Tribunal on pay dispute against Crogga continues

Founding member Diccen Sargent claims he had an unlawful deduction of pay

A tribunal to rule on a dispute between Crogga and one of its founding members over an alleged unlawful deduction of pay has gone into its second day (27 November).

Diccen Sargent left his position as director and chief executive officer of the company in March 2022 but remains a shareholder.

WHAT IS THE DISPUTE ABOUT?

It comes from a decision for various directors to defer their salaries at a time when Crogga was in 'acute financial distress' in the autumn of 2020.

Mr Sargent was one of a number to have agreed to do this.

The understanding of this deferral was that when the company had successfully secured funding it would be repaid with an added 15 percent on top of that.

It wasn't just directors who agreed to this, a number of suppliers also agreed to defer their invoices too.

Mr Sargent claims he should have been repaid at the next funding round however Crogga claims he wasn't due to be repaid until £10 million was raised for a 3D seismic survey to be completed of the seabed off Maughold to see whether the area can be drilled for gas.

Mr Sargent gave his evidence yesterday (26 November) - you can find out more here.

WHAT HAPPENED TODAY?

Representatives for Crogga gave evidence to the tribunal - John Lovelady and Mark Pearce.

Mr Lovelady was a director at the time but has since resigned his position.

He remains a shareholder.

Mark Pearce was a non-executive director at the time of the discussions although stepped up to be acting CEO when Mr Sargent resigned.

He is also a shareholder.

Today they were both cross-examined by Mr Sargent's legal representative Christopher Webb.

WHAT WERE THE MAIN POINTS COVERED?

The focus of that cross examination was the witnesses' interpretation of the phrase 'next funding round'.

Mr Lovelady said he was always of the understanding that all debts accrued by the company - from both suppliers and deferral of salaries - were to be repaid on completion of EQ1 funding, which was the scheme to raise that £10 million for the seismic survey.

He told the tribunal that minutes from various Board meetings confirmed this, as all discussions around deferred payments were made under the heading of 'EQ1 funding'.

However Mr Webb disputed this, putting it to Mr Lovelady that the EQ1 funding had been completed in May 2019 when an initial round of fundraising had gathered around £2 million of the total £12 million that was needed for the whole project.

He argued that any subsequent money raised was for a new funding scheme called EQ1S - which focused specifically on phase B of Crogga's plans, the seismic survey.

Mr Lovelady disagreed with that assessment.

He claimed it was clear to everyone that EQ1 fundraising hadn't been completed which he said was proven when it was still an item for discussion in various Board meetings over a year later in the autumn of 2020.

Mr Pearce backed up Mr Lovelady's interpretation.

He told the tribunal that in October 2020, when the salary deferrals were first discussed, he as a non-executive director and the rest of the Board were led to believe by Crogga's deal team - Mr Sargent and Eric Evenson - that a deal was 'imminent' which would cover the full £10 million needed.

This was supported by minutes from a Board meeting suggesting it was likely that the seismic survey would be able to begin in Quarter 1 of 2021 subject to that funding.

Mr Pearce said for that to happen they would have needed to have the funds 'within days or weeks'.

That investment, however, fell through.

Mr Pearce said he had also deferred his salary during this period, and was of the understanding it would be repaid in full, with a 15 percent uplift upon successful completion of the EQ1 funding, not the next funding round.

While a draft email was shown at the tribunal which did stipulate repayment to those who deferred their salaries would be made on completion of EQ1, the email that was actually signed by all interested parties said repayment was due at 'the next funding round'. 

Mr Sargent's representative stipulated that was in May 2022, when Crogga raised £800,000 of capital by selling some of its shares at a reduced price of £1, and that all parties should have been repaid at that point.

Mr Pearce disagreed stating that funding round was an 'emergency measure' and was needed to keep the company afloat. 

He says it was not part of any funding specifically for the seismic survey.

When asked why that draft email, that he also signed, was changed Mr Pearce claimed it was because the person who drew it up 'is clearly not good at drafting', adding it was great to have hindsight now but they didn't have it at the time.

WHAT HAPPENS NEXT?

The tribunal is expected to hear its closing statements tomorrow morning (28 November) before a final decision is made at a later date.