Former RTÉ Dragons Den presenter Ramona Nicholas and her husband Canice Nicholas are to receive a total of €400,000 as part of a deal in their exit from the Cara Group of pharmacies, a High Court judge has been told.
Part of that sum is €29,000 redundancy payments to each of them with the remaining €342,000 representing an “ex gratia payment on the termination of their employment" and to include non-compete clauses.
The figures were revealed after Mr Justice Denis McDonald sought details of the deal - which the couple wanted to be kept confidential - as part of a survival scheme to take the group out of examinership.
A €14.1 million investment by Renrew Ltd meant a survival scheme was approved last month by the judge, but he reserved his decision on the couple's request for confidentiality until he had been provided with details of it.
On Thursday, he said while he was troubled by what had happened and the amount of the payment, he had concluded that it had not unfairly prejudiced interested parties, in particular creditors.
Creditors
Payments of €200,000 each to the Nicholas' cannot be characterised as inconsequential, he said. Even in the context of an overall investment of €14.1m, a payment of €400,000 to the ultimate beneficial owners of the group was significant, particularly in circumstances where many of the creditors were getting no more than five cent in the euro for debts owed to them,
If the payments were confined to the statutory redundancy payments of €29,000 each, it might be possible to reach a view that payments of that scale could not be considered to give rise to any unfair prejudice to the creditors, he said.
However, the payment of an additional €342,000 by way of an “ex gratia payment on the termination of their employment” is, by any standard, "a very substantial
payment in the context of an insolvency where creditors are suffering a very substantial write-down of their debts".
It begged the question as to why this payment is being made to the directors/beneficial owners rather than to the creditors, he said.
Scale of payment
The scale of the payment was all the more relevant when one considered that the agreement under which the payment was proposed was not produced to the court until requested.
The form of the confidentiality clause was also of concern. "In the absence of a plausible explanation to the contrary, it raises a question as to whether the one-sided nature of the confidentiality obligation imposed on Ms Nicholas and Mr Nicholas was designed to ensure that the scale of the payments made (to them) was not disclosed to creditors"
While troubled by the form of the confidentiality clause, the way in which the agreement was withheld until requested and the scale of the payment, the judge concluded that the payments to be made to the couple did not, in the very particular circumstances of this case, make the proposals unfairly prejudicial to any interested parties and, in particular, to the creditors.
Underlying value
The judge also said that Mr Nicholas sought to suggest that the size of Renrew investment indicated some sinister or improper intention on the part of
the secured creditor to use the examinership process as a basis for a hostile takeover of the group.
However, the judge said the making of an investment so far in excess of the underlying value of the group will be of very considerable benefit to creditors, not only in relation to historical debts but also in relation to debts that will accrue in the future.
An investment of this scale has the best chance to secure the future viability of the business of the group and the continued employment of the highly skilled workforce. That seemed to the judge to be a powerful countervailing factor that requires to be borne in mind.
A further factor was that the agreement entered into with Ms. Nicholas and Mr. Nicholas had brought to an end the threat of proceedings to challenge the validity of the examinership process which would have required a costly hearing.
Even if the challenge failed it could have had disastrous consequences for creditors and the 150 employees in the group, he said.
The making of the payments to the couple allowed the examinership to be brought to an orderly conclusion and ensured that proposals could be put in place under which the creditors would receive some benefit, he said.
