Slater and Gordon has told Watchstone, the company formerly trading as Quindell, that it will bring a claim against it for misleading it over a £637 million deal for its legal services division, according to The Daily Telegraph.
The Australian law firm bought the business in May last year. However, a couple of months later, Quindell told investors that its previous bosses had overstated its past results and that the insurance outsourcer had been losing money when it had claimed to be profitable.
The deal subsequently dragged Slater and Gordon into serious financial trouble, pushing it to a A$1bn (£577m) loss for the 12 months to end of June and almost leading to its collapse.
Watchstone had been due to receive £50 million that had been held in an escrow account since the Slater & Gordon deal, but a possible legal battle could result in the money being clawed back by the law firm, said The Daily Telegraph.
The paper reported that the outsourcer said that it “does not believe there are grounds for a claim to be brought and will defend it robustly”.
Watchstone said that it “conducted a professional and transparent disposal process” when it offloaded the legal division and was “advised by leading specialists”.
“In addition, Watchstone allowed Slater & Gordon the opportunity to complete an extensive and detailed due diligence process with the assistance and advice of a similarly specialist team,” it said in a statement.
It is unclear whether legal action will be pursued through the British or Australian courts at present.