Jeffreys v Sheer

1. [1]

   MITCHELMORE JA: I agree with Adamson JA.

2. [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. [3]

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

4. [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. [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. [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. [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]):

8. [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. [9]

   The 2016 letter said ([18]):

10. [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. [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. [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. [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. [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:

15. [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):

16. [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. [17]

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

18. [18]

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

19. [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. [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

1. [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]:

2. [22]

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

3. [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]):

4. [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]).

5. [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.

6. [26]

   The primary judge said at [72]:

7. [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]).

8. [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]).

9. [29]

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

10. [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]).

11. [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

1. [32]

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

2. [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.

3. [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.

4. [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.

5. [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:

6. [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).

7. [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.

8. [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.

9. [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.

10. [41]

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

11. [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.

12. [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.

13. [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.

14. [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.

15. [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.

16. [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.

17. [48]

    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):

18. [49]

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

19. [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.

20. [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.

21. [52]

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

22. [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.

23. [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.

24. [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”.

25. [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.

26. [57]

    Neither ground 4 nor ground 9 has been made out.

27. [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.

28. [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.

29. [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.

30. [61]

    The statement of claim relevantly alleged:

31. [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:

32. [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.

33. [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:

34. [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”.

35. [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.

36. [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.

37. [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.

38. [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.

39. [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.

40. [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

1. [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.

2. [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:

3. [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.

4. [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.

5. [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”.

6. [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.

7. [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).

8. [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.

9. [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.”

10. [81]

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

11. [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.

12. [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.

13. [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.

14. [85]

    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).

15. [86]

    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

1. [87]

   The Court made the following orders on 26 February 2025:

   1. (1)

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

   2. (2)

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

   3. (3)

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

2. [88]

   I propose the following orders:

   1. (1)

      Dismiss the appeal.

   2. (2)

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

3. [89]

   BASTEN AJA: I agree with Adamson JA.