Jeffreys v Sheer

[2025] NSWCA 31

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Jeffreys v Sheer [2025] NSWCA 31

Hearing dates:

26 February 2025

Decision date:

11 March 2025

Before:

Mitchelmore JA at [1];
Adamson JA at [2];
Basten AJA at [89]

Decision:

(1)   Dismiss the appeal.

(2)   Order the appellant to pay the respondent’s costs of the appeal.

Catchwords:

APPEALS — Contracts — Formation — where primary judge found intention to form a binding and enforceable contract in the terms of a letter — whether primary judge erred in assessment of circumstances — whether primary judge erred in assessment of parties’ intentions — whether contract excluded by prior agreements

APPEALS — Procedural fairness — Evidence — where primary judge preferred evidence of plaintiff as to key disputed conversations — where primary judge regarded evidence of defendant as “self-interested” — whether error in treatment of evidence of witnesses

APPEALS — Procedural fairness — where slight disparity between pleaded case and case as conducted — where counsel for defendant at first instance confirmed no prejudice — whether defendant denied procedural fairness

APPEALS — Further evidence — Power to receive further evidence — where appellant made informal application to adduce fresh evidence on day of hearing — whether leave should be granted to admit fresh evidence

Legislation Cited:

Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Sch 2)

Supreme Court Act 1970 (NSW), s 75A

Cases Cited:

Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309

Australian Broadcasting Corp v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540

Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11

Council of the City of Greater Wollongong v Cowan (1955) 93 CLR 435; [1954] HCA 16

Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55

Esso Australia Resources Limited v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR 49; [1999] HCA 67

Mackay v Dick (1881) 6 App Cas 251

Onassis v Vergottis [1968] 2 Lloyd’s Rep. 403

Preston v Harbour Pacific Underwriting Management Pty Limited [2008] NSWCA 216

R v Birks (1990) 19 NSWLR 677; (1990) 48 A Crim R 385

Category:

Principal judgment

Parties:

Bruce Michael Jeffreys (Appellant)
Itshak Sheer (Respondent)

Representation:

Counsel:
Appellant (self-represented)
D P Robinson SC / M Hazan (Respondent)

Solicitors:
Not applicable (Appellant)
Shmilovits Law Group (Respondent)

File Number(s):

2024/381607

 Decision under appeal 

Court or tribunal:

Supreme Court

Jurisdiction:

Equity

Citation:

Sheer v Jeffreys [2024] NSWSC 1161

Date of Decision:

13 September 2024

Before:

Kunc J

File Number(s):

2021/162425

HEADNOTE

[This headnote is not to be read as part of the judgment]

Bruce Jeffreys appealed against orders in favour of the respondent, Itshak Sheer, for specific performance of an agreement which required Mr Jeffreys to purchase Mr Sheer’s shares in Dresden Optics Pty Ltd (Dresden) for $2.5 million.

In 2014, Mr Jeffreys was developing a start-up business, through Dresden, and offered employment to Mr Sheer, an IT specialist. Two years later, in November 2016, Mr Sheer was offered an interview for a higher paid position with Optus. When Mr Sheer told Mr Jeffreys of his intention to accept the Optus position if it was offered to him, Mr Jeffreys responded that, within five years, Mr Sheer’s 2.5% share in Dresden would be worth $2.5 million. In order to overcome Mr Sheer’s concern that the projected return from the shares was speculative, Mr Jeffreys, after discussions with Mr Sheer, sent the latter a letter dated 5 December 2016 which committed him to buy Mr Sheer’s shares for $2.5 million in five years.

On 9 March 2018, shares amounting to 2.5% of Dresden were issued to Mr Sheer. Investec, an investor, was to provide additional capital in return for a share issue. Mr Sheer agreed to the dilution of his share from 2.5% to 1.88% on condition that Mr Jeffreys confirm the commitment he had made in 2016 to purchase his shares for $2.5 million in December 2021. On 21 April 2018, Mr Jeffreys, confirmed his commitment (the 2018 letter) and on 17 May 2018, Mr Sheer executed the second shareholders’ agreement which made provision for Investec’s shareholding.

On 25 March 2019, Mr Jeffreys terminated Mr Sheer’s employment with Dresden. In February 2021, Mr Sheer reminded Mr Jeffrey of his commitment. Mr Jeffreys responded by denying any such commitment. On 6 June 2021, Mr Sheer commenced proceedings for specific performance of the agreement. On 13 September 2022, Mr Jeffreys cross-claimed to have the agreement, if it were found to exist, set aside under s 237 of the Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Sch 2) for misleading and deceptive conduct.

On 13 September 2024, the primary judge made orders for specific performance and the cross-claim was dismissed. The primary judge found that Mr Jeffreys’ promise in the 2018 letter was an offer, which was accepted by Mr Sheer orally, and was supported by consideration in the form of Mr Sheer’s agreement to the dilution of his shareholding. The primary judge preferred Mr Sheer’s evidence as to key disputed conversations.

This finding was appealed to this Court. Mr Jeffreys alleged, across 10 grounds:

1. a disparity in the treatment of the evidence of witnesses (ground 7);

2. errors relating to contract formation and the intention to create legal relations (grounds 1, 2 and 3);

3. that the agreement was excluded by a clause (the entire agreement clause) in the second shareholders’ agreement (grounds 4 and 9);

4. that the agreement was not a new agreement (ground 5);

5. a denial of procedural fairness in relation to a change of case by Mr Sheer in the course of the hearing (ground 6);

6. that corporate governance constraints inhibited Mr Jeffreys’ personal capacity to contract (ground 8); and

7. that the misleading conduct claim had been erroneously dismissed (ground 10).

At the commencement of the hearing of the appeal, Mr Jeffreys applied to amend the notice of appeal to add two new grounds of appeal (grounds 11 and 12), and to adduce further evidence on appeal. The additional grounds depended on Mr Jeffreys being granted leave to adduce the further evidence. The Court refused both applications.

The Court held (Adamson JA, Mitchelmore JA and Basten AJA agreeing), refusing leave to rely on grounds 11 and 12, refusing the informal application to rely on further evidence, granting leave to rely on grounds 1-10 of the amended grounds of appeal, and dismissing the appeal, with costs:

Applications to amend the notice of appeal and adduce further evidence

1. The lack of probative value of the evidence was sufficient to refuse its admission: [1] (Mitchelmore JA), [71]-[84] (Adamson JA), [89] (Basten AJA).

Council of the City of Greater Wollongong v Cowan (1955) 93 CLR 435; [1954] HCA 16; Esso Australia Resources Limited v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR 49; [1999] HCA 67; Australian Broadcasting Corp v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Preston v Harbour Pacific Underwriting Management Pty Limited [2008] NSWCA 216, applied.

Grounds of appeal

1. The primary judge’s treatment of the evidence of each witness was justified and reasoned in an orthodox fashion: [1] (Mitchelmore JA), [32]-[40] (Adamson JA), [89] (Basten AJA).

Onassis v Vergottis [1968] 2 Lloyd’s Rep. 403, applied.

1. Whatever Mr Jeffreys might have subjectively thought about the effect of the 2018 letter, it evinced an objective intention that he be legally bound: [1] (Mitchelmore JA), [41]-[51] (Adamson JA), [89] (Basten AJA).

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55; Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309; Mackay v Dick (1881) 6 App Cas 251, applied.

1. The entire agreement clause in the second shareholders’ agreement did not affect the 2018 letter as Mr Jeffreys, though a party as founder, was not a shareholder in Dresden: [1] (Mitchelmore JA), [52]-[56] (Adamson JA), [89] (Basten AJA).

2. There was no procedural unfairness to Mr Jeffreys in the slight disparity between Mr Sheer’s pleaded case and the case as run, as confirmed by his trial counsel who accepted that there was no prejudice: [1] (Mitchelmore JA), [59]-[66] (Adamson JA), [89] (Basten AJA).

   Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11; Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70; R v Birks (1990) 19 NSWLR 677; (1990) 48 A Crim R 385, applied.

3. That approval of other shareholders was required for the transfer did not affect Mr Jeffreys’ capacity to bind himself to purchase the shares. The approval was forthcoming before the date on which the obligation was required to be performed: [1] (Mitchelmore JA), [67]-[68] (Adamson JA), [89] (Basten AJA).

JUDGMENT

1. MITCHELMORE JA: I agree with Adamson JA.

2. ADAMSON JA: Bruce Jeffreys, the appellant, appeals against orders made by Kunc J (the primary judge) against him and in favour of Itshak Sheer, the respondent, for specific performance of an agreement. The primary judge ordered Mr Jeffreys to purchase Mr Sheer’s 42,341 shares in Dresden Optics Pty Ltd (Dresden) for the sum of $2.5 million. Mr Sheer was the plaintiff in the Court below and Mr Jeffreys was the defendant.

3. All references to paragraph numbers are to paragraphs in the primary judge’s reasons, unless otherwise stated.

4. The dispute between the parties arose in the following circumstances. In October 2014, Mr Sheer, an information technology (IT) expert, was driving an Uber when he met Mr Jeffreys, his passenger, who was an entrepreneur ([6], [8]). Mr Jeffreys was developing a start-up business, through Dresden, whereby customers could upload an optometrist’s prescription for spectacles which would be manufactured by the business from recycled plastic products. In November 2014, Mr Jeffreys offered Mr Sheer an IT position with Dresden to help develop the business ([7], [9]). Mr Sheer accepted the offer and commenced employment with Dresden that month ([10]). His remuneration was to include a 2.5% share in Dresden (although this was not formalised until 2016 and the shares were not issued until 2018).

5. Two years later, in November 2016, Mr Sheer was offered an interview for a position with Optus/Singtel (Optus) in Sydney which, if he were appointed, would pay $470,000 per annum plus bonuses for three years. Mr Sheer told Mr Jeffreys that he had spoken with his wife, that they had agreed that he needed to take up the opportunity with Optus and that he had good prospects of getting the position. Mr Jeffreys responded by saying that, within five years, Dresden would have 60 shops worldwide and be worth over $100 million. Mr Jeffreys told Mr Sheer that, in that event, Mr Sheer’s 2.5% share would be worth $2.5 million. Mr Sheer responded by pointing out that the salary he would be paid by Optus if he got the position was “a sure thing, but 2.5 million is speculative” ([12]).

6. There was a divergence between the parties’ evidence about what then occurred. Mr Sheer’s evidence (which the primary judge accepted) was that Mr Jeffreys told him that he was so confident about Dresden’s success that he would guarantee that he would buy Mr Sheer’s shares for $2.5 million in five years’ time. Mr Sheer asked for the promise in writing ([12]-[13]). Mr Jeffreys’ evidence (which the primary judge rejected) was that Mr Sheer asked him to write a letter assuring him that he would buy the shares for $2.5 million in five years’ time only for the purpose of Mr Sheer having a document which he could show to his wife to placate her and allay her concerns ([13]).

7. On 5 December 2016, Mr Jeffreys sent an email to Mr Sheer attaching a letter “as discussed”. The letter, which was signed by Mr Jeffreys, said, in part ([14]):

“Attached to your allocation of shares will also be an Option Agreement that obligates me to purchase back you (sic) shares at a total price of $2,400,000.00 Australian dollars five years from the date of Option contract. The intent of the Option contract is to give you a forwarded valuation for the value of your shares and also provide an option for you to be able to sell your shares.”

8. When Mr Sheer received the email, he phoned Mr Jeffreys immediately and asked him to change the figure to $2.5 million ([15]). On 12 December 2016, Mr Jeffreys sent an “[u]pdated letter” which included the figure of $2.5 million (the 2016 letter) ([16]-[17]).

9. The 2016 letter said ([18]):

“This letter confirms in writing that as a founding member of the Dresden team you will be allocated Class A ordinary shares in the proprietary limited company. This will give you a 2.5% share in the business.

The allocation of these shares will be made to you early in 2017 once I have successfully obtained finance for the equipment we have already purchased for the business.

The condition of the allocation of these shares is that I and the other Directors in Dresden Optics Pty Ltd maintain a first right to purchase all of your shares in the event of a sale. A shareholder agreement will be drafted to reflect this and you will get plenty of chance to talk with the Dresden lawyer and also receive independent advice.

Attached to your allocation of shares will also be a[n] Option agreement that obligates me to purchase back you (sic) shares at a total price of $2,500,000.00 Australian dollars 5 years from the date of the Option contract. The intent of the Option contract is to give you a forward evaluation of the value of your shares and also provide an option for you to be able to sell your shares.”

(Emphasis added.)

10. In his further amended defence, Mr Jeffreys admitted that he wrote the last paragraph extracted above on his own behalf and the earlier paragraphs on behalf of Dresden.

11. The shares were not issued for some time. In 2017, Mr Jeffreys retained Allunga Advisory to help find external investors to provide Dresden with additional capital. An information memorandum prepared for that purpose described Mr Sheer in glowing terms and referred to him as “Chief Integrator” with a Master’s Degree in Computer Science ([20]-[21]). Investec Australia Limited (Investec) was identified as a potential investor.

12. On about 9 March 2018, 25,000 shares in Dresden (2.5% of its then share capital) were issued to Mr Sheer ([24]). On that date, Mr Jeffreys’ shares in Dresden were transferred to a company which was trustee of his family trust, with the result that he ceased to be a shareholder. At about that time, the shareholders of Dresden entered into a shareholders’ agreement (the first shareholders’ agreement). Because the involvement of Investec would dilute the shareholders’ interests in Dresden, a new shareholders agreement was required if shares were to be issued to Investec ([26]).

13. There was a conversation in April 2018 between Mr Sheer and Mr Jeffreys, the terms of which were in issue. Mr Sheer’s evidence (which the primary judge accepted) was that he raised with Mr Jeffreys the impact which the involvement of Investec would have on their agreement and Mr Jeffreys told Mr Sheer that there would be no impact because buying Mr Sheer’s shares for $2.5 million would be a bargain for Mr Jeffreys ([27]). Mr Sheer then asked for the confirmation in writing. Mr Jeffreys’ evidence (which the primary judge rejected) was that Mr Sheer had asked for another letter to placate his wife ([28]).

14. On 21 April 2018, Mr Jeffreys and Mr Sheer corresponded by email. The initial letter which Mr Jeffreys provided to Mr Sheer was insufficient for the latter’s purposes since it did not specify that Mr Jeffreys would buy his shares in five years from 2016. Further communications ensued which led to Mr Jeffreys providing a final version dated 21 April 2018 (the 2018 letter) which met Mr Sheer’s requirements. In large part, the 2018 letter dealt with the effect on Mr Sheer’s shares of the dilution by Investec and his rights under the proposed new shareholders’ agreement. Of present relevance, the letter also said:

“Finally, my commitment to you purchase (sic) all of your shares at a value of $2.5m in 5 years[’] time from December 2016 still stands.” ([35])

15. On 9 May 2018, shares were issued to Investec, subject to the execution of a further shareholders’ agreement (the second shareholders’ agreement) which Mr Sheer executed on 17 May 2018 ([36]-[37]). As a result of the share issue to Investec, Mr Sheer’s shareholding in Dresden was diluted from 2.5% to 1.88% of the new total share capital ([36]-[37]). The second shareholders’ agreement contained the following clause (the entire agreement clause):

“22.9   Entire Agreement

This Deed supersedes all previous agreements in respect of its subject matter and together with the Subscription Agreement embodies the entire agreement between the Shareholders.”

16. On 25 March 2019, Mr Jeffreys terminated Mr Sheer’s employment with Dresden ([39]). On 9 February 2021, Mr Sheer wrote to Mr Jeffreys to remind him of his commitment to buy his shares in December 2021 and asked him if he would bring forward the payment by eight months to April 2021, during which time Mr Sheer offered to pay interest of 6% ([39]-[40]).

17. On 16 February 2021, Mr Jeffreys wrote to Mr Sheer in the following terms ([41]):

“There is no commitment for me to buy your shares either for that price or in that timeframe. You were given at no cost shares in Dresden and if you are not (sic) looking to sell these shares I will work with the management team and other shareholders to offer to buy back your shares.”

18. On 25 February 2021, Mr Sheer replied to Mr Jeffreys by email ([42]) as follows:

“I am surprised and I am hurt by your response. I waited several days before replying, so my email would not be emotional.

The shares were issued to me in the course of my employment. Your commitment (which you confirmed repeatedly on several occasions) was given very clearly in writing and for the purpose of stopping my recruitment by Optus.

It was only the safety net of $2.5M that you promised which induced me to pass over the opportunity to take a much better paid and better secured position with a blue-chip market leader (Optus), in favour of a small start-up with a questionable future (Dresden).

Bruce, I do not wish to escalate the relationship with you. However, this is a large amount to which I am entitled. It was offered to me as a safety net in the event that Dresden will not go up in value as planned. Well, it seems that now worse came to worst: not only that Dresden did not perform, but on top of it, I was fired from it. It's time that your commitment will kick in as promised.

In your response you mention that you intend to make me an offer for my shares, ignoring your commitment. I notify you that unless you confirm, within 14 days, that either a) your offer will be in the neighbourhood of $2.5M; or that b) you will honour your commitment to buy my shares this year for that amount, I will take legal steps to enforce my rights.”

19. On 16 April 2021, all of the shareholders in Dresden (including Investec) consented to any transfer of Mr Sheer’s shares to Mr Jeffreys at any time in the future and waived any pre-emption rights that they may have under the second shareholders’ agreement in relation to that transfer ([43]).

20. On 6 June 2021, Mr Sheer commenced proceedings in the Court below for specific performance of the agreement that Mr Jeffreys would buy his shares in Dresden for $2.5 million in December 2021 ([44]). On 13 September 2022, Mr Jeffreys cross-claimed seeking an order that, if the Court found that Mr Jeffreys had agreed to purchase Mr Sheer’s shares for $2.5 million, the agreement be set aside under s 237 of the Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Sch 2) for misleading or deceptive conduct ([45]).

The primary judge’s reasons

Credibility findings

21. The primary judge accepted Mr Sheer’s evidence and rejected Mr Jeffreys’ evidence, including as to the disputed conversations set out above. His Honour attached particular importance to the following exchange, which was described as “seminal” at [51]:

“Q. At the top of 426 [of the court book], there is a sentence where you say that you have a commitment to buy a specific parcel of shares for a specific price at a specific date. What is the reason why you do not intend to buy those shares and have not done so yet?

A. Because the value of the, the valuation that we wanted to – we wanted to achieve a valuation and a growth in value of the business and that hasn’t been achieved.

Q. And that’s the only reason, Mr Jeffreys, is it?

A. The main reason is that things that Itshak [Mr Sheer] said he would do, he never delivered. So when we met in the café in 2016, it was about how do we create value in this business. It was about his role in creating value in this business. It was about the plans, it was about delivering on the investment both from Investec and also from a government funding perspective, so we had the capital deliver on our plans. Itshak was an important part of that and he never delivered on those plans.

Q. And that is the reason why you have not honoured your commitment set out at the top of 426.

A. That’s correct.

HIS HONOUR

Q. And you accept sir, don’t you, that the commitment on the top of page 426 is unqualified by any of the things you’ve just told me?

A. I accept that.”

22. The primary judge said of this exchange at [55]:

“… what the transcript does not record is Mr Jeffreys’ demeanour and pauses in answering the question, which only fortified the impression I took from the words he used. It was abundantly clear from his answer, and how he gave it, that he understood perfectly well at a subjective level that the statement represented a completely unqualified commitment by him to purchase the shares in accordance with its terms. Tellingly, his answer was not that the statement was never intended to be binding and had been produced only to placate Mr Sheer’s wife. Instead, the answer referred to what he accepted was an unstated condition precedent in his mind as to the value of Dresden.”

23. The primary judge also regarded the following exchange as significant. In re-examination, Mr Jeffreys was asked why he wrote the words “my commitment to you” (in the 2018 letter) and yet, in the letter of 16 February 2021, denied that there was any commitment. The following exchange ensued ([53]):

“Q. Can you just explain to his Honour.

A. Your Honour, it’s because it was to be based on the valuation of the business.

Q. What do you mean?

A. What I mean is that the shares will be bought back if the business was valued--

Q. At what?

A. At that value in the future.

Q. What value?

A. Well in the $2.5 million of Itshak’s shares in the business.

Q. But I’m sorry, in that answer you’ve told his Honour that it was subject to or referrable to a value.

A. Yes.

Q. A value of what? What was the amount of the value? What is the number?

A. There was no value.

Q. I’m sorry. Can you just explain that to his Honour.

A. Well it hadn’t been done. There was no, there was no process, no outline of how, like the business – there was no mechanism, nothing had been done to value the business.”

The case as put compared with the case as pleaded

24. The primary judge recorded that Mr Sheer had pleaded that the contract between him and Mr Jeffreys was made by reason of Mr Jeffreys’ offer in the 2018 letter, which was accepted by Mr Sheer when he agreed to the dilution of his shares by the issue of shares to Investec and signed the necessary documents to enable this to occur ([68]).

25. The primary judge noted at [69] that the case which was ultimately put on behalf of Mr Sheer was that the contract was wholly in writing and was comprised by the 2018 letter signed by Mr Jeffreys which contained the offer which Mr Sheer accepted orally. The agreement was that Mr Sheer agreed to the dilution of his shares if Mr Jeffreys included in the letter his earlier promise that he would buy all of Mr Sheer’s shares for $2.5 million, five years from December 2016.

26. The primary judge said at [72]:

“The Court has accordingly proceeded on the basis that the case presented by Mr Sheer for determination is that the terms of the parties’ agreement is set out in the 2018 letter (in particular, the statement), which was either accepted by Mr Sheer in an anticipatory way by reason of the April conversation, or by Mr Sheer’s conduct in permitting the dilution of his shares in Dresden by executing the documents referred to in [37] above. Mr Robinson SC also made it clear that it was not necessary for Mr Sheer’s case that the 2016 letter have binding legal effect and that the Court was not being asked to determine whether it did have that effect.”

27. His Honour noted that Mr Corsaro SC, who appeared on behalf of Mr Jeffreys in the Court below, had confirmed that he was able to meet the case put by Mr Sheer in the written opening outline and maintained in the course of the hearing, notwithstanding the slight divergence from the pleaded case ([73]).

Whether there was a binding and enforceable contract between Mr Sheer and Mr Jeffreys

28. The primary judge found that the terms of the contract were to be found in the 2018 letter, that the words of the letter reflected that the parties had reached consensus and that the reference to “commitment” was a contractual promise. His Honour found that “the 2018 letter was intended to be a newly created or standalone legal obligation” ([89]). His Honour concluded that the parties had, objectively assessed, an intention to create legal relations and that the surrounding circumstances supported this conclusion. These circumstances included that the initial letter sent by Mr Jeffreys on 21 April 2018 had been rejected by Mr Sheer and a further letter sent which met his requirements ([91]). His Honour found that Mr Sheer’s promise to agree to the dilution of his shareholding was good consideration ([98]).

29. The primary judge addressed the terms of the 2016 letter, which referred to an “option agreement”, and found at [25]:

“While Mr Sheer did receive his 2.5% share in Dresden, he never received the ‘Option agreement’ referred to in the penultimate paragraph of the 2016 letter. However, as will become apparent from what follows, the need for such an agreement was overtaken by the sending of the 2018 letter in the context of Investec being issued shares in Dresden.”

30. The primary judge rejected the argument put on behalf of Mr Jeffreys that the agreement said to be constituted by the 2018 letter had been superseded by the entire agreement clause in the second shareholders’ agreement. His Honour found that the entire agreement clause could not have this effect as the subject of the second shareholders’ agreement was the relationship between shareholders as shareholders and Mr Jeffreys, although party to the agreement as a “[f]ounder”, was not a shareholder. Thus, the entire agreement clause did not have any effect on the agreement whereby Mr Jeffreys, in his personal capacity, agreed to buy Mr Sheer’s shares ([104]-[105]).

Dismissal of the cross-claim

31. Mr Jeffreys alleged in his cross-claim that Mr Sheer had asked him to produce the 2016 letter and the 2018 letter for the purpose of placating Mr Sheer’s wife and on the basis of a mutual understanding that they were to have no legal effect. The primary judge rejected the factual basis of the claim (as his Honour rejected Mr Jeffreys’ version of the conversations with Mr Sheer). The primary judge also found that the claim failed for lack of reliance ([108]-[109]).

The grounds of appeal

32. The grounds of appeal, as amended with leave, were as follows:

“1. Error in Finding a Binding Contract

The trial judge erred in concluding that the letters and conversations between the parties constituted a binding contract for the purchase of shares by the appellant, applying incorrect legal principles in interpreting the objective intention to create legal relations.

2. Error in Rejecting Conditional Nature of the Agreement

The trial judge failed to recognise that the alleged agreement was contingent on Dresden Optics achieving a certain valuation and other conditions, thereby incorrectly holding the appellant to an unqualified obligation.

3. Misapplication of the Objective Theory of Contract Formation

The court erred in applying the objective theory of contract formation, giving undue weight to informal communications and failing to account for the absence of formal contractual documents, such as the Option Agreement.

4. Error in Finding Consideration and a Separate Agreement

The primary judge erred in finding consideration and a separate agreement where the parties’ legal relations were already comprehensively settled through formal agreements (Shareholders Agreement and Employment Agreement), and any purported new obligations were either already required under existing agreements or would create commercially absurd parallel obligations outside established corporate governance frameworks.

5. Error in treating the 2018 letter as a ‘de novo’ agreement

The trial judge erred in treating the 2018 letter as a ‘de nov[o]’ agreement rather than recognizing that both the 2016 and 2018 letters fell within the third category of Masters v Cameron (1954) 91 CLR 353 as preliminary communications awaiting formal documentation, evidenced by their informal nature, lack of essential contractual elements, and the company's established practice requiring formal documentation for binding obligations.

6. Error in Permitting Late Case Change and Denial of Procedural Fairness

The trial judge fundamentally erred by allowing the Respondent to materially change their case theory during final submissions from employment misrepresentations to contract formation, and despite documented objections, denied the Appellant any opportunity to respond to this new case, prepare counter-evidence, or develop arguments about corporate governance requirements, amounting to a substantial denial of procedural fairness that undermined trial fairness and natural justice.

7. Error in Unequal Assessment of Witness Evidence and Commercial Context

The trial judge erred by applying unbalanced standards in assessing witness credibility - accepting the Respondent's evidence despite clear self-interest while discounting the Appellant's evidence - and failing to consider testimony within the complete factual matrix of corporate roles, governance requirements, and commercial realities that made the Respondent's version commercially implausible.

8. Error in Finding Personal Capacity to Contract Despite Corporate Governance Constraints

The trial judge erred in finding the Appellant acted in personal capacity to form a binding contract when he lacked legal capacity to do so, being bound by directors' duties under the Corporations Act, Shareholders Agreement, and corporate governance requirements that prohibited unilateral share dealings and required board approval for material transactions.

9. Failure to Consider the Entire Agreement Clause

The trial judge failed to give proper weight to the entire agreement clause in the May Shareholders Deed [the second shareholders’ agreement], which superseded all prior agreements, including the alleged share purchase agreement.

10. Erroneous Dismissal of Misleading Conduct Cross-Claim

The court erred in dismissing the appellant's cross-claim under the Australian Consumer Law, failing to properly consider evidence suggesting that the respondent's representations induced the alleged agreement.”

Ground 7: alleged disparity in treatment of evidence of witnesses

33. This ground will be addressed first because the findings of credit as to the two disputed conversations had a substantial bearing on the primary judge’s conclusion that Mr Jeffreys’ offer in the 2018 letter, when accepted by Mr Sheer, comprised a binding contract between them which obliged Mr Jeffreys to purchase Mr Sheer’s shares in Dresden for $2.5 million in December 2021.

34. There were two competing hypotheses as to the status and purpose of the 2018 letter. Mr Sheer’s case, which was accepted by the primary judge, was that the letter meant what it said: that Mr Jeffreys committed himself to purchase Mr Sheer’s shares in Dresden at a particular time (five years from 2016) and at a particular price ($2.5 million). Mr Jeffreys’ case, which was rejected by the primary judge, was that Mr Jeffreys had produced the 2018 letter as a favour to Mr Sheer to placate his wife, who was concerned about the effect of the dilution of his shareholding.

35. The primary judge preferred Mr Sheer’s evidence as to the disputed conversations set out above and rejected Mr Jeffreys’ evidence. His Honour did so in an orthodox fashion, by viewing the matter chronologically and taking into account the surrounding circumstances. His Honour also recorded his observations of each witness as he gave evidence, which fortified his findings as to credibility.

36. The primary judge’s approach was consistent with the approach outlined by Lord Pearce in Onassis v Vergottis [1968] 2 Lloyd’s Rep. 403 at 431:

“‘Credibility’ involves wider problems than mere ‘demeanour’ which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be... Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.”

37. In essence, the primary judge tested each case theory against the objective facts (including Mr Sheer’s role and evident value to Dresden, Mr Jeffreys’ desire to keep him on in the business, the potential for Mr Sheer to leave Dresden because of the prospect of his obtaining a lucrative position at Optus and the terms of the correspondence including the 2018 letter in which Mr Jeffreys made a commitment to buy Mr Sheer’s shares). His Honour had regard to the respective motives of the parties (Mr Sheer’s interest in selling his shares at more than they were worth at the promised date and Mr Jeffreys’ desire not to make a loss on the shares) and the surrounding circumstances (the imminent issue of shares to Investec which would dilute the percentage share and value of Mr Sheer’s shareholding). His Honour also considered the oral evidence of each party (including Mr Jeffreys’ unsatisfactory answers, extracted above) and their conduct (including Mr Sheer’s insistence on having written confirmation of Mr Jeffreys’ promise and that initial confirmations be amended to accord with what Mr Jeffreys had promised Mr Sheer, as well as the evidence that Mr Jeffreys did amend the written confirmations to meet Mr Sheer’s requirements).

38. In conducting this analysis, the primary judge was, as his Honour’s reasons indicate, influenced by the fact that, when Mr Jeffreys was confronted with the words he had used in the 2018 letter (which he had signed and which appeared on Dresden letterhead), his answers were inconsistent with his own case hypothesis (that the letter was, effectively, a ruse to placate Mr Sheer’s wife and therefore the commitment was only a fake commitment, not intended to be fulfilled). His answers (extracted above) revealed the truth: that he was not prepared to abide by his commitment to buy Mr Sheer’s shares because they were worth less than he had agreed to pay for them.

39. Further, the primary judge attached significance to Mr Jeffreys’ inability to explain what the words “my commitment to you is” in the 2018 letter meant, except by reference to unstated assumptions about the unquantified value of the business.

40. The primary judge took into account the financial motive of each party and weighed it in the balance. In describing Mr Jeffreys as “self-interested”, the primary judge ought not be understood as indicating that Mr Sheer was not (since both men plainly had conflicting financial interests in the outcome), but rather that Mr Jeffreys’ answers to questions reflected his self-interest, rather than his truthful recollection of what occurred.

41. For these reasons, ground 7 has not been made out.

Grounds 1, 2 and 3: alleged errors relating to contract formation and the intention to create legal relations

42. These grounds challenge the objective theory of contract, which the primary judge applied in his Honour’s reasons. Mr Jeffreys, who appeared for himself at the hearing of the appeal, contended that the primary judge had taken a technical, unrealistic approach which paid no regard to the commercial context, including the exigencies of start-ups, and the alleged fundamentals of entrepreneurial activity. He submitted that, in that context, participants in a start-up venture would only regard themselves as being bound by what they had said or written if lawyers had drafted a formal agreement and they had signed it.

43. Mr Jeffreys submitted that, in the context of a start-up, every participant works together with the single goal of creating something new with a view to making a profit. The creators would share in the profit through shares in the corporate entity in proportions which would reflect their respective contributions to the business. As referred to above, I also understood him to submit that, in that context, lawyers were retained for agreements such as option agreements and shareholder agreements, which were intended to be legally binding on the parties but that discussions or arrangements between participants which did not involve lawyers were not intended to be legally binding. He submitted, in effect, that it would be untoward for a participant to involve a lawyer in such discussions or arrangements, at least without disclosing the involvement of a lawyer to the other party.

44. Mr Jeffreys also submitted that the 2016 letter, in terms, contemplated that a formal option agreement would be entered into and that this had the effect that the 2016 letter was not legally binding unless and until an option agreement were executed and that, as this did not occur, he was not obliged to purchase Mr Sheer’s shares.

45. Further, Mr Jeffreys argued that it would be commercially nonsensical to construe the 2018 letter as requiring him to pay $2.5 million for Mr Sheer’s shares, regardless of their value. He contended that, in any event, it was not possible for him to promise to purchase Mr Sheer’s shares because it was not a matter within his control as the agreement of other shareholders to the transfer was required.

46. In substance, Mr Jeffreys submitted that, because he did not subjectively intend to bind himself to any arrangement to buy Mr Sheer’s shares unless their value was in excess of $2.5 million at the time of purchase, no such obligation ought be imposed on him by the Court.

47. It is not necessary to address Mr Jeffreys’ submission that the 2016 letter contemplated the execution of an option agreement since the primary judge ordered specific performance of the agreement constituted by the 2018 letter, which was in different terms. To the extent to which Mr Jeffreys contended that the primary judge was in error in finding that the 2018 letter was a standalone agreement, this is addressed in the consideration of ground 5 below.

42. The relevant principles of contract law are well established. The objective theory of contract means, as was summarised in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 at [34] (Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ):

“The legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions.”

49. In Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 330, Mahoney JA said:

“The proper view is … that the existence of a contract is a consequence which the law imposes upon, or sees as a result of, what the parties have said and done. Actual subjective intention to contract is a factor which the law takes into account in determining whether a contract exists but it is not, or not always, the determining factor.

The matter may be tested by an example: A says “I promise to sell Black Acre to B for $100”; and B says “I promise to buy Black Acre from A for that price”, the promises being made orally. In such a case, a binding contract will be held to exist. And this will be so even though neither A nor B subjectively adverted to (and therefore had no subjective intention as to) whether, by the exchange of those promises, a binding contract would be made. The law will hold a binding contract to have been made even though neither had any actual subjective intention that there be a contract, in the sense that neither party gave any thought to the matter.”

50. Thus, whatever Mr Jeffreys might have subjectively thought about the effect of the 2018 letter, the letter evinced an intention that he be legally bound to buy Mr Sheer’s shares in Dresden for $2.5 million in December 2021, whatever their worth at that date. That construction flows from the express language of the letter and the absence of any qualification to the word “commitment”. There is nothing in the surrounding circumstances to indicate any different construction of the 2018 letter. Indeed, for the reasons given by the primary judge, the surrounding circumstances fortify this conclusion.

51. The submission that the commitment made in the 2018 letter was not binding because it depended on the shareholders’ agreement to the transfer must also be rejected. Although under both shareholders’ agreements, consent by the other shareholders to a transfer of shares was required, a term that the parties will co-operate with each other would be implied: Mackay v Dick (1881) 6 App Cas 251 at 263 (Lord Blackburn). For the reasons given by the primary judge, the parties evinced an objective intention to create legal relations. As Mr Sheer had, by 16 April 2021, obtained the consent of all the shareholders to the transfer, this could not be a barrier to the grant of specific performance.

52. For these reasons, none of grounds 1, 2 or 3 has been made out.

Grounds 4 and 9: whether the 2018 letter was excluded by the entire agreement clause in the second shareholders’ agreement and whether there was consideration

53. There are two parts to ground 4: first, whether the 2018 letter was excluded by the entire agreement clause in the second shareholders’ agreement (which is replicated in ground 9); and, second, whether the promise in the 2018 letter was supported by consideration.

54. The entire agreement clause in the second shareholders’ agreement governed the rights and obligations of the shareholders of Dresden, as shareholders, in the relationship between them concerning their shares. Mr Jeffreys was only a party to the agreement as a founder and not as a shareholder. For the reasons given by the primary judge (summarised above), the entire agreement clause did not affect any agreement such as the one comprised by the 2018 letter whereby Mr Jeffreys promised to purchase Mr Sheer’s shares for $2.5 million in December 2021. Accordingly, this aspect of ground 4 has not been made out.

55. Mr Jeffreys submitted that the purported consideration for the promise he made to buy Mr Sheer’s shares for $2.5 million was not valuable consideration because it was “already required under previous agreements”; was “[n]ot additional to existing obligations”; was “[w]ithout independent value”; and was “legally ineffective”.

56. These submissions do not address the primary judge’s conclusion that consideration for the promise in the 2018 letter was provided by Mr Sheer in the form of his agreement to the dilution of his shareholding from 2.5% to 1.88% ([98]). The chronology makes the connection clear: the 2018 letter pre-dated Mr Sheer’s entry into the second shareholders’ agreement, which resulted in the dilution. Mr Jeffreys’ written promise contained in the 2018 letter (which was a form which had been redrafted at Mr Sheer’s insistence) was the basis on which Mr Sheer agreed to the share issue to Investec and the resultant dilution of his shareholding. The mutual promises (Mr Jeffreys’ to buy the shares and Mr Sheer’s to agree to the dilution) were sufficient consideration for each of the promises to be legally enforceable.

57. Neither ground 4 nor ground 9 has been made out.

Ground 5: errors in treating the 2018 letter as a new agreement

58. Mr Jeffreys submitted that the primary judge erred in finding that the 2018 letter was a new agreement which had contractual force in circumstances where it was in the form of a letter (rather than in the form of a deed) and plainly followed on from the 2016 letter which he submitted was not binding. He also contended that the 2018 letter could not constitute a binding agreement because it lacked essential terms and made no provision for the valuation of Mr Sheer’s shares at the time of proposed acquisition.

59. Ground 5 is related to grounds 1, 2 and 3. The objective theory of contract formation requires the Court to look at the communications alleged to constitute the agreement and determine whether, objectively, they comprise an agreement. There are no formal requirements for a contract since contracts may, subject to common law or legislative requirements, be oral and need not be in the form of a deed. Thus, Mr Jeffreys’ “commitment” in the 2018 letter in the context in which it was communicated amounted to a new contract which superseded the 2016 letter. No error has been demonstrated in the primary judge’s analysis.

Ground 6: alleged error and denial of procedural fairness in the primary judge permitting Mr Sheer to change his case theory in the course of the hearing

60. In order to address this ground, it is necessary to set out additional detail as to the way in which Mr Sheer’s case was conducted before the primary judge, beyond that which the primary judge referred to in his reasons at [68]-[72] referred to above.

61. The statement of claim relevantly alleged:

“18    By letter dated 21 April 2018, the defendant wrote to the plaintiff:

(a)    advising that Dresden Optics intended to raise funds by issuing new shares to Investec Australia Limited.

(b)    informing the plaintiff of Dresden Optics’ intention to dilute his shareholding in Dresden Optics from 2.5% of the total amount of shares issued in Dresden Optics to 1.87% of the total amount of shares issued in Dresden Optics;

(c)    offering to purchase the defendant’s shares in Dresden Optics at a value of $2,500,000 in December 2021, irrespective of the dilution; and

(d)    implicitly seeking the plaintiff’s agreement to the proposed issue of new shares to Investec Australia Limited.

19    On about 9 May 2018 Dresden Optics, the defendant and Investec Australia Limited entered into the Subscription Agreement dated 9 May 2018.

20 On about 17 May 2018 the plaintiff accepted the defendant’s offer contained in the defendant’s letter of 21 April 2018 (and pleaded at [18] above) and agreed to the dilution of the plaintiff’s shareholding in Dresden Optics by signing the following documents:

(a)    Deed of Termination;

(b)    Shareholders’ Deed; and

(c)    Resolution of members.”

62. In paragraph 3 of Mr Sheer’s outline of opening submissions dated 20 October 2023 (the Friday before the commencement of the hearing), Mr Robinson SC, who appeared with Mr Hazan for Mr Sheer, submitted:

“The contractual offer is in writing, signed by Mr Jeffreys, and was accepted orally on 21 April 2018. Thereafter Sheer performed his obligations under it.”

63. The written outline of opening submissions formed the basis for the oral opening at the commencement of the hearing on Monday 23 October 2023.

64. Mr Jeffreys was cross-examined by Mr Robinson about the first version of the letter which became the 2018 letter and agreed that he and Mr Sheer had had a telephone conversation in the course of which he agreed to change the letter to reflect his commitment to buy the shares five years from 2016. Mr Jeffreys agreed that, following this conversation, he had then sent the 2018 letter which included the sentence:

“Finally, my commitment to you [sic] purchase all of your shares at a value of $2.5m in 5 years[’] time still stands.”

65. As is evident from paragraphs 18-20 of the statement of claim, the pleaded case was that the offer in the 2018 letter was accepted on 17 May 2018 by Mr Sheer signing the documents referred to in paragraph 20 of the statement of claim; whereas the case as conducted was that Mr Sheer had orally accepted the offer in the 2018 letter on 21 April 2018. While Mr Corsaro complained about the disparity, he did not contend that he could not deal with the change. Nor did he contend otherwise when the primary judge described Mr Robinson’s case as “perfectly clear”.

66. The principal purpose of pleadings is to define and confine the issues in the proceedings so that the parties know the parameters of the dispute. Pleadings enable the judge to determine the relevance of evidence and delineate what needs to be decided: Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 (Mason CJ and Gaudron J); [1990] HCA 11. Where the parties conduct the case on a basis which goes beyond the parameters of the pleading, the dispute is decided in accordance with the way in which the case has been argued, since the parties, absent objection, are taken to have acquiesced in the departure from the pleadings: see Dare v Pulham (1982) 148 CLR 658 at 664 (Murphy, Wilson, Brennan, Deane and Dawson JJ); [1982] HCA 70. A party is bound by the way in which his or her case was conducted by counsel: R v Birks (1990) 19 NSWLR 677 at 685 (Gleeson CJ); (1990) 48 A Crim R 385.

67. In the present case, it was noted in the course of the trial that the way in which Mr Sheer’s case was put concerning the timing and manner of the acceptance of Mr Jeffreys’ offer in the 2018 letter differed from the way it was pleaded in the statement of claim. The disparity was identified with precision. No application for amendment was sought by Mr Sheer or required by the primary judge or Mr Corsaro. Mr Corsaro confirmed that he could deal with the change. In these circumstances, there was no denial of procedural fairness to Mr Jeffreys, who was entitled to be, and was, heard on the reformulated submission on acceptance and whose counsel confirmed that there was no prejudice as a result of the change. Ground 6 has not been made out.

Ground 8: alleged error in finding that Mr Jeffreys had a personal capacity to contract despite corporate governance constraints

68. Mr Jeffreys argued that the fiduciary duties he owed Dresden as a director and the need for board and shareholder approval for any transfer of shares were inconsistent with his having a personal capacity to bind himself by contract to buy Mr Sheer’s shares.

69. That approval of other shareholders was required for the transfer does not affect Mr Jeffreys’ capacity to bind himself to purchase the shares. If the other shareholders had not approved of the transfer, nice questions would arise as to the effect of the lack of approval on Mr Jeffreys’ contractual obligations. However, these questions do not arise in the present case as the approval was forthcoming before the date on which the obligation was required to be performed. Ground 8 has not been made out.

Ground 10: alleged erroneous dismissal of the misleading conduct claim

70. The primary judge dismissed the cross-claim which alleged that Mr Sheer had engaged in misleading conduct as his Honour rejected Mr Jeffreys’ version of the conversations which formed the basis of the claim. The primary judge found that Mr Sheer had not asked for either the 2016 letter or the 2018 letter to placate his wife ([13](2) and [28]). Further, the primary judge found that there was no reliance on the part of Mr Jeffreys.

71. As Mr Jeffreys’ challenge to the primary judge’s assessment of his and Mr Sheer’s credibility has failed (for the reasons given above), ground 10 is not made out.

Applications made by Mr Jeffreys at the commencement of the hearing of the appeal to amend the notice of appeal and to adduce further evidence

72. At the commencement of the hearing of the appeal, Mr Jeffreys made two applications: first, to amend the notice of appeal; and, second, to adduce further evidence on appeal. The Court dealt with both applications at the outset of the hearing and made orders refusing the applications. The presiding judge indicated that reasons for the refusal would be provided with the reasons for the appeal. What follows are my reasons for joining in the orders of the Court on these applications.

73. Mr Jeffreys sought to recast certain grounds of appeal as well as to add grounds. Mr Robinson accepted that Mr Sheer could deal with all grounds in the proposed amended notice of appeal save for the last two, which read as follows:

“11. Miscarriage of Justice Due to Non-Disclosure of Solicitor's Material Involvement

The non-disclosure of Mr Arye Shmilovits' direct and material involvement in the alleged contract formation denied the Appellant the opportunity to cross-examine him as a key witness and deprived the Court of critical evidence regarding the Respondent's intentions and motivations, amounting to a miscarriage of justice based on an incomplete and misleading factual record.

12. Fresh Evidence Contradicting Contract Formation Through Undisclosed Draft Email

The newly discovered draft email in the Respondent's personal account, written 11 months after the 2018 letter and containing uncommunicated additional terms, demonstrates that the Respondent did not consider the 2018 letter as a complete and final contract, directly contradicting the trial judge's finding of contract formation.”

74. Both of these grounds depended on Mr Jeffreys being granted leave to adduce further evidence on the appeal. On the morning of the hearing of the appeal, Mr Jeffreys provided, by email to the Court, a significant number of documents, which he submitted constituted fresh evidence, which ought be admitted and considered by this Court in connection with grounds 11 and 12.

75. When asked to articulate the relevance of the documents, Mr Jeffreys submitted that the documents showed that Mr Sheer had consulted a solicitor “at a very early stage”. Mr Jeffreys also sought to rely on a draft email, allegedly drafted by Mr Sheer, which Mr Jeffreys accepted had not been sent.

76. It was apparent from the tenor of Mr Jeffreys’ submissions that he regarded Mr Sheer’s alleged retainer of a solicitor as being a matter which was inconsistent with the relationship of employer and employee and amounted to deliberate concealment. Mr Jeffreys submitted that the case before the primary judge had proceeded on the basis that the 2016 letter and the 2018 letter had been “simply a letter between two people”. I understood Mr Jeffreys to contend that Mr Sheer’s alleged retainer of a solicitor to advise him was untoward and ought to have been disclosed to him so that Mr Jeffreys, too, could obtain legal advice to protect his own position. Mr Jeffreys submitted that ground 11 “really engages … the job of the Court which is to supervise its officers” and contended further that Mr Sheer’s solicitor had a duty to disclose to the Court “his involvement with the case”. Mr Jeffreys argued that because the primary judge was not aware that Mr Sheer had a solicitor, his Honour had been misled. He submitted further that, had he known that Mr Sheer and his solicitor “were working together”, the cross-examination of Mr Sheer would have been “very different”.

77. In respect of the draft email referred to above, Mr Sheer submitted that it indicated that, in Mr Sheer’s mind, the 2018 letter was not the final agreement as to the sale of the shares.

78. In the course of argument it became apparent that Mr Jeffreys sought an order that the matter be referred back to the Court below so that the further evidence could be tested (and presumably so that Mr Sheer could be cross-examined about his alleged engagement of a solicitor).

79. Mr Robinson opposed the addition of grounds 11 and 12 and the application to adduce further evidence, including on the basis that he had first been provided with the material after the hearing of the appeal had commenced.

80. Further evidence on appeal will only be allowed in certain confined circumstances. Section 75A of the Supreme Court Act 1970 (NSW), which concerns appeals, provides in s 75A(7) that “[t]he Court may receive further evidence.” However, this is qualified in appeals such as the present “where the appeal is from a judgment after a trial or hearing on the merits”, by s 75A(8), which provides that “the Court shall not receive further evidence except on special grounds.”

81. In Council of the City of Greater Wollongong v Cowan (1955) 93 CLR 435; [1954] HCA 16, Dixon CJ said at 444:

“… it is essential … that the verdict, regularly obtained, must not be disturbed without some insistent demand of justice. The discovery of fresh evidence in such circumstances could rarely, if ever, be a ground for a new trial unless certain well-known conditions are fulfilled. It must be reasonably clear that if the evidence had been available at the first trial and had been adduced, an opposite result would have been produced or … it must have been so highly likely as to make it unreasonable to suppose the contrary. Again, reasonable diligence must have been exercised to procure the evidence which the defeated party failed to adduce at the first trial.”

82. The first condition, that the evidence be so probative that it is highly likely that the opposite result would have been achieved had it been adduced at the trial, is not fulfilled by the further evidence in the present case.

83. Whether a party chooses to retain a solicitor to obtain legal advice about his or her rights is generally not a matter which needs to be disclosed to another party to a transaction. Parties may choose to act through solicitors or on their own account, having received advice from a solicitor or otherwise. The substance of the advice given by the solicitor is subject to client legal privilege: Esso Australia Resources Limited v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR 49; [1999] HCA 67 at [35] (Gleeson CJ). Thus, even if the voluminous documents Mr Jeffreys sought to adduce for the purposes of the appeal were capable of establishing that Mr Sheer had retained a solicitor to advise him regarding, say, the sufficiency for his purposes of the first version of the letter which became the 2018 letter, this would have no bearing on the determination whether the 2018 letter was an offer which, if accepted, would give rise to legal rights and obligations. That determination depended on the contents of the letter and the surrounding circumstances.

84. The draft email is in a different category in that its forensic purpose was, as submitted by Mr Jeffreys, to indicate Mr Sheer’s state of mind with respect to the 2018 letter and indicate that he did not think that an agreement had been reached. A party’s post-agreement statements or conduct may amount to an admission that there was, or was not, an intention to create legal relations: Australian Broadcasting Corp v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 547–548, 550 (Gleeson CJ). However, a draft email which was, by definition, never sent, cannot amount to an admission: it is no more than a private rumination and has no probative value.

82. The lack of probative value of the documents was sufficient to refuse Mr Jeffreys’ application to adduce the documents as further evidence on the appeal. It is therefore unnecessary to address further obstacles to their admission, such as whether the documents were not previously obtainable by reasonable diligence: Preston v Harbour Pacific Underwriting Management Pty Limited [2008] NSWCA 216 at [25] (Handley AJA, Beazley and McColl JJA agreeing).

83. Grounds 11 and 12 depend on the further evidence being admitted on the appeal. For the reasons given above, the further evidence was rejected and the application to rely on grounds 11 and 12 refused.

Orders

87. The Court made the following orders on 26 February 2025:

1. Leave to rely on grounds 11 and 12 of the amended grounds of appeal is refused.

2. The informal application to rely on the further evidence in MFI 1, MFI 2 and MFI 3 is refused.

3. Leave granted to rely on grounds 1-10 of the amended grounds of appeal.

88. I propose the following orders:

1. Dismiss the appeal.

2. Order the appellant to pay the respondent’s costs of the appeal.

89. BASTEN AJA: I agree with Adamson JA.

**********

Decision last updated: 11 March 2025