High Court: oral evidence cannot contradict a written agreement

Brendan Burgess

Founder
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This is an extract from an Ombudsman's decision rejecting a complaint.

Decision Reference: 2018-0105

Lorraine and Conor were also considering changing their car and getting a car loan. During
a meeting with a mortgage consultant in April, Lorraine and Conor reported that they had
asked whether this would affect their mortgage application. According to the couple, the mortgage consultant told them that once they received their mortgage approval in principle, they could ‘do what (they) like’. The bank denied that such a statement was made.




However, I am satisfied that whatever may or may not have been said in this meeting in
April 2016, that discussion was superseded by the subsequent events, including the issue of
a new loan offer letter to the Complainants on 26 October 2016. Therefore, the precise
terms of the conversation that took place between the Complainants and the Bank’s
Mortgage Consultant in April 2016, is not determinative of this complaint. I am cognisant
indeed in that regard of the Court’s views in Ulster Bank v Deane [2012] IEHC 248 in which
it was said that, because of the parol evidence rule, borrowers could not refer to discussions
prior to formal documentation being executed, for the purposes of arguing that what was
in the signed documentation did not reflect the agreement of the parties.

The Court noted that:

" …. claims to have been told by representatives of the Bank that the loans offered
were long-term loans and that he was told this, prior to signing the two contracts
described as the First Facility and the Second Facility. The defendants have not
produced any written documentation to support this claim. It appears, therefore,
that they are seeking to alter the terms of the facility letters which are clear on their
face by means of parol evidence. This is not permissible. For reasons of public policy,
the courts have not permitted oral evidence to be admissible if it is introduced in an
attempt to contradict the terms of a written agreement between the parties. This is
known as the 'parol evidence' rule. See Macklin v. Graecen & Co. [1983] I.R. 61, and
O'Neill v. Ryan [1992] 1 I.R. 166. In short, a party is not permitted to adduce
evidence which, in effect, contradicts the reasonable construction of words used in
a written agreement."
 

Brendan Burgess

Founder
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39,145
I find this approach very interesting.

There certainly have been cases where it was claimed that the bank's employee said "You will get a tracker at such a rate at the end of the fixed rate period". Despite the contract saying "At the prevailing rate."

Are these types of complaints doomed?

Brendan
 

Jim Stafford

Frequent Poster
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473
Brendan

I previously did a blog post on our website entitled "Why a banker's verbal agreement is not worth the paper it is written on". The article is below:

I recall some years ago a senor banker said to me, very smugly, that “Our previous verbal agreements with your client are not worth the paper they are written on.”

Was the banker legally right in his statement? Yes, he was. The parol evidence rule prevents the introduction of evidence of prior or contemporaneous negotiations and agreements that contradict, modify, or vary the contractual terms of a written contract when the written contract is intended to be a complete and final expression of the parties’ agreement.

The Irish Courts have consistently applied the parol rule in the many cases that have come before it in recent years.

What prompted me to make this particular posting was a meeting with a client yesterday who had been told by his Relationship Manager that the bank “would deal with him fairly” once he had sold all of the properties that the bank had a charge on. My client was upset to find that after he had sold all of the properties, that the bank had refused very generous settlement offers (funded by a third party) and were now intent on obtaining judgment against him in respect of the residual debt, with a very aggressive firm of solicitors involved. Unfortunately, he is one of many clients who had been given similar assurances.

Our firm advice in any case involving re-structuring of bank debt is to insist on a written settlement agreement before disposing of any assets. In some cases, the best way to proceed is by way of using a Personal Insolvency Arrangement, particularly if the mortgage on the family home was either in arrears at 1 January 2015 or had been re-structured prior to that date, as Section 115A of the Personal Insolvency Act 2012 could be utilised to “cram down” the debt.

Jim Stafford
 
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Brendan Burgess

Founder
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39,145
Jim

That is very interesting.

But on the tracker mortgages and other disputes, the Ombudsman looks at the expectations of the customer and sometimes looks at advertising and brochures around that time.

Does the parol evidence rule just apply to oral comments?

For example, if the bank had a big brochure "Sign up for a lifetime tracker at low rates"

And the subsequently signed contract said "tracker for 2 years , defaulting to SVR after that".

Does the contract trump everything that went on before?

Brendan
 
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