THE row between Paul Shepherd and the board of the York-based Shepherd Group, the family firm which once he led, today erupted into the open with written explanations to employees.

As reported in later editions yesterday, Mr Shepherd, 57, has taken out a High Court writ for wrongful dismissal from his post at the head of the group's construction division. Just five months earlier he had stepped down as chairman and managing director.

He will also allege unfair dismissal to an employment tribunal and is said to be seeking "substantial damages."

The family-owned group today responded to Mr Shepherd's allegations that he was unfairly and wrongly dismissed with an open letter to its employees.

It also took the unusual step of announcing early to its staff poor annual results because of two money-draining events. Usually the results are announced to Companies House in December.

The letter to employees, signed by Alan Fletcher, the man who replaced Mr Shepherd as chairman, claims that -

By March this year there was "an irretrievable breakdown in working relations between Paul Shepherd and all other members of the group board, and it was decided that the only solution was for him to leave the company"

On April 8 Mr Shepherd was told "in detail" in an 80-minute meeting why the group board had reached its decision and he was placed on "garden leave" until June 30 when his employment ended. So did his company directorships, which he had been asked to resign.

Mr Shepherd's claim against the company would be "very substantial" and "this is one of the reasons why the company will be contesting his claim most vigorously." But the main reason for contesting it is that the company believes that "there is strong merit in doing so."

Employees were told that the group would have preferred to maintain communications with Mr Shepherd on a strictly private basis but "his action has placed the issues into the public domain."

The company did not intend to comment further on the dispute other than in formal submissions to the Queen's Bench and the tribunal.

Mr Fletcher's final message to employees was: "It is important for all of us to concentrate on the performance of the business rather than the distraction of such issues. The past year has been a period of change across the company and, as our annual results indicate, there remains much work to be done and challenges ahead."

The results for year ending June 30, 2002 show that group turnover increased from £539 million to £557 million, largely due to higher volumes in the construction and engineering division and house building business and that operating profit rose 21 per cent from £14.2 million to £17.2 million.

But group performance was severely affected by exceptional items which meant an overall pre-tax loss of £1.9 million. These included £8 million costs of pulling out of three poorly-performing businesses in the U.S. and a potential loss of £10.8 million as a result of the debts of a client on a design-and-build industrial project in the south of England.

Julian Roskill, of London law firm Mayer Brown Rowe & Maw, representing Mr Shepherd, said he was not prepared to conduct the case publicly other than through the courts.

Updated: 11:50 Tuesday, November 05, 2002