Cadbury Ireland Ltd v Kerry Co-operative Creameries Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Berrington
• Judgment Date: 01 January 1982
• Neutral Citation: 1982 WJSC-HC 329
• Court: High Court
• Docket Number: No. 3732P./1980
• Date: 01 January 1982

1982 WJSC-HC 329

THE HIGH COURT

No. 3732P./1980

CADBURY IRELAND LTD. v. KERRY CO-OP CREAMERY LTD.

BETWEEN:

CADBURY IRELAND LIMITED

Plaintiffs

and

KERRY CO-OPERATIVE CREAMERIES LIMITED

First-named

Defendant

and

DAIRY DISPOSAL COMPANY LIMITED

Second-named

Defendant

1 Judgment of Mr. Justice Berrington delivered the 17th day of July 1981

2 The Plaintiffs are the well-known firm of chocolate manufacturers and have a registered office at Malahide Road, Coolock, Dublin.

3 The Plaintiffs have since in or about the year 1948, maintained a factory at Rathmore, County Kerry where milk has been converted into chocolate crumb, casein and other products.

4 This case concerns the supply of milk to that factory.

5 The first-named Defendants are an industrial and provident society. They have their registered office at Listowel, County Kerry. They were established in January 1974 and have grown substantially since then. They now have some 6,000 farmer members and, in 1979, had a total turnover of some £78.4 million. Directly, or through their subsidiaries, they now control the greater part of the milk produced in County Kerry.

6 Their most important subsidiaries for the purpose of this case are North Kerry Milk Products Limited and Kerry Kreem Food Products Limited. The first is a manufacturing company and produces casein and other milk products on a site of some 25 acres at Listowel. It claims to be the largest manufacturer of casein in the world.

7 The other, Kerry Kreem Food Products Limited, is, in effect, a purchasing agency for the first-named Defendants and their associated companies. The site at the industrial complex in Listowel is owned by North Kerry Milk Products Limited but Kerry Kreem Food Products Limited purchases all milk crossing the weigh bridge leading into the site whether the milk is supplies by the first-named Defendants or by outside creameries not controlled by the Defendant society. Towards the end of 1980 Kerry Kreem Food Products Limited was paying 61p per gallon for all whole milk which crossed the weigh bridge and 26.5p per gallon for all skim milk which crossed the weigh bridge irrespective of who the supplier was.

8 The second-named Defendants are the Dairy Disposal Company Limited now in liquidation. These Defendants are a limited liability company incorporated under the Companies Acts 1908 to 1917. They had however extensive statutory powers under the Creamery Act 1928and the Creameries (Acquisition) Act 1943and were, at all material times, effectively under the control of the Minister for Agriculture. One of the objectives of the Dairy Disposal Company Limited was to acquire creameries in private ownership and to vest them in co-operative societies of farmers. Because of difficulties in the agricultural industry and in the co-operative movement the Dairy Disposal Company took much longer to complete its work than originally anticipated. However, changes in the organisation of the dairying industry necessitated by Ireland's proposed entry to the E.E.C. gave a great impetus to the company's work in the early "70"s and contributed to the progress of the co-operative movement. On the 3rd August 1978 the Dairy Disposal Company, having completed its work, went into voluntary liquidation.

9 During the year 1973 the Dairy Disposal Company entered into negotiations with the Kerry Co-Operative Society for the sale by the Company to the Society of certain assets owned by the Company in County Kerry. These assets included creameries at Listowel, Ardfert, Dingle, Castlemaine, Dicksgrove, Caherciveen, Kenmare and Rathmore. The negotiations were successful and culminated in an agreement between the Company and the Society at the end of 1973 under which the Company agreed, in consideration of the sum of £1,150,000, to transfer the creameries mentioned and other assets to the Society. It is Clause 19 of this agreement which has given rise to the present litigation.

Background to the disoute

10 The background to the present dispute goes back at least to the year 1964. At that time the Plaintiff Company was considering expanding its operation at Rathmore and was concerned to ensure that adequate supplies of milk would be available for the factory. In August 1964 discussions took place between Mr. Godsil, a Director of the Plaintiff Company, the Chairman of the Dairy Disposal Company Limited and officials of the Department of Agriculture.

11 On the 17th September 1964 Mr. Nagle, the Secretary of the Department of Agriculture, wrote to Mr. Godsil a letter in which he stated:-

"I am now in a position to tell you that on the basis that the two projects would be proceeded with, the Dairy Disposal Company is prepared to give an undertaking that, in regard to their creameries on your list, with the exception of Listowel and also the exception of Coachford and Terelton (to the extent of their 1964 supplies to Ballyclough) they will afford your Company priority in the use of the supplies of whole milk available for sale from their creameries up to the total gallonage you have indicated you require from the Company viz about 50,000 per day (about 9 million gallons per year). This undertaking would of course, be subject to satisfactory arrangements being worked out between the two Companies as to the price of the milk from time to time, period of the year or which the milk will be supplied and any related matters. In addition, the Dairy Disposal Company would be prepared to offer to your Company from time to time such quantity of milk as might be available at Listowel surplus to their own manufacturing requirements You will, I am sure, appreciate that such an undertaking by the Dairy Disposal Company, at the request of the Minister for Agriculture, which would give your Company a first claim on the supplies of whole milk available for manufacturing into non-butter products in the greater part of County Kerry and also valuable assurances in relation to the supplies in the Coachford and Terelton creamery areas, is going far beyond previous practice in our dairying industry and you will especially note that a reciprocal undertaking is not being sought from you. We are therefore looking forward to hearing from you that the undertaking offered by the Dairy Disposal Company is acceptable to your Company."

12 Mr. Godsil does not appear to have been totally happy about the form of this undertaking because, on the 9th November 1964, Mr. Nagle wrote again and referred to the fact that the Chairman of the Dairy Disposal Company had, on behalf of his Company, undertaken to afford Cadbury priority in the use of supplies of whole milk available for sale from Castlemaine, Ardfert, Dingle and Caereiveen subject to satisfactory arrangements being worked out between the two Companies as to the price of the milk from time to time, period of the year over which the milk will be supplied and related matters.

13 Mr. Nagle added:-

"It must be accepted that the Company will honour this undertaking (which they gave with out full approval)."

14 Mr. Nagle also refers to the fact that discussion had taken place about supplies of milk from creameries not controlled by the Dairy Disposal Company specifically Athea, Fealebridge and Newtownsands. He referred to the fact that the Chairman of the Dairy Disposal Company would have no objection to Cadbury's being accorded priority in connection with the sale of milk by those creameries. He then added:-

"It seems clear, however, that the Dairy Disposal Company cannot guarantee to your Company the supply of milk from these or other co-operative creameries in the same manner as they guarantee the supply from creameries under their own control."

15 Mr. Godsil apparently was still not satisfied because on the 17th November 1964 Mr. Nagle wrote again expressing surprise that the undertaking given did not fully meet with Cadbury's requirements so as to enable them to proceed with the new factory at Rathmore. He continued:-

"We have consulted with Mr. Hennigan (the Chairman of the Dairy Disposal Company) again in the light of your further request, and he agrees that, in so far as his Company is concerned, an assurance may be given to you to the effect that the Dairy Disposal Company Limited will not purchase milk without your prior agreement from the co-operative societies at Athea, Fealebridge, Newtownsands, Abbeydorney, Mountcollins, Ratto, Tournafulla and Lixnaw.

You will appreciate that the Minister could be put in a very difficult and embarrassing position if, for any reason, your Company failed to reach agreement with any of these creameries in regard to supply of milk and he found himself obliged to tell them that the Dairy Disposal Company - a semi-State concern - was precluded from taking their milk.

Nevertheless, for the sake of bringing this matter to finality, the Minister is prepared to endorse, in so far as he is concerned, the undertaking of the Company set out above."

16 This letter appears to have been satisfactory to the Plaintiff company. When however in the years 1972 and 73 schemes were being discussed for the reorganisation of the dairying industry and in particular the sale by the Dairy Disposal Company to the Kerry Co-Operative Society Limited of its creameries in Kerry the Plaintiff company again became concerned about ensuring an adequate supply of milk to its factory at Rathmore. At that stage the factory was employing some 220 workers and the Trade Unions, farming interests, and the Minister were all anxious to keep the factory in operation.

17 Mr. Godsil again raised his fears with the chairman of the Dairy Disposal Company and on the 1st December, 1972 the chairman of the Dairy Disposal Company wrote Mr. Godsil a letter which concluded -

"You will appreciate that whatever we may say about availability of milk supplies for processing is subject to the overriding consideration that...