Kildare-based firm's directors allege fraud and breach of trade secrets

Two directors from a Kildare-based company are taking a High Court case against two fellow directors alleging fraud and breach of trade secrets.

A case is also being taken against a third director claiming that he failed to take action to stop the alleged fraud and misappropriation of the company's intellectual property.

Kevin McCabe and James Glynn, two directors in Fatstrippa, a company which has patented technology to remove fat and grease from water, are taking a derivative action on behalf of the company in which they claim that two UK-based directors, Alan Owen and his son Jonathan, had misappropriated the company's cash.

It is also claimed that company's trade secrets and intellectual property had been misappropriated and transmitted in secret to other parties in the US to be re-patented around the world in competition with Fatstrippa.

Senior counsel for the plaintiffs Mel Christle said that Jonathan and Alan Owen had set up business with the exact same product in the US which was flagrantly in breach of the patent. He said the two defendants had flouted the company's rules in third party dealings in the US.

Junior counsel Michael Conlon said Mr McCabe and Mr Glynn were not not taking personal actions on their own behalf but were entitled to take a derivative action for the company for fraud perpetuated against a minority by those in control. The two defendants had been trying to profit at the expense of the company and some of the actions were ultra vires or illegal, he said.

No allegation is being made that a third director and chairman of the company, Stephen Leyland, had been attempting to profit from his own or the activities of Alan and Jonathan Owen or that his actions were illegal. However, it is alleged that he aligned himself with the two defendants and prevented appropriate action in accordance with his fiduciary duty.

Senior counsel for Stephen Leyland, Michael McDowell said the action was misconceived and if any action should be taken, it should be brought under section 205 of the Companies Act.

Mr McDowell said an action to recover damages against two thirds of company's members was devoid of reality and that it was not possible that the company could proceed in its present form if the majority of directors and shareholders were sued by the minority.

The litigation, if it proceeds, would solve absolutely nothing and the company would remain as it was under some quasi-partnership, he said.

Mr McDowell said the purpose of the type of derivative action being taken by the plaintiffs was to recover damages. However, he said it was clear that the assessment of damages against Alan and Jonathan Owen and his client would be almost completely speculative based on what would or would not have been the value of the firm if certain events had or had not taken place. The hearing continues today under Justice Finlay Geoghegan when a decision will be made whether it will proceed as a derivative action.