Sanbra Fyffe Ltd v O'Sullivan

• Jurisdiction: Ireland
• Court: High Court
• Judge: KENNY J.:
• Judgment Date: 28 February 1972
• Neutral Citation: 1965 WJSC-HC 973
• Docket Number: No. 155/1970
• Date: 28 February 1972

1965 WJSC-HC 973

THE HIGH COURT

No. 155/1970

Sanbra Fyffe Ltd v. O'Sullivan

REVENUE

SANBRA FYFFE LIMITED

Appellant

and

J. M. O'SULLIVAN

Respondent

1 Judgment delivered 28th February 1972KENNY J.:

KENNY J.:

2 This case was stated in December 1970 by the Circuit Court Judge in relation to his decision on assessments to income tax on Sanbra Fyffe Limited ("the taxpayers") for the two years of assessment which ended on the 5th April 1961 and the 5th April 1962. Before 1948 the taxpayers, who carried on the business of engineers in Dublin, produced plumbers” brass ware and compression couplings. In 1948 they decided to concentrate upon compression couplings and to allow their business in plumbers” brass ware (the value of which was about £12,000 per year) to decline.

3 In 1958 they decided to expand their business in the production of plumbers” brass ware and as their existing methods of production and machinery were out of date, they sent a representative to visit a number of firms in England which carried on this business. They made a verbal agreement with one of these firms John Webb and Company Limited ("Webb's") who are one of the leading firms in this business in England and who had specialised knowledge of methods of production. This verbal agreement was subsequently given expression in a written contract made on the 31st December 1959. The relevant clauses of it read:

4 2 "1. This agreement shall be deemed to have commenced on the 1st November 1958 and shall continue until the 3lst October 1968.

5 3 "2. Webb's shall during the continuance of this agreement make available to Fyffes as and when they shall reasonably require all technical information within their knowledge necessary to enable Fyffes to manufacture in Ireland all items of plumbers“ brass ware and hot brass pressings being manufactured by Webb's at present or at any time during the continuance of this agreement.

6 4 "3. Fyffes shall be entitled to inspect and take copies of all relative patterns, designs and drawings belonging to Webb's but shall make good any damage occasioned thereby and (subject to the restriction in clause 7 hereof) shall be entitled to an exclusive license under all patents which Webb's have or may take out during the continuance of this agreement.

7 5 "4. Fyffes shall pay to Webb's for the said technical information the capital sum of £15,000 payable in the United Kingdom free from any deductions whatsoever by the following installments: (a) £2,500 on the execution hereof (b) £2,500 on the 1st November 1959; (c)£1,500 on the 1st November in each of the succeeding six years and (d) the balance of £1,000 on the 1st May thereafter; and also shall reimburse to Webb's within one month of receiving an account thereof all reasonable wages for time occupied and insurance and reasonable out-of-pocket expenses paid or incurred by ebb's in the performance of their obligations hereunder.

8 6 "5. Fyffes shall treat all information and techniques learned by them from Webb' in strict confidence and shall take all necessary precautions to avoid disclosure to any third party.

9 7 "6. Webb's shall not disclose the said information and techniques during the continuance of this agreement to any other person or corporation carrying on or about to carry on business in the Republic of Ireland and Northern Ireland.

10 8 "7. Fyffes shall not without the previous written consent of Webb's either directly or indirectly attempt to manufacture or market any of the goods within the scope of this agreement elsewhere than in the Republic of Ireland and Northern Ireland during the continuance of this agreement and within three years of its determination."

11 In anticipation of the execution of the agreement the taxpayers paid to Webb's the first installment of £2,500 on the 1st November 1958 and the second installment of £2,500 on the 1st November 1959 and the first question for decision is whether these sums were permissible deductions in computing the profits of the taxpayers for the two years of assessment. When the taxpayers decided to expand their production of plumbers” brass ware they were advised by Webb's to purchase plant and machinery which cost £20,000....