LGV in court victory over 'ideas'

Legal & General Ventures has won a landmark court case that strikes to the heart of deal-making in the City.

A High Court judge last week dismissed claims brought against the insurer's venture capital arm by business consultant George Hosking over the pounds 265m buyout of own-label detergents maker McBride in 1993.

Mr Hosking was claiming over pounds 4m after being forced out of the management buy-in (MBI) team for McBride because, he alleged, he had refused to massage profit forecasts upwards to suit City backers.

In a judgment welcomed by financiers, however, Mr Justice Harman rejected the suit, finding that no binding promises had been made while LGV sought City backing for the deal. Nor did the idea itself entitle him to any reward, the judge found.

"For the venture capital industry following the case, it will be an immense relief that the status quo has been preserved," said LGV's managing director, Charles Peal.

"When negotiating 'subject to contract', no binding commitments are made at all."

Mr Hosking, a former Unilever executive, now runs his own industry consultancy, Cameron Consultants. He took the idea to LGV in November 1992 when BP was dismantling its huge nutrition arm, which included the McBride super-market own-label soap powders and personal care business.

After a series of disputes with LGV, however, and chief executive Michael Handley - whom he brought in from Ranks Hovis McDougall - he was replaced as chairman designate by Lord Sheppard, former head of Grand Metropolitan.

Mr Handley went on to gain pounds 4m in shares and options, and Lord Sheppard pounds 1.7m, when McBride was floated for pounds 329m in July 1995. LGV also made tens of millions through the sale of a 15 per cent stake.

Just six months later, however, McBride shares collapsed after a profits warning - at 1321/2p today investors are still nursing huge losses on its 188p flotation price.

Mr Hosking alleged he was forced out after he refused to endorse a profits estimate of pounds 50m for 1995 to entice City backers regarding the buy-in.

In the event, McBride forecast operating profits of just pounds 38.7m at flotation, which collapsed to pounds 27.9m for 1996 because of production problems. Controversy followed over when the management actually knew before giving the warning.

In his judgment, however, Justice Harman restricted himself to the narrow legal contract claims of the case.

"There is no property in an idea, perhaps especially one that has failed, and in my judgement Mr Hosking has not proved any of the claims based on rights known to the law," the judge concluded.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Loren Hughes: Financial Accountant

£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...

Sheridan Maine: Finance Analyst

Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat