Dispute over car locks leads to claim against Channel

Channel Holdings, the security products group, faces a claim for damages of up to pounds 640,000 after becoming embroiled in a patent dispute.

Journalists were tipped off to attend Channel's annual meeting yesterday, where a shareholder raised the litigation, which had not been mentioned in the annual report.

Channel's non-executive chairman, Philip Ling, said the company would fight any action against it and he was confident that the damages claim was "not material'' to the business.

The dispute started earlier this year when Channel claimed Linwood was manufacturing a car steering lock similar to its own product.

Channel obtained an injunction against Linwood, its director Martin Bond, and the retailer Argos, which sold the product. Solicitors advised Channel it had a watertight case, but a High Court judge told the company to pay pounds 30,000 into court before the matter could proceed to a full trial. This would be recoverable if Channel won the case.

Hostilities deepened when Linwood served a counter-claim for damages of up to pounds 640,000 for loss of business. Mr Bond was not at yesterday's meeting, and could not be contacted later, but used a proxy shareholder to raise the legal issues.

Channel said it would make a statement to the shareholders only if the counter-claim was valid, and it was not, Patrick Rogers, the chief executive, said. "There is no reason to worry about liabilities and contingencies because there is no substantiation to their case."

He believed Linwood had managed to sell only about 5,000 of its car steering locks. He said he could not understand how it could claim pounds 640,000.

Channel also announced yesterday that it was seeking ways of reducing its number of shareholders. The company has 4,200 shareholders, but about 1,000 of these - a large number for a small company - never cash their dividend cheques. Channel hopes to devise a formula by autumn.

Mr Ling did not rule out another rights issue to fund an acquisition, but said there was no pressure on the company to raise money. Channel also plans to form an internal audit committee when it appoints a non- executive director later this year.