Imogen Bailey and Yash Janakan have analysed this decision of the NSW Court of Appeal decision:
Pre-contractual conduct cannot be used for the purpose of clarifying terms of an agreement in the presence of an 'entire agreement' clause, however post-contractual conduct may be used to clarify the identity of contracting parties to an agreement.
An appeal was brought by Karl Damien (vendor) against JKAM Investments Pty Ltd (purchaser) in respect of cross-claims filed by both parties concerning the construction of the vendor's property. The parties negotiated orally for construction of the property in early 2012 with construction commencing in mid 2012. The terms of the oral negotiations were formalised in a deed on 10 December 2012 (Deed) and the parties entered into a contract for sale of the property on 21 December 2012.
An issue before the primary judge was the identity of the company which carried out the building works, which was determined on the evidence to be Architectural Collections Pty Ltd (original builder) and that finding meant that the original builder had assigned to the purchaser the debt of $528,000 for completion of the building work. The primary judge entered judgment for the purchaser against the vendor for $138,000, following set-off of the respective amounts in the cross-claims.
The vendor appealed against the findings of the primary judge in respect of liability for the assigned debt and the use of post- and pre-contractual conduct in his Honour's judgment.
Tobias AJA, with Gleeson JA and Simpson JA agreeing, dismissed the vendor's appeal on all grounds, upholding the findings of the primary judge that the vendor was liable to the purchaser as assignee of the vendor's debt to the original builder.
In relation to grounds concerning the primary judge's refusal to accept the tender of evidence of email correspondence containing pre-contractual negotiations, Tobias AJA upheld the decision on the basis that pre-contractual negotiations should not be used to either defeat the claim of the later assignment of the debt by framing the purchaser (and not the original builder) as the 'purchaser', or to stipulate that the relevant amount only became due and payable in the event that the contract for sale was terminated. His Honour considered the 'Entire understanding' clause in the Deed which stated that all previous negotiations and understandings concerning the subject matter of the Deed were merged in, and superseded by, that document and could not be taken into account.
His Honour also held that the primary judge was correct in taking into account post-contractual conduct solely for identifying the parties to the relevant building contract. The evidence in question was a tax invoice dated 7 March 2013 provided by the vendor's broker which the primary judge inferred reflected an understanding on the vendor's part that the original builder was the relevant contracting entity