Dismissal costs Magnet pounds 850,000

MAGNET GROUP, the Yorkshire-based kitchens business that nearly collapsed after its pounds 629m buyout three years ago, has paid Albert King, its former finance director, pounds 850,000 to settle his claim for wrongful dismissal.

It is thought that the legal battle, which lasted more than two years, cost the group - since renamed Airedale Holdings - an additional pounds 700,000 in legal costs.

Mr King was fired from the group's board in November 1989 after the buyout had gone wrong and the group was in severe financial difficulties.

John Foulkes, who took over as chairman, said that there were serious deficiencies in the internal accounting and record-keeping at Magnet.

The accounts for the year to 1 April 1989 were qualified by the company's auditors, Ernst & Young, which said that 'in our opinion proper records have not been kept in accordance with Section 221 of the Companies Act 1985'. The problems were identified within the direct delivery side.

In the High Court, Judge Martin, QC, said that in the 14 months Mr King was at the company he worked hard 'with some success' to improve the internal accounting systems. The court said that Mr King could not be criticised for his efforts and that in the circumstances he acted properly and reasonably.

Judge Martin found that Mr King was not in breach of any term of his contract of employment either expressed or implied.

The settlement of the claim was agreed out of court. It is believed that Mr King received pounds 475,000 compensation and pounds 375,000 to cover his legal costs.

Since his dismissal he has worked as a freelance management consultant, but he is now seeking permanant employment as a finance or managing director of a company based in Yorkshire.

The judge's ruling includes severe critisisms of the way the buyout was conducted. The deal, led by Bankers Trust, ran into difficulties from the start, with a lukewarm directors' recommendation and a revolt by shareholders who objected to the deal to take the then-quoted group private.

Problems emerged before its assets had been transferred to the buyout vehicle, with the result that all the debts of the group were held in a company that had no claim over the assets.

The deal has since prompted a flurry of legal actions.