What have I signed up for? A recent exercise by the Court of Appeal in contractual interpretation

Where one has a purported deed or a ‘heads of agreement’ type of document, when might that document be binding and when might it fall short? And when might someone who has not signed the document still be a ‘party’ to it? The Victorian Court of Appeal in its recent decision in Nurisvan Investment Ltd & Anor v Anyoption Holdings Limited[1] has provided some guidance, and the decision is noteworthy for the way in which the Court looks to evidence of post-contractual conduct in ascertaining not so much the terms of the agreement but the identity of the parties to it.

The facts

One of the applicants, Nurisvan Investment Ltd (Nurisvan), and the respondent, Anyoption Holdings Limited (Anyoption), were companies registered in Cyprus. Nurisvan was sole shareholder of the other applicant, FIBO Australia Pty Ltd (FIBO).

In late 2014, the parties entered into negotiations with a view to Anyoption purchasing all of Nurisvan’s shares in FIBO. To that end, Anyoption and FIBO executed a document titled ‘Binding Heads of Agreement’. Nurisvan was named as a party to the Heads of Agreement but did not sign the document. The Heads of Agreement provided for the parties to subsequently enter into a share sale agreement.

Anyoption and FIBO (but not Nurisvan) executed the Heads of Agreement in December 2014, and the parties began negotiating the terms of the share sale agreement.

Negotiations came to a halt in late 2015 when Nurisvan indicated to Anyoption that it did not consider itself bound by the Heads of Agreement. Anyoption, seeing things differently, commenced proceedings seeking specific performance of either the Heads of Agreement or a draft version of the subsequent share sale agreement. The primary judge found in Anyoption’s favour and ordered specific performance of the share sale agreement.

Qualities of the Heads of Agreement document

Of note were the following qualities of the document:

  • It did not contain execution clauses for any party other than Anyoption and FIBO, although it did refer to other parties including Nurisvan.
  • In the opening ‘recitals’ to the document, it stated, amongst other things, that ‘[t]he parties wish to manifest their intention … to sell and … to purchase all of the shares in this Deed’ and that ‘[t]he parties agree that this Deed is binding on the parties’.
  • Clause 2 stated that ‘this Deed is legally binding on the parties’.
  • Clause 3 stated that the parties declared their bona fide intention ‘to enter into’ the share sale agreement.
  • Clause 6 required the parties to negotiate in good faith for the entry into the share sale agreement.
  • Clause 7 required the purchaser to pay the deposit to an intermediary on execution of the document, with the vendor becoming entitled to receive that deposit on completion or otherwise by written authorisation of the purchaser.

The decision on appeal

The Court of Appeal considered, amongst other questions:

  1. whether Nurisvan was party to and bound by the terms of the Heads of Agreement notwithstanding that Nurisvan had not executed that document; and
  2. if Nurisvan was a party to it and bound by its terms, whether the Heads of Agreement was binding and enforceable in its own right or whether it was merely an ‘agreement to agree’ in the future, with respect to the later share sale agreement.

Was the Heads of Agreement capable of being a binding deed or contract?

In answering this question, Osborn, Santamaria and Kaye JJA in a joint judgment first considered the established position at law that a document which has not been fully executed may nonetheless bind the parties where it was their intention to be bound. The Court held:

‘There is no cogent reason why the same principle should not apply to a document, that purports to be a deed, but which has not been executed by a party. In an appropriate commercial context, in which the parties have clearly attached themselves to such a document, it would be incongruous if such a document should not be treated as part of the contractual arrangements between parties.’[2]

The Court considered this approach to be consistent with existing authority including the English Court of Appeal decision in McDonald v John Twinane Limited.[3]

Was the Heads of Agreement binding on a party who had not executed the document?

Nurisvan had not executed the Heads of Agreement and, indeed, there was no provision for it to do so. In considering whether Nurisvan was a party to the deed, the Court held that ‘[the] question must be determined objectively, by an evaluation of the contractual document and the circumstances in which it was executed’.[4]

In considering whether evidence of post-contractual conduct could be admissible to assist in this enquiry, the Court noted that although such conduct is not admissible when construing a contract it is admissible on the question of whether a contract in fact was formed. The Court held:

‘[T]here is no settled view in the authorities whether post-contractual conduct may be relied on to found or support an inference as to the identity of a party to the contract’.[5]

Having considered previous decisions of the courts and finding no clear authority on point, the Court nonetheless identified circumstances in prior cases where the conduct of parties, subsequent to entry into a contract, constituted an admission by a particular party that it was party to the contract.

Turning to the facts at hand, the Court considered that Nurisvan was ‘plainly a necessary party to any contract’ for the sale of shares and that there could be no valid share sale contract unless Nurisvan was party to the Heads of Agreement, being the document paving the way for the later share sale contract.[6] The Court considered, in other words, that:

‘[T]he post-contractual conduct of the parties was relevant to the issue, not only of the identity of the parties to the contract, but also, necessarily, to the existence of the contract itself. … [I]n a case such as this, the question whether a contract was formed necessarily involves the question whether it was formed between Anyoption and Nurisvan, since contracts do not exist in the abstract’.[7]

The Court identified a number of emails passing between the parties during the negotiations for the share sale agreement so as to infer that Nurisvan had accepted its role as party to the earlier Heads of Agreement.

The Court’s approach in this case makes it clear that evidence of post-contractual conduct will be admissible when identifying the parties to a contract. The weight given to that evidence will be greater in circumstances where, as a matter of logic, the conduct with respect to one agreement would be expected to bear upon another, related agreement. Such was the case here with the parties’ share sale agreement and its relationship to the prior Heads of Agreement.

Did the Heads of Agreement bind the parties to then enter a share sale agreement?

In answering this question, the Court considered the High Court authority of Masters v Cameron.[8] In that case, the High Court identified a number of categories of ‘agreement’ by which parties might agree that the terms would later be contained in more formal document. One such category which the High Court framed was one in which the parties were content to be bound by the terms of a first document with a view to later substituting that document with a more fully-fleshed version.

The Court of Appeal, with Masters v Cameron in mind, looked to the intention of parties in entering the Heads of Agreement as ascertained objectively from the terms of the Heads of Agreement document and the surrounding circumstances. The Court observed that:

‘[T]he fact that, after entering such an agreement, the parties might negotiate further additional terms, that were not included in the first agreement, is not necessarily inconsistent with a conclusion that the first agreement constituted a binding contract between them’.[9]

The Court drew a distinction between, on the one hand, a situation where parties intended to reach a concluded agreement and, on the other, a situation where assuming such an intention they in fact reached an agreement on such terms as to have a legally enforceable contract. The Court quoted Gleeson CJ in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd,[10] where his Honour held that ‘the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention’.[11] In other words, the enquiries overlap and where a document is missing certain key terms a court will more readily infer that the document itself is not binding.

In ascertaining whether the Heads of Agreement bound the parties to enter into a share sale agreement, the Court considered the language of the Heads of Agreement and held that it ‘constituted no more than a contract between the parties to negotiate, in good faith, with respect to entering into an agreement … for the sale of … shares’.[12] The Court considered the following qualities of the Heads of Agreement document to be relevant to that conclusion:

  • In the recitals, the reference to the parties expressing their ‘wish’ to bring about the sale of shares.
  • Again in the recitals, the reference to the parties wishing to ‘manifest their intention’ to sell shares rather than manifest their ‘agreement’.
  • The reference in a clause entitled ‘Declaration of Intention’ to the parties ‘respective bona fide intention’ to sell shares.
  • The presence of terms which would otherwise be superfluous if the document were itself to be a binding agreement to sell shares, such as a clause forbidding the parties from negotiating with any third party about the sale of shares.

The Court considered that ‘[t]he terms contained in the Heads of Agreement expressly leave much to be negotiated’.[13] The Court also referred to the draft of the share sale agreement itself — the version on which Anyoption had sought specific performance in the court below — which showed that a number of terms had yet to be negotiated.

The Court concluded that the Heads of Agreement did not bind the parties to sell the shares. For that reason, the appeal succeeded and the primary judge’s order for specific performance fell away.


The Court’s decision in Nurisvan Investment Ltd & Anor v Anyoption Holdings Limited is innovative for the approach their Honours took to the admissibility of evidence of post-contractual conduct when identifying the parties to an agreement. It also provides a good illustration of how the principles of contractual interpretation can apply when ascertaining whether one document binds parties to another document or course of action, and highlights the need for parties to choose their (written) words carefully.

[1]: [2017] VSCA 141.

[2]: Ibid [57].

[3]: [1953] 2 QB 304.

[4]: Nurisvan Investment Ltd & Anor v Anyoption Holdings Limited [2017] VSCA 141 [71].

[5]: Ibid [77].

[6]: Ibid [84].

[7]: Ibid (my emphasis).

[8]: (1954) 91 CLR 353.

[9]: Nurisvan Investment Ltd & Anor v Anyoption Holdings Limited [2017] VSCA 141 [107].

[10]: (1988) 18 NSWLR 540.

[11]: Ibid 548.

[12]: Nurisvan Investment Ltd & Anor v Anyoption Holdings Limited [2017] VSCA 141 [113].

[13]: Ibid [115].