LSH Buyer’s Legal Defence Says He Pulled Out Of Deal Due To Broker’s ‘Disputes’
The man being sued by troubled estate agency Countrywide for not completing a deal to buy Lambert Smith Hampton said he pulled out of the transaction because the commercial brokerage was involved in “disputes” that had not been disclosed during sales talks and which might have opened him up to big future legal payments.
In a defence and counterclaim to a £10M-plus legal claim brought against him by Countrywide, John Bengt Moeller said LSH and its subsidiaries were involved in two disputes that he became aware of during the due diligence process undertaken ahead of buying the firm.
He said Countrywide failed to disclose these disputes and that this failure gave him the right to terminate the sales and purchase agreement he entered into in November last year to buy LSH for £38M.
The first dispute outlined by Moeller is between LSH subsidiary Holland Mitchell and Cavendish Place Hough Green Chester Management.
“The dispute relates to alleged mismanagement and dubious financial accounting and allocation on the part of Holland Mitchell whilst acting as an ‘estate manager’ for [the company],” the legal defence said. It refers to a letter, which is not a public document, attached to the defence that was provided to Moeller by a director of Cavendish Place.
The second dispute outlined in the defence was between LSH and the Regeneration Investment Fund for Wales.
“The Defendant’s belief is based upon information received informally and directly from a regional director of the company, Dudley J Cross, in January 2020,” the defence said. Cross is regional head of building consultancy at LSH.
“The dispute relates to an alleged inaccurate valuation of property in Wales which was subsequently sold at an undervalue of £37M. The potential liability to the company was therefore very substantial.”
This was headline news in Wales, and the RIFW was heavily criticised by the region’s devolved government for a deal in 2012 in which it sold a portfolio of sites for £21M.
Auditors said the sites had been undervalued by £15M, and the Welsh government took legal action against LSH and another company, Amber Fund. The legal action was settled on 10 November this year, with the terms of the settlement confidential.
Moeller said that he wasn’t given enough detail of these claims to be able to accurately value LSH, and he alleges this constituted a breach of warranty.
Countrywide launched its claim against Moeller in September and is seeking damages of more than £10M. It claims that Moeller pulled out of a deal to buy LSH that had been contractually agreed, first seeking a delay by email at 1.25am on New Year’s Eve, less than 12 hours before the transaction was scheduled to complete.
It said it is seeking damages amounting to the difference between the £38M price for LSH that had been agreed and what the firm is likely to be worth if sold today.
The company outlined in its claim against Moeller that it needed the money from the sale of LSH to pay down debt, and the company’s shares have nosedived over the past year because of its high levels of leverage.
Following the aborted deal, Countrywide in October agreed a deal to raise £90M in rescue equity from private equity firm Alchemy Partners, under pressure as it was to reduce its debt. But in November, rival estate agency Connells revealed it had made an £82M offer to buy the firm outright. Last week, shareholders rejected the Alchemy deal, leading to the resignation of Countrywide chairman Peter Long.