Brennan v Irish Pride Bakeries ((in Receivership))

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 29 March 2017
• Neutral Citation: [2017] IECA 107
• Court: Court of Appeal (Ireland)
• Docket Number: Neutral Citation Number: [2017] IECA 107 [2015 No. 547]
• Date: 29 March 2017

[2017] IECA 107

THE COURT OF APPEAL

Finlay Geoghegan J.

Finlay Geoghegan J.

Irvine J.

Hedigan J.

Neutral Citation Number: [2017] IECA 107

[2015 No. 547]

BETWEEN

CONOR BRENNAN

PLAINTIFF/RESPONDENT

AND

IRISH PRIDE BAKERIES (IN RECEIVERSHIP)

DEFENDANT/APPELLANT

Breach of contract – Damages – Termination of employment – Appellant seeking to appeal against an interlocutory order – Whether trial judge was in error in failing to accept that the respondent’s claim was in substance a claim for damages for breach of contract

Facts: The defendant/appellant, Irish Pride Bakeries, was restrained pending the determination of proceedings by an interlocutory order made by the High Court (Gilligan J) on 22nd October 2015 from: (1) taking any steps for the purpose of effecting or implementing the purported termination of the employment of the plaintiff/respondent, Mr Brennan, by letter dated 18th August 2015; (2) terminating the respondent’s employment save in conformity with his contractual entitlements; and (3) ordering that the appellant continue to discharge the payment of the respondent’s salary, emoluments and other benefits under his contract of employment. The appellant appealed to the Court of Appeal against that order. The appellant submitted that the trial judge was in error in failing to accept that the respondent’s claim was in substance a claim for damages for breach of contract. Secondly, he submitted that the trial judge was in error in not concluding that damages were an adequate remedy. In support of both these submissions, it was contended that the issue, both before the trial judge and the Court of Appeal, related to the question of priorities in an insolvency situation and that the trial judge, in making the interlocutory orders, wrongly elevated the position of the respondent from a category of unsecured creditor to one of a preferential or super preferential. A separate submission was made that even if the trial judge was correct in granting an interlocutory injunction restraining termination of employment, that he was wrong to direct the continuing payment of salary given the insolvency of the appellant.

Held by Finlay Geoghegan J that the trial judge was correct in not considering the substance of the claim made by the respondent as being one for damages for breach of contract. Referring to Giblin v Irish Life & Permanent Plc. [2010] 21 ELR 173, the Court upheld the determination of the trial judge that damages were not an adequate remedy for the respondent on the facts. Finlay Geoghegan J concluded on the facts of the case that the trial judge was entitled to exercise his discretion on the balance of convenience in favour of making the order directing payment of salary; if no such order was made, then it would set at naught the very reasons for which the Court favoured granting an injunction restraining dismissal, or in effect, a mandatory injunction requiring a continuation of employment in cases where an employee makes out a strong case that the dismissal is in breach of the contract of employment. Finlay Geoghegan J did not accept that the order made interfered with any statutory priority applicable pursuant to s. 440 and Part 11 of the Companies Act 2014; the order made was against the appellant which then continued to trade and the payments to be made to the plaintiff were not in respect of any debt due at the date of appointment of the receivers nor was his employment terminated prior to or by the effect of the appointment of the receivers.

Finlay Geoghegan J held that the appeal should be dismissed.

Appeal dismissed.

JUDGMENT of Ms. Justice Finlay Geoghegan delivered on the 29th day of March 2017

1 This is an appeal against an interlocutory order made by the High Court (Gilligan J.) on 22nd October 2015 restraining the appellant pending the determination of the proceedings from:

(1) Taking any steps for the purpose of effecting or implementing the purported termination of the respondent's employment by letter dated 18th August 2015; and

(2) terminating the respondent's employment save in conformity with his contractual entitlements; and

Ordering that the appellant continue to discharge the payment of the respondent's salary, emoluments and other benefits under his contract of employment.

Background Facts

2 The background facts, as distinct from the motive for or effect of certain steps taken are not in dispute. The appellant, a company, was at the relevant time a manufacturer of branded and own label bread products which it sold nationwide. It had two plants, in Wexford and Ballinrobe. It also had a senior management team at an office in Dublin.

3 The respondent was employed by the appellant as Business Development Director upon the terms of an agreement in writing dated 1st February 2015. His normal place of business was at an office of the appellant at Rathcoole, Co. Dublin. His remuneration package comprised a salary of €110,000; employer pension contribution of 8% of salary; annual bonus; company car and health insurance for him and his family.

4 Clause 18 of the respondent's contract provided:

‘Except in circumstances justifying summary termination or termination consequent on the application of formal disciplinary procedure, the employee will be entitled to receive three months written notice of the termination of his employment. Such termination of employment shall be a “no fault” termination. The company reserves the right to pay the employee's remuneration in lieu of notice or continue payment during the notice period, while relieving the employee of any and all of his duties and responsibilities during the notice period.’

5 There was no contention of any circumstance justifying summary termination of the respondent's employment or any disciplinary procedure leading to same. The appellant had granted security to Close Brothers Ltd. for financing. It appointed receivers on 11th June 2015, pursuant to a debenture dated 25th April 2014. On 15th June 2015, Bakers Holdings (Luxembourg) S.A.R.L. (‘Bakers’) bought the loans due to Close Brothers Ltd. together with the rights and entitlements of Close Brothers under the debenture. By deed of appointment dated 15th June 2015, Bakers appointed Kieran Wallace and Shane McCarthy of KPMG Accountants as joint receivers (the ‘receivers’). The earlier appointment of receivers by Close Brothers was presumably brought to an end.

6 The receivers, pursuant to the deed of appointment of 15th June 2015 were appointed ‘to be the receivers and managers of and over all the undertaking, property and assets of Irish Pride Bakeries …’

7 The receivers initially maintained the business as a going concern. Mr. Wallace deposed that this was to ensure that all of the business could potentially be sold or acquired as a going concern.

8 The receivers sought bids and Pat the Baker (the ‘purchaser’) was deposed to have submitted the most attractive bid. A business and asset purchase agreement was entered into with the purchaser on 6th August 2015. Mr. Wallace stated on affidavit that:

‘The Agreement provides for the sale and purchase of the defendant's business excluding the Ballinrobe facility. It is envisaged that approximately 250 jobs will be secured by the proposed sale to the purchaser’.

It was also agreed with the purchaser that the EC (Protection of Employees on Transfer of Undertakings) Regulations 2003 (the ‘TUPE Regulations’) would apply to the transfer of the business. A purchaser was not found for the business and assets of the Ballinrobe facility and it was determined that a collective redundancy process would be carried out by the appellant in relation to the Ballinrobe facility prior to the completion of the sale of the business. The sale agreed was subject to approval by the Competition and Consumer Protection Commission.

9 Mr. Wallace also deposed that a separate redundancy process was commenced with the appellant's senior executive team. He further stated that it was his understanding that ‘the purchaser does not require a stand alone executive management team for that part of the defendant's business that it is acquiring’.

10 There was a meeting between Mr. Wallace and the respondent on 6th August 2015. Whilst there is some dispute about the detail of the meeting, which is not relevant, it is agreed that Mr. Wallace informed the respondent of a proposed termination of his employment by reason of redundancy on 21st August 2015.

11 The decision was formally communicated by Mr. Wallace as ‘joint receiver and manager’ of the appellant by a letter of 18th August 2015. The respondent was informed in that letter that his ‘position as sales director will be made redundant with effect from 22 August next’. Further, he was informed that his last day of employment would be 21st August 2015; he would continue to receive salary and benefits up to that date and one week's notice in lieu of a statutory notice entitlement.

12 The respondent applied for and was granted ex parte an interim order on 24th August 2015, restraining the appellant from terminating his employment or taking any further steps to effect same pursuant to the letter of 18th August 2015 pending further order.

13 Following an exchange of affidavits, the interlocutory application was heard and a written judgment delivered by Gilligan J. on 22nd October 2015, setting out the reasons for which he made the order under appeal.

Subsequent Events

14 By a letter dated 29th October 2015, the appellant purported to terminate the respondent's employment with effect from that date and made a payment in lieu of his contractual entitlement to three months' notice. The respondent contends that the respondent's contract of employment did not terminate until 28th January 2016. The purchaser completed its acquisition of that part of the business of the appellant which...