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[2009] VSCA 79
General information, not legal advice.
Court of Appeal (Vic)
2009-04-23
ASHLEY, NEAVE and DODDS-STREETON JJA
Original judgment source is linked above.
CONTRACT - Alleged oral loan agreement between respondents, appellant and his partners - Document referring to loan agreement between respondents and a corporation, on behalf of which the appellant and his partners purportedly signed - Whether parol evidence rule excluded evidence of alleged oral agreement - Formulations of rule - Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 considered - Whether open to find that appellant induced respondents' entry into loan agreement and was liable for loan - Appeal dismissed.
1 I agree with Dodds-Streeton JA, for the reasons which her Honour gives, that this appeal should be dismissed.
2 I have had the considerable advantage of reading in draft form the reasons of Dodds-Streeton JA. I agree that the appeal should be dismissed, for the reasons given by her Honour.
3 The appellant, Joseph Nicolazzo, by an amended notice of appeal dated 29 May 2008 appeals from the judgment of a judge of the County Court given on 18 December 2007.
4 His Honour held that the appellant, George Eid and Michael Gajic (the other defendants below) were liable to pay the respondents, Nabil and Amal Harb (the plaintiffs below) the sum of $107,000 together with interest agreed at $44,100.44.
6 The appellant appeals upon the following grounds:
7 The respondents, Mr and Mrs Harb, were pizza shop proprietors. The first defendant below, George Eid ('Eid') was Mrs Harb's brother-in-law. Quality Finance Pty Ltd ('Quality Finance') was a company controlled by Eid.
8 In about March 2004, Eid informed Mr Harb that he, Michael Gajic and Nicolazzo had purchased land in Seaford from Equity One Pty Ltd ('Equity One'), on which they planned to erect units. He informed Mr Harb that they were short of money. He proposed that Harb should lend them about $100,000 in return for a completed unit in the development.
9 Mr Harb gave evidence that he asked to meet Eid's partners and, with his wife and son, attended a two hour meeting with Eid, Nicolazzo and Gajic in Eid's Clayton office on 24 May 2004.
10 There was a conflict of evidence about who attended, what occurred and what was said at the meeting. The Harbs' version of events was disputed by Gajic and Nicolazzo.
11 Mr Harb testified that at the meeting, Eid reiterated that, in return for the Harbs providing $110,000, they would receive a unit. Gajic stated, 'it's a great idea and you'll benefit from it'. Gajic also stated that the unit would be valued at $210,000 when the project ended. Nicolazzo stated 'it was a great deal and we are supporting the project financially - you'll get a unit after twelve months.'
12 Mr Harb testified that during the meeting he was told that Eid, Gajic and Nicolazzo 'were equal partners'. Eid stated that they (the partners) owned the Seaford property and did 'million dollar projects'. According to Mr Harb, he was given copies of various documents, including a plan of the project and a 'Heads of Agreement'.
14 Mr Harb stated that the Heads of Agreement was already signed by Eid, Gajic and Nicolazzo when it was shown to him. He did not read the Heads of Agreement until later, when he got home.
15 Mr Harb testified that Eid then produced a document headed 'Loan Agreement', which he read out. The other defendants said 'OK', signed the Loan Agreement and gave it to Mr and Mrs Harb to sign. They did so, witnessed by their son.
The Loan Agreement:
Harb will advance a loan the amount of $210,000.00 to QFS & EOH
Account Name: Quality Finance Services Pty Ltd ACN 089 278 526
Bank: Bank of Melbourne
...
3.[Sic] This Loan Agreement shall be governed by the laws of the Victoria, Australia and the courts of Victoria shall have non-exclusive jurisdiction in respect thereof.
Dated this Twenty Four day of May , 2004
SIGNED By:
Mr GEORGE EID ) ..................................
21 Timberglade Dve Noble Park 3174
Mr JOE NICOLAZZO ) ..................................
32 Eva Street Clayton Vic 3168
Mr MIKE GAJIC ) ..................................
36 Curlew point Dve Patterson Lakes 3197
for and on behalf of
EQUITY ONE HOLDINGS P/L
In the presence of:
..........................................Witness
Name: (Joe Ventra)
Address (14 Macdacena Pl Rowville 3178)
INVESTORS:
SIGNED by:
Mr NABIL HARB ).................................
Mrs AMAL HARB ).................................
Of,12 CARBONI COURT MULGRAVE 3170
IN THE PRESENCE OF:
...........................................Witness
Name: (Diab Harb)
Address (12 Carboni Crt Mulgrave 3170)
17 The Loan Agreement in evidence appeared to be signed by the Harbs on the one hand, and on the other hand, Eid, Gajic and Nicolazzo, on behalf of Equity One.
18 Mr Harb was cross-examined about the Loan Agreement. He stated that it was his idea to 'create a written contract'. In response to counsel's questions, Mr Harb agreed that he read the Loan Agreement before signing it and would not sign anything unless he thought it was true. He did not dispute the contents of the Loan Agreement. Mr Harb also stated that he had never created a company and did not really know what a company was. When Mr Harb was asked to acknowledge that although Eid, Gajic and Nicolazzo had signed the Loan Agreement they were not parties to it, the following exchange occurred:
It doesn't say, does it, that you will advance a loan to QFS, EOH and to each of the people who you think stand behind that company. You know the point I'm making don't you? It doesn't say here that it's a loan to Mr Nicolazzo, does it - okay -
That's correct, isn't it? - whatever you say, yes.
19 Mrs Harb generally confirmed Mr Harb's account of the meeting at Clayton on 24 May 2004. She testified that Gajic and Nicolazzo did not say much, but confirmed that they were going into the deal with Eid.
20 The Harb's son, Diab, also testified that Eid, Gajic, Nicolazzo, his parents and himself were present on 24 May 2004 at the meeting, which lasted about two hours. He understood the parties to the loan transaction were his parents on the one hand and Eid, Gajic and Nicolazzo on the other hand. He, his parents, Eid, Nicolazzo and Gajic signed the Loan Agreement. Mr Eid did most of the talking at the meeting.
21 Eid, who was bankrupt at the time of the trial, was not called and did not give evidence.
22 Gajic, a builder, was not legally represented by the time of the trial and appeared in person. He denied that there was a partnership between himself, Eid and Nicolazzo. Rather, he contended that there was only to be a partnership if the Seaford property was purchased and the project went ahead. He agreed that he, Eid and Nicolazzo were 'all together' in the project. They had different roles and the agreement was that each would receive a 33 per cent share of the profits. Gajic testified that he was not connected with Quality Finance.
23 Gajic testified that he signed the Loan Agreement (which he had never seen before) thinking he was only a witness. According to Gajic, the Harbs, their son and Eid were present when he signed, but Nicolazzo was not. Gajic had also seen the Harbs in Eid's office on another occasion.
24 Gajic testified that he only signed the Heads of Agreement after the Harbs provided the loan moneys and he knew, in consequence, that the project would proceed. In the event, however, Eid could not obtain the necessary finance. Gajic testified that 'we lost our deposit'.
25 The appellant, Nicolazzo, testified that he was a finance broker and an employee (but not an office holder or shareholder) of Quality Finance at the relevant time. He agreed that he was never paid a wage and that there were no relevant wage records or tax returns. His role was that of an analyst to assess the project's viability. He nevertheless conceded that, according to his feasibility study, he expected to receive about $650,000 out of the net profits of the anticipated project. He testified that if the project went ahead, he was going to be an equal partner.
26 Nicolazzo testified that he had been made bankrupt in 2002 and was bankrupt as at 25 May 2004. He was not discharged until August 2004.
27 Nicolazzo denied that he was present at the meeting on 24 May 2004. He denied that it was his signature on the Loan Agreement, contending that it was a forgery. He asserted that he would not have signed such a document due to his bankruptcy. He testified that he did not see the Loan Agreement until 2006, when his solicitors sent him a copy. Nicolazzo agreed that he signed the Heads of Agreement on 25 May 2004 with Eid and Gajic, in the solicitor's office.
28 He denied that he had ever represented that he was an owner of the Seaford land.
29 Both Gajic and Nicolazzo denied that they had any authority to bind Equity One, as their cross examination reveals.
Counsel: You were a director of Equity One Pty Ltd?
Witness: No, I not, no.
Counsel: Were you ever employed by Equity One Pty Ltd?
Witness: No, definitely not.
Counsel: Or Quality Finance?
Witness: Never, no. I never represent---
Counsel: Did you ever have any authority to act on behalf of Equity One Pty Ltd?
Witness: No, definitely not---
Counsel: Did you ever tell anyone that you were connected with Equity One Pty Ltd?
Witness: No...
Counsel: Did you ever have any authority to sign documents on behalf of Equity One?
Witness: No
Counsel: Shareholder?
Witness: No
Counsel: No interest whatsoever in the company? Agent?
Witness: No - No. I had discussions with Equity One---
Counsel: Were you an agent?
Witness: No.
Counsel: Did you have authority to sign on behalf of Equity One?
Witness: No.
32 Mr Harb testified that after the meeting on 25 May 2004, Eid informed him that they required the money before the end of the month. Two days later, Mr Harb paid $25,000 into a bank account and received a receipt.
33 It was Mr Harb's evidence that there was subsequent provision of a further $85,000, paid into two bank accounts at Eid's direction, in two amounts of $60,000 and $25,000, for which receipts were provided. Mr Harb testified that he had to borrow a total of $123,000 inclusive of associated costs in order to provide the loan.
34 The defendants ultimately forfeited their deposit on the Seaford land and the development never proceeded.
35 The Harbs made demand for the return of their loan moneys, but received only $3,000 in part payment from Eid in June or July 2005.
36 The respondents issued a proceeding in the County Court. By a writ and statement of claim filed on 12 January 2007, they pleaded that Eid, Gajic and Nicolazzo were in the business of financing and constructing residential units.
Oral Agreement
4. By an oral agreement made on or about 24 May 2004 (the Oral Agreement) the Plaintiffs agreed to provide financial assistance in the sum of $110,000 to Quality Finance, Eid, Gajic and Nicolazzo, in return for a completed one bedroom unit valued at $210,000 (the Unit).
PARTICULARS
The Oral Agreement is constituted by conversations between the Plaintiffs and Eid, Gajic and Nicolazzo in and around May 2004, and a meeting held between the Plaintiffs and Eid, Gajic and Nicolazzo on or about 24 May 2005 [sic] at Unit C7 Adamco Business Park 2(a) Westhall Road, Clayton, Victoria. The conversations were substantially to the effect alleged at paragraph 5 hereof.
5. There were terms of the Oral Agreement, inter alia, that:
38 The respondents pleaded that they advanced funds as follows:
6. In accordance with the Oral Agreement, the Plaintiffs deposited in instalments the Sum Paid to bank accounts as directed by Eid.
PARTICULARS
39 The respondents pleaded that in breach of the oral agreement, Quality Finance, Eid, Gajic and Nicolazzo were not the proprietors of the Seaford land, did not commence the development, construct the unit within 12 months or a reasonable time, or register the unit in the respondents' names.
40 Further, despite demand, the defendants continued to be in breach of the oral agreement.
41 The respondents also pleaded a 'purported written Agreement' as follows:
Purported Written Agreement
10. Further, and in the alternative, on 24 May 2004 the Plaintiffs together with Eid, Gajic and Nicolazzo signed a document titled 'Loan Agreement' (the Loan Agreement)
PARTICULARS
A copy of the Loan Agreement may be inspected at the offices of the Plaintiffs solicitors on reasonable notice.
11. The Loan Agreement purported to be an agreement between the Plaintiffs, Equity One Holdings Pty Ltd (Equity One) and Quality Finance, the terms of which were, inter alia, that:
42 The respondents pleaded that Eid, Gajic and Nicolazzo, who signed the Loan Agreement purportedly for and on behalf of Equity One, were not its officeholders, agents or employees and in fact had no authority to do so. The respondents pleaded that Loan Agreement was therefore unenforceable and void, but if not, it was subject to an unsatisfied condition precedent that Quality Finance, Eid, Gajic and Nicolazzo would become registered proprietors of the Seaford land, either directly or by acquisition of the shares in Equity One.
43 The respondents pleaded that in breach of the Fair Trading Act 1999, Eid, Gajic and Nicolazzo represented to the respondents that they were the proprietors of the Seaford land, on which representation the respondents relied and were thereby induced to advance the funds. In fact, Eid, Gajic and Nicolazzo were never the registered proprietors of the Seaford land.
44 The respondents also pleaded acknowledgement of the debt and account stated by Eid and Gajic, and a claim for money had and received by Quality Finance, Eid, Gajic and Nicolazzo.
45 It would appear that neither Eid (who was bankrupt by the date of the trial) nor Gajic (who represented himself at trial) filed a defence.
46 Nicolazzo was legally represented and filed a defence dated 19 March 2007.
47 The defence pleaded that Nicolazzo was employed by Quality Finance as a subcontractor or consultant and was wrongly joined to the Harbs' proceeding.
48 It pleaded that Nicolazzo was a bankrupt at the date of the alleged oral agreement.
49 It denied that Nicolazzo was party to an oral agreement or present at a meeting on 24 May 2005 [sic] (2004).
50 In relation to the Loan Agreement, Nicolazzo pleaded:
The Third Defendant denies the allegations made in paragraph 7 [sic 11] and refers to and repeats the matters set out in paragraph 5 herein. Further the third Defendant denies ever executing a document titled 'Loan Agreement' or any document at all. Any such alleged document that purports to bear the Third Defendant's signature is a fraud or fraudulent and has not been executed by the Third Defendant, nor has it been executed with the third Defendant's knowledge or consent. Further the Third Defendant does not use and has never used the name 'Joe Nicolazzo' on any documentation whatsoever, including the business card during his employment with the Fourth Defendant.
51 Nicolazzo pleaded that he had not entered into contractual relations with the Harbs.
52 In relation to the allegation that Eid, Gajic and Nicolazzo had no authority to execute the Loan Agreement on behalf of Equity One and were not directors, employees, agents or shareholders, Nicolazzo repeated a denial and reiteration that he had not entered into contractual relations.
53 The trial judge accepted the evidence of the Harbs on a number of significant issues, although he rejected some aspects of their testimony.
54 His Honour found that in May 2004, the Harbs entered into an oral agreement to lend Eid, Gajic and Nicolazzo $110,000 in return for a unit valued at $210,000 when the project was completed and that Gajic and Eid acknowledged the debt in a letter dated 15 February 2006.
55 His Honour accepted that Eid, Gajic and Nicolazzo were partners. He rejected Nicolazzo's evidence that he was only an employee of Eid and Quality Finance and intended to form a partnership only on successful purchase of the Seaford property.
56 His Honour concluded that the defendants breached the oral agreement, in that they were not proprietors of the Seaford land in May 2004, did not construct units on it and did not register a unit in the respondents' names.
57 Alternatively, his Honour concluded that the defendants breached s 9 of the Fair Trading Act 1999 by falsely representing to the respondents that they were proprietors of the Seaford land, knowing the respondents would rely on that and thereby inducing them to advance the loan moneys. His Honour also concluded that the respondents had made out their claims based on money had and received and a total failure of consideration.
58 His Honour observed that the written Loan Agreement was apparently between the Harbs on the one part and, on the other part, Equity One. Equity One was, however, a company in which Eid, Nicolazzo and Gajic (who signed on its behalf) had no interest and from which they had no authority to enter into any agreement.
59 His Honour noted that the Loan Agreement document in evidence appeared to be computer generated on 26 May 2004 and, if so, could not have been signed on 24 May 2004, as the Harbs had testified. The original Loan Agreement was not produced.
60 His Honour concluded that the Harbs signed the Loan Agreement in the presence of their son, but had mistaken the date on which it was signed, perhaps due to confusion with an earlier meeting.
61 His Honour was not, however, satisfied that the named parties to the Loan Agreement in fact signed it on 24 May 2004 or, in the case of Nicolazzo, at all; nor that the Loan Agreement in evidence was an accurate copy of any agreement that the Harbs had entered in respect of their advance of moneys.
62 The appellant principally submitted that the trial judge erred in law by failing to apply the parol evidence rule enunciated in Gordon v Macgregor[1] and Hoyt's Pty Ltd v Spencer[2] ('Hoyt's'), as recently reaffirmed in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd[3] ('Equuscorp'), which he submitted to be on all fours with the instant case.
63 Counsel for the appellant relied, in that context, on Mr Harb's acknowledgment in cross-examination that he believed that the written Loan Agreement was 'true'. He submitted that, in such circumstances, the parol evidence rule precluded the trial judge from upholding the inconsistent alleged oral agreement. In so doing, the trial judge had ignored the parol evidence rule and had effectively rewritten the parties' contract.
64 Counsel for the appellant further submitted that the alleged oral agreement would not comply with the Statute of Frauds (s 53 of the Property Law Act 1958 and s 126 of the Instruments Act 1958).
65 In my opinion, the appellant's submissions based on the parol evidence rule are unpersuasive. The scope and nature of the parol evidence rule has developed over time, and its status has been debated.[4] The parol evidence rule has been criticised as 'one of the least satisfactory chapters in the law of contract'[5] which in fact comprises at least three distinct rules. Carter, Peden and Tolhurst state:
The first rule says that where a document exists, other evidence of the terms of the document is not admissible. The second rule prohibits evidence of other terms not included 'expressly or by reference' in the document. The third rule excludes evidence of 'its writer's intended meaning'.[6]
66 No authoritative expression of the rule, however, applies to the facts of the present case, which, contrary to the appellant's submission, is clearly distinguishable from Equuscorp.
67 In Gordon v Macgregor, an early case on which the appellant particularly relied, Isaacs J (agreeing with the remarks of Griffith CJ, with whom O'Connor J also agreed) adopted Lord Blackburn's observation in Inglis v John Buttery & Co[7] that:
Where parties agree to embody, and do actually embody, their contract in a formal written deed, then in determining what the contract really was and really meant, a court must look to the formal deed and to that deed alone. That is only carrying out the will of the parties.[8]
68 In Gordon v Macgregor, Isaacs J envisaged that the parol evidence rule would apply to determine what the contract was, but that was on the basis that the document in issue was a complete record of the contract. His Honour assumed that the rule was invoked by a document which used 'words that are appropriate only to a definite absolute contract',[9] thereby raising an 'almost irresistible presumption',[10] which was not displaced by evidence, that the parties had agreed it to be the record of their bargain. His Honour stated:
Once you arrive at that position, the rule that you cannot introduce parol evidence to vary it is distinct ... Once that position is established the defendant, in order to escape from the effect of the document, would have to show that it was not intended to be the record of the contract ... .[11]
69 In Hoyt's Isaacs J, reaffirmed the views he had expressed in Gordon v Macgregor. His Honour stated:
But if the parties agree to commit their agreement to writing, then what is written is the conclusive record of the terms of their agreement and, unless it can be shown that the document was not intended as the complete record of their bargain, no oral evidence can be admitted to alter or qualify it.[12]
70 Formulations of the parol evidence rule and its legitimate scope have, however, altered over time. While in earlier cases the rule was applied to restrict evidence of the terms of the contract,[13] in later cases, it has been applied to exclude evidence as to what the contract means, rather than what terms constitute the contract.
71 The application of the rule to restrict evidence of the terms of the contract does not accord with the recognition in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales[14] that evidence of prior negotiations may be received in order to determine the terms of the bargain before the parol evidence rule is applied.
72 Carter, Peden and Tolhurst suggest the following formulation of the parol evidence rule:
A suggested formulation. The parol evidence rule is a rule which restricts the use of extrinsic evidence. The concept of extrinsic evidence depends on the purpose for which the evidence is sought to be used.
Where the question is whether extrinsic evidence may be used to prove the terms of the bargain, extrinsic evidence refers to evidence to prove terms additional to those stated in the document which is put forward as the contract. However, evidence is extrinsic evidence only where the contract has been 'integrated' in the document. To appreciate this aspect of the parol evidence rule it is necessary to consider how the parol evidence rule is applied.
The other purpose for which the evidence may be sought to be used is as an aid to the interpretation of a document. In this context there are three categories of extrinsic evidence;
(1) direct evidence of the actual (subjective) intentions of the parties;
(2) evidence of the parties' prior negotiations; and
(3) evidence of the parties' subsequent conduct.
This aspect of the rule is more general: it does not depend on whether the document integrates the parties' bargain. It has the result that the principal aid to interpretation of a document is the factual matrix.
To return to the formulation approved by Isaacs J in Gordon v Macgregor, the idea that the parol evidence rule is applied to determine 'what the contract really was' is a narrow one because it assumes that the parties have adopted a document as a complete statement of the contract. On the other hand, in relation to evidence of what was 'really meant' by the document (including the legal effect of the document) the scope of the parol evidence rule is much broader. [15]
73 In Equuscorp, investors in an aquaculture farm pursuant to a scheme designed to maximise tax deductions entered into written loan agreements with a lender. The written agreements did not limit the creditor's recourse to any particular assets. When the project failed, the investors alleged that, prior to the execution of the written agreements, they had entered oral loan agreements, by which recourse was limited to prepaid interest and capital payments.
74 The primary judge found that the terms of the loans were governed by the prior oral limited recourse loan agreement, and that, in any event, the transactions were a 'round robin' and no loans had in fact been made. The Court of Appeal held that the written agreements governed the transactions but agreed that no loans had been made. The lender and the assignee of the loans appealed to the High Court.
75 Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ (in a joint judgment) held that there were valid written loans agreements. Further, their Honours held that a finding that there were wholly oral loan agreements made prior to the execution of the written loan agreement could not stand.
It was, and always has been, common ground that each of the respondents executed a written loan agreement on 30 June 1989.
The respondents had not however alleged that the written agreements should be rectified, that non est factum defences applied, that there were written agreements executed by mistake or that their execution was procured by misrepresentation as to the contents, or effect.[16]
The respondents each having executed a loan agreement each is bound by it. Having executed the document and not having been induced to do so by fraud mistake or misrepresentation the respondents cannot now be heard to say that they are not bound by the agreement recorded in it. The parol evidence rule, the limited operation of defence of non est factum and the development of the equitable remedy of rectification, all proceed from the premise that a party executing a written agreement is bound by it. Yet fundamental to the respondents' case is that the operative agreements between the parties were wholly oral, and reached earlier than the execution of written agreements, was the proposition that the written agreements subsequently not only may be ignored, they must be. That is not so. Having executed the agreement, each respondent is bound by it unless able to rely on a defence of non est factum, or able to have it rectified. The respondents attempted neither ...[17]
77 The respondents in Equuscorp did not seek to have the written contracts rectified. They did not dispute that the written agreements were duly executed. It was common ground that the parties to the written agreements were the same as the parties to the alleged oral agreements. While the High Court in Equuscorp affirmed the parol evidence rule, its approach was consistent with the modern view that the rule does not operate until the terms which constitute the contract are determined.[18]
78 The High Court also observed that although the parties will generally be held to written agreements they had entered into, 'different questions may arise where the execution of the written agreement is contested...'[19]
79 The Loan Agreement in the present case is a patently incomplete and defective document which disregards fundamental drafting conventions and leaves uncertain the most basic matters, including the identity of the parties. There is no express identification of the borrower and lender, which is consequently a matter of inference.
80 While, on one view, the contemplated parties to the Loan Agreement are the Harbs as lenders and both Equity One and Quality Finance as joint borrowers, the contemplated borrower, as the trial judge found, is probably Equity One only, given that there is no provision for execution by Quality Finance.
81 A number of statements in the Loan Agreement are obscure, incomprehensible or, on the available evidence, incorrect. Recital B states that Harb had already signed a commercial loan agreement with EOH and QFS. No party contended that the Harbs had executed another written loan agreement. By Recital E, the loan under the Loan Agreement is expressed to be secured by a one bedroom unit at 92-98 Seaford Road, Seaford. It was not disputed that such a unit did not exist at the date of the Loan Agreement, and has never existed. The language of Recital A is obscure. Recital H refers to an obligation to fund $210,000 on the agreed date, which is not identified. The Loan Agreement, whatever its other deficiencies, refers to an advance of $210,000 which appears inconsistent with the sum of $110,000 in fact advanced by the Harbs. Further, in contrast to the alleged oral agreement for a loan of $110,000 in return for a unit valued at $210,000, the Loan Agreement contemplated an advance of $210,000 in return for a unit valued at $210,000, which is improbable, given that a return on money invested would usually be expected.
82 The only purported execution of the Loan Agreement on the part of a borrower is by Equity One, for which Eid, Nicolazzo and Gajic apparently signed.
83 There is no evidence, however, that any one of Eid, Nicolazzo or Gajic was a director or agent of, or otherwise authorised by, Equity One to execute binding agreements or indeed, to take any action at all on its behalf. Eid himself did not give evidence. Both Nicolazzo and Gajic expressly and comprehensively denied that they had any authority from Equity One. Nicolazzo gave evidence that his signature on the Loan Agreement was, in any event, a forgery.
84 Therefore, as the trial judge found, the Loan Agreement was unexecuted by one of the two contemplated parties. It was not a valid agreement and had no legal force.
85 The learned trial judge also found that the Loan Agreement was computer generated on 26 May 2006, and thus was not signed on 24 May 2006, but he was unable to conclude that it was signed on 26 May 2006 either.
86 The parol evidence rule, whatever its precise scope, characteristically applies where there is inconsistency between an alleged prior oral and a subsequent written agreement between the same parties.
87 Far from being on all fours with Equuscorp or any other case cited to us in which the parol evidence rule has applied, the present case does not concern an apparent written agreement between the appellant and the respondents but rather, a document purporting to be an agreement between the respondents and another party who had not executed it.
88 The parol evidence rule, according to its modern formulation, excludes external evidence of the meaning of the contract, rather than the identification of its terms. It does not prevent the admission of evidence as to whether a document was intended to be operative as a contract. In Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd,[20] McHugh JA (agreeing on the relevant issue with Mahoney and Hope JJA), observed that although there had been 'changes in legal theory as to the correct test for determining whether the parties have made a contract',[21] Anglo-Australian law traditionally recognised that it was open to a party to establish that a document which to all outward appearances constituted a contract was, for example, a sham or made as a joke.
In principle, I see no reason why the intention to create a legal relationship cannot be proved by material outside the document, including the statements of the parties. As Corbin points out (Contracts, s 577, vol 3 at 385) 'we need not begin excluding parol evidence until we know a contract has been made'.
The intention to create a legally binding contract although a matter to be proved objectively, may, nevertheless, in my opinion, be proved by what the parties said and did as well as by what they wrote. The intention may be proved in that way even in a case where the document is intended to comprise all the terms of their bargain. This is because the intention to be bound is a jural act separate and distinct from the terms of their bargain. [22]
90 Further, even under earlier formulations, the parol evidence rule did not apply unless there was a presumption, unrebutted by evidence, that the document in question completely recorded the relevant parties' agreement.
91 In the present case, the appellant, contrary to his pleadings and evidence below, relied on the parol evidence rule to establish that the written Loan Agreement was the only agreement entered into by the respondents and necessarily excluded their evidence of an oral agreement with different parties (including the appellant). Even if the due execution of the Loan Agreement and its status as an agreement were undisputed, the parol evidence rule would not operate to exclude evidence of an alleged oral agreement between the plaintiff and one party by reference to a written agreement between the plaintiff and a different party.
92 In the present case, Mr Harb's concession that he thought the Loan Agreement was 'true' was elicited in cross-examination. On a fair reading, the evidence did not constitute a concession that the agreement was with Equity One rather than Eid, Gajic and Nicolazzo. It was but a part of the totality of the evidence before the trial judge, which justified the finding of an oral agreement between the Harbs and Messrs Eid, Gajic and Nicolazzo. In my opinion, the appellants' submissions on the parol evidence rule misconceived its legitimate nature, scope and application. While it is unnecessary to determine the appellant's contention (raised in passing before us) that the oral agreement did not comply with the Statute of Frauds, any such non-compliance would not have precluded relief under another head, such as money had and received or pursuant to the equitable doctrine of part performance.[23]
93 In my opinion, grounds 1, 2 and 3 of the notice of appeal are not made out.
94 In my opinion, grounds 4 and 5 are not established. The evidence supported the learned trial judge's finding that Eid, Gajic and Nicolazzo were partners for the purpose of the development project for which the loan was requested; and that Gajic and the appellant were present during, and acquiesced in, Eid's assertions that each of the partners was an owner of the Seaford land. The Heads of Agreement handed to Mr Harb at the meeting on 24 May 2006 stated that each of Gajic, Eid and Nicolazzo held a one-third beneficial share of the property. The finding that Nicolazzo made the relevant representation was thus not contrary to the evidence. Further, while there was no evidence that the appellant personally received the loan moneys of $110,000, the trial judge was entitled to find that he was liable to the respondents for money applied, with his authority, at the direction of his partner for partnership purposes.
[4] See, for example, Andrew Stewart, 'Oral Premises, Ad Hoc Implication and the Sanctity of Written Agreements' (1987) 61 Australian Law Journal 119.
[5] J W Carter, Elizabeth Peden and G J Tolhurst, Contract Law in Australia (5th ed, 2007) [12-05].
[7] [1878] 3 App Cas 552, 557.
[8] Gordon v Macgregor [1909] HCA 26; (1909) 8 CLR 316, 323.
[12] Hoyt's Pty Ltd v Spencer [1919] HCA 64; (1919) 27 CLR 133, 143.
[13] See, for example, L G Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd (1956) SR (NSW) 81; 73 WN (NSW) 9.
[14] [1982] HCA 24; (1982) 149 CLR 337, 353 (Mason J); [1982] HCA 24.
[15] J W Carter, Elizabeth Peden and G J Tolhurst, Contract Law in Australia (5th ed, 2007) [12-06].
[16] Equuscorp Pty Ltd v Glengallan Investments [2004] HCA 55; (2004) 218 CLR 471, 482.
[23] See, for example, Steadman v Steadman [1976] AC 536; Regent v Millett (1976) 133 CLR 679; [1976] HCA 40; Australia & New Zealand Banking Group Ltd v Widin [1990] FCA 474; (1990) 26 FCR 21.
Nicolazzo
Harb & Anor [2009] VSCA 79
(2004) 218 CLR 471
(1909) 8 CLR 316
(1919) 27 CLR 133
(1982) 149 CLR 337
(1985) 2 NSWLR 309
(1976) 133 CLR 679
(1990) 26 FCR 21