Eshuys v St Barbara Limited - [2011] VSC 125

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL DIVISION

No. SCI 2009 of 10251

EDUARD ESHUYS	Plaintiff
V
ST BARBARA LIMITED	Defendant

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JUDGE:	KAYE J
WHERE HELD:	Melbourne
DATE OF HEARING:	21-25, 28, 29 March 2011
DATE OF JUDGMENT:	6 April 2011
CASE MAY BE CITED AS:	Eshuys v St Barbara Limited
MEDIUM NEUTRAL CITATION:	[2011] VSC 125

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CONTRACT – Employment of managing director – Provision for payment of completion based performance amount on termination of employment – Waiver of condition for payment – Construction of contract – Use of background circumstances - Discretionary determination by one party of amount – Principles.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Strong	Gadens Lawyers
For the Defendant	Mr P Solomon SC and Mr E Gisonda	Freehills

HIS HONOUR:

In July 2004, the plaintiff commenced employment with the defendant as its managing director and chief executive officer. In the latter part of 2008, the defendant’s board of directors decided to engage a new managing director. In order to ensure that the defendant retain the services of the plaintiff until the new managing director had been appointed, the plaintiff and the defendant entered into an agreement dated 18 August 2008 (“the variation agreement”), which varied the terms of the original employment contract between them. The variation agreement provided for the payment by the defendant to the plaintiff of a final performance based completion amount of up to $1,000,000, upon the termination by the defendant of the plaintiff’s employment with it. The amount of that payment was to be determined by the board, as a matter of “discretion”, based on the “extent of compliance” by the plaintiff with two criteria stated in the variation agreement.

In December 2008, the defendant advised the plaintiff that his successor as managing director and chief executive officer had been identified. As a result, the plaintiff ceased his employment with the defendant on 2 March 2009. On 12 March 2009, the board of directors of the defendant determined to pay the plaintiff $150,000 in respect of the final completion performance amount specified in the variation agreement. The plaintiff claims that the defendant failed to properly assess the amount payable to him, and that as a result he has suffered loss and damage.

Background

The defendant is an Australian gold producer and mineral explorer. It is listed on the Australian Stock Exchange, and its corporate head office is located in Melbourne. At the times relevant to these proceedings, the defendant had two principal operational assets, Leonora and Southern Cross. Both of those operations are located in Western Australia. The Southern Cross division of the company comprised three principal operations, namely, one underground mine (Marvel Loch), some ore stockpiles, and five open pit mines (each with a short mine life). The Leonora operations comprised the Gwalia underground mine and the Trump open pit mine. The defendant also commenced the development of the Kailis open pit mine at the Leonora operations in September 2008. However, that…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Eshuys v St Barbara Limited

Details

AGLC: Eshuys v St Barbara Limited [2011] VSC 125
Case: [2011] VSC 125
Decision Date: 6 April 2011

CaseChat Overview and Summary

Eshuys v St Barbara Limited involves a dispute between a former managing director, Mr. Eshuys, and St Barbara Limited, a mining company, concerning the payment of a performance-based completion amount upon termination of his employment. The matter was heard in the Federal Court of Australia. The central issue for the court was to determine the proper interpretation and application of the contract's provisions regarding the completion payment and the extent to which background circumstances could be considered in determining the amount due.

The court was required to assess whether the contract's language allowed for the company's unilateral discretion in determining the completion amount and if the background circumstances could be used to inform this determination. Specifically, the court had to examine the extent to which it could consider the company's assessment of Mr. Eshuys's performance and the context in which the completion payment was to be made. The court also needed to decide if the waiver of the condition for payment constituted an agreement to a specific sum or if it left the determination to the company's discretion.

The court concluded that the contract did not explicitly restrict the company's discretion in determining the completion amount and allowed for consideration of the background circumstances in making this determination. It found that the contract's language did not preclude the use of background circumstances to assess the completion amount, thereby upholding the company's right to make a discretionary determination. The court ruled that the waiver of the condition for payment did not equate to an agreement on a specific sum but rather left the determination to the company's discretion. Consequently, the company's decision on the completion payment was upheld.

Orders