3 days ago
- Business
- Irish Independent
Food truck firm fails in High Court bid over disputed €2m earn-out following multi-milllion euro takeover
Family had sought court's judgment in advance of independent expert's decision
A Co Wicklow-based family firm that agreed to sell its food-van business in 2022 for up to €13m to a Swedish company has failed to persuade the High Court to interfere in an accounting dispute over a more than €2m earn-out fee.
The Ward family's Reward Catering business, which was owned by them through a vehicle called Sunward, was established in 2018 to construct mobile catering and food trucks.
Its business surged during the pandemic, with the company becoming the biggest of its kind in Europe.
The High Court said that: 'Sunward has engaged in what the Supreme Court had described as 'wasteful and premature' litigation' in seeking an advance declaration from it.
Swedish conglomerate Teqnion agree to buy the Irish business in August 2022 for an initial €5.2m plus a potential earn-out to Sunward, which is controlled by Kevin, Thomas, Anne and John Ward.
That earn-out consisted of three potential payments.
The two firms had agreed that future disputes would be resolved by independent experts
A first such payment, of €3m, was paid by Teqnion to Sunward. However, the Ward family disagreed with Teqnion's proposed second earn-out payment, which covered the period from September 1, 2023, to August 31, 2024.
The earn-out was based on the gross profit the Irish catering-van business generated in a specific period.
In October 2024, Teqnion delivered a draft earn-out statement to Sunward, in which it assessed the gross profit of the Irish business during the second earn-out period to be just under €2.8m, but reduced to just under €2.5m.
The reason for the reduction was due to six invoices that were issued in August 2024.
However, Teqnion didn't treat those transactions as income received until September 2024, when the trucks were delivered.
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Teqnion therefore argued that the sale of those trucks didn't fall within the second earn-out period, but the third.
The High Court heard that as a result of this change, Teqnion claimed that the second earn-out amount due to Sunward is €222,754, rather than the almost €2.2m which Sunward claimed it would be if the six invoices had been treated as part of the revenue for the second earn-out period.
The Swedish company pointed out that the required financial statements had to be prepared in accordance with accepted accounting principles and practices generally accepted in Ireland.
Sunward claimed that Teqnion 'impermissibly adjusted' the gross profit in Reward Catering's management accounts by excluding the invoices from the calculations.
Under the terms of the acquisition agreement, Teqnion and Sunward had agreed that any future disputes between them would be resolved by an independent expert accountant, rather than resorting to the courts.
However, once they had a dispute, and before the expert determination process had commenced, Sunward initiated court proceedings regarding the dispute.
It sought a declaration from the court that the expert is not entitled to refer to certain accounting standards in reaching her decision and that she is bound by a definition of gross profit contained in the agreement between the parties.
The court rejected that application.
'It is clear therefore that the expert in this case is entitled to apply her interpretation of gross profit to the facts of the dispute and to come up with her adjustments, if any, to the draft earn-out statement, without any interference, in advance, from the courts,' it stated.
