Ferrotec Ltd -v- Bramwell trading as Slimming World, [2009] IEHC 46 (2009)

Docket Number:2007 377 P
Party Name:Ferrotec Ltd, Bramwell trading as Slimming World
Judge:Dunne J.
 
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THE HIGH COURT2007 377 PBETWEENFERROTEC LIMITEDPLAINTIFFAND

MYLES BRAMWELL EXECUTIVE SERVICES LIMITED

TRADING AS SLIMMING WORLDDEFENDANTJUDGMENT delivered by Ms. Justice Dunne on the 5th day of February 2009

Background

These proceedings arise out of an agreement entered by the plaintiff and the defendant on or about the 6th October, 2005, whereby the plaintiff undertook to design develop and manufacture and deliver a number of data management systems complete with specialised software for the defendant consisting of weigh pads, printers and cables. The contract price for the delivery of 3,000 systems was 3,090,000.00. On foot of this agreement, the defendant issued a purchase order No. PR3295 on the 26th January, 2006, for 3,000 systems. At the time of entering into the agreement it was agreed that the defendant would pay to the plaintiff a deposit of 10% of the total order value and this was done by payments on the 4th November, 2005, the 29th November, 2005 and the 2nd of February, 2006. A further payment of 300,000.00 was made by the defendant to the plaintiff on the 6th July, 2006. There is some dispute between the parties as to the circumstances in which that payment came to be made. The agreement between the parties was terminated by the defendant by letter dated the 18th August, 2006.

Application

The application before the court is an application for an order pursuant to

s. 390 of the Companies Act 1963 requiring the plaintiff to furnish to the defendant herein security for costs in respect of this action. Section 390 of the Companies Act 1963 provides as follows:-"Where a limited company is plaintiff in any action or other legal proceeding, any judge having jurisdiction in the matter, may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs and may stay all proceedings until the security is given."The Affidavits

I propose to refer to a number of the affidavit sworn herein in respect of this application. The grounding affidavit is an affidavit of David Rathbone sworn herein on the 30th November, 2007. Having set out details of the agreement, he referred to the defendant's defence to these proceedings, namely, inter alia, denying that the money as claimed by the plaintiff herein in the sum of 2,781,000.00 is due; that the defendant lawfully terminated the agreement; that the plaintiff misrepresented its ability to design and manufacture the systems required by the defendant and tried to sell the defendant a pre-existing system which it had developed for a competitor of the defendant without making the necessary or any software changes to reflect the rules and terminology used by the defendant. A number other issues of contention are set out in the affidavit and it is claimed that the inability of the plaintiff to develop the required system has led to losses on the part of the defendant due to the failure of the plaintiff to provide the system as ordered and the significant delay suffered by the defendant in the completion and incorporation of appropriate systems in its ongoing operations. These are calculated in the amount of St£1,700,000.00. On that basis the defendant seeks to set off any monies due and owing to the plaintiff against those losses should any sum be found to be due. It is also claimed that the sum of 609,000.00 already paid is adequate to discharge any claim that the plaintiff may have against the defendant. Thus, Mr. Rathbone makes it clear that not only will the defendant be defending these proceedings, there will be a substantial counterclaim.

Mr. Rathbone then goes on to deal with the assets of the plaintiff. In that regard he has referred to copies of the financial statements of the plaintiff for the years ending the 31st July, 2005, and the 31st July, 2006. Those accounts have been reviewed by Mazars Ireland on behalf of the defendant herein and it is the conclusion of Mazars that the plaintiff would not be in a position to pay any costs of the defendant if successful in defending the present proceedings. Mr. Rathbone further pointed out that there is no up to date information in relation to the financial status of the plaintiff.

Mr. Rathbone also indicated that he has been advised by Behan and Associates, Legal Costs Accountants, by letter dated the 27th November, 2007, that the hearing of these proceedings will involve significant expense for all the parties. Behan and Associates have advised that the approximate costs of the defendant in defending the proceedings would be a sum of 362,333.32 (excluding VAT). By letter dated the 21st November, 2007, the defendant's solicitors sought confirmation from the plaintiff's solicitors that the plaintiff would provide security for the costs that may be incurred in these proceedings. A response dated the 28th November, 2007, was received from the plaintiff's solicitors, but the letter did not provide security for costs although it indicated that the plaintiff has always been able to meet its liabilities. Given that response, this application was commenced.

Affidavit of John Ferrie Sworn on the 12th March, 2008.

John Ferrie is the Managing Director of the plaintiff company. In his replying affidavit, he dealt comprehensively with the meeting that gave rise to the agreement between the parties. He exhibited in his affidavit the pleadings herein together with the defendant's request for particulars and the plaintiff's replies to those particulars. The replies to particulars are extensive and were accompanied by twenty books of correspondence and e-mails passing between the plaintiff and the defendant during the course of the agreement. The twenty books of documents are set out in such a way as to deal with specific items and issues that arose between the parties over the course of the agreement. One of the issues raised and dealt with extensively by Mr. Ferrie in the course of his affidavit and in the twenty books referred to above is the extent to which he claims that the project was delayed by the defendant "vacillating in making decisions and reversing the decisions it did make, regarding its rules". In addition, Mr. Ferrie referred to the meeting between the parties on the 6th October, 2005, during the course of which he states that Mr. Rathbone requested a private meeting with Mr. Ferrie when he (Mr. Rathbone) expressed concern as to the plaintiff's ability to complete the contract having regard to the plaintiff's financial position. Mr. Ferrie states that he discussed the background to the plaintiff's financial position and the fact that a timely completion of the defendant's contract would restore the plaintiff's position to one that was completely solvent.

It is not necessary to set out in detail the contentions of Mr. Ferrie as to the extent of the difficulties in preparing the system for the defendant which he states were caused by the defendant's requests for changes to the system being prepared, their request to remodel the outer case of the product and an issue that was raised in relation to a standard grey display screen in the unit. Suffice it to say that this is an area of significant dispute between the parties.

The next issue dealt with by Mr. Ferrie in his affidavit relates to the issue of solvency of the plaintiff. It is noted by Mr. Ferrie that prior to the letter terminating the agreement on the 18th August, 2006, no complaint was made by the defendant in relation to any default on the part of the plaintiff and indeed, a further payment of 300,000.00 was made by the defendant to the plaintiff in July 2006. It is contended by Mr. Ferrie that the plaintiff's current financial situation is directly the result of the defendant's breach of its contractual obligations. He also reiterates that the defendant was fully aware of the plaintiff's financial position before entering into the contract. Complaint is also made that at the time of entering into the agreement with the defendant,...

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