Background

The McKenna's (applicants) entered into a settlement agreement with Ennis Property Finance DAC (Ennis), arising out of litigation, to repay the sum of €675,000 in full and final settlement of proceedings.

The applicants claimed that the performance of the settlement agreement was predicated on the sale of the mortgaged property by Ennis rather than by any other means. Ennis alleged that at no stage during the settlement negotiations was there any reference to the settlement agreement being dependent on the sale of the mortgaged property and there was no mention of this in the settlement agreement itself. The McKenna's contended that given Ennis's thorough knowledge of their financial affairs, it cannot but have been known by Ennis that a necessary element of what was agreed for the settlement to be implemented, was a sale by mortgagee in possession of the mortgaged property. Counsel for the applicants cited Tradax v Irish Grain Board [1984] ILRM 471 and the circumstances where a court may imply a term and noted that a court may imply a term in order to repair an intrinsic failure of expression. The applicants asked the Court to read this requirement into the settlement agreement so as to give it business efficacy.

Decision

The Court (Mr Justice Max Barrett) reviewed the caselaw and noted that there was nothing in the text of the settlement agreement or the other evidence before the Court (noting also a sworn affidavit by the solicitor for Ennis), which suggested that a requirement of the sale of the property by the mortgagee in possession was within "the presumed intention of the parties'', or for the Court to read the settlement agreement so would be giving "business efficacy to the transaction as must have been intended at all events by both parties". The Court held that the literal, natural and correct reading of the settlement agreement is that it was complete in what it stated and it did not involve the underlying predication that the McKenna's would now like the Court to read into it (ie the sale by Ennis Property as mortgagee in possession of the mortgaged property) because that was never agreed between them or indeed was not within contemplation of both sides to the settlement agreement.

Entire Agreement Clause

This decision illustrates that generally speaking a well drafted "entire agreement clause" – which does not appear to have been inserted in the agreement in this instance - is useful in the construction of an agreement. Entire agreement clauses are intended to prevent the parties to a written agreement from raising claims that statements made during contract negotiations which are not included in the final agreement. Notwithstanding this any gaps in drafting are best avoided as an entire agreement clause may not necessarily prevent the court from filling them – noting the usual rules of interpretation would apply ie when interpreting clauses in an agreement the courts would not just analyse the clause in isolation.

Seamus McKenna v Ennis Property Finance DAC [2019] IEHC 565