Kentech directors win stay on $683k judgment

Two directors of the Cork-based Kentech group have secured a two-month stay on execution of judgments for $683,000 (€539,000) against them following disputes about implementation of a settlement agreement to buy another director’s shares for $11m.

Sarah and John Kent had argued an order for execution would put the company in “immediate peril” on grounds including a risk Danske Bank would call in a $7m overdraft facility plus $4.5m of outstanding bonds. A third director, John Gilley, also sought a stay on execution of a $57,000 judgment entered against him.

John Murphy, of Coach Hill, Rochestown, Co Cork, the director who sought execution of the judgments as part of the €11m settlement of legal proceedings against the other directors, disputed as “scarcely credible” the claims execution of the judgment would put it in peril, saying it has annual revenues of up to $140m.

Josar Holdings Ltd is the holding company in the Kentech group, with registered offices at Little Island, Co Cork. It employs up to 3,000 people worldwide, but only a small number in Cork.

The judge said Mr Murphy’s proceedings were settled in 2012, on terms including those directors who were parties to the settlement were to buy his shares for $11m via agreed payments on agreed dates. Some $3m had been paid so far under the settlement.

Sarah and John Kent sought a stay on execution and registration arguing valid reasons for the delay in making payments due, including it had not been possible to sell Mr Murphy’s shares on the open market. They were advised not to try and sell the shares until the company recorded a stronger set of financial results, the judge noted.

The respondents say the company is in a better position to procure the share sale and they have engaged Investec Bank in that regard, he said.

A new non-executive chairman was appointed last June, new board appointments are envisaged, and the company is forecasting an EIITDA of $5.6m for 2014 and a normalised EBITDA of $12m for 2014, the judge said. The hope is Mr Murphy’s shares will be sold in the coming months with a likely discharge of all obligations under the settlement agreement, he noted.

While Mr Murphy had a strong prima facie entitlement to enforce the judgment as the respondents had not met contractual obligations, the balance of justice favoured a stay, he said.

If a stay was not granted, the judge believed there was a “realistic prospect” of great damage being done to the company, its finances, employees and to the likelihood of the settlement ever being implemented.

A stay to Jan 1, 2015, would meet the justice of the case and he would not permit the respondents any further stay as two months gave ample time to meet their obligations, he stressed. A similar stay applied on the judgment against Mr Gilley.