Unitherm Heating Systems Ltd v Wallace as official liquidator of BHT Group Ltd ((in Liquidation))

JurisdictionIreland
JudgeMs. Justice Irvine
Judgment Date29 July 2015
Neutral Citation[2015] IECA 191
CourtCourt of Appeal (Ireland)
Docket NumberAppeal No. 2014/1329
Date29 July 2015

[2015] IECA 191

THE COURT OF APPEAL

Ryan P.

Irvine J.

Hogan J.

Appeal No. 2014/1329

In the Matter of BHT Group Limited (in liquidation)

In the Matter of Sections 99 and 231 of the Companies Act 1963

Between
Unitherm Heating Systems Limited
Applicant/Respondent
and
Kieran Wallace as Official Liquidator of BHT Group Limited (in liquidation)
Respondent/Appellant

Sale of assets – Conditions of sale – Proceeds of sale – Appellant seeking a declaration that the respondent stands as an unsecured creditor – Whether High Court judge erred in law and in fact

Facts: The respondent, Unitherm Heating Systems Ltd, supplied goods to BHT Group Ltd which in turn sold these on to third parties. Unitherm went into examinership in February, 2012, and in April, 2012, the appellant, Mr Wallace, was appointed as liquidator. With court approval, the liquidator sold certain assets of BHT to Washglade Ltd. Unitherm was owed €93,907.65 in respect of goods that had been supplied by Unitherm to BHT but which had later been sold on to third parties before the appointment of the liquidator. The liquidator was satisfied that Unitherm”s standard conditions of sale had created a charge in favour of Unitherm over funds received by BHT in respect of goods which it had supplied and which had been paid for by its customers. Unitherm maintained that it was entitled to payment of the aforementioned sums on the grounds that it had, allegedly by agreement, entered into a fiduciary relationship with BHT. In July, 2013, Unitherm asked the High Court to conclude that the proceeds of sale clause created a trust over the said monies in favour of Unitherm, such that it was entitled to trace those proceeds of sale into the accounts of the BHT. The court rejected the liquidator”s arguments and concluded that BHT owed a fiduciary duty to Unitherm arising out of the relationship of principal and agent which existed between the parties. In April, 2014, the court declared that the official liquidator held the proceeds of sale of the goods on trust for Unitherm and that it was entitled to a full account and inquiry in order to enable it to trace the €93,907.65 that had been received by BHT from the sale of the goods. The liquidator, in July, 2014, sought an order reversing and setting aside the order of the High Court and, in its place, a declaration that Unitherm stands as an unsecured creditor of BHT in the sum of €93,907.65 on grounds that the High Court judge erred in law and in fact in: 1) concluding that BHT, as agent on behalf of its principal Unitherm, was acting in a fiduciary capacity when it sold Unitherm”s goods such that Unitherm was entitled to seek to trace into the account of BHT the sum of €93,907.65 received in respect of the sale of such goods; and 2) failing to conclude that the proceeds of sale clause, on the facts of the present case, created a charge in favour of Unitherm over the book debts of BHT and, as such, required registration under s.99 of the Companies Act 1963.

Held by Irvine J that clause 11 of Unitherm”s standard conditions of sale, that being the foundation stone upon which its claim was based, was clearly designed with the objective of securing its interests, so far as was possible, against the risk of non-payment after it had parted possession with its goods to any of its customers such as BHT. Irvine J accepted that the retention of title clause in the conditions of sale operated between Unitherm and BHT as intended in relation to the supply contract. Irvine J held that it was clear from those conditions and from the manner in which the parties traded that while Unitherm”s goods remained in BHT”s possession and payment therefore remained outstanding, title did not pass and was not intended to pass, hence the payment of €13,853.49 to Unitherm in respect of goods which fell into that category in the course of the liquidation. As to the proceeds of sale clause and the relationship between the parties when BHT sold Unitherm”s goods to its customers, Irvine J was satisfied that the relationship at that stage was always intended to be one of creditor and debtor; the parties did not intend that BHT would act as fiduciary on behalf of Unitherm either as its agent or as bailee in possession of its goods with a power of sale. Irvine J held that the High Court judge was wrong in concluding that the evidence supported a finding that the parties had entered into such a relationship which was not evidenced in the standard conditions of sale, the documentation concerning the supply contract, or the contracts for the resale of the goods, or by the conduct of the parties themselves. Irvine J could find no evidence to support a conclusion that the parties intended that BHT would sell Unitherm”s goods as bailee in possession.

Irvine J held that she would allow the appeal.

Appeal allowed.

JUDGMENT of Ms. Justice Irvine delivered on the 29th day of July 2015
Ms. Justice Irvine
1

This is an appeal against the judgment of the High Court (Peart J.) delivered on 2nd April, 2014, and is one which concerns the legal effect of what is commonly described as a ‘proceeds of sale clause’ that formed part of the standard conditions of sale of the respondent, Unitherm Heating Systems Ltd. (‘Unitherm’). The appeal is brought by the official liquidator of BHT Group Ltd. (‘BHT’), with whom Unitherm had traded for many years. While the background to the relationship between Unitherm and BHT is not disputed and is set out in the judgment of Peart J., I will nonetheless summarise it here for ease of reference.

Background
2

Unitherm has been involved in the design and supply of heating systems in Ireland since 2004. In the course of its business, it supplied goods to BHT, which in turn sold these on to third parties. BHT carried on a retail business supplying heating and plumbing products to both trade and end user customers from approximately 40 locations throughout Ireland under various business names and various legal entities, including Brooks, Heat Merchants, and Tubs and Tiles.

3

It is not disputed that prior to the commencement of that relationship in March 2007, Unitherm set out in writing, for the benefit of BHT, its standard conditions of sale. These are referred to in some detail later in the judgment.

4

The manner in which business was conducted was that the customer would engage with BHT regarding their plans and possible requirements. These would later be forwarded by BHT to Unitherm, which would prepare a quotation. That might or might not involve Unitherm making a site visit. Unitherm would then prepare a quotation on the headed notepaper of BHT, or on joint headed notepaper, and this would then be presented by BHT to the customer. BHT was obliged to offer the goods to the customer at the price quoted by Unitherm. If the customer accepted the quotation, BHT would then raise a purchase order for the goods from Unitherm, and this would specify the address to which the goods were to be delivered. Unitherm would then invoice BHT for the amount that had been set out in the original quotation less an agreed discount, the size whereof was dependent upon the nature of the goods supplied. That discount represented BHT's profit on the transaction. It is accepted that such goods as were delivered to BHT were stored in a manner that allowed them to be clearly identified as those of Unitherm.

5

The price quoted by Unitherm for what are described as ‘Commissioning Goods’ included a commissioning service to be supplied by Unitherm. This involved an attendance at the customer's site by a servant or agent of Unitherm, who would carry out an inspection to ensure that the goods had been correctly installed and were functioning appropriately. This service, which was only provided in respect of ‘Commissioning Goods’ that had been paid for in full, entitled the customer to the benefit of an extended warranty in respect of those goods.

6

Unitherm went into examinership on 16th February, 2012, and on 20th April, 2012, Mr. Kieran Wallace was appointed as liquidator. On the 20th April, 2012, with court approval, the liquidator sold certain assets of BHT to a company by the name of Washglade Limited (‘Washglade’). At that time, Unitherm was owed €107,761.14 in respect of goods which had been supplied and invoiced to BHT. €13,853.49 of the aforementioned sum was in respect of goods which had been delivered to BHT and which were still physically present on its premises at the time of the asset sale. The liquidator accepted that these goods were the subject matter of a valid retention of title clause, and Washglade accordingly discharged that sum to Unitherm. That left a balance of €93,907.65 remaining due in respect of goods that had been supplied by Unitherm to BHT but which had later been sold on to third parties before the appointment of the liquidator. In each instance the customer had paid BHT for the goods.

7

By letter dated 28th September, 2012, Unitherm, through its solicitors, Denis McSweeney, sought confirmation that the said sum of €93,907.65 had been received by BHT from its customers and called upon the liquidator to discharge the same within 14 days.

8

In a series of letters commencing in October 2012, Messrs A & L Goodbody, on behalf of the liquidator, expressed themselves satisfied that Unitherm's standard conditions of sale hadcreated a charge in favour of Unitherm over funds received by BHT in respect of goods which it had supplied and which had been paid for by its customers. Given that this charge had not been registered in the Companies Registration Office in accordance with s. 99 of the Companies Act 1963, they maintained that the charge was void as against the official liquidator.

9

By letter dated the 29th January, 2013, Denis McSweeney wrote to Messrs A & L Goodbody maintaining that Unitherm was entitled to payment of the aforementioned sums on the grounds that...

To continue reading

Request your trial
4 cases
  • Governor and Company of The Bank of Ireland v Eteams International Ltd
    • Ireland
    • High Court
    • 15 June 2017
    ...analysis. Those facts are succinctly summarised in the recent decision of the Court of Appeal in Unitherm Heating Systems Ltd v Wallace [2015] IECA 191 (at para. 44 of the judgment of Irvine J). 39 The correct approach to the principles of the construction of contracts governing questions ......
  • The Governor and Company of The Bank of Ireland v Eteams (International) Ltd (in Voluntary Liquidation)
    • Ireland
    • Court of Appeal (Ireland)
    • 14 May 2019
    ...or to an account specified by it. This clause enables the judgment of the Court of Appeal in Unitherm Heating Systems Ltd v. Wallace [2015] IECA 191 to be readily distinguished as there, the agreement provided for a sixty-day credit period during which the company could use the proceeds of ......
  • ADM Londis Plc v Ranzett Ltd
    • Ireland
    • Court of Appeal (Ireland)
    • 19 October 2016
    ...I.R. 481. The judgment of Murphy J. in the High Court was recently applied by this Court in Unitherm Heating Systems. Ltd. v. Wallace [2015] IECA 191. Each of those cases was concerned with whether the purchaser of the goods was a fiduciary of the seller. 69 The first point that is apparent......
  • Comans v J. Donohue Beverages
    • Ireland
    • High Court
    • 8 October 2019
    ...opened to the court was that of Irvine J. of Unitherm Heating Systems Limited v Kieran Wallace as official Liquidator of BTH Group LTD [2015] IECA 191. This was the defendant's appeal from a decision of the High Court holding that the plaintiff's retention of title clause created a trust. ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT