Case over INM payment resolved


A High Court action by a non-executive director of Independent News and Media (INM) over a €1.87 million exit payment to the company’s former chief executive Gavin O’Reilly has been settled.

Mr Justice Brian McGovern, who was due to give his ruling today in the action brought by Paul Connolly, was told the matter had been resolved yesterday.

Mr Connolly had sought a declaration that the payment to Mr O’Reilly was unlawful. The case was heard over three days last month before Mr Justice McGovern reserved his decision.

He was due to give that decision today when Michael Howard SC, for INM, said the matter had been resolved.

The judge asked when this had happened because he had spent many hours over the last two-and-a-half weeks working on the judgment particularly in relation to two areas of relevant company law which had not been decided on before. 

It seemed a “shocking waste of court resources and time” when there are other matters which needed to be dealt with, the judge said. A lot of other work had to be parked while he worked on this judgment, he also said.

Mr Howard said the settlement took place only yesterday and the reason it had not occurred sooner was because the parties believed the original re-listing for the case was October 8th. They wanted to apologise and wish the court could have been told sooner, he said.

Rossa Fanning BL, for Mr Connolly, also apologised and asked the matter be struck out with no order.

The judge also said that it was good the settlement had been reached yesterday rather than a week ago during which time the court might not have been informed.

“The third secret of Fatima was eventually revealed but this (holding up his judgment in his hand) will not suffer the fate of seeing the light of day,” he said.

In his action, Mr Connolly, a nominee of major shareholder Denis O’Brien, said it was made with “indecent haste” and Mr O’Reilly presided over “a period of destruction” of the company’s share value.

He sought declarations the payment breached Section 186 of the Companies Act because it was approved by the board without being put before the company’s shareholders at a general meeting.

He was told the payment would not be referred to a general meeting and that it had already been made to Mr O’Reilly on April 19th last, the same day it was approved.

His lawyers said the court had to decide whether the Companies Act 1963 required such a “compensation” payment to be approved by the members of a company at a general meeting.

INM’s lawyers argued the board was within its legal rights to make the payment because it had been approved on the basis of settling an employment dispute and in order to avoid litigation.

The court heard Mr O’Reilly had threatened legal proceedings and the board directed negotiations take place with him to avoid having to fight time-consuming litigation.

It was argued the directors of a company are empowered to enter into a bona fide compromise of legal, and in particular contractual, claims and have a broad discretion when doing so.

It is well established that such agreements are outside the scope of Section 186 of the Act, it was also argued.

Even if it did (fall within Section 186), there was also an exception to such payments provided by Section 189(3) of the Act which allows the payment for damages for breach of contract entered into on foot of legal advice and in the best interests of a company, INM said.