A family-owned school meals provider which was bought out for some €54 million is being sued in the Commercial Court by the purchaser who claims it was misled about the financial state of affairs of the business.
In 2023, Compass Catering Ireland Ltd, part of a global food services group, acquired CNB Investments Ltd, which held the entire share capital in Glanmore Foods Ltd.
Glanmore provides pre-packaged hot and cold meals and snacks to around 450 primary and secondary schools in disadvantaged, or DEIS areas.
The Department of Social Protection, which provides schools with the funds for the scheme, has said it intends to roll out the provision of meals to all schools by 2030.
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Glanmore MD, John Mooney, and his wife Jennifer, own CNB which is registered in Raheen, Rathcoffey, Naas, Co Kildare.
Compass is seeking damages for breach of contract under the share purchase agreement as well as, or alternatively, damages for deceit, fraudulent or negligent misrepresentation and restitution for alleged unjust enrichment.
It also seeks, if necessary, an injunction preventing CNB from reducing its assets below €25 million, or cash below €10 million, pending resolution of the proceedings.
The claims are denied.
On Monday, Mr Justice Mark Sanfey admitted the case to the fast track Commercial Court on the application of Joe Jeffers SC, for Compass, with the consent of Brian Conroy SC, for the defendant. The case comes back before the court next month.
In its claim, Compass says Glanmore initially provided cold meals to schools but during the pandemic the government expanded funding for hot meals and by 2022/23 the number of schools availing of hot meals from Glanmore increased to 93.
In 2023, Compass paid €54.8 million for the business. Compass announced that Blanchardstown-based Glanmore would retain its current management team.
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As part of the pre-purchase due diligence process, Compass says CNB provided information showing that turnover as of December 2022 was €10m and net profit €1.3m.
However, during a transitional management meeting in September 2023, Compass said it became apparent that “certain financial irregularities” had arisen about the charging of schools for hot meals.
Compass says it became clear there was previously an undisclosed problem with Glenmore’s billing system in relation to overcharging errors for hot meals. This was where the invoicing system automatically charged participating schools for hot meals even though a child had declined the hot meal and chosen only snacks.
Compass claims a conscious decision was made by Glanmore only to refund schools which raised concerns rather than correct the invoicing model and inform other affected schools.
It says an internal review calculated total overcharges of at least some €734,000.
Compass says it would not have agreed to buy the business if it had had known about this and that it was worth “significantly less” than it was worth.
