Fermoy Fish v Canestar: fiduciary duty owed by firm contracted to manage client accounts

AAEAAQAAAAAAAADYAAAAJDg4MzI3Mzk0LTJkYWYtNDNlOC1hNGMzLTE4ZGE3OGRlMGNiMwIn this case, the Court held that as Canestar was under contract to manage client accounts for Fermoy Fish and to collect payment from its customers it did owe Fermoy Fish a fiduciary duty to pass on all payments received. But the breach of that duty by failure to pass on payments received from Fermoy Fish’s clients did not entitle Fermoy Fish to withhold payment contractually due to Canestar for management services.

Background

Fermoy Fish supplied fish to Canestar, which it packaged and sold to major retail groups. Canestar got into financial difficulty and owed Fermoy Fish almost €900,000. The companies reached an agreement whereby Fermoy Fish would purchase Canestar’s assets and goodwill and pay it to manage the client accounts for two years in return for a management fee plus bonus payments should they achieve set sales figures. During the period of the contract Canestar used €480,000 of payments received from Fermoy Fish’s customers to discharge its own debts, and Fermoy Fish withheld payments contractually due to Canestar under the contract.

High Court

Fermoy Fish issued High Cort proceedings seeking, firstly, a Mareva Injunction, and secondly, an order for payment from Canestar. The High Court granted the injunction pending judgment after full hearing. Canestar issued a counterclaim seeking judgment for unpaid management fees and commission. The High Court rejected Fermoy Fish’s argument that Canestar owed it a fiduciary duty and also granted Canestar judgment for €420,000 against Fermoy Fish. Fermoy Fish appealed that decision to the Supreme Court.

Supreme Court

Dunne J (here) held that as the High Court found as matters of fact that it was not within the spirit of the agreement between the parties that Canestar could withhold payments and that there was a clear obligation on Canestar to lodge payments on Fermoy Fish’s account,  the trial judge erred in finding that Canestar  did not have a fiduciary duty towards Fermoy Fish. And as the trial judge had determined that Canestar had wrongly withheld money from Fermoy Fish it had breached that fiduciary duty.

However, Fermoy Fish could produce no authority before the Court to the effect that Canestar’s breach of duty entitled it to retain payments due under the contract for services rendered. Therefore the Court did not overturn the High Court order granting Canestar judgment against Fermoy Fish (plus interest), except to vary the sum owed (to €150,000) due it finding that Canestar had not achieved its sales target to entitle it to the bonus payments.

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