The High Court has urged members of the family behind a major manufacturing business to resolve a row over an outstanding buyout payment of €10 million to a former chief executive and son of the founder.
Mr Justice Liam Kennedy told members of the Harty family, who run the highly successful Dairymaster dairy machinery manufacturing facility in Causeway, Co Kerry, to “reflect on the benefits of constructive engagement” to resolve all ongoing “damaging and distressing” disputes.
He did so when he ruled that unless the family can resolve the matter, he would in the coming weeks approve an application by Dr Edmond (Ed) Harty, a former chief executive and son of the firm’s founder Edmond Patrick (Ned) Harty, for judgment for €10 million against the family firm, Edmond P Harty & Co Unlimited Company. Dr Harty is a governor of The Irish Times Trust.
Ned Harty established Dairymaster in 1968. The judge described the business as having achieved global acclaim and customers, employing 300 staff, with subsidiaries worldwide and supported by its state-of-the-art manufacturing facility in Causeway.
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Ned, now an octogenarian, remains actively involved in the business. In 1998, his sons Ed and John joined the business.
Ed became chief executive but by 2018 a legal dispute began when “unfortunate disagreements” arose and relationships deteriorated, the judge said.
Ned, supported by his son John, who is now chief executive, and by Ned’s sister Mary Harty, who is the company’s financial controller, brought High Court proceedings against Ed to set aside a 2018 restructuring arrangement that had given Ed majority control of the company.
Ed counterclaimed against his father and his brother and the company was a respondent to both claims and counterclaims.
Those proceedings settled on the basis that Ed would cut ties with the company and receive €44 million for his majority stake in a series of instalments over five years.
The settlement also included provisions that the company would endeavour to ensure it had the funds to make the payments to Ed. It further included mutual non-disparagement and confidentiality obligations and non-compete and non-interference obligations by Ed.
It also included a clause that should the company be sold, or a majority of its shares sold, this would trigger the immediate payment to Ed of all the money due to him.
Unfortunately, the judge said, issues soon arose with the company holding back earlier instalment payments alleging Ed was breaching the agreement. He denied the allegations and disputed the company’s entitlement to delay payment or impose new requirements. Under threat of proceedings, the company finally paid the instalments.
In 2022, a restructuring of the business took place. This arose because the company was facing a new obligation to file its accounts which had been private.
To retain its non-filing structure, while avoiding personal liability for the ultimate owners, Ned and John sold their 99.65 per cent voting shares to a newly incorporated Isle of Man entity called Bovis. This was done by exchanging their stakes for Bovis shares.
This meant, the judge said, that Ed remained an unsecured creditor of the company with €10 million in final payments still due to him.
It also meant his contractual protections were eroded because Edmond P Harty unlimited company no longer had a central and controlling position in the corporate structure
The company denied the restructuring prejudiced Ed, pointing out its credit risk had not changed from a creditor’s perspective and that it had sufficient funds to meet the payments.
Ed brought summary judgment proceedings seeking the outstanding €10 million. He argued the immediate payment clause in the settlement applied to any sale whether or not it involved an external purchaser or a group restructuring.
The company argued it was not a sale in the commercial sense and was not a sale for the purpose of triggering the payment clause.
It also claimed Ed had breached his obligations under the settlement by, among other things making inappropriate and offensive communications to his father, brother and Aunt Mary, with employees and with the firm’s solicitors.
Ed denied these claims. He testified that he cared very deeply about his father and that his mother, Maureen Harty, had been present on key occasions and she had declared in a letter that she rejected key allegations against him.
Mr Justice Kennedy found the restructuring did constitute a sale within the meaning of the settlement clause and thus expediting the payment obligation.
The company was not entitled to withhold any payments on the basis of Ed Harty’s alleged or anticipated breaches of the agreement, he said.
