A legal challenge to a €1.87m payment to former Independent News & Media chief executive Gavin O’Reilly on his departure two weeks ago is “unfounded”, lawyers for the company told the Commercial Court yesterday.
The full challenge will begin in the Commercial Court on Jun 6.
Paul Connolly, one of two directors on the INM board representing the company’s biggest shareholder Denis O’Brien, is seeking declarations the €1.87m payment is unlawful on grounds it allegedly breached Section 186 of the Companies Act because it was approved by the board and paid the same day, without being put before shareholders at a general meeting.
He also alleges the payment was unduly generous in the context of the company’s performance during Mr O’Reilly’s tenure as chief executive. Mr Connolly said the INM performance in recent times had been “extremely disappointing” with the share price falling from €27.09 on Jun 1, 2007, to €0.215 on Mar 30.
INM’s pension fund deficit had also increased to €147m in 2011 and it had issued two profit warnings in the past 12 months.
Mr Justice Peter Kelly last week granted counsel for Mr Connolly, Rossa Fanning, leave to apply at short notice to have the case transferred to the Commercial Court. Yesterday, Mr Fanning said INM was consenting to transfer as both sides were anxious to have the case determined.
His side were proposing a timetable for exchange of legal documents aimed at achieving a very early hearing, counsel said. A net legal issue was involved and he did not believe discovery of documents would be necessary.
The judge said INM appeared to believe some discovery may be necessary and asked Mr Fanning what was so urgent.
Counsel said the INM annual general meeting was scheduled for Jun 8. While notice of resolutions for that AGM had to be provided by May 9, and INM had said there could be no decision on this case by then, his side believed it might be possible to get a court decision before the AGM.
Mr Fanning complained most of the INM directors had said they would oppose Mr Connolly’s re-election to the board in the absence of an adjudication of his claims about the payment and said he wanted members to know the court view of the claim.
Mr Justice Kelly observed, whether Mr Connolly won or lost his case, the reality was the payment matter would not be on the AGM agenda.
Paul Gallagher, counsel for INM, said they were consenting to transfer as they were anxious this “unfounded” claim be dealt with. The fact was it could not be decided in time to go before the AGM and, in those circumstances, his side believed it was not especially urgent. He also took issue with the suggestion of some discourtesy to the court arising from the directors having taken a view on this action.
Mr Fanning suggested the case could be heard over two days but the judge, having asked how many witnesses would be involved and being told there would be three for Mr Connolly and four for INM, indicated some scepticism about that.
Mr Justice Kelly said he would transfer the case as the sum involved was over the minimum €1m threshold for transfer and he accepted there was an element of urgency, although he was “not at all convinced” it was as urgent as Mr Connolly argued.
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