Committee

in FY2012, FY2013, FY2014, FY2015 and FY2016 up to the end of the

Relevant Period (including during the Relevant Period).

9. Erica Maree Lane (Lane):

(a) was appointed a Non-Executive Director of SGH on 22 December 2008 and



in FY2012, FY2013, FY2014, FY2015 and FY2016 up to the end of the

Relevant Period (including during the Relevant Period).

10. Rhonda O‟Donnell (O’Donnell):

(a) was appointed a Non-Executive Director of SGH on 7 March 2013 and



in FY2013 (after 1 March 2013), FY2014, FY2015 and FY2016 up to the end of

the Relevant Period (including during the Relevant Period).

11. Wayne Brown (Brown):

(a) was appointed as the Chief Financial Officer of SGH in 2004, and remained in

that office until on or about 15 November 2015 when he resigned (but remained

at SGH after that date in a senior role related to special finance related

projects); and

(b) was appointed company secretary of SGH on 5 January 2004, and remained in

that role until 29 January 2016.

12. Bryce Houghton (Houghton) was appointed as Group Chief Financial Officer of SGH

on or about 18 November 2015, with a commencement date of 30 November 2015

and remained in that role throughout the balance of the Relevant Period.

13. Kirsten Marie Morrison (Morrison):

10

(a) was appointed as the General Counsel of SGH in 2008, and remained in that

office during the Relevant Period; and

(b) was appointed company secretary of SGH on 11 December 2008 and

remained in that role until 29 January 2016 (including during the Relevant

Period).

14. James Millar (Millar):

(a) was appointed a Non-Executive Director of SGH on or about 27 October 2015,

with effect from 1 December 2015 and remained in that office during the

balance of the Relevant Period;

(b) was appointed Chair of SGH‟s Audit, Compliance and Risk Management

Committee with effect from 1 December 2015 (and remained in that role for the

balance of the Relevant Period).

15. Moana Weir (Weir) was appointed Group General Counsel and Company Secretary

of SGH on or about 27 October 2015 with effect from 29 January 2016, and remained

in that role throughout the balance of the Relevant Period.

16. By reason of the matters pleaded in paragraphs 5 to15:

(a) each of Grech, Fowlie, Brown and Morrison (together, SGH Long-Term

Executives), and Court, Skippen, Lane and O‟Donnell (together, SGH NEDs),

and Houghton, Millar and Weir was an officer of SGH within the meaning of s 9

of the Corporations Act, and ASX Listing Rule 19.12; and

(b) any information of which any of Grech, Fowlie, Court, Skippen, Lane,

O‟Donnell, Brown, Morrison, Houghton, Millar or Weir became aware, or which

ought reasonably to have come into his or her possession in the course of the

performance of his or her respective duties was information of which SGH was

aware (as awareness is defined in ASX Listing Rule 19.12).

11

B. SGH

B.1 SGH’s business

17. At all material times, SGH carried on business providing legal services to consumers

being:

(a) personal injuries law services, including in relation to motor vehicle accidents,

workers‟ compensation and civil liability (PI Work); and

(b) non-personal injuries law (also called general law) services, including “Personal

Legal Services” (family law, conveyancing, wills, estate planning and probate

services) and “Business and Specialised Litigation Services”) (business law,

property law, estate, employment and professional negligence litigation, class

actions and criminal defence) (Non-PI Work).

Particulars

Further details are contained in:

i) SGH’s Annual Report 2012 published and lodged with ASX (and published on SGH’s website) on 3 October 2012 (2012 Report), p.10;

ii) SGH’s Annual Report 2013 published and lodged with ASX (and published on SGH’s website)on 24 September 2013 (2013 Report), pp.2, 7;

iii) SGH’s Annual Report 2014 published and lodged with ASX (and published on SGH’s website)on 19 September 2014 (2014 Report), pp.2, 9-10;

iv) SGH’s Half Year Report for the period ending 31 December 2014, published and lodged with ASX (and published on SGH’s website) on 10 February 2015 (2015 HY Report), p. 12;

v) SGH’s Annual Report 2015 published and lodged with ASX (and published on SGH’s website) on 19 October 2015 (2015 Report), p.16.

18. At all material times most PI Work performed by SGH has been performed on a “no

win no fee” (or conditional fee arrangement) basis where legal fees are paid on the

successful conclusion of a client‟s matter (CFA Basis).

Particulars

i) 2012 Report, p.10;

ii) 2013 Report p.7;

iii) 2014 Report, pp.9 and 10;

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iv) 2015 Report, p.16.

19. At all material times, legal services providers who perform PI Work on a CFA Basis

generally recover legal fees from:

(a) settlements of claims by a defendant, or an insurer; or

(b) awards of costs against an unsuccessful defendant or insurer.

B.2 SGH UK

20. On or about 30 January 2012, SGH announced that, after carrying out extensive due

diligence, it proposed to acquire Russell Jones & Walker (RJW), a legal firm in the

United Kingdom (UK), which acquisition was completed on 30 April 2012 (First UK

Acquisition).

Particulars

SGH Announcement “Slater & Gordon Ltd Expansion into UK Legal Market” published and lodged with ASX (and published on SGH’s website) on 30 January 2012 (30 January 2012 Announcement).

21. After the First UK Acquisition, SGH considered acquiring, carried out due diligence

on, and did acquire a number of other leading personal injuries legal practices

providing legal services to consumers in the UK (Further UK Acquisitions).

Particulars

i) On 7 May 2013,SGH announced the signing of term sheets by SGH to acquire Simpson Millar, Goodmans Law (Goodmans) and Taylor Vinters (PI Practice only). The acquisition of Taylor Vinters was completed on 16 August 2013 and the acquisition of Goodmans was completed on or about 30 August 2013. The acquisition of Simpson Millar did not proceed.

ii) On 21 August 2013 SGH disclosed the proposed acquisition of Fentons Solicitors UK (Fentons). The acquisition was completed in September 2013.

iii) On 24 October 2013 SGH announced the proposed acquisition of John Pickering & Partners LLP”. The acquisition was completed on 29 November 2013.

iv) On 28 November 2013 SGH disclosed the proposed acquisition of Pannone LLP (Pannone). The acquisition was completed on 14 February 2014.

v) On 10 February 2015 SGH disclosed the proposed acquisition of Walker Smith Way and Leo Abse & Cohen (LAC). Those acquisitions were completed on 30 April 2015 and 8 May 2015 respectively.

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22. At all material times after the First UK Acquisition and prior to the commencement of

the Relevant Period, SGH has carried on business in the UK providing legal services

(by performing PI Work and Non-PI Work) to consumers in the United Kingdom (SGH

UK).

23. Neil Kinsella (Kinsella) was:

(a) a qualified solicitor who had been admitted to practice in the UK in 1983 and

who had specialist expertise in performing PI Work in the UK;

(b) the chief executive officer of RJW prior to its acquisition by SGH;

(c) from the date of the First UK Acquisition, an executive officer of and/or key

management personnel in SGH, who held the following titles:

(i) from 1 July 2012 and October 2014, title “Head of UK”;

(ii) from October 2014 to August 2015, “Head of UK (M&A)”;

(iii) from August 2015, with the title “Interim Head of General Law UK” and

then “Head of General Law UK”

24. Cathy Diane Evans (Evans) was:

(a) a qualified solicitor who had been admitted to practice in Australia, and who

had specialist expertise in performing PI Work in Australia;

(b) a director of SGH between 1 July 2003 and 22 March 2007;

(c) an executive officer of and/or key management personnel in SGH, who held the

following titles:

(i) from December 2012 to about 30 June 2014, “Chief Operating Officer –

UK”;

(ii) from 30 June 2014 to 30 June 2015 – “Chief Executive Officer, United

Kingdom”;

(iii) from 1 July 2015, “Chief Executive Officer, Personal Injury Law”.

25. By reason of the matters pleaded in paragraphs 23 to 24:

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(a) each of Kinsella and Evans (together, SGH UK Executives) was an officer of

SGH within the meaning of s 9 of the Corporations Act, and ASX Listing Rule

19.12; and

(b) any information which any Kinsella or Evans became aware of, or which ought

reasonably to have come into his or her possession in the course of the

performance of his or her respective duties was information of which SGH was

aware (as awareness is defined in ASX Listing Rule 19.12).

C. PI WORK AND UK PI WORK

C.1 The significance of PI Work to SGH

26. At all material times, PI Work has been the core business of, and contributed the

majority of revenue to SGH (both in Australia (SGH Australia) and in the UK (that is,

SGH UK)).

Particulars

i) In FY2012, PI Work contributed approximately 80% of SGH’s revenue from the Australian business (2012 Report, p.10). As the total group revenue was $217.7m (2012 Report, p.3) and the contribution of SGH UK to this was $11.5m (2012 Report, p.8), the contribution of SGH Australia PI Work was approximately $164.96m (($217.7m - $11.5m) x 80%).

ii) In FY2013, SGH Australia PI Work contributed approximately $178.16m of SGH’s consolidated revenue (there being 8% revenue growth ($164.96m x 108%): 2013 Report, p.1). As total group revenue was $297.6m (2013 Report p.1), SGH Australia PI Work contributed approximately 59.9% of that amount. The Applicant does not know with its present state of knowledge the percentage of SGH UK revenue for FY2013 ($70.5m) which was attributable to SGH UK PI Work, but believes it to be in excess of 60% on the basis that at the time of acquisition of RJW PI Work represented 60% of RJW’s revenue: SGH’s Announcement “Slater & Gordon Ltd Expansion into UK Legal Market” published and lodged with ASX (and published on SGH’s website) on 30 January 2012, p.6.

iii) In FY2014, SGH Australia PI Work contributed approximately 46% of SGH’s consolidated revenue and SGH UK PI Work contributed approximately 34% of SGH’s consolidated revenue, being a combined total of 80% of SGH revenue: 2014 Report, p.2.

iv) In the half year ending 31 December 2014, SGH Australia PI Work contributed 79% of revenue of $127.7m ($100.88m) and SGH UK PI Work contributed 80% of revenue of $117.6m ($94.08m), and thus PI Work contributed total of $194.96m of revenue of $245.3m (80%): SGH’s

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“H1 FY15 Results Presentation” published and lodged with ASX (and published on SGH’s website) on 10 February 2015 (2015 HY Presentation), pp.6-7.

C.2 Types of UK PI Work

27. At all material times, the Ministry of Justice (MoJ) has been a ministerial department

of the Government of the UK (UK Government) with responsibility for the civil justice

system of the UK.

28. At all material times, PI Work in the UK has been divided between:

(a) cases in the “Small Claims Track”, which is the normal track for low value

cases where the financial value of the claim is not more than a stipulated

amount and the financial value of any claim for damages for personal injuries is

not more than a stipulated amount (Small Claims Track PI Cases);

(b) cases in the “Fast Track”, which is the normal track for cases with a financial

value up to a stipulated amount where the trial is likely to last for no longer than

one day and there are only two expert fields with each party having only one

expert per expert field (Fast Track PI Cases); and

(c) cases in the “Multi-Track”, for which the Small Claims Track or the Fast Track

is not the normal track (Multi-Track PI Cases), which cases are normally of

higher value or complexity.

Particulars

Civil Procedure Rules 1998, Rule 26.6.

29. At all material times:

(a) one class of claim which is the subject of PI Work in the UK has been claims for

personal injury sustained as a result of a road traffic accident (RTA Claims);

and

(b) a subset of RTA Claims has been claims for soft tissue injury also known as

“whiplash claims” (Whiplash Claims).

C.3 Reforms relevant to UK PI Work

30. From 3 November 2008 until the dissolution of the UK Parliament on 30 March 2015

the UK Government had been engaged in a process of reform of personal injuries

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litigation designed to reduce the number and cost of such claims (PI Reform

Process).

Particulars

Particulars are in Schedule A.

31. As at 30 March 2015, when UK Parliament dissolved, the UK Government had, since

2008:

(a) been engaged, as part of the PI Reform Process, in a programme of reform

focussed upon:

(i) reducing the costs which legal services providers could charge for

performing PI Work for RTA Claims under £25,000; and/or

(ii) reducing the number and cost of Whiplash Claims,

(RTA Claim Reform Programme); and

(b) considered, as part of the RTA Claim Reform Programme, but had deferred

implementing, the small claims track limit of the county court for road traffic

accident personal injury claims from to £1,000 to £5,000 (Small Claims Track

Threshold Reform).

32. At all material times the Small Claims Track Threshold Reform was a reform which

would:

(a) reduce the costs which lawyers could charge for performing PI Work for RTA

Claims under £25,000; and

(b) reduce the number and cost of Whiplash Claims.

33. By reason of the matters pleaded in paragraphs 30 to 32 as at 30 March 2015 there

existed a material risk that, within the term of the 56th Parliament of the UK (being a

term of approximately 5 years pursuant to the Fixed Term Parliaments Act 2011

(UK)), the UK Government would continue the RTA Claim Reform Programme,

and/or implement the Small Claims Track Threshold Reform (Reform Risk).

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C.4 Potential Impact of the RTA Claim Reform Programme as at 30 March 2015

34. Between about July 2012 and March 2015:

(a) the average Whiplash Claim was around £2,500; and

(b) the majority of Whiplash Claims were less than £5,000;

Particulars

i) 2012 MoJ Whiplash IA, p.9 [1.9] and Footnote 4;

ii) Further particulars will be provided following discovery.

35. Between about July 2012 and March 2015:

(a) the average Whiplash Claim (as pleaded in paragraph 34(a)) was able to be

resolved through the RTA PI Protocol or the Fast Track, in which case:

(i) successful claimants were able to recover Portal FRC or Reduced Portal

FRC (depending upon when the claim was lodged), or Fast Track Costs;

and

(ii) legal services providers performing UK PI Work on a CFA Basis in respect

of the average successful Whiplash Claim were able to earn an income;

(b) the majority of Whiplash Claims (as pleaded in paragraph 34(b)) were able to

be resolved either through:

(i) the RTA PI Protocol or the Fast Track if they were above the Small Claims

Track Threshold of £1,000 (Moderate Value Whiplash Claims), in which

case:

(A) successful claimants were able to recover stipulated fixed

recoverable costs (namely, Portal FRC or Reduced Portal FRC

(depending upon when the claim was lodged)) or Fast Track Costs

(with any applicable credit for any Portal FRC or Reduced Portal

FRC already paid before such claims left the Portal); and

(B) legal services providers performing UK PI Work on a CFA Basis in

respect of that proportion of the majority of Whiplash Claims as

were successfully resolved through the RTA PI Protocol or the Fast

Track were able to earn an income;

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(ii) the Small Claims Track if they were below the Small Claims Track

Threshold of £1,000 (Low Value Whiplash Claims), in which case:

(A) successful claimants were only able to recover Non-Legal FRC; and

(B) legal services providers performing UK PI Work on a CFA Basis

were unable to earn an income from that proportion of the majority

of Whiplash Claims as were successfully resolved through the

Small Claims Track.

Particulars

i) Refer to Schedule A, paragraphs A4, A7, A22 and A24. The terms “Fast Track Costs”, “Non-Legal FRC”, “Portal”, “Portal FRC”, “Reduced Portal FRC” and “RTA PI Protocol” are also defined in Schedule A;


36. By reason of the matters pleaded in paragraph 35, at all material times after in or

about July 2012, legal services providers performing UK PI Work on a CFA Basis

were able to earn an income:

(a) from performing legal services in respect of the average successful Whiplash

Claim;

(b) from performing legal services in respect of that proportion of the majority of

Whiplash Claims which were successful Moderate Value Whiplash Claims; and

(c) without performing legal services in respect of that proportion of the majority of

Whiplash Claims which were Small Claims Track Whiplash Claims.

37. By reason of the matters pleaded in paragraphs 35 to 36, at all material times after in

or about July 2012, legal services providers performing UK PI Work on a CFA Basis

were able to make projections of the future income they would derive, by making

assumptions for the period in respect of which projections were being made

(Projection Period) based on:

(a) the number of average Whiplash Claims and/or Moderate Value Whiplash

Claims which had been brought to them by claimants but were not yet finally

resolved and would be brought to them by claimants in the Projection Period

(based upon historical claim generation rates) (Claims Pipeline

Assumptions);

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(b) the number of cases in the Claims Pipeline case resolved in the Projection

Period (based on historical timelines for claim resolution) (Claims Resolution

Rate Assumption);

(c) the rate of success of average Whiplash Claims and/or Moderate Value

Whiplash Claims (based on historical success rates) (Claims Success Rate

Assumptions); and

(d) the quantum of Portal Costs, Reduced Portal Costs and/or Fast Track Costs

usually recoverable in respect of successful average Whiplash Claims and/or

Moderate Value Whiplash Claims (Recoverable Costs Assumptions),

(together, Relevant Earnings Projection Assumptions).

38. At all material times after in or about July 2012 if the Small Claims Track Threshold

Reform was implemented:

(a) all Moderate Value Whiplash Claims valued at less than £5,000 (Reform

Affected Whiplash Claims) would fall to be determined in the Small Claims

Track, including, by reason of the matters pleaded in paragraph 34:

(i) the average Whiplash Claim; and

(ii) the majority of Whiplash Claims;

(b) in respect of the Reform Affected Whiplash Claims described in sub-paragraph

(a), claimants would only able to recover Non-Legal FRC, and therefore, by

reason of the matters pleaded in paragraph 34:

(i) claimants would only be able to recover Non-Legal FRC in respect of the

average successful Whiplash Claim; and

(ii) the majority of claimants with Whiplash Claims would only be able to

recover Non-Legal FRC in respect of their Whiplash Claims.

Particulars

i) Refer to Schedule A, paragraphs A4, A7, and A24. The terms “Fast Track Costs”, “Non-Legal FRC”, “Portal”, “Portal FRC”, “Reduced Portal FRC” and “RTA PI Protocol” are also defined in Schedule A;


20

39. By reason of the matters pleaded in paragraphs 37 and 38 at all material times after

in or about July 2012, if the Small Claims Track Threshold Reform was implemented:

(a) legal services providers performing UK PI Work on a CFA Basis would be

unable to earn an income from performing legal services in respect of:

(i) Reform Affected Whiplash Claims;

(ii) the average Whiplash Claim; and/or

(iii) the majority of Whiplash Claims;

(b) further, or alternatively, there would be an aggregate reduction in business

volume for legal service providers carrying out UK PI Work in respect of

Whiplash Claims due to a reduction of demand for such services.

Particulars

i) 2012 MoJ Whiplash IA (defined in Schedule A), p.20 [2.71] p.24 [2.112], p.27 [2.135].


40. By reason of the matters pleaded in paragraph 33 and 39, if the Reform Risk

eventuated:

(a) there would be a material adverse impact on the future financial performance

and financial position of legal service providers who had a significant

dependence on performing UK PI Work on a CFA Basis in respect of Whiplash

Claims and/or Reform Affected Whiplash Claims; and/or

(b) the viability of the business model of legal service providers who had a

significant dependency upon performing UK PI Work on a CFA Basis in respect

of Whiplash Claims and/or Reform Affected Whiplash Claims would be

uncertain or questionable,

(each a Reform Impact).

Particulars

i) The future financial performance of such legal service providers was adversely affected because of the reduction in revenue which was consequential upon the matters pleaded in each of sub-paragraphs 39(a) and (b).

21

ii) The future financial position of such legal service providers was adversely affected because of: (1) the impairment to the asset position of the company consequential upon revenue reduction and/or (2) the impairment to any goodwill which was dependent upon their business continuing to perform UK PI Work in respect of Whiplash Claims and/or Reform Affected Whiplash Claims (including the fair value of any acquired businesses which had such a dependency).

iii) Further particulars will be provided following discovery.

41. By reason of the matters pleaded in paragraphs 33 and 39 to 40, as at 30 March

2015, there existed a material risk that the Reform Impacts would affect legal service

providers who had a significant dependency upon performing UK PI Work on a CFA

Basis in respect of Whiplash Claims and/or Reform Affected Whiplash Claims

(Reform Impact Risk).

42. By reason of the matters pleaded in paragraphs 38 to 39, as at 30 March 2015, the

reliability of projections of future income on the basis of the Relevant Earnings

Projection Assumptions made by legal service providers who had a significant

dependency upon performing UK PI Work on a CFA Basis in respect of Whiplash

Claims and/or Reform Affected Whiplash Claims depended upon the Small Claims

Track Threshold Reform not occurring in the Projection Period, or at all.

Particulars

i) The Claims Pipeline Assumptions depended upon the Small Claims Track Threshold Reform not happening because if it did happen historical claims generation rates would not be an accurate guide to future claims generation, and the “pipeline” would narrow to resolution of those average Whiplash Claims and/or Reform Affected Whiplash Claims which had already been brought, but which were not resolved;

ii) The Claims Resolution Rate Assumption depended upon the Small Claims Track Threshold Reform not happening, because: (1) the assumed rate was applied to the results of the Claims Pipeline Assumptions; and (2) if it did happen, historical resolution rates of average Whiplash Claims and/or Reform Affected Whiplash Claims through the RTA PI Scheme or the Fast Track would not be a meaningful guide to future resolution rates in the Small Claims Track;

iii) The Claim Success Rate Assumptions depended upon the Small Claims Track Threshold Reform not happening, because: (1) the assumed rate was applied to the results of the Claims Pipeline Assumptions as modified by the Claims Resolution Rate Assumption; and (2) if it did happen, historical rates of success average Whiplash Claims and/or Reform Affected Whiplash Claims through the RTA PI Scheme or the Fast Track would not be a meaningful guide to future success rates in the Small Claims Track;

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iv) The Recoverable Costs Assumptions depended upon the Small Claims Track Threshold Reform not happening because if it did happen Portal Costs, Reduced Portal Costs and Fast Track Costs would not be applicable to average Whiplash Claims and/or Reform Affected Whiplash Claims, but instead only Non-Legal FRC would be recoverable.

43. By reason of the matters pleaded in paragraphs 33 and 41, as at 30 March 2015

there existed a material risk that projections of income of legal service providers

performing UK PI Work which had a significant dependency upon performing UK PI

Work in respect of Whiplash Claims and/or Reform Affected Whiplash Claims in and

for the period from 2015 to 2020 were unreliable (UK Income Projection

Unreliability Risk).

C.5 Significance of the RTA Claim Reform Programme to SGH prior to 30 March

2015

44. In the period after the First UK Acquisition and prior to the commencement of the

Relevant Period:

(a) SGH derived an increasingly substantial proportion of its consolidated revenue

from SGH UK, but no more than approximately 50% of that revenue;

Particulars

i) In FY2012, SGH Australia contributed 94.7% of revenue: 2012 Report, p.69 (Note 3 to the Financial Statements for the year ended 30 June 2012), revenue from “S&G” ($170,472,000) and from “TML” ($35,752,000) as a percentage of the total ($217,704,000);

ii) In FY2013, SGH Australia contributed 76.3% of revenue: 2014 Report, p.56 (Note 3 to the Financial Statements for the year ended 30 June 2014), revenue from “Australia” ($227,435,000) as a percentage of the total ($297,963,000);

iii) In the half year ending 31 December 2014, SGH Australia contributed 52% of revenue and 51.3% of EBITDA: 2015 HY Report, p.12 (Note 2 to the Financial Statements for the half-year ended 31 December 2014), revenue from “AUS” ($127,687,000) as a percentage of the total ($245,334,000).

(b) SGH derived an increasingly substantial proportion of its consolidated revenue

from SGH UK PI Work, but no more than approximately 38.5% of that revenue;

Particulars

i) The particulars to paragraphs 26 and 44(a) are repeated;

23

ii) In FY2013, SGH UK contributed 23% of consolidated revenue (and SGH UK PI Work approximately 60% of that (13.8%);

iii) In FY 2014, SGH UK PI Work contributed 34% of SGH consolidated revenue;

iv) In the half-year ending 31 December 2014, SGH UK PI Work contributed 38.4% of SGH consolidated revenue (($117.6m x 80%) / ($127.7m + $117.6m)).

(c) approximately 50% of the revenue contributed by SGH UK PI Work was

derived from Multi-Track PI Cases (that being a percentage which was

significantly higher than the industry average);

Particulars

i) Approximately 20% of PI Work performed by SGH UK (representing about 50% of revenue derived from PI Work by SGH) were Multi-Track PI Cases, compared to the industry at large where Multi-Track PI Cases represented approximately 5-10% of PI Work;


(d) by reason of the matters pleaded in sub-paragraphs (a) to (c), SGH derived no

more than approximately 20% of its consolidated revenue from SGH UK PI

Work in respect of claims which were not Multi-Track PI Cases (which was

significantly lower than the industry average).

45. By reason of the matters pleaded in paragraph 44, immediately prior to the

commencement of the Relevant Period, SGH was not significantly dependent upon

performing UK PI Work in respect of Whiplash Claims and/or Low Value Whiplash

Claims.


commencement of the Relevant Period, SGH:

(a) was not exposed to the Reform Impacts (or any of them) and/or the Reform

Impact Risks (or any of them);

(b) alternatively, was only exposed to the Reform Impacts (or any of them) and/or

the Reform Impact Risks (or any of them) to a relatively insignificant degree.

Particulars

i) No more than approximately 20% of SGH’s consolidated revenue was derived from Whiplash Claims and/or Low Value Whiplash Claims

24

(being the type of claims that were exposed to the RTA Claim Reform Programme and/or the Small Claims Track Threshold Reform);

ii) Accordingly a significant majority of SGH’s consolidated revenue was derived from performing legal services which were not subject to the Reform Impacts, and SGH was not exposed to the Reform Impact Risks.


commencement of the Relevant Period, SGH:

(a) was not exposed to the UK Income Projection Unreliability Risk;

(b) alternatively, was only exposed to the UK Income Projection Unreliability Risk

to a relatively insignificant degree.

Particulars

The particulars to paragraph 46 are repeated.

D. SGH’S PROPOSED ACQUISITION OF PSD

D.1 The 30 March Publications

48. On 30 March 2015, SGH published and lodged with the ASX (and published on

SGH‟s website) (with the knowledge and authority of the board of SGH):

(a) an announcement entitled “Slater and Gordon executes agreement to acquire

Quindell‟s Professional Services Division and launches A$890m accelerated

renounceable entitlement offer” (30 March Announcement), which was

classified “price-sensitive” and marked (“$”) on ASX‟s website;

(b) a presentation entitled “Professional Services Division Acquisition and

Entitlement Offer” (30 March Presentation);

(c) a cleansing notice (30 March Cleansing Notice) under s 708AA(2)(f) of the

Corporations Act as notionally modified by Class Order 08/35 issued by the

Australian Securities and Investments Commission (ASIC); and

(d) an Appendix 3B – new issue announcement (30 March Appendix 3B),

(together the 30 March Publications).

49. In the 30 March Announcement, SGH made the following statements:

25

(a) SGH had entered into an agreement to acquire the Professional Services

Division (PSD) of Quindell Plc (Quindell);

(b) in consideration for the acquisition of PSD, SGH had agreed to pay the

following amounts (together, the PSD Acquisition Price):

(i) upfront consideration of £637 million ($1,225 million based on an

exchange rate of AUDGBP 0.52); and

(ii) an earnout based on the performance of PSD‟s noise induced hearing

loss (NIHL) cases.

D.2 The Entitlement Offer

50. In the 30 March Announcement, SGH stated that:

(a) SGH was seeking to raise approximately $890 million in new equity to fund the

acquisition of PSD through a 2 for 3 pro rata renounceable entitlement offer

(Entitlement Offer); and

(b) SGH would fund the balance of the upfront consideration for the acquisition of

PSD by bank debt.

51. In the 30 March Announcement, SGH made the following statements about the

Entitlement Offer:

(a) under the Entitlement Offer, eligible shareholders would be invited to subscribe

for 2 (two) new SGH Shares for every 3 (three) existing SGH Shares held as at

7.00PM on 2 April 2015;

(b) the offer price under the Entitlement Offer was A$6.37 per new SGH share

(Offer Price), representing a 15.6% discount to the closing price for SGH

Shares on Friday 27 March 2015;

(c) The Entitlement Offer comprised:

(i) an institutional entitlement offer which would take place between 30 and

31 March 2015 (and be settled on 13 April 2015, with new SGH shares to

be issued and quoted on 14 April 2015) (Institutional Entitlement Offer);

26

(ii) a retail entitlement offer which would take place between 9 April 2015 and

5.00PM on 20 April 2015 (and be settled on 29 April 2015, with new SGH

shares to be issued and quoted on 30 April 2015) (Retail Entitlement

Offer);

(d) entitlements which were not taken up:

(i) by eligible institutional shareholders under the Institutional Entitlement

Offer would be sold through an institutional shortfall bookbuild on 1 April

2015; or

(ii) eligible retail shareholders under the Retail Entitlement Offer would be

sold through a retail shortfall bookbuild on 23 April 2015,

and in each case any amount by which the relevant shortfall bookbuild price

exceeded the Offer Price in respect of entitlements not taken up would be paid

(net of withholding tax) to the relevant shareholders;

(e) new SGH Shares issued under the Entitlement Offer would rank equally with

existing SGH Shares from the date of allotment;

(f) a retail offer booklet and accompanying personalised entitlement and

acceptance form would be sent to eligible retail shareholders on 9 April 2015

(and would be published on the ASX website and published on SGH‟s website

on the same date);

(g) the indicative timetable for:

(i) the Institutional Entitlement Offer was as follows:

Institutional Entitlement Offer opens Monday, 30 March

Institutional Entitlement Offer closes Tuesday, 31 March

Institutional shortfall bookbuild Wednesday, 1 April

Trading halt lifted Thursday, 2 April

Record date for eligibility in the Institutional Entitlement Offer

7:00PM (Melbourne time) Thursday, 2 April

27

Settlement of the Institutional Entitlement Offer Monday, 1 April

Issue and quotation of New Shares under the Institutional Entitlement Offer

Tuesday, 14 April

(ii) the Retail Entitlement Offer was as follows:

Record date for eligibility in the Retail Entitlement Offer

7:00PM (Melbourne time) Thursday, 2 April

Retail Entitlement Offer opens Thursday, 9 April

Retail Offer Booklet despatched Thursday, 9 April

Retail Entitlement Offer closes Monday, 20 April

Retail shortfall bookbuild Thursday, 23 April

Settlement of the Retail Entitlement Offer Tuesday, 28 April

Issue of New Shares under the Retail Entitlement Offer

Wednesday, 29 April

New Shares under the Retail Entitlement Offer commence trading on ASX on a normal settlement basis

Thursday, 30 April

Retail premium (if any) despatched From 1 May

52. The Entitlement Offer was an offer pursuant to s 708AA of the Corporations Act (as

modified by ASIC Class Order CO [08/35]).

Particulars

30 March Presentation, p.2.

53. By reason of s 708AA of the Corporations Act, SGH was obliged in connexion with

the Entitlement Offer to:

(a) give to ASX a notice complying with s 708AA(7) within the 24 hour period

before the first offer was made under the Entitlement Offer (s 708AA(2)(f));

(b) if the notice referred to in sub-paragraph 53(a)53(a) was defective by reason

that:

28

(i) it was false or misleading in a material particular; or

(ii) it omitted from it a matter or thing, the omission of which renders it

misleading in a material respect,

to correct the defect within a reasonable time after becoming aware of the

defect (if it becomes so aware within 12 months after the securities are

issued) by giving ASX a notice that sets out the information necessary to

correct the defect (s 708AA(10)).

54. The 30 March Cleansing Notice stated that:

(a) it was a notice under s 708AA(2) of the Corporations Act (SGH’s s 708AA

Notice);

(b) SGH had complied with s 674 of the Corporations Act (being its Continuous

Disclosure Obligations) (Section 708AA Notice Statement).

55. On or about 2 April 2015, SGH completed the Institutional Entitlement Offer and

Institutional Shortfall Bookbuild, raising A$608 million through the issue of

approximately 95.5 million new SGH Shares.

Particulars

SGH announcement published and lodged with ASX (and published on SGHs website) on 2 April 2015, entitled “Slater & Gordon Limited successfully completes institutional component of accelerated Entitlement Offer” (2 April Announcement).

56. On or about 14 April 2015, 94,253,906 SGH Shares issued as part of the Institutional

Entitlement Offer at a price of A$6.37 per SGH Share commenced trading on the

ASX.

Particulars

SGH Appendix 3B (New Issue announcement) published and lodged with ASX on 14 April 2015.

57. On or about 23 April 2015, SGH completed the Retail Entitlement Offer and Retail

Shortfall Bookbuild, raising A$120 million through the issue of approximately 18.8

million new SGH Shares.

29

Particulars

SGH announcement published and lodged with ASX (and published on SGHs website) on 23 April 2015, entitled “Slater & Gordon Limited successfully completes retail component of accelerated Entitlement Offer”.

58. On or about 29 April 2015, 45,568,943 SGH Shares issued as part of the Retail

Entitlement Offer and Retail Shortfall Bookbuild at a price of A$6.37 per SGH Share

(in respect of the 18,836,677 SGH Shares issued as part of the Retail Entitlement

Offer) or at a price of A$6.38 per SGH Share (in respect of the 26,732,266 SGH

Shares issued as part of the Retail Shortfall Bookbuild) commenced trading on the

ASX.

Particulars

SGH Appendix 3B (New Issue announcement) published and lodged with ASX on 29 April 2015.

D.3 Completion of the acquisition of PSD

59. On or about 29 May 2015, SGH completed the acquisition of PSD.

Particulars

SGH announcement entitled “Slater and Gordon Limited successfully completes acquisition of PSD” published and lodged with ASX on 1 June 2015 (1 June Announcement).

60. By no later than early June 2015, SGH (itself or through a subsidiary) entered into a

multicurrency syndicated bank facility with NAB and Westpac (and additional banks)

with an overall limit of £375 million and A$90 million, comprising:

(a) a £157.5 million revolving loan facility with an expiry date in June 2018;

(b) a £157.5 million revolving loan facility with an expiry date in June 2020;

(c) a £60 million revolving loan facility, bank guarantee facility and/or letter of credit

with an expiry date in June 2018;

(d) an A$45 million revolving loan facility with an expiry date in June 2018;

(e) an A$45 million revolving loan facility with an expiry date in June 2020,

(Acquisition Debt Facilities) which facilities were partly drawn down to settle the

acquisition of PSD.

30

Particulars

i) SGH announcement entitled “Chairman’s Address to Shareholders”, recording what Skippen said to the 2015 AGM (Skippen’s 20 November Address), p.3;

ii) 2015 Report, p.127.

E. WHAT SGH SAID ABOUT THE ACQUISITION OF PSD ON 30 MARCH 2015

E.1 SGH’s 30 March statements about the proposed acquisition of PSD

61. In the 30 March Publications, SGH made the following statements about the

acquisition of PSD (and, in addition, the statements set out in paragraphs 62 to 64

below):

(a) the acquisition of PSD by SGH was anticipated to create significant value for

SGH shareholders, including because it:

(i) was expected to be substantially EPS accretive (greater than 30%) to

SGH from the first full year of ownership; and

(ii) had an attractive acquisition multiple of c.6.9x;

(b) the transaction was anticipated to be substantially EPS accretive (greater than

30%) to SGH from the first full year of ownership (being FY2016), assuming

FY2014 volume trend core PSD EBITDA of £86 million;

(c) the transaction had an attractive acquisition multiple of c.6.9 times the pro

forma adjusted volume trend core PSD EBITDA (ex NIHL contribution)

(assuming FY2014 volume trend core PSD EBITDA (excluding legacy NIHL) of

£86 million, based on an adjusted transaction value of £597 million (upfront

cash consideration of £637 million less £40 million NPV of 50% earnout related

to legacy NIHL portfolio);

(d) the key financial assumptions made by SGH included that:

(i) the acquisition multiple of 6.9x (referred to in sub-paragraphs 61(a)(ii) and

61(c) was based upon:

31

(A) a transaction value of £597 million, calculated by deducting from the

upfront cash consideration of £637 million, £40 million (being 50%

of the earnout of the legacy NIHL portfolio in FY2016 and FY2017,

on a net post-tax basis at a 10% discount rate), being the same

amount referred to in sub-paragraph 61(c)61(c) above;

(B) volume trend adjusted core PSD EBITDA of £86 million for FY2014,

being the PSD FY2014 Adjusted Volume Trend Core EBITDA

referred to in sub-paragraph 61(b);

in that the amount referred to in (A) divided by the amount referred to in

(B) equals 6.9;

(ii) $710 million would be recognised as goodwill, being the excess of the

acquisition purchase consideration over the fair value of the net assets.

(e) the key risks attaching to an investment in SGH, and risks inherent in the

acquisition of PSD which would affect the future operational and financial

performance of SGH and SGH Shares included:

(i) that it was a risk specific to the acquisition of PSD that PSD operated in a

highly regulated environment, PSD‟s business operations could be

adversely affected by changes in UK governments and changes in

government legislation, guidelines and regulations. However, Slater and

Gordon was already exposed to this risk through its existing operations in

the UK (although the acquisition will significantly increase the potential

consequences of the realisation of this risk); and

(ii) that it was a general Slater and Gordon risk that Slater and Gordon

operated in a highly regulated environment, Slater and Gordon‟s business

operations could be adversely affected by changes in UK or Australian

State, Territory and Commonwealth governments and changes in

government legislation, guidelines and regulations. Additionally it was a

requirement that a person who is disqualified from practice as a lawyer

may not have any financial interest in an Incorporated Legal Practice.

There are certain safeguards built into Slater and Gordon‟s constitution to

assist Slater and Gordon to comply with this requirement,

(together the 30 March General Regulatory Risk Disclosures).

32

62. The 30 March Announcement, SGH made the following statements:

(a) The acquisition of PSD was a transformational opportunity in line with SGH‟s

growth strategy, positioning SGH as the leading personal injury law group in the

UK;

(b) The acquisition of PSD diversified SGH‟s sources of legal work and broadened

access to claims management companies, insurers and insurance brokers;

(c) SGH had carried out an extensive period of due diligence based on a bottom

up, fundamental assessment of PSD;

(d) The statement referred to in paragraph 61(a), and that further details were

contained in the accompanying investor presentation (being the 30 March

Presentation);

(e) PSD was a leading personal injury law firm in the UK which comprised two key

operating segments: (1) Legal Services, which offered a broad range of

specialist personal injury claims services including road traffic accident (RTA),

NIHL, employers‟ liability and public liability claims; and (2) Complementary

Services, which extends PSD‟s reach across the personal injuries claim value

chain and increases client delivery and capture opportunities;

(f) There was a clear path to optimise PSD, leveraging its unique, comprehensive

platform of businesses, processes and infrastructure to focus on the process-

driven, higher velocity, cash generative road traffic accident segment;

(g) SGH intended to reorient PSD to focus on fast-track RTA, employers‟ liability

and public liability claims;

(h) SGH would implement a moratorium on new NIHL client intake and the existing

NIHL file portfolio would be expedited to drive claims resolution and maximise

cash generation (that portfolio being subject to a 50% profit share with Quindell

being the deferred conditional cash consideration for it);

(i) SGH confirmed its FY15 guidance for existing operations, namely total revenue

of A$500 million, normalised EBITDA margin of 23-24% and cash from

operations of > 70% (as a % of NPAT).

63. The 30 March Presentation stated:

33

(a) SGH was to acquire PSD, which was a leading personal injury law firm in the

UK, operating across the claims value chain which provided:

(i) legal services – road traffic accident, employee liability / public liability and

NIHL cases;

(ii) complementary services – marketing, health and motor services,

(p.7);

(b) SGH was to pay upfront cash consideration of £637 million (A$1,225 million

based on an exchange rate of AUDGBP 0.52) and an earnout based on the

performance of PSD‟s NIHL cases (which would be based on a 50% sharing of

after tax profits from the settlement of existing NIHL files over the next two

years) (p.7);

(c) there was a compelling strategic rationale for the acquisition, including:

(i) transformational opportunity in line with SGH‟s growth strategy, making

SGH the leading personal injury law group in the UK;

(ii) PSD built to provide and sustain competitive advantage;

(iii) extensive period of due diligence, based on a bottom-up, fundamental

assessment of PSD plus SGH‟s deep UK market experience, underpins

confidence in opportunity,

(p.7);

(d) the statement referred to in paragraph 61(b) (pp. 8, 17, 30);

(e) the statement referred to in paragraph 61(c) (pp. 8, 17);

(f) key facts about PSD included:

(i) as to “Legal Services” “RTA”, there was a significant opportunity given the

size of the market (over 818,000 claims p.a. and 657,000 settlements p.a.

(in each case based on the 2012-13 year)) as well as fragmentation and

lack of scale of competitors;

(ii) as to “Legal Services,” “Other Practices” comprised ELPL (being cases

arising from workplace accidents and accidents in public places), Multi-

34

Track (being higher value cases with expected damages above £25,000)

and Compass Costs (one of the UK‟s largest legal costs drafting

practices);

(iii) as to “Legal Services,” “NIHL” involved claims relating to hearing loss

caused by exposure to excessive noise levels during employment (but

SGH would initially place a moratorium on NIHL new case intake in PSD

and focus operations on settling existing portfolios of NIHL cases),

(p.9);

(g) the acquisition would give SGH an increased market share from c. 5% to c.12%

in the UK and position SGH at the forefront of the £2.5 billion UK personal

injury market (which was 5 to 6 times the size of the Australian personal injury

market) (p.13);

(h) SGH‟s vision included to become the leading Fast Track personal injury claim

service provider in the UK (p.15);

(i) execution of SGH‟s vision included pivoting PSD to entrench its market leading

position in the RTA segment, in circumstances where PSD currently only

intakes c.80% of possible RTA volume from pool, with clear path to increase

client intake (pp.15, 41);

(j) SGH had undertaken significant due diligence on PSD involving:

(i) exclusivity granted on 1 January 2015 and business assessment

conducted on the ground in the UK;

(ii) case file due diligence conducted by SGH involving a review of 8,000

cases by 70 lawyers of six weeks;

(iii) financial / commercial due diligence conducted by SGH and an accounting

advisor, involving a bottom-up review of quality of earnings, revenue and

acquisition cost recognition policies aligned with SGH‟s more conservative

approach, and a comprehensive review of Quindell‟s statutory and

management accounts which confirmed an aggressive approach to

reporting performance, resulting in over-investment in NIHL;

(iv) legal due diligence conducted by a legal advisor;

35

(v) legislative risk due diligence conducted by an industry advisor, involving

assessment of regulatory landscape, parliamentary sentiment and

appetite for reform;

(vi) key management personnel due diligence conducted by SGH; and

(vii) other due diligence, on IT systems, property and professional standards

and indemnity insurance,

(p.19);

(k) SGH had undertaken a comprehensive review of Quindell‟s statutory and

management accounts, and:

(i) Quindell‟s historical approach had involved:

(A) recognising revenue on a time lapsed basis for all cases regardless

of individual case progression;

(B) more aggressive estimates of effort required to reach each

milestone and potential case success rates;

(C) attributing significant value in absence of resolution track record;

(D) deferring case acquisition costs to match revenue profile; and

(E) accruing internal costs required to settle cases,

which resulted in headline profits materially benefitting from the

acquisition of NIHL cases, which had made a significant NIHL contribution

in FY2014, although there was minimal settlement experience and cash

generation;

(ii) SGH‟s approach was to:

(A) recognise revenue case by case based on performance;

(B) make more measured estimates of effort required to reach each

evidence-based milestone and potential case failure rates;

(C) expense case acquisition costs in the period incurred;

(D) expense internal costs required to settle cases,

36

which would drive higher velocity, cash generative Fast Track segment,

place NIHL intake on moratorium while reviewing future profitability of

NIHL business,

(p.20);

(l) SGH had developed pro forma adjusted FY2014 financial statements for PSD

from internal accounts based on Quindell‟s accounting policies (which recorded

FY2014 (December y/e) revenue at £645 million (PSD Baseline Revenue) and

EBITDA at £289 million (PSD Baseline EBITDA), but had:

(i) removed all revenue and expenses related to NIHL in their entirety

(resulting in a £278 million reduction to PSD Baseline Revenue, a £210

million reduction to gross profit, and a £201 million reduction to PSD

Baseline EBITDA); and

(ii) had better aligned non-NIHL Legal Services revenue recognition with

SGH‟s approach of using evidence based milestones and other

accounting adjustments (which resulted in a £1 million increase to PSD

Baseline Revenue, a £18 million reduction to gross profit, and a £18

million reduction to PSD Baseline EBITDA,

(p.21);

(m) SGH‟s adjustments to the FY2014 (December y/e) internal accounts of Quindell

for PSD (calculated by undertaking the processes described in sub-paragraph

(l) above) resulted in:

(i) revenue (ex NIHL) (PSD FY2014 Core Revenue) of £368 million, as

compared to Quindell‟s internal accounts which showed £645 million

including NIHL (i.e. PSD Baseline Revenue);

(ii) gross profit of £99 million (ex NIHL), as compared to Quindell‟s internal

accounts which showed £328 million including NIHL;

(iii) EBITDA (ex NIHL) (PSD FY2014 Core EBITDA) of £70 million, as

compared to Quindell‟s internal accounts which showed £289 million

including NIHL (i.e. PSD Baseline EBITDA),

(p.21);

37

(n) SGH‟s further adjustments to the PSD FY2014 Core EBITDA of £70 million to

reflect the impact of annualised actual Sep-Nov 2014 quarter RTA intake

(93,660) with settlements (77,381)) resulted in a “Pro forma adjusted volume

trend” EBITDA (PSD FY2014 Volume Trend Core EBITDA) of £86 million

(p.23);

(o) PSD‟s guidance for FY2016 EBITDA, inclusive of legacy NIHL portfolio run-off

was £95 million, of which legal services was expected to contribute £55 million

(based, inter alia, upon continued momentum in RTA case intake, forecast to

grow more than 20% year-on-year, and growth in RTA settlement rates) (p.24);

(p) The key outlook drivers for PSD included:

(i) the monthly case intake volumes for RTA claims, of which recent

observations had been a total of ~8,400 (of which ~70% were Portal

claims) and the outlook was increasing;

(ii) the success rate through the RTA Portal, of which recent observations

had been ~90%, and the outlook was steady;

(iii) the typical settlement period through the RTA Portal, of which recent

observations had been 6 – 9 months, and the outlook was steady;

(iv) the acquisition cost per case for RTA claims, of which recent observations

had been - £810, and the outlook was decreasing,

(p.25);

(q) Following the acquisition of PSD, the Pro forma combined balance sheet would

increase the amount of intangible assets (including goodwill) by approximately

$851 million to $996 million (p.28);

(r) the expected financial impact and FY2015 guidance of the acquisition of PSD

was confirmation of FY2015 guidance for the existing Slater and Gordon

business, with group revenue target of $500 million, a normalised EBITDA

margin of 23% to 24%, and cash flow from operations as a % of NPAT > 70%

(p.31).

64. The appendices to the 30 March Presentation stated:

38

(a) following the acquisition of PSD, SGH‟s pro forma FY2014 EBITDA by

geography would change from 50% (SGH Australia) and 50% (SGH UK) to

21% (SGH Australia), 21% (SGH UK) and 58% (PSD) (p.43);

(b) SGH‟s analysis of PSD to construct its view of future performance had been

based upon certain selected drivers, which in relation to the “Legal Services”

Division of PSD were:

(i) RTA monthly case intake, where SGH considered the glide path (recent

performance to outlook) was on an upward trajectory, such that there

would be continued growth in case intake volume;

(ii) RTA success rates, where SGH considered the glide path (recent

performance to outlook) was on a downward trajectory, such that there

would be incrementally higher dilution as intake volumes increase;

(iii) RTA settlement period, where SGH considered the glide path (recent

performance to outlook) was on a flat trajectory, such that the time to

resolve was consistent with historical PSD trends and SGH UK

experience;

(iv) RTA average fee per file, where SGH considered the glide path (recent

performance to outlook) was on a flat trajectory, such that fees per

successful case were consistent with historical trends and SGH UK

experience;

(v) RTA case acquisition cost, where SGH considered the glide path (recent

performance to outlook) was on a downward trajectory, such that

acquisition costs per case were reduced through optimising origination

mix, moving towards SGH UK experience;

(vi) ELPL monthly case intake, where SGH considered the glide path (recent

performance to outlook) was on a flat trajectory, such that ELPL case

volume was consistent with recent PSD levels;

(p.45);

(c) PSD‟s FY2014 unaudited financials recorded:

(i) revenue (that is, PSD Baseline Revenue) of £645 million;

39

(ii) EBITDA (that is, PSD Baseline EBITDA) of £289 million;

(iii) an EBITDA margin of 45%,

(p.44);

(d) the statements referred to in sub-paragraph 61(d) above (pp.51, 53); and

(e) the statements referred to in sub-paragraph 61(e) above (pp.59, 61).

E.2 The 30 March Representations

E.2.1 Representations concerning the future risks associated with SGH acquiring

PSD

65. By reason of the matters pleaded in sub-paragraph 61(e), on 30 March 2015 SGH

represented to the Affected Market, including persons to whom the Entitlement Offer

was made (each being a Risk Profile Representation), that:

(a) SGH‟s acquisition of PSD would not significantly expose SGH to regulatory

risks to which SGH was not already significantly exposed through its ownership

of SGH UK; and/or

(b) alternatively, SGH‟s acquisition of PSD would not expose SGH to potential

consequences of the realisation of regulatory risks of a kind to which SGH was

not already exposed by reason of its existing exposure to regulatory risks

through its ownership of SGH UK.

Particulars

i) The representations were partly express and partly implied;

ii) To the extent they were express, the Applicant refers to the 30 March General Regulatory Risk Disclosures (and each of them);

iii) To the extent they were implied, the Applicant refers to the 30 March Publications and the absence from them of any disclosure of the Reform Risks or the Reform Impacts;

iv) The representations are representations as to future matters and s 12BB of the ASIC Act, s 769C of the Corporations Act and/or s 4 of the ACL are relied upon.

66. By reason of the matters pleaded in paragraph 61 to 64, on 30 March 2015 SGH


40

was made (each representation being an Income Projection Reliability

Representation), that:

(a) SGH was able to project reasonably reliably the revenue and earnings it would

derive from the various components of its business (including, post-acquisition,

PSD) for the short to medium-term; and/or

(b) following the acquisition of PSD, SGH would remain able to project reasonably

reliably its consolidated revenue and earnings (including that part of its revenue

and earnings which it would derive from PSD) for the short to medium-term.

Particulars

i) The representations were implied;

ii) The representations are to be implied from the matters pleaded in paragraph 61 in the context of the 30 March Publications as a whole, and in particular from:

A) the statements made by SGH concerning the due diligence it performed in respect of the acquisition of PSD (as referred to in paragraph 62(c), 63(c)(iii), (j), (k) and (l));

B) the statements made by SGH concerning the future financial performance of PSD and SGH (as referred to in sub-paragraphs 63(r) and 64(a)-(b), which gave financial forecasts);

C) the nature of the financial assumptions made by SGH in respect of the acquisition of PSD (as referred to in sub-paragraph 63(m) to (n)), which involved valuing PSD on a multiple of its adjusted annual EBITDA;

iii) The representations are representations as to future matters and s 12BB of the ASIC Act, s 769C of the Corporations Act and/or s 4 of the ACL are relied upon.

E.2.2 Representations concerning the value of PSD

67. By reason of the matters pleaded in paragraphs 49 and 61 to 64, on 30 March 2015

SGH represented to the Affected Market, including persons to whom the Entitlement

Offer was made, that the acquisition of PSD for £597 million resulted in SGH paying

an acquisition multiple of 6.9x of the PSD FY2014 Core EBITDA calculated using an

appropriate and conservative approach to revenue recognition (PSD Reasonable

Valuation Representation).

Particulars

i) The representation was partly express and partly implied;

41

ii) To the extent the representation was express, the Applicant refers to sub-paragraphs 61(a)(ii), 61(c), and 61(d)(i) (and sub-paragraphs 62(d), 63(e), (l)-(n) and 64(d));

iii) The Applicant refers to the matters pleaded in paragraphs 49 and 61 in the context of the 30 March Publications as a whole, and in particular to sub-paragraph 61(d) (and sub-paragraphs 62(a) to (g), 63(a) to (r) and 64(d), including the statements made by SGH concerning the due diligence it performed in respect of the acquisition of PSD (as referred to in sub-paragraphs 62(c), 63(c)(iii), (j), (k) and (l)).

68. Further, or alternatively, by reason of the matters pleaded in paragraphs 49 and 61 to

64, on 30 March 2015 SGH represented to the Affected Market, including persons to

whom the Entitlement Offer was made, that there was a reasonable basis to consider

that the underlying business performance and prospects of PSD were such that the

acquisition by SGH of PSD would increase SGH‟s earnings per share by more than

30% in the first full year of ownership, and/or create significant value for SGH

shareholders (each a PSD Future Value Representation).

Particulars

i) The representations were implied, and are to be implied from the express statements pleaded in paragraphs 61(a) (i) and 61(b) (and sub-paragraphs 62(d) and 63(d))

ii) The Applicant refers to the matters pleaded in paragraphs 49 and 61 in the context of the 30 March Publications as a whole, and in particular to sub-paragraphs 61(d) (and sub-paragraphs 62(a) to (g), 63(a) to (r) and 64(d), including the statements made by SGH concerning the due diligence it performed in respect of the acquisition of PSD (as referred to in sub-paragraphs 62(c), 63(c)(iii), (j), (k) and (l)).

iii) The representations were representations as to future matters and s 12BB of the ASIC Act, s 769C of the Corporations Act and/or s 4 of the ACL are relied upon

E.2.3 Representation concerning due diligence conducted into PSD

69. By reason of the matters pleaded in paragraph 61, on 30 March 2015, SGH


was made, that SGH had carried out an extensive, thorough and appropriate due

diligence exercise prior to agreeing to acquire PSD for the PSD Acquisition Price

(Due Diligence Representation).

Particulars

i) The representation was partly express and partly implied;

42

ii) The Applicant refers to sub-paragraphs 62(c), 63(c)(iii), (j), (k) and (l), and says that they expressly represent that the due diligence carried out by SGH was extensive;

iii) To the extent it is implied, the Applicant says that the combined effect of the matters pleaded in sub-paragraphs 62(c), 63(c)(iii), (j), (k) and (l) in the context of the 30 March Publications as a whole conveyed that the due diligence carried out by SGH was thorough and appropriate.

E.2.4 The Continuous Disclosure Compliance Representation

70. By reason of the matters pleaded in paragraphs 52 to 54, on 30 March 2015 SGH


was made, that there was no information concerning SGH that a reasonable person

would expect to have a material effect on the price or value of SGH Shares which

SGH had not disclosed to the Affected Market prior to releasing to the ASX the 30

March Publications (Continuous Disclosure Compliance Representation).

Particulars

i) The representations were express and are contained in the 30 March Cleansing Notice, paragraph (d)(ii);

ii) Alternatively, the representations are to be implied from the publication by SGH of the 30 March Publications and the making of the Entitlement Offer under s 708AA of the Corporations Act.

E.3 Repetition of the 30 March Representations in April 2015

71. On or about 9 April 2015, SGH:

(a) published and lodged with the ASX (and published on SGH‟s website) a “Retail

Offer Booklet and Entitlement and Acceptance Form” (9 April Retail Offer

Documents); and

(b) despatched a copy of the 9 April Retail Offer Documents to eligible retail

shareholders in SGH.

72. The 9 April Retail Offer Documents:

(a) gave information as to how participate in the Retail Entitlement Offer, and how

to make payment (pp.7-10);

(b) contained a copy of:

43

(i) the 30 March Announcement (pp.11-16);

(ii) the 30 March Presentation (pp.17-56);

(iii) the 2 April Announcement (pp.58-60);

(c) stated that:

(i) this Retail Offer Booklet did not contain all the information which may be

required by a recipient in order to make an informed decision regarding an

application for new shares under the Retail Entitlement Offer, and that it

was important to read carefully and understand the information on SGH

and the Entitlement offer made publicly available prior to deciding whether

to take up all or part of an entitlement (p.7);

(ii) in particular, the recipient should refer to this Retail Offer Booklet and

other announcements made available at www.slaterandgordon.com.au

(p.7);

(iii) there may be additional announcements made by SGH after the date of

this Retail Offer Booklet that may be relevant to the recipient‟s

consideration of whether to take up or do nothing in respect of an

entitlement, and it was prudent to check whether any further

announcements have been made by SGH (by visiting the ASX website)

before submitting your application to take up your entitlement (p.65);

(d) stated that the recipient should carefully read this Retail Offer Booklet in its

entirety and in particular should read and consider the Key Risks section of the

30 March Presentation included in this Retail Offer Booklet (pp.5, 65);

(e) stated that the 30 March Presentation detailed important factors and risks that

could affect the financial and operating performance of SGH and the recipient

should refer to the „Key Risks‟ section of the 30 March Presentation which was

included in Section 3 of the Retail Offer Booklet, and should consider these

factors in light of the recipient‟s personal circumstances, including financial and

taxation issues before making a decision in relation to the recipient‟s

entitlement (p.66); and

(f) stated that SGH was subject to disclosure obligations under the Corporations

Act and the ASX Listing Rules, and was required to notify ASX of information

44

about specific events and matters as they arise for the purposes of ASX making

that information available to the public, and in particular was obliged to notify

ASX immediately of any information of which it is or becomes aware which a

reasonable person would expect to have a material effect on the price or value

of SGH Shares (p.67).

73. By the 9 April Retail Offer Documents, SGH repeated:

(a) the Risk Profile Representations;

(b) the Income Projection Reliability Representations;

(c) the PSD Reasonable Valuation Representation;

(d) the PSD Future Value Representations;

(e) the Due Diligence Representation; and

(f) the Continuous Disclosure Compliance Representation.

Particulars

i) As to sub-paragraphs (a) to (e), the Applicant repeats paragraph 72(b) and says the 9 April Retail Offer Documents incorporated the whole of the 30 March Announcement and the 30 March Presentation, and repeats the particulars to each of paragraphs 65 to 69.

ii) As to sub-paragraph (f), the Applicant says that the repetition is to be implied from the matters pleaded in paragraphs 72(c)(iii) and (f).

74. On 17 April 2015 SGH lodged with ASX an announcement entitled “Quindell

Shareholders Approve Sale of Professional Services Division to Slater and Gordon”,

which was published by ASX on 20 April 2015 (17/20 April Announcement).

75. In the 17/20 April Announcement, SGH stated:

(a) Quindell shareholders had approved the sale of PSD to SGH;

(b) Grech had said that the acquisition of PSD was a transformational opportunity

for SGH;

(c) it was anticipated by SGH that the acquisition would deliver significant value to

SGH shareholders (referring to the 30 March Investor Presentation for further

detail on basis of EPS impact and acquisition multiple);

45

(d) PSD [was] to be more than 30% EPS accretive in the first year of ownership

(being FY2016, June y/e);

(e) [there was an] attractive transaction multiple of 6.9 times pro form adjusted

volume trend core EBITDA of £86 million (assuming FY2014 volume trend core

PSD EBITDA excluding legacy noise induced hearing loss (NIHL) of £86

million, based on an adjusted transaction value of £597 million (upfront cash

consideration of £637 million less £40 million NPV of 50% earnout related to

legacy NIHL portfolio);

(f) Fowlie had said that, in reaching the decision to acquire PSD, we have

undertaken a bottom-up fundamental assessment of PSD‟s historical

performance and future potential, leveraging a large team of internal experts

and external advisers, and as part of this, SGH restated PSD‟s financials using

SGH‟s own evidence-based accounting policies.

76. By the 17/20 April Announcement, SGH repeated:



(c) the PSD Reasonable Valuation Representations;


(e) the Due Diligence Representations;


Particulars

i) The repetition is to be implied from the terms of the 17/20 April Announcement, including the matters pleaded in paragraph 75, and the fact it did not qualify any of those representations, in the context where the 30 March Publications and the 9 April Retail Offer Documents had been published recently.

ii) Further, the repetition of the Due Diligence Representations was express, and sub-paragraph 75(f) is repeated.

46

F. THE TRUE POSITION AS AT 30 MARCH 2015

F.1 PSD’s True Regulatory Risk

F.1.1 The true risk profile of PSD

77. As at 30 March 2015, PSD was significantly dependent upon performing UK PI Work

in respect of Whiplash Claims and/or Reform Affected Whiplash Claims.

Particulars

i) Sub-paragraphs 63(f), (h), (i), (p) and 64(b) are repeated;


78. As at 30 March 2015, PSD:

(a) was exposed to the Reform Impacts (and each of them) and/or the Reform

Impact Risks (and each of them);

(b) alternatively, was exposed to the Reform Impacts (and each of them) and/or

the Reform Impact Risks (or any of them) to a significant degree.

Particulars

i) Whiplash Claims and/or Reform Affected Whiplash Claims (being the type of claims that were exposed to the Reform Risks and/or the Reform Impacts) comprised the substantial majority of the UK PI Work performed by PSD;


79. By reason of the matters pleaded in paragraph 78, as at 30 March 2015, PSD:

(a) was exposed to the UK Income Projection Unreliability Risk;

(b) alternatively, was exposed to the UK Income Projection Unreliability Risk to a

significant degree.

Particulars

i) Whiplash Claims and/or Reform Affected Whiplash Claims (being the type of claims that were exposed to the Reform Risks and/or the Reform Impacts) would comprise the substantial majority of the UK PI Work performed by PSD;

ii) Accordingly the reliability of PSD’s projections of future income in respect of a significant majority of PSD’s consolidated revenue would be affected by the UK Income Projection Unreliability Risk (because

47

the validity of the Relevant Earnings Assumptions in respect of that part of the future income was dependent upon the Reforms not happening);


F.1.2 SGH’s true risk profile upon acquisition of PSD

80. As at 30 March 2015, if the acquisition by SGH of PSD proceeded:

(a) SGH would derive the substantial majority of its consolidated revenue (in

excess of 75%) from SGH UK (including PSD);

Particulars

Sub-paragraph 64(a) is repeated. Approximately 79% of SGH’s consolidated revenue would be derived from SGH UK and PSD.

(b) SGH would derive the majority of its consolidated revenue from SGH UK PI

Work (performed by SGH UK and PSD);

Particulars

The particulars to sub-paragraph 80(a) are repeated.

(c) the majority of SGH‟s consolidated revenue would be derived from SGH UK PI

Work in respect of claims which were not Multi-Track PI Cases (but which were

Whiplash Claims and/or Reform Affected Whiplash Claims).

Particulars

i) PSD would contribute approximately 58% of SGH’s consolidated revenue, and sub-paragraph 64(a) is repeated;

ii) Approximately 90% of PI Work performed by PSD was in respect of Whiplash Claims and/or Reform Affected Whiplash Claims, and sub-paragraphs 63(f), (h), (i), (p), 64(b)) and paragraph 77 are repeated;


81. By reason of the matters pleaded in paragraphs 77 and 80, as at 30 March 2015, if

the acquisition by SGH of PSD proceeded, SGH would be significantly dependent

upon performing UK PI Work in respect of Whiplash Claims and/or Reform Affected

Whiplash Claims.

82. By reason of the matters pleaded in paragraphs 77 to 81, as at 30 March 2015, if the

acquisition by SGH of PSD proceeded, SGH:

48

(a) would be exposed to the Reform Impacts (and each of them) and/or the Reform

Impact Risks (and each of them);

(b) alternatively, would be exposed to the Reform Impacts (and each of them)

and/or the Reform Impact Risks (or any of them) to a significant degree.

Particulars

i) In excess of 50% of SGH’s consolidated revenue would be derived from PSD, and Whiplash Claims and/or Reform Affected Whiplash Claims (being the type of claims that were exposed to the Reform Risks and/or the Reform Impacts) would comprise the substantial majority of the UK PI Work performed by PSD;

ii) Accordingly a significant majority of SGH’s consolidated revenue would be derived from performing legal services which were subject to the Reform Impacts;


83. By reason of the matters pleaded in paragraphs 34 to 46 and 77 to 82, it was

materially misleading to represent that:



of SGH UK; and/or





84. Alternatively, by reason of the matters pleaded in paragraphs 34 to 46 and 77 to 82,

SGH did not have reasonable grounds to represent that:



of SGH UK; and/or





49

F.1.3 SGH’s true ability to give reliable income projections for PSD

85. By reason of the matters pleaded in paragraphs 77 to 81, as at 30 March 2015, if the

acquisition by SGH of PSD proceeded, SGH:

(a) would be exposed to the UK Income Projection Unreliability Risk;

(b) alternatively, would be exposed to the UK Income Projection Unreliability Risk

to a significant degree.

Particulars

i) In excess of 50% of SGH’s consolidated revenue would be derived from PSD, and Whiplash Claims and/or Reform Affected Whiplash Claims (being the type of claims that were exposed to the Reform Risks and/or the Reform Impacts) would comprise the substantial majority of the UK PI Work performed by PSD;

ii) Accordingly the reliability of SGH’s projections of future income in respect of a significant majority of SGH’s consolidated revenue would be affected by the UK Income Projection Unreliability Risk (because the validity of the Relevant Earnings Assumptions in respect of that part of the future income was dependent upon the RTA Claim Reform Programme not continuing and/or the Small Claims Track Threshold Reform not happening);


86. By reason of the matters pleaded in paragraphs 34 to 47, 77 to 82 and 85, it was

materially misleading to represent that:

(a) SGH was able reliably to project the revenue and earnings it would derive from

PSD for the period from 2015 to 2020; and/or

(b) following the acquisition of PSD, SGH would remain able reliably to project its

consolidated revenue and earnings (including that part of its revenue and

earnings which it would derive from PSD) for the period from 2015 to 2020.

87. Alternatively, by reason of the matters pleaded in paragraphs 34 to 47, 77 to 82 and

85, SGH did not have reasonable grounds for making the Income Projection

Reliability Representations.

F.1.5 The true value of PSD having regard to the Reform Impact Risk

88. As at 30 March 2015, the existence of the Reform Impact Risk and/or the UK Income

Projection Unreliability Risk:

50

(a) resulted in the existence of a material risk that the goodwill to be recognised by

SGH on its acquisition of PSD for the PSD Acquisition Price would be subject to

a material impairment charge on the next occasion that SGH was required to

undertake impairment testing for goodwill; and/or

Particulars

i) In its acquisition accounting, SGH accounted for the PSD Acquisition Price by attributing $710 million to goodwill, whereas the goodwill was subject to a material risk of material impairment by reason of the existence of the Reform Risks and/or the Reform Impact Risks (or any of them).

ii) Pursuant to AASB 136, impairment testing was required at the balance date (which, for SGH, was 30 June 2015).

iii) The level of the impairment charge which might be required was at least approximately A$236.5 million: SGH’s announcement published and lodged with ASX on 28 February 2016 entitled “Slater and Gordon Group FY16 Half Year Financial Results” (29 February Announcement). An impairment charge would result in a reduction of the net income attributable to PSD, and consequently would impact SGH’s earnings (and earnings per share).

ii) Further particulars will be provided with the Applicant’s opinion evidence in chief.

(b) adversely affected the value of PSD.

Particulars

i) The particulars to sub-paragraph (a) are repeated.

ii) Further, the justification of the price agreed to be paid by SGH for PSD by reference to payment of an acquisition multiple of PSD’s volume trend adjusted core EBITDA for FY2014 necessarily proceeded on the basis that PSD would continue to perform UK PI Work in respect of Whiplash Claims and/or Low Value Whiplash Claims at the same (or increased) level as enjoyed in FY2014. Because the Reform Impact Risks and/or the UK Income Projection Unreliability Risk contradicted that assumption (or the ability reasonably to make that assumption), the existence of those risks adversely affected the value of PSD;

iii) Further particulars will be provided with the Applicant’s opinion evidence in chief.

89. By reason of the matters pleaded in paragraphs 77 to 87 and/or 88, as at 30 March

2015 there was not a reasonable basis to consider that the underlying business

performance and prospects of PSD was such that it was reasonable for SGH to pay

£597 million for PSD.

51

90. Further, or alternatively, by reason of the matters pleaded in paragraphs 77 to 87

and/or 88, as at 30 March 2015 there was not a reasonable basis for SGH to

consider that the acquisition by SGH of PSD would increase SGH‟s earnings per

share by more than 30% in the first full year of ownership, and/or create significant

value for SGH shareholders.

F.2 PSD’s True Revenue and EBITDA

F.2.1 The investigation into PSD’s accounting practices

91. Prior to 30 March 2015, a United Kingdom regulator opened an inquiry into Quindell‟s

financial statements for the year ended 31 December 2012, including a review of

revenue recognition within PSD (UK Regulatory Investigation).

Particulars

i) Quindell Plc Annual Report & Financial Statements for the year ended 31 December 2014, published on 5 August 2015 (Quindell 2014 Report), p.39 (Note 3), referring to the Financial Reporting Council Conduct Committee inquiry;

ii) The Financial Reporting Council Conduct Committee inquiry commenced on 20 March 2014 and was extended on 30 September 2014.

92. Following the commencement of the UK Regulatory Investigation, and prior to 30

March 2015, the board of Quindell undertook a review of Quindell‟s accounting

policies, including those applicable to PSD.

Particulars

Quindell 2014 Report, pp.39-40 (Note 3).

93. As part of the review pleaded in paragraph 92, in December 2014 Quindell appointed

external experts (PricewaterhouseCoopers (PWC) to review Quindell‟s and PSD‟s

accounting policies.

Particulars

SGH ASX Announcement dated 25 June 2015 entitled “Media Reports in relation to Quindell plc” (25 June Announcement)

94. By 30 March 2015, PWC had reported to Quindell that, and the board of Quindell

had, by undertaking a review of Quindell‟s accounting policies (including those

applicable to PSD), identified:

52

(a) certain of the accounting policies historically adopted by Quindell, in respect of

recognising revenue and deferring case acquisition costs in a number of

Quindell‟s product areas were at the aggressive end of acceptable practice;

(b) some policies adopted by Quindell, principally (but not only) the NIHL case

revenue recognition and related balances which became significant during

2014, were not appropriate.

Particulars

i) 25 June Announcement;

ii) Quindell 2014 Report, pp.39-40 (Note 3).

F.2.2 Impact of an appropriate or conservative approach to accounting for revenue

95. As at 30 March 2015, by undertaking an appropriate review of Quindell‟s accounting

policies (including those applicable to PSD), a reasonable person was likely to form

the view that an appropriate and/or conservative approach to accounting for revenue

should have been undertaken by Quindell for all PSD cases (including non-NIHL

cases).

Particulars

i) Paragraphs 92 to 94 are repeated and relied upon by the Applicant to show that a reasonable review of Quindell’s accounting policies would lead a reasonable person to form this view;

ii) The Applicant refers to the Quindell 2014 Report, pp.39-40 (Note 3). This stated that a more appropriate and conservative approach to accounting for revenue involved recognising revenue at a later stage, on the basis of services received by the customer (which, for legal services, meant at the time there was an admission of liability or settlement of the case by the at-fault third party insurer) (Corrected Quindell Revenue Recognition Policy);

iii) The Applicant will provide further particulars at the time of service of opinion evidence in chief.

96. As at 30 March 2015, implementing a more appropriate and/or conservative

approach to accounting for Quindell‟s revenue would be likely to have the following

effects:

(a) a very significant reduction in PSD‟s revenue for FY2014;

(b) a very significant reduction in Quindell‟s profit position for FY2014; and

53

(c) a very significant reduction in the net assets of Quindell as at 31 December

2014.

Particulars

i) The Quindell 2014 Report stated that the Corrected Quindell Revenue Recognition Policy was a more appropriate and conservative approach to accounting for revenues (p.40), and that implementing it had the effects pleaded;

ii) The impacts on revenue and assets were as follows:

A) reduction in PSD’s revenue for FY2014 by approximately – £289.783 million (from approximately £510.323 million to approximately £220.540 million);

B) a reduction in Quindell’s profit position for FY2014 by increasing its group loss by approximately £312.31 million (and its group loss after taxation by £282.2 million);

C) a reduction in the value of Quindell’s trade and other receivables at 31 December 2014 by approximately £506.85 million;

D) a reduction in the net assets of Quindell (and equity attributable to equity holders of Quindell) as at 31 December 2014 by approximately £438.017 million;

iii) Quindell 2014 Report, p.40 (Note 3), p.46 (Note 3a), p.48 (Note 3b), p.50 (Note 3c).

97. Further, or alternatively, by reason of the matters pleaded in paragraphs 94 to 96, on

an appropriate and/or conservative approach to accounting for revenue:

(a) PSD‟s FY2014 revenue and EBITDA was significantly less than the amount

recorded in Quindell‟s internal accounts;

Particulars

i) As to revenue:

A) The adjustment to revenue required by the Corrected Quindell Revenue Recognition Policy reduced the revenue which Quindell attributed to PSD (£510.323 million) by approximately £289.783 million (–56.8%) (Quindell 2014 Report, p.8).

B) Applying the reduction in revenue required by the Corrected Quindell Revenue Recognition Policy (£289.783 million) to the amount recorded in Quindell’s internal accounts of £645 million (as referred to in sub-paragraphs 63(m) and 64(c)), shows that PSD’s FY2014 revenue was approximately 45% less than the amount recorded in Quindell’s internal accounts.

54

The remaining amount (£355.217 million), includes revenue attributable to NIHL cases.

ii) As to EBITDA:

A) The adjustment to EBITDA required by the Corrected Quindell Revenue Recognition Policy reduced the EBITDA which Quindell attributed to PSD (£200.427 million) by approximately £299.968 million (over 100%), resulting in negative EBITDA for FY2014 of £99.541 million (Quindell 2014 Report, p.8);

B) Applying the reduction in PSD’s FY2014 EBITDA of £299.968 million to the amount recorded in Quindell’s internal accounts of £289 million (as referred to in sub-paragraphs 63(m) and 64(c)), would result in FY2014 EBITDA which was either negative, or close to negative. The remaining amount (-£10.968 million), includes earnings attributable to NIHL cases.


(b) PSD‟s FY2014 revenue and EBITDA attributable to non-NIHL related cases

was significantly less than the amount recorded in Quindell‟s internal accounts

as being attributable to non-NIHL related cases.

Particulars

i) As to revenue:

A) the Quindell 2014 Report did not breakdown the impacts of the Corrected Quindell Revenue Recognition Policy as between PSD’s NIHL and non-NIHL related business, however, as the impact on revenue was a reduction of approximately 56.7%, this would also likely have resulted in materially less revenue attributable to PSD’s non-NIHL related cases;

B) The 30 March Presentation recorded that a negative adjustment of £278 million to PSD’s FY2014 EBITDA would remove all revenue and expenses related to NIHL (p.21), which means that PSD’s revenue attributable to non-NIHL cases, as recorded in Quindell’s internal accounts, was £367 million. If the percentage impact of the Corrected Quindell Revenue Recognition Policy on revenue was the same as between NIHL and non-NIHL related cases (as referred to in Particular (i)(A) of paragraph 97(a) above, being –56.7%), this would result in a significant reduction in revenue attributable to non-NIHL related cases (to £158.91 million);

C) The precise amounts of the impacts on revenue referred to in (A) and (B) above is not presently known to the Applicant, but will be further particularised at the time of service of opinion evidence in chief;

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ii) As to EBITDA:

A) the Quindell 2014 Report did not break down the impacts of the Corrected Quindell Revenue Recognition Policy as between PSD’s NIHL and non-NIHL related business, however, as the impact was an EBITDA loss for PSD as a whole, this would also likely have resulted in an EBITDA loss for PSD’s revenue attributable to non-NIHL related cases;

B) The 30 March Presentation recorded that a negative adjustment of –£201 million to PSD’s FY2014 EBITDA would remove all revenue and expenses related to NIHL (p.21), and accordingly, £88 million of the EBITDA of £289 million (as referred to in sub-paragraphs 63(m) and 64(c)) was attributable to non-NIHL related cases. If the percentage impact of the Corrected Quindell Revenue Recognition Policy on EBITDA (as referred to in Particular (ii)(A) to paragraph 97(a) above was the same as between NIHL and non-NIHL related cases, this would also likely have resulted in negative EBITDA attributable to PSD’s non-NIHL related cases;

iii) No change in PSD’s business occurred between 1 January 2015 and 30 March 2015 which improved the financial position of PSD. The Quindell 2014 Report reported that during 2015 PSD continued to trade and incur further operating losses (p.12);

iv) The Applicant will provide further particulars at the time of service of opinion evidence in chief.

98. By reason of the matters pleaded in paragraphs 94 to 96 and/or 97:

(a) the PSD Baseline EBITDA was, or was likely to be, significantly overstated;

(b) the PSD FY2014 Core EBITDA was, or was likely to be, significantly overstated

(because the integers in its calculation included the PSD Baseline EBITDA

figure); and

(c) the PSD FY2014 Volume Trend Core EBITDA was, or was likely to be,

significantly overstated (because the integers in its calculation included the

PSD Baseline EBITDA and the PSD FY2014 Core EBITDA).

F.2.3 The revenue-impacted value of PSD

99. By reason of the matters pleaded in paragraphs 97 and/or 98, on an appropriate and

conservative approach to accounting for PSD‟s FY2014 revenue, the acquisition

multiple resulting from SGH‟s acquisition of PSD for the PSD Acquisition Price was,

or was likely to be (to the extent it could be calculated at all) significantly higher than

6.9x.

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Particulars

i) The precise methodology used by SGH to calculate the PSD FY2014 Volume Trend Core EBITDA of £86 million is unknown to the Applicant, but the Applicant refers to the 30 March Presentation, p.23, and says that the baseline of the calculation was PSD FY2014 Core EBITDA amount of £70 million referred to on p.21 of the 30 March Presentation, which was derived from the PSD Baseline EBITDA being the amount recorded in Quindell’s internal accounts (as referred to in sub-paragraphs 63(m) and 64(c)), which by reason of the matters referred to in paragraph 97 above would have been nil and/or materially lower had an appropriate and conservative approach to accounting for PSD’s FY2014 revenue and EBITDA been adopted.

ii) It is not possible to calculate an acquisition multiple based on nil (or negative) EBITDA. However, an acquisition multiple based on EBITDA of £1 million would be 597x;


100. By reason of the matters pleaded in paragraphs 97 to 99, there was not a reasonable

basis for SGH to consider that the acquisition of PSD for £597 million resulted in SGH

paying an acquisition multiple of 6.9x PSD‟s FY2014 EBITDA if calculated in an

appropriate or conservative manner.

101. Further, or alternatively, as at 30 March 2015, by reason of the matters pleaded in

paragraphs 94, 95 and 96(c), the negative adjustments to the value of trade and

other receivables, net assets and equity, required by implementing an appropriate or

conservative approach to accounting for revenue meant that the fair value of PSD

was significantly less than the amount recorded in Quindell‟s internal accounts as at

the time SGH agreed to acquire PSD, and a fraction of what SGH had agreed to pay

for it.

Particulars

i) The fair value of PSD was no more than approximately £304 million on a gross basis (A$584 million at an exchange rate of 0.52) or £121 million on a net basis (A$232 million at an exchange rate of 0.52), including intangibles and goodwill the fair value of which was no more than approximately £148.45 million (A$285 million at an exchange rate of 0.52): Quindell 2014 Report, p.12 (at [1.8]), p.105 (Note 37);

A) The fair value of PSD reported in the Quindell 2014 Report was at least approximately £293 million (49%) lower than the £597 million transaction value attributed to it by SGH as pleaded in sub-paragraph 61(d)(i)(A) and 64(d);

B) The fair value of the NIHL earnout reported in the Quindell 2014 Report (p.13) was approximately the same (£39.6 million) as the

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valuation of it by SGH as pleaded in sub-paragraph 61(d)(i)(A) and 64(d) (£39.6 million);

ii) No change in PSD’s business occurred between 1 January 2015 and 30 March 2015 which improved the financial position of PSD. The Quindell 2014 Report reported that during 2015 PSD continued to trade and incur further operating losses (p.12);

iii) SGH agreed to pay A$1,225 million by way of upfront consideration for PSD, which is 5.28 times A$232 million (being the net fair value of PSD referred to in (i) above).

iv) The Applicant will provide further particulars at the time of service of opinion evidence in chief.

102. By reason of the matters pleaded in paragraphs 99, 100 and/or 101, as at 30 March

2015 there was not a reasonable basis for SGH to value PSD at £597 million, and/or

to pay £597 million for PSD.

103. Further, or alternatively, by reason of the matters pleaded in paragraphs 99, 100

and/or 101, as at 30 March 2015 there was not a reasonable basis for SGH to

consider that the acquisition by SGH of PSD would increase SGH‟s earnings per

share by more than 30% in the first full year of ownership, and/or create significant

value for SGH shareholders.

G. WHAT SGH OMITTED TO SAY ABOUT THE PSD ACQUISITION ON 30 MARCH 2015

G.1 The 30 March Omissions

104. SGH did not make any disclosure to the Affected Market of:

(a) the RTA Claim Reform Programme and/or the Small Claims Track Threshold

Reform;

(b) the Reform Impacts;

(c) the Reform Impact Risks,

by the 30 March Publications, or otherwise.

105. SGH did not make any disclosure to the Affected Market of the matters pleaded in

paragraph 82 (Reform Impacts Exposure Information), by the 30 March

Publications, or otherwise.

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paragraph 85 (UK Income Projection Unreliability Risk Information), by the

30 March Publications, or otherwise.


paragraph 88 (Regulatory Risk-Impacted Value Information), by the 30 March



paragraph 94 to the extent they related to accounting policies other than those

applicable to NIHL cases (PSD Core Revenue Recognition Investigation

Information) by the 30 March Publications, or otherwise.


paragraphs 95, 96, 97 and/or 98 (Inappropriate PSD Core Revenue Recognition

Information), by the 30 March Publications, or otherwise.


paragraph 99 (Revenue-Impacted Value Information), by the 30 March


G.2 What SGH knew or ought to have known as to PSD’s True Regulatory Risk

G.2.1 What SGH ought to have known as to the Reform Impacts Exposure

Information

111. As at 30 March 2015, the existence of the RTA Claim Reform Programme and/or the

Small Claims Track Threshold Reform was information which ought reasonably to

have come into the possession of:

(a) SGH UK Executives in the course of the performance of his or her respective

duties;

Particulars

i) The Applicant repeats paragraphs 23 to 25, and says that the existence of the RTA Claim Reform Programme and/or the Small Claims Track Threshold Reform ought to have been known to legal practitioners with specialist expertise in perform UK PI Work and/or to persons with management responsibility for legal services providers performing UK PI Work;

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ii) The Applicant also refers to the fact that submissions were lodged by firms which were or became part of SGH UK in relation to:

A) the Civil Justice Costs Review (referred to in Schedule A, paragraph A2);

B) the MoJ consultation on the extension of the RTA PI Protocol (as referred to in Schedule A, paragraph A17);

C) the 2013 Whiplash Consultation (as referred to in Schedule A, paragraph A19);

D) the TSC inquiries into the cost of motor insurance: whiplash (as referred to in Schedule A, paragraphs A21 and A28).

(b) Grech and/or Fowlie in the course of the performance of their respective duties;

Particulars

The Applicant repeats paragraphs 15 and 48, and says that the existence of the Reform Impacts Exposure Information ought to have been known to SGH Long-Term Executives as:

i) persons who had participated in and taken responsibility for the due diligence conducted into PSD (as referred to in sub-paragraphs 62(c), 63(c)(iii), (j), (k) and (l)) prior to agreeing for SGH to acquire PSD and causing SGH to issue the 30 March Publications;

ii) persons who (in their capacity as directors of SGH) had management oversight of Kinsella and the SGH UK business.

(c) SGH NEDs in the course of the performance of their respective duties.

Particulars

The Applicant says that the existence of the Reform Impacts Exposure Information ought to have been known to SGH NEDs as:

i) persons who had management oversight of Kinsella, Grech and Fowlie and the SGH UK business, and ultimate responsibility for the due diligence conducted into PSD (as referred to sub-paragraphs 62(c), 63(c)(iii), (j), (k) and (l)) prior to agreeing for SGH to acquire PSD and causing SGH to issue the 30 March Publications;

ii) persons who sat on SGH’s Audit, Compliance and Risk Management Committee at the time when the acquisition of PSD was being considered and negotiated.

112. As at 30 March 2015, the existence of the Reform Impacts and/or the Reform Impact

Risks, was information which ought reasonably to have come into the possession of:

(a) SGH UK Executives in the course of the performance of his or her respective

duties;

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Particulars

The Applicant repeats paragraphs 23 to 25 and 111, and says that the existence of the Reform Impacts and/or the Reform Impact Risks ought to have been known to SGH UK Executives, as persons with management responsibility for legal services providers performing UK PI Work.

(b) Grech and Fowlie in the course of the performance of their respective duties;

and/or

Particulars

The Applicant repeats paragraph 16 and 48, and says that the existence of the Reform Impacts Exposure Information ought to have been known to SGH Long-Term Executives as:

i) persons who had participated in and taken responsibility for the due diligence conducted into PSD (as referred to in sub-paragraphs 62(c), 63(c)(iii), (j), (k) and (l)) prior to agreeing for SGH to acquire PSD and causing SGH to issue the 30 March Publications, in the course of which due diligence these matters should have been identified;



Particulars

The Applicant says that the existence of the Reform Impacts Exposure Information ought to have been known to SGH NEDs as:

i) persons who had management oversight of Kinsella, Grech and Fowlie and the SGH UK business, and ultimate responsibility for the due diligence conducted into PSD (as referred to in sub-paragraphs 62(c), 63(c)(iii), (j), (k) and (l)) prior to agreeing for SGH to acquire PSD and causing SGH to issue the 30 March Publications, in the course of which due diligence these matters should have been identified;


113. As at 30 March 2015, SGH was aware of the matters pleaded in paragraphs 64(a),

81 and 82 above.

Particulars

These matters were, or are to be inferred from statements made by SGH in the 30 March Publications.

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114. As at 30 March 2015, by reason of the matters pleaded in paragraphs 111 to 113, the

Reform Impacts Exposure Information was information which ought reasonably have

come into the possession of:

(a) SGH UK Executives in the performance of their duties;

Particulars

The Applicant repeats paragraphs 23 to 25, and 112(a), and says that the Reform Impacts Exposure Information ought to have been known to Kinsella as a person who:

i) ought to have been aware of the Reform Impacts and/or the UK Reform Impact Risks as pleaded in paragraph 112(a);

ii) was at that time the Head of UK (M&A), designating responsibility for mergers and acquisitions; and

iii) accordingly ought to have considered the significance of the information of which he ought to have been aware as pleaded in paragraph 112 to the acquisition of PSD.

(b) Grech and/or Fowlie in the course of the performance of their respective duties;

and/or

Particulars

The Applicant repeats paragraphs 16, 48 and 112(b), and says that the existence of the Reform Impacts Exposure Information ought to have been known to SGH Long-Term Executives as:




Particulars

The Applicant repeats paragraphs 16, 48 and 112(c), and says that the existence of the Reform Impacts Exposure Information ought to have been known to SGH NEDs as:

i) persons who had management oversight of Kinsella, Grech and Fowlie and the SGH UK business, and ultimate responsibility for the due diligence conducted into PSD (as referred to in sub-paragraphs 62(c), 63(c)(iii), (j), (k) and (l)) prior to agreeing for SGH to acquire

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PSD and causing SGH to issue the 30 March Publications, in the course of which due diligence these matters should have been identified;


G.2.2 What SGH ought to have known as to the UK Projections Unreliability Risk

Information

115. As at 30 March 2015, information as to the matters pleaded in paragraphs 42 and the

UK Income Projection Unreliability Risk ought reasonably have come into the

possession of SGH UK Executives in the course of the performance of their

respective duties.

Particulars

The Applicant repeats paragraphs 23 to 25, 111(a) and 112(a), and says that this information ought to have been known to SGH UK Executives, as persons with management responsibility for legal services providers performing UK PI Work.

116. As at 30 March 2015, the UK Income Projection Unreliability Risk Information was

information which ought reasonably to have come into the possession of:


Particulars

The Applicant repeats paragraphs 23 to 25, and 112(a), and says that the UK Income Projection Unreliability Risk Information ought to have been known to Kinsella as a person who:

i) ought to have been aware of the Reform Impacts and/or the UK Reform Impact Risks (as pleaded in paragraph 112(a)) and/or the matters pleaded in paragraphs42 and the UK Income Projection Unreliability Risk (as pleaded in paragraph 115);


iii) accordingly ought to have considered the significance of the information of which he ought to have been aware as pleaded in paragraph 111(a) to the acquisition of PSD.


and/or

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Particulars

The Applicant repeats paragraphs 16, 48 and 112(b), and says that the existence of the UK Income Projection Unreliability Risk Information ought to have been known to SGH Long-Term Executives as:




Particulars

The Applicant repeats paragraphs 16, 48 and 112(c), and says that the existence of the UK Income Projection Unreliability Risk Information ought to have been known to SGH NEDs as:



G.2.3 What SGH ought to have known as to the Regulatory Risk-Impacted Value

Information

117. As at 30 March 2015, the matters pleaded in paragraph 85 was information which

ought reasonably to have come into the possession of:


Particulars

The Applicant repeats paragraphs 23 to 25, 114(a) and 116(a), and says that the matters pleaded in paragraph 88 ought to have been known to Kinsella as a person who:

i) ought to have been aware of the Reform Impacts Exposure Information as pleaded in sub-paragraph 114(a)114(a) and/or the UK

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Income Projection Unreliability Risk Information as pleaded in sub-paragraph 116(a);


iii) accordingly ought to have considered the significance of the information of which he ought to have been aware as pleaded in sub-paragraphs 114(a) and/or 116(a) to the fair value of PSD, so as to become aware of the information pleaded in paragraph 85.


and/or

Particulars

The Applicant repeats paragraphs 16, 48, 114(b)114(b) and 116(b), and says that the matters pleaded in paragraph 85 ought to have been known to SGH Long-Term Executives as persons who:

i) ought to have been aware of the Reform Impacts Exposure Information as pleaded in sub-paragraph 114(b) and/or the UK Income Projection Unreliability Risk Information as pleaded in sub-paragraph 116(b);

ii) had participated in and taken responsibility for the due diligence conducted into PSD (as referred to in sub-paragraphs 62 (c), 63(c)(iii), (j), (k) and (l)) prior to agreeing for SGH to acquire PSD and causing SGH to issue the 30 March Publications, in the course of which due diligence these matters should have been identified;

iii) persons who (in their capacity as directors of SGH) had management oversight of Kinsella and the SGH UK business;

iv) accordingly, ought to have considered the significance of the information of which they ought to have been aware as pleaded in sub-paragraphs 114(b) and/or 116(b) to the fair value of PSD, so as to become aware of the information pleaded in paragraph 85.


Particulars

The Applicant repeats paragraphs 16,48, 114(c) and 116(c) and says that the matters pleaded in paragraph 88 ought to have been known to SGH NEDs as persons who:

i) ought to have been aware of the Reform Impacts Exposure Information as pleaded in sub-paragraph 114(c) and/or the UK Income Projection Unreliability Risk Information as pleaded in sub-paragraph 116(c);

ii) persons who had management oversight of Kinsella, Grech and Fowlie and the SGH UK business, and ultimate responsibility for the

65

due diligence conducted into PSD (as referred to in sub-paragraphs 62 (c), 63 (c)(iii), (j), (k) and (l)) prior to agreeing for SGH to acquire PSD and causing SGH to issue the 30 March Publications, in the course of which due diligence these matters should have been identified;

iii) persons who sat on SGH’s Audit, Compliance and Risk Management Committee at the time when the acquisition of PSD was being considered and negotiated;

iv) accordingly, ought to have considered the significance of the information of which they ought to have been aware as pleaded in sub-paragraphs 114(c) and/or 116(c) to the fair value of PSD, so as to become aware of the information pleaded in paragraph 85.

G.3 What SGH knew or ought to have known as to PSD’s True Revenue

G.3.1 What SGH knew as to the PSD Core Revenue Recognition Investigation

Information

118. As at 30 March 2015, the matters pleaded in paragraphs 91 to 94 was information of

which SGH was actually aware.

Particulars

The 25 June Announcement stated that at the time of the announcement of the sale of PSD to SGH Quindell confirmed to SGH the matters pleaded in paragraph 94, and by inference also disclosed to SGH prior to that time the contextual matters pleaded in paragraphs 91 to 93.

G.3.2 What SGH ought to have known as to the Inappropriate PSD Core Revenue

Recognition Information

119. As at 30 March 2015 by reason of the due diligence carried out by SGH into PSD and

the matters pleaded in paragraphs 93, the matters pleaded in paragraphs 95 to 96

and/or 97 to 98, was information which ought reasonably to have come into the

possession of:

(a) Grech, Fowlie and/or Brown in the course of the performance of their respective

duties; and/or

Particulars

The Applicant repeats paragraphs 16, and 48, and says that the matters pleaded in paragraphs 95 to 96 and/or 97 to 98 ought to have been known to SGH Long-Term Executives as persons who:

i) had participated in and taken responsibility for the due diligence conducted into PSD (as referred to in sub-paragraphs 62(c), 63 (c)(iii),

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(j), (k) and (l)) prior to agreeing for SGH to acquire PSD and causing SGH to issue the 30 March Publications, in the course of which due diligence these matters should have been identified;

ii) accordingly, ought to have carried out, or caused to be carried out, a reasonable review of Quindell’s and PSD’s accounting policies, so as to identify the matters which such a review would have led them to identify, as pleaded in paragraph 94, by reason of which the matters pleaded in paragraphs 95 to 96 and/or 97 to 98 would have come to their attention.

(b) SGH NEDs in the course of the performance of their respective duties.

Particulars

The Applicant repeats paragraphs 16 and 48, and says that the existence of these matters ought to have been known to SGH NEDs as:


ii) persons who sat on SGH’s Audit, Compliance and Risk Management Committee at the time when the acquisition of PSD was being considered and negotiated;

iii) accordingly, ought to have carried out, or caused to be carried out, a reasonable review of Quindell’s and PSD’s accounting policies, so as to identify the matters which such a review would have led them to identify, as pleaded in paragraph 94, by reason of which the matters pleaded in paragraphs 95 to 96 and/or 97 to 98 and/or 99 would have come to their attention.

G.2.5 What SGH knew or ought to have known as to the Revenue-Impacted Value

Information

120. As at 30 March 2015, by reason of the matters pleaded in paragraphs 118 and/or

119, the matters pleaded in paragraph 99 was information which ought reasonably to

have come into the possession of:

(a) Grech and Fowlie in the course of the performance of their respective duties;

and/or

67

Particulars

The Applicant repeats sub-paragraphs 118 and/or 119 (a), and says that by reason of what Grech and Fowlie ought to have known as there pleaded, they ought also to have known these matters.


Particulars

The Applicant repeats sub-paragraphs 118 and/or 119(b), and says that by reason of what the SGH NEDs ought to have known as there pleaded, they ought also to have known these matters.

G.4 True characteristics of SGH’s due diligence into PSD

121. To the extent that those charged on SGH‟s behalf with carrying out due diligence into

PSD were not subjectively aware of:

(a) the matters pleaded in paragraphs 30 to 43 (including the Reform Impact Risks

and the UK Income Projection Unreliability Risk);

(b) the matters pleaded in paragraphs 77 to 85 (including the Reform Impacts

Exposure Information and the UK Income Projection Unreliability Risk

Information);

(c) the matters pleaded in paragraphs 88 to 89 (including the Regulatory Risk-

Impacted Value Information);

(d) the matters pleaded in paragraphs 91 to 96 (including the PSD Core Revenue

Recognition Investigation Information and the Inappropriate PSD Core

Revenue Recognition Information);

(e) the matters pleaded in paragraphs 99 to 102 (including the True PSD Value

Information),

those were matters of which they would have become subjectively aware had an

extensive, thorough and appropriate due diligence process into PSD been

undertaken.

Particulars

i) The Applicant repeats paragraphs 111 to 120, which sets out the Applicant’s current state of knowledge of the extent to which matters were subjectively known by those charged with due diligence into PSD;

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ii) The Applicant will provide further particulars at the time of service of opinion evidence in chief.

122. By reason of the matters pleaded in paragraphs 111 to 121, the due diligence

process conducted by SGH into PSD prior to agreeing to acquire PSD for the PSD

Acquisition Price was not extensive, thorough and appropriate.

H. SGH’S 30 MARCH CONTRAVENING CONDUCT

H.1 Continuous Disclosure Contraventions

H.1.1 Reform Impacts Exposure Information

123. By reason of the matters pleaded in paragraphs 16, 25 and 114, as at 30 March 2015

the Reform Impacts Exposure Information was information of which SGH was aware

within the meaning of ASX Listing Rule 3.1 (having regard to the definitions in ASX

Listing Rule 19.12).

124. As at 30 March 2015, the Reform Impacts Exposure Information was not generally

available within the meaning of s 676 of the Corporations Act.

125. As at and from 30 March 2015, the Reform Impacts Exposure Information was

information that a reasonable person would expect to have a material effect on the

price or value of SGH Shares within the meaning of ASX Listing Rule 3.1 and

s 674(2)(c)(ii) of the Corporations Act.

126. By reason of SGH‟s Continuous Disclosure Obligations and the matters pleaded in

paragraphs 123 to 125, SGH became obliged to tell the ASX the Reform Impacts

Exposure Information on 30 March 2015.

127. SGH did not inform the ASX of the Reform Impacts Exposure Information on

30 March 2015 (including by reason of the matters pleaded in paragraph 105).

128. By reason of the matters pleaded in paragraphs 126 to 127 SGH contravened ASX

Listing Rule 3.1 and s 674(2) of the Corporations Act (Reform Impacts Exposure

Continuous Disclosure Contravention).

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H.1.2 UK Income Projection Unreliability Risk Information


the UK Income Projection Unreliability Risk Information was information of which

SGH was aware within the meaning of ASX Listing Rule 3.1 (having regard to the

definitions in ASX Listing Rule 19.12).

130. As at 30 March 2015, the UK Income Projection Unreliability Risk Information was not

generally available within the meaning of s 676 of the Corporations Act.

131. As at and from 30 March 2015, the UK Income Projection Unreliability Risk

Information was information that a reasonable person would expect to have a

material effect on the price or value of SGH Shares within the meaning of ASX Listing

Rule 3.1 and s 674(2)(c)(ii) of the Corporations Act.


paragraphs 129 to 131, SGH became obliged to tell the ASX the UK Income

Projection Unreliability Risk Information on 30 March 2015.

133. SGH did not inform the ASX of the UK Income Projection Unreliability Risk

Information on 30 March 2015 (including by reason of the matters pleaded in

paragraph 106).

134. By reason of the matters pleaded in paragraphs 132 to 133, SGH contravened ASX

Listing Rule 3.1 and s 674(2) of the Corporations Act (UK Income Projection

Unreliability Continuous Disclosure Contravention).

H.1.3 Regulatory Risk-Impacted Value Information


the Regulatory Risk-Impacted Value Information was information of which SGH was

aware within the meaning of ASX Listing Rule 3.1 (having regard to the definitions in

ASX Listing Rule 19.12).

136. As at 30 March 2015, the Regulatory Risk-Impacted Value Information was not

generally available within the meaning of s 676 of the Corporations Act.

137. As at and from 30 March 2015, the Regulatory Risk-Impacted Value Information was


70




paragraphs 135 to 137 SGH became obliged to tell the ASX the Regulatory Risk-

Impacted Value Information on 30 March 2015.

139. SGH did not inform the ASX of the Regulatory Risk-Impacted Value Information on

30 March 2015 (including by reason of the matters pleaded in paragraph 107).


Listing Rule 3.1 and s 674(2) of the Corporations Act (Regulatory Risk-Impacted

Value Continuous Disclosure Contravention).

H.1.4 PSD Core Revenue Recognition Investigation Information


the PSD Core Revenue Recognition Investigation Information was information of

which SGH was aware within the meaning of ASX Listing Rule 3.1 (having regard to

the definitions in ASX Listing Rule 19.12).

142. As at 30 March 2015, the PSD Core Revenue Recognition Investigation Information

was not generally available within the meaning of s 676 of the Corporations Act.

143. As at and from 30 March 2015, the PSD Core Revenue Recognition Investigation





paragraphs 141 to 143 SGH became obliged to tell the ASX the PSD Core Revenue

Recognition Investigation Information on 30 March 2015.

145. SGH did not inform the ASX of the PSD Core Revenue Recognition Investigation


paragraph 108).


Listing Rule 3.1 and s 674(2) of the Corporations Act (PSD Core Revenue

Recognition Investigation Continuous Disclosure Contravention).

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H.1.5 Inappropriate PSD Core Revenue Recognition Information

147. By reason of the matters pleaded in paragraphs 16, 25 and 119 , as at 30 March

2015 the Inappropriate PSD Core Revenue Recognition Information was information

of which SGH was aware within the meaning of ASX Listing Rule 3.1 (having regard

to the definitions in ASX Listing Rule 19.12).

148. As at 30 March 2015, the Inappropriate PSD Core Revenue Recognition Information

was not generally available within the meaning of s 676 of the Corporations Act.

149. As at and from 30 March 2015, the Inappropriate PSD Core Revenue Recognition





paragraphs 147 to 149 SGH became obliged to tell the ASX the Inappropriate PSD

Revenue Recognition Information on 30 March 2015.

151. SGH did not inform the ASX of the Inappropriate PSD Core Revenue Recognition


paragraph 109).

152. By reason of the matters pleaded in paragraphs 150 to 151 SGH contravened ASX

Listing Rule 3.1 and s 674(2) of the Corporations Act (Inappropriate PSD Core

Revenue Recognition Continuous Disclosure Contravention).

H.1.6 Revenue-Impacted Value Information


the Revenue-Impacted Value Information was information of which SGH was aware

within the meaning of ASX Listing Rule 3.1 (having regard to the definitions in ASX

Listing Rule 19.12).

154. As at 30 March 2015, the Revenue-Impacted Value Information was not generally


155. As at and from 30 March 2015, the Revenue-Impacted Value Information was


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price or value of SGH Shares within the meaning of ASX Listing Rule 3.1 and s

674(2)(c)(ii) of the Corporations Act.


paragraphs 153 to 155, SGH became obliged to tell the ASX the Revenue-Impacted

Value Information on 30 March 2015.

157. SGH did not inform the ASX of the Revenue-Impacted Value Information on 30

March 2015 (including by reason of the matters pleaded in paragraph 110).


Listing Rule 3.1 and s 674(2) of the Corporations Act (Revenue-Impacted Value


H.2 Section 1041E Contraventions

H.2.1 Introduction

159. Each of the PSD Reasonable Valuation Representation, the PSD Future Value

Representation, the Risk Profile Representations and the Income Projection

Reliability Representations was a statement or information that was likely to induce

persons comprising the Affected Market to:

(a) apply for financial products (being SGH Shares to be issued pursuant to the

Entitlement Offer; and/or

(b) acquire financial products (being SGH Shares, either to be issued pursuant to

the Entitlement Offer or already issued and tradeable on the ASX).

H.2.2 Risk Profile Representations

160. By reason of the matters pleaded in paragraphs 83 and/or 84, the Risk Profile

Representations were false in a material particular or materially misleading.

161. By reason of the matters pleaded in paragraph 114, SGH ought reasonably to have

known that the Risk Profile Representations were false in a material particular or

materially misleading.

162. By reason of the matters pleaded in paragraphs 159, 160 and 161, by making the

Risk Profile Representations (or any of them), SGH contravened s 1041E of the

Corporations Act (Risk Profile Representations s 1041E Contraventions).

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H.2.3 Income Projection Reliability Representations

163. By reason of the matters pleaded in paragraphs 85 to 86 and/or 87, the Income

Projection Reliability Representations were false in a material particular or materially

misleading.


known that the Risk Profile Representations were false in a material particular or

materially misleading.

165. By reason of the matters pleaded in paragraphs 159, 163 and 164 by making the

Income Projection Reliability Representations (or any of them), SGH contravened

s 1041E of the Corporations Act (Income Projection Reliability Representations

s 1041E Contraventions).

H.2.4 PSD Reasonable Valuation Representations

166. By reason of the matters pleaded in paragraphs 89 and/or 102, the PSD Reasonable

Valuation Representation was false in a material particular or materially misleading.

167. By reason of the matters pleaded in paragraphs 117 and/or 120, SGH ought

reasonably to have known that the PSD Reasonable Valuation Representation was

false in a material particular or materially misleading.

168. By reason of the matters pleaded in paragraphs 159 and 166 to 167, by making the

PSD Reasonable Valuation Representations (or any of them), SGH contravened s

1041E of the Corporations Act (PSD Reasonable Valuation Representations s

1041E Contraventions).

H.2.5 PSD Future Value Representations

169. By reason of the matters pleaded in paragraph 90 and/or 103 the Future Value

Representation was false in a material particular or materially misleading.

170. By reason of the matters pleaded in paragraph 117 and/or 120, SGH ought

reasonably to have known that the PSD Future Value Representations were false in a

material particular or materially misleading.

171. By reason of the matters pleaded in paragraphs 159 and 169 to 170, by making the

PSD Future Value Representations (or any of them), SGH contravened s 1041E of

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the Corporations Act (PSD Future Value Representations s 1041E

Contraventions).

H.3 Misleading or deceptive conduct

H.3.1 Introduction

172. The conduct pleaded in paragraphs 48 to 70, including the making of the PSD

Reasonable Valuation Representation, PSD Future Value Representation, Due

Diligence Representations, Risk Profile Representations, the Income Projection

Reliability Representations and/or the Continuous Disclosure Compliance

Representations was conduct engaged in by SGH:

(a) in relation to financial products (being SGH Shares), within the meaning of

subsections 1041H(1) and 1041H(2)(b) of the Corporations Act;

(b) in trade or commerce, in relation to financial services within the meaning of

section 12DA(1) of the ASIC Act;

(c) in trade or commerce, within the meaning of section 2 of the ACL.

H.3.2 Risk Profile Representations

173. By reason of the matters pleaded in paragraphs 83 and/or 84, in making each of the

Risk Profile Representations, SGH engaged in conduct which was misleading or

deceptive, or likely to mislead or deceive.

Particulars

The representations are representations as to future matters and s 12BB of the ASIC Act, s 769C of the Corporations Act and/or s 4 of the ACL are relied upon.

174. By reason of the matters pleaded in paragraphs 172 and 173, as at 30 March 2015,

SGH contravened s 1041H of the Corporations Act, s 12DA(1) of the ASIC Act and/or

s 18 of the ACL (Risk Profile Representations Misleading Conduct

Contraventions).

H.3.3 Income Projection Reliability Representations

175. By reason of the matters pleaded in paragraphs 85 to 86 and/or 87, in making the

Income Projection Reliability Representations SGH engaged in conduct which was

misleading or deceptive, or likely to mislead or deceive.

75

Particulars




s 18 of the ACL (Income Projection Reliability Representations Misleading

Conduct Contraventions).

H.3.4 PSD Reasonable Valuation Representation

177. By reason of the matters pleaded in paragraphs 89 and/or 102, the PSD Reasonable

Valuation Representation was misleading or deceptive, or likely to mislead or

deceive.



s 18 of the ACL (PSD Reasonable Valuation Representation Misleading Conduct

Contraventions).

H.3.5 PSD Future Value Representation

179. By reason of the matters pleaded in paragraphs 90 and/or 103, in making the PSD

Future Value Representation, SGH engaged in conduct which was misleading or


Particulars




s 18 of the ACL (PSD Future Value Representation Misleading Conduct

Contraventions).

H.3.6 Due Diligence Representations

181. By reason of the matters pleaded in paragraphs 121 to 122, in making the Due

Diligence Representations, SGH engaged in conduct which was misleading or


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s 18 of the ACL (Due Diligence Representation Misleading Conduct

Contraventions).

H.3.7 Continuous Disclosure Compliance Representation

183. By reason of the matters pleaded in paragraphs 128, 134, 140, 146, 152 and/or 158

in making each of the Section 708AA Notice Statement and the Continuous

Disclosure Compliance Representation, SGH engaged in conduct which was


184. By reason of the matters pleaded in paragraphs 172 and 183, SGH contravened

s 1041H of the Corporations Act, s 12DA(1) of the ASIC Act and/or s 18 of the ACL

(Continuous Disclosure Compliance Representation Misleading Conduct

Contraventions).

H.4 Continuing nature of the March Contraventions

185. Each of the following contraventions (March Contraventions) was a continuing

contravention, which of its nature continued from and after 30 March 2015 during the

Relevant Period:

(a) the following contraventions (together March Continuous Disclosure

Contraventions), which continued until such time as the undisclosed

information was disclosed to the Affected Market:

(i) the Reform Impacts Exposure Continuous Disclosure Contravention;

(ii) the UK Income Projection Unreliability Continuous Disclosure

Contravention;

(iii) Regulatory Risk-Impacted Value Continuous Disclosure Contravention;

(iv) the PSD Core Revenue Recognition Investigation Continuous Disclosure

Contravention

(v) the Inappropriate PSD Core Revenue Recognition Continuous Disclosure

Contravention;

(vi) the Revenue-Impacted Value Continuous Disclosure Contravention;

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(b) the following contraventions (together March s 1041E Contraventions), which

until such time as the falsity of the representations underlying the

contraventions was revealed to the Affected Market:

(i) the Risk Profile Representations s 1041E Contraventions;

(ii) the Income Projection Reliability Representations Misleading Conduct

Contraventions;

(iii) the PSD Reasonable Valuation Representations s 1041E Contravention;

and

(iv) the PSD Future Value Representations s 1041E Contraventions;

(c) the following contraventions (together March Misleading Conduct

Contraventions), which continued until such time as the misleading nature of

the representations was revealed to the Affected Market:

(i) the Risk Profile Representations Misleading Conduct Contraventions;

(ii) the Income Projection Reliability Representations Misleading Conduct

Contraventions;

(iii) the PSD Reasonable Valuation Representations Misleading Conduct

Contravention;

(iv) the PSD Future Value Representations Misleading Conduct

Contraventions;

(v) the Due Diligence Representation Misleading Conduct Contraventions;

(vi) the Continuous Disclosure Compliance Representation Misleading

Conduct Contraventions.

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I. THE JUNE EVENTS

I.1 1 June Announcement

186. On or about 29 May 2015 SGH lodged with ASX the 1 June Announcement, which

was published by ASX on 1 June 2015 (and on SGH‟s website around the same

time).

187. In the 1 June Announcement, SGH (and Grech) stated that:

(a) since the transaction was announced in May, SGH‟s senior executive team

lead by Fowlie had been working very closely with new colleagues at PSD, and

through this process SGH had been able to confirm the findings of SGH‟s

extensive due diligence work;

(b) SGH continued to expect PSD to be more than 30% EPS accretive in SGH‟s

first full year of ownership; and

(c) PSD provided a comprehensive platform of businesses, processes and

infrastructure that augments SGH‟s existing UK business, and SGH saw

significant opportunities to leverage PSD‟s strengths.

188. By the 1 June Announcement, SGH repeated:



(c) the PSD Reasonable Valuation Representations;


(e) the Due Diligence Representation; and/or


Particulars

i) The repetition is to be implied from the terms of the 1 June Announcement including the matters pleaded in paragraph 187 which repeated headline aspects of the 30 March Publications, and did not qualify any of those representations;

ii) Further, the repetition of:

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A) the PSD Future Value Representation was partially express, and sub-paragraph 187(b) is repeated;

B) the Due Diligence Representation was express, and sub-paragraph 187(a) is repeated.

I.2 The 24-29 June Announcements

189. On Wednesday 24 June 2015, SGH published and lodged with the ASX:

(a) at around 10:22AM, an announcement entitled “ASX Announcement” (and

“SGH Update”) (First 24 June Announcement);

(b) at around 10:49AM, an announcement entitled “Professional Services Division

Information Session” (Second 24 June Announcement); and

(c) at around 2:57PM, an announcement entitled “ASX Announcement” (and

“Slater and Gordon Media Reports”) (Third 24 June Announcement),

(together, 24 June Announcements).

190. In the First 24 June Announcement, SGH stated that:

(a) the contention in an article in the Australian Financial Review that SGH‟s

accounting practices were the subject of an ASIC examination was incorrect

and misleading;

(b) the contention in an article in the Australian Financial Review that SGH had

engaged Ernst & Young (EY) to undertake its UK audit in response to

preliminary inquiries from ASIC was incorrect and misleading;

(c) Pitcher Partners had confirmed it had not received any targeted inquiry from

ASIC in relation to SGH‟s accounting practices.

191. In the Second 24 June Announcement, SGH stated:

(a) in the group overview that:

(i) SGH UK provided personal injury law services, weighted to complex

matters and general law;

(ii) PSD provided personal injury law services, weighted to fast track matters,

and a range of complementary services,

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(p.6);

(b) PSD was the leading not-at-fault, fast track personal injury law firm in the UK

(p.9);

(c) the acquisition of SGH meant that SGH‟s estimated UK market share had

increased from ~5% to ~ 12% (p.9);

(d) the strategic rationale for the acquisition of PSD included that:

(i) there was a significant addressable market, which included 870,000 fast

track personal injury RTA claims a year, and 150,000 fast track EPL claim

a year (p.11);

(ii) PSD‟s business model was well positioned to maximise opportunities in

an operating environment where UK personal injury claims were

predominantly fast track claims (p.13);

(e) strategic concerns that:

(i) SGH was overweight on UK Fast Track were addressed because:

(A) PSD‟s scale and proprietary processes minimised cost-to-serve and

resulted in a significant relative competitive advantage;

(B) evidence supported maintenance of current legislative settings;

(ii) as to the value of PSD were addressed because the strategic opportunity

and cost to replicate were underestimated,

(p.15);

(f) SGH confirmed PSD‟s EBITDA guidance of £95 million in FY2016 (p.39);

(g) SGH‟s guidance excluding PSD was:

(i) SGH was ahead of previous guidance in relation to its revenue target for

FY15 of A$520 million;

(ii) SGH was on track to achieve a normalised EBITDA margin for FY15 of

23% to 24% (normalised for acquisition costs);

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(iii) SGH was on track to achieve cash flow from operations for FY15 greater

than 70% of NPAT;

(iv) the FY16 revenue growth outlook was 5% for PIL practices and 8-10% for

general law practices.

(p.41).

192. In the Third 24 June Announcement, SGH stated that:

(a) SGH confirmed that neither SGH nor Pitcher Partners had received any

targeted inquiry from ASIC in relation to SGH‟s accounting practices;

(b) ASIC had been in contact with Pitcher Partners regarding its audit of SGH as

part of a routine, periodic and rotational review of the processes of auditors of

publicly listed companies; and

(c) SGH remained very confident in the robustness of SGH‟s accounting practices.

193. On Wednesday 24 June 2015 (UK time, being a time after the close of the ASX on 24

June 2015):

(a) Quindell announced that a UK regulator (the Financial Conduct Authority

(FCA)) had commenced an investigation in relation to public statements made

regarding Quindell‟s financial accounts during 2013 and 2014 (FCA

Investigation);

(b) Quindell shares were suspended from trading on the Alternative Investment

Market (AIM), a sub-market of the London Stock Exchange;

(c) the FCA confirmed it had commenced an investigation under the Financial

Services and Markets Act 2000 (UK) in relation to public statements made

regarding Quindell‟s financial accounts during 2013 and 2014.

194. On Thursday 25 June 2015 at 11:52AM, following the announcement pleaded in

paragraph 193(a), SGH published and lodged with the ASX the 25 June

Announcement.

82

195. In the 25 June Announcement, SGH stated, inter alia, that:

(a) SGH noted the announcement of the suspension of Quindell‟s shares from AIM

pending the FCA Investigation;

(b) SGH‟s due diligence investigations in relation to the acquisition of PSD were

undertaken with the assistance of EY having regard to the underlying assets of

PSD and SGH‟s accounting policies;

(c) SGH had disclosed in the 30 March Presentation that it had restated revenue

recognised under Quindell accounting policies for PSD in CY2014 under SGH

accounting policies, and this involved a reduction of £277m (43%);

(d) Quindell had disclosed to SGH at the time of announcing the sale of PSD to

SGH that:

(i) PWC had been engaged in December 2014 to review Quindell‟s

accounting policies;

(ii) PWC had identified that:

(A) certain of the accounting policies historically adopted by Quindell, in

respect of recognising revenue and deferring case acquisition costs

in a number of Quindell‟s product areas were largely acceptable but

were at the aggressive end of acceptable practice;

(B) some policies adopted by Quindell were not appropriate, principally

being the NIHL case revenue and related balances which became

significant during 2014;

(e) SGH had been aware of the concerns raised publicly in relation to the

accounting policies of Quindell at all stages of its engagement with Quindell;

(f) SGH remained confident in its due diligence inquiries and in its accounting

policies.

196. On 29 June 2015 at about 8:28AM, SGH published and lodged with the ASX an

announcement entitled “Market Update” (29 June Announcement).

83

197. In the 29 June Announcement, SGH stated, inter alia, that:

(a) SGH and its auditors had identified a consolidation error in its accounts relating

to the reporting of UK cash flows, but that the net operating cash flows, and the

consolidated statements of comprehensive income and consolidated

statements of financial position remain unchanged;

(b) to avoid the market trading with imperfect information:

(i) SGH did not acquire Quindell or the common stock of Quindell and was

satisfied that in the event findings were made against Quindell as a result

of the FCA inquiry, those findings will not expose SGH to any material

financial risk;

(ii) Quindell was shortly to lodge accounts with AIM which would present

Quindell‟s view of the PSD‟s assets on disposal;

(iii) SGH reiterated that its evaluation of the fair value of the PSD assets was

undertaken with the assistance of EY and SGH‟s assessment of the value

of those assets was undertaken under SGH‟s own accounting policies.

I.3 Information disclosed in the 24-29 June Announcements

198. By the 25 June Announcement, the Affected Market became aware of part of the

PSD Core Revenue Recognition Investigation Information.

Particulars

The Applicant refers to the terms of the 25 June Announcement, repeats paragraphs 91 to 94, and 193(d) to (e), and says that the 25 June Announcement disclosed part of or the substance of the PSD Core Revenue Recognition Investigation Information.

199. By the 25 June Announcement and/or the 29 June Announcement, the Affected

Market became aware that:

(a) when Quindell published its FY2014 accounts, it was likely that they would

adopt a more appropriate and conservative approach to accounting for revenue

for all PSD cases (including non-NIHL cases); and

(b) by reason of the matters pleaded in sub-paragraph (a), that when Quindell

published its FY2014 accounts, they would record that PSD had a value which

84

was less than the PSD Acquisition Price (by reason of having reduced revenue,

EBITDA and profit);

and the Affected Market thereby became aware of part of the Inappropriate PSD

Core Revenue Recognition Information.

Particulars

The Applicant refers to the terms of the 25 June Announcement and the 29 June Announcement, and says that they disclosed, or enabled the Affected Market to infer part of or the substance of the Inappropriate PSD Core Revenue Recognition Information.

200. By the 25 June Announcement and the 29 June Announcement the Affected Market

became aware of:

(a) the Revenue-Impacted Value Information; and

(b) the likely inaccuracy of the PSD Reasonable Valuation Representation.

Particulars

i) The Applicant refers to the terms of the 25 June Announcement and the 29 June Announcement, and says that they disclosed, or enabled the Affected Market to infer the substance of the Revenue-Impacted Value Information and the likely inaccuracy of the PSD Reasonable Valuation Representation;

ii) The Applicant does not say that the disclosures enabled the Affected Market to infer what the magnitude of adjustments consequent on that information would be.

I.4 The price effect of the 25-29 June Announcements

201. On 24 June 2015, SGH Shares:

(a) opened at a price of $6.36 per share; and

(b) closed at a price of $6.13 per share,

on a traded volume of 6,259,780 SGH Shares.


(a) opened at a price of $5.30 per share (being a decline of $0.83 (13.5%) as

against the closing price on 24 June 2015);

85

(b) closed at a price of $5.06 per share (being a total daily decline of $1.07

(17.45%) as against the closing price on 24 June 2015),

on a traded volume of 23,834,790 shares.



against the closing price on 26 June 2015 of $5.04);

(b) closed at a price of $3.78 per share (being a total daily decline of $1.26 (25%)

as against the closing price on 26 June 2015 of $5.04 and a decline of 40.6%

as against the opening price on 24 June 2015),


I.5 SGH’s June Conduct

204. By the Second 24 June Announcement, the 25 June Announcement and the 29 June

Announcement, SGH repeated to the Affected Market:


Particulars

The repetition is to be implied from:

i) the contents of the 24 June Announcements as a whole (and, in particular the matters pleaded in sub-paragraph 191(e)(i)(A) stated in the Second 24 June Announcement);

ii) the contents of the 25 June Announcement as a whole in the context where the Second 24 June Announcement had been issued on the previous trading day;

iii) the contents of the 29 June Announcement as a whole in the context where the Second 24 June Announcement and the 25 June Announcement had been issued on the two previous trading days; and

iii) the fact that the only new information disclosed or revealed to the Affected Market was that pleaded in paragraphs 198 to 200 (which did not qualify or contradict the Risk Profile Representations).

(b) the Income Projection Reliability Representation;


86

i) the contents of the 24 June Announcements as a whole (and, in particular the matters pleaded in paragraph 191(f) stated in the Second 24 June Announcement);

ii) the contents of the 25 June Announcement as a whole in the context where the Second 24 June Announcement had been issued only the day before; and

iii) the fact that the only new information disclosed or revealed to the Affected Market was that pleaded in paragraphs 198 to 200 (which did not qualify or contradict the Income Projection Reliability Representations).

(c) the PSD Future Value Representation; and/or

Particulars


i) the contents of the 24 June Announcements as a whole (and, in particular the matters pleaded in paragraph 191(a) to (e) stated in the Second 24 June Announcement);

ii) the contents of the 25 June Announcement as a whole in the context where the Second 24 June Announcement had been issued only the day before; and

iii) the fact that the only new information disclosed or revealed to the Affected Market was that pleaded in paragraphs 198 to 200 (which did not qualify or contradict the PSD Future Value Representation).

(d) the Due Diligence Representation.

Particulars


i) the contents of the 24 June Announcements as a whole (and, in particular the matters pleaded in paragraph 191 stated in the Second 24 June Announcement);

ii) the contents of the 25 June Announcement as a whole (and, in particular, the matters pleaded in sub-paragraphs 195(b) to (c)), in the context where the Second 24 June Announcement had been issued only the day before; and

iii) the fact that the only new information disclosed or revealed to the Affected Market was that pleaded in paragraphs 198 to 200) did not qualify or contradict the Due Diligence Representation because:

A) in the case of the matters referred to in paragraph 198, the terms of the 25 June Announcement suggested that that information had been known to SGH at the time it made the Due Diligence

87

Representations (albeit that it did not disclose it at that time)); and

B) in the case of the matters referred to in paragraphs 199 to 200, the terms of the 25 June Announcement and the 29 June Announcement suggested that that information was not, and could not reasonably have been, known to SGH at the time it made the Due Diligence Representation.

J. THE AUGUST/SEPTEMBER EVENTS

J.1 The 6 August Conduct

205. On Wednesday 5 August 2015 (UK time, being a time after the close of the ASX on 5

August 2015)), Quindell published the Quindell 2014 Report.

206. On Thursday 6 August 2015 at about 8:30AM, following the announcement pleaded

in paragraph 203, SGH published and lodged with the ASX an announcement entitled

“Market Update” (6 August Announcement).

207. In the 6 August Announcement, SGH stated:

(a) SGH noted Quindell‟s release of the Quindell 2014 Report;

(b) consistent with SGH‟s due diligence of PSD, Quindell‟s FY2014 accounts

incorporate significant revenue and expense adjustments most notably relating

to NIHL cases;

(c) Quindell has moved revenue recognition to a point typically just before cash

receipt and made a range of other adjustments to its accounts;

(d) Quindell‟s accounting policies were not relied on by SGH in its due diligence of

PSD which was undertaken with the assistance of EY;

(e) SGH‟s assessment of PSD, including its historical financial performance, was

based on a fundamental, bottom-up analysis including the review of 8,000 case

files by 70 lawyers;

(f) PSD was now focussed on the higher velocity, cash generative fast track road

traffic accident segment rather than growth in cash consumptive hearing loss

claims;

88

(g) the publication of Quindell‟s statutory accounts did not alter SGH‟s view of the

PSD, nor the economic benefits SGH expects the business to generate.

208. By the 6 August Announcement, SGH repeated to the Affected Market:


Particulars


i) the contents of the 6 August Announcement as a whole (and, in particular the matters pleaded in paragraph 207(e) to (g));

ii) the fact that no new information was disclosed which qualified or contradicted the Risk Profile Representations.


Particulars


i) the contents of the 6 August Announcement as a whole (and, in particular the matters pleaded in paragraph 207);

ii) the fact that no new information was disclosed which qualified or contradicted the Income Projection Reliability Representation.


Particulars


i) the contents of the 28 August Announcement as a whole (and, in particular the matters pleaded in paragraph 207(e) to (g));

ii) the fact that no new information was disclosed which qualified or contradicted the PSD Future Value Representation.


Particulars


i) the contents of the 6 August Announcement as a whole (and, in particular the matters pleaded in paragraph 207(d)-(e));

ii) the fact that no new information was disclosed which qualified or contradicted the Due Diligence Representations.

89

J.2 The 28 August Publications

209. On 28 August 2015 between about 9:03AM and 9:06AM, SGH published and lodged

with the ASX (and published on SGH‟s website):

(a) an announcement entitled “Slater and Gordon Group FY15 Full Year Financial

Results” (28 August Announcement), which was classified “price-sensitive”

and marked (“$”) on ASX‟s website;

(b) SGH‟s Appendix 4E preliminary final report (28 August Appendix 4E), which

was classified “price-sensitive” and marked (“$”) on ASX‟s website; and

(c) an announcement entitled “SGH FY15 Full Year Financial Results Investor

Presentation (28 August Investor Presentation),

(together 28 August Publications).

210. In the 28 August Announcement, SGH stated:

(a) SGH‟s normalised FY15 EBITDA excluding the one month impact of PSD was

A$121.6 million, and its FYNPAT was $70.7 million (with an EBITDA margin of

24.5%);

(b) SGH‟s net debt as at 30 June 2015 was A$623 million, with a gearing ratio (net

bank debt/equity) of 43.0%;

(c) the July performance of PSD (now called Slater Gordon Solutions (SGS)) was

in line with expectations;

(d) SGH‟s FY2016 guidance was:

(i) total group fees (including SGS) of A$1,150+ million;

(ii) group earnings before interest, tax, depreciation and changes in work in

progress (EBITDAW) of A$205+ million;

(iii) gross operating cashflow to EBITDAW of 100%.

211. In the 28 August Appendix 4E, SGH stated:

(a) SGH‟s consolidated revenue and other income for FY2015 was $623,348,000

(p.2);

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(b) SGH‟s consolidated profit for FY2015 was $82,341,000 (p.2);

(c) SGH had consolidated net assets (and equity holders in SGH had equity of)

$1,449,546,000 (p.4), based on assets including:

(i) current work in progress of $553,177,000 and non-current work in

progress of $272,721,000 (giving a total of $825,898,000); and

(ii) intangibles of $1,229,398,000;

(d) SGH had consolidated positive cash flows from operating activities in FY2015

of $40,762,000, and an overall increase in its cash position from $25,270,000 at

the end of FY2014 (restated) to $96,985,000 at the end of FY2015 (p.5);

(e) the following information was significant information for the investor to make an

informed decision of SGH‟s financial performance and financial position (in

accordance with Listing Rule 4.3A):

(i) SGH was continuing a process of reviewing the businesses and assets

within the PSD and in that context continues to gain a better

understanding of those assets and businesses (p.15);

(ii) on 5 August, Quindell published qualified financial statements and the

Serious Fraud Office advised it had opened a criminal investigation into

the business and accounting practices of Quindell (p.15);

(iii) the acquisition of PSD was not an acquisition of the common stock of

Quindell, and Quindell had provided detailed warranties in relation to the

operations of PSD secured by a warranty escrow account holding £50m,

and the directors or SGH were confident that SGH has no liability as a

result of the matters described above (p.15);

(iv) the directors of SGH had sought to identify, understand and properly

account for all relevant prior transactions undertaken by entities within

PSD, and despite reasonable inquiries were unable to identify or

rationalise every historic transaction undertaken by the former directors of

PSD entities and had made fair value adjustments as appropriate, but

believed that none of the known transactions relate to the fundamental

business activities or economics of the PSD and none were material in

value or effect (p.16);

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(f) the financial report was in the process of being audited and was not likely to be

subject to audit dispute or qualification (p.22).

212. In the 28 August Presentation, SGH stated:

(a) a FY2015 key point was “guidance delivered – strong operational performance”

(p.4);

(b) a FY2015 key point was that the PSD acquisition provides a platform for future

growth in the UK (p.4);

(c) SGS (PSD) was “on track” and:

(i) July performance was in line with expectations;

(ii) clear operational objectives [had been] set for FY2016 aligned to key

deliverables;

(iii) SGS was tracking to FY2016 EBITDA target, weighted to H2 connected

with increasing matter resolution rates in SGS legal services,

(p.6);

(d) Financial highlights included:

(i) for FY2015:

(A) EBITDA of $121.6 million (with an EBITDA margin of 24.5%);

(B) EBITDAW of $67 million (with an EBITDAW margin of 13.5%)

(C) gross operating cashflow % EBITDAW of 105.3%;

(D) net operating cashflow % NPAT of 73.6%

(p.8);

(ii) positive cash-flow performance (in which FY2015 gross operating

cashflow being 105% of FY2014 gross operating cashflow) (p.11);

(e) in terms of operational performance:

(i) Australian PIL was resilient and growing (p.12);

92

(ii) Australian GL was making strong progress through investment phase

(p.13);

(iii) UK PIL was positioned for ongoing success (p.14);

(iv) UK GL was investing in scale (p.15);

(v) SGS legal services was showing good early signs, including:

(A) an improving trajectory in resolution rates (with H2 FY2015 up

~35% year on year);

(B) key business improvement projects already delivering results;

(C) risks associated with potential settlement delays associated with

Medco (being the implementation of the Independent Medical

Assessment Reform referred to in Schedule A, paragraph A16(b))

were understood and mitigated;

(D) thorough review of NIHL files was well progressed;

(E) SGH‟s preliminary conclusion was that there was substantial value

in the NIHL portfolio, and expectations for FY2016 remained

unchanged,

(p.16);

(f) SGH‟s group outlook included the following group financial targets of:

(i) ~5% revenue growth for PIL practices (excluding SGS/PSD);

(ii) total group fees (including SGS/PSD) of A$1,150 million+;

(iii) group EBITDAW of A$205 million+; and

(iv) operating cashflow/EBITDAW of 100%,

(together FY2016 Financial Targets) (p.19)).

J.3 The 7 September Statements

213. On 7 September 2015, Grech participated in a lengthy interview with Alan Kohler (7

September Grech Interview).

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214. In the 7 September Grech Interview, Grech and SGH stated:

(a) The controversies surrounding the investigations by the UK regulators into

Quindell had not affected new client numbers of inquiry numbers, as Quindell

was not a consumer facing brand;

(b) Prior to the acquisition of PSD, SGH had been orientating the SGH UK

business towards the higher value, more complex work, and the acquisition

allowed SGH to get access to the processing capability to do high volume low

value work more profitably;

(c) SGH had valued the PSD business based upon the accounting assumptions

and principles that SGH applied in its own standing businesses and also looked

at the underlying client work and the quality of the underlying client work, and

did very extensive due diligence;

(d) SGH did a valuation of PSD based upon the future earnings that could be

generated from the business assets SGH acquired, and SGH would say that

the way you assess the value of a business as a going concern is to value the

earnings that that business can generate; SGH did a lot of due diligence to try

and get comfort that SGH would be able to generate the earnings which

underpinned SGH‟s valuation from the acquisition of the PSD business assets;

(e) SGH had put clear guidance out there in the market in terms of what SGH

expected the PSD business assets to deliver and believed that that was

achievable;

(f) It was not appropriate for Grech to go into detail into what ASIC was

investigating with SGH in Australia, and Grech was sure that Alan Kohler would

know that the surveillance unit of ASIC looked at 60 to 80 companies at least

every year and had a conversation with those companies about various

accounting treatments;

(g) SGH‟s underlying business was performing in line with guidance, so its not as

though the underlying business or any of the underlying business

fundamentals; they continued to be strong and improving and that‟s why SGH

believed that SGH is and will continue to be a sound investment for our

shareholders.

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Particulars

The 7 September Grech Interview was transcribed and the transcription was published shortly after 7 September 2015 under the heading “Slater and Gordon: The CEO explains”

J.4 The Late August/Early September Representations

215. By the 28 August Publications and/or the 7 September Grech Interview, SGH

represented to the Affected Market that:

(a) there was a reasonable basis to consider that the FY2016 Financial Targets

were achievable; and/or

(b) the FY2016 Financial Targets had been prepared using an appropriate

approach to financial forecasting,

(each a FY2016 Forecast Reliability Representation).

Particulars

i) The representations are to be implied from the matters pleaded in paragraphs 210 to 212;

ii) The representations are representations as to future matters and s 12BB of the ASIC Act, s 769C of the Corporations Act and/or s 4 of the ACL are relied upon.

216. Further, or alternatively, by the 28 August Publications, SGH represented to the

Affected Market that there did not exist a material risk that the FY2016 Financial

Targets were not achievable (FY2016 Forecast Risk Representation).

Particulars

i) The representations are to be implied from the matters pleaded in paragraphs 210 to 212;

ii) The representations are representations as to future matters and s 12BB of the ASIC Act, s 769C of the Corporations Act and/or s 4 of the ACL are relied upon.

217. Further, or alternatively, by the 28 August Publications, SGH represented to the

Affected Market that there was a reasonable basis for SGH not to raise any

impairment charge against the carrying value of goodwill associated with the

acquisition of PSD by reason of risks associated with PSD‟s business (Unimpaired

PSD Goodwill Basis Representation).

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Particulars

i) The representations are to be implied from the matters pleaded in paragraphs 210 to 212, and particularly sub-paragraphs 210(c), 211(e)(iv) and (f), and 212(b) to (c) and (e), in a context where SGH had already issued the 6 August Announcement, and made the statements pleaded in paragraph 207;

ii) To the extent that SGH disclosed that a “consolidation error” required a restatement of intangible assets for FY2014, it also disclosed that that was associated with matters other than PSD, or the acquisition of PSD.

218. By each of the 28 August Publications and/or the 7 September Grech Interview, SGH

repeated to the Affected Market:


Particulars


i) the contents of the 28 August Announcement as a whole (and, in particular the matters pleaded in paragraph 212(e)(v)(C)) and the contents of the Grech Interview as a whole (and, in particular the matters pleaded in paragraph 214(a)-(d));

ii) the fact that no new information was disclosed which qualified or contradicted the Risk Profile Representations.


Particulars


i) the contents of the 28 August Announcement as a whole (and, in particular the matters pleaded in paragraph 210(c) to (d), 212(a) to (c) and (f)) and the contents of the Grech Interview as a whole (and, in particular the matters pleaded in paragraph 214(e) and (g));

ii) the fact that no new information was disclosed which qualified or contradicted the Income Projection Reliability Representation.


Particulars


i) the contents of the 28 August Announcement as a whole (and, in particular the matters pleaded in paragraph 212(c) and the contents of

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the Grech Interview as a whole (and, in particular the matters pleaded in paragraph 214(a)-(d));

ii) the fact that no new information was disclosed which qualified or contradicted the PSD Future Value Representation.


Particulars


i) the contents of the 28 August Announcement as a whole and the contents of the Grech Interview as a whole (and, in particular the matters pleaded in paragraph 214(a)-(d));

ii) the fact that no new information was disclosed which qualified or contradicted the Due Diligence Representation or the 6 August Announcement. Inasmuch as any information disclosed about SGH’s investigations into PSD’s accounts following the commencement of the Serious Fraud Squad investigation suggested that that information of its nature could not have been discovered by an extensive, thorough and appropriate due diligence exercise.

219. Further, by the 7 September Grech Interview, Grech and SGH repeated each of:

(a) the FY2016 Forecast Reliability Representation;

(b) the FY2016 Forecast Risk Representation.

Particulars

The repetition is to be implied from the statements referred to in paragraph 214(e) and (g).

J.5 The repetition of the Late August/Early September Representations

220. On 30 September 2015, SGH published and lodged with the ASX (and published on

SGH‟s website):

(a) an announcement entitled “Full Year Statutory Accounts” (30 September

Directors Report and Full Accounts);

(b) an announcement entitled “SGH Audited FY15 Financial Statements” (30

September Announcement);

(30 September Publications).

221. In the 30 September Directors Report and Full Accounts, SGH stated:

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(a) SGH had acquired PSD, and:

(i) on 5 August, Quindell published qualified financial statements and the

Serious Fraud Office advised it had opened a criminal investigation into

the business and accounting practices of Quindell (p.3);

(ii) the acquisition of PSD was structured as an acquisition of the various

entities rather than an acquisition of the common stock of Quindell, and

Quindell had provided detailed warranties in relation to the operations of

PSD secured by a warranty escrow account holding £50m, and the

directors or SGH were confident that SGH has no liability as a result of the

matters described above (p.3);

(iii) the directors of SGH had sought to identify, understand and properly

account for all relevant prior transactions undertaken by entities within

PSD, and despite reasonable inquiries were unable to identify or

rationalise every historic transaction undertaken by the former directors of

PSD entities and had made fair value adjustments as appropriate, but

believed that none of the known transactions relate to the fundamental

business activities or economics of the PSD and none were material in

value or effect (p.3);

(iv) There were not matters or circumstances that had significantly affected, or

may significantly affect, the results reported in the financial statements (so

as to be events subsequent to reporting date) other than the vesting or

conversion of certain Vesting Convertible Redeemable ordinary shares

(p.4);

(b) In terms of likely developments:

(i) SGH had a commanding market share lead in both Australia and the UK,

and was freed from the demands of near term acquisition activity would

focus on improvement of operating effectiveness;

(ii) Having acquired significant businesses in both Australia and the UK, and

established critical mass in the personal injury law market, SGH would

focus its resources to deliver sustainable shareholder returns through a

business strategy built on organic growth;

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(iii) The directors of SGH remained convinced of the strategic merit of taking a

leading position in both the Australian and UK consumer legal services

markets; the momentum for further consolidation in both markets

remained strong, and SGH was extremely well placed to take advantage

of that trajectory given its position, brand strength and the breadth of its

offering,

(p.4);

(c) SGH‟s consolidated revenue and other income for FY2015 was $627,309,000

(pp.2, 45);

(d) SGH‟s consolidated profit for FY2015 was $83,803,000 (pp.2, 45);

(e) SGH had consolidated net assets (and equity holders in SGH had equity of)

$1,434,993,000 (p.46), based on assets including:

(i) current work in progress of $553,177,000 and non-current work in

progress of $272,721,000 (giving a total of $825,898,000); and

(ii) intangibles of $1,244,964,000;

(f) SGH had consolidated positive cash flows from operating activities in FY2015

of $40,762,000, and an overall increase in its cash position from $25,270,000 at

the end of FY2014 (restated) to $96,985,000 at the end of FY2015 (p.48);

(g) SGH tested goodwill annually for impairment, or more frequently if events or

changes in circumstances indicate that it might be impaired (p.55), and did so

by estimating the value of change in use of the cash generating units (“CGUs”)

to which goodwill had been allocated which SGH had determined were (1)

Australia – Personal Injury Law, (2) Australia – General Law, (3) UK Personal

Injury Law, (4) UK General Law and (5) SGS (p.65);

(h) SGH had carried out impairment testing in June 2015, and had determined that

there was no impairment to its CGUs (pp.77-79).

222. In the 30 September Announcement, SGH stated:

(a) Subsequent to the release of the Appendix 4E, in the ordinary course of

completion of the statutory audit process, changes and corrections had been

identified which were reflected in the audited statutory financial statements,

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including to reflect a review of the provisional accounting treatment for the SGS

acquisition (Attachment, p.1);

(b) The review of the provisional accounting treatment for the SGS acquisition had

resulted in changes in the opening balances of various balance sheet items, but

no movement in net assets (Attachment, p.2).

223. By the 30 September Publications, SGH repeated each of:


(b) the PSD Future Value Representation;

(c) the Due Diligence Representation;

(d) the FY2016 Forecast Reliability Representation;

(e) the FY2016 Forecast Risk Representation; and

(f) the Unimpaired PSD Goodwill Basis Representation.

Particulars

i) The repetition is to be implied from the fact that the 30 September Publications did not materially alter or qualify the 28 August Publications which repeated, or gave rise to those representations (as pleaded in paragraphs 215 to 219);

ii) In addition,

(A) the repetition of the Due Diligence Representation is to be implied from the matters pleaded in sub-paragraph 221(a);

(B) the repetition of the PSD Future Value Representation, the FY2016 Forecast Reliability Representation and the FY2016 Forecast Risk Representation is to be implied from the matters pleaded in sub-paragraph 221(b);

(C) the repetition of the Unimpaired PSD Goodwill Basis Representation is to be implied particularly from the matters pleaded in sub-paragraphs 221(e)-(g)

224. On 19 October 2015, SGH published and lodged with the ASX (and sent to existing

SGH shareholders), SGH‟s Annual Report to Shareholders (that is, the 2015 Report).

225. The 2015 Report incorporated and repeated the 30 September Directors Report and

Full Accounts.

100

Particulars

2015 Report, pp.23-140.

226. By reason of the matters pleaded in paragraph 225, the 2015 Report repeated each

of:


(b) the PSD Future Value Representation;

(c) the Due Diligence Representation;

(d) the FY2016 Forecast Reliability Representation;

(e) the FY2016 Forecast Risk Representation; and

(f) the Unimpaired PSD Goodwill Basis Representation.

Particulars

The particulars to paragraph 223 are repeated.

K. THE TRUE POSITION AS AT 28 AUGUST 2015

K.1 SGH’s true risk profile

227. Each of the matters pleaded in paragraphs 80 to 90 remained true as at 28 August

2015, save that the acquisition by SGH of PSD had proceeded to completion and

was no longer conditional or prospective.

K.2 The true reliability of SGH’s FY2016 guidance

228. As at 28 August 2015, the Claims Resolution Rate Assumption adopted by SGH (for

SGH UK (including SGS/PSD)) was unreasonably optimistic.

Particulars

i) The Claims Resolution Rate Assumption adopted by SGH was unreasonably optimistic (for SGH UK (including SGS/PSD)) by reason of matters including:

A) those referred to in the second paragraph of the particulars to paragraph 42;

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B) the fact that historical resolution rates were unreliable in circumstances in which the Independent Medical Assessment Reform had been recently implemented (as referred to in Schedule A, sub-paragraph A16(b));

ii) The Applicant also refers to SGH’s announcement published and lodged with ASX on 29 February 2016 entitled “FY16 H1 Financial Results Investor Presentation” (29 February Investor Presentation), p.6;


229. By reason of the matters pleaded in paragraph 228, as at 28 August 2015:

(a) there was not a reasonable basis to consider that the FY2016 Financial Targets

were achievable; and/or

(b) the FY2016 Financial Targets had not been prepared using an appropriate

approach to financial forecasting.

Particulars

i) The Applicant also refers to the fact that SGH carried out a review of its approach to financial forecasting and independent advisors prior to 17 December 2015, on which date it announced that its FY2016 financial guidance had been reconsidered: SGH announcement published and lodged with ASX on 17 December 2015 dated “2016 Financial Year Update” (17 December Announcement);

ii) Further particulars will be provided with the Applicant’s opinion evidence in chief.

230. By reason of the matters pleaded in paragraphs 228 and/or 229, as at 28 August

2015, there was a material risk that the FY2016 Financial Targets were not

achievable.

Particulars

The Applicant repeats the particulars to paragraph 228, and says that the matters that gave rise to there being no reasonable basis for the FY2016 Financial Targets gave rise to a material risk that the FY2016 Financial Targets were not achievable.

K.3 The true likelihood of 1H FY2016 negative cash flow

231. As at 28 August 2015, SGH was experiencing, and it was likely SGH would continue

to experience during FY2016, significant negative cash flow.

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Particulars

i) Paragraph 211(d) is repeated. On the basis of consolidated positive cash flows from operating activities in FY2015 of $40,762,000, the average monthly cash flow was approximately $3.4 million (positive);

ii) The condensed consolidated cash flow statement of Quindell for FY2014 contained in its Interim Results for the Six Months Ended 30 June 2014 published on 21 August 2014:

A) reported its adjusted operating cash flow for the half year ended 30 June 2014 was £51.2 million, on which basis the average monthly cash flow was approximately £4.26 million (negative);

(B) stated that Quindell expected an operating cash inflow of £30-40 million in the second half of FY2014;

iii) Quindell’s 2014 Report published on 5 August 2015 recorded that:

A) in 2015, PSD had operating cash flows of £83.2 million (negative) during CY2014, representing an average monthly cash outflow of £6.9 million (Note 37, p.106); and

B) in 2015, PSD continued to trade and incurred operating losses which needed to be funded by other Quindell group companies (Quindell 2014 Report (p.12)). Intragroup funding would not have been necessary if PSD had been cash flow positive in 2015;

iv) On the basis of (ii) to (iii), as at the time SGH took ownership of PSD, PSD had been significantly cash flow negative for a considerable period of time in amounts which significantly exceeded the average monthly cash inflows of SGH prior to the acquisition of PSD;

v) it was unlikely in such circumstances that that longstanding trend of negative cash flow would be reversed in the short-term.

K.4 The true level of impairment of goodwill associated with the acquisition of PSD

232. By reason of the matters pleaded in paragraph 88 and/or 89, the level of goodwill

associated with the acquisition of PSD ought to have been subject to a material

impairment.

Particulars

i) The goodwill associated with the acquisition of PSD should have been impaired by reason of the existence of the Reform Risks and/or the Reform Impact Risks (or any of them);

ii) The amount of the impairment should have been at least approximately A$236.5 million: 29 February Announcement;


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233. By reason of the matters pleaded in paragraph 232, as at 28 August 2015, there was

not a reasonable basis for SGH not to raise any impairment charge against the

carrying value of goodwill associated with the acquisition of PSD.

L. SGH’S AUGUST CONTRAVENING CONDUCT

L.1 Continuous Disclosure Contraventions

L.2.1 Negative Cash flow Information

234. As at 28 August 2015, the matters pleaded in paragraph 231 (Negative Cash Flow

Information) was information which ought reasonably to have come into the

possession of:

(a) Grech, Fowlie and/or Brown in the course of the performance of their respective

duties; and/or

Particulars

The Negative Cash Flow Information was information that SGH Long-Term Executives ought to have become aware of by reason of being:

i) persons who had participated in and taken responsibility for the due diligence conducted into PSD (as referred to in sub-paragraphs 62(c), 63(c)(iii), (j),(k) and (l)) prior to agreeing for SGH to acquire PSD and causing SGH to issue the 30 March Publications, in the course of which due diligence they ought to have become aware of and reviewed the document referred to in particular (ii) to paragraph 231;

ii) persons with management oversight for PSD since 29 May 2015, by reason of which they ought to have become aware of and reviewed the document referred to in particular (iii) to paragraph 231 by a time reasonably shortly after 5 August 2015, and of which SGH was actually aware (and paragraph 207(a) is repeated);

iii) accordingly, persons who ought reasonably to have considered the significance of the information of which they were or ought to have been aware as pleaded in paragraphs (i) and (ii) above so as to become aware of the information referred to in particulars (iv) and (v) to paragraph 231.


Particulars

The Negative Cash Flow Information was information that SGH NEDs ought to have become aware of by reason of being:

104

i) persons who had management oversight of Grech and Fowlie and the SGH UK business, and ultimate responsibility for the due diligence conducted into PSD (as referred to in sub-paragraphs 62(c), 63(c)(iii), (j),(k) and (l)) prior to agreeing for SGH to acquire PSD, in the course of which they ought to have become aware of and reviewed the document referred to in particular (ii) to paragraph 231;

ii) persons with management oversight for PSD since 29 May 2015, by reason of which they ought to have become aware of and reviewed the document referred to in particular (iii) to paragraph 231 by a time reasonably shortly after 5 August 2015, and of which SGH was actually aware (and paragraph 207(a) is repeated);

iii) accordingly, persons who ought reasonably to have considered the significance of the information of which they were or ought to have been aware as pleaded in paragraphs (i) and (ii) above so as to become aware of the information referred to in particulars (iv) and (v) to paragraph 231.

235. By reason of the matters pleaded in paragraphs 234, as at 28 August 2015 the

Negative Cash Flow Information was information of which SGH was aware within the

meaning of ASX Listing Rule 3.1 (having regard to the definitions in ASX Listing Rule

19.12).

236. As at 28 August 2015, the Negative Cash Flow Information was not generally


237. As at and from 28 August 2015, the Negative Cash Flow Information was information

that a reasonable person would expect to have a material effect on the price or value

of SGH Shares within the meaning of ASX Listing Rule 3.1 and s 674(2)(c)(ii) of the

Corporations Act.


paragraphs 236 to 237 SGH became obliged to tell the ASX the Negative Cash Flow

Information on 28 August 2015.

239. SGH did not inform the ASX of the Negative Cash Flow Information on 28 August

2015.


Listing Rule 3.1 and s 674(2) of the Corporations Act (Negative Cash Flow


105

L.2.2 Unreasonable Non-Impairment of PSD Goodwill Information

241. By reason of the matters pleaded in paragraphs 111 to 114, as at 28 August 2015 the

matters pleaded in paragraph 233 (Unreasonable Non-Impairment of PSD

Goodwill Information) was information which ought reasonably have come into the

possession of:

(a) Grech and Fowlie in the course of the performance of their respective duties;

and/or

Particulars

The Unreasonable Non-Impairment of PSD Goodwill Information was information that SGH Long-Term Executives ought to have become aware of by reason of:

i) what they ought to have become aware as pleaded in paragraphs 111 to 114;

ii) a reasonable and thorough consideration of the financial statements which SGH was to disclose in the 28 August Appendix 4E.

(b) SGH NEDs in the course of the performance of their respective duties;

Particulars

The Unreasonable Non-Impairment of PSD Goodwill Information was information that SGH NEDs ought to have become aware of by reason of:

i) what they ought to have become aware as pleaded in paragraphs 111 to 114;

ii) a reasonable and thorough consideration of the financial statements which SGH was to disclose in the 28 August Appendix 4E.

242. By reason of the matters pleaded in paragraphs 241, as at 28 August 2015 the

Unreasonable Non-Impairment of PSD Goodwill Information was information of which

SGH was aware within the meaning of ASX Listing Rule 3.1 (having regard to the

definitions in ASX Listing Rule 19.12).

243. As at 28 August 2015, the Unreasonable Non-Impairment of PSD Goodwill

Information was not generally available within the meaning of s 676 of the

Corporations Act.

244. As at and from 28 August 2015, the Unreasonable Non-Impairment of PSD Goodwill


106




paragraphs 242 to 244 SGH became obliged to tell the ASX the Unreasonable Non-

Impairment of PSD Goodwill Information by no later than 28 August 2015.

246. SGH did not inform the ASX of the Unreasonable Non-Impairment of PSD Goodwill

Information.


Listing Rule 3.1 and s 674(2) of the Corporations Act (Unreasonable Non-

Impairment of PSD Goodwill Continuous Disclosure Contravention).

L.2 Misleading or deceptive conduct

L.2.1 FY2016 Forecast Reliability Representations

248. The conduct pleaded in paragraphs 209 to 219, including the making of the FY2016

Forecast Reliability Representations, the FY2015 Forecast Risk Representation and

the Unimpaired PSD Goodwill Basis Representation was conduct engaged in by

SGH:





(c) in trade or commerce, within the meaning of section2 of the ACL.

L.2.2 FY2016 Forecast Reliability Representations

249. By reason of the matters pleaded in paragraph 229, in making each of the FY2016

Forecast Reliability Representations, SGH engaged in conduct which was misleading

or deceptive, or likely to mislead or deceive.

Particulars


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s 18 of the ACL (FY2016 Forecast Reliability Representations Misleading


L.2.3 FY2016 Forecast Risk Representations

251. By reason of the matters pleaded in paragraph 230, in making the FY2016 Forecast

Risk Representation, SGH engaged in conduct which was misleading or deceptive, or

likely to mislead or deceive.

Particulars




s 18 of the ACL (FY2016 Forecast Risk Representation Misleading Conduct

Contraventions).

L.2.4 Unimpaired PSD Goodwill Basis Representation

253. By reason of the matters pleaded in paragraph 233, in making the Unimpaired PSD

Goodwill Basis Representation, SGH engaged in conduct which was misleading or




s 18 of the ACL (Unimpaired PSD Goodwill Basis Representation Misleading


L.3 Section 1041E Contravention

255. The Unimpaired PSD Goodwill Basis Representation was a statement or information

that was likely to induce persons comprising the Affected Market to acquire financial

products (being SGH Shares).

256. By reason of the matters pleaded in paragraph 233, the Unimpaired PSD Goodwill

Basis Representation was false in a material particular or materially misleading.

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known that the Unimpaired PSD Goodwill Basis Representation was false in a

material particular or materially misleading.

258. By reason of the matters pleaded in paragraphs 255 to 257 by making the

Unimpaired PSD Goodwill Basis Representation, SGH contravened s 1041E of the

Corporations Act (Unimpaired PSD Goodwill Basis Representation s 1041E

Contravention).

L.4 Continuing nature of the August Contraventions

259. Each of the following contraventions (August Contraventions) was a continuing

contravention, which of its nature continued from and after 28 August 2015 during the

Relevant Period:

(a) the Negative Cash Flow Information Continuous Disclosure Contravention

and/or the Unimpaired PSD Goodwill Continuous Disclosure Contravention

(August Continuous Disclosure Contraventions) which continued until such

time as the undisclosed information was disclosed to the Affected Market;

(b) the following contraventions (together August Misleading Conduct

Contraventions):

(i) the FY2016 Forecast Reliability Representations Misleading Conduct

Contraventions;

(ii) the FY2016 Forecast Risk Representations Misleading Conduct

Contraventions;

(iii) the Unimpaired PSD Goodwill Basis Representation Misleading Conduct

Contravention,

which continued until such time as the inaccuracy or falsity of the

representations underlying the contraventions was revealed to the Affected

Market; and

(c) the Unimpaired PSD Goodwill Basis Representation s 1041E Contravention,

which continued until such time as the inaccuracy or falsity of the

representation underlying the contravention was revealed to the Affected

Market.

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M. THE NOVEMBER EVENTS

M.1 The 20 November Publications

260. On 20 November 2015, SGH held its Annual General Meeting (2015 AGM).

261. On 20 November 2015, between about 10:32AM and 10:43AM, being at around the

time of or immediately after the 2015 AGM, SGH published and lodged with ASX

(and published on SGH‟s website):

(a) an announcement entitled “Chairman‟s Address to Shareholders”, recording

what Skippen said to the 2015 AGM (namely, Skippen‟s 20 November

Address);

(b) an announcement entitled “Managing Director‟s Address to Shareholders”,

recording what Grech said to the 2015 AGM (Grech’s 20 November

Address);

(c) an announcement entitled “Annual General Meeting Presentation to

Shareholders”, containing slides presented by Skippen and Grech to the 2015

AGM (20 November Presentation).

262. In Skippen‟s 20 November Address, Skippen stated:

(a) in FY2015, the Australian PIL business remained resilient with strong growth in

fee revenue from Victoria and New South Wales in particular (p.1, Slide 4);

(b) in FY 2015, the Australian General Law practice continued to make good

progress with strong revenue growth across all practice groups (p.1, Slide 4);

(c) in the UK, SGH UK delivered strong increases in file openings across the PIL

practice and continued to build momentum in General Law (p.1, Slide 5);

(d) SGH had made a number of adjustments and corrections to its financial

accounts in recent months, none of which reflect any change in the previously

reported trading performance of SGH (p.3);

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(e) Skippen and the board were confident that SGH was moving forward as a

stronger and better company that will succeed in delivering sustainable value

for shareholders (p.4).

263. In Grech‟s 20 November Address and in the 20 November Presentation, Grech

stated:

(a) after 5 months of ownership of PSD, SGH remained convinced of the strategic

merit which underpinned SGH‟s acquisition of PSD (p.1);

(b) in FY2015 SGH delivered strong operating and financial performance (p.2);

(c) SGH‟s strategic priorities in FY2016 included:

(i) to deliver on the group guidance SGH provided in August and which SGH

was confirming today (p.2, Slide 10);

(ii) to deliver SGS‟s operational and financial targets (p.2);

(d) the FY2016 outlook was as follows:

(i) SGH Australia was performing well and was on track to meet its financial

performance targets; (p.2, Slide 11);

(ii) SGH UK (other than SGS/PSD) has had a slower than expected start to

FY2016, including:

(A) some loss of productivity as a result of the transition to a new

system which has impaired case resolution rates across the PIL

group;

(B) sector wide delays in resolving Fast Track RTA cases as a result of

the introduction of Medco by the MoJ,

but while the first half contribution would be significantly lower than

historically had been the case, SGH was confident that each of these

impacts was temporary and would be remediated in the second half (p.3);

(iii) in terms of SGS/PSD‟s legal services business:

(A) it had performed according to SGH‟s expectation in terms of billed

fees and cases resolved outside the Portal, and was on track

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although improved productivity would be needed to reach targets for

performance over the full year (p.4);

(B) the Fast Track Portal practice had been impacted by factors

including fewer cases on hand to be resolved and a lower

percentage of total client intake resolving in the Portal than

anticipated, as well as the impact of Medco in impacting resolution

times, and SGH expected that the practice would improve markedly

in the second half but some ground had been lost which would not

be made back (p.4);

(C) SGH had reduced its forecast case resolution numbers for FY2016

from 77,000 to 70,000 and had reduced its forecast RTA case

intake from 95,000 to 73,000 (p.5, Slide 12);

(iv) SGH was reaffirming its FY2016 guidance provided in its full year results

presentation in August and was very confident that it would achieve that

guidance (p.6, Slide 14);

(v) there was a likelihood that SGH‟s operating cashflow would be negative in

the range of A$30million to $40 million in the first half of FY2016, with a

strong recovery expected in the second half (p.6).

M.2 Information disclosed in the 20 November Publications

264. By the 20 November Publications, the Affected Market became aware of the Negative

Cash Flow Information.

Particulars

The Applicant refers to the matters pleaded in paragraph 263(d)(v) above;

M.3 Price effect of the 20 November Publications

265. On 19 November 2015, SGH Shares:


(b) closed at a price of $3.05 per share,

on a traded volume of 6,609,392 SGH Shares.

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(a) opened at a price of $3.08 per share;

(b) closed at a price of $2.68 per share (being a daily decline of $0.40 (12.99%),




(b) closed at a price of $2.15 per share (being a total daily decline of $0.50

(18.86%), and a decline of $0.93 (30%) as against the opening price on 20

November 2015),


M.4 The 26 November Announcement

268. On 25 November 2015 (UK time, being a time after the close of the ASX on 25

November 2015) the following matters were published:

(a) the UK Government (HM Treasury) published the "Spending Review and

Autumn Statement 2015” (Cm 9162), which stated:

(i) the UK Government was determined to crack down on the fraud and

claims culture in motor insurance. Whiplash claims cost the country £2

billion a year, an average of £90 per motor insurance policy, which is out

of all proportion to any genuine injury suffered;

(ii) the UK Government intended to introduce measures to end the right to

cash compensation for minor whiplash injuries, and would consult on the

details in the New Year.

Particulars

Cm 9162, at [1.143]. p.40.

(b) the UK Government (HM Treasury) published a document entitled “Spending

Review and Autumn Statement 2015: key announcements”, which stated more

injuries will also be able to go to the small claims court as the upper limit for

these claims will be increased from £1,000 to £5,000.

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Particulars

https://www.gov.uk/government/news/spending-review-and-autumn-statement-2015-key-announcements

(c) the Chancellor of the Exchequer (the Rt Hon George Osborne) publicly stated

in remarks published by the international financial press that the UK

Government intended to cut legal costs by transferring personal injury claims of

up to £5,000 to the small claims court.

Particulars

Bloomberg article published on 26 November 2015, 3:02AM AEDT (http://www.bloomberg.com/news/articles/2015-11-25/u-k-insurers-welcome-osborne-pledge-to-tackle-whiplash-fraud)

269. On 26 November 2015, at about 11:43AM, following the announcements pleaded in

paragraph 268, SGH published and lodged with the ASX an announcement entitled

“UK Government Announcement” (26 November Announcement).

270. By the 26 November Announcement, SGH stated:

(a) the UK Government had overnight announced proposals, which if implemented,

would impact on the rights of people injured in road traffic accidents;

(b) SGH did not expect there to be any impact on its FY2016 performance, or the

guidance recently confirmed at the 2015 AGM, from the UK Government‟s

announcement;

(c) the UK Government‟s proposal if implemented would restrict the right of people

injured in road traffic accidents to obtain compensation for pain and suffering in

minor soft tissue injury claims;

(d) the UK Government had proposed to increase the limit of the Small Claims

Court from £1,000 to £5,000;

(e) SGH would participate in the foreshadowed consultation process with MoJ and

provide further information on the impact (if any) on its financial performance in

FY2017 and beyond;

(f) the UK Government‟s announcement was unexpected by SGH.

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M.5 Information disclosed in the 26 November Announcement

271. By the UK Government Announcement and/or the 26 November Announcement, the

Affected Market became aware of:

(a) the RTA Claim Reform Programme and/or the Small Claims Track Threshold

Reform;

(b) the Reform Impacts;

(c) the Reform Impact Risks;

(d) the Reform Impacts Exposure Information;

(e) the UK Income Projection Unreliability Risk Information;

(f) the Regulatory Risk-Impacted Value Information;

(g) the Unreasonable Non-Impairment of PSD Goodwill Information;

(h) the inaccuracy of the Risk Profile Representations;

(i) the inaccuracy of the Income Projection Reliability Representation;

(j) the inaccuracy of the Due Diligence Representation; and/or

(k) the likely inaccuracy of the Unimpaired PSD Goodwill Basis Representation.

Particulars

The Applicant refers to the terms of the UK Government Announcement and/or the 26 November Announcement, and repeats paragraphs 30 to 33, 40 to 42 and says that the 26 November Announcement disclosed the substance of these pieces of information, or the Affected Market was able to become aware of these matters from what was disclosed in the 26 November Announcement.

M.6 The price effect of the 26 November Announcements



(b) closed at a price of $0.94 per share (being a total daily decline of $0.98 (51%)),


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M.7 The November Conduct

273. By the 20 November Publications and the 26 November Announcement, SGH

repeated:

(a) the FY2016 Forecast Reliability Representation; and/or

(b) the FY2016 Forecast Risk Representation.

Particulars

The repetition was express and/or implied, and the Applicant refers to the contents of the 20 November Announcement as a whole (and, in particular the matters pleaded in paragraph 263(d)(iv) and (v)).

274. Further, or alternatively, by the 20 November Publications and the 26 November

Announcement, SGH represented to the Affected Market that issues of the kind

which had impacted SGH‟s financial position and/or which might be anticipated to

adversely affect SGH‟s future financial position in FY2016 were confined to SGS/PSD

and/or SGH UK (Quarantined Problem Representation).

Particulars

i) The repetition was implied, and the Applicant refers to paragraph 263(d)(i)-(iv);

ii) Nothing said in the 26 November Announcement qualified or contradicted what was to be expressed or implied from the 20 November Announcement so far as the Quarantined Problem Representation was concerned;

iii) The representation was a representation as to future matters and s 12BB of the ASIC Act, s 769C of the Corporations Act and/or s 4 of the ACL are relied upon.

N. THE TRUE POSITION AS AT 20-26 NOVEMBER

N.1 The ASIC Investigation

275. As at 20 November 2015, ASIC was, to SGH‟s knowledge, conducting an

investigation into SGH‟s financial reports for FY2014 and FY2015 (ASIC

Investigation).

276. As at 20 November 2015, the ASIC Investigation included inquiries by ASIC into:

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(a) the recoverable value of goodwill attributable to SGH‟s Australian and UK

businesses; and

(b) SGH‟s recognition of fee revenue and related WIP by SGH (focussing on the

appropriateness of accounting policies adopted and the testing of WIP

estimates and assumptions against historical data).

Particulars

ASIC media release entitled “ASIC Notes Slater and Gordon’s Decision to Reduce Asset Values” published on 29 February 2016 (29 February ASIC Media Release).

N.2 The likely goodwill impairment of SGH Australia

277. As at 20 November 2015, it was likely and/or there was a material risk that following

the ASIC Investigation SGH would:

(a) adopt more conservative revenue recognition policies, with the result of

reducing the amount of revenue recognised or to be recognised by SGH;

and/or

(b) make impairments in respect of the goodwill attributable to the business of SGH

Australia.

Particulars

i) It was likely and/or there was a material risk that SGH would either adopt a more conservative approach to recognising revenue within AASB 118 (Revenue) or move to early adoption of AASB 15 – Revenue from Contracts with Customers;

ii) Either of the above courses was likely to result in a lesser amount of revenue being recognised because of either:

A) the adoption of more conservative WIP estimates, success rates and historical average fee estimates, and completion milestones;

B) the adoption of the AASB 115 requirement that revenue can only be recognised to the extent it is highly probable that the cumulative amount of revenue recognised would not be subject to significant reversals;

iii) The Applicant refers to the 29 February Announcement, and will provide further particulars at the time of service of opinion evidence in chief.

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278. As at 20 November 2015 one of the matters which had impacted and/or might be

anticipated to adversely impact SGH‟s financial position in FY2016 was the

impairment of goodwill associated with PSD/SGS.

Particulars

i) the Applicant repeats paragraph 96 and 101, and says that the appropriateness and conservatism of revenue recognition policies was one reason why the goodwill associated with PSD/SGS ought reasonably to be impaired;

ii) the Applicant repeats paragraphs 88(a), 232 and/or 233, and says that the prospect of regulatory change was one reason why the goodwill associated with PSD/SGS ought reasonably to be impaired.

279. By reason of the matters pleaded in paragraphs 276 to 278, as at 20 November

2015:

(a) it was not the case that issues of the kind which had impacted SGH‟s financial

position and/or which might be anticipated to adversely affect SGH‟s future

financial position in FY2016 were confined to SGS/PSD and/or SGH UK; and/or

(b) SGH did not have reasonable grounds for making the Quarantined Problem

Representation.

O. SGH’S NOVEMBER CONTRAVENING CONDUCT

O.1 Continuous Disclosure Contravention

280. As at 20 November 2015, the matters pleaded in paragraph 279 (Groupwide

Problem Information) was information which ought reasonably to have come into

the possession of:

(a) Grech and/or Fowlie in the course of the performance of their respective duties;

and/or

Particulars

The Groupwide Problem Information was information that Grech and/or Fowlie ought to have become aware of by reason of:

i) the matters pleaded in paragraph 241(a) (alleging that they ought reasonably to have known of the Unreasonable Non-Impairment of Goodwill Information);

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ii) being persons who were or ought to have been aware of the ASIC Investigation and to what it related;

iii) being accordingly, persons who ought reasonably to have considered the information they ought to have had as referred to in (i) and (ii) above on the accuracy of the Quarantined Problem Representation which they ought to have appreciated was conveyed by the 20 November Announcement and the 26 November Announcement.


Particulars

The Groupwide Problem Information was information that SGH NEDs ought to have become aware of by reason of:

i) the matters pleaded in paragraph 241(b) (alleging that they ought reasonably to have known of the Unreasonable Non-Impairment of Goodwill Information);

ii) being persons who were or ought to have been aware of the ASIC Investigation and to what it related by reason of being persons who sat on the Audit, Compliance and Risk Management Committee;

iii) being accordingly, persons who ought reasonably to have considered the information they ought to have had as referred to in (i) and (ii) above on the accuracy of the Quarantined Problem Representation which they ought to have appreciated was conveyed by the 20 November Announcement and the 26 November Announcement.

281. By reason of the matters pleaded in paragraphs 280, as at 20 to 26 November 2015

the Groupwide Problem Information was information of which SGH was aware within

the meaning of ASX Listing Rule 3.1 (having regard to the definitions in ASX Listing

Rule 19.12).

282. As at 20 to 26 November 2015 the Groupwide Problem Information was not generally


283. As at and from 20 to 26 November 2015 the Groupwide Problem Information was





paragraphs 280 to 283 SGH became obliged to tell the ASX the Groupwide Problem

Information on 20 to 26 November 2015.

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285. SGH did not inform the ASX of the Groupwide Problem Information on 20 to

26 November 2015.


Listing Rule 3.1 and s 674(2) of the Corporations Act (Groupwide Problem


O.2 Section 1041E Contravention

287. The Quarantined Problem Representation was a statement or information that was

likely to induce persons comprising the Affected Market to acquire financial products

(being SGH Shares).

288. By reason of the matters pleaded in paragraphs 279, the Quarantined Problem



known that the Quarantined Problem Representation was false in a material

particular or materially misleading.

290. By reason of the matters pleaded in paragraphs 287 to 289 by making the

Quarantined Problem Representation, SGH contravened s 1041E of the Corporations

Act (Quarantined Problem Representation s 1041E Contravention).

O.3 Misleading or deceptive conduct

291. The conduct pleaded in paragraphs 260 to 263, 269 to 270 and 273 to 274, including

the making of the Quarantined Problem Representation was conduct engaged in by

SGH:






292. SGH did not have reasonable grounds for making the Quarantined Problem

Representation.

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Particulars

i) Paragraphs 277 to 279 are repeated.

ii) Further, and without limitation, the representation was a representation as to future matters and s 12BB of the ASIC Act, s 769C of the Corporations Act and/or s 4 of the ACL are relied upon.

293. By reason of the matters pleaded in paragraph 279 and/or 292, in making the

Quarantined Problem Representation, SGH engaged in conduct which was


Particulars


294. By reason of the matters pleaded in paragraphs 291 to 293, as at 20 and 26

November 2015, SGH contravened s 1041H of the Corporations Act, s 12DA(1) of

the ASIC Act and/or s 18 of the ACL (Quarantined Problem Representation

Misleading Conduct Contraventions).

O.4 Continuing nature of the November Contraventions

295. Each of the Groupwide Problem Continuous Disclosure Contravention, the

Quarantined Problem s 1041E Contravention and the Quarantined Problem

Misleading Conduct Contravention (November Contraventions) was a continuing

contravention, which of its nature continued from and after 20 to 26 November 2015

during the Relevant Period.

P. THE DECEMBER EVENTS

P.1 The 17 December Announcement

296. On 17 December at 9.42AM, SGH published and lodged with ASX (and published in

SGH‟s website) the 17 December Announcement (entitled “2016 Financial Year

Update”).

297. In the 17 December Announcement, SGH stated:

(a) SGH and PSD were continuing to trade in line with expectations.

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(b) SGH had commenced a review of SGH‟s approach to financial forecasting by

Houghton and independent advisers appointed by the SGH Board

(Forecasting Review);

(c) the Forecasting Review had resulted in FY2016 financial year guidance being

reconsidered;

(d) while SGH expected the UK business to make a positive contribution to gross

operating cash flow in December, cash timing differences and a poorer than

expected case resolution profile will impact negatively on gross operating cash

flow results for the 6 months ending 31 December 2015, and SGH would give

an update on the impact on gross operating cashflow result for that period in

January 2016;

(e) there was significant risk that full year guidance would not be met;

(f) SGH withdrew its previous full year guidance pending the outcome of the

Forecasting Review;

(g) SGH had kept its financiers informed of its position at all times, and had A$100

million headroom within its banking facilities, which headroom was expected to

increase as the financial year progresses; and

(h) SGH would test its goodwill values for impairment of the UK business at the

half year ending 31 December 2015, which review will take into account

matters including the risks associated with the proposed changes to the law by

the UK Government.

P.2 Information disclosed in the 17 December Announcement

298. By the 17 December Announcement, the Affected Market became aware of:

(a) the inaccuracy of the FY2016 Forecast Reliability Representations;

(b) the inaccuracy of the FY2016 Forecast Risk Representations;

Particulars

The Applicant refers to the terms of the 17 December Announcement, repeats paragraphs 215 to 216, and 297(d) to (f), and says that the 17 December Announcement disclosed the substance of those matters.

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P.3 The price effect of the 17 December Announcement

299. On 17 December 2015, SGH Shares:


against the closing price on 16 December 2015 of $1.08 per share; and

(b) closed at a price of $0.89 per share (being a total daily decline of $0.19 (17.6%)

as against the closing price on 16 December 2015),


P.4 The December Conduct

300. By the 17 December Announcement SGH repeated the Quarantined Problem

Representation.

Particulars

The repetition was express and/or implied, and the Applicant refers to the contents of the 17 December Announcement as a whole (and, in particular the matters pleaded in paragraph 297(a) about SGH and the fact that the matters pleaded in paragraph 297(h), were expressly stated to relate to the UK business only.

301. Further, or alternatively, by the 17 December Announcement, SGH represented to

the Affected Market that:

(a) there was a reasonable basis to consider that the headroom in SGH‟s debt

facilities would improve over FY2016; and/or

(b) there was a reasonable basis to consider that SGH‟s FY2016 cashflow would

be sufficient to allow it to operate within its current banking facilities,

(Debt Coverage Adequacy Representation).

Particulars

i) The representations were partly express and partly implied, and the Applicant refers to the contents of the 17 December Announcement as a whole paragraph 297(g);

ii) The representation was a representation as to future matters and s 12BB of the ASIC Act, s 769C of the Corporations Act and/or s 4 of the ACL are relied upon.

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Q. SGH’s DECEMBER CONTRAVENING CONDUCT

Q.1 The true state of SGH’s bank facilities

302. As at 17 December 2015, McGrath Nicol and FTI Consulting had been engaged as

bank advisers on behalf of the banking syndicate.

303. By reason of the matters pleaded in paragraph 302, as at 17 December 2015

whether or not SGH‟s cash flow was sufficient to allow it to operate within its current

banking facilities was not a matter solely within SGH‟s control in the ordinary course

of business.

304. Further, or alternatively, as at 17 December 2015, there was, by reason of the

Negative Cash Flow Information and/or the matters pleaded in paragraph 303, a

material risk that SGH‟s FY2016 cash flow would not be sufficient to allow it to

operate within its current banking facilities.

305. By reason of the matters pleaded in paragraphs 302 to 304:

(a) there was not a reasonable basis to conclude that the headroom in SGH‟s debt

facilities would improve over FY2016; and/or

(b) there was not a reasonable basis to conclude that SGH‟s FY2016 cash flow

would be sufficient to allow it to operate within its current banking facilities.

Q.2 Misleading or deceptive conduct

306. The conduct pleaded in paragraphs 296 to 297, 300 and 301 including the making of

the Debt Coverage Adequacy Representation was conduct engaged in by SGH:






307. SGH did not have reasonable grounds for making the Debt Coverage Adequacy

Representation.

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Particulars

i) Paragraphs 302 to 305 are repeated;

ii) Further, and without limitation, the representation was a representation as to future matters and s 12BB of the ASIC Act, s 769C of the Corporations Act and/or s 4 of the ACL are relied upon.

308. By reason of the matters pleaded in paragraphs 305 and/or 307, SGH engaged in

conduct which was misleading or deceptive, or likely to mislead or deceive.

Particulars


309. By reason of the matters pleaded in paragraphs 306 to 308, as at 17 December

2015, SGH contravened s 1041H of the Corporations Act, s 12DA(1) of the ASIC Act

and/or s 18 of the ACL (Debt Coverage Adequacy Representation Misleading

Conduct Contravention).

Q.3 Section 1041E Contravention

310. The Debt Coverage Adequacy Representation was a statement or information that

was likely to induce persons comprising the Affected Market to acquire financial

products (being SGH Shares).

311. By reason of the matters pleaded in paragraphs 305 and/or 307, the Debt Coverage

Adequacy Representation was false in a material particular or materially misleading.

312. By reason of:

(a) the matters pleaded in paragraph 302 (of which SGH was actually aware) and

303 (of which SGH ought reasonably to have been aware); and/or

(b) the matters pleaded in paragraph 304 (of which by reason of the matters

pleaded in paragraphs 234 to 235, SGH ought reasonably to have been

aware);

SGH ought reasonably to have known that the Debt Coverage Adequacy


125

313. By reason of the matters pleaded in paragraphs 310 to 312 by making the Debt

Coverage Adequacy Representation, SGH contravened s 1041E of the Corporations

Act (the Debt Coverage Adequacy Representation s 1041E Contravention).

Q.4 Continuing nature of the December Contraventions

314. The Debt Coverage Adequacy Representation Misleading Conduct Contraventions

and the Debt Coverage Adequacy Representation s 1041E Contravention

(December Contraventions) were continuing contraventions, which of their nature

continued from and after 17 December 2015 during the Relevant Period.

R. THE POST 17 DECEMBER EVENTS

R.1 The 7 January Announcement

315. On 7 January 2016 at about 7:55PM, SGH published and lodged with ASX (and

published on SGH‟s website) an announcement entitled “Response to Media

Reports” (7 January Announcement).

316. In the 7 January Announcement, SGH stated that:

(a) Grech had said that on 17 December 2015 SGH informed the market that SGH

had more than A$100 million of headroom within its banking facilities, that this

headroom is expected to increase as the financial year progresses, and that

SGH had commenced a review of SGH‟s forecasts by CFO and independent

advisers appointed by the board;

(b) as part of the review process announced in the 17 December Announcement,

SGH agreed that SGH‟s banking syndicate would appoint their own advisers to

work alongside those appointed by the board of SGH.

317. On 28 January 2016 at about 8:56AM, SGH published and lodged with ASX (and

published on SGH‟s website) an announcement entitled “Market Update” (28

January Announcement).

318. In the 28 January Announcement, SGH stated:

(a) SGH continued to work with its auditors and advisors to finalise its half year

result including statutory gross operating cashflow;

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(b) the process of reviewing SGH‟s approach to financial forecasting led by

Houghton and advisors appointed by the board was proceeding as planned,

and in the course of that process SGH was considering its expectations for

operating performance and cashflow for the balance of FY2016;

(c) SGH intended to report its audited first half financial results on 29 February

2016.

R.2 The January Conduct

319. By each of the 7 January Announcement and the 28 January Announcement, SGH

repeated the Quarantined Problem Representation.

Particulars

The repetition was implied in each case from the terms of the respective announcements as a whole, and the fact that they did not qualify that representation.

320. By each of the 7 January Announcement and the 28 January Announcement, SGH

repeated the Debt Coverage Adequacy Representation.

Particulars

i) As to the 7 January Announcement, the repetition was partly express and partly implied, and the Applicant refers to the contents of the 7 January Announcement as a whole (and, in particular the matters pleaded in paragraph 306 which expressly repeated the matters pleaded in paragraph 297(g));

ii) As to the 28 January Announcement, the repetition is to be implied from the fact that it did not the fact it did not qualify that representation, in the context where the 7 January Announcement had been published recently and repeated it.

R.3 The suspension of SGH Shares

321. On 24 February 2016, SGH Shares were suspended from quotation on the ASX at

the request of SGH.

R.4 The 29 February Publications

322. On 29 February 2016, between about 9:00AM and 9:01AM SGH published and

lodged with ASX (and published on SGH‟s website):

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(a) an announcement entitled “FY16 H1 Financial Results” (that is, the 29 February

Announcement);

(b) an announcement entitled “FY16 H1 Results Investor Presentation” (29

February Presentation);

(c) SGH‟s Financial Report for the half-year ended 31 December 2015 (1H16

Report);

(d) SGH‟s Appendix 4D (Half Year Information for the year ended 31 December

2015),

(together, 29 February Publications).

323. On 29 February 2016, ASIC issued the ASIC 29 February Media Release (which

media release was lodged by SGH with ASX at about 9:47AM).

324. In the 29 February Announcement, the 29 February Presentation and the FY16 Half

Year Report, SGH stated:

(a) SGH had ended 1H FY2016 with total revenue and other income of $487.5

million (and had restated its 1H FY2015 revenue and other income to $267.7

million) (29 February Announcement, p.1; 29 February Presentation Slide 5;

1H16 Report, p.1/3);

(b) SGH had made a net loss after tax of $958.3 million (and had restated its 1H

FY2015 net profit to $49.3 million) (29 February Announcement p.1, 29

February Presentation, Slide 4; 1H16 Report, p.1/3);

(c) SGH‟s reported net operating cashflow for 1H FY2016 was –$83.3 million (29

February Presentation, Slide 4; 1H16 Report, p.7/9);

(d) SGH‟s reported EBITDAW for 1H FY2016 was –$58.3 million (-$17.8 million on

a “normalised” basis, being as adjusted for AASB3 adjustments, goodwill

impairment and additional debtor/disbursement provisioning) (29 February

Presentation, Slide 4; 1H16 Report, p.1/3);

(e) The half year result was impacted by, inter alia:

(i) an $876.4 million impairment charge against the carrying value of

goodwill;

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(ii) underperformance in SGH‟s UK operations in relation to both intake and

resolution of personal injuries claims in SGH UK and SGS;

(iii) A$21.3 million of additional provisioning for debtors and disbursements

across the UK and Australia;

(iv) early adoption of new accounting standard AASB 15 – Revenue from

Contracts with Customers

(29 February Announcement p.1, 1H16 Report, p.1/3);

(f) the impairment charge raised by SGH comprised:

(i) $814,245,000 against SGS (which downward revision was due to poorer

than anticipated financial performance to date and potential impact of the

foreshadowed UK Government legislative changes on future cash flows);

(ii) $9,458,000 against SGH UK (which related to SGH UK‟s Non-PI Work

practice, and was on the basis that the forecast cash flow did not support

the goodwill balance); and

(iii) $52,745,000 against SGH Australia, of which:

(A) $38.8 million was in respect of the PI Work practice (being a goodwill

impairment assessed at State cash generating unit level rather than

national level); and

(B) $13.9 million was in respect of the Non-PI Work practice (on the

basis that the forecast cash flow did not support the goodwill

balance),

(29 February Announcement, p.4; 29 February Presentation, Slide 8,

1H16 Report, pp.18/20-20/21 (Note 7));

(g) SGH had remeasured and reduced the fair value of its work in progress:

(i) carried as at the end of FY2014 from $467,334,000 to $381,521,000 (a

$85,813,000 reduction) (1H16 Report, p.9/11 (Note 1), by reason of the

application of AASB15);

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(ii) carried as at the end of FY2015 from $825,890,000 to $693,616,000 (a

$45,576,000 reduction in addition to a reduction of $86,706,000

attributable to prior year re-measurement) (1H16 Report, p.9/11 (Note 1)),

by reason of the application of AASB15);

(h) the value of SGH‟s work in progress at the end of 1H2016 was less than the

remeasured and reduced fair value amount as at the end of FY2015 (from

$676,693,000 (current and non-current) to $663,359,000 (current and non-

current) (1H16 Report, p.5/7); and

(i) SGH had reduced the provisional fair value of SGS‟s work in progress $31.4

million (to $121,941,000), as the provisional fair value of work in progress had

been updated since SGH‟s disclosures in its financial report at 30 June 2015

(1H16 Report, p.25/27 (Note 12)).

325. In the ASIC 29 February Media Release, ASIC stated:

(a) ASIC noted SGH‟s decision to reduce asset values in its financial report for 1H

2016;

(b) ASIC had made inquiries of SGH in relation to its financial reports for FY2014,

and FY2015;

(c) ASIC‟s inquiries mainly concerned the recoverable value of goodwill attributable

to SGH‟s Australian and UK businesses, the recognition of fee revenue and

related WIP, provisioning against debtors and disbursement assets, and the

basis for classifying WIP and disbursement assets as current assets;

(d) ASIC‟s inquiries on revenue recognition and WIP focussed on the

appropriateness of accounting policies adopted and the testing of WIP

estimates and assumptions against historical data;

(e) Given SGH had transitioned to AASB 15, ASIC has not approved or

disapproved of SGH‟s use of the percentage of completion basis of accounting

for fee revenue under AASB 118 in its previous financial reports; and

(f) ASIC has now discontinued its inquiries in relation to SGH‟s financial reports for

FY2014 and FY2015.

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326. In the 29 February Presentation, SGH stated:

(a) McGrath Nicol and FTI Consulting had been engaged as bank advisers (Slide

14);

(b) Short term cash flow forecasts had been provided demonstrating liquidity (Slide

14);

(c) an operating plan and restructure proposal was due to be provided to the

banking syndicate in March 2016 (which would include a performance

improvement programme and debt reduction plan) (Slide 14);

(d) agreements were to be reached on amendments to the facility, if any, by

30 April 2016, facility maturity may be shortened to no earlier than 31 March

2017 if no agreement was reached (Slide 14); and

(e) a FY16 priority was a restructured financing agreement (Slide 16).

327. On 29 February 2016, SGH Shares were reinstated to official quotation on the ASX

following the release of the FY16 Half Year Report.

R.5 Information disclosed in the 29 February Publications

328. By the 29 February Publications, the Affected Market became aware of:

(a) the Groupwide Problem Information and the inaccuracy of the Quarantined

Problem Representation;

Particulars

i) The Applicant refers to the terms of the 29 February Announcement, (and in particular the matters pleaded in paragraph 324(f)(iii)) and says that it disclosed the substance of those matters;

ii) The Applicant refers to Morgans CIMB research report dated 1 March 2016, pp.1, 3.

(b) the inaccuracy of the Debt Coverage Adequacy Representation.

Particulars

i) The Applicant refers to the terms of the 29 February Presentation, (and in particular the matters pleaded in paragraph 326) and says that it disclosed the substance of those matters;

131

ii) The Applicant refers to Deutsche Bank research report dated 29 February 2016, p.5; Morgans CIMB research report dated 1 March 2016, pp.1, 3; Macquarie research report dated 29 February 2016, pp.1,4.

R.6 The price effect of the 29 February Announcement

329. On 29 February 2016, SGH Shares:

(a) opened at a price of $0.53 per share (being a decline of $0.30 (36%) as against

the closing price on 23 February 2016 of $0.83, being the price at which SGH

Shares last traded before the suspension pleaded in paragraph 321); and


as against the closing price on 23 February 2016),


330. On 1 March 2016, SGH Shares:



as against the closing price on 29 February 2016, and a total decline of $0.51

(61.4%) as against the closing price on 23 February 2016),


S. CONTRAVENING CONDUCT CAUSED LOSS

S.1 Market-based causation

331. The Applicant and some Group Members acquired an interest in SGH Shares in a

market of investors or potential investors in SGH Shares:

(a) operated by the ASX;

(b) regulated by, inter alia, sections 674(2) of the Corporations Act and ASX Listing

Rule 3.1;

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(c) where the price or value of SGH Shares would reasonably be expected to have

been informed or affected by information disclosed in accordance with sections

674(2) of the Corporations Act and ASX Listing Rule 3.1;

(d) where material information had not been disclosed, which a reasonable person

would expect, had it been disclosed, would have had a material adverse effect

on the price or value of SGH Shares (namely the information the subject of the

contraventions of s 674(2) of the Corporations Act pleaded in this Statement of

Claim (or any of them) (together, the Contravening Omissions); and

(e) where misleading or deceptive statements had been made, namely the

statements the subject of the contraventions of s 1041E of the Corporations Act

and/or ss 1041H of the Corporations Act, s 12DA of the ASIC Act and s 18 of

the ACL pleaded in this Statement of Claim (of any of them) (together

Contravening Representations), that a reasonable person would expect to

have a material effect on the price or value of SGH Shares, in that if they had

not been made no investors or potential investors in SGH Shares would have

been in a position to read or rely upon them.

332. In the Relevant Period each or a combination of:

(a) the March Contraventions (or any of them);

(b) the August Contraventions (or any of them);

(c) the November Contraventions (or any of them); and/or

(d) the December Contraventions (or any of them),

(each being a Market Contravention) caused or materially contributed to the market

price of SGH Shares to be substantially greater than their true value and/or the

market price that would have prevailed but for the Market Contraventions, from the

respective dates that those Market Contraventions commenced, as pleaded in this

Statement of Claim.

Particulars

The extent to which the Market Contraventions caused the market price for SGH Shares to be substantially greater than their true value and/or the market price that would otherwise had prevailed (that is, inflated) during the Relevant Period is a matter for evidence, particulars of which will be served immediately following the Applicant filing opinion evidence in the proceeding.

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333. The declines in the price of SGH Shares pleaded in paragraphs 202 to 203 above:

(a) were caused or materially contributed to by:

(i) the market‟s reaction to the information communicated to the Affected

Market in the 25 June Announcement and/or the 29 June Announcement

(as pleaded in paragraphs 198 to 200), in the context of what had been

communicated to the Affected Market prior to those announcements; and

(ii) the Market Contraventions or, alternatively, some of them, namely:

(A) the PSD Core Revenue Recognition Investigation Continuous

Disclosure Contravention, the Inappropriate PSD Core Revenue

Recognition Continuous Disclosure Contravention, the Revenue-

Impacted Value Continuous Disclosure Contravention, the PSD

Reasonable Valuation Representations s 1041E Contraventions

and/or the PSD Reasonable Valuation Representations Misleading

Conduct Contraventions; and/or

(B) the Continuous Disclosure Compliance Representation Misleading

Conduct Contraventions (to the extent they arose by the existence

of the contraventions referred to in sub-sub-paragraph (A),

(collectively, June Corrected Market Contraventions); and/or

(b) would, to the extent they removed inflation from the price of SGH Shares, have

occurred, or substantially occurred, earlier if:

(i) SGH had disclosed to the Affected Market the information that was the

subject of Contravening Omissions, (or, alternatively, some of them,

namely those which were June Corrected Market Contraventions); and/or

(ii) SGH had not made the Contravening Representations to the Affected

Market (or, alternatively, some of them, namely those which were June

Corrected Market Contraventions).

Particulars

The extent to which inflation was removed from the price of SGH Shares, and would have been removed at earlier points in time during the Relevant Period is a matter for evidence, particulars of which will be served immediately following the Applicant filing expert evidence.

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334. The declines in the price of SGH Shares pleaded in paragraph 266 and 267 above:



Market in the 20 November Publications (as pleaded in paragraphs 264),

in the context of what had been communicated to the Affected Market

prior to those announcements; and

(ii) the Market Contraventions (or, alternatively, some of them, namely the

Negative Cash Flow Information Continuous Disclosure Contravention

and the FY2016 Forecast Risk Representations Contraventions

(20 November Corrected Market Contraventions));




subject of Contravening Omissions, or, alternatively, some of them,

namely those which were 20 November Corrected Market

Contraventions); and/or


Market (or, alternatively, some of them, namely those which were

20 November Corrected Market Contraventions).

Particulars


335. The declines in the price of SGH Shares pleaded in paragraph 272 above:



Market in the 26 November Announcement (as pleaded in paragraph

271), in the context of what had been communicated to the Affected

Market prior to those announcements; and

(ii) the Market Contraventions, or, alternatively, some of them, namely:

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(A) the Reform Impacts Exposure Continuous Disclosure

Contravention, the UK Income Projection Unreliability Continuous

Disclosure Contravention, the Regulatory Risk-Impacted Value

Continuous Disclosure Contravention, the Risk Profile

Representations s 1041E Contraventions, the Income Projection

Reliability Representations Misleading Conduct Contraventions, the

PSD Future Value Representations s 1041E Contravention, the

Risk Profile Representations Misleading Conduct Contraventions,

the Income Projection Reliability Representations Misleading

Conduct Contraventions, the PSD Future Value Representations

Misleading Conduct Contravention, the Due Diligence

Representation Misleading Conduct Contravention, the Unimpaired

PSD Goodwill Basis Representation Misleading Conduct

Contravention and/or the Unimpaired PSD Goodwill Basis

Representation s 1041E Contravention; and/or

(B) the Continuous Disclosure Compliance Representation Misleading

Conduct Contraventions (to the extent that they arose by reason of

the existence of the contraventions referred to in sub-paragraph (A),

(collectively, 26 November Corrected Market Contraventions); and/or




subject of Contravening Omissions, or, alternatively, some of them,

namely those which were 26 November Corrected Market

Contraventions); and/or


Market (or, alternatively, some of them, namely those which were 26

November Corrected Market Contraventions).

Particulars


136

336. The declines in the price of SGH Shares pleaded in paragraph 299 above:



Market in the 17 December Announcement (as pleaded in paragraph

298), in the context of what had been communicated to the Affected

Market prior to those announcements; and

(ii) the Market Contraventions, or, alternatively, some of them, namely the

FY2016 Forecast Reliability Misleading Conduct Contravention, the

Unimpaired PSD Goodwill Basis Representation Misleading Conduct

Contravention and/or the Unimpaired PSD Goodwill Basis Representation

s 1041E Contravention (to the extent the Affected Market had not already

become aware of the inaccuracy of the representations underlying the

latter two contraventions by reason of the 26 November Announcement)

(17 December Corrected Market Contraventions); and/or



(i) SGH had disclosed to the Affected Market the information the subject of

Contravening Omissions, or, alternatively, some of them, namely those

which were 17 December Corrected Market Contraventions); and/or



17 December Corrected Market Contraventions).

Particulars


337. The declines in the price of SGH Shares pleaded in paragraph 329 and 330 above:



Market in the 29 February Publications (as pleaded in paragraph 328), in

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the context of what had been communicated to the Affected Market prior

to those announcements; and

(ii) the Market Contraventions, or, alternatively, some of them, namely the

Groupwide Problem Continuous Disclosure Contravention, the

Quarantined Problem Representation s 1041E Contravention, the

Quarantined Problem Representation Misleading Conduct Contravention,

the Debt Coverage Adequacy Representation Misleading Conduct

Contraventions and/or the Debt Coverage Adequacy Representation s

1041E Contravention (29 February Corrected Market Contraventions);

and/or



(i) SGH had disclosed to the Affected Market the information the subject of

Contravening Omissions, or, alternatively, some of them, namely those

which were 29 February Corrected Market Contraventions); and/or



29 February Corrected Market Contraventions).

Particulars


S.2 No transaction case

338. Further, or in the alternative to paragraphs 331 to 337, were it not for each or any

combination of the March Contraventions, the Applicant and some Group Members

would not have acquired SGH Shares pursuant to the Entitlement Offer.

Particulars

The identities of all those Group Members which or would not have acquired SGH Shares pursuant to the Entitlement Offer are not known with the current state of the Applicant’s knowledge and cannot be ascertained unless and until those advising the Applicant take detailed instructions from all Group Members

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on individual issues relevant to the determination of those individual Group Member’s claims; those instructions will be obtained (and particulars of the identity of those Group Members will be provided) following opt out, the determination of the Applicant’s claim and identified common issues at an initial trial and if and when it is necessary for a determination to be made of the individual claims of those Group Members.

339. Alternatively to paragraph 338, had the 30 March Contraventions not occurred, the

Entitlement Offer would not have occurred in the way in which it occurred, or at all.

Particulars

SGH would not have been able to proceed with the acquisition of PSD for the PSD Acquisition Price and/or the Entitlement Offer because:

i) SGH and/or the board of SGH would not have issued the 30 March Publications in the form in which they were issued, or on the date on which they were issued, and

A) SGH would not have been able to raise sufficient funds in the Institutional Entitlement Offer to enable it to complete the acquisition of PSD; and/or

B) SGH would not have been able raise sufficient funds in the Retail Entitlement Offer to enable it to complete the acquisition of PSD;

including because the value of the rights and new SGH Shares would have been so far below A$6.37 that issuing the number of new SGH Shares to be issued under the Entitlement Offer (and auctioning off entitlements not taken up) would not have enabled sufficient funds to be raised); and/or

ii) SGH would not have been able to obtain and/or utilise the Acquisition Debt Facilities, or sufficient debt funding to enable it to complete the acquisition of PSD Acquisition Price (having regard to the matters referred to in i) above;

S.3 Reliance

340. Further, or in the alternative to paragraphs 331 to 337 and/or 338 to 339, in the

decision to acquire an interest in SGH Shares:

(a) the Applicant and some Group Members would not have acquired interests in

SGH Shares if they had known the information the subject of Contravening

Omissions;

(b) the Applicant and some Group Members relied directly on some or all of the

Contravening Representations.

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Particulars

i) The Applicant would not have acquired an interest in SGH Shares had he known the information the subject of the Contravening Omissions and, he relied upon each of the Contravening Representations;

ii) The identities of all those Group Members which or who would not have acquired an interest in SGH Shares had they known of any or all of the information that was the subject of the Contravening Omissions and/or which or who relied directly on any or all of the Contravening Representations are not known with the current state of the Applicant’s knowledge and cannot be ascertained unless and until those advising the Applicant take detailed instructions from all Group Members on individual issues relevant to the determination of those individual Group Member’s claims; those instructions will be obtained (and particulars of the identity of those Group Members will be provided) following opt out, the determination of the Applicant’s claim and identified common issues at an initial trial and if and when it is necessary for a determination to be made of the individual claims of those Group Members.

S.4 Loss or damage suffered by the Applicant and Group Members

341. By reason of the matters pleaded in paragraphs 331 to 337, the Applicant and some

Group Members have suffered loss and damage by and resulting from the Market

Contraventions (or any one or combination of them).

Particulars

The loss suffered by the Applicant will be calculated by reference to:

(i) the difference between the price at which SGH Shares were acquired by the Applicant during the Relevant Period and the true value of that interest; or

(ii) the difference between the price at which the Applicant acquired an interest in SGH Shares and the market price that would have prevailed had the Market Contraventions not occurred; or

(iii) alternatively, the days during the Relevant Period where the traded price of SGH Shares fell as a result of the disclosure information which had not previously been disclosed because of the Market Contraventions, the quantum of that fall; or

(iv) alternatively, the days after the Relevant Period when the traded price of SGH Shares fell as a result of the disclosure of information which had not previously been disclosed because of the Market Contraventions, the quantum of that fall.

Further particulars in relation to the Applicant’s losses will be provided after the service of evidence in chief.

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Particulars of the losses of Group Members are not known with the current state of the Applicant’s knowledge and cannot be ascertained unless and until those advising the Applicant take detailed instructions from all Group Members on individual issues relevant to the determination of those individual Group Member’s claims; those instructions will be obtained (and particulars of the losses of those Group Members will be provided) following opt out, the determination of the Applicant’s claim and identified common issues at an initial trial and if and when it is necessary for a determination to be made of the individual claims of those Group Members.

342. Further, or alternatively to paragraph 341, by reason of the matters pleaded in

paragraphs 338 and/or 339, the Applicant and some Group Members have suffered

loss and damage by and resulting from the March Contraventions (or any one or

combination of them).

Particulars

i) The loss suffered by the Applicant will be calculated by reference to:

A) the difference between the price at which SGH Shares were acquired by the Applicant during the Relevant Period and the true value of that interest; or

B) the difference between the price at which the Applicant acquired an interest in SGH Shares and the amount left in hand.

ii) Further particulars in relation to the Applicant’s losses will be provided after the service of opinion evidence in chief.

iii) Particulars of the losses of Group Members are not known with the current state of the Applicant’s knowledge and cannot be ascertained unless and until those advising the Applicant take detailed instructions from all Group Members on individual issues relevant to the determination of those individual Group Member’s claims; those instructions will be obtained (and particulars of the losses of those Group Members will be provided) following opt out, the determination of the Applicant’s claim and identified common issues at an initial trial and if and when it is necessary for a determination to be made of the individual claims of those Group Members.

343. Further, or alternatively, to paragraphs 341 and/or 342, by reason of the matters

pleaded in paragraph 340, the Applicant and some Group Members have suffered

loss or damage.

Particulars

The particulars to paragraph 341 and 342 are repeated.

This pleading was prepared by W.A.D. Edwards of counsel, and settled by J.C. Sheahan of

Queens Counsel.

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Certificate of lawyer

I, Lee Taylor, certify to the Court that, in relation to the statement of claim filed on behalf of

the Applicant, the factual and legal material available to me at present provides a proper

basis for each allegation in the pleading.

Date: 12 October 2016

Signed by Lee Taylor Lawyer for the Applicant

142

SCHEDULE A

(Particulars to paragraph 30)

A1. On or about 3 November 2008, the Master of the Rolls (Sir Anthony Clarke), with the

support of the MoJ appointed the Right Honourable Lord Justice (Sir Rupert) Jackson

(Lord Justice Jackson) to carry out an independent review of the rules and

principles governing the costs of civil litigation and to make recommendations in order

to promote access to justice at proportionate cost (Civil Justice Costs Review).

Document reference

Terms of Reference, being Appendix to the Announcement made by Sir Anthony Clarke MR dated 3 November 2008.

A2. Between 31 January 2009 and 30 July 2009, Lord Justice Jackson conducted the

Civil Justice Costs Review, during which submissions were lodged by interested

parties (including RJW, Pannone and Fentons).

Document reference

Report entitled “Review of Civil Litigation Costs” dated 21 December 2009, authored by the Right Honourable Lord Justice Jackson (Jackson Report), pp.473-488.

A3. As at the time the Civil Justice Costs Review was conducted, the monetary limits

applicable to contested PI Work in the UK were:

(a) Small Claims Track PI Cases – claims for personal injury damages up to

£1,000 (for pain, suffering and loss of amenity) (Small Claims PI Threshold,

and otherwise £5,000 (Small Claims General Threshold);

(b) Fast Track PI Cases – claims above the threshold for Small Claims Track PI

Cases, up to £25,000 (Fast Track Threshold); and

(c) Multi-Track PI Cases – claims above the Fast Track Threshold.

A4. As at the time Civil Justice Costs Review was conducted, the following rules and

practices governed the recoverability of costs by successful claimants:

(a) a successful claimant with a Small Claims Track PI Case was generally only

able to recover:

143

(i) stipulated fixed recoverable costs (FRC), which did not include any costs

for legal representation (Non-Legal FRC) – if proceedings had been

commenced; or

(ii) any amount offered by an insurer (which amount was no more than about

£80) – if the case resolved before proceedings had been commenced;

(b) a successful claimant with a Fast Track PI Case which was a RTA Claim with

agreed damages at up to £10,000 (Low Value RTA Agreed Damages PI

Case) was generally able to recover fixed recoverable costs which did include

costs of legal representation up to a specified limit of £800 plus 20% of the

damages agreed up to £5,000 plus 15% of the damages agreed up to £10,000

plus a 12.5% uplift if the claimant instructs a lawyer who practises in London

and stipulated surrounding areas where the claimant lives in those areas (Low

Value RTA Agreed Damages FRC, often called Predictable Costs), which

costs were recoverable where proceedings had not been commenced.

Document reference

Civil Procedure Rules, Part 45, Section VI (as then in force).

(c) a successful claimant with a Fast Track PI Case (other than a Low Value RTA

Agreed Damages PI Case) was generally not subject to fixed recoverable costs

(except in respect of the costs of an advocate preparing for and appearing at

the trial of the claim), but was generally able to recover costs according to

scales and other rules of Court (including, where the claimant‟s lawyers were

operating on a CFA Basis, fee uplifts stipulated by the Courts and Legal

Services Act 1990 (UK) (Fast Track Costs); and

Document reference

Civil Procedure Rules, Part 44 and Part 45, Section VI (as then in force).

(d) a successful claimant with a Multi-Track PI Case was generally not subject to

fixed recoverable costs but was generally able to recover costs according to

rules of Court (including, where the claimant‟s lawyers were operating on a

CFA Basis, fee uplifts stipulated by the Courts and Legal Services Act 1990

(UK) (Multi-Track Costs).

Document reference

Civil Procedure Rules, Part 44 (as then in force).

144

A5. On or about 21 December 2009, the Jackson Report was published by the MoJ, and

stated:

(a) Lord Justice Jackson recommended that costs recoverable in all Fast Track PI

Cases be fixed (i.e., FRC);

(b) Lord Justice Jackson could see considerable force in the arguments for raising

the limit for Small Claims Track PI Cases from £1,000, but did not think that

now was the right time to review that limit, because:

(i) In Lord Justice Jackson‟s view, the top priority at the moment was to (a)

fix all costs on the fast track and (b) to establish an efficient and fair

process for handling personal injury claims (which constitute the major

part of fast track work);

(ii) if a satisfactory scheme of fixed costs is established for fast track personal

injury cases (both contested and uncontested) and if the process reforms

bed in satisfactorily, then all that will be required in due course will be an

increase in limit for Small Claims Track PI Cases to reflect inflation since

1999; and

(iii) If a satisfactory scheme of fixed costs is not established or if the process

reforms prove unsatisfactory, then the question of raising the limit for

Small Claims Track PI Cases will have to be revisited at the end of 2010.

Document reference

Jackson Report at [2.9] (p.xviii), Pt 3, Chap. 15 (pp.146-163), and Recommendation 18 (p.464), Pt 4, Chap.18, [3.1]-[3.5] (p.183).

A6. On or about 30 April 2010, the UK Government introduced the Pre-Action Protocol for

Low Value Personal Injury Claims in Road Traffic Accidents (RTA PI Protocol) which

was a streamlined electronic process (Portal) which applied to claims arising out of a

road traffic accident valued between £1,000 and £10,000 where liability was not

contested (Low Value RTA PI Cases) (which would otherwise be Fast Track PI

Cases).

Document reference

i) MoJ Report “Low Value Personal Injury Claims in Road Traffic Accidents” (October 2009);

145

ii) Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents; CPR Part 45, Section III and Practice Direction 8B (Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents – Stage 3 Procedure.

A7. After the introduction of the RTA PI Protocol:

(a) a successful claimant with a Small Claims Track PI Case was only able to

obtain Non-Legal FRC;

(b) a successful claimant with a Low Value RTA PI Case whose claim:

(i) did not leave the Portal was generally only able to recover FRC of: £400

(at Stage 1 – completion of the claim notification form), plus £800 (at

Stage 2 – obtaining medical reports), plus £250 or £500 (Stage 3 (paper

or oral hearing, respectively), with success fees of 12.5% payable at each

stage (Portal FRC); or

(ii) did leave the Portal was generally only able to recover Low Value RTA

Agreed Damages FRC (with a credit for any Portal FRC already paid);

(c) a successful claimant with a Fast Track PI Case (other than a Low Value RTA

PI Case) was able to recover Fast Track Costs;

(d) a successful claimant with a Multi-Track PI Case was able to recover Multi-

Track Costs.

A8. On or about 6 May 2010, a general election was held in the UK, and on 12 May 2010

the Rt Honourable David Cameron (Cameron) was invited by Her Majesty Queen

Elizabeth II to form a government in her name, as leader of a coalition between the

Conservative Party and the Liberal Democrat Party (pursuant to the Conservative-

Liberal Democrat coalition agreement of 11 May 2010).

A9. In or about June 2010, the Right Honourable Lord Young of Graffham (Lord Young)

was appointed as adviser to the UK Government to investigate and report back to

Cameron on the rise of the compensation culture over the last decade coupled with

the current low standing that health and safety legislation now enjoys and to suggest

solutions, and following the agreement of the report, to work with appropriate

departments across government to bring the proposals into effect.

146

Document reference

Terms of Reference, being Annex A to the Report entitled “Common Sense Common Safety” dated 15 October 2010 (Young Report).

A10. On or about 15 October 2010, the UK Government published the Young Report, in

which:

(a) in a Foreword, Cameron stated:

(i) a damaging compensation culture has arisen, as if people can absolve

themselves from any personal responsibility for their own actions, with the

spectre of lawyers only too willing to pounce with a claim for damages on

the slightest pretext;

(ii) Lord Young has come forward with a wide range of far reaching proposals

which this Government fully supports;

(iii) we‟re going to curtail the promotional activities of claims management

companies and the compensation culture they help perpetuate;

(iv) we need to act on this report and Lord Young has agreed to remain as

Cameron‟s advisor on these important issues, to work with departments

and all those with an interest in seeing his recommendations put into

effect;

Document reference

Young Report, Foreword by Cameron, p.5

(b) Lord Young recommended that:

(i) a simplified claims procedure for personal injury claims similar to that for

road traffic accidents under £25,000 on a fixed costs basis should be

introduced;

(ii) extending the upper limit for road traffic accident personal injury claims to

£25,000 should be examined;

(iii) the recommendations in the Jackson Report should be introduced;

(iv) the operation of referral agencies and personal injury lawyers should be

restricted.

147

Document reference

Young Report, Foreword by Cameron, p.15

A11. On or about 15 November 2010, MoJ published a report entitled “Proposals for

Reform of Civil Litigation Funding and Costs on England and Wales: Implementation

of Lord Justice Jackson‟s Recommendations” (2010 MoJ Report), which stated:

(a) the Government was considering the Jackson Report‟s recommendation that

costs recoverable in the fast track be fixed in conjunction with the experience of

the new process for low value personal injury claims in road traffic accidents

(that is, the RTA PI Protocol);

(b) Lord Young had strongly recommended extending the new process (that is, the

RTA PI Protocol) to all Fast Track PI Cases;

(c) the Government aimed to introduce the new extended process by April 2012,

subject to consultation and as part of wider civil justice reform.

Document reference

Cm 7947

A12. As at 31 May 2011, the business plan of the MoJ for 2011 to 2015 stated that the

MoJ would take the following actions:

(a) implement the recommendations in the Jackson Report into the funding and

costs of civil litigation, including by consulting on Lord Justice Jackson‟s

proposals and analyse consultation responses; and

(b) extend the RTA PI Protocol to cover cases other personal injury accident

claims, subject to consultation.

Document reference

MoJ Business Plan 2011-2015 dated 12 May 2011, p.16

A13. On or about 14 February 2012, Cameron met with the Association of British Insurers

and following the meeting Cameron‟s office published a “Statement on outcomes

following the Downing Street Insurance Summit”, which stated:

(a) the UK Government was committed to take action to tackle the compensation

culture, reduce legal costs and cut health and safety red tape (and the

insurance industry committed to pass savings made on to consumers);

148

(b) the UK Government and the insurance industry agreed to work together in

future to make progress on this;

(c) the measures agreed included:

(i) industry commitment to pass savings onto customers resulting from a

Government commitment to reduce the current £1,200 fee that lawyers

can earn from small value personal injury claims;

(ii) industry commitment to adjust premiums to reflect any reductions in legal

costs created through the Jackson reforms that will reform „no win, no fee‟

and ban referral fees; and extending the road traffic accident claims

process to cover employers‟ liability and public liability;

(iii) the UK Government and insurance industry committed to work together to

identify effective ways to reduce the number and cost of whiplash claims.

Options include improved medical evidence, technological breakthroughs,

the threshold for claims or the speed of accidents. Progress on this will be

made in the coming months.

Document reference

i) The meeting was attended by Cameron, the Rt Hon Oliver Letwin (Minister of State, Cabinet Office) The Rt Hon Justine Greening (Secretary of State for Transport), Nick Herbert (Minister of State for Justice), Otto Thoresen (Director General, ABI), David Stevens (COO, Admiral), Trevor Matthews (Chief Executive, Aviva UK), Paul Evans, Group CEO (Axa UK and Ireland), David Riches (Director of Ops, British Chamber of Commerce), John Cridland (Director General, CBI), David Neave (Director of General Insurance, Co-operative Insurance), Judith Hackitt (Chair, Health and Safety Executive), Paul Geddes (Chief Executive, RBS Insurance), Ann Robinson (Uswitch), Stephen Lewis, (CEO, Zurich UK);

ii) Prime Minister’s Office, “Statement on outcomes following the Downing Street Insurance Summit”, dated 14 February 2012.

A14. In February 2012, the MoJ announced that the UK Government had determined to

increase the monetary limit applicable to the Small Claims Track (for claims other

than personal injury claims) to £10,000 with effect from April 2013, with the aim to

increase it further to £15,000 after further evaluation.

Document reference

MoJ Report “Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation on reforming civil

149

justice in England and Wales. The Government Response, Cm 8274, February 2012, p.11 [21].

A15. As at 31 May 2012, the business plan of the MoJ for 2012 to 2015 stated that the

MoJ would take the following actions:

(a) increase the Small Claims Track Threshold to £10,000 by April 2013;

(b) implement the recommendations in the Jackson Report into the funding and

costs of civil litigation, including by banning referral fees in personal injury

cases by April 2013;

(c) implement proposals to extend the RTA PI Protocol to cover cases up to

£25,000 and to other personal injury accident claims by April 2013; and

(d) review FRC available within the RTA PI Protocol, and implement reform by

April 2013.

Document reference

MoJ Business Plan 2012-2015 dated 31 May 2012, pp.12-13

A16. As at 30 July 2012:

(a) the policy of MoJ (and the UK Government) included:

(i) to reduce the cost of contesting road traffic accident personal injury claims

through court;

(ii) to discourage people from bringing less meritorious personal injury claims

or from making exaggerated claims; and

(iii) overall, to lower the cost of road traffic personal injury claims to insurers,

which given insurers‟ commitment to pass on savings to policy holders,

would result in downward pressure on the cost of motor insurance;

(b) the policy options being considered (apart from doing nothing) were:

(i) to introduce independent medical panels to assess whiplash injuries

(Independent Medical Assessment Reform);

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(ii) to increase the small claims track limit of the county court for road traffic

accident personal injury claims from to £1,000 to £5,000 (that is, the Small

Claims Track Threshold Reform);

(iii) to implement both the Independent Medical Assessment Reform and the

Small Claims Track Threshold Reform;

(c) the MoJ‟s (and the UK Government‟s) preferred option was to implement both

the Independent Medical Assessment Reform and the Small Claims Track

Threshold Reform.

Document reference

MoJ Impact Assessment No MoJ163 (“Reducing the number and costs of personal injury claims”) dated 30 July 2012 – impact assessment at the consultation stage, pp.1, 11-12 (2012 MoJ Whiplash IA).

A17. Between about 19 November 2012 and February 2013, the MoJ undertook a

consultation on the extension of the RTA PI Protocol to higher value RTA Claims, and

the reduction of FRC available under it, during which submissions were lodged by

interested parties (including Pannone and Fentons).

Document reference

Report entitled “Extension of the Road Traffic Accident Personal Injury Scheme: proposals on fixed recoverable costs”, published on 27 February 2013 by MoJ, pp.6-7 and Annex C (2013 MoJ RTA Report).

A18. On 11 December 2012, the MoJ published a consultation paper entitled “Reducing

the number and costs of whiplash claims: a consultation on arrangements concerning

whiplash injuries in England and Wales”: Consultation Paper 17/2012 (2012 MoJ

Whiplash Consultation Paper), which stated:

(a) in the Foreword written by the Parliamentary Under Secretary of State for

Justice (Helen Grant):

(i) between 2006 and 2012 road traffic accident claims increased by 60%;

(ii) the UK Government shared the widespread concerns over this totally

disproportionate growth in claims;

(iii) Cameron has recognised the pressing need to tackle the rising cost of

insurance premiums, and the effect this has on individuals, families and

businesses;

151

(iv) insurers estimate that the cost of whiplash claims from road traffic

accidents, which comprise 90% of relevant personal injury claims, to the

average policy-holder is £90 per annum;

(v) The measures in this consultation look to remedy two areas where the

current arrangements are imperfect: the difficulties in diagnosing the injury

and the nature and cost of the court system that can work against insurers

challenging suspect claims.

(vi) The 2012 MoJ Whiplash Consultation Paper looked at the small claims

track threshold for personal injury claims arising from road traffic

accidents, which provides a more cost effective route for straightforward

claims and self-represented litigants;

Document reference

2012 MoJ Whiplash Consultation Paper, pp.3-4.

(b) in the balance of the 2012 MoJ Whiplash Consultation Paper:

(i) there was some evidence to suggest that the majority of whiplash and

many other PI RTA claims are valued between £1,000 and £5,000 and

therefore were highly likely to be considered under the Fast Track if they

are contested [57];

(ii) The UK Government was of the view that many small value whiplash

claims are relatively straight forward and that the Small Claims Track

might be a more suitable venue in which to determine them than the Fast

Track;

(iii) The UK Government was consulting on options that would bring more PI

or whiplash claims arising from road traffic accidents into the Small Claims

track. The options were to:

(A) increase the threshold for RTA whiplash claims to £5,000;

(B) increase the threshold for all RTA PI claims (including whiplash) to

£5,000;

(C) retain the current threshold;

152

(iv) The UK Government was increasing the threshold for general Small

Claims track matters to £10,000 from April 2013, but this consultation did

not consider increasing the limit for PI or whiplash injury to that level.

Document reference

2012 MoJ Whiplash Consultation Paper, pp.19-20 [57]-[62].

A19. Between about 11 December 2012 and 8 March 2013, the MoJ conducted a

consultation on arrangements concerning whiplash injuries in England and Wales

(2013 Whiplash Consultation), during which submissions were lodged by interested

parties (including Pannone).

Document reference

i) 2012 MoJ Whiplash Consultation Paper;

ii) Paper entitled “Reducing the number and costs of whiplash claims: A Government response to consultation on arrangements concerning whiplash injuries in England and Wales, dated October 2013; Cost of motor insurance – whiplash: A Government response to the House of Commons Transport Committee (Cm 8738) (2013 MoJ Whiplash Report), Annex B.

A20. On or about 27 February 2013, the MoJ published the 2013 MoJ RTA Report, which

stated that it was the UK Government‟s intention to request the Civil Procedure Rule

Committee to make rules which:

(a) with effect from 30 April 2013, amended the RTA PI Protocol by reducing the

quantum of fixed recoverable costs;

(b) with effect from 31 July 2013:

(i) extended the RTA PI Protocol to all RTA Claims with a value of up to

£25,000, with effect from 31 July 2013;

(ii) implemented a new fixed recoverable cost regime for cases falling out of

the extended RTA PI Protocol.

Document reference

2013 MoJ RTA Report, pp.3-4.

A21. On or about 15 March 2013, the Transport Select Committee of the House of

Commons (TSC) initiated an inquiry into the cost of motor insurance: whiplash, during

which submissions were lodged and evidence given by interested parties.

153

Document reference

Report published by the House of Commons on 31 July 2013 entitled “Cost of Motor Insurance: whiplash” (Fourth Report of Session 2013-14) (2013 TSC Report), pp.33.

A22. With effect from 1 April 2013, the UK Government increased the Small Claims Track

Threshold for general matters (but not personal injury claims) to £10,000 (effective 1

April 2013).

Document reference

Civil Procedure (Amendment) Rules 2013.

A23. With effect from 30 April 2013, the UK Government reduced Portal FRC applicable to

Low Value RTA PI Cases to: £200 (at Stage 1 – completion of the claim notification

form), plus £300 (at Stage 2 – obtaining medical reports), plus £250 or £500 (Stage 3

(paper or oral hearing, respectively), with success fees of 12.5% payable at each

stage (Reduced Portal FRC) (effective 30 April 2013).

Document reference

Civil Procedure (Amendment No.3) Rules 2013.

A24. With effect from 31 July 2013, the UK Government:

(a) extended the RTA PI Protocol so that it applied to claims arising out of a road

traffic accident valued between £1,000 and £25,000 where liability was not

contested (Extended Low Value RTA PI Cases) (all of which would otherwise

be Fast Track PI Cases);

(b) introduced a Pre-Action Protocol for Low Value Personal Injury (Employers‟

Liability And Public Liability Claims (EL/PL Protocol) so that it applied to many

employers‟ liability and public liability claims valued between £1,000 and

£25,000 (Low Value EL/PL Case).

Document reference

i) Civil Procedure (Amendment No.6) Rules 2013;

ii) Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents from 31 July 2013;

iii) Pre-Action Protocol for Low Value Personal Injury (Employers’ Liability And Public Liability Claims).

154

A25. After the introduction of the Extended RTA PI Protocol and the EL/PL Protocol:

(a) a successful claimant with a Small Claims Track PI Case was only able to

obtain Non-Legal FRC;

(b) a successful claimant with a Low Value RTA PI Case:

(i) arising out of a road traffic accident in respect of which a claim was

lodged in the Portal before 30 April 2013:

(A) whose claim did not leave the Portal was generally only able to

recover from a defendant Portal FRC;

(B) whose claim did leave the Portal was generally only able to recover

from a defendant Low Value RTA Agreed Damages FRC (with a

credit for any Portal FRC already paid);

(ii) arising out of a road traffic accident in respect of which a claim was

lodged in the Portal after 30 April 2013 and before 31 July 2013:

(A) whose claim did not leave the Portal was generally only able to

recover Reduced Portal FRC;

(B) whose claim did leave the Portal was generally only able to recover

from the unsuccessful defendant Low Value RTA Agreed Damages

FRC (with a credit for any Reduced Portal FRC already paid);

(c) a successful claimant with an Extended Low Value RTA PI Case (being all Fast

Track PI Cases which were RTA Claims) in respect of which a claim was

lodged in the Portal after 31 July 2013):

(i) whose claim did not leave the Portal was generally only able to recover

Reduced Portal FRC;

(ii) whose claim did leave the Portal was generally only able to recover FRC

assessed in accordance with CPR Part 45, Section IIIA, with a credit for

any Reduced Portal FRC already paid (Post-Portal FRC);

(d) a successful claimant with a Fast Track PI Case (other than an Extended Low

Value RTA PI Case) was able to recover Fast Track Costs;

155

(e) a successful claimant with a Multi-Track PI Case was able to recover Multi-

Track Costs.

A26. On 31 July 2013, the 2013 TSC Report was published, which stated that:

(a) there are good arguments for and against switching whiplash claims of between

£1,000 and £5,000 to the Small Claims Track, but on balance the TSC did not

support that proposal at this time;

(b) the £1,000 threshold for personal injury claims using the small claims track was

set in 1991 and cannot be left at that level indefinitely. However, the TSC

considered that any proposal to change the threshold should be informed by a

fuller understanding of the impact of the new electronic portal for claims on how

claims are managed and on costs.

Document reference

2013 TSC Report, pp.20-21 [50]-[54].

A27. In October 2013, the MoJ published the 2013 MoJ Whiplash Report (in response to

both the 2013 Whiplash Consultation and the 2013 TSC Report), and stated:

(a) in the foreword by the Lord Chancellor and Secretary of State for Justice (the

Rt Honourable Chris Grayling):

(i) in this response the Government sets out what action we intend to take

following consultation to reduce the number and costs of whiplash claims;

(ii) on the consultation options to increase the Small Claims Track Threshold,

the Government believes that there are good arguments for increasing the

Small Claims Track to £5,000 for all road traffic accidents;

(iii) at this stage the Government has decided to defer any increase in the

Small Claims Track Threshold;

Document reference

2013 MoJ Whiplash Report, pp.6.

156

(b) in the balance of the report:

(i) the UK Government remains of the view that extending the Small Claims

track would be beneficial in providing a low cost route to bringing a claim

through the courts, with each side bearing its own costs;

(ii) the UK Government has carefully considered the full range of consultation

responses from the 2013 Whiplash Consultation and the 2013 TSC

Report and is persuaded that on balance it would not be appropriate to

increase the Small Claims limit for RTA-related personal injury at this

stage;

(iii) while the Government believes that an increase in the Small Claims Track

Threshold in this sector would provide additional benefits, it regards it as

sensible and pragmatic to consider the combined impact of earlier reforms

before embarking on any further change now.

Document reference

2013 MoJ Whiplash Report, p.17 [38], [41], p.18 [45].

A28. Between late December 2013 and mid-2014, the TSC conducted further inquiries into

the cost of motor insurance: whiplash, during which submissions were lodged and

evidence given by interested parties, including SGH UK t/as Slater & Gordon LLP

(which lobbied against increasing the Small Claims Track Threshold).

Document reference

i) Report published by the House of Commons on 30 June 2014 entitled “Driving premiums down: fraud and the cost of motor insurance” (First Report of Session 2014-15) (2014 TSC Report).

ii) SGH’s written submission was dated December 2013 (CMI0017), and in [8]-[9] SGH lobbied against increasing the Small Claims Track Threshold).

A29. On 30 June 2014, the TSC published the 2014 TSC Report.

A30. On 20 October 2014, the UK Government and the Association of British Insurers

published a response to the 2014 TSC Report, which stated, inter alia, that:

(a) the UK Government believed there was evidence to support raising the small

claims limit but its main focus for now was the implementation of the reforms to

157

medical evidence and reporting announced on 23 October 2013 (ie in the 2013

MoJ Whiplash Report); and

(b) Further consideration will be given to the issue of raising the small claims limit

in due course.

Document reference

Report published by the House of Commons Transport Committee (HC716) entitled “Driving premiums down: fraud and the cost of motor insurance: Government and Association British Insurers Responses to the Committee’s First Report of Session 2014-15, at p.3

A31. As at 16 September 2014:

(a) the policy of MoJ (and the UK Government) included to ensure that road traffic

accident personal injury claims, especially in relation to whiplash, were founded

upon credible medical reports and to ensure that the cost of such medical

reports was proportionate;

(b) the policy option being considered for immediate introduction by MoJ and the

UK Government was to reform medical examination and reporting in motor

accident soft tissue injury cases (namely, the Independent Medical Assessment

Reform);

(c) the implementation of the policy option of increasing the Small Claims Track

Threshold for personal injury claims had been deferred.

Document reference

MoJ Impact Assessment No MoJ163 (“Reducing the number and costs of personal injury claims”) dated 16 September 2014 – impact assessment at the final stage, pp.1, 3 (2014 MoJ Whiplash IA).

A32. Between September 2014 and December 2014 the UK Government implemented the

Independent Medical Assessment Reform (so as to take effect from 6 April 2015).

Document reference

i) Amendments to the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents made with effect from 31 July 2013;

ii) Civil Procedure (Amendment No.8) Rules 2014.

A33. On 11 March 2015, Aviva Insurance Limited (Aviva) published a document entitled

“Road to reform: Driving out the compensation culture”, in which it stated:

158

(a) Aviva had commissioned a report from Frontier Economics which found that the

UK should:

(i) ban or lower allowable contingency fees for lawyers;

(ii) lower the cap on legal fees from £500 to a lower amount;

(iii) increase the Small Claims Track Threshold from £1,000 to allow more

whiplash/soft tissue injury claims to be settled without solicitors.

(b) Aviva had formed recommendations to address the UK‟s burgeoning

compensation culture and outlined a roadmap of what a potential package of

reforms could look like, which Aviva would urge the next UK Government to

consider.

Document reference

Aviva, “Road to Reform: driving out the compensation culture”, pp.7-9.

159

SCHEDULE B (DEFINED TERMS)

1

1 June Announcement ........................................... 30 17 December Announcement ......................... 103 17 December Corrected Market

Contraventions ................................................... 138 17/20 April Announcement .................................. 45 1H16 Report ................................................................ 129

2

2 April Announcement ........................................... 29 20 November Corrected Market

Contraventions ................................................... 136 20 November Presentation ............................... 111 2010 MoJ Report...................................................... 150 2012 MoJ Whiplash Consultation Paper . 154 2012 MoJ Whiplash IA ......................................... 153 2012 Report .................................................................... 11 2013 MoJ RTA Report .......................................... 153 2013 MoJ Whiplash Report .............................. 155 2013 Report .................................................................... 11 2013 TSC Report...................................................... 156 2013 Whiplash Consultation ........................... 155 2014 MoJ Whiplash IA ......................................... 161 2014 Report .................................................................... 11 2014 TSC Report...................................................... 160 2015 AGM ..................................................................... 111 2015 HY Presentation .............................................. 15 2015 HY Report............................................................ 11 2015 Report .................................................................... 11 24 June Announcements ...................................... 81 25 June Announcement ........................................ 53 26 November Announcement ......................... 115 26 November Corrected Market

Contraventions ................................................... 138 28 August Announcement ................................... 90 28 August Appendix 4E ......................................... 90 28 August Investor Presentation ..................... 90 28 August Publications .......................................... 90 28 January Announcement .............................. 128 29 February Announcement ............................... 51 29 February ASIC Media Release ................. 118 29 February Corrected Market

Contraventions ................................................... 139 29 February Investor Presentation.............. 102 29 February Presentation .................................. 129 29 February Publications .................................. 129 29 June Announcement ........................................ 84

3

30 January 2012 Announcement ..................... 12 30 March Announcement ..................................... 25 30 March Appendix 3B ........................................... 25 30 March Cleansing Notice ................................. 25

30 March General Regulatory Risk

Disclosures .............................................................. 32 30 March Presentation ........................................... 25 30 March Publications ........................................... 25 30 September Announcement .......................... 98 30 September Directors Report and Full

Accounts ................................................................... 98 30 September Publications ................................ 98

6

6 August Announcement ..................................... 88

7

7 January Announcement ................................. 127

9

9 April Retail Offer Documents ........................ 43

A

ACL ........................................................................................ 7 Acquisition Debt Facilities .................................. 30 Affected Market ............................................................. 7 AIM ...................................................................................... 83 ASIC ................................................................................... 25 ASIC Act ............................................................................. 7 ASIC Investigation .................................................. 118 ASX ........................................................................................ 7 ASX Listing Rules ........................................................ 8 August Continuous Disclosure

Contraventions .................................................... 110 August Contraventions ....................................... 110 August Misleading Conduct

Contraventions .................................................... 110 Aviva ................................................................................ 161

B

Brown ................................................................................... 9

C

Cameron ........................................................................ 148 Cashflow Negativity Continuous Disclosure

Contravention ...................................................... 106 CFA Basis ....................................................................... 11 Civil Justice Costs Review ............................... 145 Claims Pipeline Assumptions .......................... 19 Claims Resolution Rate Assumption ........... 19 Claims Success Rate Assumptions ............. 19 Continuous Disclosure Compliance

Representation ...................................................... 43 Continuous Disclosure Compliance

Representation Misleading Conduct

Contraventions ...................................................... 78 Continuous Disclosure Obligations ................ 8 Contravening Omissions ................................... 134 Contravening Representations ...................... 134

160

Corporations Act .......................................................... 5 Corrected Quindell Revenue Recognition

Policy ............................................................................ 53 Court ..................................................................................... 8

D

Debt Coverage Adequacy Representation

....................................................................................... 125 Debt Coverage Adequacy Representation

Misleading Conduct Contraventions ... 126 Debt Coverage Adequacy Representation s

1041E Contravention ....................................... 127 Due Diligence Representation .......................... 42 Due Diligence Representations Misleading

Conduct Contraventions ................................. 77

E

EBITDAW ......................................................................... 91 EL/PL Protocol .......................................................... 157 Entitlement Offer ........................................................ 26 Evans ................................................................................. 13 Extended Low Value RTA PI Cases ............ 157 EY ......................................................................................... 81

F

Fast Track ....................................................................... 15 Fast Track Costs ..................................................... 146 Fast Track PI Cases ................................................. 15 Fast Track Threshold ........................................... 145 FCA ...................................................................................... 83 FCA Investigation ...................................................... 83 Fentons ............................................................................. 12 First 24 June Announcement ............................ 80 First UK Acquisition ................................................. 12 Forecasting Review ............................................... 123 Fowlie................................................................................... 8 FRC ................................................................................... 146 Further UK Acquisitions ....................................... 12 FY2016 Financial Targets ..................................... 94 FY2016 Forecast Reliability Representation

.......................................................................................... 96 FY2016 Forecast Reliability

Representations Misleading Conduct

Contraventions ................................................... 109 FY2016 Forecast Risk Representation ........ 96 FY2016 Forecast Risk Representation

Misleading Conduct Contraventions ... 109

G

Goodmans ...................................................................... 12 Grech .................................................................................... 8 Grech’s 20 November Address ..................... 111 Group Members ............................................................ 5 Groupwide Problem Continuous Disclosure

Contravention ...................................................... 121 Groupwide Problem Information .................. 119

H

Houghton ........................................................................... 9

I

Inappropriate PSD Core Revenue

Recognition Information ................................. 59 Income Projection Reliability

Representation ...................................................... 41 Income Projection Reliability

Representations Misleading Conduct Contraventions ...................................................... 76

Income Projection Reliability Representations s 1041E Contraventions

.......................................................................................... 74 Independent Medical Assessment Reform

........................................................................................ 153 Institutional Entitlement Offer .......................... 26

J

Jackson Report ........................................................ 145 June Corrected Market Contraventions ... 135

K

Kinsella ............................................................................ 13

L

LAC ..................................................................................... 13 Lane ....................................................................................... 9 Lord Justice Jackson ........................................... 145 Lord Young .................................................................. 149 Low Value EL/PL Case......................................... 157 Low Value RTA Agreed Damages FRC ..... 146 Low Value RTA Agreed Damages PI Case

........................................................................................ 146 Low Value RTA PI Cases .................................... 148 Low Value Small Claims Track Whiplash

Claims .......................................................................... 18

M

March Continuous Disclosure

Contraventions ...................................................... 78 March Contraventions ........................................... 78 March Misleading Conduct Contraventions

.......................................................................................... 79 March s 1041E Contraventions ........................ 78 Market Contravention ........................................... 135 Millar .................................................................................. 10 Moderate Value Whiplash Claims .................. 18 MoJ ..................................................................................... 15 Morrison .......................................................................... 10 Multi-Track ..................................................................... 15 Multi-Track Costs .................................................... 147 Multi-Track PI Cases ............................................... 15

N

Negative Cash Flow Information .................. 105 Non-Legal FRC .......................................................... 146 Non-PI Work .................................................................. 11 November Contraventions ................................ 122

O

O’Donnell ........................................................................... 9

161

Offer Price ....................................................................... 26

P

Pannone ........................................................................... 13 PI Reform Process .................................................... 16 PI Work.............................................................................. 11 Portal ............................................................................... 148 Portal FRC ................................................................... 148 Post-Portal FRC ....................................................... 158 Predictable Costs ................................................... 146 Projection Period ....................................................... 19 PSD ...................................................................................... 25 PSD Acquisition Price ............................................ 25 PSD Baseline EBITDA............................................. 37 PSD Baseline Revenue .......................................... 37 PSD Core Revenue Recognition

Continuous Disclosure Contravention .. 72 PSD Core Revenue Recognition

Investigation Continuous Disclosure

Contravention ......................................................... 72 PSD Core Revenue Recognition

Investigation Information ................................ 59 PSD Future Value Representation

Misleading Conduct Contraventions ...... 77 PSD Future Value Representations s 1041E

Contraventions ...................................................... 75 PSD FY2014 Core EBITDA ................................... 37 PSD FY2014 Core Revenue ................................. 37 PSD FY2014 Volume Trend Core EBITDA . 38 PSD Reasonable Valuation Representation

Misleading Conduct Contraventions ...... 76 PSD Reasonable Valuation

Representations s 1041E Contraventions

.......................................................................................... 74 PSD Reasonable Value Representation ..... 41 PWC .................................................................................... 52

Q

Quarantined Problem Representation ...... 117 Quarantined Problem Representation

Misleading Conduct Contraventions ... 122 Quarantined Problem Representation s

1041E Contravention ....................................... 121 Quindell ............................................................................ 25 Quindell 2014 Report ............................................... 52

R

Recoverable Costs Assumptions ................... 19 Reduced Portal FRC ............................................. 156 Reform Affected Whiplash Claims ................. 19 Reform Impact ............................................................. 21 Reform Impact Risk .................................................. 21 Reform Impacts Exposure Continuous

Disclosure Contravention ............................... 70 Reform Impacts Exposure Information ....... 59 Reform Risk ................................................................... 17 Regulatory Risk-Impacted Value

Continuous Disclosure Contravention .. 71

Regulatory Risk-Impacted Value

Information ............................................................... 59 Relevant Earnings Projection Assumptions

.......................................................................................... 19 Relevant Period ............................................................. 5 Retail Entitlement Offer ......................................... 26 Revenue-Impacted Value Continuous

Disclosure Contravention .............................. 73 Revenue-Impacted Value Information ......... 59 Risk Profile Representation ............................... 40 Risk Profile Representations Misleading

Conduct Contraventions................................. 76 Risk Profile Representations s 1041E

Contraventions ...................................................... 74 RJW .................................................................................... 12 RTA ..................................................................................... 33 RTA Claim Reform Programme ....................... 16 RTA Claims .................................................................... 16 RTA PI Protocol ........................................................ 147

S

Second 24 June Announcement ..................... 80 Section 708AA Notice Statement ................... 29 SGH .................................................................................. 5, 6 SGH Australia .............................................................. 14 SGH Long-Term Executives............................... 10 SGH NEDs ...................................................................... 10 SGH Shares ...................................................................... 5 SGH UK ............................................................................ 13 SGH UK Executives ................................................. 14 SGH’s Accounting Obligations ........................... 8 SGH’s s 708AA Notice ........................................... 29 SGS ..................................................................................... 91 Skippen ............................................................................... 9 Skippen’s 20 November Address ................... 30 Small Claims General Threshold .................. 145 Small Claims PI Threshold................................ 145 Small Claims Track .................................................. 15 Small Claims Track PI Cases ............................ 15 Small Claims Track Threshold Reform ....... 16

T

Third 24 June Announcement .......................... 81

U

UK ........................................................................................ 12 UK Government .......................................................... 15 UK Income Projection Unreliability

Continuous Disclosure Contravention . 70 UK Income Projection Unreliability Risk ... 22 UK Income Projection Unreliability Risk

Information ............................................................... 59 UK Regulatory Investigation ............................. 52 Unimpaired PSD Goodwill Basis

Representation ...................................................... 96 Unimpaired PSD Goodwill Basis

Representation Misleading Conduct

Contraventions .................................................... 109

162

Unimpaired PSD Goodwill Basis Representation s 1041E Contravention

....................................................................................... 110 Unreasonable Non-Impairment of PSD

Goodwill Continuous Disclosure

Contravention ...................................................... 108 Unreasonable Non-Impairment of PSD

Goodwill Information ...................................... 106

W

Weir .................................................................................... 10 Whiplash Claims ........................................................ 16

Y

Young Report ............................................................. 149