SRI Apparel Ltd v Revolution Workwear Ltd and Others

JurisdictionIreland
JudgeMs. Justice Laffoy
Judgment Date21 June 2013
Neutral Citation[2013] IEHC 289
CourtHigh Court
Date21 June 2013

[2013] IEHC 289

THE HIGH COURT

[No. 10923P/2011]
SRI Apparel Ltd v Revolution Workwear Ltd & Ors

BETWEEN

SRI APPAREL LIMITED
PLAINTIFF

AND

REVOLUTION WORKWEAR LIMITED, DONAL O'SULLIVAN, PAUL BOND AND SAFETY WORLD LIMITED
DEFENDANTS

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 101

COMPETITION ACT 2002 S4

COMPANIES ACT 1963 S194

HEARN & MATCHROOM BOXING LTD v COLLINS UNREP O'SULLIVAN 3.2.1998 1998/21/7893

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 101(1)

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 101(3)

EEC REG 330/2010 ART 4

EEC REG 330/2010 ART 4(B)

DUNLEAVY & SREENAN COMPETITION LAW: A PRACTITIONERS GUIDE 2010 222

PIERRE FABRE DERMO-COSMETIQUE SAS v PRESIDENT DE L'AUTORITE DE LA CONCURRENCE 2013 AER (EC) 281 2012 BUS LR 1265 2011 5 CMLR 31

EEC REG 2790/1999

EEC REG 330/2010 ART 4(C)

EEC REG 330/2010 ART 4(B)(i)

COMPANIES ACT 1963 S194(1)

COMPANIES ACT 1963 S194(6)

MCCANN & ORS COMPANIES ACTS 1963-2012 2012

ROYAL BANK OF SCOTLAND PLC v ETRIDGE (NO 2) 2002 2 AC 773 2001 3 WLR 1021 2001 4 AER 449 2001 2 AER (COMM) 1061 2002 HLR 4

SEATON v HEATON; SEATON v BURNAND 1899 1 QB 782

HAMILTON v WATSON 8 ER 1339 1845 12 CL & F 109

MOORVIEW DEVELOPMENTS LTD & ORS v FIRST ACTIVE PLC & ORS UNREP CLARKE 6.3.2009 2009/40/9929 2009 IEHC 214

NORTH SHORE VENTURES LTD v ANSTEAD HOLDINGS INC & ORS 2012 CH 31 2011 3 WLR 628 2011 2 AER (COMM) 1024 2011 BUS LR 1036

MCCABE BUILDERS (DUBLIN) LTD v SAGAMU DEVELOPMENTS LTD & ORS 2011 3 IR 480 2009/33/8240 2009 IESC 31

MCDERMOTT CONTRACT LAW 2001 PARA 21.97

MOODY v COX & HATT 1917 2 CH 71

POLAK v EVERETT 1876 1 QBD 669

HOLME v BRUNSKILL 1878 3 QBD 495

REES v BERRINGTON 30 ER 765 1795 2 VES JR 540

BANK OF INDIA v TRANS CONTINENTAL COMMODITY MERCHANTS LTD & PATEL 1982 1 LLOYDS 506

BANK OF MONTREAL v WILDER 149 DLR (3D) 193

DANSKE BANK A/S T/A NATIONAL IRISH BANK v MCFADDEN UNREP CLARKE 20.4.2010 2010/10/2402 2010 IEHC 116

WITTMANN (UK) LTD v WILLDAV ENGINEERING SA 2007 BLR 509 2007 AER (D) 505 (JUL) 2007 EWCA CIV 824

GABBS v BOUWHUIS UNREP MASUHARA 20.6.2007 2007 BCSC 887

HIGH MOUNTAIN FEED DISTRIBUTORS LTD v PAW PLEASERS LTD & MCCANN-SUCHOWER UNREP SHARP 27.9.2004 2004 MBQB 220

ANKAR PTY LTD v NATIONAL WESTMINSTER FINANCE (AUSTRALIA) LTD 162 CLR 549 1987 HCA 15

Practice and procedure- Injunction- Distribution Agreement- Guarantee- Worldwide-Enforceability- Anti-competitive- Reliefs- Judgment- Damages- Whether discharged from liability

Facts: The plaintiff was a limited liability company and held the worldwide distribution rights of Caterpillar clothing. The defendant, Revolution, was incorporated with Mr. O”Sullivan as an eighty per cent shareholder. The plaintiff entered a distribution agreement with Revolution in 2009. The 2009 Agreement was varied in 2011. The plaintiff sought an interlocutory injunction restraining the defendants from exporting or permitting the distribution of merchandise without the approval of the plaintiff and various mandatory orders, including a requirement to furnish a complete customer list to the plaintiff as well as damages. The defendants challenged the enforceability of the 2009 Agreement under competition law, for alleged material non-disclosure and the alleged automatic termination of the agreement by default. It was contended that Mr. O”Sullivan had been discharged from liability on foot of a guarantee in the 2009 Agreement.

Held by Laffoy J. that the Court would grant judgment in the sum of Eur 114,951 against Revolution, that the unless the defendants gave a permanent undertaking in the terms of the prohibitory injunctive relief sought, there would be an order in those terms, a declaration that Mr. O”Sullivan had not been discharged as a guarantor under the Agreement

1

Judgment of Ms. Justice Laffoy delivered on 21st day of June, 2013.

The parties and their relationship
2

1. The plaintiff is a limited liability company incorporated in this jurisdiction. It is the holder of the worldwide distribution rights in Caterpillar (commonly referred to as CAT) Clothing merchandise. It acquired these distribution rights from a corporation which I understand is incorporated in the United States of America, Summit Resource Imports LCC. The plaintiff is apparently controlled by Mr. Sean Gallinger, who described himself as Vice President of Summit Resource Imports LCC when testifying. At the time the plaintiff acquired the global distribution rights in the Caterpillar Clothing merchandise there was already an arrangement in place since 2006 under which a company controlled by the third named defendant (Mr. Bond) and his family, J. P. Bond & Co. Ltd. (the Bond Company) held the right to distribute Caterpillar Clothing merchandise in Ireland. Mr. Bond was a director of the plaintiff. According to a Form BIO lodged in the Companies Registration Office (CRO) on 9 th July, 2010, he resigned as director of the plaintiff with effect from 17 th February, 2010. Strangely, the abridged financial statements of the plaintiff for the year ended 31 st December, 2008, which were filed in the CRO on 25 th March, 2010, show Mr. Bond and Mr. Gallinger as signatory directors in the Directors' Report, which was dated 18 th February, 2010.

3

2. The third named defendant (Mr. O'Sullivan) has been in the business of retailing protective clothing for the construction industry for many years. Since 1982 he has carried on that business through the medium of a company, O'Sullivan Safety Limited. That company commenced purchasing Caterpillar Clothing from the Bond Company in 2007. The only significance of that is that the personnel of O'Sullivan Safety Limited became familiar with Mr. Bond. Mr. O'Sullivan was introduced by Mr. Bond to Mr. Gallinger in June 2009. It is clear on the evidence that the Bond Company was in serious financial difficulties at the time, to the extent that it owed the plaintiff €730,000 in respect of stock. What happened as a result of the introduction was that the first named defendant (Revolution) was incorporated with Mr. O'Sullivan as an eighty per cent shareholder and Mr. Bond as a twenty per cent shareholder. The plaintiff then entered into a distribution agreement with Revolution on 16 th August, 2009 (the 2009 Agreement) in which Mr. O'Sullivan and Mr. Bond participated.

4

3. The fourth named defendant (Safety) is a company incorporated in the State through which Mr. O'Sullivan has carried on business. While the plaintiff seeks relief against Safety, its involvement in the issues which arise in these proceedings is peripheral. The principal proponents are the plaintiff on one side and Revolution and Mr. O'Sullivan on the other side.

The 2009 Agreement
5

4. There was no Irish lawyer involved in the drafting of the 2009 Agreement on behalf of the plaintiff, nor did Revolution or the other parties obtain any legal advice in relation to its provisions at the time. Mr. Gallinger's evidence was that it was drafted by a family member of his who is a lawyer in the State of Montana. In any event, the parties to the agreement were expressed to be -

6

(a) the plaintiff, referred to as "Grantor",

7

(b) a company referred to as "Bond and Company", whose function was expressed at the commencement as "to evidence their consent to the appointment of the Distributor",

8

(c) Mr. Bond and Mr. O'Sullivan, referred to at the commencement as "Guarantors of the Distributor's performance", and

9

(d) Revolution (although "Limited" was missing from its name), followed by the words "Donal O'Sullivan Distributor herein".

10

5. The provisions of the 2009 Agreement which were invoked by the parties were the following:

11

(a) Clause 1.1, which was part of Clause 1 which was headed "Grant of Exclusive Distribution Rights", set out the term of the agreement - the term commencing on its execution (16 th August, 2009) and expiring on 31 st December, 2014, with provision for extension, which is not relevant. For that term the plaintiff granted to Revolution the exclusive right -

12

(i) to purchase "Merchandise Products", which expression was defined in Clause 14 as meaning "CAT brand apparel … limited to workwear products for men, women and children …" from the plaintiff and from vendors appointed by the plaintiff, and

13

(ii) to sell at wholesale and to distribute that merchandise to "mid and upper tier retailers only within the Countries listed on exhibit A (Territory)".

14

In fact, there was no exhibit A attached to the 2009 Agreement. Clause 1.1 then provided that Revolution would be invoiced for goods "at published or commonly used list price paid by other distributors, less 25%". It was then provided as follows:

"Additionally, [Revolution] shall pay an amount equal to 7% of the greater of Minimum Wholesale sales or net wholesale sales (Sales Compensation) as a service and product development fee, payable on the 10 th day following the close of each calendar month, with respect to [Revolution's] sales in that month. Such 7% fee shall not apply to sales to approved sub distributors, provided [Revolution] shall not make any sales to sub distributors without first obtaining the consent of [the plaintiff] evidenced by an addendum to this agreement, which agreement shall provide for all fees, if any, which shall apply to sales to each sub distributor."

15

(b) Clause 14.4 contained the following definitions:

"The Terms "Minimum Purchases" and "Minimum Wholesale Sales" shall have monetary value as set forth on Exhibit B. In each Contract Year, Minimum Purchases and Minimum Wholesale Sales for each year shall be as provided on Exhibit B."

16

A document headed "Schedule B", not exhibit B, which will be considered later, became annexed to the 2009 Agreement after its execution.

17

(c) Clause 2, which was headed "Payments to [the...

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2 firm's commentaries
  • Competition Litigation 2019
    • Ireland
    • Mondaq Ireland
    • September 25, 2018
    ...matters. Competition issues may also be raised in cases not entered in the Competition List. In Ski Apparel v Revolution Workwear et al. [2013] IEHC 289, for instance, which concerned a dispute involving an Irish distributor of Ski Apparel's products (clothing) and in which it was argued th......
  • Competition Litigation 2017
    • Ireland
    • Mondaq Ireland
    • September 26, 2016
    ...matters. Competition issues may also be raised in cases not entered in the Competition List. In Ski Apparel v Revolution Workwear et al. [2013] IEHC 289, para. 61., for instance, which concerned a dispute involving an Irish distributor of Ski Apparel's products (clothing) and in which it wa......

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