FIVE businessmen claimed in the High Court yesterday that they invested in an IDA sponsored rescue package for an ailing company and that Foir Teo, the state rescue agency, failed to subscribe its portion of the required finance.
Mr Michael McDowell SC, for the investors, said Foir Teo, instead of investing £125,000, decided to drip feed with small loans a company which had been "in intensive care from birth". The men lost their investment and were claiming more than £400,000. The company collapsed.
The action was brought by Mr Brian Reddy, a business consultant, of Glenart Avenue, Blackrock, Dublin; Mr Cyril O'Mahony, an accountant, of Oakdene, Ballinclea Road, Killiney, Co Dublin; Mr Gosta Brannstrom, a business consultant, of Stockholm, Sweden; Mr Paul Beecher, a dairy scientist, with an address at Ruwi, Oman; and Mr Eugene McGillycuddy, an engineer, of Killorglin, Co Kerry.
Mr McDowell said the company, Garrard Engineering Ltd, Newtown Industrial Estate, Coolock, Dublin, which made transformers and controllers for use in toy trains and games, got into financial difficulties in 1982-83.
It employed 100 people and the IDA had given fairly significant assistance. Garrards was insolvent and if it was to survive, the firm would have to be under a new company, Corvette Ltd.
In June 1984 a deal was hammered out between the IDA, ICC, Foir Teo, AIB and the five individuals. Total investment was to be £525,000. The five individuals were to come up with £125,000 and this would be matched by Foir Teo.
Mr McDowell said that between November and December 1984 it appeared the notion crept into the mind of some persons in Foir Teo that they could renege on the deal. Instead of providing capital upfront they decided to "drip feed" Corvette Ltd. Foir Teo made loans totalling £46,000 so that between £78,000 and £80,000 was withheld.
By the summer of 1985 the company was on the floor financially, and Foir Teo said it would not make any more funds available. The company collapsed.
The company was denied a cash flow which would have maintained it for at least eight to 12 months and would have meant the difference between success and failure. The five individuals claimed Foir Teo's "pull out" destroyed the value of their investment.
These men, said Mr McDowell, invested at the request of the IDA. They were seeking compensation on the basis that their investment was rendered worthless and that, conservatively, the capital appreciation of their investment would take them from £125,000 in 1984 to £330,000 or £350,000 today.
Foir Teo denies the five businessmen's claims or that Foir Teo entered into any agreement with them. The £125,000 facility was subject to conditions specified in a letter in April 1984.
The offer, the state rescue agency claimed, was subject to there being no likely adverse effect on the business or its future prospects and that the facility would be in instalments. Foir Teo denies the investors adequately complied with the terms of the offer.
Alternatively, Foir Teo claims it reserves the right to decide whether there are developments likely to have an adverse effect on the business and its future prospects.
It claims it advanced £51,000 gross to the company but refused the balance because the financial situation had deteriorated significantly. There had been delays and the investors were in breach of the terms of the offer.
Foir Teo claims the investors were guilty of contributory negligence because they failed to properly assess the financial position of the company failed to properly run or manage the company; and invested in a company they ought to have known was likely to lose their money.
The hearing continues today.