Lep is being sued in the High Court by John Read for wrongful dismissal.
Mr Read is claiming more than pounds 2m against his former employees. David James, the company doctor now chairing Lep, which has debts of around pounds 380m, has told bankers that an out-of-court settlement would not have been practical because the company could not have afforded an immediate payment of pounds 1m or more.
He said he wanted to seek constant dialogue with the banks, who are led by National Westminster, throughout the case, 'with a view to assessing the means by which to resolve any unfavourable judgment resulting, so that the best interests of the banks and all other parties concerned with Lep are preserved'.
Mr Read, who had been chairman and chief executive of Lep since November 1982, was forced out of the company at the end of 1991, at the behest of the group's banks, without compensation after it emerged that the company was in a state of financial crisis.
Mr Read is claiming compensation for his rolling three-year contract, which earned him more than pounds 300,000 in 1990, arguing that he was wrongfully dismissed from the company.
But Lep's lawyers, Berwin Leighton, who contemplate calling around 20 witnesses, have prepared a long case, arguing that Mr Read was primarily responsible for many of the misadventures the company got itself into and they will allege that he actively misled Lep's board of directors in respect of some of them. The case is expected to last around three to four weeks and a judgment may take a further three to four weeks.
Bankers to the group are said to be supportive of the company's resolute determination to fight the case. However, some of them have made it clear that they will not be happy to support the company in the event of it losing the case. 'We would not be happy about providing further funds to pay the man we think got us into this trouble in the first place,' said one banker last night.
Mr Read is in financial trouble himself and is in the process of trying to agree a voluntary scheme of arrangement with his creditors, who are owed around pounds 2m.
His creditors, some of whom are also bank lenders to Lep through other arms of their banking groups, are funding Mr Read's legal expenses.
Lep's shares, which in 1989 stood at 189p at one point, closed yesterday at 6p. Under the terms of a financial restructuring, the company's bankers now own around 85 per cent of the company's equity.
Yesterday, in court, Mr Read's counsel outlined part of the story as far as his client was concerned, in particular with regard to Mr Read's involvement in a company which Lep set up in the US, Trading Alliance Corporation. The group was launched in 1988 to provide US importers with trade finance by means of back-to-back letters of credit. Importers who made use of this finance were to be encouraged to use the services of the group's freight-forwarding network.
Mr Read's position is that at all times he acted in the interests of the company and with proper authority.
Pension payments to Mr Read have not been authorised because of a dispute over the sale of a Lep property, Coombe Hill House, to the fund for pounds 12.5m by a trustee company associated with Mr Read, which has left the UK pension fund in deficit. This dispute is being considered separately.Reuse content