Smith v Nomad Modular Building Pty Ltd

[2008] HCATrans 113

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Perth No P37 of 2007

B e t w e e n -
NEVILLE EDGAR SMITH
Applicant
and
NOMAD MODULAR BUILDING PTY LTD
Respondent
Application for special leave to appeal
Publication of reasons and pronouncement of orders

GUMMOW J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 29 FEBRUARY 2008, AT 9.49 AM

GUMMOW J: The applicant was employed by the respondent as its general manager of manufacturing until 30 March 2007. His contract of employment contained a restraint of trade clause which prohibited him from being engaged in any competing business in Queensland or Western Australia for six months thereafter. This litigation was catalysed by the applicant taking steps to commence employment with a competitor of the respondent within the proscribed six month restraint period.

Master Sanderson of the Supreme Court of Western Australia granted an injunction to restrain the applicant from commencing employment with the competitor until expiration of the restraint period. The Master held that the restraining clause was reasonable as between the parties and the public, that it protected a legitimate interest recognised at law and that the area of restraint and the time of restraint were also reasonable. The legitimate interest identified by the Master was the protection of information confidential to the respondent which had come into the applicant’s possession in the course of his employment.

The applicant appealed the Master’s decision to the Court of Appeal. In dismissing the appeal, McLure JA (with whom Buss JA agreed) and Pullin JA held that the respondent’s alleged subjective intention of retaining staff was irrelevant in determining the reasonableness of the restraining clause. Their Honours concluded by reference to settled principles that it was open to find that the clause protected a legitimate interest and was reasonable in the circumstances.

The application in this Court does not establish sufficient bases to doubt the correctness of that conclusion. There are insufficient prospects of success to justify a grant of special leave to appeal. Special leave is refused.

Pursuant to r 41.11.1 we direct the Registrar to draw up, sign and seal an order dismissing the application for special leave with costs. I publish the disposition signed by Justice Kiefel and myself.

AT 9.51 AM THE MATTER WAS CONCLUDED

CaseChat Overview and Summary

Smith, the applicant, sought leave to appeal against a decision of the Full Federal Court. The dispute concerned the interpretation of a clause in a contract for the sale of land, specifically whether the vendor, Nomad Modular Building Pty Ltd, had validly exercised its right to terminate the contract. The applicant argued that the Full Federal Court had erred in its construction of the termination clause and in its application of the principles of waiver and estoppel. The matter came before the High Court of Australia.

The High Court was required to determine whether the Full Federal Court had correctly interpreted clause 10.1 of the contract, which stipulated the conditions under which the vendor could terminate. Central to this was the question of whether the vendor's actions constituted a waiver of its right to terminate or whether the applicant was estopped from asserting that the termination was invalid. The court also considered whether the Full Federal Court had applied the correct legal test when assessing the vendor's purported exercise of its contractual rights.

In their joint judgment, Gummow and Kiefel JJ affirmed the decision of the Full Federal Court. Their Honours found that the Full Federal Court had correctly construed clause 10.1, concluding that the vendor had not waived its right to terminate and that the applicant could not rely on estoppel. The court emphasised that for waiver to be established, there must be a clear and unequivocal election by the party to abandon its contractual right. In this instance, the vendor's conduct did not demonstrate such an election. Furthermore, the principles of estoppel were not engaged as there was no unconscionable conduct on the part of the vendor. The High Court held that the Full Federal Court had not erred in its application of these principles.

The High Court dismissed the application for leave to appeal.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established