Challenge to €1.9m O'Reilly payout 'unfounded', court told
A CHALLENGE to a payment of €1.87m to former Independent News and Media (INM) CEO Gavin O'Reilly on his departure two weeks ago is "unfounded", a lawyer for the company has told a court.
Mr Justice Peter Kelly yesterday transferred the case to the Commercial Court and fixed it for hearing on June 6.
Paul Connolly, one of two directors on the INM board representing the company's biggest shareholder Denis O'Brien, is seeking declarations that the payment is unlawful on grounds it allegedly breached the Companies Act because it was approved by the board on April 19, and paid the same day, without being put before shareholders at a general meeting.
He also alleged the payment was unduly generous in the context of the company's performance during Mr O'Reilly's tenure as CEO.
Last week, Mr Justice Kelly granted Rossa Fanning, for Mr Connolly, leave to apply at short notice to INM to have the case transferred to the Commercial Court. Yesterday, Mr Fanning said INM was consenting to a transfer as both sides were anxious to have the case determined.
His side was proposing a timetable for exchange of legal documents aimed at achieving a very early hearing, Mr Fanning said.
A net legal issue was involved and he did not believe discovery of documents would be necessary.
Mr Justice Kelly said INM appeared to believe some discovery of documents may be necessary and asked Mr Fanning what was so urgent.
Mr Fanning said the INM annual general meeting was scheduled for June 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 that date, his side still believed it might be possible to get a court decision before the AGM.
Mr Fanning complained that 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's 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, for INM, said it was consenting to the transfer as it was anxious this "unfounded" claim be dealt with. The fact was the matter could not be decided in time to go before the AGM and, in those circumstances, his side believed it was not especially urgent for it to be decided this court term (which ends on May 24).
Mr Gallagher 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 Mr Justice Kelly, 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 to the Commercial Court and he accepted there was an element of urgency, although he was "not at all convinced" it was as urgent as Mr Connolly argued.
In an affidavit, Mr Connolly said he had told the board he believed the payment should first be approved by a general meeting and he intended to take advice about that but was told the board's advice was it could approve the payment.
The case involved deciding whether Section 186 of the Companies Act required such a "compensation" payment to be approved by the members of a company at a general meeting, he said.
He added he understood the board was advised the payment was to be compensation to compromise any claims Mr O'Reilly could bring against INM if he were dismissed.
Because Mr O'Reilly lives in London, does not ordinarily work here and some 70pc of his remuneration from INM was paid to a Jersey-registered company, Mr Connolly said there was "serious doubt" whether Mr O'Reilly could avail of the protections of the Unfair Dismissals Act.
The €1.87m payment was an extremely large sum because Mr O'Reilly had no executed contract of employment, it is also claimed.
Meanwhile, the company's 2011 annual report, which was published yesterday, showed that Mr O'Reilly's total remuneration in 2011 was €878,000. This included a basic salary of €750,000. The balance was made up of pension and other benefits. This compared with a package of €1.036m in 2010.
Total directors' remuneration for the year amounted to €1,991,000. This was made up of €569,000 for services as INM directors and €1,423,000 for other services.