Shares in embattled tort law practitioner Slater & Gordon Limited (ASX: SGH) have taken off this week to climb around 30% to hit 31.5 cents this morning as potential new legislative changes important to its business model are fiercely debated in the UK.
What's likely to be exciting traders is the potential for reforms around the treatment of small claims in the personal injury (PI) sector to be watered down or shot down entirely in favour of claimant law firms over their insurance industry rivals.
The UK's popular Law Society Gazette reported on the evening of December 6 that the Law Society is fighting the government's proposals to raise the small claims limit to £5,000 for all PI claims. If the limit were raised it would eliminate a lot of the claims made for minor injuries incurred in road traffic accidents or in the workplace that Slater & Gordon's claims management business Quindell processes.
Slater & Gordon is also reportedly now preparing to sue the Quindell vendor now named Watchstone Group after it was forced to write off $814 million of the value of the acquisition due to its disastrous performance and Slater & Gordon's lack of due diligence.
Slater & Gordon itself is also being pursued by class action lawyers Maurice Blackburn over the hopeless performance of a business that is now lumbered with $765 million of gross debt and an operating cash loss of $104.2 million last financial year.
Indeed, if its chief executive Andrew Grech was in court charged with being a complete fool I would not want to be acting for the defence, and this looks a stock to avoid even if it's soon thrown a lifeline by an update to the government's proposals that were widely regarded as being driven by the now ex-chancellor George Osbourne.
In this sense Brexit may prove a blessing in disguise for the lawyers thanks to the plummeting value of UK sterling (the currency in which a lot of its debt is held) and sweeping changes to the government in the UK that came about as a result of the vote.
