Action Alarms Ltd v O'Rafferty and Another

• Jurisdiction: Ireland
• Judge: Ms. Justice Faherty
• Judgment Date: 15 May 2024
• Neutral Citation: [2024] IECA 117
• Court: Court of Appeal (Ireland)
• Docket Number: Record Number: 2022/114

Between/

Action Alarms Limited Trading as Action Security Systems

Plaintiff/Respondent

and

Emmet O'Rafferty and Top Security Limited

Defendants/Appellant (Second Defendant)

[2024] IECA 117

Whelan J.

Faherty J.

Binchy J.

Record Number: 2022/114

THE COURT OF APPEAL

UNAPPROVED

Judgment of Ms. Justice Faherty dated the 15 ^th day of May 2024

1 . This appeal arises from a judgment of the High Court (Humphreys J.) of 4 February 2022 and his Order of 21 February 2022 (perfected 8 April 2022) whereby the plaintiff/respondent (hereinafter “Action”) was awarded a total sum of €148,324.89 (inclusive of VAT and Courts Act 1981 interest) in respect of its claim for commission payments from the second defendant/appellant (hereinafter “Top”).

2 . To best understand the claim brought by Action against Top and the decision arrived at in the court below, it is necessary to give some details about the business carried on by each of the parties and the nature of the commercial dealings between each up to the time of the commencement of the within proceedings.

Background

3 . Action is a company incorporated within the State and is an installer and maintainer of alarm systems, and latterly a provider of alarm monitoring services. Top is also a company incorporated in the State and is wholly or substantially owned and controlled by the first name defendant (hereinafter “Mr. O'Rafferty”) and is in the business of alarm systems monitoring. Top set up its alarm monitoring station in or about 1986. It purchased a number of alarm installation companies in the early 2000s.

4 . The evidence established that as monitoring companies were not allowed to actually go onto the alarm customer's premises and did not have engineers on the ground, it was the alarm installation companies (such as Action), who had the codes to the alarm panels and security systems, who did so when the need arose. Thus, if a problem arose with an alarm system, the relevant monitoring company would contact the relevant alarm company and the alarm company would send one of its engineers to the customer's premises in order to solve whatever problem arose. The evidence given by Action was to the effect that as of 1985, it was working with a number of monitoring centres on this basis. Its relationship with those centres was built up by Action having introduced its customers to the monitoring centres in the first place.

5 . It was also established that as monitoring centres were effectively unable to procure business without the assistance of alarm installer/maintainers, it had been agreed at industry level that the annual monitoring fee which the monitoring companies charged alarm installation customers for their services would be divided (not necessarily equally) between the monitoring company and the alarm installer/maintainer. The split of the annual monitoring fee was often referred to as “commission”.

6 . In the mid-1980s Mr. Derek Mooney of Action and Mr. O'Rafferty (of Top) formed a business relationship, whereby Action would solicit customers for whom it installed and/or maintained alarms to become users of Top's monitoring centre.

7 . This commercial relationship whereby Action would introduce alarm monitoring customers to Top for Top to provide the customer with monitoring services inured from 1986 to 2009. During this period Top paid Action commission, calculated as a percentage of the annual fee received by Top from its Action-introduced customers. As already explained, the basis of the fee portion being paid by Action to Top was on foot of Action having secured the introduction of the customer to Top and thereafter ensuring the maintenance of the physical connection between the customer and the monitoring centre as and when the need arose, over and above Action's own service and maintenance obligations to the customer as the installer of the alarm system.

8 . In 1989, Action was anxious to have its position as introducer of customers to Top protected by limiting Top's ability to assign to third parties Top's interest in the monitoring contracts it had with those Action-introduced customers (as was provided for in clause 12 of the contract Top had with those customers). The parties entered into correspondence in this regard. On 25 October 1989, following a request from Action, Top furnished Action with a draft letter offering to limit Top's ability to rely on clause 12. This offer was agreed to and signed by Mr. O'Rafferty and accepted by Action on 3 November 1989 (hereinafter referred to as “the 3 November 1989 Agreement”). The terms of the 3 November 1989 Agreement were expressed as follows:

“Re Monitoring Contracts.

We are writing to you regarding your customer connections with our control room. Clause 12 of the contract between Top … and your customers states that we are entitled to assign all or any of our rights in the contract. I therefore agree that Top … will, at your request, assign all or any of its rights under the agreement it has with your customers to you or your nominees without penalty to the subscriber or Action… There will be no penalty for allowing this transfer however, any annual renewals which have become due at that stage would be due for the full 12 months period and still remain owing if outstanding at that date. The three year contract in terms of these customers would in this instance would be waived. I further agree that Top Communications will not assign any or all of the contracts with your customers to any other party without prior written consent from you. Three months' notice is required in respect of any such assignments. In the event of Top… or any company to whom it assigns, going into liquidations, the contracts are automatically assigned to you or your nominees.”

9 . Following the 3 November 1989 Agreement, the arrangement which theretofore had pertained regarding the payment by Top of commission to Action continued save that on occasion, the annual monitoring fee charged by Top to the customers in question was revised, with the split due to Action then being duly adjusted to reflect the fee revision.

10 . During the currency of the parties' dealings, Top ran regular marketing drives, which comprised encouraging alarm installers/maintainers like Action to introduce new customers to Top for each of which new customer the alarm installer/maintainer would receive a split of the monitoring fee charged by Top to those customers.

11 . In 1992, Top ran a promotion which after nine months saw Action introduce 97 connections to Top with an annual monitoring contract value of £10,050 to Top, of which Action was entitled to £4,500 and Top, £5,550.

12 . It is common case that for twenty years from 1989 – 2008, Top provided Action with a monthly “Commission Report” based upon which Action would then invoice Top for the amount owed to Action from annual monitoring fees collected in that month by Top. Thus, commission payments to Action were made via the process whereby following the generation of monthly Commission Reports, Action raised invoices on foot of those Reports. Such Reports were readily capable of being printed by Top from its computer system until January 2015 when a new computer system was installed.

13 . In the case of a small number of the relevant customers who wished to receive one invoice only for security services, it was Action rather than Top that raised invoices for Top's monitoring services, with Action then paying over Top's portion of the relevant fee to Top upon being invoiced by Top.

14 . It also appears that Action requested and was given daily overnight customer alarm fault reports (“Activity Reports”) from Top's system up until January 2009 albeit there was no suggestion that there was an enforceable agreement that those reports would be provided by Top to Action.

15 . Checking the connection to the monitoring station was one of Action's obligations pursuant to the maintenance contract it had with the majority of its customers. Thus, Action was entitled to charge customers for servicing their system, inter alia, to ensure that the system was connected to Top's monitoring service.

16 . By 2008, some 804 customers had been introduced by Action to Top and Action was entitled to part of Top's annual monitoring fee for each of them, in respect of which Action received such payments, via the process just described.

17 . In 2008, Action informed Top that it intended opening its own monitoring station (through its associated company Action Alarm Control 24 Ltd.) and that Action intended to rely on the 3 November 1989 Agreement to seek that Top assign to Action Top's interest in the monitoring contracts in respect of as many of the 804 customers who had been introduced to Top by Action as might agree to transfer their monitoring contract to Action.

18 . While in the 3 November 1989 Agreement it had not been envisaged that Action would establish a monitoring business, it is common case that Top was largely agreeable to complying with the terms of the 3 November 1989 Agreement as regards facilitating the transfer of Action-introduced customers to Action's monitoring service subject only to Action addressing Top's “reasonable” request that Action procure the customer's written consent authorising the cancelation of Top's monitoring service and the transfer to “Action Central Station”, and a completed RC1C form in order to facilitate the transfers of the customers.

19 . By letter of 25 February 2009, Dillon Solicitors, on behalf of Action, asserted that Top's requirement for a letter of consent and a completed RC1C form from each transferring customer was inconsistent with the 3 November 1989 Agreement and so Action threatened injunction proceedings to compel Top to comply with the terms of that Agreement.

20 . On 3 March 2009, Top responded as follows, in relevant part:

“ We fully intend to honour those...