Former Smart Telecom CEO sued for sum of €1.16m

 

SMART YUROE Broadband (SYB) and related companies have sued former Smart Telecom chief executive Oisin Fanning for more than €1.1 million over alleged unjust enrichment during his time as chief executive.

SYB, Switchcom Ltd and Smart Telecom Holdings Ltd claim Mr Fanning received some €1.16 million in sums allegedly due to the companies for their use while he was chief executive of Smart from September 2004 to September 2006.

They claim there were a number of payments, drawings and transactions of a personal nature made by Mr Fanning which were not part of his agreed remuneration and not approved by the board of directors.

Some €859,237 is due arising from loan account balances which remain outstanding, net salary overpayments and a number of apparently unauthorised expenses, it is claimed.

A further €308,989 relates to monies allegedly improperly claimed by Mr Fanning as a bonus payment which he then used to acquire a 25 per cent interest in Outpost Properties Ltd.

The action against Mr Fanning is the latest of several sets of proceedings involving the company, Mr Fanning and others to come before the Commercial Court following the October 2006 buyout of Smart by SYB, a company controlled by businessman Brendan Murtagh.

Mr Justice Peter Kelly yesterday made orders consolidating all the actions and fixed a hearing date for November 3rd next. The proceedings are expected to run for more than four weeks.

Mr Fanning has brought his own proceedings under Section 205 of the Companies Act against Outpost and Smart Telecom Holdings Ltd and also has proceedings against Mr Murtagh and others.

Mr Fanning claims he is a 25 per cent shareholder in Outpost. He claims Mr Murtagh has caused accounts to be prepared showing Outpost owes Smart Telecom plc some €1.23 million but he denies Outpost owes that sum and has refused to approve the accounts.

In the Murtagh proceedings, Mr Fanning is claiming his severance agreement with Smart was a result of undue influence, breach of duty, misrepresentation or misstatement on the part of Mr Murtagh and his sons Alan and Fergal and is claiming damages against all three.

He also claims that he is entitled to an indemnity against Mr Murtagh in relation to a loan of €5 million given to Mr Fanning by Anglo Irish Bank.

Mr Fanning claims he was pressurised by Mr Murtagh into taking out that loan to purchase shares in Smart Telecom. He further claims Mr Murtagh was a shadow director of Smart Telecom. Mr Murtagh and his sons have denied the claims.

The cases arise from the buyout of Smart in October 2006 by Calally, now SYB, a company controlled by Brendan Murtagh, of Dunheeda, Kingscourt, Co Cavan.

Last July, the High Court refused Mr Fanning permission to bring a derivative action (an action on behalf of a company where a company itself has declined to act) aimed at overturning the agreement of October 2006 under which Calally purchased the company.

Mr Fanning had alleged the Murtaghs had perpetrated a fraud on the minority shareholders of the company by procuring the buyout at an undervalue. Smart Telecom adopted a neutral position on the application for a derivative action but disputed some of his factual claims regarding the circumstances of the buyout and also disputed Mr Murtagh controlled Smart at the time of the buyout.

Ms Justice Mary Irvine ruled Mr Fanning had failed to show sustainable evidence Smart was sold at an undervalue. Mr Fanning had ignored the undisputed fact the sale to Calally was on the basis of it taking over Smart’s €50 million liabilities at a time when the company was facing liquidation with no prospect of creditors being paid, the judge said.