A SERIOUS quarrel between some directors and shareholders of the giant Kentech Group, which employs 2,800 people in Ireland and worldwide in providing engineering and other services, has come before the Commercial Court.
John Murphy, a director with a shareholding of more than 20 per cent, has brought a petition alleging the affairs of Josar Holdings Ltd – the holding company in the Kentech Group with registered offices at Little Island, Co Cork – and the powers of some directors are being conducted in an unfair, oppressive and unlawful manner.
In his petition, brought under section 205 of the Companies Act, he claims his employment with the company was terminated last March in breach of a shareholders agreement and he is also seeking orders for the purchase of his shares.
The respondents are four directors – Michael Francis Kent, founder of the company, Sarah Kent, who has been chief executive since 2008, John Kent and John Gilley.
In a lengthy affidavit, Mr Murphy, Coach Hill, Rochestown, Co Cork, makes a series of claims about the operation of the company and claims Ms Kent conceived the termination of his employment as a “coercive negotiating tactic” aimed at achieving the “greater end” of his elimination as a shareholder and to prevail upon him to sell his shares at an undervalue.
Mr Murphy claims Ms Kent e-mailed him on March 7th last, stating he had been disabled from the company’s network and e-mail systems and she was terminating his services because he had told her he believed Bank of Ireland had sought to grasp the Kent family shareholding in Kentech and the shares “were quite likely to end up in Nama if that happened”.
Ms Kent had accused him of defamation and gross insubordination for making that statement but he fully stood by it, he said.
The case was fast-tracked this week into the Commercial Court by Mr Justice Peter Kelly, who said it involved a bitter dispute. He has given the sides two weeks to consider a possible mediation rather than “a battle royal in court”.
Mr Murphy, who has been involved with the group since it was founded in 1994 by Michael Francis Kent, says in his affidavit that he believes the allegedly “perilous state of finances” of the Kent family and their own personal financial interests are taking precedence over the interests of the company, which had a $141 million turnover last year.
Ms Kent denies the claims in an affidavit. While accepting that the Marlfield property development project of John Kent and Michael Francis Kent failed in 2008, with a significant sum owed to Bank of Ireland, that debt was “entirely unrelated” to the company, she says.
Ms Kent also says she emphatically rejects the claim that the affairs of the company were being run unfairly or oppressively and denied the various claims by Mr Murphy concerning his treatment and employment.
The picture of company matters painted by Mr Murphy did not reflect the very serious difficulties experienced by the company between 2007-09 which almost forced its liquidation and related to the company’s operations in its earlier years, she added.
One of the most significant problems was in the area of corporate governance with senior personnel, including Mr Murphy, having no formal employment contracts, she said. Corporate governance and controls problems were the main reason for the sale of the company to Enerflex falling through some years ago.
Mr Murphy was employed by the company until 2008 after which, at his request and on the advice of KPMG, his status changed to an independent contractor operating through OctagonOne Ltd, a company incorporated by him in Cyprus, she said. He had entered into a services agreement between OctagonOne and Josar for tax purposes.
Ms Kent said she and a non-executive director, John Buckley, began a review in late 2009 of compensation packages and employment agreements related to senior people at the group. Mr Murphy was informed of the proposed compensation package and agreements in early 2010 but he refused to agree to those while other senior personnel had agreed.
Mr Murphy believed he should be treated preferentially with no one, except the chief executive, being paid more than him, she said. He also continued to request that the company pay for travel for his grown children and for personal furniture.
Due to Mr Murphy’s alleged refusal to comply with many of the group’s standard policies and other matters, he was informed in December 2010 that the company intended to terminate the OctagonOne contract, Ms Kent added.
KENTECH
CORK-BASED engineering group Kentech, founded in 1994, services the oil, gas and petrochemical industries in countries such as Russia, Azerbaijan, Mexico, the United Arab Emirates (UAE), Qatar, Kuwait and Kazakhstan. In 2009, it generated pre-tax profits of $8.2 million on sales of $137 million.
