Zimmermann Vearings Pty Ltd v Sandhurst Capital Pty Ltd

This case arose from a dispute over a relatively small percentage of shares in a company that held a very valuable property asset. Vearings Lane Pty Ltd had acquired land in Epping, Victoria. The judgment records that Johnson said the property was worth about $295 million by the time of the dispute. That meant even a 0.65 per cent difference in shareholding could have major commercial consequences.

The ownership structure was simple at first. Until about 8 or 10 December 2021, Vearings Lane had one ordinary share on issue, held by Sandhurst Capital Pty Ltd. Johnson was the sole director of Vearings Lane and was also one of the directors and indirect shareholders of Sandhurst. In 2021, he discussed with the other Sandhurst principals whether he should receive a greater stake in Vearings Lane in recognition of his work on the project.

The reasons identify one key discussion. Strano asked Johnson whether he would be happy if Sandhurst agreed to give him 10 per cent of Sandhurst's 100 per cent shareholding in Vearings Lane. Johnson said he would be happy with that. The later fight was not just about whether there had been an agreement, but about what exactly had been agreed, how it was implemented, and whether later conduct could support a different ownership position.

In December 2021, Johnson caused Vearings Lane to issue 8,934 ordinary shares to Sandhurst and 1,065 ordinary shares to himself. He later transferred those 1,065 shares to Zimmermann Vearings Pty Ltd. Because Sandhurst already held the original share, the register then showed Sandhurst with 8,935 shares and Zimmermann with 1,065 shares. That translated to 89.35 per cent and 10.65 per cent.

The court noted that Johnson was able to cause those steps to occur without reference to anyone else because he held positions across the relevant entities. But the other Sandhurst directors who had been involved in the earlier discussions had no role in the issue itself. The reasons say they did not know at the time that more than 1,000 shares had been issued to Johnson or his entity. They only discovered that in late 2024.

Once the issue surfaced, the dispute took on two different forms. Zimmermann first sued on the basis that 65 shares had been issued by mistake and should be transferred back to Sandhurst so the final position would be 90 per cent to Sandhurst and 10 per cent to Zimmermann. Later, however, Zimmermann also tried to run an alternative case that it was entitled to keep all 1,065 shares because the original 10 per cent arrangement had been varied by conduct into a 10.65 per cent arrangement.

The judgment dealt with two interlocutory applications in related proceedings. In one proceeding, Zimmermann sought leave to amend its originating process and statement of claim. In the other, Sandhurst, Vearings Lane and related parties sought to strike out part of the defence filed by Johnson and Zimmermann. The court said both applications raised the same underlying issue.

That procedural setting matters. The court was not conducting a full final trial on all disputed facts. It was deciding whether a particular legal contention could properly remain in the pleadings. A party can lose at that stage if the pleaded case is legally incoherent, even before the court decides every factual dispute.

Zimmermann's original case was built around mistake and correction. Johnson's affidavit said there had been an error in the calculations leading to the share issue. He said that what should have happened was the issue of 9,999 additional shares, with 1,000 going to him and 8,999 to Sandhurst. He also said he did not recognise when he signed the documents that 1,065 shares exceeded 10 per cent of the issued shares in the company.

The original relief sought reflected that position. Zimmermann sought a declaration that it was entitled to 10 per cent of the shares in Vearings Lane and specific performance of an agreement under which it would transfer 65 shares back to Sandhurst. It also sought correction of the register under section 175 of the Corporations Act 2001 (Cth).

Later, however, Zimmermann sought to amend its pleading to add an alternative claim that it rightly held all 1,065 shares. In the related proceeding, Johnson and Zimmermann pleaded that Sandhurst and Johnson had first agreed that Johnson or his nominated entity would be a 10 per cent shareholder in Vearings Lane, and then subsequently agreed to vary that arrangement so that Zimmermann would be a 10.65 per cent shareholder.

The conduct relied on for that alleged variation included the preparation and signing of share issue documents showing 1,065 shares to Zimmermann, and later shareholder contributions said to have been made in 89.35 per cent and 10.65 per cent proportions. Sandhurst challenged that alternative case directly, arguing that it was not just factually weak but legally untenable.

The legal issue was narrow but important. The court had to decide whether the alleged second agreement, described as a variation of the earlier 10 per cent agreement, was legally capable of succeeding on the way it had been pleaded. The question was not simply whether later conduct might suggest a different commercial understanding. The question was whether the legal structure of the claim made sense.

Sandhurst's argument, which the court accepted, was straightforward. On the pleaded case, the only term of the original agreement was that Johnson or his nominee would be a 10 per cent shareholder in Vearings Lane. By 8 or 10 December 2021, on that same pleaded case, Zimmermann had become at least a 10 per cent shareholder. That meant the original contract had already been fully performed by both parties.

If that was right, the court said the contract could not later be varied in the way pleaded. The alleged 10.65 per cent variation was therefore a legal nonsense. In other words, the problem was not merely that the evidence might be contested. The problem was that the pleaded variation theory contradicted the pleaded completion of the original bargain.

The reasons also show that the parties spent time arguing about admissions, the objective theory of contract, and the use of subsequent conduct. But the judge said it was unnecessary to decide those broader points because the pleading failed at a more basic level. That is often how interlocutory disputes are resolved. A court may not need to reach every doctrinal argument if one threshold defect is enough to dispose of the point.

O'Callaghan J held that the common 10.65 per cent contention advanced in both proceedings was untenable. The court accepted Sandhurst's submission that, on the pleaded case, the original 10 per cent agreement had already been fully performed by either 8 or 10 December 2021. Because of that, the later plea that the agreement had been varied so as to produce a 10.65 per cent entitlement could not stand.

In the Johnson Vearings proceeding, the court gave Zimmermann leave to amend its originating process and statement of claim, but not to include paragraph 7B of the proposed amended statement of claim and not to include the corresponding part of the relief that depended on that paragraph. In the Sandhurst Vearings proceeding, the court struck out paragraph 25(c) of the defence, which was the matching plea alleging a variation to 10.65 per cent.

The court also made costs orders against the parties advancing the unsuccessful interlocutory positions. Zimmermann was ordered to pay the defendants' costs of its interlocutory application. Johnson and Zimmermann were ordered to pay the applicants' costs of the strike-out application in the related proceeding.

The available reasons indicate that the court did not need to decide broader arguments about whether Johnson's affidavit contained admissions that foreclosed the later case, or about the proper use of subsequent conduct evidence, because the pleading failed on the more basic point that the alleged variation was legally incoherent on its own terms.

This decision is best read as a warning about equity documentation and transaction discipline. A statement such as 'you will get 10 per cent' is not enough on its own. You need to know 10 per cent of what, achieved how, and at what point in time. If a company has one share on issue and is about to issue thousands more, the arithmetic and the legal implementation need to be checked carefully.

The case also shows the risk where one person acts across several entities in the same group or project. Johnson was said to be able to sign and cause documents to be lodged because he held roles across Sandhurst, Vearings Lane and Zimmermann. That kind of overlap is common in founder-led groups, family businesses and property structures. But overlap does not remove the need for proper authority, transparent approvals and accurate records.

Another practical point is that later conduct may not rescue an earlier documentation problem. Here, one of the pleaded indicators of a 10.65 per cent arrangement was that shareholder contributions were later made in proportions matching 89.35 per cent and 10.65 per cent. Even so, the court held the variation case was untenable because the legal mechanism itself did not work on the pleaded facts. Businesses should not assume that payment patterns, accounting treatment, reimbursement entries or internal emails will automatically prove a fresh equity agreement.

The shift in litigation position is also instructive. Moving from 'there was a mistake and we should correct it' to 'we were entitled to the larger amount all along, or by variation' can create both credibility issues and legal structure problems. If there is a genuine discrepancy between intention and implementation, it is usually better to identify the exact legal basis for correction early and make sure the documents support it.

The reasons refer to a range of documents and conduct that businesses should recognise. These included applications for shares, consents to be a member and hold shares, a memorandum of resolution of the sole director, share certificates, ASIC Form 484 filings, and a later transfer to Zimmermann. The court also referred to emails and later drawdown requests that were said to have produced shareholder contributions in the same proportions as the disputed shareholdings.

What is important is not just that these documents existed, but how they fitted into the pleaded legal theory. A complete set of forms and certificates does not automatically answer the legal question if the pleaded contract theory is internally inconsistent. Equally, later conduct that appears commercially consistent with a particular ownership split may still be insufficient if the legal basis for that split has not been properly articulated.

For businesses, the practical takeaway is to treat share issue paperwork as part of a single coordinated process. The commercial agreement, board authority, issue documents, ASIC updates, trust or nominee arrangements, and the register should all tell the same story. If they do not, the inconsistency can become the centre of the dispute.

The judgment is dated 22 December 2025 and concerns interlocutory applications in two related Federal Court proceedings. The available reasons are detailed enough to explain the court's core reasoning and orders on those applications. However, the accessible text appears truncated near the end, so this page should be read as an explainer of the interlocutory ruling recorded in the available reasons rather than a complete account of every issue in the broader litigation.

On the available material, the case is best classified as a commercial contracts and corporations dispute involving share issues and pleading logic. It should not be read as an intellectual property or patent authority.