CAC 17-year dispute comes to an end
Published:Friday | October 30, 2020 | 12:14 AMKarena Bennett - Business Reporter
Industrial air-cooling company CAC 2000 Limited will make a final payment of US$45,000 to X-Ray Diagnostics in December, bringing an end to a 17-year legal battle between the two companies.
A turn in their ongoing legal strife came on May 28, when claimant X-Ray Diagnostics reached out to settle the case. The court had ruled in the company’s favour but, at the time, CAC was still challenging aspects of how the damages were computed.
X-Ray Diagnostic proposed to CAC that it pay them a settlement of $1.16 million plus US$445,000 – totalling around $66 million – in six instalments ending December 31 of this year. CAC decided to say yes to the proposal, and agreed to terminate its intention to appeal the case, to mitigate the chance of incurring additional interest charges and legal fees, and to avoid the uncertainty of exchange rate fluctuations on the foreign currency component of the award.
Chairman and CEO of CAC 2000 Steven Marston told the Financial Gleaner that the company has made all payments on schedule, with the final payment due in December.
Years ago, X-Ray Diagnostics sued CAC 2000 to recover money for the replacement of equipment and loss of profit following a fire in 2003, which destroyed equipment that CAC was engaged to service. The fire also damaged X-Ray and Diagnostics' premises.
In October 2016, the court awarded damages of US$372,100 and $568,187 to X-Ray Diagnostics, plus loss of profits of $7.08 million, which at the time amounted to $55.6 million. Interest at commercial rates and legal fees were also awarded to X-Ray Diagnostics.
CAC later filed notice of appeal relating to computation of the interest component of the award for the period June 2009 to 2016.
The company subsequently made provisions of $72.98 million in October 2019 to cover related interest on charges for the court-awarded damages and estimated legal costs payable to the claimant’s lawyers.
The $66-million settlement agreed with X-Ray Diagnostics does not include legal fees, which are now being negotiated by CAC’s lawyers.
“We received the offer to settle and accepted, as this was: one, a known amount; two, we would save on further legal fees; and three, the plaintiff had filed a countersuit seeking interest on another portion of the claim, plus pushing for payments ahead of court date, which is still not scheduled,” Marston told the Financial Gleaner.
“At this time, we cannot draw conclusions about the impact on profit and loss, but expect it to be minimal,” he said.
The settlement is expected to be paid from cash on hand and monthly cash flow.
Over nine months to July 2020, CAC racked up profit of $7.2 million, erasing losses of $39.4 million posted a year earlier, while revenues climbed to $928 million from $738 million. The improvement in performance was largely as a result of the indoor environmental quality, or IEQ, service CAC has launched, which is designed to mitigate the spread of the COVID-19 virus in offices and confined spaces.
At the end of the period, the company had cash of $149 million.
With the nearly two-decades-old court case virtually behind his company, Marston says the focus is now on aggressively growing its IEQ business, while offering customers more energy-efficient solutions.
“We can now proceed with our growth plans, albeit cash poorer, without any concern about legal costs, timing of appeal and future judgment amount, while finally removing this liability from our balance sheet.
“It will also prove to our investors and banks that we have, once again, the financial capacity to deal with huge variables such as this. Lastly, our management team can stop wasting valuable time on this past occurrence and focus on our daily operations and customers,” Marston said.