Slater and Gordon plans to sue UK insurance outsourcer Watchstone Group, formerly known as Quindell, over the £637m acquisition of its professional services division.

In a statement to the Australian Securities Exchange earlier today, the law firm said it had advised Watchstone that its UK division may bring a claim against it in relation to the acquisition.

Not long after the deal, first announced in March 2015, completed, Quindell was placed under investigation by the UK's Serious Fraud Office over its past accounting practices.

In August this year, Slater and Gordon said it expected to make a A$1bn (£577m) loss for the 2015-16 financial year, amid efforts to turn around the UK business acquired from Quindell.

This followed a A$958.3m (£493m) after-tax loss in the six months to 31 December 2015, which included a massive writedown of the value of Quindell.

Previously, in May, Slater and Gordon agreed an A$840m (£437m) refinancing deal with its bankers.

In today's announcement the, Australian-listed law firm also said £50m of the acquisition  price is being held in escrow and is due to be released on 29 November. Part or all of this money could be retained subject to its claim, according to the statement.

Watchstone said in a statement today that it did "not believe that there are grounds for a claim to be brought and will defend it robustly".

The sale, Watchstone said, was "professional and transparent" and was assisted and advised by leading specialists. It added it had already granted Slater & Gordon the opportunity "to complete an extensive and detailed due diligence process with the assistance and advice of a similarly specialist team".