Hopcroft & Edwards v Edmunds - [2013] SASCFC 38

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
HOPCROFT & EDWARDS v EDMUNDS & ORS
[2013] SASCFC 38
Judgment of The Full Court
(The Honourable Chief Justice Kourakis, The Honourable Justice White and The Honourable Justice Stanley)
23 May 2013
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS
CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - AUTHORITY OF AGENTS - CONSTRUCTION AND EXTENT OF AUTHORITY
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - OFFER AND ACCEPTANCE - CONTRACT IMPLIED FROM CONDUCT OF PARTIES
EVIDENCE - ADMISSIONS AND DECLARATIONS - ADMISSIONS - WHAT ARE AND EXTENT OF ADMISSIONS
ESTOPPEL - GENERAL PRINCIPLES
In 1995, the first, second and third respondents were engaged in litigation - the appellants had knowledge which they thought may assist the respondents - after discussions, a proposal emerged to the effect that the appellants would assist these respondents and in return be paid a percentage of the proceeds of the respondents' action, and each appellant would be made a shareholder and director of the third respondent - a shareholders' agreement to give effect to the proposal was prepared and executed by the appellants, but not the respondents - the appellants did not know until September 1997 that the respondents had not executed the agreement - the respondents were successful in their litigation.
The appellants claimed the monies said to be due under the agreement - they contended that, despite the non-execution by the respondents, a contract had been concluded in one or other of two ways - first, that the respondents' accountant had proffered the agreement to them for signature on the basis that a binding contract would come into existence upon their signature - alternatively, that they had made an offer in terms of the agreement by returning the signed document to the respondents' accountant, which offer had been accepted by the respondents as evidenced by their conduct in appointing the appellants as directors and shareholders of the third respondent.
The appellants also asserted that admissions made by the first and second respondents in proceedings in 1999 to the effect that they had an agreement with the appellants, were admissible as evidence of the formation of the contract.
By a Notice of Contention the fourth respondent submitted that the Judge should not have found that it was estopped from denying that it was a party to the agreement, if such an agreement had been concluded.
The trial Judge found that a contract had not been concluded and dismissed the appellants' claim.
Held (dismissing the appeal):
Per White J, Kourakis CJ and Stanley J agreeing:
(1) The question of whether a contract had been concluded was to be resolved by an objective assessment of the circumstances pertaining between the parties at the relevant time (Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, applied) (at [27]).
(2) The Judge was correct to find that a binding contract did not come into existence on the execution of the documents by the appellants (at [55]).
(a) The respondents' accountant did not have actual or ostensible authority to proffer the document to the appellants on the basis that it would become binding on all parties upon their signature and without signature by the respondents (at [55], [62]).
(b) In any event, the ordinary expectation that when a formal contractual document with provision for execution by both parties is prepared, the parties do not intend to be bound until all parties have executed the document, was not displaced (at [69]).
(3) Whether or not the respondents' conduct in appointing the appellants as shareholders and directors was to be understood as acceptance of an offer by the appellants was to be determined by an objective consideration of what the respondents' conduct may have indicated to the appellants (Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523, applied) - the respondents' conduct did not amount to an acceptance on their part, as their conduct was not referable only to the terms of the document (at [90]-[93], [95]).
(4) The respondents' evidence in the proceedings in 1999 was simply a statement of their then belief as to the subsistence of a contractual relationship and irrelevant to the Judge's determination (at [112]).
Per Kourakis CJ, Stanley J agreeing:
(5) The evidence of the first and second respondents in the 1999 proceedings expressed a legal conclusion and was therefore inadmissible (at [5]).
Per Kourakis CJ:
(6) The Judge's finding of estoppel was correct - in the circumstance that the fourth respondent had taken no steps to correct the mistaken assumption that the third respondent was the relevant entity entitled to recovery in the respondents' other litigation, even though it knew that the agreement was to its benefit, it would have been unconscionable for the fourth respondent to take advantage of that mistake (at [6]).
Per White J:
(7) Although there may be a proper basis upon which the fourth respondent should be estopped from denying the truth of the assertion represented to the appellants that the third respondent was the relevant entity entitled to recovery in the respondents' other litigation, such an estoppel would not preclude the fourth respondent from denying that it should be bound by the agreement (had the agreement in fact been concluded) (at [126]).
Per Stanley J:
(8) It is unnecessary to decide whether the fourth respondent was estopped from denying it was bound by the agreement (at [132]).
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523; Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, applied.
Hopcroft v Edmunds (No 2) [2012] SASC 94; Eccles v Bryant and Pollock [1948] 1 Ch 93; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Pianta v National Finance & Trustees Ltd (1964) 180 CLR 146; Barrier Wharfs Ltd v W Scott Fell and Company Ltd (1908) 5 CLR 647; Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd (1981) 2 BPR 9173; Brogden v Metropolitan Railway Company [1877] 2 AC 666; Rust v Abbey Life Assurance Co Ltd [1979] 2 Lloyd's Rep 334; Topaloglu UPS SCS (Australia) Pty Ltd [2011] QSC 217; JP Morgan Australia Ltd v Consolidated Minerals Ltd [2010] NSWSC 100; Steirn v Spanko Soulos Legal Services Pty Ltd [2009] NSWSC 1388; Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd (2005) 225 ALR 57; McBride v Sandland (1918) 25 CLR 69; Cooney v Burns (1922) 30 CLR 216; Regent v Millett (1976) 133 CLR 679; Australian and New Zealand Banking Group Ltd v Widin (1990) 26 FCR 21; Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669; Jones v Sutherland Shire Council [1979] 2 NSWLR 206; Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317; Pitcher v Langford (1991) 23 NSWLR 142; Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251; Tomko v Palasty [2007] NSWCA 258; Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500; Director of Public Prosecutions Reference No 1 of 1996 [1998] 3 VR 352; Director General, Department of Education and Training v MT (2006) 67 NSWLR 237; North Sydney Council v Roman (2007) 69 NSWLR 240, considered.

HOPCROFT & EDWARDS v EDMUNDS & ORS
[2013] SASCFC 38
Full Court: Kourakis CJ, White and Stanley JJ

KOURAKIS CJ: I agree with the conclusions of White J on the first three issues identified by him.
I have nothing to add to the reasons given on the first issue.
As to the second issue I express the view that questions of contractual acceptance by performance are to be determined by the objective consideration test articulated by McHugh JA in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd.[1] Terms such as “referable only”, “pointing quite unequivocally” and an “inevitable inference” do not describe a legal test but address the evidential difficulty in satisfying the reasonable bystander that there has been an acceptance by performance in the absence of oral or written communication. As White J observes, in this case that persuasive burden was compounded by the failure to indicate acceptance by the very means, subscription by all of the parties, contemplated by the document itself.
[1] (1988) 14 NSWLR 523 at 534-5.
On the third issue I take the view that the legal conclusion that parties have made a contractually binding agreement does involve a normative judgment, derived from business and community standards, about the sufficiency of the conduct necessary to impose and confer contractual obligations and rights. The reasonable bystander personifies those norms.
The evidence of Mr and Mrs Edmunds expressed a legal conclusion and was therefore inadmissible. For further reasons given by White J, it was also of no probative weight on the question of whether a contract was made. The decisions in Howard Smith Co Ltd v Varawa[2] and Barrier Wharfs Ltd v W Scott Fell & Co Ltd[3] do not deal with evidence admitting the existence of a contract, but with the use of evidence of events after, but proximate to, an act of alleged acceptance to determine whether or not it was a contractually binding act of acceptance.
[2] (1907) 5 CLR 68.
[3] (1908) 5 CLR 647.
On the fourth issue I agree with the Judge’s finding that Dadeeton Pty Ltd (Dadeeton) would have been estopped from denying that it was bound to deal with the trust assets in accordance with the alleged contract, if it had been made. Dadeeton, through Mr and Mrs Edmunds, must be taken to have been aware that the alleged contract, had it been made, was negotiated on the mistaken assumption that Smoothpool Nominees Pty Ltd (Smoothpool) was the trustee. Dadeeton took no steps to correct that assumption even though it knew that the agreement was to its benefit. In those circumstances, it would have been unconscionable for Dadeeton to take advantage of the mistake under which it knew Edwards and Hopcroft laboured because of the misrepresentations of its principals.
I would dismiss the appeal.
WHITE J. The appellants sought to recover from the respondents monies said to be due under a contract. A Judge of this Court found that the contract had never been concluded and dismissed their claim.[4] The appellants appeal against that dismissal.
[4] Hopcroft v Edmunds (No 2) [2012] SASC 94.
Background Circumstances
In 1995, the first three respondents, Mr and Mrs Edmunds and Smoothpool Nominees Pty Ltd (Smoothpool), purportedly in its capacity as trustee of the Cliff Edmunds Family Trust (the Edmunds Family Trust), were engaged in two actions in this Court. In the first they were suing a Mr Pickering and related parties (the Pickering Action). The claims in that action are not presently material, save that they included a claim by the respondents to recover an abalone authority (W17) as well as monetary sums. In the second action, the respondents were suing their former solicitors. Ultimately that action was dismissed by consent. The Judge referred to the two actions collectively as “the Edmunds litigation”.
The fourth respondent, Dadeeton Pty Ltd (Dadeeton), had in 1982 replaced Smoothpool as the trustee of the Edmunds Family Trust, but that went unnoticed until 1997, when it was added as a plaintiff in the Pickering Action. Except when necessary to do so, I will not distinguish between the respondents, even though Dadeeton only became involved in the Edmunds litigation in 1997.
The appellants, Mr Hopcroft and Mr Edwards, were also engaged in litigation in 1995. As a result, they had acquired certain knowledge which they thought may be of assistance to the respondents in the Pickering Action. In March or April 1995, Mr Edwards and Mr Edmunds commenced discussions concerning the assistance which the appellants could provide, and the terms on which it may be provided. A proposal emerged to the effect that the appellants would provide assistance; that in return they would be paid a percentage of the proceeds of the Pickering Action; and that each would become a shareholder and director of Smoothpool.
Thereafter, the respondents’ accountant, a Mr Noolan, and solicitors retained by him, Cowell Clarke, prepared a draft shareholders’ agreement. The parties to the proposed agreement were to be Mr Hopcroft, Mr Edwards, Mr and Mrs Edmunds, and Smoothpool. Negotiation of its terms continued during April, May and June 1995. In its final form the document (the SHA) contemplated that the appellants would provide to the respondents “the full benefit and assistance of [their] knowledge and experience in connection with the actions” (cl 7); the respondents would pay to each of the appellants 7.5 per cent of “the value of the damages and/or property awarded … by the Court” (cl 2), 7.5 per cent of the net value of the abalone authority W17 in the event that it was recovered by the respondents (cl 3.1), and 7.5 per cent of any additional compensation received for loss of income (cl 4); and that the appellants would be appointed as directors of Smoothpool immediately following the execution of the agreement (cl 5.1). Further, each of the appellants was to be paid $4,000 by Smoothpool “in consideration of their becoming ... and offering to provide their services as directors ...”. Those payments were to be made within seven days of their appointment as directors.
On 28 June 1995, Mr Hopcroft attended at Mr Noolan’s office. He signed three copies of the SHA, an application for the allotment of one non‑cumulative preference share, and a consent to act as director of Smoothpool.
Mr Noolan then posted to Mr Edwards the three copies of the SHA executed by Mr Hopcroft, together with a share allotment application and a form for consent to act as director. Mr Edwards signed each document and returned them to Mr Noolan.[5] It was not suggested that Mr Noolan made a pertinent representation at the time of providing the SHA to the appellants for signature.
[5] Curiously, despite Mr Noolan having sent the documents to Mr Edwards in Hamilton, Victoria, the signatures of the witness to Mr Hopcroft’s and Mr Edward’s signatures are identical, but nothing is said to turn on this circumstance.
In early July 1995, Mr Noolan posted documents to the Edmunds for their signature. On the Judge’s findings, these documents included the minutes of an Extraordinary General Meeting (EGM) of the members of Smoothpool (amending the company Memorandum and Articles to provide for non‑cumulative preference shares) and share certificate forms for the issue of the shares to each of the appellants. The Judge also considered it likely that Mr Noolan sent at the same time minutes of a meeting of the directors of Smoothpool appointing the appellants as directors. Mr Edmunds, as chairperson, signed the minutes of the EGM and both Mr and Mrs Edmunds signed the share certificates and the appointments of Mr Hopcroft and Mr Edwards as directors. They returned those documents to Mr Noolan. Also in early July, Mr Noolan prepared and sent to Mrs Edmunds for her signature, the ASIC forms recording the allotment of the non‑cumulative preference shares to the appellants and their appointments as directors. Mr Noolan entered 13 July 1995 as the date of Mrs Edmunds’ signatures and lodged them with ASIC on 17 July 1995.
The Judge accepted that the documents sent to the Edmunds did not include the copies of the SHA executed by the appellants. He found that the Edmunds did not see the partially executed SHA until about one week after they had made Mr Hopcroft and Mr Edwards shareholders and directors.[6] The Judge also found that the SHA was never executed by the respondents.
[6] Hopcroft v Edmunds (No 2) [2012] SASC 94 at [169], [417], [424], [425].
The Judge found that it was not until September 1997 that the appellants became aware that the respondents had not executed the SHA.[7] He found that until then each had assumed that the SHA had been executed by the respondents.[8] In reaching these findings, the Judge rejected Mr Edmunds’ evidence that he had informed Mr Edwards expressly in July 1995 that he was not prepared to agree to the SHA.[9] The Judge referred to evidence from Mr Edmunds that in mid‑July 1995 Mr Noolan had shown him the partially executed SHA, that he had read one page of it and had then indicated that he was not prepared to agree to it.[10] Although noting that the timing of this discussion was not challenged, the Judge did not make any finding as to its content.
[7] Ibid at [172]. The Judge’s finding is actually September 2007 but it is common ground that this is a typographical mistake.
[8] Ibid.
[9] Ibid at [173].
[10] Ibid at [169].
The respondents were successful in the Pickering Action. They have since rejected the appellants’ claims for payment pursuant to the SHA.
The Appellants’ Case
The appellants’ case at trial proceeded on the basis that the respondents had never executed the SHA. There was no claim that they had signed the SHA but were falsely denying having done so. The appellants’ claim was that an offer had been made to them by Mr Noolan’s proffering the SHA for signature; that they had accepted the offer by signing the SHA; and that it had then become binding on all parties. They recognised that this claim required the Court to be satisfied that Mr Noolan had the respondents’ authority to offer the SHA to them for execution on the basis that, on their signatures, it would become binding on all parties.
The appellants submitted, in the alternative, that a binding contract resulted from their offer in signing and returning the SHA to Mr Noolan, and from the respondents’ acceptance of that offer, as evidenced by their conduct in performing its terms. The appellants relied on three aspects of the respondents’ conduct, namely, the respondents’ appointment of them as directors of Smoothpool; the allotment of the non‑cumulative preference share to each of them; and the payment to each of $4,000 following their appointment as directors.[11]
[11] Second Further Amendment Statement of Claim [8.2] and [9].
The Decision of the Judge
The Judge found that it was “the manifest intention” of the parties that the SHA was not to become binding until it was executed by all parties[12] and that, in any event, Mr Noolan had neither actual nor ostensible authority to proffer the SHA to the appellants for execution on the basis that, upon their signature, it would immediately become binding on all parties. He considered that a claim of ostensible authority had not been raised by the appellants’ pleading.[13]
[12] Hopcroft v Edmunds [2012] SASC 94 at [367], [376], [393].
[13] Ibid at [374].
The Judge also rejected the appellants’ alternative claim, holding that none of the respondents’ conduct was “unequivocally referable” to the SHA and consistent only with the SHA having binding effect.
The Issues on the Appeal
The issues raised by the Notice of Appeal, as modified by the appellants’ submissions on the hearing of the appeal, are these:
1.Should the Judge have found that the parties had entered into a binding contract in the terms of the SHA upon the appellants signing the SHA and returning the executed copies to Mr Noolan? This involves a consideration of the parties’ objective intention (Grounds Three and Four) and of Mr Noolan’s authority (Grounds One and Two).
2.Should the Judge have found that the appellants’ execution of the SHA constituted an offer to contract on its terms, which offer was accepted by the respondents’ later conduct, whether unequivocally referable to the SHA or otherwise? (Grounds Four, Five and Seven)
3.Should the Judge have found that Mr and Mrs Edmunds, or at least Mr Edmunds, had, in the proceedings before Lander J in 1999 admitted both the existence and binding nature of the agreement in the terms contained in the SHA and, if so, what is the effect of the admission? (Ground Eight)
There is some overlap between these issues.

The respondents filed a Notice of Contention, containing 12 separate alternative grounds upon which it was said that the appellants’ claim was properly dismissed. At the hearing of the appeal, the respondents abandoned all but [5] of this Notice. That paragraph gives rise to a further issue, namely:
4.If there was a binding agreement in terms of the SHA, should the Judge have found that the fourth respondent, Dadeeton, was not estopped from denying that it was bound by that Agreement? This issue arises because, until 1997, Dadeeton’s role as trustee of the Edmunds Family Trust had been overlooked with the effect that it was not included as a party in the SHA executed by the appellants.
Issue 1: Contract Binding on the Appellants’ Execution of the SHA?
The appellants advanced three matters in contending that the Judge had erred in failing to find that a binding agreement came into existence on their execution of the SHA. First, that the Judge should have found that Mr Noolan had actual or ostensible authority to offer the SHA to them for execution on this basis. Secondly, that although ordinarily the preparation of a formal document with provision for execution by all parties gives rise to an expectation that the parties do not intend the contract to be binding until executed by all,[14] the Judge should have found that that expectation was displaced in this case. Thirdly, that the Judge failed to attach appropriate weight to the admissions said to have been made by the Edmunds in 1999 in the proceedings before Lander J (this is the third substantive issue identified above).
[14] See, for example, Eccles v Bryant and Pollock [1948] 1 Ch 93 at 99.
Before addressing these matters, it is convenient to identify the principles governing the determination of whether parties have by their conduct concluded a binding agreement.
An Objective Assessment
The question of whether the parties intended that a binding contract should come into existence on the appellants’ execution and return of the SHA to Mr Noolan, and without execution by the respondents, was to be resolved by an objective assessment of the circumstances pertaining between the parties in June and July 1995.
In Ermogenous v Greek Orthodox Community of SA Inc,[15] the issue was whether a clergyman had entered into a contract of employment with his community. That raised the question of whether the parties had intended their relationship to be contractual. In relation to this question, the plurality said:
Because the search for the “intention to create contractual relations” requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word “intention” is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties.[16]
(Emphasis added, citations omitted)
[15] [2002] HCA 8; (2002) 209 CLR 95.
[16] Ibid at [25]; 105-6.
The plurality also referred to Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd,[17] in which the issue was also whether the parties had concluded an agreement. After referring to the pervasive influence of the general test of objectivity in the law of contract, Gleeson CJ continued:
The case involves the objective determination of the intention of the parties from a consideration of a series of communications exchanged by them in the context of their dealings over a period of time. In those circumstances it is both appropriate and necessary to have regard to the commercial circumstances surrounding the exchange of communications and, in particular to the subject matter of those communications ...[18]
[17] (1988) 18 NSWLR 540.
[18] Ibid at 550.
Although the issue in this case is one of contract formation, and not construction, the same principle of objectivity as discussed in Pacific Carriers Ltd v BNP Paribas[19] and in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd[20] is applicable. This means that the enquiry on the first issue is whether a reasonable person in the position of the appellants in June and July 1995 could have understood that the SHA was being offered for their execution on the basis that it should immediately, without execution by the respondents, become binding. The enquiry on the second issue is whether a reasonable person would have regarded the respondents’ conduct, including their silence, as indicating to the appellants that the offer conveyed by their return of the signed SHA had been accepted.
[19] [2004] HCA 35 at [22]; (2004) 218 CLR 451 at 461-2.
[20] [2004] HCA 52 at [40]; (2004) 219 CLR 165 at 179.
Mr Noolan’s Actual Authority
The Judge held that the SHA could have become binding on all parties upon the signature of the appellants only if Mr Noolan had been authorised by the Edmunds to proffer it for signature on that basis. He held that Mr Noolan was not so authorised.
Mr Noolan undoubtedly had the authority of the Edmunds in relation to some matters. The issue was as to the scope of that authority.
For the contention that Mr Noolan had actual authority to bind the respondents, the appellants relied on evidence that the Edmunds had instructed Mr Noolan in relation to the agreement using words to the effect of “do whatever [is] necessary”.[21]
[21] Mr Noolan’s evidence was at T1321; Mr Edmunds’ evidence at T1201; and Mrs Edmunds’ evidence at T1442.
The Judge rejected the appellants’ contention that this instruction amounted to an authorisation to Mr Noolan not only to instruct solicitors to draft and finalise an agreement but also to proffer that agreement to the appellants for their acceptance. He held that the authority given to Mr Noolan was confined to the preparation of the amendments to the Memorandum and Articles of Association of Smoothpool and of the documents by which the appellants would become shareholders and directors of Smoothpool.[22] Implicitly, this included authority to retain solicitors to assist in that preparation. The Judge went on to hold that the authority did not extend to Mr Noolan making those changes himself and, more pertinently, did not permit Mr Noolan to decide the terms of the SHA, let alone to proffer them to the appellants on the basis that their acceptance would bind the Edmunds.[23]
[22] Hopcroft v Edmunds (No 2) [2012] SASC 94 at [144], [370].
[23] Ibid at [372]-[373].
The appellants contended that the Judge’s finding was inconsistent with his rejection of the evidence of Mr Noolan and the Edmunds on closely related topics. This was the only inconsistency for which the appellants contended. It was not suggested, for example, that there were inconsistencies in the Judge’s assessment of the evidence of Mr Noolan and Mr and Mrs Edmunds or in the findings which he made concerning their discussions.
Mr Noolan’s evidence as to his authority was as follows. At the request of the Edmunds, he discussed with Mr Edwards on or about 12 April the proposal for the appellants to provide assistance in the Pickering Action. He then sent a memorandum dated 12 April 1995 to the Edmunds in which he outlined Mr Edwards’ proposal.[24] This included the proposal that the appellants be allocated shares in Smoothpool, be appointed directors, and be entitled to receive 15 per cent of the proceeds of a judgment against Mr Pickering. Mr Noolan concluded his memorandum by stating:
Please advise if this is in agreement with your understanding and advise whether you wish me to instruct Richard Armour (or another solicitor) to make necessary changes to Memo and Articles of Smoothpool Nominees Pty Ltd.
[24] The memorandum refers to a meeting with Mr Hopcroft but it was common ground that this was a mistake and should have referred to Mr Edwards.
Subsequently, Mr Noolan discussed the proposal with the Edmunds at the Hyde Park Hotel. He was instructed to proceed by a statement from Mr Edmunds to the effect, “Do whatever you have to do”. A day or so later he sent a letter to Cowell Clarke dated 20 April 1995 outlining the terms of the contemplated agreement, identifying some necessary changes to the Memorandum and Articles of Association, and concluding with a request:
Could you please prepare DRAFT changes to Memorandum and Articles so it can be perused by all parties before adoption.
(Capitals in original)
Later still, he gave instructions to Cowell Clarke in relation to the preparation of the SHA and had discussions with Mr Edwards concerning the content of the draft. In his letter to Cowell Clarke of 20 April, Mr Noolan referred to the Edmunds’ agreement to pay the appellants 15 per cent of any compensation for loss of income received in the Pickering Action and 15 per cent of the earnings from use of the abalone authority W17.
The Judge regarded several aspects of Mr Noolan’s oral evidence as unsatisfactory. He rejected Mr Noolan’s claim that the topic of the appellants receiving some percentage of the proceeds of the Pickering Action had not been discussed at all at the Hyde Park Hotel, as well as his assertion that the Edmunds had not agreed to pay any percentage of the litigation proceeds to the appellants. His letter to Cowell Clarke contradicted that claim (although the Judge later found that at the Hyde Park Hotel, the Edmunds had neither accepted nor rejected the proposal that the Hopcroft/Edwards share should be 15 per cent).[25] The Judge regarded as “objectively bizarre” Mr Noolan’s assertion that he had suggested modifications to the draft SHA to Cowell Clarke without any reference to the Edmunds, and his assertion that he provided the documents relating to the allotment of shares and appointment of directors to the Edmunds in early July 1995 without telling them of the existence of the SHA. There were other respects in which the Judge regarded Mr Noolan’s evidence as unsatisfactory, and he concluded that Mr Noolan’s loyalty to Mr and Mrs Edmunds as former clients had affected his recollection of events.
[25] Hopcroft v Edmunds (No 2) [2012] SASC 94 at [145].
Mr Edmunds’ evidence was to the effect that after an initial discussion with Mr Edwards on the topic of provision of assistance, he had told him (Mr Edwards) to discuss the proposal with Mr Noolan and, in turn, that he had asked Mr Noolan to discuss the proposal with Mr Edwards. Subsequently he received Mr Noolan’s memorandum of 12 April 1995. About one week later he and his wife met Mr Noolan at the Hyde Park Hotel. He said that at that time he was prepared to agree only a 7.5 per cent share in the proceeds, and not 15 per cent and that he told Mr Noolan as much. This too was seemingly contradicted by Mr Noolan’s contemporaneous letter to Cowell Clarke. Mr Edmunds said that he told Mr Noolan that he would consider making the appellants shareholders and directors of Smoothpool, but if there was a way of doing that without giving them a financial interest in the company, he should adopt that method. He also instructed Mr Noolan to draw up the necessary changes to the company Memorandum and Articles for the consideration of him and his wife. Mr Edmunds said that he relied upon Mr Noolan to attend to the detail. He did not ask him to instruct solicitors but knew that that may be necessary.
In his cross‑examination, Mr Edmunds said that he had told Mr Noolan to do whatever was necessary to make Mr Hopcroft and Mr Edwards directors and shareholders of Smoothpool.
The Judge regarded several aspects of Mr Edmunds’ evidence as unsatisfactory, concluding that on numerous occasions he had given the evidence which he thought would best advance his defence. He rejected in particular Mr Edmunds’ evidence that at the Hyde Park Hotel he had discussed only a 7.5 per cent share of the proceeds with Mr Noolan, and considered that Mr Edmunds had been evasive on the question of whether the discussion had included Mr Noolan instructing solicitors to draw up the documents to amend the Memorandum and Articles of Association.
Mrs Edmunds said that at the meeting at the Hyde Park Hotel, she and her husband had told Mr Noolan that they would never agree to the proposal outlined in his memorandum of 12 April 1995, and that (albeit reluctantly in her case) they had agreed only that the appellants should be made directors and shareholders of Smoothpool.
The Judge considered that Mrs Edmunds had formed a strong dislike of the appellants, so much so that she was unable to give an objective account of what had occurred in 1995. He rejected her evidence that she and her husband had emphatically rejected Mr Edwards’ proposal, as outlined in Mr Noolan’s memorandum of 12 April, but nevertheless refrained from making a positive finding that they had, at the meeting at the Hyde Park Hotel, indicated agreement to the proposal.
I should add that, although rejecting the evidence of Mr Noolan and the Edmunds on a number of matters, it is also apparent that the Judge accepted their evidence on other matters.
The appellants emphasised the Judge’s rejection of significant aspects of the evidence of the Edmunds and Mr Noolan concerning the discussions at the Hyde Park Hotel, in particular the rejection of their evidence concerning discussion of Mr Hopcroft and Mr Edwards having a share in the litigation proceeds.
Despite the submission of the appellants, I do not consider that there is an inconsistency between the Judge’s finding as to the authority given to Mr Noolan by the words, “do whatever [is] necessary”, on the one hand, and his rejection of the evidence of Mr Noolan and the Edmunds, on the other. Rejection of some aspects of the Edmunds’ discussion with Mr Noolan cannot have the effect that the words must have had the meaning for which the appellants contend.
An instruction in terms of “do whatever [is] necessary” begs the question: necessary to do what? In my opinion, an objective bystander hearing those words would have understood them as amounting only to an instruction by clients to their professional advisor to identify the necessary steps and to prepare the necessary documents to give effect to a proposal, but not as a grant of authority to the advisor to conclude the terms of an agreement and then to bind the clients to that agreement. This is the effect of the Judge’s finding.
A persuasive indication that Mr Noolan’s authority was limited is contained in the contemporaneous documents. As already noted, the instructions which Mr Noolan sought from the Edmunds in his memorandum of 12 April 1995 related only to the making of changes to the Memorandum and Articles of Association of Smoothpool. It is natural to understand the Edmunds’ response as directed to that request. Similarly, the letter which Mr Noolan wrote to Cowell Clarke of 20 April 1995 related only to preparation of “draft changes” to the Memorandum and Articles. Those contemporaneous documents are strongly suggestive that Mr Noolan’s authority at that time, at least with respect to the preparation or modification of formal documents, was confined. There is no indication that he was authorised not only to identify the necessary changes, and to express them in the appropriate documents, but also to proceed to make them.
It is also pertinent that the suggestion for a written agreement in the form of a shareholder’s agreement emanated from Cowell Clarke on 8 May 1995 and not from Mr Noolan. Thereafter, Cowell Clarke prepared a draft of the SHA. Further still, they varied some of its proposed terms at the request of Mr Edwards, as well as at the request of Mr Noolan. The fact that a written agreement was not even in contemplation at the time of the Hyde Park Hotel discussion is, by itself, a significant obstacle to acceptance of the appellants’ submission that the words “do whatever [is] necessary” amounted to an authority to finalise such a document and to offer it to the appellants for signature on the basis that the Edmunds would then become immediately bound by it.
Mr Noolan’s authority may also have extended to negotiating matters with the appellants, but there is nothing to indicate that he was to do so without reference to the Edmunds. The fact that Mr Noolan concluded his letter to Cowell Clarke of 20 April 1995 with a reference to the perusal of the proposed changes “by all parties before adoption” is inconsistent with him having such an authority. The Judge’s finding that the Edmunds made no decision at the Hyde Park Hotel on the extent of the share of the litigation proceeds which the appellants were to receive also counts against Mr Noolan having such an authority.
It was of course open to the Judge to reject the evidence of Mr Noolan and the Edmunds on some topics, but to accept their evidence on others. A direct inconsistency between the evidence rejected and that accepted might call into doubt the reliability of the Judge’s reasoning, but, in my opinion, the appellants have not identified any such inconsistency. In particular, contrary to the appellants’ contention, there is no inconsistency between the Judge’s rejection of the evidence of the Edmunds and Mr Noolan concerning their discussion of a percentage share for the appellants, or the amount of the share, on the one hand, and the findings that Mr Noolan’s authority with respect to negotiation of the SHA was limited, on the other. Even if the Judge had found that Mr Noolan was authorised to agree to a 15 per cent share to the appellants, it would not follow that he must have been authorised to finalise the terms of an overall agreement, to reduce those terms to writing, and to submit the document to the appellants for execution on the basis that, upon their doing so, the Edmunds would become bound immediately.
Counsel for the appellants on the appeal acknowledged the absence of direct evidence that Mr Noolan had been authorised to proffer the SHA on the basis that it would be binding on all parties upon the appellants’ signatures. He submitted that instead it was to be inferred from the course of conduct between 12 and 20 April 1995 and from the negotiation of the terms of the SHA thereafter. I have already remarked on the difficulty in accepting this submission arising from the fact that a written agreement was not even contemplated until 8 May 1995. Further, as already seen, the Judge rejected as “objectively bizarre” Mr Noolan’s evidence that he had made revisions to the draft SHA while it was being negotiated without any reference to the Edmunds. No challenge was made to that finding. The fact that Mr Noolan did seek instructions from the Edmunds concerning the content of the SHA is inconsistent with Mr Noolan having the authority for which the appellants contended.
Further again, if Mr Noolan did have an authority of that kind, one may well have expected the execution clause in the SHA to have permitted Mr Noolan to have executed it as agent for and on behalf of the Edmunds and Smoothpool.
In my opinion, the position of Mr Noolan was akin to that of the solicitor considered by the High Court in Pianta v National Finance & Trustees Ltd:[26]
He was retained, in the capacity of a solicitor, to settle written terms of sale which he could advise his clients to accept and sign. For this purpose, he could negotiate and agree with the representatives of the respondent the terms which the respondent could be expected to accept or, if the representatives were so authorised, which they could accept on behalf of the respondent and which the solicitor could advise his clients as satisfactory in their interest. But this does not confer on the solicitor authority to contract on behalf of the clients to sell the land. If he is to have that authority it must be given expressly or by necessary implication.[27]
(Emphasis added)
[26] (1964) 180 CLR 146.
[27] Ibid at 152.

The expectation that the Edmunds would themselves have to sign the SHA before it became binding on them is so strong that one would expect clear and express evidence of Mr Noolan’s authority to bind them before concluding that that expectation was displaced. As counsel for the appellants acknowledged, there is no such evidence. In that circumstance, the Judge’s conclusion against the appellants was not only understandable, but inevitable.
Accordingly, I consider that this criticism of the Judge’s reasons fails.
Mr Noolan’s Ostensible Authority
The appellants contended in the alternative that the Judge should have found that Mr Noolan had the ostensible authority of the respondents to finalise the terms of the SHA and to present it to them as an offer for their acceptance. This contention was contained in the grounds of appeal and in the appellants’ written summary of argument, but was pursued only faintly in the oral submissions.
In my opinion, the appellants have not demonstrated any error in this respect. In the first place, on the third day of trial, the Judge refused to permit an amendment to the appellant’s Reply to raise ostensible authority, holding that a plea to that effect should be made in the Statement of Claim. The appellants did not thereafter seek to amend their Statement of Claim and the trial was conducted on the basis that the question of ostensible authority of Mr Noolan (at least to proffer the SHA for acceptance) did not arise. There is no appeal against the Judge’s interlocutory ruling concerning the pleading of ostensible authority.
Despite this, on the appeal the appellants contended that two paragraphs of their existing Reply, [8.2] and [8.5], did, in any event, raise a plea of ostensible authority. It is not possible, in my opinion, to construe [8.2] in that way and [8.5], properly understood, is a plea of actual authority.
Given the Judge’s disallowance of an express plea of ostensible authority in the Reply, and the absence of any contention by the appellants that the parties did conduct the trial on the basis that [8.5] did contain such a plea, this Court should be slow to construe [8.5] in the manner for which the appellants contend. It should be even more reluctant to permit the appellants now to advance a case which they chose not to advance at trial.
In any event, the findings of the Judge upon which the appellants rely are insufficient to establish that Mr Noolan had the necessary ostensible authority. The appellants’ claim is, in effect, that the respondents had allowed Mr Noolan to give the impression that he had more authority than was the case in reality and, in particular, to give the impression that he had authority to bind the respondents. This was so, it was said, because Mr Noolan appeared to be acting in accordance with the instructions of the respondents in his communications with Cowell Clarke and then in relation to the drafts of the SHA.[28] However, that appearance cannot sensibly be said to have indicated in addition that Mr Noolan had the authority to bind the respondents by proffering the SHA to them for signature.
[28] As the Judge found in [114(4)].
It was then said that it was reasonable for the appellants to infer that the respondents were aware of the terms of the SHA at the time Mr Noolan proffered it to them for signature.[29] Again, the reasonableness of that inference did not warrant a conclusion that Mr Noolan had authority at that time to bind the respondents merely by proffering the SHA for signature. Ordinary commercial experience contradicts such an inference. It is common, for example, for a land agent to secure the signature of a purchaser to a contract before submitting it for consideration by the agent’s principal.
[29] As the Judge found in [420].
Accordingly, I would reject the appellants’ submission concerning the ostensible authority of Mr Noolan on this aspect of the matter.
Displacement of the Ordinary Expectation
Quite apart from Mr Noolan’s lack of authority, the Judge considered that, considered objectively, the parties must have intended that they would be bound only upon execution of the SHA on both sides. He considered a number of matters to be pertinent in this respect.
First, the subject matter of the agreement concerned an item of substantial value. The Judge was satisfied that the appellants knew that an abalone authority in mid 1995 had a value of more than $1m and accordingly that shares of the licence totalling 15 per cent had a potential value of hundreds of thousands of dollars. In addition, the monetary sums which the respondents sought to recover in the Pickering Action had the potential to be substantial. The significant value of the subject matter of the proposed agreement suggested by itself that the parties were contemplating a formal agreement.
Secondly, there was no suggestion that the parties had concluded a bargain prior to preparation of the formal document. Mere agreement on some of the terms to be included in a concluded agreement was not to conclude the agreement itself.[30]
[30] Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548; Barrier Wharfs Ltd v W Scott Fell and Company Ltd (1908) 5 CLR 647 at 650, 666.
Thirdly, the SHA was a formal and detailed document, prepared by lawyers and proceeding through several iterations. Each iteration provided for formal execution by each party. The Judge considered that when a formal contractual document with provision for execution by both parties is prepared, the ordinary expectation is that the parties do not intend to be bound until all parties have executed the document. He referred in this respect to Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd[31] in which Glass JA, in the judgment of the Court said:
Many contracts are made in an informal way when the parties have passed beyond the negotiating stage by reaching an agreement upon all the terms of the bargain. But there are other forms of negotiation in which the achievement of an agreement upon terms fails to produce a binding agreement because the parties contemplate that it is not the settlement of the terms but the completion of some ceremony which marks the stage at which a contract comes into existence. …It is well understood that the exchange of contracts for the sale and purchase of land is such a ceremony without which a bargain of that kind cannot be struck. …The terms of the correspondence between the solicitors already noted objectively evince an intention that neither client was to be bound by the memorandum of lease at the moment when all its terms had been settled by the solicitors. Some further ceremony was required whether it was to be the contemplated lodgement for registration of a memorandum duly executed by the lessor’s solicitors or the earlier ceremony whereby both lessor and lessee reciprocally bound themselves by a bilateral execution of a registrable memorandum of lease.[32]
[31] (1981) 2 BPR 9173.
[32] Ibid at 9175-6.
The Judge concluded on the basis of these matters alone that it was the “manifest intention” of the parties that the SHA was not to become binding until it was executed by all parties. Until that point, either party was free to resile from the terms of the document.[33]
[33] Hopcroft v Edmunds (No 2) [2012] SASC 94 at [367].
Although initially the appellants’ counsel foreshadowed a challenge to these conclusions, ultimately it was not pressed. Counsel recognised the difficulties in overcoming the ordinary expectation that, when parties go to the trouble and expense of having a formal document prepared for their execution, they do not intend to be bound until all parties have executed it. In my opinion, counsel’s recognition was correct. There is no basis for this Court to interfere with the Judge’s findings.
Subject to consideration of the effect of the Edmunds’ evidence in the proceedings before Lander J, this means that these grounds of appeal fail.
Issue 2: Contract Formed by the Respondents’ Later Conduct?
The appellants’ alternative claim at trial was that by executing and returning the SHA to Mr Noolan, they had made an offer to the respondents which had been accepted, as evidenced by three aspects of the respondents’ later conduct. This was the respondents’ action in issuing to each of them one share in Smoothpool, in appointing them directors of Smoothpool, and in later paying $4,000 to each.
The Judge accepted that a party’s acceptance of a written offer may, in the absence of signature, be inferred from that party’s later conduct. However, he rejected the appellants’ alternative claim, referring again to the inference that the parties did not intend to become bound until the execution of their formal document. The Judge also considered that the identified conduct of the respondents was not “unequivocally referable” to an acceptance of the SHA and its terms.
On the appeal, the appellants relied only on the respondents’ conduct in making them shareholders and directors of Smoothpool, and abandoned reliance on the making of the payments. This meant that the respondents were contending (in accordance with their pleading) that a contract in the terms of the SHA became binding by at least 17 July 1995, that is, when Mr Noolan lodged the prescribed forms at ASIC.
This was the only conduct of the respondents on which the appellants relied. This is not a case in which the offeror relied on conduct of the offeree in accepting the provided service, or in making communications which assumed the existence of a binding agreement.
General Principles
There are cases in which parties have been found, by their conduct, to have concluded a contract even though the contemplated written agreement was not executed by one or the other. The courts have been reluctant, however, to infer acceptance from the mere silence or passivity of an offeree in the absence of some duty to respond or unless the very nature of the transaction gave rise to an expectation that objection would be made if the offer was rejected. Generally, some communication or action by the offeree is required. Further still, that conduct must be of a particular kind, being able to be characterised as “referable ... only to the contract”[34] or as “necessarily to lead to the inference on the part of the [offerors] that the agreement had been accepted on the part of the [offerees], and was to be acted upon by them”,[35] or as pointing “quite unequivocally to [the] agreement”,[36] or as giving rise to “an inevitable inference”.[37]
[34] Brogden v Metropolitan Railway Company [1877] 2 AC 666 at 680 (Lord Cairns).
[35] Ibid at 686 (Lord Hatherley).
[36] Ibid at 689 (Lord Selborne).
[37] Rust v Abbey Life Assurance Co Ltd [1979] 2 Lloyd’s Rep 334 at 340; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 528 (Kirby P).
However, the objective theory of contract may indicate that the standard is not as stringent as these expressions may suggest. Instead the question is simply that of whether an objective bystander would regard the offeree’s conduct as indicating to the offeror that its offer had been accepted. An “inevitable inference” would be very relevant to the resolution of that question but not essential. This was the approach adopted by McHugh JA (with whom Samuels JA agreed) in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd:[38]
The objective theory of contract requires an external manifestation of assent to an offer. Convenience, and especially commercial convenience, has given rise to the rule that the acceptance of the offer should be communicated to the offeror. After a reasonable period has elapsed, silence is seen as a rejection and not an acceptance of the offer. ...
Nevertheless, the silence of an offeree in conjunction with the other circumstances of the case may indicate that he has accepted the offer ... The offeree may be under a duty to communicate his rejection of an offer. If he fails to do so, his silence will generally be regarded as an acceptance of the offer sufficient to form a contract. ... [W]here an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms ...
The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted.[39]
(Emphasis added, citations omitted)
This approach has been followed in a number of subsequent cases.[40]
[38] (1988) 14 NSWLR 523.
[39] Ibid at 534-5.
[40] Topaloglu v UPS SCS (Australia) Pty Ltd [2011] QSC 217 at [91]-[92]; JP Morgan Australia Ltd v Consolidated Minerals Ltd [2010] NSWSC 100 at [140]; Steirn v Spanko Soulos Legal Services Pty Ltd [2009] NSWSC 1388 at [22]; Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd [2005] FCA 1521 at [107], (2005) 225 ALR 57 at 86.
Acting on a submission of the appellants’ trial counsel, the Judge applied the first approach by enquiring whether the respondents’ conduct was “unequivocally referable” to an acceptance of the terms of the SHA. That terminology appears to have been derived from the equitable doctrine of part performance, pursuant to which a plaintiff may enforce a contract which it has partly performed despite the fact that the contract does not comply with a Statute of Frauds provision. In those cases, the plaintiff is relying on its own conduct to avoid the effect of the Statute of Frauds. In Australia, the courts have insisted that that conduct be “unequivocally referable” to the terms of the contract sought to be enforced.[41]
[41] McBride v Sandland (1918) 25 CLR 69 at 78; Cooney v Burns (1922) 30 CLR 216 at 221-2; Regent v Millett (1976) 133 CLR 679 at 682-3; Australian and New Zealand Banking Group Ltd v Widin (1990) 26 FCR 21 at 35-6.
The issue in the present case did not concern part performance of a contract, but instead whether a contract had come into existence at all. Further still, the appellants do not rely on their own conduct, but on that of the respondents. In those circumstances, the elements of the equitable doctrine of part performance had no application.[42]
[42] Cf GE Dal Pont and DRC Chalmers, Equity and Trusts in Australia (4^th ed, 2007) at [12.10].
However, the difference between an “unequivocally referable” test, on the one hand, and a “necessary inference” test, on the other, may be a matter of minor degree only. If the Judge did apply a concept derived from the equitable doctrine of part performance in the present case, then I doubt that it has had any material impact on the outcome.
Application of the “Unequivocally Referable” Test
It is appropriate first to consider the matter on the basis adopted by the Judge.
The only reference in the SHA to the appellants becoming shareholders was in a recital to the effect that they were each to be allotted one non‑cumulative redeemable preference share in Smoothpool. In relation to directorships, cl 5 provided:
5.     Directors
5.1    Hopcroft and Edwards have consented to act as directors of Smoothpool and in consideration of their becoming directors of Smoothpool and offering to provide their services as directors of Smoothpool they will each be paid the sum of $4,000 by Smoothpool and the parties agree to do all that is necessary to effect the appointments of Hopcroft and Edwards as directors immediately following the execution of this Agreement. The payments to be made pursuant to this clause shall be made within seven days of Hopcroft and Edwards being appointed directors of Smoothpool.
5.2    Hopcroft and Edwards will each resign as a director of Smoothpool without any compensation for loss of office (however described) upon the termination of this Agreement.
By cl 6, the shareholders and directors were to bind themselves to enable Smoothpool to perform its obligations under the SHA. Clause 7 was expressed as follows:
7.     Hopcroft’s and Edwards’ Obligations
In consideration of the above, Hopcroft and Edwards will at their own expense fully, willingly and promptly at all times during this Agreement, give to Smoothpool, the Edmunds and their legal or other advisors the full benefit and assistance of Hopcroft’s and Edwards’ knowledge and experience in connection with the actions.
The Judge held that the Edmunds’ making of the appellants shareholders and directors of Smoothpool was not referable “either unequivocally or sufficiently” to the terms of the SHA so as to indicate acceptance by them of its terms.[43] Those actions were equally consistent with an intention to facilitate access to documents in Mr Edwards’ possession or to add credibility to the Edmunds litigation, without the respondents committing themselves to the terms of the SHA.[44]
[43] Hopcroft v Edmunds (No 2) [2012] SASC 94 at [396].
[44] Ibid.
The Judge relied on his earlier finding that the purposes agreed between Mr Edwards and Mr Edmunds for the appellants becoming shareholders and directors were facilitating the Edmunds’ access to Mr Edwards’ documents; adding credibility to the Edmunds litigation; and it being “a precondition to or step towards” the appellants providing the contemplated assistance.[45]
[45] Ibid at [134.7], [318], [395].
As I understand it, the Judge accepted that the appointment of the appellants as shareholders and directors was to satisfy a precondition for the provision of their assistance, but could not be regarded as indicating acceptance of all the other terms upon which they were to provide that assistance. Put slightly differently, the Edmunds’ conduct indicated acceptance of one condition of an anticipated agreement but not acceptance of all the contemplated conditions, let alone as an indication of an intention to be contractually bound.
In my opinion, this view of the matter was open and error has not been shown. In many respects the appointment of the appellants as shareholders and directors appears to have been secondary to the real purpose of the proposed agreement, namely, the provision by the appellants of assistance and the reward which they were to receive in exchange. It was secondary because it was a means of facilitating the assistance which the appellants could provide, and also provided them with a means of participation in the Pickering Action. Being secondary, it was capable of being regarded as a separate and distinct step, without indicating necessarily any agreement at all on the primary issues of the assistance to be provided and the reward to be given.
Objective Consideration
For the reasons given earlier, I consider that the question of whether the Edmunds’ making the appellants shareholders and directors of Smoothpool indicated acceptance of the appellants’ offer should be determined by reference to the position of the objective bystander. The issue is whether a reasonable person in the appellants’ position would have regarded the Edmunds’ conduct as indicating that their offer had been accepted.[46] In addressing that issue, it is necessary to keep in mind both the limited nature of the respondents’ conduct on which the appellants relied, and the fact that it did not involve any communication to the appellants at all.
[46] Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535.
Questions of Mr Noolan’s authority do not loom large in relation to this issue. It was obvious that Mr Noolan had ostensible, if not actual, authority to receive the executed SHAs from the appellants and to provide them to the Edmunds. It was also reasonable for the appellants to infer that he would have authority to communicate any response from the Edmunds to them, if a response was to be made.
A reasonable bystander may well have assumed that the Edmunds did have the SHAs executed by the appellants at the time they made them shareholders and directors. An objective consideration of what was conveyed to the appellants by the respondents’ conduct should take account of that circumstances.

However, a number of matters point against the reasonable bystander concluding that the Edmunds’ conduct, in making the appellants shareholders and directors, amounted to an acceptance by them of the terms of the SHA.
First, the ordinary expectation arising from the preparation of a formal document with provision for execution by all parties continued to apply. A reasonable bystander is unlikely to have considered that that expectation had been displaced. That is especially so having regard to the fact that the making of the appellants as shareholders and directors occurred only two weeks after their execution of the SHA. This is not a case like Brogden in which there had been a course of dealing over some time which was capable of displacing the ordinary expectation. If that expectation existed when the executed SHA was returned to Mr Noolan, there is no reason to suppose that it had dissipated only two weeks later.
Secondly, there was no communication at all from the respondents to the appellants. They were not informed of their appointments as shareholders and directors. The Judge found that the appellants made no enquiry as to whether the respondents had executed the SHA, but simply proceeded on an assumption. It is true that silence or passivity can be conduct evidencing an acceptance of an offer in some circumstances. Rust v Abbey Life Assurance Co Ltd[47] is an example. But in the present case, the respondents were under no duty to respond to the offer and the nature of the transaction could not have given rise to an expectation that they would do so. A reasonable bystander is likely to have drawn an inference from the absence of communication, thinking that if the respondents had accepted the SHA, that acceptance would have been communicated to the appellants. The Judge was correct, in my opinion, in regarding the Edmunds’ own silence and the absence of enquiry by the appellants as to whether the SHA had been executed as significant matters indicating that a contract was not concluded.[48]
[47] [1979] 2 Lloyd’s Rep 334.
[48] Hopcroft v Edmunds (No 2) [2012] SASC 94 at [393].
Thirdly, the fact that, on the Judge’s findings, the Edmunds’ conduct is equally consistent with an intention on their part to satisfy a precondition for the provision of assistance by the appellants and therefore not referable only to the terms of the SHA also makes it unlikely that a reasonable bystander would have concluded that that conduct evidenced acceptance of the terms of the SHA.
Finally, I refer to the appellants’ submission that it was reasonable for them to assume, when returning the SHA to Mr Noolan, that the respondents were aware of its terms. Even if that be so, it was, in my opinion, of little significance. From the appellants’ perspective, the position was simply that they had made an offer on terms assumed to be known to the respondents but to which they received no response. A reasonable bystander would not have inferred from the fact of the respondents’ knowledge of the terms of the offer and the absence of response that the offer had been accepted.
I note again the precise and confined conduct of the respondents which the appellants contend constitutes an acceptance of their offer. They do not rely on any subsequent conduct of the respondents, such as their acceptance of services or assistance.
In my opinion, subject to consideration of the Edmunds’ evidence in the proceedings before Lander J, these grounds of appeal fail.
Issue 3: The Edmunds’ Evidence before Lander J
In their evidence in the Pickering Action before Lander J in 1999, each of Mr and Mrs Edmunds was asked some questions about an agreement with the appellants. The appellants submitted that their responses indicated an awareness by them of the SHA and an admission of it. They contended that the Judge had erred in not understanding the evidence in that way.
The passages in Mr Edmunds’ cross‑examination in the Pickering Action upon which the appellants rely is as follows:
Q.Do they stand to benefit from the proceeds of a successful conclusion of this case so far as Smoothpool is concerned.
A.There was an agreement, a separate agreement made up with Hopcroft and Edwards, to an effect of, I’m not too sure what the percentage was, but they were to receive a certain percentage if we were successful, if they were able to assist at all.
HIS HONOUR:
Q.They would receive a percentage, would they, of any award of damages in this case, is that the agreement.
A.I am not too sure just what the agreement says now. It was to the effect of a percentage of the licence or damages, I’m not too sure. …
XXN
Q.Can you just explain how they would receive a percentage of the licence.
A.You would have to ask them that. As far as I can recall. If the licence went to Smoothpool, and if they upheld their duties, somehow they were entitled to 7 and a half per cent …
Q.Who negotiated that agreement on behalf of Smoothpool.
A.I was involved with discussions with Edwards and Hopcroft, and after that it was drawn up between those two, and I think their lawyer and our accountant …
Q.And you were the person who, on behalf of Smoothpool, finally agreed the terms.
A.That would be so, yes …
Q.When you said that they did not have a financial interest in Smoothpool, that was not correct.
A.I’m not too sure just how it all equates with what they are entitled to.
Q.They are shareholders and have been shareholders since 1995.
A.Since ’95 yes.
Q.And they have the agreement to receive 7 and a half per cent, which you have already described.
A.I believe so, I don’t know.
HIS HONOUR:
Q.    Can you remember what you negotiated; yes or no.
A.    Yes.
Q.    What did you negotiate.
A.    7 and a half per cent.
Q.    Of what …
A.As far as I can recall, if the licence went to Smoothpool, the agreement stated that they would obtain 7 and a half per cent of the licence, and I would believe that would also entitle them to 7 and a half per cent of the proceeds.
Q.Did you agree, on behalf of Smoothpool, that they would obtain 7 and a half per cent of the licence, and 7 and a half per cent of the income from the licence.
A.I think so, yes.
(Emphasis added)
The appellants relied in particular on the emphasised passages.
The appellants relied on the following passage in Mrs Edmunds’ cross‑examination in the Pickering Action:
QDo they [Messrs Edwards and Hopcroft] have any financial interest in Smoothpool.
ANo, they do not, other than a single share.
QDo they have any financial interest in the outcome of these proceedings.
AYes.
QWhat is that.
AIf the resolution is – it’s in the discretion of the directors what, you know, what happens on a result of the case.
QIs that an arrangement which is recorded in writing.
AYes.
QDo you have that.
AI don’t have the document at the moment, no …
QWhere is the document.
AI don’t know offhand, but I am sure I could locate one.
...
Q… You were asked some questions by Mr Clayton about an agreement, as it were, that was entered into with the directors Messrs Edwards and Hopcroft, do you recall that.
AYes
QWere you able to locate that document.
AYes
QWhat’s happened to that document.
AI don’t know, my counsel’s got it. I’ve got no idea. I heard that it was located. I didn’t locate it myself. I just heard it was located.
(Emphasis added)
The Judge considered that it was unclear whether the appellants were contending that Mr Edmunds had admitted the existence of a contract in terms of the SHA in his evidence before Lander J.[49] To the extent that such a submission was made, the Judge rejected it for three reasons.
[49] Ibid at [428].
First, the Judge considered that the evidence did not establish that Mr Edmunds was authorised by either Smoothpool or Dadeeton to make admissions binding them in his evidence before Lander J. Secondly, he held that the question of whether a contract had come into existence was an objective one and that Mr Edmunds belief on that topic, some four years later, was not relevant. Thirdly, while considering that some of Mr Edmunds’ evidence in the Pickering Action reflected adversely on his credit, the Judge did not consider that he had “clearly and unequivocally” made an admission that the SHA was subsisting and binding on the Edmunds.[50]
[50] Ibid at [431].
Mr Edmunds’ Authority
I agree, with respect, with the appellants’ submission that issues of Mr Edmunds’ authority to make an admission binding Smoothpool or Dadeeton did not really arise. Mr Edmunds could only give evidence of facts and circumstances. His evidence remained evidence of those facts and circumstances whether or not he was authorised by Dadeeton or Smoothpool to give the evidence. The legal effect of the evidence given by a witness is a matter for the courts and does not depend on the authority of the witness.
Further, and in any event, given the control which Mr and Mrs Edmunds exercised over both Dadeeton and Smoothpool, there is some artificiality in not regarding evidence which they gave concerning affairs involving those companies as binding on those companies.
The Effect of the Admission
The second and third matters to which the Judge referred are more significant.
In effect, the appellants were relying on post‑contractual conduct in the form of an admission as evidence of the existence of the contract for which they contended. Mr Edmunds had, so the appellants contended, “admitted the agreement”.
An admission in these terms involves a legal conclusion. It is not an admission of a fact or circumstance from which the legal conclusion for which the appellants contended could be inferred. It was not, for example, an admission that Mr and Mrs Edmunds had acted to make the appellants shareholders and directors of Smoothpool because of the terms of the SHA, or in an endeavour to implement its terms, or because they regarded themselves as bound by its terms.
The circumstance that the admission relied upon by the appellants involved a conclusion of law did not mean that it was not admissible at all. There are many circumstances in which courts do admit admissions comprising legal conclusions, or involving at least to some extent a legal conclusion. In Grey v Australian Motorists & General Insurance Co Pty Ltd,[51] Mahoney JA said:
An admission may provide material from which a court may find a question of law, a question of fact, or a question being a conclusion from a mixture of fact and law: ...[52]
Mahoney JA repeated this statement in Jones v Sutherland Shire Council.[53] (This statement of principle does now need to be read subject to the qualification stated by Gummow J in Dovuro Pty Ltd v Wilkins[54] to which I will refer shortly). In Pitcher v Langford,[55] Handley JA expressly agreed with the approach of Mahoney JA, and held that a statement of a station owner that he was the employer of shearers was admissible in evidence against him.[56]
[51] [1976] 1 NSWLR 669.
[52] Ibid at 684.
[53] [1979] 2 NSWLR 206 at 231.
[54] [2003] HCA 51 at [68]-[71]; (2003) 215 CLR 317 at 340-2.
[55] (1991) 23 NSWLR 142.
[56] Ibid at 160.
In other cases regard has been had to the subsequent conduct of the parties as providing evidence that they had not concluded a contract. For example, in Howard Smith & Co Ltd v Varawa,[57] Griffith CJ considered that the subsequent conduct of the parties indicated that their previous communications were “not intended to have a contractual operation at all”.[58] Similarly, in Barrier Wharfs Ltd v W Scott Fell & Co Ltd,[59] Griffith CJ considered that subsequent correspondence could show that a concluded contract had not been formed.[60] Issacs J also referred to the subsequent conduct of the parties, holding that it indicated “that it was not understood that they were bound down contractually to the exact terms which had already been set out in the letters”.[61]
[57] (1907) 5 CLR 68. See also Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 at 9255-6; Tomko v Palasty [2007] NSWCA 258 at [13]-[14].
[58] Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77.
[59] (1908) 5 CLR 647.
[60] Ibid at 668.
[61] Ibid at 672.
Some admissions involving legal conclusions will not be admissible or, if admitted, will be regarded as valueless. In Dovuro Pty Ltd v Wilkins,[62] Gummow J (with whom McHugh and Heydon JJ agreed) held that the statement of Mahoney JA in Grey v Australian Motorists and General Insurance Co Pty Ltd quoted earlier in these reasons stated the proposition too widely. His Honour referred in particular to that part of the statement which suggested that evidence may be given of an admission involving a mixture of fact and law or of law. He held that an admission which involves a conclusion depending upon the application of a legal standard would not be admissible.[63]
[62] [2003] HCA 51; (2003) 215 CLR 317.
[63] Ibid at [68]-[71]; 340-2. See also Gleeson CJ at [25]; 327-8.
The present case does not involve the application of a legal standard, such as breach of a duty of care, as discussed in Dovuro. Accordingly I do not consider that Dovuro of itself precludes regard to the evidence of the Edmunds before Lander J. However, it remains necessary to identify precisely the fact or matter said to have been admitted. Gleeson CJ in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd,[64] made this point in the following passage:
In so far as acts or statements of the kind referred to, not involving communications between the parties, are claimed to be relevant in a case such as the present upon the ground that the constitute an admission, it seems to me that it will often be necessary to identify with some care the fact which is said to have been admitted. As was noted, there may be cases in which the issue is such that the fact of the subjective state of mind of one or other of the parties is relevant. Normally, however, what is in issue is not the subjective state of mind but their “intention as expressed”... and caution may need to be exercised in relating the fact which is said to be admitted to the fact which is legally relevant.[65]
(Citation omitted)
[64] (1988) 18 NSWLR 540.
[65] Ibid at 550-1.
Therein lies the difficulty for the present appellants. If the issue in this case had been that of whether the respondents had signed the SHA, the admission of Mr Edmunds in the evidence before Lander J may well have been relevant and probative. However, the issue is instead whether a reasonable bystander would have regarded the Edmunds’ conduct in making the appellants shareholders and directors of Smoothpool, as well as their silence, as signalling to the appellants that the offer made by them when signing the SHA had been accepted.
It is difficult to see how Mr Edmunds’ admission in 1999 is probative of that circumstance. Mr Edmunds’ subjective belief, as evidenced by the admission, does not bear upon the objective assessment required. That is especially so when it is remembered that Mr Edmunds was giving evidence some four years after the contract was said to have been formed. Further still, none of Mr Edmunds’ evidence amounted to an admission of any of the factual circumstances now relied upon by the appellants for the formation of the contract.
Accordingly, I consider that the Judge was correct to conclude that Mr Edmunds’ belief in 1999 (and to the extent that the appellants relied on the evidence of Mrs Edmunds, her belief) as to the subsistence of a contractual relationship was irrelevant to the Judge’s determination.[66]
[66] Hopcroft v Edmunds (No 2) [2012] SASC 94 at [430].
Ground 6: Estoppel
In Ground 6 of the Notice of Appeal, the appellants contended that the Edmunds and Smoothpool were estopped from relying on their failure to execute the SHA as a ground for denying the existence of a binding contract.
However, on the hearing of the appeal, counsel for the appellants acknowledged that no such estoppel had been raised by the pleadings or otherwise agitated at trial. The Judge had made no findings concerning such estoppel. In those circumstances counsel did not press this ground and it is not necessary in these reasons to address it.
Issue 4: Estoppel of Dadeeton?
By a Notice of Contention, the respondents contended that, if there was a concluded contract in terms of the SHA, the Judge should have found that it did not bind Dadeeton. This was because no one had contemplated in 1995 that it should be a party to the SHA. The Judge had been wrong, the respondents submitted, to uphold the appellants’ claim that, in the event that the SHA was binding, Dadeeton was estopped from denying that it was also bound.
Given that I would dismiss the appeal, this issue does not strictly speaking require determination. However, in case the matter goes further, I will state my views briefly.
As the respondents wish to re‑agitate a determination made against them at trial, this complaint should have been raised by cross‑appeal, and not by a Notice of Contention. However, it is not necessary to dwell on this procedural irregularity.
The Judge held that if the appellants had established that a contract in terms of the SHA had been concluded, Dadeeton would have been estopped, either by representation or by convention, from denying that it was bound by that contract. In relation to estoppel by representation, he relied on the following circumstances:
1.Smoothpool’s interest in the abalone authority W17 which was the subject of the Pickering Action had always been held on trust for the Edmunds Family Trust;
2.Dadeeton succeeded Smoothpool as trustee of the Edmunds Family Trust in about June 1983;
3.The relief sought by Smoothpool in the Edmunds litigation was sought on behalf of the Edmunds Family Trust and, if granted to Smoothpool, would have inured to the benefit of the Edmunds Family Trust;
4.In June and July 1995, Dadeeton was not a party to the Edmunds ligitation;
5.By reason of a representation from Mr Edmunds (who the Judge considered to be the controlling mind and will of both Smoothpool and Dadeeton) each of the appellants believed that Smoothpool was the trustee of the Edmunds Family Trust and was the entity which would be entitled to relief in the Edmunds litigation if that litigation was successful;
6.Ultimately, Lander J held in the Pickering Action that it was Dadeeton and not Smoothpool which was entitled to relief in its capacity as trustee of the Edmunds Family Trust.
In short, the only reason that Smoothpool, and not Dadeeton, was named as a party to the SHA was because of Mr Edmunds’ representation in 1995 that Smoothpool was the trustee of the Edmunds Family Trust and the owner of the abalone authority which was the subject of the Pickering Action.
The respondents did not contend that Mr Edmunds’ representation should not be attributed to Dadeeton.[67]
[67] As to which see Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 at 506. See also Director of Public Prosecutions Reference No 1 of 1996 [1998] 3 VR 352 at 355; Director General, Department of Education and Training v MT [2006] NSWCA 270 at [22], (2006) 67 NSWLR 237 at 243; North Sydney Council v Roman [2007] NSWCA 27 at [28]-[29], (2007) 69 NSWLR 240 at 247-8.
Instead, the respondents advanced three contentions. The first was that the appellants had not raised the estoppel in their pleading with the effect that it had not been an issue at the trial. This submission cannot be upheld. Paragraph 15 of the appellants’ Statement of Claim pleads in detail the matters upon which they relied for the claim of estoppel. Although the paragraph does not use the word “estoppel”, it concluded with a plea that it would be “unconscionable for the defendants to assert that [Dadeeton] is not bound to pay the plaintiffs the benefits intended for them by the Agreement”. Further, the matter was addressed in the final submissions of counsel for the respondents in answer to a question from the Judge:
Commonsense would suggest that if all of the contracting parties were contracting on a particular basis and belief, [and] there is an interchange between them about that belief, so that is a common belief, in other words, the issue is not the identity, for example, of the trustee. The issue is simply that a trustee will become the legal owner, by reversion will become the legal owner. Objectively you would say, I think you would say that it doesn’t matter who the trustee is in those circumstances. That is where everybody is contracting on the same basis and everybody is working on the same basis.[68]
Although this submission of counsel seems directed to an estoppel by contention rather than representation, it indicates that estoppel was addressed at trial. Accordingly, the Judge was correct to regard the matter as arising for determination.
[68] T1597.

Next, the respondents contended that the relevant representation was not made by Mr Edmunds at a time when the SHA was contemplated and not made for the purposes of inducing the appellants to enter into the SHA or any other agreement. That is because the representation was made before the proposal for the appellants to provide assistance to the respondents had emerged.
This submission overlooks the continuing nature of the representation. It is obvious that it underpinned the continuing communications and negotiations between the parties and, in particular, their negotiation of the terms upon which the appellants may provide their assistance to the respondents.
Thirdly, the respondents contended that it was beyond the power of Smoothpool or Dadeeton, as a fiduciary, to dispose of a portion of a trust asset. The submission seemed to be that this meant that it had not been open to either Smoothpool or Dadeeton to agree that the appellants could have a 15 per cent share in the abalone authority as this was a trust asset. No authority was advanced to support this wide‑ranging and somewhat surprising submission. Further, no authority was provided to support the breach of fiduciary duty said to be involved. It was of course open to Smoothpool and Dadeeton to enter into commercial arrangements with a third party for assistance in recovering the trust asset, and that included disposing of a trust asset, or part of a trust asset, for that purpose.
In many respects, the respondents’ complaint is unmeritorious. That is because they seek to take advantage of the misrepresentation, albeit innocent, made by Mr Edmunds to the appellants.
However, there is a difficulty in the Judge’s finding of estoppel. Although there may well be a proper basis upon which Dadeeton should be estopped from denying the truth of the representation made to the appellants, such an estoppel would preclude it only from denying the truth of the assertion that Smoothpool was the trustee of the Edmunds Family Trust and the entity entitled to recovery of the abalone authority W17. It would not of itself give rise to a separate estoppel precluding Dadeeton from denying that it was bound by the SHA (on the hypothesis that an agreement in terms of the SHA had been concluded).
Similarly, Dadeeton’s contribution to the common assumption and convention that Smoothpool was the entity which was entitled to recover the licence and any damages or compensation on behalf of the Edmunds Family Trust would not preclude it from relying on the finding of Lander J that it was it, and not Smoothpool, which had the entitlement. More pertinently, the common assumption arising from Mr Edmunds’ representation as outlined earlier in these reasons could not have the effect of precluding Dadeeton from denying that it was a party to the SHA.
The Judge held that there was also a common assumption that, if the SHA was concluded, the appellants would be entitled to a percentage of the proceeds of the Edmunds litigation recovered on behalf of the Edmunds Family Trust.[69] The difficulty with that conclusion is that neither of the appellants gave evidence to that effect. The appellants’ evidence does not go any further than stating that they understood that Smoothpool’s action against Pickering was in its capacity as trustee for the Edmunds Family Trust.[70]
[69] Hopcroft v Edmunds (No 2) [2012] SASC 94 at [447].
[70] See the evidence of Mr Hopcroft at 712, 717-8 and of Mr Edwards at 81, 236 and 238-9.
Perhaps the appellants may have had a remedy for misleading or deceptive conduct, or possibly for rectification. It appears difficult, however, to justify the finding of estoppel. The submissions of the parties on appeal did not address these difficulties. That being so, I would prefer not to express a final view about them. Had it been necessary to do so, it may have been appropriate for the Court to invite further submissions on this aspect of the matter.
Conclusion
For the reasons given earlier, I would dismiss the appeal.
STANLEY J: I would dismiss the appeal. I agree with the reasons of White J and the additional reasons of the Chief Justice save and except that I consider it unnecessary to decide the difficult question of whether Dadeeton Pty Ltd was estopped from denying it was bound by the SHA, on the basis that it would have been unconscionable for it to take advantage of the mistake under which it knew Edwards and Hopcroft laboured because of the misrepresentation of Edmunds.