Directors of a British-based subsidiary of collapsed Peregrine Investments Holdings were strongly criticised by a senior judge yesterday for paying themselves and staff huge bonuses at the expense of the parent company's creditors. Mrs Justice Doreen Le Pichon said the board of Peregrine Securities (UK) had even tried to block any future legal action arising from the payments by a method which 'is little short of an affront to the court'. She branded the British board's behaviour 'outrageous' and called on the provisional liquidators to look into their conduct and 'consider whether misfeasance proceedings are warranted'. The judge took the Peregrine winding-up proceedings into open court in order to reveal 'certain events' to the group's creditors. She also wanted to explain why she had sanctioned a deal allowing Spanish banking group Banco Santander to purchase parts of the Peregrine Group. The judge said a draft agreement for the deal had originally included a 'clause 9.3' which would have prevented the provisional liquidators from taking legal action against directors of the British subsidiary in relation to the bonuses. Mrs Justice Le Pichon said she had only been prepared to sanction the agreement once amendments had been made to the clause to preserve the right to take action against the directors. The judge said the board of eight directors had resolved to pay bonuses totalling US$7.85 million after meetings on January 23 and 29. Talks on the bonuses in December had not led to a figure being fixed because of the group's predicament. '1997 was anything but a normal year for Peregrine and senior management could not have been oblivious of the looming disaster,' the judge added. The bonuses were to be paid in three stages. 'Two of the three installments have already been paid and the third is either due today or early next week,' said the judge. The British directors claimed they believed the bonus payments had the full support of the provisional liquidators, but this was disputed by them as they had only been appointed on January 13. Mrs Justice Le Pichon said the clause aimed at protecting the directors from legal action had been 'designed to tie the hands of the provisional liquidators and forestall any misfeasance proceedings that the facts, once fully investigated, may warrant'. 'Put differently, this court is indirectly being asked to bless conduct on the part of the directors of [Peregrine Securities (UK)] which, justifiably, may be considered outrageous,' the judge said. 'The request is as unmeritorious as it is bold: it is little short of an affront to the court and deserves to be rejected out of hand.' Mrs Justice Le Pichon noted that the company's bonuses for 1996 and 1997 had absorbed as much as 80 per cent and 90 per cent of its profits. 'These stark figures give the impression that [Peregrine Securities' (UK)] fund bonus payments to its employees,' she said. 'It is a remarkable state of affairs that substantially all of [Peregrine Securities' (UK)] profits should be applied in this fashion.' She said this issue might also be targeted by the provisional liquidators who may also need to consider the duties of the main board of the group. 'As the company is a public company, its senior management are accountable to investors who, in the present case, are members of the public,' the judge said. She revealed that the benefits of selling to Santander rather than to Banque Nationale De Paris, who have an offer pending court approval, amounted to $6,762,363. The judge said the net difference between the Santander deal and the BNP bid was $3,200,363. 'The difference is accounted for by the fact that the liquidation values of the assets which BNP does not wish to acquire have significantly reduced values of even no value on a liquidation basis,' she said. Added values of the Santander transaction included $1,402,000 in bonus and redundancy costs by employment offers made by the company in Hong Kong. Further gains were in relation to Singapore where bonuses of $660,000 and a subordinated loan of $1,500,000 have been taken on by Santander.