A multi-million dollar fight between top tier law firm Herbert Smith Freehills and its former client United Petroleum will go back to court next Monday after the law firm and the petrol retailer failed to reach a settlement on Wednesday.
The court-ordered mediation before Associate Justice John Efthim of the Supreme Court of Victoria took place on Wednesday, until negotiations broke down and Freehills and United walked away from the negotiating table around 2.30pm. This was the third time the parties attempted mediation, following two failed mediation attempts last year. This means Freehills and United will go back to hearing before Justice James Elliott next Monday.
As of Wednesday afternoon the mediation between United and its former chairman Martin Hudson was still ongoing.
Freehills is locked in a fee dispute with the petrol retailer over $600,000 of outstanding legal bills.
United Petroleum is also suing Freehills and its former chairman Mr Hudson for over $27 million in advisors’ fees and damages. It alleges the law firm acted negligently by advising its then chairman in his personal capacity and not informing the rest of the board of its concerns about not meeting the IPO deadline.
Banks ‘ready to go’
At last week’s hearing, Freehills’ barrister, United’s barrister, Michael Wyles, QC, said there was a “substantial, not merely speculative” prospect of $500 million being raised as a result of the float, had Freehills’ lead partner, Michael Ziegelaar, performed his duties.
It is United’s case the “commercial people” including the investment banks were “ready to go” and release the draft prospectus to analysts on Monday, October 24, 2016, but the IPO failed because the legal advisor Freehills and its then chairman Martin Hudson “gave up” on the IPO the day before.
“Mutterings that it could all be done later misses the issue entirely. Opportunities are created in commerce and this was a commercial opportunity to proceed in 2016 and it was that opportunity … which the conduct of Herbert Smith and the conduct of Mr Hudson on 23 October extinguished,” Mr Wyles said.
United is an independent fuel retail business which was co-founded in the 1980s by South African-born businessmen Avi Silver and Eddie Hirsch. The Christmas 2016 float, which was its fourth attempt in less than two years and touted to be worth about $500 million, never went ahead.
Financial information still missing
Freehills’ barrister, Philip Crutchfield, QC, said at last week’s hearing the financial section was still missing from the draft prospectus sent by Morgan Stanley at 1.10am on Saturday morning, two days before the Monday deadline, and even the updated draft prospectus sent three hours later – which did have a financial section – remained a work in progress.
By Saturday afternoon, Mr Ziegelaar formed the view it was unlikely the financial section of the prospectus would be completed by the next day, to give sufficient time for everyone to provide the sign-offs that day, Mr Crutchfield said.
Mr Crutchfield said after the Freehills team “working around the clock for several months”, it was reasonable for Mr Ziegelaar to instruct his team to stop working on the matter that Saturday.
“Mr Ziegelaar had no interest in asking his staff to continue to work all Saturday night and incur additional fees on an IPO that he considered was unlikely to proceed, especially having regard to the small amount of work that Herbert Smith Freehills still had to do,” Mr Crutchfield said.
‘Everyone gets sacked’
Mr Crutchfield said the advisers and the non-executive directors were contemplating a pre-Easter float in 2017 instead, but before they could do so United’s co-founders asked the non-executive directors to resign on Monday – the day after they refused to sign off on the draft prospectus. Freehills, who was advising United on a number of matters, was instructed “not to do any work on any matters” until further notice.
“Everyone gets sacked on the Monday,” Mr Crutchfield said.
Last week’s hearing also revealed an internal email from joint lead manager Credit Suisse’s Adam Lennen, who told a member of his team after the float fell through: “I want to say thank you very much for your help on this. An extremely tough and under-prepared client”.
Extracted from AFR.