Shareholders. Credit: Bloomberg

Commercial litigation boutique Harcus Parker is to take on litigation giant Herbert Smith Freehills, as shareholders at Quindell – now known as the Watchstone Group – mount an action against the company, which they have accused of misleading them. 

According to Harcus Parker, in the four years to 2015, AIM-listed insurance group Quindell regularly published positive market announcements about its financial health, only to reveal that it suffered a £238 million loss in 2014. This, the firm is arguing, resulted in institutional investors losing money. 

Harcus Parker has issued Watchstone a letter before action, the firm has said. According to a person with knowledge of the action, Watchstone has deployed HSF banking litigation heavyweight and U.K. class actions head Harry Edwards to advise it. Edwards previously successfully advised Lloyds against a class-action claim for £385 million, which was not upheld.

Last year, the Financial Reporting Council fined big four firm KPMG more than £4 million connected to failings in its audit of Quindell's accounts, including failing to "exercise sufficient professional scepticism".

The Serious Fraud Office launched an investigation into Quindell soon after the losses came to light. The investigation is ongoing. 

Acting for the shareholders, Harcus Parker partner Jennifer Morrissey said: "We are rapidly building a cohort of shareholders who suffered significant losses when the share price collapsed when the truth started coming out, and we hope Watchstone will recognise the failures of its predecessor and compensate them without the need for a drawn-out legal fight."

As the successor to Quindell, the Watchstone Group has found itself involved in a clutch of high-profile disputes. In September, the High Court allowed the company to bring a counterclaim against Slater & Gordon, in a longstanding dispute over the law firm's £637 million acquisition of the group's professional services division. CMS and Dorsey & Whitney acted.