by Fiona Shipsey January-26-2016 in Litigation & Dispute Resolution, Commercial & Business

The Court of Appeal was recently asked to consider an appeal from the High Court which centred on whether a deed could be amended to remove a clause that had allegedly been added in by mistake. It was found that sharp practice by one party led to the other’s mistake and so the deed could be rectified. Fiona Shipsey reports.

Slattery v Friends First [2015] IECA 149 related to an investment in a hotel in Washington DC. As part of the deal, Mr Slattery and other directors of his firm entered into guarantees with Friends First. When difficulties arose with the investment, Friends First tried to enforce their security against Mr Slattery. However, Mr Slattery argued that any action against him was limited due to a clause in the relevant deed; a clause inserted by Mr Slattery’s legal team during the course of negotiations, which was not noticed by Friends First.

It emerged during the High Court case that Mr Slattery’s advisers inserted the clause into the draft deed without specifically alerting Friends First to the change. The court found that while the deed was sent to Friends First’s legal team for review, the change to the deed was not specifically pointed out to them and so was not noticed in advance of executing the deed.

The Court of Appeal held that this was a “unilateral mistake” by Friends First, one which Mr Slattery and his team either knew Friends First was making or, alternatively, they wilfully closed their eyes to that knowledge. The Court of Appeal felt that the action taken constituted sharp practice. Indeed the court went on to say that the term ‘sharp practice’ may even be a “charitable description” of their conduct in this instance. The court held that it was clear that there was an intention to mislead Friends First as to the contents of the deed. Friends First were therefore entitled to rectify the deed by removing the relevant clause.

It is clear from this case that, notwithstanding the fact that both parties had legal advisers involved who reviewed the various drafts of the deed, the court was willing to rectify the contents of a document in a situation where one party had intentionally brought about the misunderstanding.

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