Edmond P Harty & Company Unlimited Company v Companies Act 2014
| Jurisdiction | Ireland |
| Judge | Mr Justice Kennedy |
| Judgment Date | 21 September 2023 |
| Neutral Citation | [2023] IEHC 575 |
| Court | High Court |
| Docket Number | [Record No. 2019 No. 352 COS] |
In the Matter of:
Section 212 of the Companies Act 2014
and
In the Matter of:
Edmond P Harty & Company Unlimited Company
[2023] IEHC 575
[Record No. 2019 No. 352 COS]
THE HIGH COURT
COMMERCIAL
Summary judgment – Settlement agreement – Corporate restructuring – First respondent/counterclaim applicant seeking summary judgment against the second respondent/third counterclaim respondent – Whether a corporate restructuring constituted a sale within the meaning of a settlement agreement
Facts: A dispute within the family responsible for the ownership and management of the Dairymaster business was resolved by agreement before trial (the Settlement Agreement). The first respondent and counterclaim applicant, Dr E Harty (the plaintiff), sought summary judgment against the second respondent and third counterclaim respondent, Edmond P Harty & Company Unlimited Company (the Company), in the sum of €10,000,000 together with Courts Act interest at 2% per annum from 29 October 2022. Other parties to the original proceedings included: (a) the plaintiff’s father, Mr EP Harty, who established the Dairymaster business which was in issue in the proceedings and was the applicant and first counterclaim respondent in the original proceedings (the Founder); and (b) the plaintiff’s brother, Mr J Harty, who was the Chief Executive of the business. The key issues were: (a) whether a corporate restructuring effected by the Company and its owners in October 2022 (the Restructuring) constituted a sale within the meaning of the Settlement Agreement (such a finding could trigger an obligation to expedite payments otherwise due to the plaintiff by 31 October 2023 and 31 October 2024); and (b) whether the Company was entitled to withhold any payments on the basis of the plaintiff’s alleged breaches of the agreement.
Held by the High Court (Kennedy J) that the issues arising on the application concerned: (i) the interpretation of the Settlement Agreement; and (ii) the correct legal characterisation of the transaction documents. Kennedy J held that there was no risk of injustice in determining such issues on a summary judgment application. Kennedy J held that no factual disputes required remission for hearing because the allegations about the plaintiff’s past or ongoing conduct were not material to the application. Kennedy J held that any such issues may be pursued in accordance with Clause 7.1 of the Settlement Agreement. Kennedy J held that both key issues must be decided in the plaintiff’s favour. Kennedy J held that the Restructuring did constitute a sale within the meaning of Clause 3.6 of the Settlement Agreement, thus expediting the payment obligation and the Company was not entitled to withhold any payments on the basis of the plaintiff’s alleged or anticipated breaches of the agreement. Kennedy J held that if the Company failed to comply with Clause 3.6 then, pursuant to Clause 3.7 of the Settlement Agreement, it had irrevocably committed to consent to the entry of judgment. Kennedy J hoped that the clarification of responsibilities in the judgment would obviate the need for judgment to be entered under Clause 3.7, which could be unhelpful from the perspective of the business and its owners. In the circumstances, it appeared reasonable to Kennedy J to afford the parties a short window to seek to agree arrangements for the payment of the last two instalments (plus interest), but with liberty to apply in the meantime in the unlikely event that it should prove necessary. Kennedy J held that one of the two instalments was to be paid into escrow by 1 October in any event, with payment to the plaintiff on 31 October, whereas the Restructuring meant that both payments fell due from 31 October 2022.
Kennedy J held that the matter would accordingly be listed before the Court in the coming weeks. Kennedy J held that if, by then, arrangements for the payment of the principal and interest had not been agreed by the parties, the plaintiff would be entitled to seek judgment in accordance with Clause 3.7; if the parties had agreed or implemented satisfactory arrangements in the meantime, the only remaining question would be costs, in circumstances in which the plaintiff had succeeded in his application.
Application granted.
JUDGMENT of Mr Justice Kennedy delivered 21 September 2023 .
. These proceedings arise from an unfortunate dispute within the family responsible for the ownership and management of a world-class business. The dispute was resolved by agreement before trial and this application arises out of that agreement (the “Settlement Agreement”).
. Edmond Harty, the First Named Respondent and Counterclaim Applicant, (for brevity, “the Plaintiff”) seeks summary judgment against the Second Named Respondent and Third Named Counterclaim Respondent (“the Company”) in the sum of €10,000,000 together with Courts Act interest at 2% per annum from 29 October 2022. Other parties to the original proceedings include; (a) the Plaintiff's father, Edmond Patrick Harty, who established the Dairymaster business which is in issue in these proceedings and was the Applicant and First Named Counterclaim Respondent in the original proceedings (“the Founder”); and (b) John Harty, the Plaintiff's brother who is the current Chief Executive of the business (“the Chief Executive”). Affidavits have also been sworn by; (a) the Founder's wife, Maureen Harty; (b) his sister, Mary Harty, a director and financial controller of the Company (“the Financial Controller”); (c) David Meagher, who joined the Company's board as an independent non-executive director after the settlement, bringing with him a wealth of sectoral accounting and corporate finance experience; and (d) Liam Booth, whose undoubted accountancy and corporate finance expertise was relied on by the Company.
. The key issues are; (a) whether a corporate restructuring effected by the Company and its owners in October 2022 (“the Restructuring”) constituted a sale within the meaning of the Settlement Agreement (such a finding could trigger an obligation to expedite payments otherwise due to the Plaintiff by 31 October 2023 and 31 October 2024); and (b) whether the Company was entitled to withhold any payments on the basis of the Plaintiff's alleged breaches of the agreement.
. By way of context, the Dairymaster Business (“the Business”) represents a remarkable achievement. At the time of the original proceedings the Plaintiff was its CEO and, following a controversial restructuring which was in issue in the original proceedings, its majority shareholder. The Founder had started the Business from scratch in 1968. He, his family, and their colleagues developed a world-class, global business based on the successful combination of Irish (they might say “Kerry”) ingenuity, dedication, and entrepreneurship. It designs, manufactures, and exports innovative products to assist farmers. The Business is known for its automated milking parlour equipment but also supplies products to other farm sectors. Its solutions were originally directed to the needs of local farmers but won global acclaim (and customers). It employs approximately 300 people and has subsidiaries in the United States, the United Kingdom and elsewhere, supported by a large, modern, state-of-the-art manufacturing plant in Kerry (in an area with no previous industrial footprint). The Founder, an octogenarian, remains actively involved in the Business which represents his life's work. By 1998 (when his sons, the Plaintiff and the (current) Chief Executive joined), he had developed a substantial global business, an impressive achievement.
. It is unnecessary to ventilate the issues in the original proceedings save to note that unfortunate disagreements arose, and relationships deteriorated between the individuals centrally involved in the business, the Founder and his two sons, leading to mutual recriminations. The Founder (supported by the Financial Controller and the (current) Chief Executive) issued the proceedings to set aside a 2018 restructuring arrangement which had given Plaintiff majority control of the Company. The Plaintiff counterclaimed against the Founder and the (current) Chief Executive. The Company was a Respondent to the claims and counterclaims. The proceedings settled as the case came on for hearing and were adjourned with liberty to apply for enforcement.
. The Settlement Agreement essentially provided the Plaintiff's interest to be “bought out”. Clause 3.2 provided for the Company to redeem his majority stake with effect from 31 October 2020 “ in return for” the payment of €44 million by a series of instalments (all but two of which have been paid, leaving €10 million outstanding). The payments were staggered over 5 years to enable the business to generate the funds. The Plaintiff's employment and directorship ended, and the restrictions typically imposed on exiting owner/directors were imposed.
. Various provisions protected the Plaintiff's interest as an unsecured creditor until the shares had been paid for under Clause 3.2. These included; (a) Clause 3.3 which required all parties (i.e. including the Company, the Founder and the Chief Executive) to use all reasonable endeavours and to exercise their powers as members and directors to ensure that the Company had sufficient funds and profits available to complete the redemption and associated payments under Clause 3.2; Clause 3.3 also provided that the Company could prepay the amounts due under...
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