Art Coating Pty Ltd v Gerace

Art Coating Pty Ltd appealed to the New South Wales Court of Appeal against orders made by Master Macready concerning a dispute arising from a Heads of Agreement. The core of the dispute involved the interpretation and enforceability of a term within the Heads of Agreement, particularly in light of a subsequent legislative amendment, and its connection to a commutation agreement for workers' compensation.

The Court of Appeal was required to determine whether the Heads of Agreement had been abandoned by the parties and, if not, what its effect was in relation to a proposed commutation of a workers' compensation claim. Specifically, the court had to consider whether the legislative amendment impacted the contractual obligations of the parties under the Heads of Agreement and whether the defendant was bound to pay a specific sum in the event of a successful commutation application.

The Court of Appeal reasoned that the Heads of Agreement remained binding and had not been abandoned. It held that the legislative amendment did not alter the defendant's obligation under the Heads of Agreement to pay the agreed commutation amount, less lawful deductions, should the Compensation Court approve the commutation. The court found that the Master’s orders did not adequately reflect this binding obligation.

Consequently, the Court of Appeal allowed the appeal, setting aside the Master's order of 23 August 1999 and substituting a declaration that the defendant was bound by the Heads of Agreement to pay the commutation amount of $130,000, subject to lawful deductions. The court also granted liberty to apply and otherwise confirmed the Master's orders, with the appellant ordered to pay the respondent's costs of the appeal.