Bitter feud threatened the
Lagan Group
The brothers
grew the Lagan Group into a business with 1,000 staff
The BBC has learned that two brothers who built one of Ireland's biggest
construction groups had a bitter feud which threatened the business.
Kevin and Michael Lagan grew the Lagan Group into a business with 1,000
staff and an annual turnover of £400m.
Details of the falling out were revealed in a High Court judgement which
concerned Michael's attempt to have the business wound up.
Delivered in 2008, it could not be reported until now for legal reasons.
It describes how "increasing and unresolved differences"
between the brothers developed into a "serious conflict".
In a joint statement issued on Thursday, the brothers said said they now
have separate businesses but are working together on areas of mutual interest.
In affidavits filed in 2008 as part of the court case Michael Lagan
accused his brother of seriously undermining their "relationship of trust
and confidence".
He claimed Kevin's behaviour involved reneging on agreements and trying
to exclude him from the management of the group.
Michael also said Kevin undertook a "tactical manoeuvre" which
involved pressuring him to invest £9m of his personal money in the group's
house-building operation and breaching fiduciary duties in respect of a £31m
deal to buy a Welsh slate company.
He said the attempt to have the business wound-up was taken as a last
resort after Kevin failed to make "a fair and reasonable offer" to
buy his 42.5% share of the business.
'Catastrophic consequences'
In responding affidavits Kevin Lagan rejected those claims and said
Michael's attempt to have the group wound up had caused it "substantial
damage".
He said the act of filing a winding-up petition had, at that time, put
the company in technical default of bank loans and PFI contracts.
Another Lagan director gave evidence that had the petition become public
it would have had "catastrophic" consequences for the business.
In the event the court ordered that as the case was essentially a
dispute between the two men, and the business was solvent, the petition should
not be made public.
The case was settled in 2010 and the order removed in 2011 which cleared
the way for the details to be published.
The judgement suggests that the roots of the dispute go back to 2001
when there were efforts by the two men to agree on the re-organisation of the
group.
From around 2004, there was an "informal demerger" which saw
the management of one company division report to Michael and the other four
divisions report to Kevin.
However, Michael complained that in 2005 Kevin had
"frustrated" the agreed sale of the group's building materials and
clay business.
Then in 2006 they reached what the judge described as "at most an
agreement in principle" on a "partition" which would have seen
each of them take exclusive ownership of different parts of the business.
Michael later complained the Kevin had "reneged" on this deal
with a view to getting him to sell his shareholding for a reduced price.
'Major rift'
Matters appeared to reach a head in 2007 when a company in which Kevin
was the majority shareholder paid £31m to acquire Welsh Slate.
Mr Justice McCloskey described this deal as "the impetus for a major
rift between the brothers".
There were then further unsuccessful negotiations before Michael filed
the petition as what he described as "a last resort".
That could have lead to the group being broken up and its trading
companies sold.
Kevin's affidavits said the petition had had the effect of
"fundamentally altering" the firm's relationships with its bankers
and business partners.
The judge said there was then a "trading of punch and
counter-punch" when more allegations were made.
In the event, the winding-up petition did not go to a full hearing
because the substantive matters were settled out of court.
The settlement involved Michael Lagan taking exclusive control of some
parts of the business, now called the Lagan Construction Group.
Its most recent set of accounts, for the year to March 2011, refer to it
acquiring the civil engineering, piling, PFI and operating and maintenance
business of the Lagan Group as "part of a wider re-organisation".
In a joint statement issued on Thursday the brothers said: "This
matter relates to a succession planning issue which arose some four years ago.
"In 2008, acting in the best interests of the Lagan businesses, we
entered a process of negotiation and discussion through the Chancery Court. The
issue was subsequently resolved by agreement to separate certain of the Lagan
companies, the smooth transition of which completed in 2010.
"We continue to work closely on areas of mutual interest while
leading our individual businesses through this challenging economic
climate."
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