Lep came out fighting: David Hellier examines the plans that a company made to contest a wrongful dismissal court case brought by its former chairman

LEP GROUP, the freight forwarding to security services company, planned to take evidence from a man facing charges of illegal arms dealing to rebut a case brought by John Read, its dismissed former chairman, which reached court last week.

According to information given to the group's bankers by LEP's current chairman, the company doctor David James, the company tried to gain access to Brian Nalborough, who was involved in a $537,000 (£301,000) settlement reached by LEP in 1998, through a judge in Italy, where he is awaiting action on accusations of 'illicit negotiation' in respect of an arms deal.

When the trial judge refused Lep access to Mr Nalborough, the company instructed an eminent lawyer to contact Mr Nalborough through his defence counsel in an attempt to secure a written statement.

The company also applied for assistance through the British Embassy.

Lep also tried to obtain a voluntary statement from a journalist at Private Eye, the satirical magazine, about an article written in 1990 about the same settlement.

The journalist refused to do so voluntarily but the company intended to subpoena him to the court room.

Lep has alleged that Mr Read had a personal interest in the settlement, a claim Mr Read has denied.

The court case was settled on Thursday, the third day of the hearing, after Lep agreed to pay costs of up to pounds 350,000 but no compensation to Mr Read, whose claim for wrongful dismissal could have cost Lep up to pounds 2.6m and could have tipped the heavily indebted company into receivership.

Lep's decision to fight the claim from its former chairman and chief executive in court involved the company in planning to call as many as 20 witnesses, flying some over from the United States, where Lep has a number of subsidiaries.

Mr Read was dismissed from Lep, at the behest of the group's bankers, at the end of 1991 when it became clear that the company was heading for a financial crisis.

A few months after Mr Read's departure, the new management disclosed total write-offs of pounds 220m, which included discounting the group's entire investment in US property and the writing off of pounds 23m that had been invested in Trading Alliance Corporation (TAC), a clothing and knitwear company.

Lep planned to call two directors from the company to give evidence against Mr Read. It intended to argue in court that Mr Read mismanaged the TAC operations and that he misled Lep's directors in respect of them - allegations which Mr Read denies.

According to documents in the hands of the Independent on Sunday, Mr Read, through his solicitors, opened settlement discussions before the case commenced in London's High Court last week.

Mr Read's demands were initially for more than pounds 2m, but these were subsequently reduced as he began to concentrate on ensuring the payment of his pension, which was a separate issue from the wrongful dismissal case.

Mr Read's pension payments have not been made since his dismissal because of a dispute about the sale of a property, Coombe Hill House, to the pension fund.

The pension fund directors argue that the property was sold to the pension fund by Mr Read and others at an inflated price, to help bring funds into the company.

Mr Read denies this.

The Lep directors held discussions directly with members of the pension fund to discover whether they were willing to provide payment of the pension. They replied that payment of the pension would necessitate a cash contribution from Lep, estimated to be pounds 1m, if the fund was not to be depleted so substantially that it would put at risk other beneficiaries and lay the directors of the fund open to censure. Lep decided not to proceed with a settlement at an early stage, partly because it did not have surplus funds available to cover an immediate payment of pounds 1m to the fund.

Terence Etherton, the QC acting on behalf of Lep, said before the case that the chances of the company winning depended on the credibility of its witnesses and whether the judge would conclude that Mr Read knowingly misled the Lep board to the point of dishonesty or whether he simply exercised poor judgement. In the latter had been accepted as the case, his claim would have succeeded.

Mr James admitted to bankers that the documentary evidence available to the company was not 'particularly strong' and that much depended on whether Mr Read's credibility could be effectively undermined on cross-examination.

Mr James said that last week's settlement of the case would enable his management team to concentrate on the task of trying to develop the company's businesses.

Had the case gone to its full seven weeks, Lep estimates that its costs would have reached around pounds 500,000. Mr James said that such costs had already been provided for in the group's accounts.

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