Sheer v Jeffreys

In a letter dated 21 April 2018, the defendant, Mr Bruce Jeffreys wrote to the plaintiff, Mr Itshak Sheer: “Finally, my commitment to you purchase (sic) all of your shares at a value of $2.5m in five years’ time from December 2016 still stands”. Unfortunately for Mr Jeffreys, in the events which have happened, that statement (to use a neutral word) has at the very least proved to be rash.

In these proceedings, Mr Sheer says that the statement was a term of a contractual offer by Mr Jeffreys to purchase all of Mr Sheer’s shares in a start-up company, Dresden Optics Pty Ltd, which Mr Sheer accepted, and which he now seeks to have specifically performed. The consideration is said to be Mr Sheer’s agreement to having his 2.5% shareholding in Dresden diluted by the issue of new shares to an external investor, Investec Australia Limited. Mr Jeffreys denies that the statement has any binding legal effect.

It was common ground that the shares are now worth considerably less than $2,500,000. Nevertheless, for the reasons which follow, the Court has concluded that:

Mr D Robinson of Senior Counsel appeared with Mr M Hazan of Counsel for Mr Sheer. Mr F Corsaro of Senior Counsel appeared with Mr J Rodgers of Counsel for Mr Jeffreys.

The Court finds the following facts. Except where indicated otherwise, they were either uncontroversial or not seriously contestable, including being evidenced by contemporary records.

Mr Sheer is experienced in information technology (IT).

Mr Jeffreys is an entrepreneur. Prior to the events which are the subject of these proceedings, Mr Jeffreys had achieved financial success with a business called “Go Get”. After that success, he turned his attention to a new business venture, Dresden. This was intended to be an online business by which customers could upload their eye glass prescription from their optometrist for Dresden to make low cost glasses made from recycled plastic products.

In about October 2014, Mr Sheer was driving for Uber. Mr Jeffreys was one of Mr Sheer’s passengers. A casual conversation during a journey led to some further meetings between the two men.

By letter dated 17 November 2014, Mr Jeffreys, on behalf of Dresden, offered Mr Sheer employment with Dresden. The letter included:

Mr Sheer accepted the offer and commenced employment with Dresden.

On 22 November 2016, Mr Sheer received unsolicited information by email through his LinkedIn account about a potential position at Optus. Mr Sheer followed up the email within 20 minutes of receiving it and received a job description from Ms N Van Eck, whose position was described as “Talent Acquisition Specialist – Optus Corporate”. The job description (which did not specify a salary) referred to a position with the title of “Head of Spring Release No 2” concerning a particular project within SingTel and Optus and was said to be located in Sydney. In relation to an applicant’s education and work experience, the document specified:

The Court finds in accordance with paragraph 14 of Mr Sheer’s affidavit affirmed 3 September 2021:

The finding in the preceding paragraph is based upon the view the Court has taken as to the reliability of Mr Sheer’s evidence over that of Mr Jeffreys’ testimony (see [50]) below. In making this finding I expressly reject Mr Jeffreys’ evidence about that meeting at the coffee shop, in particular that:

On 5 December 2016 at 11:29am, with the subject line “Letter – as discussed,” Mr Jeffreys emailed Mr Sheer saying “Hope you had a great weekend. The letter as discussed is attached. Any questions let me know.” Attached to that was a letter signed by Mr Jeffreys and addressed to Mr Sheer which contained this paragraph:

Mr Jeffreys accepted in cross-examination that Mr Sheer phoned him “immediately” and asked him to change the figure to $2,500,000. I reject, for the reasons set out in [50] below, Mr Jeffreys’ explanation that the figure of $2,400,000 was his estimate that Mr Sheer would have earned $480,000 per annum at Optus and then multiplied it by five. In my respectful view, Mr Jeffreys’ ready acquiescence to the change corroborates Mr Sheer’s evidence set out in [12] above.

At 8:03am on 12 December 2016, with the subject “updated letter”, Mr Jeffreys emailed Mr Sheer:

The attachment was a letter on Dresden letterhead dated 12 December 2016 addressed to Mr Sheer (2016 letter). The “update” was the change in the proposed purchase price for the shares to $2,500,000. There was no dispute that Mr Jeffreys signed the letter both in his personal capacity and as a director of Dresden.

The text of the 2016 letter was (emphasis added):

Mr Sheer never followed up Mr Jeffreys about the “Option agreement” referred to in the December 2016 letter. To the extent that requires an explanation, the Court accepts Mr Sheer’s explanation that he felt his entitlement was secure because he had the 2016 letter.

The issue of the shares did not happen quickly. During 2017, Mr Jeffreys set about finding external investors for Dresden. He retained a firm of corporate advisors, Allunga Advisory, to assist. Allunga prepared an information memorandum (IM) during 2017.

The IM included a section about Dresden staff. There was a photograph of, and details about, Mr Sheer which described his position as “chief integrator” and listed his qualifications as “M. Computer Science.” It said of him:

On 23 January 2018, Mr Jeffreys sent an email to Dresden executives, including Mr Sheer, attaching a term sheet for a proposed investment by Investec.

On 25 January 2018 Mr Sheer emailed Mr Jeffreys and the other executives:

While the transaction with Investec was being negotiated, on 9 March 2018 Mr Sheer was issued 25,000 shares in Dresden, being 2.5% of its then share capital. On the same day, Mr Jeffreys ceased to be a shareholder in Dresden, with nearly all of his shares being transferred to Harika Holdings Pty Ltd, the trustee of his family trust. Also on or about 9 March 2018, Harika, Mr Sheer, Dresden and other Dresden executives (or their entities) – but not Mr Jeffreys – entered into a shareholders agreement in relation to Dresden (March Shareholders Agreement).

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.

As part of the arrangements for Investec to invest in Dresden, Investec was to be issued shares in the company. This would necessarily dilute the existing shareholders’ interest in Dresden, including Mr Sheer’s interest, and a new shareholders agreement would be required. Therefore, Mr Jeffreys proceeded to seek the consent of all the parties to the March Shareholders’ Agreement to the proposed arrangements.

The Court accepts Mr Sheer’s evidence that sometime in April 2018 (which by reason of what follows the Court finds was before 21 April 2018) he had a conversation with Mr Jeffreys at a coffee shop in which they had this exchange:

The finding in previous paragraph is based upon the Court’s conclusion as to the respective reliability of Mr Sheer’s and Mr Jeffreys’ evidence (see [50] below). In making this finding, the Court expressly rejects Mr Jeffrey’s evidence as to the conversation he deposed took place at this time. In particular, the Court rejects that Mr Sheer asked Mr Jeffreys to provide the letter which became the 2018 letter (see [35] below) solely to placate Mr Sheer’s wife’s alleged concerns about the effect of the dilution on Mr Sheer’s shareholding.

On 21 April 2018, Mr Jeffreys sent Mr Sheer a letter about what was to occur with Investec.

On 21 April 2018 at 1:21pm, Mr Sheer emailed Mr Jeffreys saying “Can you please update the letter to reflect the Investec impact on the 2.5 percent but not on the value amount.”

On 21 April 2018 at 1:22pm, Mr Jeffreys emailed Mr Sheer “Will do later today. Cheers Bruce”.

On 21 April 2018 at 6:51pm, Mr Jeffreys replied to Mr Sheer, “Here it is. Call me if you like. I’ll give you a call anyone(sic) just to make sure this is what you want.” The letter attached to that email included this sentence, “Finally, my commitment to you purchase (sic) all of your shares at a value of $2.5m in 5 years times still stands.”

Conformably with his email, Mr Jeffreys telephoned Mr Sheer.

Mr Jeffreys accepted in cross-examination (and the Court finds) that he and Mr Sheer then had a telephone conversation (April conversation) in which Mr Sheer said:

On 21 April 2018 at 7:20pm, with the subject line “Re: updated letter”, Mr Jeffreys emailed Mr Sheer, “Letter updated with the date starting from Dec 2016”. The attachment was a letter dated 21 April 2018 (2018 letter) to Mr Sheer signed by Mr Jeffreys (there being no dispute that he did so as a director of Dresden and in his own right) in these terms (emphasis of the statement added):

On or about 9 May 2018, Investec, Dresden and Mr Jeffreys (described as “Founder”) entered into a Share Subscription Agreement whereby Investec would be issued shares in Dresden. The transaction was expressed in that agreement to be subject to a number of conditions precedent, including each of the existing shareholders (including Mr Sheer) consenting to the share issue, terminating the March Shareholders Agreement and entering into a new Shareholders Deed (May Shareholders Deed). The Court finds that Mr Sheer then executed the relevant documents to enable Investec to receive shares in Dresden, with the consequential dilution in Mr Sheer’s interest in the company.

On 17 May 2018, Mr Sheer executed the documents to which he was a party necessary to give effect to the transaction with Investec, including:

By the end of 2018, relations between Mr Jeffreys and Mr Sheer had soured as a result of complaints which Mr Jeffreys had about alleged deficiencies in Mr Sheer’s performance of his duties.

On 25 March 2019, Mr Jeffreys emailed Mr Sheer:

Having left Dresden, and nearly two years later, Mr Sheer emailed Mr Jeffreys on 9 February 2021:

On 16 February 2021, Mr Jeffreys emailed Mr Sheer:

On 25 February 2021, Mr Sheer replied to Mr Jeffreys by email:

By a document entitled “Consent to Proposed Transfer” dated 16 April 2021, all of the shareholders in Dresden (including Investec) gave their consent to any transfer of Mr Sheers’ shares in the company to Mr Jeffreys at any time in the future and waived any pre-emption rights that they may have under the May Shareholders Deed in relation to that transfer. There is therefore no impediment under the May Shareholders Deed to the relief sought by Mr Sheer in these proceedings.

Mr Sheer commenced these proceedings by a statement of claim filed on 6 June 2021 for relief including:

By a cross-claim filed on 13 September 2022, Mr Jeffreys sought orders against Mr Sheer including:

In these proceedings I have applied the legal principles which I summarised in Saravinovska v Saravinovski (No 6) [2016] NSWSC 964:

To these I would respectfully add and have applied this recent summary by Leeming JA (sitting at first instance) in Dedakis v Deligiannis [2024] NSWSC 1018;

As might be expected, each of Mr Sheer and Mr Jeffreys was extensively cross-examined. Another witness called in Mr Jeffreys’ case, Mr Jason McDermott, was also cross-examined, but by the end of the case it was not suggested that Mr McDermott’s evidence had any impact upon the issues to be decided.

There were only two disputed conversations between the parties which remained of any relevance by the end of the case (see [12] and [27] above). Even then, Mr Robinson SC made it clear, that those conversations were not relevant to Mr Sheer’s case in contract. Nevertheless, at least in relation to Mr Jeffreys’ cross-claim, it is necessary for the Court to make findings about those conversations.

For the reasons which follow, the Court had determined that where their evidence is in conflict, the evidence of Mr Sheer is to be preferred over that of Mr Jeffreys. The Court will only accept Mr Jeffeys’ evidence if it is against interest, inherently likely or independently corroborated, including by contemporaneous documents.

In assessing Mr Jeffrey’s reliability, the seminal exchange in Mr Jeffreys’ evidence is what occurred when he was asked about the statement (Tcpt, 25 October 2023, p. 227(45) – p.228(27))

For completeness, I also record that later in his evidence Mr Jeffreys said that he had not performed what Mr Sheer contended were Mr Jeffreys’ obligations because Mr Sheer had never followed him (Mr Jeffreys) up about the option agreement, and that in relation to both the 2016 letter and 2018 letter he said (Tcpt, 25 October 2023, p.230(29-30))

Finally, also in re-examination, Mr Jeffreys gave this evidence about his email of 16 February 2021 reproduced at [41] above: (Tcpt, 25 October 2023, p.233(10-47)

I note that at least as a matter of pleading, Mr Jeffreys contended that any agreement was conditional on Dresden reaching a value of $100 million, and that Mr Sheer had to be employed by Dresden in December 2021. To the extent these defences were pressed, they are rejected because the Court finds no such conditions were ever written or said between the parties.

Returning to what I have referred to as the seminal exchange set out in [51] above, 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.

This exchange crystalised what I considered to be Mr Jeffreys’ entire approach to his evidence. That was to concede nothing that might possibly suggest that he had any obligation to buy the shares, and to proffer whatever reason he could as to why he did not have to buy the shares. His evidence was pervaded by what I might refer to as the clear subjective acknowledgement of obligation to Mr Sheer conflicting with a visceral response of wanting to avoid that result because it would lead to, for him, the completely uncommercial outcome of having to purchase shares which, it was common ground, are worth far less than $2,500,000 million, if they are worth anything.

In making these observations, I am not drawing the conclusion that Mr Jeffreys was consciously attempting to mislead the Court. I did not form the view that he was deliberately telling untruths, but rather that his evidence was unreliable because it was completely coloured by the conflict to which I have referred in the preceding paragraph, such that his evidence on critical matters could not be accepted where it relevantly differs from that of Mr Sheer.

Modern science has proven the truth of McClelland CJ in Equity’s classic observation quoted in [46] above that “human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are relayed, often subconsciously, by perceptions of self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.” So it is that the Court accepts that Mr Sheer referred to his wife in his conversation with Mr Jeffreys in November 2016 (see [12] above), but not to the effect which Mr Jeffreys says he now recalls.

That “ordinary human experience” referred to by McClelland CJ in Equity has now been the subject of extensive scientific examination. It is well understood that each time a memory is recalled, it is reconstructed. That process of reconstruction, when combined with a witness’ interest in the outcome, can lead to a distortion of witnesses’ memories. Witness memory has been said to be inherently frail and potentially unreliable. While the science has been devoted largely to the accuracy of memory in the criminal jurisdiction, the same question, including the impact of witness preparation, is now being explored in the civil context (see MJ Steele, JM Chin and C Van Golde “Witness Preparation and the Corruption of Memory: A Survey of Australian Trial Judges” (2024) 48 (1) Melbourne University Law Review (Advance)).

In referring to Mr Jeffreys’ subjective understanding in [55] above, and before turning to the question of Mr Sheer’s credit, two matters should be made clear:

The Court was strongly urged by Mr Corsaro SC not to accept Mr Sheer as a witness of truth. I shall deal with the particular criticisms of Mr Sheer in what follows. However, it is convenient to begin with a general observation. Mr Corsaro SC brought the full force of the cross-examiner’s art to bear on Mr Sheer’s evidence. He taxed Mr Sheer about every available inconsistency in his evidence that could be established from available contemporaneous material. Nevertheless, and with absolutely no disrespect intended, the end result was that the cross-examination appeared to be straining out gnats.

Mr Sheer’s essential evidence was, in my respectful opinion, completely unshaken by the cross-examination because his narrative was a simple one, depending on two unequivocal statements in letters signed by Mr Jeffreys both in his capacity as a director of Dresden and in his personal capacity. Mr Sheers’ subjective (and through his lawyers, legal) position was perfectly clear: he had been made a promise by Mr Jeffreys and he was entitled to have that promise honoured.

None of the matters complained of by Mr Corsaro SC in relation to Mr Sheer’s evidence strike me as sufficiently significant or central to his narrative as to cause me to doubt Mr Sheer’s reliability, in particular in contrast to the conclusion that I have drawn about Mr Jeffreys. Nor has Mr Jeffreys’ case identified any part of Mr Sheer’s affidavit or oral evidence which is objectively demonstrable as false.

One of the issues explored with Mr Sheer in cross-examination was his representation of his professional qualifications, including having attended the Sivan Computer College in Israel, and the difference between having a masters degree or having undertaken a course of study equivalent to a masters degree. The upshot in relation to Mr Sheer’s qualifications, as appeared from other documents in evidence, was that he had what he described as the equivalent of a masters degree. That equivalence he said had been established by an immigration agent having approached a professor at the University of Auckland to express a view as to the appropriate comparison between the studies that Mr Sheer had undertaken with a university degree. Issue was also taken with the description of Mr Sheer’s qualifications in the IM (see [21] above). I accept Mr Sheer’s evidence that the document had been prepared by Allunga and he had only seen it “briefly”.

There was also cross-examination about evidence Mr Sheer had given about having found a problem with Adobe Postscript which led, according to Mr Sheer, to the head of development of Adobe asking Mr Sheer if he would be interested in a job at Adobe, to which Mr Sheer told him that he was not. The cross-examination never went further than expressing incredulousness as to the truth of this, but without demonstrating any basis on which it could be found that the evidence was false.

Finally, it was submitted for Mr Jeffreys that Mr Sheer’s credibility was fatally undermined in relation to the November 2016 coffee shop conversation (see [12] above) by his email of 9 February 2021 (see [40] above) which referred to him having “agreed to reject the job offer which I received from Sing Tel Optus” when it was clear that the most he had was the offer of an interview. Having observed Mr Sheer give his evidence, I accept his explanation that English not being his first language explains the difference.

In any event, whether it be an issue of language or an exaggeration born of his reaction to Mr Jeffreys’ point blank rejection of any commitment, neither this issue nor any of the other matters tested in cross-examination is sufficient to displace the view which I formed watching Mr Sheer give his evidence that he was doing his best to give a truthful account of what had occurred, and that he was unshaken by an intense cross-examination from his essential narrative, which was supported by the terms of the two letters that he had had been given by Mr Jeffreys.

Mr Sheer’s pleaded case in his statement of claim filed on 6 June 2021 was:

By the time of final submissions, Mr Sheer’s case was slightly different. It was that the contract between the parties was wholly in writing signed by Mr Jeffreys (being the 2018 letter), with the written offer having been accepted orally on 21 April 2018. The oral acceptance was submitted to be the April conversation (see [34] above). Mr Sheer’s case was that in that conversation, Mr Sheer had agreed to the dilution of his shares if Mr Jeffreys changed the content of the letter to reflect the promise that he would buy all of the shares for $2,500,000 million, five years from December 2016.

To adopt the language used by Mr Robinson SC in Mr Sheer’s closing written submissions, it was intended that “the parties have adopted the terms of the document as the repository of their agreement, upon the change requested being acceded to, and made to the document”. The consideration provided by Mr Sheer was said to be his agreement to the dilution of his shareholding in Dresden and thereafter taking the necessary steps for that to occur by executing the relevant documentation (see [37] above).

In the course of address, I had this exchange with Mr Robinson SC

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.

While Mr Corsaro SC drew to attention Mr Sheer’s departure from his pleaded case, there was no suggestion that Mr Jeffreys was not in a position to meet the case that was ultimately put.

Mr Corsaro SC began by drawing to attention this statement: “Assessing the existence and content of an offer is a question of construction from the point of view of a reasonable in the putative offeree’s position” (JD Heydon, Heydon on Contract (2019, Thomson Reuters) at [2.130]).

From that starting point, it was submitted (Tcpt, 14 December 2023, p. 245(19-24):

It was submitted that the correct characterisation of the statement was that it was the reiteration of a non-binding agreement, and which could not be made binding by its reiteration. The legal analysis underlying this general proposition was contended to be:

It was next submitted that any agreement that might have otherwise been brought into existence, failed for want of consideration. This was because, it was said, the shares would have been diluted whether Mr Sheer had agreed to it or not by reason of clause 7.12 of the March Shareholders Agreement, being what was referred to as a “drag along” provision.

Finally, it was contended that any agreement was superseded by the entire agreement clause of the May Shareholders Deed.

For the reasons which follow, the Court finds that there is a binding agreement between Mr Sheer and Mr Jeffreys that Mr Jeffreys would purchase all of Mr Sheer’s shares in Dresden for $2,500,00 million during December 2021.

In setting out how the Court has reached this conclusion, it is helpful to begin by observing what the case is not about. As ultimately argued by the parties, it was not about the proper construction of the statement or the 2018 letter as a whole. In other words, it was no part of Mr Jeffreys’ case that if there was a binding agreement, there was any doubt about what Mr Jeffreys had to do to perform that agreement.

As I will develop in what follows, confronted with the unequivocal language of the statement, the heart of Mr Jeffreys’ defence was an attempt to demonstrate on the facts that the Court should not be satisfied that the parties intended to be legally bound. This was the purport of the evidence advanced by Mr Jeffreys, which the Court has not accepted, that both the 2016 and 2018 letters were being provided to Mr Sheer not as the record of a binding agreement, but as pieces of paper brought into existence to be shown to Mr Sheer’s wife to “placate” her but otherwise not having any legal effect.

In my respectful view, there can be no doubt that the statement represents a promise. The reference to “my commitment” is, in accordance with the ordinary meaning of the word in that context, a reference to a promise or a pledge. If it can properly be inferred from all the circumstances (in this case including the language of the statement and the April conversation) that a promise is being made, it does not matter that the language is not strictly promissory: see Ballantyne v Phillott (1961) 105 CLR 379 at 397 per Menzies J.

While not strictly necessary to decide, I consider that the use of the words “still stands” in the statement fits more neatly into the category of a contractually binding warranty. As Zelling J (with whom Wells J agreed) said in Ellul v Oaks [1972] 3 SASR 377 at 387:

So understood, the question of whether or not the 2016 letter was legally binding becomes irrelevant. In any event, for the reasons set out in [89] below, the statement was, to use Mr Corsaro SC’s language set out in [75] above, a de novo offer made in a materially different factual context to the circumstances which gave rise to the 2016 letter, and irrespective of whether that earlier letter was legally binding or not.

As I have noted in [69] above, Mr Robinson SC clearly presented Mr Sheer’s case on the basis that the 2018 letter represented the agreement between the parties. So understood, the case is best assessed by reference to the three questions posed by Mahoney JA (as his Honour then was) in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 327:

The first question should be answered “yes”. As I develop further in [89] below, I reject Mr Corsaro SC’s submission that the 2018 letter must be read with, or somehow incorporate the terms of, the 2016 letter. Other than the possibility of the 2016 letter, there was no suggestion as the case was finally argued that there were any other terms between the parties to be found outside the 2018 letter.

Mahoney JA’s second question should also be answered “yes”. There was no suggestion that, for reasons of uncertainty or anything else, the consensus represented by the 2018 letter was not capable of forming a binding contract.

Mahoney JA’s third question invites application of the proposition that such intention must be objectively ascertained from the terms of the relevant document when read in the light of the surrounding circumstances. The statement, in the context of the 2018 letter, bespeaks a binding contract. As appears from [27] to [35] above, its terms were negotiated. The fact of negotiation points to an intention to be bound, especially when understood in the context of the April conversation. It would require clear language between the parties (not found in this case) to reduce the process of negotiation to a solemn farce, which is what it would be if there was no intention to be bound.

Next, I accept Mr Robinson SC’s submission in reply that there are a number of surrounding circumstances known to the parties which both negative the incorporation of the 2016 letter and support the inference that the 2018 letter was intended to be a newly created or standalone legal obligation. These were:

The paramountcy of the objective determination of the parties’ intention is particularly evident when it is understood that the process of negotiation in commerce does not always fall easily into the traditional analysis of offer and acceptance. Nevertheless, in this case the Court accepts the alternative position advanced on behalf of Mr Sheer that the offer was made to Mr Sheer by Mr Jeffreys in the form which Mr Sheer had foreshadowed would be acceptable (the 2018 letter) and that this was accepted by Mr Sheer by his conduct in executing the documents necessary to permit the issue of shares to Dresden with the consequential dilution of his shareholding in Dresden.

The same result could be achieved by analysing the sequence of events as:

Either analysis demonstrates the working out of the Court’s ultimate conclusion, being that objectively the parties intended to be bound by the 2018 letter.

Insofar as the terms of the agreement between the parties are concerned, there is one other matter which should be noted at this point. That is the source of Mr Sheer’s obligation, as he contended it to be, that he would agree to the dilution of his shareholding. Because Mr Robinson SC contended that the agreement between the parties was wholly in writing as evidenced by the 2018 letter, any such obligation on Mr Sheer had to be implied. This is because the 2018 letter does not contain any express request that Mr Sheer agree to the dilution of his shareholding.

The need for an implication was recognised in paragraph 18(d) of Mr Sheer’s statement of claim (see [68] above), which referred to the 2018 letter as “implicitly seeking the plaintiff’s agreement to the proposed issue of new shares to Investec Australia Limited”. The Court accepts that, having regard to the totality of the 2018 letter, what should be implied into it as a matter of business efficacy is a term that Mr Sheer agree to, and do all things necessary to give effect to, the dilution of his shareholding by entering into the documents. In return, Mr Sheer received the benefit of the promise contained in the statement.

Again, other analyses might be used to reach the same result. For example, even if the Court’s conclusion about the implication of a term is wrong, given that the April conversation was common ground, there can be no unfairness to Mr Jeffreys in the Court finding (as it does, as an alternative) that the contract between Mr Sheer and Mr Jeffreys was partly oral and partly in writing. The oral part was the April conversation and the written part was the 2018 letter. So understood, it is clear that Mr Sheer assumed a binding obligation to agree to the dilution of his shareholding in Dresden in return for Mr Jeffreys undertaking the obligation contained in the statement.

Turning to the issue of consideration, the argument put for Mr Jeffreys was that Mr Sheer’s acceptance of the dilution of his shareholding could not be consideration because Mr Sheer was already bound to permit this to occur by reason of clause 7.12 of the March Shareholders Agreement. It was submitted that a promise to perform an extant contractual duty could not be good consideration: Silver v Dome Resources NL [2007] NSWSC 455 at [127].

Clause 7.12 of the March Shareholders Agreement relating to “drag along” included:

The Court accepts Mr Robinson SC’s argument that clause 7.12(a) had no application because what was being proposed did not involve an offer to transfer existing shares in Dresden. Instead, the parties were entering an agreement whereby further shares would be issued to a new shareholder, Investec, thereby diluting the existing shareholders’ interests in Dresden. Contrary to the argument put on behalf of Mr Jeffreys, the Court finds that Mr Sheer’s promise to agree to the dilution of this shareholding was good consideration.

There is also a more fundamental difficulty with relying on the March Shareholders Agreement. This is that it was an essential condition precedent to the Investec transaction that all the existing shareholders should consent to the termination of the March Shareholders Agreement. That is what occurred (see [37] above) including those shareholders releasing and waiving any claims (broadly defined) they may have had against each other under the March Shareholders Agreement.

Mr Jeffreys’ final answer to Mr Sheer’s case was to rely on the entire agreement clause in the May Shareholders Deed:

Mr Sheer was a “Shareholder” for the purposes of the May Shareholders Deed.

Mr Corsaro SC’s argument turned on the definition in that deed of “Shareholder”, being “a person entered on the register of the members of the Company from time to time being initially the Existing Shareholders”. While not relevant to the outcome, the parties acknowledged that there was no definition in the new shareholders deed of “Existing Shareholders”.

Nevertheless, it was put that the definition of “Shareholder” was very broad and that Mr Jeffreys was a party to the May Shareholders Deed, as well as his trustee company, Harika, which held what had been Mr Jeffreys’ shares in Dresden. It was therefore submitted that, having once been on the register, Mr Jeffrey was a “Shareholder” so that the entire agreement clause was sufficient to include any agreement between Mr Sheer and Mr Jeffreys about the shares.

The Court accepts the arguments put on behalf of Mr Sheer as to why the entire agreement clause has no operation in the present case:

The subject matter of the deed was not an agreement between a shareholder and a third party (being Mr Jeffreys personally, and not as a “Shareholder”) to purchase shares in Dresden or, for that matter, even if (which the Court does not consider to be the case) Mr Jeffreys was a “Shareholder”. What the deed did provide was the binding framework within which that sale and purchase must occur: Bennett v Goodwin [2005] NSWSC 513 at [39] per Campbell J (as his Honour then was).

In this case, that framework was provided by clause 8 which included:

Mr Jeffreys has the benefit of the “Consent to Proposed Transfer” dated 16 April 2021 (see [43] above), the effect of which is that there is no impediment under the May Shareholders Deed to Mr Sheer transferring the shares to Mr Jeffreys.

Mr Jeffreys’ cross-claim was premised upon the allegation that both the 2016 and 2018 letters were induced by the misleading and deceptive conduct of Mr Sheer insofar as it alleged that Mr Jeffreys produced both letters on the understanding given to him by Mr Sheer that their content was only to be used for the purposes of Mr Sheer placating his wife and otherwise not having any legal effect. By reason of the Court’s findings in [13] and [28] above, Mr Jeffreys’ cross-claim fails on the facts because the Court does not accept that Mr Sheer said anything about either letter being required to placate his (Mr Sheer’s) wife.

In any event, I accept the submission made for Mr Sheer that Mr Jeffreys’ cross-claim also should fail for not establishing causation. Taking Mr Jeffreys’ evidence of the two relevant conversations at face value, there was no evidence from Mr Jeffreys that he relied on what was allegedly said by Mr Sheer having to placate his wife as the basis for offering to buy the shares. Nor does Mr Jeffreys give any evidence to the effect that absent the alleged statements about needing the letters to placate Mr Sheer’s wife, he (Mr Jeffreys) would otherwise not have offered to purchase the shares and, in particular, that he would not have made the statement.

Finally, for completeness, I reject Mr Corsaro SC’s submission that, assuming the 2016 letter was the product of misleading and deceptive conduct, the 2018 letter was “infected” by that conduct. For the reasons set out in [89] above, the Court has concluded that the 2018 letter was brought into existence against the background of new and different factual circumstances. Whatever may have been the cause of the 2016 letter, those new and different factual circumstances broke any chain of causation that might otherwise have connected the 2016 letter to the 2018 letter.

The Court accepts Mr Sheer’s evidence that he is ready, willing and able to do all things necessary to transfer his shares to Mr Jeffreys upon the latter tendering the purchase price of $2.5 million. Accordingly, Mr Sheer is entitled to an order for specific performance of the contract found in paragraph [79] above. Subject to hearing the parties, my present view is that the order should specify that settlement of the sale should occur eight weeks after the date of the order.

Mr Jeffreys’ cross-claim will be dismissed.

Subject to any special arguments about costs of which the Court is not currently aware, Mr Jeffreys should pay Mr Sheer’s costs of the proceedings.

The parties will be given an opportunity to bring in short minutes of order to give effect to these reasons.