Dany Bahar files £6.7m claim against Group Lotus for wrongful dismissal

It will come as no surprise to anyone who’s been following Group Lotus recently, that Dany Bahar, who was fired as CEO back in June this year, has initiated a claim for £6.7m ($10.6 million) against his former employers for “unlawful early termination of his employment”.

In a stock exchange filing published on Monday, DRB-Hicom Berhad disclosed that a claim for £6,737,240 had been delivered to their lawyers in the UK last Thursday (23rd August) which came via Bahar’s London-based solicitor, Edwards Wildman Palmer LLP. The claim cites Group Lotus as first defendant with DRB-HICOM as second defendant.

Bahar launched an ambitious five-year (New Era) plan at the 2010 Paris Motor Show, to launch new models that would boost production and improve Lotus’ competitiveness with the likes of Porsche, Ferrari and Maserati.

Bahar spent heavily during the early phase of the investment, however his ability to draw down further funds was frozen last July. Thereafter, despite continuing to make progress, the plan was suspended last December when DRB-HICOM made the surprise purchase of Malaysian national automaker Proton, who also own Group Lotus.

Dany Bahar, former CEO of Group Lotus, who last Thursday initiated a £6.7m claim against Lotus and DRB-HICOM for wrongful dismissal.

At the time of Bahar’s suspension on 25th May, I was reviewing various options to restructure his now infamous New Era plan and introducing him to financiers with the means to offer DRB-HICOM some alternative choices. When his contract was then terminated , we said at the time he would likely claim against Lotus and DRB-HICOM for wrongful dismissal, so now it’s time for this to play out.

He will argue that the actions he took in his role were within the mandate given to him as CEO of Group Lotus by Proton’s (then) CEO Dato’ Syed, and that there was no breach or misconduct on his part, which would have allowed DRB-HICOM the latitude to terminate his contract without compensation.

At the time, Sulaiman Yahya, Head of Corporate Communications at DRB-HICOM, said “We had anticipated this when Lotus dismissed him.” He added: “Bahar was dismissed based on the results of Lotus’ investigations into his conduct. We shall rely on this evidence should he wish to take legal action.”

Publicly, Lotus has never provided a reason for dismissing Bahar, apart from describing the move as the result of an investigation (by DRB-HICOM) into his stewardship and conduct.

Speculation then developed about expenses irregularities and misuse of company funds, but those close to the matter understood the more serious issue about his failure to meet the covenants of the company’s £270 million syndicated loan – which underpinned Bahar’s ambitious New Era plan to develop five new models (Esprit, Elite, Elan, New Elise and Eterne).

DRB-HICOM discovered this liability during the due diligence performed by Ernst & Young and Rothschild, after their acquisition of Proton earlier this year. With Lotus being in breach of these covenants, DRB-HICOM were faced with the withdrawal of several syndicate members and the need to repay part (or all) of the £207 million already drawn down by Bahar.

Bahar’s position was clearly untenable, DRB-HICOM had little option but to remove him and seek to restore confidence in their lending institutions while renegotiating new terms for the remaining capital.

Whether Bahar should (or could) have been terminated so swiftly is a matter for the High Court, but DRB-HICOM are sufficiently incensed by the situation to now be filing counter-claims against Bahar.

DRB said in the filing, “Dany Bahar was dismissed after an investigation into his stewardship of Lotus. We believe we have acted properly at all times,” adding that DRB and Lotus would “vigorously” oppose and/or defend the claim “..including filing counter-claims against Bahar.”

“The exact quantum of costs arising from the claim cannot be determined at this point in time… however it is not expected to have any major impact on the [finances] or operations of the group. We will make the requisite announcements when appropriate,” it added.