Independent News & Media has described as "unfounded" a challenge to a payment of €1.87 million made to former Independent News & Media CEO Gavin O'Reilly on his departure two weeks ago.
Mr Justice Peter Kelly today agreed to transfer to the Commercial Court the challenge brought to the payment by a non-executive director, Paul Connolly.
Paul Gallagher SC, for IN&M, agreed to the transfer and said his side was anxious the "unfounded claim" be disposed of speedily.
Mr Gallagher also said it was not possible for the issue of the payment to be on the agenda of the IN&M AGM, to take place on June 8th, as company members had to have 20 days' notice of any resolutions and the case coiuld not be decided in that timescale..
Rossa Fanning, for Mr Connolly, said his side was seeking if perhaps the case could be heard before the AGM itself. If the issues raised by Mr Connolly were determined before the AGM, then members of the company would know the court's decision, he said.
This was important in circumstances where most of the directors had already decided to vote against Mr Connolly's re-election to the board without being aware of the court's decsion on his claims, counsel said.
Mr Justice Kelly said the matter was urgent but not as urgent as Mr Connolly's side argued. It was not possible to determine it in time for the payment to be on the agenda for the AGM.
The judge said he would fix the case for hearing on June 6th and approved a timetable for exchange of documents in the interim.
Mr Connolly, a non-executive director of the company, has alleged the payment was unlawful, "unduly generous" given what he described as the disappointing performance of the company during Mr O'Reilly's time as CEO, and was made with indecent haste.
Mr Connolly, one of two directors on the IN&M board representing the company's biggest shareholder, Denis O'Brien, is seeking 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.
The case, which is against IN&M only, arises from the payment approved following the resignation of Gavin O'Reilly and his replacement by Vincent Crowley as chief executive of IN&M.
Mr Connolly - a chartered accountant, director of Commmunicorp Group and a non-executive director of IN&M since 2009 - and another director voted against the €1.87 million payment.
In court documents, Mr Connolly said he believed the payment should first be approved by a general meeting, had communicated that view to the board and told it he intended to take advice but was told the board's advice was it could approve the payment.
He was later informed the payment would not be referred to a general meeting and had already been made on April 19th last, the same day it was approved. The payment was made with "indecent haste", he claims.
This case involves deciding whether Section 186 of the Companies Act 1963 required such a "compensation" payment to be approved by the members of a company at a general meeting.
Mr Connolly has also claimed the payment was unduly generous because Mr O'Reilly's term as CEO was unhappy, involving two profit warnings.
In the proceedings, Mr Connolly said he understood the board was advised the payment was to be compensation to compromise any claims Mr O'Reilly could bring against IN&M were he dismissed.
As Mr O'Reilly lives in London, does not ordinarily work here and some 70 per cent of his remuneration from IN&M was paid to a Jersey-registered company, Mr Connolly contends there is serious doubt whether Mr O'Reilly could avail of the protections of the Unfair Dismissals Act.
Mr Connolly also claims the €1.87 million payment was an extremely large sum because Mr O'Reilly had no executed contract of employment.
