High Court dismisses claim to rescind family company settlement due to lack of fundamental breach or mistake.

THE HIGH COURT

COMMERCIAL

[2025] IEHC 697

[Record No. 2021/6828P]

BETWEEN

PETER McCAUGHEY AND IJM TIMBER ENGINEERING LIMITED

PLAINTIFFS

AND

MARTIN McCAUGHEY AND McCAUGHEY HOMES LIMITED

DEFENDANTS

JUDGMENT of Mr Justice Mark Sanfey delivered on the 3rd day of December 2025.

Introduction.

1. These proceedings concern a protracted and most unfortunate dispute between two brothers, Peter and Martin McCaughey, which in turn originated in a dispute between the brothers and their father Seán McCaughey in relation to two familyowned companies (collectively ‘the companies’) IJM Timber Engineering Limited (‘IJM’) and McCaughey Homes Limited (‘MHL’). For simplicity, I shall refer to the brothers in this judgment as ‘Peter’ and ‘Martin’.

2. This judgment primarily concerns the scope and effect of a settlement of proceedings initiated in 2019 by Martin against Peter and IJM pursuant to s.212 of the Companies Act 2014. (“the s.212 proceedings”) The parties, with the addition by consent of MHL, executed a formal settlement agreement (“the settlement” or “the settlement agreement”) on 21 January 2020. The present proceedings concern whether the settlement was intended to affect certain entitlements conferred on Peter by IJM pursuant to two resolutions adopted by IJM on 04 December 2017 in circumstances which I shall set out below. A further issue arises as to whether the parties have abided by the settlement, and if not, whether it should be rescinded.

3. Prior to the initiation of the present proceedings, Martin applied in the s.212 proceedings for an order enforcing the terms of the settlement agreement, and an order directing the sale of IJM to proceed on the basis that Peter had no claim, right or entitlement against IJM arising from the two resolutions of 04 December 2017 referred to above. McDonald J, in a judgment delivered on 18 June 2021 – see [2021] IEHC 412 – held that the settlement should be enforced on the basis that any payment claims which Peter may have made pursuant to the December 2017 resolutions had been settled and released by virtue of paras. 1 and 25 of the settlement agreement.

4. In addition to appealing the decision of McDonald J, Peter initiated the present proceedings on 20 December 2021. His primary contention is that mistake occurred in the negotiating and documenting of the settlement, such that the settlement should be rectified to reflect the true agreement of the parties, or rescinded. I shall set out the arguments for and against this proposition in detail below.

5. The hearing of the matter was listed for three days, and took place on 24-26 January 2023. While the evidence was concluded in this period, it proved necessary to hear submissions on a further day. For various reasons, this did not occur until 15 March 2023. The parties, having already delivered detailed written submissions, took the opportunity in the interim to deliver further lengthy submissions, together with transcript extracts, in relation to the evidence given the previous January.

6. The present application was brought by Peter in light of the decision of McDonald J in relation to the objective interpretation of the settlement; if the appeal of that decision had been successful, it would probably have rendered unnecessary any need for the present judgment. In the event, the Court of Appeal heard the appeal and gave judgment on 30 March 2024: see the judgment of Barniville P, [2024] IECA

135. The court dismissed the appeal in its entirety, holding that the trial judge, “correctly interpreted the settlement agreement as including a compromise or release of the entitlements Peter had to the payments provided for in resolutions 2A and 2B passed at the EGM of IJM in December 2017…there is no error of principle in the judge’s determination of Martin’s application and no injustice has been caused as a result of that determination [para. 181]”.

7. Both McDonald J and I, in our respective hearings, strongly urged the parties to consider resolving their differences by agreement, whether through mediation or otherwise; my comments in this regard can be seen in the transcript at day 3, pp. 209-

210. I was subsequently asked to “pause” work on this judgment while the parties sought to seek compromise; this process went on for several months, including as recently as February 2025, when I was requested to proceed with finalising the judgment.

8. In writing this judgment, I have had the benefit of the voluminous written submissions and case law regarding both the law and the evidence. I have had regard to transcripts of the full hearing, and in addition have had access to the digital audio recording of the hearing where I considered it necessary.

Background

9. In order to provide the context for the issues in dispute, it is necessary to set out the background to the matter in some detail. Much of this is not contentious, and can be summarised briefly.

10. The two companies, IJM and MHL, are private companies. IJM was previously controlled by Seán McCaughey (‘Seán’), Peter and Martin’s father. Seán held 70% of the shares in IJM between 1991 and 2018, with Peter and Martin holding 20% and 10% respectively. A third company, McCaughey Developments Limited (‘MDL’), was held on a similar basis to that in IJM as regards shareholding, save that Martin held more shares than Peter.

11. In 2013, a receiver was appointed over MDL. That company and Danske Bank subsequently agreed that a new company – McCaughey Homes Limited – would be incorporated and would buy from MDL certain lands known as “Cois Farraige”. An agreement was executed by Seán, Martin and Peter in May 2016 which recorded that Martin would hold 99 shares in that company, with Andrew McCaughey – Martin’s son – holding the remaining share. The agreement also recorded the funding by way of loans from Martin and IJM to facilitate the Cois Farraige purchase.

12. During the course of 2016, there were negotiations between Peter, Martin and Seán with a view to Seán exiting from IJM. An agreement in this regard was finalised in August 2016 (“the 2016 agreement”), by which Seán’s shares would be bought back by IJM. Following this agreement, a further written agreement was concluded between Peter and Martin. That agreement provided as follows: “We confirm that further to agreement by Seán McCaughey on 22 August 2016 to accept a share buyback by IJM Timber Engineering Ltd of his entire shareholding, including his interests in any other related companies including McCaughey Homes Ltd, for the sum of One million four hundred thousand Euro. Following Seán McCaughey’s agreement Peter and Martin McCaughey met at 8pm on 22 August 2016 in the Windsor Restaurant, Dundalk and the following was agreed as a framework for moving forward:

1. We will arrange shareholding in these companies on a 50/50 basis.

2. Peter McCaughey will be responsible for the day to day running of IJM Timber Engineering Limited.

3. Martin McCaughey will be responsible for the day to day running of McCaughey Homes Limited.

4. Both will use their best endeavours to grow profitable businesses.

5. A shareholders’ agreement will be professionally structured to provide for dispute resolution, succession planning including probable separation of ownership in advance of the next generation’s involvement etc.

6. Restructuring of the companies will be carried out with

professional advice to maximise protection for the companies and

provide for the most tax efficient exit by the parties.

7. A proper overarching and individual company board structure

which should include both parties along with both executive and

non-executive members. These boards will meet on a regular basis, as agreed by the parties.”

13. Subsequently, as the plaintiffs put it at para. 8 of the statement of claim in the present case – which is admitted by the defendants – “…Seán McCaughey later sought to repudiate the agreement to buy back his shareholding and made demands of IJM and of various property assets, which he believed to be then held by IJM but actually had been transferred by IJM to [MHL]”.

14. In order to address this situation, an extraordinary general meeting (‘EGM’) of IJM was convened for Monday 04 December 2017 at which several special resolutions and one ordinary resolution were proposed. The special resolutions included a resolution ratifying the agreement with Seán in August 2016 that IJM should buy back his shares in the company for €1.4m. In the alternative, and failing ratification of that resolution, a further special resolution was proposed approving the share buyback by IJM of the shares held by Peter and Martin in IJM. There was also an ordinary resolution, to be triggered in the event that the agreement of August 2016 was not ratified, approving an “exit package” for Peter.

15. Two further ordinary resolutions were subsequently proposed at the meeting. These resolutions are at the heart of the present dispute, and are as follows:

“2. Ordinary resolutions: - notified on or before 24 Nov 17

A. Approval that immediately upon his exit from the company, for

whatever reason, Peter McCaughey will receive a payment of not less than 5% of turnover generated from 1st Jan 2014 to date and projected forward to include all existing orders and customer commitments. This payment may be made by way of cash, assets, shares, etc, or any combination thereof, at his discretion.

B. On confirmation from Peter McCaughey that his intention is to remain with the company. He will receive payment of €1,500,000 (one million and five hundred thousand Euro) and given 500,000 (five hundred thousand) ordinary shares. The authorised share capital of the company will be increased to 1,500,000 (one million and five hundred thousand) shares to accommodate this.”

16. The special resolutions were defeated. Ordinary resolutions 2A and 2B however were passed; it appears that a shareholders’ agreement of 03 December 2008 was produced to support the proposition that only a simply majority of shareholders was required to pass those resolutions, which the chairman deemed to be passed by two votes to one. A further resolution was also passed appointing Martin as a director of IJM in this manner.

17. Subsequently, Seán issued proceedings pursuant to s.212 of the Companies Act 2014 against IJM, Peter, Martin and the chair of the meeting, Gregory McKenna, a director of IJM. Proceedings were also initiated by IJM against Seán in 2018, seeking to enforce the buyback agreement. Both proceedings were settled on 25 October 2018, and a deed of settlement was executed on that date. This deed recorded the agreement by IJM to buy back Seán’s shares. Ultimately, an EGM of IJM was convened, and a resolution was passed approving the buyback of Seán’s shares by IJM, which then purchased 699,999 IJM shares held by Seán. This change in shareholding was registered in the Companies Registration Office (‘CRO’) on 17 December 2018; on the same day, an allotment of an additional 500,000 shares to Peter on foot of resolution 2B was also registered.

18. However, this allotment to Peter prompted Martin to issue proceedings pursuant to s.212 of the Companies Act 2014. In his grounding affidavit supporting the application, Martin claimed that the allotment of 500,000 shares to Peter was in breach of the 2016 agreement. He averred at para. 43 of that affidavit that the resolution “…had been passed in the context of Seán refusing to honour the 2016 buyback agreement and had been the proposed temporary mechanism to allow Peter and I to take control of the company from him. It was not necessary in circumstances where the buyback had now happened…”.

19. Martin accordingly alleged that the affairs of IJM were being conducted in a manner oppressive to him and in disregard of his interests as a member of IJM. Pleadings were exchanged and the matter was case-managed in the commercial list, with a hearing date of 21 January 2020 assigned. On that date, the court was asked to adjourn the proceedings to 30 January 2020, on which date consent orders were made joining MHL to the proceedings “for the purpose of giving effect to the terms of settlement agreed between the parties and executed by the parties on 21 January 2020”; an order that the issue of 500,000 shares to Peter be cancelled and that the €500,000 consideration for these shares “by way of bonus” to Peter be restored to the distributable reserves of IJM; and an order that the proceedings were to be struck out with no order as to costs, with liberty to apply to re-enter the proceedings “solely for the purposes of enforcing the terms of settlement executed by the parties on 21 January 2020”.

20. The parties thereafter disagreed as to the scope and effect of the settlement. Peter re-entered the proceedings to enforce a term of the settlement by which Martin was to discharge €150,000 to Peter within 21 days; Peter obtained summary judgment on that application. It became clear that the parties were at odds on a number of matters, and in particular whether claims or entitlements which Peter may have had under resolutions 2A or 2B continued to subsist (as claimed by Peter) or were compromised by the settlement (as claimed by Martin).

21. Ultimately, Martin issued a motion on 03 February 2021 seeking to re-enter the proceedings in order to give effect to the settlement and in order that the sale of IJM proceed forthwith on the basis that Peter had no claim, right or entitlement against IJM arising out of resolutions 2A or 2B. As we have seen, McDonald J, in a characteristically comprehensive and lucid judgment, acceded to the application, and Peter’s appeal from this decision was unsuccessful. I shall refer to the judgments of the High Court and the Court of Appeal (Barniville P) in more detail below when considering the present application.

The Settlement

22. Before addressing the plaintiff’s present application, it is necessary to have regard to the relevant terms of the settlement in order to provide context for the arguments of the parties as to whether rectification or recission are appropriate reliefs in all the circumstances. The reader is also commended to the analyses by McDonald J and Barniville P at paras. 40 to 88 (High Court) and 23 to 50 (Court of Appeal) of their respective judgments.

23. Given the extensive examination by the High Court and Court of Appeal of the text of the settlement, I do not propose to set out a further analysis of its text. I shall however refer below to some of the clauses of the settlement in the context of the present dispute.

24. It is appropriate to highlight clauses 1 and 25 of the settlement agreement, which are as follows: - “1. These proceedings are hereby settled on the following terms and the parties acknowledge that this Settlement Agreement is entered into in full and final settlement of all matters the subject of these proceedings and the subject of the proceedings referred to in schedule 1 and any and all claims or disputes between the parties as of the date hereof. … 25. Apart from performance of the obligations contained herein to each other, the parties hereby agree that they have no further claims whatsoever against each other and that performance of the terms of this Settlement Agreement will constitute full and final settlement of all outstanding matters between the parties hereto as of the date hereof and the parties expressly agree that there are no other claims which any of the parties have against the other(s) or against any associated companies, partners or any other companies within the control of any of the parties.”

25. Barniville P referred to these clauses at para.47 of his judgment in the following terms: - “In my view, clauses 1 and 25 of the Settlement Agreement, properly construed, are the most important provisions of the Settlement Agreement for the purposes of ascertaining both the scope of, and the matters compromised by, the Settlement Agreement. Both Clauses 1 and 25 refer to the full and final settlement by the parties of matters, claims and disputes between the parties and, as provided by Clause 25, claims which the parties may have against “associated companies, partners or any companies within the control of any of the parties”. [McDonald J] carefully analysed Clauses 1 and 25 in the context of the Settlement Agreement as a whole and also by reference to the relevant factual and legal context at the time it was concluded”.

The issues on the pleadings

26. The plaintiff seeks the following reliefs in the statement of claim:

1. An order to have the settlement contract dated 21 January 2020 rectified or amended to reflect that:

(a) it did not affect and was not intended to affect the respective director’s compensation packages and the Remuneration Entitlements the subject of the Resolutions passed on 04 December 2017;

(b) it was not intended to compromise any matters as between the first and second plaintiff in respect of which they were not in fact in dispute including remuneration entitlements which had not been put in issue in the proceedings thereby compromised;

(c) Clause 25 was intended to address parties in the sense of opposing parties to the litigation and did not purport to compromise director compensation packages, including the remuneration entitlements, as between the first and second plaintiff and the first and second defendant respectively.

2. In the alternative, recission of the Settlement Contract dated 21 January 2020;

3. Strictly in the alternative, damages for breach of contract;

4. Interest.

5. Costs.

27. In relation to the claim for rectification, the plaintiff pleads inter alia as follows: - “20. The settlement entered into by the parties makes no express reference to the remuneration entitlements nor any aspects of the resolutions save and except the cancellation of the issue of 500,000 shares.

21. During the course of 2019 proceedings and in the course of settlement of same at no time were either of the two resolutions referred to at para. 14 above raised or discussed or questioned. Neither was any question raised as to whether those remuneration entitlements were, or were to be, compromised, same not having been referenced in the pleadings to the 2019 proceedings.

22. In the premises, the plaintiff’s [sic] each and/or either of them entered into the settlement in the shared belief and understanding that pending the sales of the respective companies contemplated by the settlement, the first plaintiff’s [sic] and the first defendant’s respective compensation packages were unaffected by and would remain unaffected by the settlement, including the remuneration entitlements. …25. The plaintiffs each and/or either of them plead that the true agreement between the parties comprised a settlement of the litigation therein referenced and an agreement for the joint sale of the IJM and MHL businesses but that:

(a) it did not affect and was believed, intended and understood not to affect the respective director’s [sic] compensation packages and the remuneration entitlements the subject of the resolutions passed on

04 December 2017;

(b) they did not agree to compromise any matters as between the first and second plaintiff in respect of which they were not in fact in dispute including remuneration entitlements which had not been put in issue in the proceedings thereby compromised;

(c) clause 25 was believed, intended and understood to address parties in the sense opposing parties to the litigation and did nor purport to compromise director compensation packages, including the remuneration entitlements, as between the first and second plaintiff and the first and second defendant respectively.”

28. As regards the claim for rescission, the plaintiff pleads as follows: - “30. In the alternative, and without prejudice to the foregoing pleas, if the claim for rectification and/or recission by reason of operative mistake and/or lack of consensus ad idem is not upheld, the plaintiff’s plea that the defendants each and/or either of them have repudiated the settlement by reason of matters now pleaded, including the damage each and/or either of them have occasioned to the value of the MHL and/or their failure to take reasonable steps to maximum the value of the sale assets.”

29. The succeeding paragraphs of the statement of claim plead that, wrongfully and in breach of warranty, “the defendants…failed to maximise [the value of MHL] …” [para. 32], and particulars of the alleged failures are set out. Breaches of clauses 7 and 9 of the settlement [paras. 34 and 35] are also alleged and particularised.

30. The plaintiff’s claims are denied in their entirety by the defendant. While it is admitted that the s.212 proceedings – referred to in the pleadings as “the 2019 proceedings” – initiated by Martin against Peter and IJM were compromised by the settlement, the defendant pleads that: - “8….The settlement compromised [sic] of a broader compromise than just the 2019 proceedings, involving, inter alia, the sale of both IJM and MHL and the settlement of additional proceedings and disputes, as well as ‘all further claims whatsoever’ and ‘all outstanding matters’, that any of the four parties thereto (being the parties also to these proceedings) had against another of the parties or any associated companies or partners, or any companies within the control of any of the other parties. The defendants will rely upon the full terms of the settlement at the hearing of this action to establish its true meaning and effect”.

31. The defence goes on to plead as follows: -

“11. While the first plaintiff and first defendant’s ongoing salaries and pension contributions from IJM and MHL respectively were maintained by clause 15 of the settlement, which allowed for the disposition of assets from the companies in the ordinary course of business, as the High Court has determined, all other claims and entitlements that they may have had against the companies, including the first plaintiff’s so called remuneration entitlements against IJM, were fully compromised by the settlement, including clauses 1 and 25 thereof. Without prejudice to the foregoing, if the plaintiffs had a contrary belief or understanding, same was never communicated to, known by, nor shared by, the defendants or either of them prior to the execution of the settlement. In this regard, neither of the defendants had any reasonable cause whatsoever for believing (nor did either or both of them actually believe) that the so called remuneration entitlements had not been compromised by the settlement… 15.… The compromise achieved by the settlement was not to be limited to matters between the plaintiffs which were expressly in dispute between them, whether in the 2019 proceedings compromised or otherwise and whether as alleged or at all. In this regard, the settlement comprised all claims or disputes and all other outstanding matters between all or any of the parties, and thus compromised any alleged entitlement on the part of the first named plaintiff against IJM to the so called remuneration entitlements. Without prejudice to the foregoing, if the plaintiffs believed that such limitation of the type pleaded by them was to apply, such belief was misplaced, unreasonable and wrong, was not reflected in the settlement and was not shared by, known by, nor communicated to, the defendants.”

Submissions

32. As indicated above, the parties took the opportunity prior to the final day of the hearing to deliver supplemental submissions which referred in detail to the evidence which had been given in the first three days of the trial. In their submissions, the plaintiffs advanced the position that: - “1.8 The indisputable evidence at trial is that Peter would never have countenanced an agreement that deprived him of these entitlements and Martin McCaughey (“Martin”) would never have entered a compromise that preserved them 1. Peter’s evidence portrayed the entitlements as just reward for his sacrifice and dedication to IJM and essential capital for re-launching a new business post completion of the settlement (D1, p.64). Martin was adamant that he would ‘absolutely not’ have entered any agreement if they were to survive (D3, p.24).”

33. Accordingly, the plaintiffs, under the heading “refined issues” contended that “2.1 In the wake of the evidence, the plaintiffs submit that one issue in the case predominates:

• Whether the settlement should be set aside on the basis of mutual mistake in that the parties, in truth, never arrived at a consensus ad idem.

2.2 Although the Outline Submissions developed a number of alternative arguments, including rectification based on common mistake of the parties, it Peter at D1,p.64 L20, and Martin at D3, p.24 L7.

is acknowledged that the evidence at trial strongly favours recission rather than rectification.

2.3 Two other residual issues also remain for consideration if mutual mistake is not established to the satisfaction of the Court:

• Do the circumstances justify rescission/rectification for unilateral mistake?

• If not, do the clear breaches by the defendants of the settlement support recission?”

34. The plaintiff contends that “the predominant issue now is that of equitable recission for mutual mistake”. The plaintiff relies in the alternative on the ground of unilateral mistake and, if an operative mistake is not established, on the contention that “the Defendants’ subsequent actions support repudiation of the Settlement [para. 3.1].”

35. The defendants in their supplemental submissions, contend that the evidence adduced does not support a claim for rectification or recission of the settlement on the grounds of mistake, and set out at length their reasons for this contention, with reference to excerpts from the evidence. They further submit that the alleged breaches of the settlement “have not been made out on the evidence or are not of the type which would entitle the Plaintiffs to rescind the Settlement Agreement” [para. 50].

Equitable recission for mutual mistake

36. As the plaintiffs’ submissions, both written and oral, have focused on the proposition that the settlement should be set aside on the basis of mutual mistake, it is necessary to examine closely the case made by the plaintiff in that regard.

37. The issue involves a consideration of whether both parties are mistaken but are not making the same mistake; that they are at cross purposes, such that there is no consensus ad idem, or agreement as to the same thing.

38. The plaintiffs submit at para. 3.4 of their written submissions that: - “Two key questions arise for decision:

(a) What was Peter’s intention and understanding in respect of the Settlement agreement as regards the 2017 resolutions?

(b) What was Martin’s intention and understanding as regards those Resolutions?” The decision of the High Court (McDonald J)

39. To set in context the evidence adduced by Peter intended to demonstrate what his intention and understanding of the settlement was, it is necessary to consider the findings of McDonald J in relation to how the settlement agreement should be interpreted on an objective basis.

40. When issues in the s.212 proceedings arose between the parties, Martin brought an application to re-enter those proceedings for the purpose of giving effect to the settlement agreement and to obtain an order directing that the sale of IJM would proceed on a particular basis. Notwithstanding objection by Peter, McDonald J ruled on 19 February 2021 that the proceedings be re-entered for the purpose of giving effect to the settlement agreement, and gave directions for the hearing of that application.

41. Having heard written and oral submissions, involving both procedural and substantive issues, the High Court (McDonald J) decided those issues in favour of Martin. Peter appealed the decision and, in a judgment of 30 May 2024, the Court of Appeal dismissed the appeal. At para. 5 of his judgment on behalf of the court, Barniville P found that: - “…Peter has failed to advance any basis on which this Court should interfere with the findings, conclusions and orders made by the judge [i.e., McDonald J]. The judge delivered an extremely detailed judgment in which he set out the correct legal principles applicable to the procedural issue arising on the application (which was essentially whether the re-entry of the proceedings on foot of the terms of the settlement agreement was the appropriate way of resolving the disputed issues of interpretation of that agreement which had arisen between the parties) and to the substantive issue (which concerned the proper interpretation of the settlement agreement). The judge then carefully explained why, in his view, Martin was entitled to succeed on both of those issues. Peter did not contend that the judge had not correctly identified the applicable legal principles but did argue that the judge had failed properly to apply those principles to the facts. I disagree. I am satisfied that having identified the correct legal principles applicable to both aspects of the appeal, the judge then went on carefully to apply those principles in a correct and proper manner and his reasoning was, in my view, unimpeachable…”.

42. At para. 1 of his judgment, McDonald J set out the central contention by Martin, the applicant in the s.212 proceedings, in relation to the interpretation of the settlement agreement as follows: - “…The applicant makes the case that, by the terms of the settlement agreement, any such claim on the part of Mr. Peter McCaughey on foot of the resolutions in question was extinguished. In particular, the applicant relies on para. 1 of the settlement agreement under which (inter alia) the parties to the settlement agreement agreed that it was in full and final settlement not only of the matters in issue in these proceedings (together with two additional sets of proceedings identified in the schedule to the settlement agreement) but also “any and all claims or disputes between the parties as of the date hereof”. The applicant also relies on clause 25 (addressed in further detail below) by which the parties to the agreement agreed that they would have “no further claims whatsoever against each other and… that there are no other claims which any of the parties have against the other(s) or against any associated companies…”. Essentially, the applicant submits that, by virtue of these provisions of the settlement agreement, any claim or entitlement which Mr. Peter McCaughey may formerly have had under the resolutions in question was released.”

43. At para. 4 of his judgment, McDonald J describes Peter’s position on this issue as follows: - “In response, Mr. Peter McCaughey argues that the application is misconceived and that there is nothing in the terms of the settlement agreement (when construed against the relevant factual background) to support the suggestion made by the applicant that the entitlements which Mr. Peter McCaughey has under those resolutions were in any way settled or compromised under the terms of the settlement agreement of January, 2020.”

44. After a comprehensive analysis at paras. 61 to 88 of his judgment of the settlement agreement and the relevant issues arising accordingly, McDonald J set out his detailed conclusions at para. 89. He acknowledged that this was “not a case where all of the factors weigh in favour of one side alone…” and stated as follows: - “…Placing myself in the position of a reasonable person armed with all of the knowledge available to the parties at the time the settlement was concluded, it is therefore necessary to objectively weigh the competing factors and to attempt to identify what the parties must have intended. Approaching the issue in that way, I have come to the conclusion that the intention and effect of paras. 1 and 25 of the agreement is that Mr. Peter McCaughey has released any claim he may have had against IJM under resolutions 2A and 2B…”

45. At para. 89(a), McDonald J expressed the view that:-

“…the language of paras. 1 and 25 is plainly sufficiently wide to cover such a release... Not only is the language sufficiently wide but there are, as explained in para. 86, strong reasons to take the view that this wide language was intentional…”.

46. McDonald J sets out at paras. 89(b) to (e) these “strong reasons”, referring back to his analysis at paras. 61 to 88. He sets out at para. 89(b): - “…a number of other provisions of the settlement agreement which are consistent with an interpretation of paras. 1 and 25 in the manner outlined at

(a) above….

47. He points out at para. 89(c) that: -

“… It is of some significance that the parties took care to spell out in a number of express provisions in the agreement the specific sums that are to be paid to Mr. Peter McCaughey or the specified proportion of amounts realised that are to be paid to him. Had it been the intention that he should also be paid the loyalty or exit payments, it would be reasonable to expect that those payments would also be specifically identified in the text. This is especially so given the sheer scale of the payments to be made and the consequential impact they would have on the distribution to be made to the applicant and Mr. Peter McCaughey under para. 18(d).”

48. McDonald J referred at para 89(d) to the treatment of the liabilities for what would arise under the resolution in the financial statement of IJM: “…The liabilities on foot of the resolutions are not recorded in the financial statements of IJM which Mr Peter McCaughey himself signed as director. It is true that the exit payment is in the nature of a contingent liability arising on his exiting IJM. However, the notes to the financial statements for 2017 and subsequent years addressed contingent liabilities such as IJM's potential exposure under guarantees and warranties. It is striking that those contingent liabilities (which were on a significantly more modest scale than the exit payment) should be noted in the financial statements, while the far higher exposure in respect of the exit payment was not noted at all.”

49. McDonald J acknowledged at para. 89(e): -

“the narrow focus of the s.212 claim made by the applicant in these proceedings and the fact that he did not challenge the making of the payments…. In that regard – in a passage of the judgment which, although lengthy, is of high relevance to the present dispute and warrants reproduction below – he stated as follows: - “That consideration would have very substantial weight if parties had confined themselves in the language which they used in paras. 1 and 25 to the matters in dispute in these proceedings. They did not so confine themselves and instead used language which, as outlined in paras. 67 and 85 to 87 above, plainly seems designed to expressly extend the settlement to other matters.

In making that observation, I acknowledge that, as Lord Nicholls made clear in the Bank of Credit and Commerce case, the circumstances in which a release of claims is entered into may suggest that widely drawn language of the kind used in paras. 2 and 25 was intended to be construed more narrowly. However, in contrast to the position in that case, the parties here knew in January 2020 of the circumstances giving rise to the potential liabilities of IJM to Mr. Peter McCaughey. Each of IJM, the applicant and Mr. Peter McCaughey were clearly aware of the passing of the December 2017 resolution.

In the Bank of Credit and Commerce case, the employees, at the time of execution of the relevant releases, were wholly unaware of the corrupt practices that subsequently came to light. It was in those circumstances that the House of Lords held that the stigma damages claim could not reasonably have been in the contemplation of the parties at the time the releases were signed. In circumstances where the parties here were aware of the December 2017 resolutions, there is no similar basis to suggest that the release of IJM's liability to Mr. Peter McCaughey could not reasonably have been in the contemplation of the parties.

As outlined in para. 86 above, the circumstances here support a conclusion that the parties intended to wipe the slate clean and ensure that the relationship between them was brought to a clean end. For that purpose, as the plain words of para. 25 suggest, they wanted to ensure that the settlement would capture any claims that might arise between any one of them and any of the others – and not just any of the others but also any associated companies, partners or any companies within any of their control. As Lord Nicholls suggested in the Bank of Credit and Commerce case, such a general release is typical in the case of the termination of a business relationship.

The termination of such a relationship is at the heart of the settlement agreement here. Moreover, the troubled relationship here was an intra-familial one which made it all the more important to ensure that the settlement would wipe the slate clean in a way that avoided further dispute in the future. As noted previously, the provisions of paras.

7 to 12 of the settlement agreement appear designed to assist in achieving that end.”

The evidence generally

50. As McDonald J put it: -

“… The approach which the court must take in interpreting the agreement is to put itself in the position of a reasonable person with all of the background knowledge available to the parties at the time the settlement agreement was concluded” [para. 61]. The court therefore applied the appropriate principles of construction to arrive at an objective conclusion as to the meaning of the agreement.

51. The evidence adduced by the plaintiff in the present proceedings was presented in order to establish that, whatever the objective interpretation of the settlement agreement, it was in fact the product of mistake by the parties: in simplistic terms, either the same mistake by both contracting parties (common mistake), a mistake made by one party, which mistake was known to the other party (unilateral mistake), or the parties were at cross-purposes so that no agreement was achieved (mutual mistake). As we have seen, it is the latter category of mistake upon which the plaintiffs now primarily rely.

52. Witness statements were proffered by the witnesses for both sides, and each gave evidence in court in support of their statements and were duly cross-examined. It was clear in some instances that evidence had been adduced by the plaintiffs to address conclusions drawn by McDonald J in his judgment.

53. I refer below to parts of the evidence adduced by the parties which are relevant to the issue of mistake. This is necessarily a selective exercise, given that there were three days of evidence. I note however that both parties have adopted a similar approach in their supplemental submissions, and I have concentrated below on the matters upon which the parties themselves have placed particular reliance. However, I have had the benefit of transcripts of the entire proceedings and the digital audio recording where necessary, and have taken all of the evidence into account in reaching my conclusions.

The plaintiffs’ evidence

Peter McCaughey

54. In his witness statement and his evidence to the court, Peter dealt in some detail with the background of litigation which preceded the settlement agreement. He referred to the agreement in resolution 2B to allot 500,000 shares to him, which would give him the same shareholding in IJM as Sean, with Martin holding the balance of 6.66% of the shares. Peter accepted that this arrangement “…was there to try and block my father…” [day 1, p.54, lines 4 to 5]. The allotment of shares to Peter in December 2018 was in accordance with resolution 2B following the settlement of the proceedings involving Seán in October 2018 (see para. 17 above); however, this transfer of shares lead to the initiation of the s.212 proceedings by Martin against Peter.

55. Peter stated that “the other element” of the resolutions was agreed “for all of the work that I put in over the years…”, and for “sticking with the business and keeping it going and surviving through the recession which was a very very difficult period…my exit remuneration…would happen at some point in time” [day 1, pp. 54 to 55]. He gave evidence that the €1.5m referred to in Resolution 2B was not paid because “there was a stay put on all of this when my father started proceedings and we gave an undertaking to the court to put a stay on it all… [day 1, p.56, lines 15 to 18]. Peter stated that he did not take the €1.5m when the litigation with Seán settled “…because the company has just paid out €4.8m [i.e., to Seán] and we really didn’t have the spare cash to do that” [day 1, p.57, lines 4 to 7].

56. At para. 21 et seq of his witness statement, Peter addressed the circumstances of how this settlement agreement was concluded. In particular, Peter stated: - “…No non-compete commitment was not [sic] sought from me or obtained from me, I would never [have] agreed to one, in any event. … The only compromise made by me was to cancel the allotment of the 500,000 shares to me. I did not, and would never have considered, compromising the remaining portions of the resolutions in respect of remuneration. They were not on the table as Martin had never raised any protest with them in any affidavits filed, complaints raised in correspondence or indeed during the negotiation stage. Had these resolutions been raised I would not have agreed to a settlement of the proceedings…”

57. Peter was asked by his counsel “…when you entered into this settlement agreement, what did you think you were entering into?” Peter replied as follows: - “Well I was entering into a settlement agreement that both businesses were to be sold and we were to get 50% of the sale values of the assets which were McCaughey Homes and the sale value of IJM and we were to divide the proceeds from those sales equally”. [day 1, p.63, lines 6 to 10].

58. Peter in further response to the question, went on to say as follows: - “And that was as simple as the agreement was, it was – it didn’t effect – there was no non-compete in it which I wouldn’t have agreed to if there had of been a noncompete because my intention was to keep in the business. And my remuneration such as the 5% of the other €1.5m were never in the proceedings, they were never pleaded. And I didn’t think they were even in discussion in this agreement, there was never any mention of them. So like any other of my remunerations such as salary or pension, it wasn’t brought into this” [day 1, p.64, lines 10 to 19].

59. It was put to Peter that “the 5% and the 1.5 [million Euro] wasn’t raised by the other side?” Peter agreed that these matters were not raised, and when asked what his attitude would have been if it had been suggested by Martin that the settlement “was to compromise your entitlement to the 1.5 and the 5%”, he replied that “we would not have [had] an agreement…the case would have had to go on”. He “never” thought that he was compromising his claim in entering the settlement agreement [day 1, p.64, line 20 to p.65, line 3]. He said that he “did not consider the rights that IJM had granted me by those resolutions to be under discussion let alone compromised” [witness statement para. 22(iv)].

60. In cross-examination, it was put to Peter that Martin’s position had been that the resolutions were “a temporary arrangement” to address the repudiation by Seán of the agreement to buy back his shareholding: see particularly paras. 13 to 16 above. Peter said that he did not know that this was Martin’s attitude: see day 1, p.84, lines

17 to 23.

Bernadine Gormley/Laura Daly/Gregory McKenna

61. Perhaps mindful of the significance which McDonald J placed on the fact that the contingent liabilities which would arise for IJM if the remuneration entitlements under the resolutions remained valid were not recorded in the company’s accounts, the plaintiffs adduced evidence to explain why the liabilities had been treated in this way.

Bernadine Gormley

62. Ms Bernadine Gormley is a chartered certified accountant and was appointed auditor of IJM in April 2018. Her first audit was in relation to the accounts for the year ending 31 December 2017. She gave evidence that the resolutions were “reviewed” as part of the audit for 2018, and that “…in relation to the €1.5m bonus this was discussed with Laura Daly, Financial Controller of IJM and it was agreed that this would not be accrued in the accounts as if not taken by Peter McCaughey within six months of year end, then it would be deemed to have been taken and the tax would become payable on same. I also considered that the payment was subject to legal proceedings and legal undertakings had been given not to proceed with the payments and therefore the matter did not reach the threshold of an accrual…” [para. 5 witness statement].

63. Ms Gormley stated that her view of how the remuneration entitlements should be treated was informed by “FRS102”, the appropriate financial reporting standard applicable in Ireland, and in particular section 21 of FRS102, which deals with “provisions and contingencies”. Ms Gormley stated that she discussed the matter with Laura Daly, Finance Director of IJM, in July 2020, “…and our opinion remained the same as it was in June 2019…” [para. 7 witness statement]. In April 2021 Ms Gormley was requested by Ms Daly to confirm the reasoning for not treating the €1.5m “bonus” as an accrual in the accounts. Ms. Gormley responded by an email, which read as follows: - “Dear Laura, Further to previous discussions in June 2019 and again in July 2020 the payment of €1.5m was not accrued for in the accounts. The reason being if the salary was accrued for and not paid out withing [sic] six months of the year end then it would be deemed to have been paid and the relevant taxes would be due and become payable hence no accrual provided for. Regards…”

64. Ms Gormley was cross-examined in relation to the decision not to include the €1.5m as a contingent liability in the accounts as follows:

Q. “Can you just explain to me again why it is that that liability was not recorded in the accounts either as a liability for which you made provision or the very least as a contingent liability?

A. Yes, I have already read that out to the court in that if a payment is accrued for in a set of accounts and under tax legislation if that payment isn’t taken within six months of the year end, it is deemed to have been taken anyway and therefore the tax would become payable on it. So if you paid a payment of - - if you accrued from a payment of €1.5m, assuming someone is on the higher rate of tax, €750,000 would become payable after the six month had passed and therefore you would be paying €750,000 on €1.5 million.

Q. You see, that is what troubles me - -

Mr Justice Sanfey: Me too. Is that a reason not to include it in the accounts if it is an appropriate accrual?

A. That is the decision I took at the time, whether it is … appropriate or not, yeah, look, I made that decision and I concurred with the directors that it wouldn’t be accrued for that reason”.

[Day 1, p.157, line 11 to p.158 line 3].

65. Ms Gormley was also cross-examined about the failure to refer in the audited accounts to the possible liability of IJM to pay 5% of turnover in accordance with resolution 2A on Peter’s “exit from the company, for whatever reason…”. It was suggested that this was clearly a “contingent liability” within the meaning of FRS102. Ms Gormley did not agree. She stated that “…I did rely upon [the definition of contingent liabilities in FRS102], but I took the view that because it wasn’t probable, and that there was no indication that [Peter’s exit from the company] would happen at any time in the future, that a contingent liability didn’t exist at the reporting date. That is the view I took…” [day 1, p.149, lines 5 to 25].

66. It was put to Ms Gormley that Peter had made a statement to senior executives of IJM the day after the settlement had been executed that he intended to leave the company and set up on his own. Ms Gormley said she was not aware of this, in either 2020 or 2021, notwithstanding that she had discussed the treatment of the resolutions with Laura Daly, who “reaffirmed…that Peter had no intention of leaving the company” [day 1, pp. 153 to 156].

Laura Daly

67. Ms Laura Daly is a chartered certified accountant who started working for IJM in 2001. Apart from a brief period, she has worked for IJM in various financial roles since then, and is currently finance director of IJM, having been finance manager until September 2020.

68. Ms Daly referred in her evidence to the discussions with Ms Gormley in relation to the treatment of the remuneration resolutions. She referred to a discussion with Ms Gormley in December 2017 when “Bernadine pointed out that if the €1.5m was accrued in the accounts then the Revenue Commissioners could deem this a distribution to Peter and collect tax on it even though Peter himself had not yet benefitted from the payment” [para. 8 witness statement].

69. Ms Daly goes on to refer to having received a copy of a letter of 30 August 2018 from McEvoy Corporate Law Solicitors addressed to the auditors. The letter, written by Bernard McEvoy of that firm, referred to the then-current proceedings entitled Seán McCaughey v IJM Timber Engineering Limited, Peter McCaughey, Martin McCaughey and Gregory McKenna [2017/433COS], and confirmed “…that the issue of 500,000 shares and a payment of €1.5m to Peter McCaughey at the EGM held on 4 December 2017 are issues in dispute in the above-named proceedings. As such, our clients have provided undertakings to the Court and to the applicant that no further action shall be taken in relation to these matters. Accordingly, the amount of €1.5 million has not been paid to Peter McCaughey”. [Witness statement para. 9].

70. Ms Daly states that she forwarded the email to Ms Gormley, and that “…Bernadine and I had another call after this email was sent and agreed that given the uncertainty around the timing, method of distribution and tax consequences, it did not require disclosure”. [Witness statement para. 9].

71. Ms Daly arrived at the same conclusion in June 2019 when she and Ms Gormley “discussed the resolutions by phone”. “The Resolutions were a matter of dispute before the Court and again, given the uncertainty around the timing, method of distribution and tax consequences we agreed that they did not require disclosure in the accounts” [witness statement para. 15].

72. Ms Daly states that “the resolutions were again discussed with Bernadine in 2020, 2021, and 2022 and it was agreed that while the matter was still in dispute and given the ongoing uncertainty with the timing and method of distribution of the resolutions and the tax consequences, that they continued not to require disclosure in the accounts” [witness statement para. 22]. She gave evidence that she was informed by Mr McEvoy in an email of 10 September 2020 that the sale of the issued share capital of IJM would be a “very lengthy process…” and “unlikely to complete with the next twelve months”. She said that, “…on the basis that, unless Peter couldn’t [sic] define when he was leaving the business, I took the view that there was no need to accrue for the 5% exit payment” [day 2, p.43, lines 5 to 19].

73. Reference was made by Ms Daly to a meeting on 22 January 2020, the day after the settlement was concluded, at which Gregory McKenna, Director and Company Chairman of IJM, Ms Daly and Peter attended. Ms Daly’s account of the meeting in her evidence was as follows: - “So I arrived at the office on the morning after the settlement was signed. Peter had rang my number and just asked me [to] meet him and Gregory in the conference room. When we went in he handed us the settlement agreement, we had a read through it. I was very shocked by it, I couldn’t believe that IJM was to be sold. That Peter had reassured us that he had not signed a noncompete, there was nothing to prevent him from setting up a competing business and that he still retained the benefits of the resolutions and between the money he would be due or assets or whatever he would be due from the resolutions and his proceeds from the two sales, that he would have enough to set up the new business and continue on” [day 2, p.44, lines 4 to 17].

74. On cross-examination, Ms Daly was asked whether “…it is simply to avoid Peter having to pay tax on €1.5m, that is the only reason why you didn’t provide for it in the accounts?” Ms Daly replied “Sure”. She was pressed as to whether the payment of €1.5m was one which IJM had an obligation to pay; she stated that “we would have a legal obligation once Peter would indicate to us that he wanted us to pay that to him" [day, 2, p.54, lines 1 to 26].

Gregory McKenna

75. Mr Gregory McKenna is a director and chairman of IJM, which he joined in 1974, proceeding to work in several technical roles in the company. In 2001 he was appointed operations director, a post he held until October 2021.

76. Mr McKenna gave evidence mainly in relation to the meeting of 22 January 2020 with Peter and Ms Daly. His account of that meeting accorded with that of Ms Daly: - “8. On 22 January 2020 Peter McCaughey explained to me that he and Martin McCaughey had come to a settlement of the current dispute and that a settlement agreement was signed. I was informed that the basis of the agreement that both IJM and McCaughey Homes Limited would be sold with the proceeds of the sale of the companies and their assets to be divided equally between Peter and Martin McCaughey. Peter McCaughey also explained to me that with the remuneration that he would receive under resolutions 2(a) and 2(b) passed at the EGM, he would have enough capital and assets to start a new company and continue to trade with the existing customer base with IJM. Peter had won the full support of the senior management team and key staff in IJM to set up a new operation.” [Paragraph 8 witness statement].

77. Under cross-examination, Mr McKenna accepted that the final statement in the paragraph above was his personal view, rather than a view expressed by Peter, in relation to having the support of management and staff.

The defendants’ evidence

Martin McCaughey

78. In his written statement, Martin addresses the instructions to his legal team regarding what was to be included in the settlement. This was to result in a situation where “Peter and I were to have no further entitlements from the companies and any pre-existing claims or entitlements were compromised” [paras. 10 to 11 witness statement]. He went on to say as follows: - “12. In the circumstances, I was very clear in my mind that, upon execution of the Settlement Agreement, any pre-existing rights or entitlements Peter had in respect of IJM, apart from salary payments in the ordinary course of business, were being compromised. The Settlement Agreement provided for comprehensive exit packages for myself and Peter from the two businesses. Any previously agreed exit package clearly fell away.

13. If Peter mistakenly understood otherwise (and I do not believe that he had reasonable grounds for such understanding), such mistake was not shared by me, nor was it shared by MHL, on behalf of whom I engaged in the settlement negotiations”. [Paragraphs 12 to 13 witness statement].

79. When asked in examination in chief about the instructions given to his solicitors about what he wanted to achieve from the settlement, he said “…I wanted to bring a conclusion that this was all over, we were sharing 50/50, and that was it, and we were both going to walk away and that was the end of it” [day 3, p.23, line 59 to p.24, line 6]. This lead to the following exchange: - “Q. Did you understand the settlement agreement to be keeping these two resolutions alive, excepting the 500,000 allotment which was being set aside?

A. No, no, they were never in issue.

Q. If it had been intimated to you during the course of the negotiations that Peter intended to act upon these two resolutions following the execution of the settlement agreement, what would your reaction have been?

A. There would have been no settlement. Definitely not.” [Day 3, p.24, line 22 to p.25, line 3].

80. Martin was asked by his counsel whether it was ever intimated to him that “these two resolutions were going to remain valid and effective, other than the 500,000 shares, and were going to be relied upon by Peter…”, to which Martin replied “absolutely not” [day 3, p.24, lines 7 to 14]. Martin accepted in cross-examination that the resolutions were “never mentioned” in the negotiations leading to the settlement agreement [day 3, p.73, line 24 to p.74, line 9].

Equitable recission for mutual mistake: Analysis

81. Peter McCaughey relies heavily on the evidence adduced by him to persuade the court that the parties were at cross-purposes, such that there was no consensus ad idem. The plaintiffs cite Foskett on Compromise (9th Edition) which, at para. 4-14, states “…where there has been a mutual mistake or understanding the contract will be regarded as void ab initio…”, and at para. 4-16 that “…a shared misapprehension of fact which goes to the route of the compromise renders the agreement void” [para.

4.41 written submissions]. It is submitted that this is “precisely what occurred” in the leading case of Mespil v Capaldi [1986] ILRM 373.

82. In that case, two actions for possession of land and recovery of arrears of rent were settled in writing in a document which was signed by counsel. The settlement set out the terms agreed; they were preceded by the sentence “Full and final settlement of all matters and acts in dispute between the parties: in these proceedings” [emphasis added in judgment].

83. The phrase “in these proceedings” was “inserted as an interlineation at the request of counsel for the plaintiffs”. In the High Court, both counsel involved in the settlement gave evidence as to what was intended by the terms of the agreement. Counsel for the plaintiffs did not wish the settlement to encompass the second set of proceedings. Counsel for the defendants on the other hand “…considered that, in the light of the discussions leading to the settlement and not the addition of the words ‘in these proceedings’, the settlement covered all matters and acts in dispute between the parties and not simply the matters in issue in the proceedings in question” [at p.375, emphasis in original].

84. The High Court found that there had been a mutual mistake in the recording of the settlement. The Supreme Court (Henchy J) held that “the finding of mistake was fully justified”, and that the heads of settlement were “not sufficiently specific to exclude ambiguity”, and that “the two counsel left court that day, each with a genuine but opposite belief as to what the settlement had achieved” [at p.376].

85. The High Court had held that, notwithstanding its finding, the defendants were bound by a term of the settlement requiring them to pay a sum of £21,000 referred to in the document. The Supreme Court stated that this conclusion was reached: - “…on the basis of cases which have decided that when a person enters into an agreement, giving the other person the impression that he understands the nature and effect of the agreement, the general rule is that he will not be allowed to say later that he should not be bound by the agreement because he did not at the time understand its import or effect. That is undoubtedly correct law. Business relations would be thrown into undesirable uncertainty if a party to an agreement, who at the time gave no indication that he did not understand what he was doing, could later renounce the agreement on subjective considerations. If he freely and competently entered into the agreement, he will not normally escape being bound by it by saying that he misunderstood its effect.” [at p. 376].

86. The Supreme Court considered the position to be “essentially different when, as is the case here, there was mutual or bilateral mistake as to the true nature of the agreement”… and went on to say as follows: - “It is of the essence of an enforceable simple contract that there be a consensus ad idem, expressed in an offer and an acceptance. Such a consensus cannot be said to exist unless there is a correspondence between the offer and the acceptance. If the offer made is accepted by the other person in a fundamentally different sense from that in which it was tendered by the offeror, and the circumstances are objectively such as to justify such an acceptance, there cannot be said to be the meeting of minds which is essential for an enforceable contract…” [at p. 376]

87. Henchy J concluded as follows: -

“Applying those basic principles to the present case, it is clear that the form of the written consent, viewed in terms of its wording and of the negotiations leading up to it, was capable of justifying the opinion of counsel for the defendants that the settlement was adequate to cover all outstanding complaints between the parties. It is also to be said, on an objective consideration of the relevant circumstances, that counsel for the plaintiffs was justified in thinking that the settlement was limited to the matters in dispute in the two actions then being settled. In those circumstances of latent ambiguity and mutual misunderstanding, it must be held that there was no real agreement between the parties…” [at p. 376].

88. The plaintiffs submit that there is “ample evidence of ambiguity in this case”. They refer, inter alia, to the resolutions “having been voted for by Martin, and…never challenged in any proceedings”. It is submitted that it is “not lightly to be assumed that an entitlement conferred at a general meeting of a company would be unwound without being expressly addressed”. In particular, it is suggested that both Martin and Peter “considered and acted as if their respective salary and pension entitlements would remain unaffected”, and that “pending sale, the companies were to continue to trade in the ordinary course of business – why then, would one assume an openly adopted resolution to be reversed?” [See para. 3.39 supplemental submissions].

89. Peter relies on the evidence adduced on his behalf, to which I have referred above, in two important respects. Firstly, he contends that the absence of reference to the remuneration entitlements in the financial statements of IJM was for valid reasons, and should not be interpreted as an indication that he did not consider that the resolutions were not intended to be enforced. Secondly, he asserts that the evidence of the meeting of 22 January 2020, the day after the settlement agreement was concluded, shows that he considered in the immediate aftermath of the conclusion of the agreement that the remuneration entitlements were still in force.

90. In relation to the accounting treatment of the entitlements and whether or not they should be regarded as contingent liabilities, it is important to acknowledge that the initial decision not to accrue for these liabilities – or even refer to them in the accounts – pre-dated the settlement agreement and was first addressed as part of the audit for 2018. The decision to exclude those entitlements from the accounts extended into the years after the settlement agreement had been concluded.

91. It seems clear to me from the evidence of Ms Gormley and Ms Daly that the main motivation for the decision not to accrue for IJM’s possible exposure to the claims to which the remuneration entitlements might give rise was to avoid a situation whereby a tax liability would arise for Peter if the remuneration entitlements in his favour were acknowledged in the accounts as contingent liabilities. Whether that

decision can be justified objectively in accounting terms must be open to doubt. It is not open to this Court to come to a definitive conclusion on this issue.

92. If the remuneration entitlements had been included in the accounts as contingent liabilities — along with other contingent liabilities of IJM noted in the financial statements — prior to and after the settlement agreement, that would tend to demonstrate that IJM considered those entitlements to be valid and binding. However, given the view of McDonald J as set out at para 48 above in relation to the omission of those contingent liabilities from the accounts, the plaintiffs appear to have sought to excuse this omission by attributing it to a wish to avoid a tax liability for Peter. It is notable that no coherent rationale, much less independent expert evidence, was proffered which would justify this treatment of the entitlement under the relevant tax legislation or accounting standards. As a justification for the omission of the remuneration entitlements or contingent liabilities from the accounts, the excuse offered is less than satisfactory.

93. The evidence of Mr McKenna and Ms Daly regarding what Peter told them the day after the settlement agreement was concluded was uncontested, and I accept this evidence as truthful and accurate. That evidence suggests that, at that time, Peter was of the view that, as Mr McKenna put it, “…with the remuneration that he would receive under resolutions 2A and 2B passed at the EGM, he would have enough capital and assets to start a new company…” or as Ms Daly put it, “…he would have enough to set up the new business and continue on…” [see paras. 75 and 72 respectively above].

94. Peter appears to have been of the view that the resolutions were not mutually exclusive, and that he could benefit under both of them. In this regard, he was crossexamined as follows: - “Q. And just in relation to that, on confirmation that your intentions to remain with the company and receive the €1.5m.

A. Mmm mm.

Q. Now, this was something that was resolved at 10 o’clock or in the minutes after 10 o’clock on the 4th December. If you indicated your intention to stay with the company at say half past ten but then signalled your intention at 11 o’clock to quit the company, would you have been entitled to the €1.5m?

A. According to these resolutions, yes.

Q. Isn’t that absurd?

A. It may be absurd but that is what it states.

Q. And in relation to the next resolution that having said, just taking your absurd position, having stayed for half an hour, you got €1.5m, then at 11 o’clock having now signalled your intention to depart you’re going to get at least 5% of the turnover of the business that has been accrued to date and 5% of projected future turnover, isn’t that right?

A. Correct.

Q. Projected how far into the future?

A. Projected as far as the orders are projected.” [Day 1, p.85, lines 1 to 23].

95. Peter was cross-examined in relation the entitled to “5% of turnover” in resolution 2A as follows: - “Q. What was the turnover of IJM for 2021?

A. 21 was down to €27m I think off the top of my head.

Q. And the previous year?

A. Which was the recession, it is the Covid years it did drop back to 21 then 27, it is currently running at 30.

Q. But on the basis of the 2021 figures, 5% of turnover would give you at least €1.35m?

A. Correct.

Q. Yes annualised then?

A. Correct.

Q. On the basis you would keep it up?

A. Mmm mm.

Q. Well, in any event, I’d suggest to you that those resolutions would in their entirety have been absurd and that you easily knew that if you sought to actuate them you would have been met with the same response from Martin as you were met with in respect of the attempts to allot the shares?

A. I don’t know and he never pleaded that then with the resolutions that were passed? So how would I know. [Day 1, p.87, lines 5 to 25].

96. It seems, then, that Peter considered that he was entitled to benefit from both resolutions: one designed to benefit him if he left the company, and the other designed to benefit him if he stayed. He contends that, not having signed a non-compete clause, he was free to use the money or assets which he would receive on the implementation of the resolutions to set up a new and separate venture.

97. As we have seen, Martin took a completely different view. As he put it at para.

8 of his witness statement: -

“…My aim, in negotiating with Peter in January 2020, was to put an end to the disputes then in being and, more importantly, to avoid any further disputes down the line. It was clear to me that the only way of achieving that was to completely disentangle our business interests and the method which emerged in the course of negotiations to effect such disentanglement was to sell both businesses and distribute the proceeds in an agreed manner”.

Conclusions regarding recission for mutual mistake

98. The plaintiffs’ central contention is that Peter and Martin were at crosspurposes, such that there was no consensus ad idem, and that the settlement agreement should be rescinded accordingly.

99. Whenever two parties conclude an agreement, and subsequently have differing and inconsistent views as to the meaning or effect of the contract, it can be said in colloquial terms that they were “at cross-purposes” in concluding the contract. However, this does not of itself establish a mistake sufficient to warrant recission.

100. In its passage from Mespil v Capaldi cited at para. 84 above, the Supreme Court emphasised the need for certainty in business relations, and stated that “the general rule is that [a party to a contract] will not be allowed to say later that he should not be bound by the agreement because he did not at the time understand its import or effect…if he freely and competently entered into the agreement, he will not normally escape being bound by it by saying that he misunderstood its effect.”

101. The Supreme Court, having considered the circumstances and the terms of the settlement agreement in Mespil, concluded that either counsel who signed the settlement could have been justified in their differing interpretations of that agreement: see para. 86 above. In the circumstances, there was “latent ambiguity and mutual misunderstanding” resulting in “no real agreement between the parties”.

102. In conducting an exercise to determine “what the parties are reasonably to be taken to have intended by the settlement agreement” [para. 89], McDonald J laid particular emphasis on the wording of clause 25 of the settlement: “85. The opening words of clause 25 plainly envisage that the obligations arising under the settlement agreement are the only obligations that remain in force as between the parties. The parties acknowledge that they have no “further claims” (i.e. no claims apart from those that now arise under the settlement agreement). In my view, a reasonable person standing in the shoes of the parties would understand this language to signal that the parties intended that the settlement agreement would wipe the slate clean as between all the parties to it. There is nothing in the language to suggest that the clause is intended to solely address claims which arose between the applicant and Mr Peter McCaughey or as between the applicant and IJM.

86. This is strongly reinforced by the concluding language of para. 25 by which the parties ‘expressly agree that there are no other claims which any of the parties have against the other(s) or against any associated companies, partners or any companies within the control of any of the parties’ (emphasis added). The use of the word ‘any’ clearly suggests that this paragraph of the settlement agreement was concerned not with two parties (in which case the word ‘either’ would be appropriate) but was concerned, instead, with resolving claims between more than two parties.

The wide language used does not suggest that it was intended to be confined to claims between the applicant or MHL, on the one side, and Mr Peter McCaughey or IJM, on the other. The language to the effect that ‘the parties expressly agree’ that there are ‘no other claims” (emphasis added) which ‘any’ of them have against ‘the other(s) any associated companies, partners or any companies within the control of any of the parties’ reads like a straightforward but comprehensive confirmation to that effect. It strongly indicates that the parties wished to ensure that there were no issues between any of the parties that might affect the outcome of the process of the realisation and distribution of assets envisaged by the agreement as a whole and which is intended to be carefully managed in accordance with the provisions of, for example, paras. 6 to 14 of the agreement.

The parties went further still and made clear that not only was the release to extend to claims which any of the parties had against the others but also any claims which they had against associated companies, partners or any companies within the control of any of them. This language which they chose to use in the latter part of para. 25 provides further support for the view that they intended to wipe the slate clean and to ensure that there would be no unwelcome surprises along the way towards completion of the sales of the companies and the distribution of the proceeds.

Such an intention is unsurprising in the context of an agreement which, as previously noted, is designed to bring a pre-existing (and in this case also a troubled) relationship to an end. A widely drawn clause makes sense in that context. These considerations support a conclusion that the agreement here falls into a similar category to that described in para. 23 of the opinion of Lord Nicholls in the Bank of Credit and Commerce case (quoted in para. 83 above).

103. The exhaustive analysis by McDonald J, having acknowledged that “this is not a case where all of the factors weigh in favour of one side alone…”, arrives at a clear and decisive conclusion that Martin’s interpretation of the settlement agreement was correct, and in particular that “…the circumstances here support a conclusion that the parties intended to wipe the slate clean and ensure that the relationship between them was brought to a clear end” [para. 89(e)]. As the dicta of Barniville P cited at paras 6 and 41 above made clear, the Court of Appeal emphatically endorsed the High Court’s interpretation of the agreement.

104. I am conscious that the task presented to McDonald J was different from that comprised in the present application. McDonald J was required to arrive at an objective interpretation of what the settlement agreement meant, based on applying principles of contractual interpretation. In the present application, the plaintiffs invoke the equitable jurisdiction of the court to set aside the settlement agreement on the basis that the evidence establishes that the agreement is premised on a mutual mistake.

105. However, the clear and unequivocal findings of the High Court and Court of Appeal as to the objective interpretation of the contract are an important and influential element of the process to be conducted by this Court, particularly bearing in mind the need for commercial certainty in contractual matters which the Supreme Court emphasised in Mespil. That principle would be put at risk if it were open to a party to avoid the consequences of a concluded contract by alleging a mistake as to what the contract meant, in circumstances where there is no ambiguity in the contract itself.

106. In this regard, the case of O’Neill v Ryan (No. 3) [1992] 1 IR 166 is instructive. The plaintiff in that case instituted proceedings under s.205 of the Companies Act 1963 against the defendants. He also issued plenary proceedings against a number of parties including the first named defendant claiming damages for, inter alia, conspiracy, fraudulent or negligent misrepresentation and various breaches of competition rules of the European Economic Community. The plaintiff subsequently sought specific performance of what he alleged was an agreement with the defendants to settle the first dispute and instituted proceedings seeking specific performance of the alleged settlement agreement. The defendants claimed that the agreement had been entered into by mistake and that the offer to settle was made on the basis that both sets of proceedings would be terminated.

107. At p.186 et seq of his judgment, Costello J addressed the principles governing the issue of “mutual mistake”. He commented that “the legal principles to be applied in such cases have been long established…”, and cited the following passage from Chitty on Contracts, 26 Edition, Volume 1 paras. 351 and 352 “as a correct statement of the law”: “The intention of the parties is, as a general rule, to be construed objectively. The language used by one party, whatever his real intention may be, is to be construed in the sense in which it would be reasonably understood by the other, or at least in the sense in which a reasonable person would construe it. Nevertheless cases may occur in which the terms of the offer and acceptance suffer from such latent ambiguity that it is impossible reasonably to impute any agreement between them; or it may happen that one party knowingly accepts a promise in different terms from those intended by the other. In such circumstances, the mistake may render the contract void. In most cases the application of the objective test will preclude a party who has entered into a contract under a mistake from setting up his mistake as a defence to an action against him for breach of contract. If a reasonable man would have understood the contract in a certain sense, then, despite his mistake, the court will hold that the mistaken party is bound. But where parties are generally at cross-purposes as to the subject-matter of the contract and the terms of the offer and acceptance are so ambiguous that it is not possible to point to one or other of the interpretations as the more probable, the court must necessarily hold that no contract exists”.

108. Costello J went on to say as follows: -

“It is the principle of law thus formulated that I applied earlier in this judgment. It required me to consider the words used by the defendants’ solicitors in their letter of 24 May, 1990, and to construe them objectively in the sense in which they would reasonably be understood. In doing so I concluded that they would be reasonably understood as an offer to settle the s.205 proceedings only and not as an offer to settle those proceedings and the plenary action. It was in this sense that the offer was accepted by the letter of

30 May, 1990. The defence of mistake therefore fails as I cannot take into account that the authors of the letter may have intended to make an offer of settlement different to that which a reasonable construction of the words they used disclosed”.

109. Costello J referred to the decision of Mespil, in particular citing the passage in relation to the need for commercial certainty cited at para. 85 above. He stated as follows: - “Mespil Ltd v Capaldi [1986] ILRM 373 is an example of a case where, looking at the words used by the parties, the court could come to the

conclusion that, objectively speaking, they suffered from such ambiguity that it was impossible to conclude that the parties had reached an agreement. That is not, in my judgment, the situation which pertains in this case. In my view the words used by the defendants’ solicitors could only be construed as an offer to settle the s.205 proceedings only. This was the sense in which they were understood by the plaintiffs’ solicitor, and accepted by him”.

110. The decision of Costello J was appealed to the Supreme Court, which dismissed the appeal. Finlay CJ commented at p.195 of the report that the law had been “correctly and comprehensively set out by Costello J in his judgment”. O’Flaherty J joined with the Chief Justice “in his endorsement of the analysis of Costello J of the proceedings in general and his exposition of the effect of mistake in contracts in particular…” [p.196].

111. The decisions of the Supreme Court in Mespil and O’Neill are binding on this Court. They both make it clear that, where one party has failed to appreciate the commercial effect of an agreement, he will not be permitted on that basis to resile from the agreement. This principle was illustrated in Clarion Ltd v National Provident Institution [2000] 2 AER 265. In that case, the plaintiff (“Clarion”) contended that it had reached agreement with the defendant (“NPI”) in relation to an investment management scheme under which investments could be switched in a manner which was advantageous to Clarion. NPI claimed that it had not appreciated that the agreement would enable Clarion to exercise its switching options with the benefit of such advantageous pricing.

112. Rimer J concluded that NPI had simply failed to appreciate the commercial effect of the agreement, and that this did not constitute an operative mistake. He stated as follows: - “…I do not regard NPI’s mistake as being a mistake either as to the terms of the contract asserted by Clarion or as to its subject matter. There was no mistake as to either of these things. If there had been then I would accept that NPI would have an arguable case for being released from its contract. The only mistake was as to the commercial advantage which the contract gave Clarion. I am prepared to assume that, had NPI been aware of that advantage, it would not have entered into the contract at all. The thrust of NPI’s complaint is simply that it made a bad bargain from which it now wants to be released. It is, however, of the essence of business transactions that each party is bargaining in his own interests and for his own benefit and that each has to look after his own interest and that in most cases neither owes any duty of care or disclosure to the other. It is inherent in such a system that there would be those who will make bad bargains, but that is the risk which in my view each bargaining party must be assumed to be willing to take and which the law must be regarded as having allocated to him…”. [at p.281.]

113. In the present case, the question of whether there could be said to be any “latent ambiguity” or “mutual misunderstanding” in the settlement agreement has been comprehensively addressed by the High Court and the Court of Appeal. One cannot read those judgments, and in particular the analysis by McDonald J of clause

25 of the agreement, without concluding that both courts were of the view, after extensive consideration, that the objective inferences to be drawn from the agreement were clear and unambiguous, and accord with Martin’s interpretation.

114. I accept that view and agree with the conclusions of both courts. It is always possible, particularly where a settlement agreement has been the product of a complex

factual background and hard-fought negotiations, to point to factors which might suggest one interpretation rather than another. The plaintiffs submit that there is “ample evidence of ambiguity” in the present case. I do not agree. In my view, the objective meaning of the settlement agreement is clear. It seems to me that, while it is clear what the bargain reached by the parties entailed, Peter did not appreciate what it meant in commercial terms. This is evident from the accounts of Ms Daly and Mr McKenna of the meeting with Peter the day after the settlement agreement was concluded.

115. In the circumstances, Peter is not entitled to set up his failure to understand the commercial effect of the settlement as a mistake which caused the parties to be at cross-purposes. The terms and import of the agreement are clear. Accordingly, I do not consider an order of recission of the settlement agreement on the grounds of mutual mistake to be appropriate.

Rectification for unilateral mistake

116. Although the plaintiffs relied primarily on their contention that the court should rescind the contract due to a mutual mistake, they did not abandon the contention that it would be open to the court to rectify the contract on the basis that it was concluded under a unilateral mistake of the plaintiffs.

117. There was no disagreement between the parties as to the appropriate principles concerning unilateral mistake, which are set out in the decision of the Supreme Court in Irish Land Assurance Company Ltd v Dublin Land Securities Ltd [1989] IR 253, and the decision of the Court of Appeal in Slattery v Friends First [2015] IECA 149. As the defendants’ expressed the position in their submissions, a party claiming rectification needs to show that “(a) they were mistaken as to an element of the settlement agreement,

(b) the defendants knew or ought to have known of that mistake, and

(c) the defendants’ conduct is so unconscionable that it would not be unfair to hold them to the agreement which they knew the plaintiffs intended to enter into.” [Original written submissions, para. 34].

118. In this latter regard, the Court of Appeal (Ryan P) in Slattery noted that Irish Land “referred to the decisions of the English Court of Appeal requiring some element of sharp practice by the non-mistaken party…”, which may suggest a lower threshold for the parties seeking rectification than that suggested by the defendants.

119. The Court of Appeal however emphasised the difficulty facing a party seeking rectification: - “37. The first principle is that it is difficult for a party to a written contract to escape the effects of its provisions by reason of mistake. When he has had the benefit of legal advice and versions of the Deed have gone back and forth in the course of drafting, the undertaking is even more onerous for a party seeking to establish entitlement to rectification. There is, however, an equitable jurisdiction in exceptional cases for a court to order that the written formal document be rectified by removing, inserting or altering the provisions so as to reflect what the parties truly intended, understood and agreed”.

120. The plaintiffs contend that Peter, at the time he entered into the settlement agreement, “was operating under a fundamental misapprehension as to the scope and effect of its terms” [supplemental submissions para. 3.46]. It is suggested that Martin “well knew the resolutions would not be agreed if he raised them”, and that “Martin McCaughey must have been aware, that Peter McCaughey was operating under the impression that the settlement did not compromise the remuneration resolutions but failed to correct this error” [para. 3.47].

121. A curious feature of the evidence was that neither party referred to the resolutions, or insisted that the position as to their continued validity or otherwise be clarified, in the settlement agreement. Peter complains that Martin made no mention of them, and infers from this that Martin knew of Peter’s mistaken interpretation and deliberately kept quiet about it. Martin says that Peter did not refer to the resolutions, and that he would have done so if he had wanted the resolutions to be preserved: see day 3, p.150, line 25 et seq]. As far as Martin was concerned, the resolutions “weren’t in play” [day 3, p.78].

122. Peter did not take steps to include in the settlement express provisions protecting his remuneration entitlements. Nonetheless, he informed Ms Daly and Mr McKenna the day after the conclusion of the agreement that the entitlements were preserved. The defendants submit that it is not credible that Peter did not feel he needed to refer expressly to the remuneration entitlements in the settlement; “…it is more likely that Peter chose not to say anything in that regard, knowing that Martin would not enter into any agreement that did not compromise the remaining claims under the resolutions” [para. 18 supplemental submissions; emphasis in original].

123. Martin was unswerving in his evidence that the resolutions were not an issue, in that they fell under the terms of the agreement which provided for a 50/50 split and an abandonment of all claims in accordance with clause 25. The objective interpretation of the agreement, as set out by the High Court and Court of Appeal, supports this view, i.e., that the parties intended to “wipe the slate clean”. No doubt both brothers had their reasons for not referring to the resolutions in the settlement agreement. However, as the judgments in Mespil, O’Neill and Clarion make clear, parties to a contract require to protect their own positions in order to avoid making a bad bargain.

124. A heavy burden rests on a party seeking rectification of a concluded agreement, particularly where that agreement has been agreed with the benefit of legal advice. Peter did not protect his own position by including reference to the remuneration entitlements in the settlement agreement, although it is suggested that Martin would never have agreed to their preservation. The defendants rely heavily on the failure by the plaintiffs to include those entitlements as contingent liabilities in IJM’s accounts, or in the valuation provided by Peter in the course of Seán’s s.212 proceedings, as suggesting that Peter accepted that the resolutions were temporary and to be abandoned when the situation with Seán had been resolved.

125. In any event, the parties must act to protect their respective positions in any concluded agreement. Peter did not do so. It is not suggested that Peter told Martin of his belief that the remuneration entitlements should continue to subsist. There appears to have been no discussion of that specific issue between the brothers. The plaintiffs rely on inferences about Martin’s understanding of Peter’s position which fall far short of the proof required to show that Martin knew Peter was making a mistake and unfairly took advantage of it.

126. In the circumstances, I do not consider that Peter has established a unilateral mistake which entitles him to rectification of the contract.

Common mistake

127. The contention of the plaintiffs that the settlement agreement should be rectified on the basis of common mistake was effectively abandoned in their written supplemental submissions and also in the oral submissions of counsel. A common mistake might have existed if the parties had agreed a provision to deal with the entitlements, but due to error or oversight, this was not included in the settlement. However, the parties did not broach the issue in the negotiations; as counsel for the plaintiffs put it, “…if anybody had mentioned it one to the other, that the resolutions were either in or out, then no settlement would have happened” [day 4, p.16, lines 10 to 12].

128. In the circumstances, there was no “common” mistake, i.e., both parties making the same mistake in the recording of their agreement, and the issue of rectification does not arise.

Recission for breach of settlement

129. In the alternative to their contention that the settlement should be either rescinded or rectified on the grounds of mistake, the plaintiffs submitted that the settlement should be rescinded on the basis that there had been a “deliberate and sustained” breaches of the settlement by the defendants. In particular, it was alleged that clauses 7,9 and 14 had been breached in this regard.

130. These clauses are, in as far as relevant, as follows: “7. Crowe Ireland and BDO shall be appointed joint selling agents for the purpose of the sale of MHL and the Lands (defined below). …

9. James H Murphy & Son Solicitors & McEvoy Corporate Law shall be appointed as joint solicitors in the sale of the companies (“the joint solicitors”) and the Lands (defined below). …

14. The parties warrant that –

(a) they have not done anything since the institution of these proceedings to damage the value of the companies,

(b) pending the sale of the companies, they shall not do anything to damage the value of the companies and shall take such reasonable steps to maximise the value of the sale assets…”

131. The plaintiffs abandoned the argument based on clause 7 at the hearing. While there was considerable delay in Crowe Ireland and BDO being appointed, that appointment did ultimately take place. The supplemental written submissions of the plaintiff refer only to alleged breaches of clauses 9 and 14 of the settlement agreement.

132. There was no disagreement between the parties as to the legal position. The plaintiffs cite the decision of Costello J in Irish Telephone Rentals Limited v Irish Civil Service Building Society [1992] 2 IR 525, 533-534. In that case, the defendant counterclaimed for damages in respect of a telephone system rented to it by the plaintiff which was impossible to use and caused serious delays to those seeking to access the business from outside due to calls blocked within the system. Costello J considered the circumstances in which the breach of contract by a party might entitle the innocent party to treat himself as discharged from obligations further to perform to perform the contract, and cited the dicta of Diplock LJ in Hong Kong Fir Shipping Company Limited v Kawasaki Kisen Kaisha Limited [1962] 1 QB 26 at pp. 65-66 as follows: “…where an event occurs the occurrence of which neither the parties nor Parliament have expressly stated will discharge one of the parties from further performance of his undertakings, it is for the Court to determine whether the event has this effect or not. The test whether an event has this effect or not has been stated in a number of metaphors all of which I think amount to the same thing: does the occurrence of the event deprive the party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings?”

133. Having cited this test with approval, Costello J stated as follows:

“The ‘event’ which occurred in this case is the development of a situation in which the installation which the defendants had hired significantly failed to fulfil its purpose. This ‘event’ has deprived the defendant of the whole of the benefit which it was intended the defendant would obtain from the hiring agreements. The defendant was therefore, in my opinion, discharged from further performing the hiring agreements and was entitled to treat the contract as being at an end and request the plaintiff to take back its installations”.

134. The plaintiffs point out in their submissions that this approach was approved and applied by Charleton J as a correct statement of the law in Leopardstown Club Limited v Templeville Developments Limited [2013] IEHC 526. The plaintiffs submit that the alleged breaches of the settlement agreement by the defendants were repudiatory, in that they make clear the defendants’ intention to no longer perform obligations arising under the contract: see paras. 4.60-4.61 of the plaintiffs’ original submissions.

Clause 9

135. Bernard McEvoy, the plaintiffs’ solicitor, formerly of McEvoy Corporate Law Solicitors and subsequently of Philip Lee Solicitors, gave evidence for the plaintiffs; Mr Dermot Murphy, the defendants’ solicitor, of James H Murphy & Sons Solicitors gave evidence for the defendants. It is clear that their professional relationship with each other was beset by difficulty and was not a happy one.

136. At para. 35 of the statement of claim, the plaintiffs pleaded as follows: - “Further, in breach of clause 9 of the Settlement the Defendants have denied the entitlement of the Plaintiff’s [sic] solicitors to acts [sic] as joint solicitors on the sale of the lands and refused to facilitate any role by the Plaintiff’s [sic] solicitors as joint solicitors in the sale of the Lands and the Defendants have caused or instructed their own solicitors to withhold basic information from the Plaintiff’s [sic] solicitors which would be consistent with a joint solicitor role”.

137. The defendants replied to these allegations at para. 26 of the defence: - “The contents of para. 35 of the Statement of Claim are denied as if the same were set forth separately and traversed seriatim. Further and in the alternative and without prejudice to the foregoing, if the Defendants have not complied with the precise terms of the Settlement in relation to the appointment of solicitors, such non-compliance was justified in the circumstances of the continuing litigation and the Plaintiffs’ own refusal to accept the meaning and import of the Settlement and did not amount to a fundamental breach of the Settlement. The Defendants are prepared to accept the appointment of the Plaintiffs’ Solicitors to have joint carriage of sale, upon the Plaintiffs accepting and agreeing to abide by the terms of the Settlement as properly construed and interpretated by the Court”.

138. Effectively, Martin accepted in evidence that he instructed his solicitors to have no further dealings with the plaintiffs’ solicitor. He considered that it was inappropriate for Philip Lee Solicitors to act as joint solicitor under the settlement in circumstances where that firm was instrumental in attempting to wind up MHL and was representing Peter in an application for judgment against MHL, in addition to disputing the scope of the settlement agreement. As set out at para. 26 of the defence, Martin was prepared to accept the appointment of the plaintiffs’ solicitors to have joint carriage of sale as long as the plaintiffs would abide by the terms of settlement, and he specifically indicated in his evidence that he would abide by any ruling of the court that the respective solicitors have joint carriage of sale.

139. In any event, certain sales – and in particular the Cois Farraige land – proceeded without the plaintiffs’ solicitors being appointed as joint solicitors. It is not suggested by the plaintiffs that the lands were sold at an undervalue, or that they incurred any loss as a result of the failure to appoint Mr McEvoy’s firm as joint solicitors. It was of course very much in Martin’s interests to get the best price for any lands sold, and it is not suggested that he did not do so. As he puts it at para. 33 of his witness statement as follows: “Far from acting in breach of the Settlement Agreement. I am the only party actually implementing it and trying to maximise value for both sides. Thanks to my efforts, as explained above, the MHL lands have increased substantially in value. Further, one key asset, and at the date of the Settlement Agreement the most valuable of the assets, has already been sold for a sum far above the valuations. Peter has therefore benefitted greatly from my efforts and the efforts of MHL.”

140. Far from repudiating the agreement, Martin’s actions are consistent with an intention to perform the agreement in its essential terms. While he may have breached clause 9 in failing to agree the appointment of joint solicitors, it does not seem to me that any breach in this regard was fundamental or repudiatory, and certainly not a ground for setting aside the agreement.

Clause 14

141. The plaintiffs alleged breaches by the defendants of clauses 14(a) and (b) of the settlement agreement, set out at para. 130 above, which they considered to be in fundamental and repudiatory breach of the settlement. They rely in particular on two matters as set out in their supplemental submissions.

142. Firstly, it is alleged that Martin damaged the value of MHL by cashing a cheque made out to him by that company for €650,000 two days after the settlement was executed. The plaintiffs accept that the payment was included in the 2019 accounts – although they point out that these accounts were “drawn up at a later date”

– but state that the effect of the payment was to reduce the company’s cash at bank position in contravention of clause 14.

143. Secondly, the plaintiffs alleged that Martin “caused MHL to discharge very significant costs by way of legal fees”. It is contended that “the lion’s share” of these costs related to “a purely personal shareholder action pursued by Martin McCaughey in IJM…[T]he principal costs of the proceedings cannot be said to have been incurred for the benefit of the Company … [supplemental submissions para. 4.6].

The €650,000 payment

144. Martin was cross-examined closely in relation to this payment to him by MHL. The payment was debited to MHL’s bank account on 23 January 2020, two days after conclusion of the settlement. Martin accepted in evidence that he lodged the cheque in his bank at that time. However, the cheque stub in the MHL cheque book gave a date of 05 December 2019. Martin gave evidence that he received the cheque on that date and placed it in a safe, not lodging it until after the settlement; [see day 3, p.80 et seq].

145. Martin’s evidence was that, if any liability were owed to him on the day of the settlement, it would have been expressly included in the settlement agreement. He regarded the €650,000 as having been paid to him on 05 December 2019, notwithstanding that he did not cash the cheque until 23 January 2020, and relies on the fact that the payment is included in the 2019 accounts of MHL in this regard.

146. The plaintiffs put to Martin that the cheque was out of sequence, in that two cheques which bore dates on their cheque stubs after 05 December 2019 came before the cheque stub for Martin’s payment. However, those two cheques were themselves not in date sequence, with the later of the cheques by date apparently – according to the cheque stubs – written before the other. There were other instances of cheques which were not in date sequence. When asked by the court for an explanation for the cheques being out of sequence, Martin stated as follows: - “A. Well in later years, going back years ago, we would have automated cheques, going through. But whenever it came to doing transfers and stuff like that, we have handwritten cheques. At different times there could be - - if I was going on holidays, I could have left two cheques with one of the girls in the office, a signed cheque in case there was a cheque to be paid, but normally there wasn’t that many cheques written, and that’s the only explanation I can give.” [Day 3, p.153, lines 1 to 9].

147. On the one hand, Martin argues that the payment was made prior to the settlement and was given effect after it, which he contends is not a breach of the agreement. On the other hand, Peter argues that the payment must be regarded as having taken place after the date of the settlement agreement, and that it is therefore in clear breach of clauses 14(a) and (b).

148. Interestingly, the plaintiffs did not argue that any claim of Martin to the €650,000 was compromised by clause 25 of the settlement agreement, and could not be exercised after the date of the agreement. Given the plaintiffs’ contentions that the settlement agreement should be rectified or rescinded consequent upon the objective interpretation of its meaning by McDonald J, and in particular his view of the clear meaning of clause 25, that is perhaps not surprising.

149. I am inclined to accept Martin’s evidence that the payment to him by MHL of a cheque for €650,000 took place prior to 21 January 2020. It is certainly the case that payment of the debt was included in the 2019 accounts. I think it is probable that, if Martin had yet to receive, as of 21 January 2020, a cheque which he was due for that amount from MHL, he would have insisted on the settlement agreement specifying that he be paid that amount. There is no clear evidence that Martin wrote the cheque after 21 January 2020, notwithstanding the peculiar sequence of the cheques as suggested by the cheque stubs.

150. In any event, if Martin were in breach of the agreement by cashing the cheque, I do not consider that it is a fundamental or repudiatory breach of the agreement. I think the defendants are correct in characterising it, at para. 70 of their supplemental submissions, as “an isolated, separable incident”… “in circumstances where there has already been considerable performance of the settlement agreement…”.

151. While the issue as to the payment by Martin of €650,000 arose in the course of hearing the evidence, it was not in fact pleaded by the plaintiffs. While it may be that the issue only emerged on discovery, the defendants’ counsel made the point that no application was made to amend the pleadings to raise the issue. It is only in very unusual circumstances that I would be prepared to hold that an issue not pleaded by the plaintiff could form the basis for recission of a contract between litigants; I am quite satisfied that no such circumstances arise in the present case.

The legal fees issue

152. In relation to the legal fees issue, evidence was given by Joseph Walsh on behalf of the plaintiffs. Mr Walsh is a Fellow of Chartered Accountants Ireland and Managing Director of JW Accountants, a Dublin-based firm. Mr Walsh prepared a report for the court, and gave evidence at the hearing.

153. Mr Walsh gave an analysis of the historical financial position of MHL, “…and in particular the material increase in administrative expenses in YE 2019 and YE 2020” [para. 3, p.18 report]. Mr Walsh accepted that, while he was asked to address “administrative expenses”, legal and professional fees were the main focus of his exercise as they represented “70% of [those] overheads” [day 2, p.166, line 28 to p.167, line 2]. Mr Walsh described the scope of his work at para. 1.3 of his report as preparing an accountant’s opinion on “…the actions of MHL and whether, based on the accounts and material provided, it can be concluded that there has been a diminution of value of that company, in breach of the settlement agreement”.

154. Mr Walsh accepted on cross-examination that his analysis was “an entirely paper exercise”, and that he did not at any stage seek any explanations for the expenses from the directors of MHL [day 2, p.154, lines 16 to 23]. On being questioned by the court, Mr Walsh accepted that his conclusions as regards the actions of MHL were only those which could be inferred from the financial statements. On the basis set out in his report, Mr Walsh came to a conclusion that “in the absence of specific explanations and details of how certain overheads related to MHL, I have formed the opinion that the net asset value of MHL has reduced by €544,715” [p.18 of report].

155. However, it must be said that the exercise Mr Walsh was asked to conduct was unsatisfactory in a number of respects. Mr Walsh was not aware from his “paper exercise” of any reasons why expenses were incurred, and did not seek to elicit any such information from the directors of MHL. His report tells the reader that there were material increases in administrative expenses in 2019 and 2020; it is of little or no assistance in deciding whether or not there was a breach by Martin of his obligations under clause 14.

156. At para. 19 of his witness statement, Martin stated as follows: “MHL was involved in numerous legal issues in the period 2018 to 2020. During that period it engaged the services of solicitors in four separate legal disputes and retained junior counsel and senior counsel in all of those disputes. As well as a dispute over the ownership of the shares in MHL which required the directors to be directly involved, it also concluded High Court proceedings in relation to a dispute with Louth County Council in a planning related matter and the proceedings taken by Peter against it for recovery of the sum of €573,000 which was agreed to be paid in the settlement agreement but was not in fact owed to Peter at all as it was owed to IJM. Additionally a large part of the work in the oppression proceedings, which were taken in respect [of] IJM, related to an agreement to jointly own both IJM and MHL, involving instructions from MHL as to the steps that were taken to arrive at that 2016 agreement between Peter and myself.”

157. Martin accepted in his evidence that some of his personal legal expenses may have been covered by the company, but that the company was centrally involved in the litigation identified by him. The company undoubtedly incurred very significant legal expenses in 2019 and 2020. In para 20 of his witness statement, he stated as follows: - “It is literally impossible to determine what legal fees were attributable to a benefit accruing to me and/or in the alternative MHL. Further as the fees in litigation are accrued to the end of the litigation it meant that when the three issues that I referred to above are resolved MHL was left with an enormous amount of accruals in relation to the cases identified above. It is possible that some of the fees that MHL could have accrued for work for my benefit but it would be such a complex exercise to carry out that it has not been carried out to date. In any event it did not matter as the agreement was that all assets were to be sold without delay so that if any of the fees that had been paid accrued to my benefit a balancing exercise could have been carried out when the distributions were to be made. As however the sales have not completed no discussion has taken place as of yet on this issue and it would be merely an issue to be resolved by agreement as is practically always the case in a sale or winding up of a limited company.”

158. Martin also made the point in his oral evidence that “…I didn’t do anything different than Peter did. Peter confirmed to the court on Tuesday morning that IJM paid all his legal fees” [day 3, p.37, lines 19 to 21]. That is correct. Peter acknowledged in his evidence that separate bills for legal costs were not made out to him and IJM; that legal bills were all made out to IJM, and paid by that company. Peter justified this on the basis that “I was one of the defendants, not ‘the defendant’” [day 1, p.78, line 20 to p.79, line 1].

159. In both his witness statement and his evidence, Martin set out at length the steps taken by him to maximise the value of the assets of MHL. It was clearly in his interests to do so. The evidence of Mr Walsh is frankly of little or no assistance to the plaintiff in corroborating an allegation that Martin in some way damaged the value of the companies, or failed to take reasonable steps to maximise the value of the sale assets.

160. This Court has to decide whether the evidence establishes that Martin is in breach of clause 14 to a degree which warrants the rescission of the settlement agreement. It is doubtful whether any breach of clause 14 as regards legal expenses has been substantiated by the plaintiff, particularly in circumstances where Peter appears to have taken the same approach to his own expenses. However, it is certainly the case in my view that the plaintiffs have not established a fundamental or repudiatory breach on Martin’s part. It is somewhat ironic that the plaintiffs, who seek rescission of the agreement, allege that Martin, whose efforts have clearly been directed towards achieving performance of the settlement, is the party who has committed repudiatory breach of that agreement.

Conclusion

161. My conclusions may be summarised as follows:

(i) the settlement agreement is not vitiated by common, mutual or unilateral mistake;

(ii) accordingly, the settlement agreement does not require to be rectified or rescinded;

(iii) it is not established that the first named defendant has committed any fundamental or repudiatory breach of the settlement agreement;

(iv) the reliefs sought in the statement of claim – see para. 26 above – are refused;

(v) the proceedings will be dismissed.

162. I will list the matter for hearing on Wednesday 17th December 2025 at 10:30am in order to hear submissions on any ancillary orders, including costs. My preliminary view is that, having successfully resisted the plaintiffs’ claim, the defendants are entitled to their costs. If the parties wish to proffer written submissions, such submissions must be not more than 1,500 words and be delivered on or before 5pm on Friday 12th December 2025.