One of the biggest fish purchasing companies in the State during the 1980s went into receivership after a fish-processing venture failed because of alleged defects in machinery supplied by a Danish company, the High Court was told yesterday.

Campbell Seafoods (in receivership) of Burtonport, Co Donegal and an associated company, Campbell Fish Products (in receivership), of St Catherines Road, Killybegs, Co Donegal, have brought a damages action against Brodrene Gram A/S of Denmark.

Mr Hugh O'Neill SC, with Mr Martin Hayden, for the Irish companies, said Campbell Seafoods was one of the largest fish buyers in the Republic in 1984. A healthy, profitable company, with net assets at the beginning of 1985 of £3 million (€3.81 million), had its assets reduced to nil over an 18-month period, counsel said. The decline was caused because Brodrene Gram's machinery was unable to bring about the production capacity required by Campbell Seafoods, Mr O'Neill said.

Counsel said the owners of Campbell, with Green Isle, had hoped to set up a value product called "Campbell Catch". Since then, Green Isle had set up with another company under the name "Donegal Catch" and this was very successful.

The first phase was to set up machinery capable of producing 1,000 kilograms of fish per hour and a factory was designed so that a second similar machine could be installed, Mr O'Neill said.

Campbell Seafoods representatives were introduced to Brodrene Gram - a very large Danish company specialising in freezing equipment. They met a Mr Leif Anderson of Brodrene Gram and a Mr Paddy O'Connor of CNB, Charleville, Co Cork, the Irish agent of the Danish company. Mr O'Neill said the Campbell representatives were assured Brodrene Gram had the machinery with the required capability.

In order to protect itself from currency fluctuations, Campbell Seafoods agreed to operate through CNB. A machine was installed in 1985 but was not capable of dealing with 1,000 kilograms of fish per hour. Mr O'Neill said Brodrene Gram's main argument in its defence was that the contract was with the Irish agent. It was also denied the machine was defective.

In March 1986, Brodrene Gram agreed the level of 1,000 kilograms could not be achieved and supplied additional machinery which did not reach its stated production. Campbell Seafoods had spent £1.8 million setting up the plant. Its fish processing had never commenced and it had interest running on monies borrowed to finance it. Its main bank, National Irish Bank, ultimately lost patience.

Mr O'Neill said Campbell Foods would claim CNB were the agents of the Danish company in the legal sense.

He said the Danish company claimed the receivership and collapse of Campbell Seafoods was not caused by its action. Brodrene Gram was alleging Campbell Seafoods "were on their way out anyway" and also that the case was statute barred.

The hearing before Mr Justice Geoghegan is expected to last three weeks.