The High Court
1999 No 533S
Between:
The Stanley Works Limited
trading as Mac Tools
Plaintiff
And

Timothy O’Connell
Defendant

Judgment of Mr Justice Michael Peart delivered the 4th December 2002

The plaintiff company entered into a Distributor Agreement with the Defendant on the 27th April 1995 whereby the defendant was granted a franchise permitting the defendant to carry on business within a specified territory. In addition the plaintiff advanced to the defendant the sum of £21000 to develop the business, and later advanced a further sum of £5000 on or about the 11th October 1996. These sums were advanced pursuant to a Running Account Credit Facility Agreement dated 27th April 1995. 

The Agreement was terminated on or about the 7th September 1998. The plaintiff says that the defendant terminated the agreement, but there may be some dispute as to the exact circumstances of the termination. There is an internal memo dated 7th September 1997 from Gerry Wainright to two other members of the plaintiff company which says:

“Mark/Sue, Just to inform you that Tim has just told me of his intention to finnish(sic). I will make it official to everyone when I get it from him in writing. No real surprise under his present circumstances!! Regards, Gerry.” 

The defendant says it was never put in writing. However, the fact emerges from the affidavits that there is at the very least a de facto termination in the sense that the parties are no longer in association under the terms of the agreement. The Agreement provided that upon termination all sums owing on foot of the loan agreement would thereupon become payable. Accordingly, on the 21st April 1999 the plaintiff furnished what they regarded as an accurate statement of account of sums owing.

The plaintiffs claim that under the terms of the said agreements a sum of €51546.05 is due to them. The amount claimed in the summons is in Sterling but I am informed by Counsel that this was altered to Irish Pounds by order. 

An Appearance having been entered to the summary summons issued herein, the plaintiffs issued a Notice of Motion before the Master seeking liberty to enter final judgment in the usual way. This motion is grounded on an affidavit of John Kennedy sworn the 12th November 2001 in which Mr Kennedy makes the usual averments in such an affidavit in order to demonstrate an entitlement to the order sought. 

The defendant filed a replying affidavit in which, apart from making a point about whether the claim was properly brought in Pounds Sterling or Irish Punts, makes a more substantial argument against the plaintiff, namely that under the terms of the Distributor Agreement the plaintiff had certain obligations to the defendant, and that the plaintiff is in breach of some of those obligations, and that the defendant has a valid bona fide counterclaim against the plaintiff for damages.

 In those circumstances the defendant submits that the dispute between the parties, both as to any amount due to the plaintiff, and any damages to which the defendant may be entitled should be sent forward to plenary hearing. The plaintiff on the other hand submits that the sums due on foot of the loan agreement are clearly due, and that judgment should be entered for that sum now, and that the counterclaim, if any, should be separately litigated.

The defendant makes the following points of defence in his replying affidavit:

1.	That there has been no valid termination of the agreement, since he never sent, and neither did the plaintiff, any notice of termination.

2.	The plaintiff is in breach of the agreement on account of delays in the delivery of products to the defendant, no back up was provided by the plaintiff company, queries were not responded to after Philip Geraghty left the plaintiff company.

3.	There was inadequate management of the franchise by the plaintiff, including a seven month period following the departure of a Mr Philip Geraghty from the plaintiff company.

4.	No meetings were held with the franchisees, and there were breaches of representations made by some of the plaintiff’s employees regarding the delivery of goods and the organisation of promotional events.

5.	The defendant has goods in his possession to the value of £17500 which he is willing to return to the plaintiff in accordance with the terms of the agreement.

6.	That the defendant has failed to be paid by some of his customers following the termination of the agreement, and that it was agreed that in the event of termination the plaintiff would undertake the task of recovering sums from these creditors.

7.	That a sum of £4000 alleged by him to have been paid to Philip Geraghty by him has not been credited to his loan account.

8.	That the defendant is entitled to a credit in respect of broken tools which were returned by him to the plaintiff company.

The plaintiff states through their Counsel that points 6 to 8 above have been mentioned for the first time by the defendant in his affidavit sworn the 4th November 2002.

Having considered the contents of all affidavits filed on this motion and having listened carefully to what was carefully argued by Counsel on both sides, I am satisfied that the plaintiff has sufficiently made out its case to be entitled to judgment for the amount sought, namely the sum of €51546.05. I am not satisfied that the defendant has sufficiently proven the facts in relation to the sum of £4000 he alleges he paid to Mr Geraghty against the loan account. In relation to credit being given for broken tools and goods available to be returned to the plaintiff, I am satisfied that these are matters that can still be taken into account by the plaintiff on a voluntary basis, if the parties can agree as to amount, but they are not matters which can be taken into account by way of defence to the plaintiff’s claim for judgment.  It might well be in the plaintiff’s interests to explore if the amount due can be defrayed to the extent of the value to be put on these items, given that they may experience difficulty in recovering the amount of their judgment by way of execution.

I am satisfied also that the other claims being made against the plaintiff by the defendant are not grounds which can sustain a challenge to the plaintiff’s right to judgment, but are in the nature of a counterclaim for damages. There is in essence no defence to the claim for monies due under the Agreement upon its termination. I am satisfied that the agreement has been validly terminated, so as to trigger the repayment clause in the agreement.

Counsel for the defendant has submitted that I should not give judgment at this stage as the defendant should be entitled to set off against any sum due, any amount that may in the future be awarded to the defendant by way of damages for breach of contract against the plaintiff. She has referred the court to the case of Prendergast v. Biddle – Supreme Court 31st July 1957 (unreported). This case assists the court in deciding how to accommodate the competing interests of a plaintiff who is owed money and seeks his judgment, and a defendant who may be entitled to a sum for damages, perhaps even greater in amount to the sum to which the plaintiff is entitled to judgment. 

It is necessary to balance these competing interests having regard to the facts and circumstances of the particular case. Mr Justice Kingsmill Moore stated that there could not be any hard and fast rules, and suggested a number of factors which ought to be taken into account in resolving these competing interests. He stated:

“It seems to me that a judge  in exercising his discretion may take into account the apparent strength of the counterclaim and the answer suggested to it, the conduct of the parties and the promptitude with which they have asserted their claims and also the financial position of the parties. If for instance the defendant could show that the plaintiff was in embarrassed circumstances it might be considered a reason why the plaintiff should not be allowed to get judgment or execute judgment, on his claim till after the counterclaim has been heard, for the plaintiff having received payment might use the money to pay his debts or otherwise dissipate it so that judgment on the counterclaim would be fruitless. I mention only some of the facts which a judge before whom the application comes may have to take into consideration in the exercise of his discretion.”

A similar approach was adopted by Barrington J. in Agra Trading Ltd v. Minister for Agriculture – unreported – 19th May 1983, and also by Geoghegan J. in Soanes v. Leisure Corporation International Ltd – unreported – 18th December 1992.

Applying these guidelines to the present case a number of facts are relevant. I have been informed that a short time ago this motion came before Mr Justice Kearns who having heard the motion adjourned the matter to allow the defendant lodge in court a sum of €10000 as the price for a stay on any judgment pending the hearing of the case. I am informed that the defendant has been unable to produce this sum, and that the plaintiff is also involved in some matrimonial proceedings. These facts were not challenged on behalf of the defendant. It was also pointed out to the court that some of the points of defence asserted by the defendant have been asserted only in recent weeks in his affidavit sworn on the 4th November 2002. 

As far as the strength of the defendant’s counterclaim is concerned, it could not be said that it is unstatable, at least in respect of some of the facts asserted by him. But there is no doubt also that the plaintiff may be in a position to defend some if not all of the counterclaim. It is not necessary for me to examine this aspect in more detail.

I am therefore satisfied that in exercising my discretion as to whether or not to grant judgment to the plaintiff at this point, I should exercise it in favour of the plaintiff. There can be no doubt that the Defendant’s financial circumstances are to say the least strained, given his inability to produce the sum specified by Mr Justice Kearns. It is also the case that the hearing of this case might well not take place for perhaps 12 months, if not longer, given the backlog of cases in the court lists. It would not be fair in these circumstances to make the plaintiff wait for their judgment.

In these circumstances, I will grant the plaintiff liberty to enter judgment in the sum of €51546.05. I will however order that there will be a stay on entry of this judgment if, upon the delivery of a Counterclaim by the defendant, the defendant lodges in court a sum of €15000. Any such counterclaim is to be delivered on or before 6th January 2003. The said sum of €15000 is also to be lodged in court on or before that date as a condition of the said stay. Upon its lodgement, a stay will exist on entry of judgment. In this way the court is being fair to both sides. I also order that the plaintiff be entitled to their costs of this motion to be taxed in default of agreement.