FORMER SMART Telecom chief executive Oisín Fanning is not a credible person to challenge the October 2006 buyout of the company by businessman Brendan Murtagh as Mr Fanning himself both voted for and benefited from the deal which was the only alternative to liquidation, the High Court was told yesterday.
The court was also told Smart has claimed that, instead of owing Mr Fanning money, he owes it some €860,000 in alleged overpayments and items allegedly improperly claimed by him as business expenses.
In submissions for Brendan Murtagh and his sons Alan and Fergal, opposing Mr Fanning's application for leave to bring proceedings to overturn the buyout, Paul Sreenan SC said the buyout was not just for €1 but also involved Mr Murtagh taking on Smart's €50 million liabilities and giving it a 10 per cent equity share of the newly formed company Smart Yuroe Broadband.
Mr Sreenan said Mr Fanning had, before the buyout, negotiated a severance package for himself and had left out of his petition challenging the buyout the "critical fact" that he himself had voted for it. Mr Murtagh's offer in October 2006 was "the only show in town" given Smart's precarious financial position, inability to pay its debts and the lack of any other offers.
Contrary to claims by Mr Fanning, Mr Murtagh also did not owe Smart any monies in October 2006, Mr Sreenan said.
He said the deal was supported by the Smart board of directors and by more than 97 per cent of shareholders at an emergency general meeting and it would be very difficult to unwind it now. Mr Murtagh also did not have a controlling interest in the company and was neither a director nor shadow director as alleged by Mr Fanning.
He said Mr Fanning's delay in bringing his legal challenge was a factor to be taken into account. There was no reference to Mr Fanning bringing legal proceedings until some days after newspaper articles in April 2008 related to the possible sale of Smart Yuroe to O2. This was "opportunistic litigation" by Mr Fanning.
Mr Fanning claimed Smart had failed to pay the severance package for him, which included a payment of €650,000 but the company was claiming Mr Fanning owed it more, Mr Sreenan said.
He referred to an internal memo outlining concerns within Smart, a public limited company, that Mr Fanning had received large sums beyond his salary and that sums may have been improperly paid by the company for house maintenance, landscaping works and car expenses.
Mr Sreenan said Mr Fanning had also placed at different times values of €25 million, €95 million and €121 million on the 90 per cent stake held by Mr Murtagh in Broadband Communications Ltd.
Yesterday was the second day of the hearing of the application by Mr Fanning for leave to bring an action to overturn the October 2006 buyout of Smart on grounds of alleged unlawful and oppressive conduct of the affairs of the company by Mr Murtagh and others.
Mr Fanning needs the permission of the court to have the case heard as a derivative action - an action by a minority shareholder in a company where the company itself has not taken action. Smart Telecom has adopted a neutral position on the application and has said it will abide by the court's decision.
Mr Murtagh, Dunheeda, Kingscourt, Co Cavan, and his sons Alan and Fergal are defendants and have asked the court to strike out the application as "opportunistic".
Mr Fanning's "real motive" was to derail a proposed "highly sensitive" transaction between Smart Yuroe and another company, which would benefit Smart Telecom as a 10 per cent shareholder in Smart Yuroe, Mr Murtagh said in an affidavit.
While he was advised it was not appropriate at this stage for him to engage in a detailed refutation of Mr Fanning's entire affidavit evidence, Mr Murtagh said this was not to be taken as an acceptance by him of any matters alleged.
Mr Murtagh said he did not control either the board or a majority of shareholders in the company at any time and did not believe he was a shadow director of the company. The fact he approved the share transfer of 2006 did not mean it was a foregone conclusion that the transaction would be approved at the egm, he said.
In another affidavit, Smart chairman Kyran O'Dwyer said Mr Fanning's claim that Mr Murtagh effectively controlled the company by 2005 was difficult to reconcile with a 2004 certification by the directors, including Mr Fanning, that no person exercised any control over the board. He rejected Mr Fanning's account of Mr O'Dwyer's role in events relating to the buyout and particularly rejected as "baseless" an assertion that he had threatened Mr Fanning.
The hearing continues today.
