Carton shareholder sues for breach of investment terms

A SHAREHOLDER in the Carton Group poultry business is suing the company and its other owners, members of the Carton family, for allegedly breaking the terms of its original €4 million investment.

In 2004, Gharion, a company owned by businessman John Gilroy, paid €4 million for a 40 per cent stake in poultry business Carton Group Holdings which is one of the biggest operators in its industry with sales of €168 million a year.

Over the last two years, Mr Gilroy and the Cartons have been in dispute over a planned sale of the business, payments to family members who are not involved in the company and a €600,000 loan from its pension fund to a number of the directors.

At a brief hearing yesterday, the High Court was told arbitration efforts had failed and that Gharion is claiming that the shareholders’ agreement has been breached to the point where its rights are being suppressed. The Carton Group wants the case referred back to arbitration.

Gharion and the Carton Group originally agreed the company would be sold in 2009 and that both parties would make every effort to boost its value between 2004 and that date.

However, Mr Gilroy, who is one the company’s directors, and Gharion claim the Cartons have resisted this and continue to run the company as a family concern.

According to court documents, Mr Gilroy is also concerned at a number of other issues. In 2006, directors and shareholders, Vincent Carton and Justin Carton, borrowed €600,000 from the group’s pension fund.

Mr Gilroy did not find out about this until August 2007. The money has since been repaid. The Cartons borrowed it to fund their share of a €1 million capital investment required to combat the impact on the business of the avian flu outbreak in 2006.

The group has also continued to pay around €220,000 a year to members of the Carton family who are not involved in the business. Mr Gilroy was aware of that one such family member was receiving payments from the company when Gharion originally invested, but did not find out about the others for some time.

Carton Group has yet to make an ex-gratia payment to a group of workers laid off as a result of the closure of one of hatcheries in 2007, and could be facing legal action.

Gharion’s action is against Carton Group Holdings and Vincent, Justin and Elizabeth Carton.

It is understood they believe that, as a result of a number of developments outside the company’s control, it would not have been possible to sell the business at a profit in 2009.

Gharion wants the court to order the Carton family to sell their stake in the business to it or to buy out its 40 per cent stake.