LIR Australia v Gunst [2001] NSWSC 467

New South Wales Supreme Court

CITATION : LIR Australia v Gunst [2001] NSWSC 467 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 5155 of 2000 HEARING DATE(S) : 4 June 2001 JUDGMENT DATE : 4 June 2001

PARTIES : LIR Australia Pty Limited (Plaintiff) Andrew Gunst (Defendant) JUDGMENT OF : Windeyer J at 1

LOWER COURT Supreme Court (Master) JURISDICTION : LOWER COURT FILE NUMBER(S) : LOWER COURT Master Macready JUDICIAL OFFICER :

COUNSEL : D Robinson (Appellant/Defendant) J Phillips (Respondent/Plaintiff) SOLICITORS : Toomey Pegg & Drevikovsky (Appellant/Defendant) Murrays (Respondent/Plaintiff) CATCHWORDS : CORPORATIONS LAW - statutory demand - appeal from Master CASES CITED : Sandra Investments Pty Ltd v Booth (1982) 153 CLR 153 DECISION : Appeal dismissed with costs

4 THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

WINDEYER J

MONDAY 4 JUNE 2001

5155/00 LIR AUSTRALIA PTY LTD v GUNST

JUDGMENT

1 HIS HONOUR: This is an appeal from a decision of Master Macready where he set aside a statutory demand served by Mr Gunst, the defendant in the proceedings before him, on LIR Australia Pty Ltd. 2 That demand sought payment of a sum of $139,166.67 claimed to be due by LIR Australia to Mr Gunst under the terms of a contract of employment dated 20 August 1999. The relevant provisions of the contract are set out in the decision of the learned Master and I will not repeat them. To save time this decision must be read in conjunction with the judgement of the learned Master given on 6 April 2001. 3 The question at issue before the Master was whether or not the employer had the right to waive its entitlement under a non-competition clause, thereby bringing to an end the rights of the employee to certain payments which that employee would otherwise have been entitled to under the non-competition covenant. 4 This was not a contract which merely provided as one of its terms a covenant not to compete. What it did provide was that the non-competition clause ("clause 11") would come into force on termination of the employee's employment and that in consideration of the giving of that covenant the company would make certain payments to the employee on termination. 5 The employer wrote to the employee by letter of 1 May 2000 which terminated the contract, enclosed cheques for the amount due on termination in lieu of notice, and stated in the last paragraph that the non-competition clause would not be enforced and, thus, the employee was free to compete. 6 The argument of the employee was and is that he is entitled to the amount which the employer agreed to pay under clause 11 on termination, because he had already given the non-competition covenant. 7 The only matter in the Master's judgement which is relevant is the finding that there was a question to be determined as to waiver. The other arguments of the employer were held not to be good and have not been pressed before me. 8 The question for decision before the Master was whether or not, in the words normally now used, the employer could plausibly contend that it had the right to waive the non-competition clause. The learned Master held that this was a matter which was arguable. 9 To some extent his decision was founded on the case of Sandra Investments Pty Ltd v Booth (1982) 153 CLR 153, where there is some discussion as to whether, for a right of waiver to exist, the covenant or clause in question must be solely for the benefit of the person who purports to waive it, or whether it need only be primarily for the benefit of that person. 10 It is generally accepted, I think, that there can be no doubt about the matter where a covenant is solely for the benefit of one of the parties, but there might be thought to remain some doubt as to a right of waiver where the covenant is, on the true construction of the contract, primarily but not solely for the benefit of the person who wishes to waive it. I consider it is right to say this matter was not finally decided in Sandra which could have been determined without considering that question of waiver at all. 11 The other question which has been raised before me, and which was perhaps not quite so clearly dealt with in the judgement of the learned Master, is whether or not a right of waiver can continue to exist or can only exist in the case of an executory contract rather than one that has been executed. There can, I think, be no doubt that in the instant case the contract with which we are dealing is one which was executed upon the employee entering into employment in accordance with its terms. The right of the employee to the consideration on termination is said to be given as consideration for his entering into the covenant in question. Nearly all of the cases which deal with the question of waiver are conveyancing cases dealing with the position under an executory contract, where it is expected the contract will be executed by completion. Thus there is a question in this case as to whether or not the contract is executory in part because the rights under the non-competition covenant and the rights to payment for the giving of it only arise on termination. 12 As the learned Master said, it is not desirable to engage in a final determination of questions of law in applications such as this unless the position is entirely clear. I accept that it is possible for the Court to make a final determination, but in my view the position needs to be almost beyond doubt before doing so. The failure of the learned Master to do so was not an error on his part. I should uphold his decision because I consider the employer's contentions are arguable. 13 In those circumstances, while in some ways it is unfortunate that this matter will have to be litigated in debt proceedings between the parties, I propose to dismiss the appeal. 14 Order that the appeal be dismissed with costs.