Wrights of Howth Galway Ltd v Canestar Ltd & O'Regan
| Jurisdiction | Ireland |
| Judge | Mr. Justice Roderick Murphy |
| Judgment Date | 07 June 2011 |
| Neutral Citation | [2011] IEHC 255 |
| Court | High Court |
| Date | 07 June 2011 |
[2011] IEHC 255
THE HIGH COURT
BETWEEN
AND
CONTRACT LAW
Breach
Asset sale agreement - Consultancy agreement - Breach of trust - Breach of fiduciary relationship - Breach of warranty - Recission - Damages for non disclosure and non performance - Conversion - Deliberate withholding of monies due - Commission - Failure to calculate commission on a monthly basis - Set off - Counterclaim - Contra Proferentem principles -Whether plaintiff entitled to sums claimed - Whether defendant entitled to set off - Whether withholding money amounted to fraudulent conversion - Whether defendant deliberately mislead plaintiff as to monies owed - Whether breach of trust or breach of fiduciary agreement - Whether breach of warranty of solvency - Whelan Frozen Foods Ltd v Dunnes Stores [2006] IEHC 171, (Unrep, MacMenamin J, 17/02/2006) considered - Judgment granted (2006/1350P - Murphy J - 7/06/2011) [2011] IEHC 255
Wrights of Howth Galway Ltd v Canestar Ltd
JUDGMENT of Mr. Justice Roderick Murphy dated the 7th day of June 2011
The plaintiff (Wrights) carried on the business of fish processing, storage, distribution and sale and agreed to purchase the business and goodwill of the first named defendant pursuant to an Asset Sale Agreement (ASA) and employ the defendants as consultants pursuant to a Consultancy Agreement (CA).
The first named defendant (Canestar) carried on the business of fish purchasing, packaging and distribution under the trade name Fermoy Fish and at the time of the agreement, was indebted to the plaintiff in the sum of €889,682.
The second named defendant (Mr. O'Regan) is a director of the first named defendant.
Canestar had withheld certain payments which it received on behalf of Wrights under the agreement. On the 27 th March, 2006, the plaintiff was granted an interlocutory injunction freezing all transactions in the first named defendant's bank account.
By a series of agreements made in writing on the 19 th August, 2005, between the first named defendant and the plaintiff, the plaintiff purchased the business of Fermoy Fish including the name, assets and goodwill of the business.
By a Consultancy Agreement made on the same date, the first and second named defendants were appointed by the plaintiff as consultants to manage, inter alia, the firm of Fermoy Fish customer accounts on behalf of the plaintiff.
The first named defendant formerly agreed on 19 th August 2005, that the plaintiff would purchase part of the first named defendant's business as a going concern.
The consideration payable consisted of commission of sales, €400,000 for equipment, the value of stock at the transfer date to be agreed and a sum for goodwill. That was to be offset against the sum of €889,682 being the amount outstanding in respect of sums owed by Canestar to Wrights.
The sum calculated for commission was 12% of the monthly sales to existing clients as listed in the 10th Schedule to the Asset Sale Agreement and all new customers introduced by Canestar. In the event that the clients Dunnes Stores introduced a central distribution system the monthly sales should be discounted by Wrights historical sales to the Dunnes Stores clients listed on 11 th schedule. Where stock was not available from Wrights and was available to Canestar from other suppliers to fill an order on their existing client list, at a price equal to or less than selling price to the customer, then it was agreed that Canestar could source the stock from other supplier and Wrights would discharge the cost of the stock. It was agreed that monthly payments due to Canestar up to the sum of €400,000 would be set off against the amount due from Canestar to Wrights.
The sums payable were to be calculated over a maximum period of twenty-four months from the date of the agreement and be based on the maximum aggregate sales figure of €10M. In the event the aggregate sales figure exceeded €10 million within the twenty-four month period, Wrights would pay the a sum representing 4% of the aggregate sales valued in excess of that sum arising exclusively from the business to be discharged thirty days after the expiration for the twenty-four month period. In the event of aggregate sale figure at the end of the seventh month from the date of the agreement was at least €2.3M, the vendor would be paid the sum of €130,000 which sum would be discharged thirty days after the expiration on the seventh month.
On the signing of the agreement €250,000 was to be paid to Canestar in respect of equipment.
A sum of €100,000 was to be paid in respect of stock set out in the 9th schedule, on the signing of the agreement and the balance in thirty days after the date of the agreement.
The sum provided for goodwill of €300,000 was also payable on the signing of the agreement.
Sums payable at the date of the agreement were €250,000, €100,000 and €300,000 or €650,000. Against this it was agreed that €489,682.24 of the €889,682.24 was payable by the vendor to the purchaser.
Accordingly on signing of the payment a figure of €160,317.76 was due by Wrights to Canestar.
The agreement included certain restrictions on Canestar for a period of three years from the transfer date.
The parties committed themselves to the spirit of the letter of the agreement. They would not for the duration of the agreement in any way directly themselves or indirectly, procure another or others to work towards undermining the agreement or the spirit thereof. Wrights would not seek to have Canestar's agreed client list supplied in any way other than through Canestar and would conduct its affairs in such way, through pricing or otherwise, that would avoid the risk of that happening.
The agreement provided that:-
2 "29.1 No substantial customer or supplier of the vendor (Canestar) has from the date the twenty four months preceding the date of the agreement ceased or indicated an intention to cease trading with or supply the vendor or is likely to reduce substantially its trading with or supply to the vendor and so far as they warrantor is aware the attitude or actions of customers, suppliers and employees with regard to the vendor will not be prejudicially effected by the execution or completion of this agreement.
3 29.2 The vendor has not within two years prior to the date hereof been and is not in prospect of being materially and adversely affected by the loss of an important customer or supplier or that abnormal fact or relation to a customer or supplier or by any disputed matter which would reflect the relationship of it with any of its customers or suppliers."
The Consultancy Agreement made between Canestar and Mr. O'Regan as consultant and Wrights as a customer (the company) agreed on the appointment for twenty four months of the consultant to provide the services to the company as set out in the 1st schedule or as agreed between the consultant and the board of directors of the company.
The consultancy fee was at a rate of €795 per week plus VAT, together with the weekly outlay as contained in the 2nd schedule in relation to the Fermoy Fish offices at Connolly Street, Fermoy. These included rent of €250 per week, wages of staff employed, ESB, heating, phone and fax, vouched costs of running and maintaining computer system, vouched insurance costs, rates payable and agreed decoration and to recent general repair costs.
The agreement also contained a standard reporting, confidentiality, intellectual property and restrictive covenants.
In addition the consultant agreed to indemnify and keep indemnifying the company against all losses, costs, demands, damages, actions, expenses and claims however incurred by the company relating to taxation treatment of the payments and as result of the breach by the consultant, with any provisions of the confidentiality intellectual property and restrictive covenant trusts.
The plaintiff pleaded that it was an express and or implied term of the agreements that the first named defendant would warrant that it would deal in good faith with the plaintiff and undertake to execute and deliver any documents and take any other steps as should be reasonably be required to vest the assets in the plaintiff and that the parties would commit themselves to the spirit and letter of the agreements.
It was further pleaded that the Consultancy Agreement provided that the first and second named defendants undertook to devote such time, attention and skills to their duties under the agreement as might be reasonably be required to bring the agreement to a successful conclusion.
It was pleaded that the plaintiff instructed the first and second named defendants to inform its customers to make all cheques payable to the plaintiff trading as "Fermoy Fish" but contrary to such instruction, and in breach of the agreement, the first and second named defendants failed to notify the relevant customers and continued to make cheques payable to the first named defendant.
It was pleaded that, on the 16 th March, 2006, the defendants admitted for the first time that payments in the sum of €484,895.88 had been received by them from the plaintiff's customers but had been withheld by them from the plaintiff.
The plaintiff said that at diverse dates from January to February 2006, it raised queries with the second named defendant in relation to current arrears and customer accounts. In response the second named defendant said that there were delays in...
To continue reading
Request your trial