Comans v J. Donohue Beverages
| Jurisdiction | Ireland |
| Judge | Ms. Justice Murphy |
| Judgment Date | 08 October 2019 |
| Neutral Citation | [2019] IEHC 657 |
| Docket Number | Record No. 2016/2426P |
| Court | High Court |
| Date | 08 October 2019 |
[2019] IEHC 657
THE HIGH COURT
Murphy
Record No. 2016/2426P
AND
AND
AND
Preliminary issue – Contract – Retention of title clause – Plaintiff seeking the proceeds of sale of its goods by the first defendant – Whether clause 9.4 of the general conditions created a charge
Facts: This case came before the High Court on a preliminary issue as to the meaning and effect of a retention of title clause contained in a contract for the sale and supply of drinks and beverages made between the plaintiff, Comans Wholesale, and the first defendant, J. Donohue Beverages Ltd (in receivership). Pursuant to a deed of appointment of receiver dated 3rd November, 2015, the fourth defendant, the governor and company of the Bank of Ireland, appointed the second and third defendants, Mr O’Leary and Mr Wallace, as receivers to the first defendant. Those receivers identified and returned goods to the plaintiff, to the value of €51,910.85 which goods had not yet been paid for, or resold by the company. They were returned pursuant to the retention of title clause. The plaintiff claimed an additional €334,362.58 being the proceeds of sale of its goods by the first defendant during the period of 1st July, 2015 to 13th November, 2015, for which the plaintiff had not been paid. It claimed entitlement to that sum pursuant to the retention of title clause. It was the plaintiff’s case that the retention of title clause in the contract constituted a trust, so that the above sum was held by the first defendant on trust for the plaintiff. It was also contended that the existence of the trust gave the plaintiff the right to trace the proceeds of sale. Alternatively, the plaintiff contended that, in the event that the retention of title clause was held to create a charge rather than a trust, then the charge was a charge within the meaning of ss. 408 and 409 of the Companies Act 2014, such that it did not require registration in the CRO in order to be effective. Bank of Ireland contended that having acquired ownership of all debts of the company, both present and future, it had a competing claim to the relevant proceeds and therefore had a vested interest in the outcome of these proceedings. The receivers contended that the retention of title clause constituted a charge and not a trust, and that such charge to be effective, required registration under s. 99 of the Companies Act. The Bank contended that since the charge was not registered, it was consequently void against creditors of the first defendant company. It was further contended by Bank of Ireland that it obtained and registered charges over the first defendant’s assets, and was therefore entitled to the proceeds of sale, unless the plaintiff could assert a valid and enforceable right to them. Two issues stood to be determined by the court. The first issue was whether clause 9.4 of the general conditions created a charge. Secondly, if the court did find that a charge had been created, the issue arose as to whether it was a charge that required registration under the Companies Act 2014.
Held by Murphy J that, on the basis of the facts presented to the court, and on an analysis of the relevant case law, the court took the view that the plaintiff’s retention of title clause in its contract with the first defendant created a charge and not a trust.
Murphy J held that the charge was not one which came within the exceptions specified in s. 408 (1) of the Companies Act 2014, and therefore required to be registered in order to be effective against the receivers and creditors of the first defendant company.
Judgment approved.
This case comes before the court on a preliminary issue as to the meaning and effect of a retention of title clause contained in a contract for the sale and supply of drinks and beverages made between the plaintiff, Comans Wholesale, and the first defendant, J. Donohue Beverages Limited (In Receivership).
Pursuant to a deed of appointment of receiver dated 3rd November, 2015, the governor and company of the Bank of Ireland appointed Kieran Wallace and Andrew O’Leary as receivers to the first defendant. These receivers identified and returned goods to the plaintiff, to the value of €51,910.85 which goods had not yet been paid for, or resold by the company. They were returned pursuant to the retention of title clause. The plaintiff claims an additional €334,362.58 being the proceeds of sale of its goods by the first defendant during the period of 1st July, 2015 to 13th November, 2015, for which the plaintiff has not been paid. It claims entitlement to this sum pursuant to the retention of title clause.
It is the plaintiff's case that the retention of title clause in the contract constitutes a trust, so that the above sum is held by the first defendant on trust for the plaintiff. It is also contended that the existence of the trust gives the plaintiff the right to trace the proceeds of sale. Alternatively, the plaintiff contends that, in the event that the retention of title clause is held to create a charge rather than a trust, then the charge is a charge within the meaning of ss. 408 and 409 of the Companies Act 2014, such that it does not require registration in the CRO in order to be effective.
Bank of Ireland, the fourth defendant, contends that having acquired ownership of all debts of the company, both present and future, it has a competing claim to the relevant proceeds and therefore has a vested interest in the outcome of these proceedings. The receivers contend that the retention of title clause constitutes a charge and not a trust, and that such charge to be effective, required registration under s. 99 of the Companies Act. The Bank contends that since the charge was not registered, it is consequently void against creditors of the first defendant company. It is further contended by Bank of Ireland that it obtained and registered charges over the first defendant's assets, and is therefore entitled to the proceeds of sale, unless the plaintiff can assert a valid and enforceable right to them.
The agreed facts are those as set out in the amended statement of claim dated 28th March, 2017.
The plaintiff is a private unlimited company with its registered office situate at Belgard Road, Tallaght, Dublin 24.
The first defendant is a limited liability company in receivership with its registered office situate at Railway Stores, Templeshannon, Enniscorthy, Co. Wexford.
The second and third-named defendants are sued in their capacity as joint receivers of the first defendant, J. Donohue Beverages Limited. Their address is at KPMG Restructuring, 1 Stokes Place, St. Stephen's Green, Dublin 2.
The fourth-named defendant is a bank, having its registered office situate at 40 Mespil Road, Dublin 4.
Between 1st July, 2015 and 13th November, 2015 the plaintiff supplied and sold drinks and related goods to the first defendant, subject to ‘Comans General Conditions of Sale and Supply’. Clause 9 of these conditions provides as follows:-
“9.1 Notwithstanding delivery, or the passing of risk in and to the Goods, title to the Goods shall not pass to the Customer until all Invoices for the Goods are discharged to Comans in full in either cash or cleared funds, together with all other costs and expenses due and any other monies owed by the Customer for any other reason howsoever arising.
9.2 Until such time as title to the Goods passes to the Customer the Customer shall hold the Goods as Comans fiduciary agent and shall: (a) keep the Goods marked and stored separately from other goods so as to be identifiable as the property of Comans; (b) keep the Goods properly stored, protected and insured to their full market value; (c) give to Comans such information relating to the Goods as Comans shall from time to time require; (d) allow Comans to enter unto the Customer's premises for the purpose of inspecting the Goods at any time; (e) deliver the Goods up to Comans upon demand and if the Customer fails to do so, Comans shall be entitled to enter upon the Customer's premises or any other premises where the Goods are stored in order to retake possession of the Goods. This entitlement shall continue to subsist following termination of the Contract for any reason and is without prejudice to any accrued rights of Comans.
9.3 Until title in the Goods has passed to the Customer the Customer shall not be entitled to pledge, create a lien over or charge in any way whatsoever the Goods and if the Customer does so, all monies owing to Comans shall immediately become due and payable.
9.4 The Customer may (unless Comans revokes permission) in the ordinary course of its business resell the Goods at the full market price even though title has not passed provided the Customer holds in a fiduciary capacity on trust for Comans from the proceeds of such resale a sum equal to the Price of the Goods under the Contract (‘Comans’ Proceeds’) and keeps Comans’ Proceeds separate from any monies of the Customer and third parties in a separate bank account clearly denoted as an account containing monies deposited for the benefit of Comans and in the case of tangible proceeds, properly stored, protected and insured.
9.5 The provision of clause 9 shall be without prejudice to the obligation of the Customer to purchase the Goods.”
By a charge created on 9th April, 2015 and registered in the Companies Office on 23rd April, 2015, the first defendant company granted a charge to the bank over, inter alia, all monies and/or obligations which now are, or at any time may, become due or owing to the security holder by the company, on any account and all the other liabilities...
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