Kavanagh and Anor v O'Neill and Anor (Approved)

Factual and Procedural Background

The Defendant applied for summary judgment against the Plaintiff for €2,200,000 under clause 2.9 of a settlement agreement dated 18 January 2023, as revised in July 2023. The original agreement required three payments totalling €2,400,000 and contemplated that Company A would acquire the property known as the Property upon payment of €2 million. Clause 2.9 provided for consent to judgment upon default. [1][2]

The Plaintiff paid €200,000 and sought an executed contract for sale. The parties subsequently disputed the treatment of VAT in that contract. Proceedings seeking specific performance were issued, and a revised settlement agreement required delivery of a signed contract containing a finalised VAT position. [3][4][5]

The Receiver delivered a signed contract containing a VAT clause, but the Plaintiff disputed that clause and declined to proceed on terms that might create further financial exposure. The Plaintiff later issued further specific-performance proceedings. The Defendant counterclaimed for judgment under clause 2.9. Summary judgment had previously been granted against Company A for €2,200,000. [6][7]

Legal Issues Presented

1. Whether the Plaintiff had demonstrated a fair or reasonable probability of a real or bona fide defence to the Defendant’s application for summary judgment. [8][9]
2. Whether the disputed VAT provision and the parties’ obligations under the revised settlement agreement involved factual and legal issues requiring determination at trial. [10][11]
3. Whether the Defendant could rely on estoppel, the alleged incompleteness of the sale contract, or seek judgment for the claimed amount less the maximum potential VAT liability. [12][13][14][15]

Arguments of the Parties

Defendant’s Arguments

• The Plaintiff expressly consented to judgment under the settlement agreement, as revised, and had failed to make the required payments. The Defendant argued that there was no room for debate on liability. [16][12]
• The Plaintiff was estopped from disputing VAT because the Defendant relied on the Plaintiff’s earlier affidavit concerning the VAT position when entering the revised settlement terms. [12]
• Alternatively, specific performance was unavailable because the contractual terms were incomplete. [12]
• Further alternatively, the Defendant argued that judgment should be entered for €1,930,000, excluding the maximum disputed VAT liability of €270,000. [12]

Plaintiff’s Arguments

• The obligation to make the relevant compromise payment was not freestanding but was consideration for receiving the Property. [17]
• The sale did not complete because the parties disputed responsibility for VAT, raising a mixed question of law and fact that was unsuitable for summary determination. [18][19]
• On the Plaintiff’s construction of the agreement, responsibility for the failure to complete rested with the Defendant and the Receiver, not the Plaintiff. [20]
• The Defendant was therefore not entitled to rely on clause 2.9 to obtain judgment. [21]

Table of Precedents Cited

Court’s Reasoning and Analysis

The Court considered the revised settlement agreement, rather than treating the Plaintiff’s earlier affidavit as determinative of its interpretation. The agreement referred to a sale contract in which VAT was still marked “TBC”, so the earlier affidavit could not itself establish the correct contractual meaning. [27]

The Plaintiff relied on the agreement’s reference to a total payment of €2,400,000 and contrasted this with the express provision concerning conveyancing costs plus VAT. The Plaintiff argued that the agreement did not make the purchaser liable for VAT and that the failure to complete arose from this unresolved issue. [10]

Taking the Plaintiff’s case at its highest, the Court held that he had gone far enough to establish a credible bona fide defence. Clause 2.9 did not eliminate the need to determine why the payments were not made or which party was at fault in implementing the revised settlement terms. [11]

The allegation that the Plaintiff lacked clean hands did not alter that conclusion. The Court stated that the equitable maxim concerning unclean hands did not necessarily apply to a defence to a claim, at least on an interlocutory summary-judgment application. [28]

The alleged estoppel by convention also raised mixed questions of law and fact and could not be conclusively determined in the Defendant’s favour at this stage. [13]

The Court rejected the argument that the sale contract was incomplete, but held that whether the VAT clause was a material term required examination and cross-examination at trial. [14][29]

The Court also rejected part judgment excluding the maximum potential VAT liability. The Plaintiff’s bona fide defence applied to the whole claim because he maintained that VAT was never part of what he had agreed to pay. [15]

Given the low threshold for establishing a bona fide defence and the factual disputes requiring discovery and witness examination, the matter had to proceed to a plenary hearing. [26]

Holding and Implications

Summary judgment refused. The Court held that the Plaintiff had established a bona fide defence and that the disputes concerning VAT, contractual interpretation, estoppel, and responsibility for non-completion could not be resolved summarily. [11][13][29][26]

The case was directed to proceed to a plenary hearing. The indicative view was that the costs of the summary-judgment motion should be costs in the cause, with final costs to be determined by the trial judge. [26][30]

No broader implication was stated beyond the direct procedural effect, and the decision set no new precedent.