Watchstone Group PLC v PricewaterhouseCoopers LLP

In assessing disputed evidence, particularly in a commercial fraud or confidence claim, the court should test recollections against contemporaneous documents, objective facts, motives and the overall probabilities. Contemporary documents are important, but oral evidence remains relevant and must be addressed fairly.

For a loss-of-chance claim based on a hypothetical decision by a third party, the claimant must first establish the relevant breach, receipt and use of the information, and then show a real and substantial chance that the third party would have acted differently. A claim fails where the alleged information was not passed, did not influence negotiations, and could not causally support a higher price.

Watchstone Group plc claimed damages from PricewaterhouseCoopers LLP for breach of confidence, breach of contract, breach of fiduciary duty and unlawful means conspiracy. The claim arose from a meeting on 15 January 2015 between a PwC partner and an investment banker advising Slater & Gordon on its proposed acquisition of Quindell’s professional services division.

Watchstone alleged that confidential information about Quindell’s cash position, accounting and business had been disclosed and then used by Slater & Gordon to negotiate a lower purchase price. PwC denied that relevant information had been disclosed and disputed causation. The central questions were what occurred at the meeting, whether any information reached Slater & Gordon, and whether it affected the price.

1. The claim was dismissed. The additional claim by PwC against Slater & Gordon also did not arise and was dismissed.
2. The court preferred the evidence of the PwC partner to the contemporaneous email written by the investment banker after the meeting. Applying the approach in Armagas Ltd v Mundogas S.A. (The Ocean Frost), the court tested the evidence against the documents, objective facts, motives and inherent probabilities. The email contained numerous inaccuracies, mixed information from different sources with the writer’s own conclusions, and was not a reliable record of the meeting.
3. The court accepted that the meeting was short and that the PwC partner did not disclose the information alleged by Watchstone. His statement that there was sufficient cash to complete the transaction substantially reflected public announcements and did not imply that cash would run out shortly afterwards. His silence while the banker spoke did not amount to an implied representation or endorsement.
4. Even if some information had been disclosed, it was not shown to have reached the relevant Slater & Gordon decision-makers in material form or to have influenced the negotiations. The only material information apparently conveyed was that PwC was instructed solely by Quindell rather than by its lenders. That led to an open attempt to arrange contact between PwC and EY, but had no effect on price.
5. On causation, the court adopted the loss-of-chance approach indicated by Allied Maples Group Ltd v Simmons & Simmons. Watchstone had to establish the breach, receipt and use of the information, and a real and substantial chance that Slater & Gordon would otherwise have offered more. None of those requirements was satisfied. The evidence showed that the price was determined by detailed due diligence and maintainable EBITDA modelling, and that there was no real or substantial chance of a higher offer.