THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("MAR").
Watchstone Group plc
("Watchstone" or the "Company" or the "Group")
Proposed counterclaim by former Executive Chairman, Mr Robert Terry and others
In the ongoing High Court proceedings brought by Watchstone against its former Executive Chairman, Mr Robert Terry and others, for breach of the share purchase agreement entered into by the Company with Mr Terry and others on 28 April 2011 in respect of the sale and purchase of shares in Watchstone Limited ("WL") (the "SPA" and the "SPA Proceedings"), the Company has received an application by Mr Terry and the other defendants, seeking permission to bring a counterclaim for approximately £14.7m.
The Company has obtained legal advice on the proposed counterclaim, and considers it to be without merit and lacking in credibility.
Although the proposed counterclaim is materially lacking in detail, in essence it appears to be a claim in negligent misrepresentation arising out of a tax indemnity that Mr Terry says the Company's subsidiary WL granted to him orally in 2011 (the "Oral Indemnity"). Mr Terry alleges that, in 2013, at and around the time when WL paid approximately £3.1m to Mr Terry (the then Chairman and Group Chief Executive) in respect of personal tax liabilities arising as a result of the disposal of shares in WL in 2011 pursuant to the Oral Indemnity, the Company expressly (and by conduct) made false representations that it would not challenge the validity of the Oral Indemnity and would not seek to recover any amount paid under the Oral Indemnity, including under the SPA.
Mr Terry now says that, in reliance on these alleged representations, he did not seek to sell some 22.59% of his then shareholding in the Company between January and March 2013 (which, he says, would have yielded some £20m), and thereby suffered a loss of approximately £14.7m relative to the price for which he eventually sold his shares in the Company between November 2014 and January 2015 shortly after he left the Company.
The Company's solicitors have written to the defendants' solicitors to identify deficiencies in the proposed counterclaim. If it is maintained (in its current form or otherwise) the Company intends to defend it vigorously and to continue with the SPA Proceedings.
The release of this announcement has been authorised by Stefan Borson, Group Chief Executive Officer and Company Secretary of the Company.
For further information:
1. By way of background, on 16 November 2018, in separate proceedings, Mr Terry, and other connected parties including Mrs Terry, successfully established the existence of the Oral Indemnity and claimed £1.0m (plus the award of costs and interest) from WL in respect of further capital gains tax liabilities arising as a result of the disposal of shares in WL in 2011, and associated fees, pursuant to the Oral Indemnity. One issue in those proceedings was whether the Oral Indemnity was voidable as a substantial property transaction entered into without shareholder approval, contrary to section 190 of the Companies Act 2006. The High Court found that it was not susceptible to challenge on that ground, and on 18 February 2019, the Court of Appeal granted WL permission to appeal on that issue. The appeal is listed to be heard in November 2019. If the appeal is allowed, WL would be entitled to repayment of the sums paid under the Oral Indemnity (exceeding £4m in total).
2. The Company's claim in the SPA Proceedings is a claim to recover amounts paid by WL under the Oral Indemnity, and is therefore contingent on the outcome of the appeal in the Oral Indemnity proceedings.