FEDERAL COURT OF AUSTRALIA
Commonwealth Bank of Australia v Barker [2013] FCAFC 83
IN THE FEDERAL COURT OF AUSTRALIA | |
COMMONWEALTH BANK OF AUSTRALIA Appellant | |
AND: | Respondent |
DATE OF ORDER: | |
WHERE MADE: |
THE COURT ORDERS THAT:
1. The appeal be dismissed with costs.
2. The order made on 3 September 2012 by Besanko J in the proceedings at first instance be varied, nunc pro tunc, by replacing the figure “$317,500” with “$335,623.57”.
3. The cross-appeal be otherwise dismissed.
4. The cross-appellant pay the costs of the cross-appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
SOUTH AUSTRALIA DISTRICT REGISTRY | |
GENERAL DIVISION | SAD 241 of 2012 |
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
BETWEEN: | COMMONWEALTH BANK OF AUSTRALIA Appellant
|
AND: | STEPHEN JOHN BARKER Respondent
|
JUDGES: | JACOBSON, LANDER AND JESSUP JJ |
DATE: | 6 august 2013 |
PLACE: | ADELAIDE |
REASONS FOR JUDGMENT
JACOBSON AND LANDER JJ
1 Mr Stephen John Barker was employed by the Commonwealth Bank of Australia as an executive manager in the Bank’s corporate banking section in Adelaide under a written contract of employment which permitted the Bank to terminate the contract, without cause, by four weeks’ written notice.
2 On 2 March 2009, at a meeting with a number of officers of the Bank, Mr Barker was handed a letter which informed him that his current position was to be made redundant with effect from the close of business that day. The letter went on to say:
It is the Bank’s preference to redeploy you to a suitable position within the Bank and we will explore, in consultation with you, appropriate options.
3 Mr Barker was told on 2 March 2009 that if he was not redeployed within the Bank his employment would be terminated on 2 April 2009. That date was later extended to 9 April 2009 on which date Mr Barker was informed that his employment was terminated by reason of redundancy with effect from the close of business on that day.
4 In 2010 Mr Barker brought proceedings against the Bank for breach of his contract of employment and for damages under s 82 of the Trade Practices Act 1974 (Cth), as then in force.
5 Mr Barker’s claim in contract included a claim that certain written policies of the Bank which covered, inter alia, the issue of redundancy, were incorporated into his contract of employment. He claimed that the Bank breached those policies, relevantly, by failing to inform him of a possible alternative position within the Bank, and that he thereby lost that opportunity.
6 The primary judge (Besanko J) found that the policies were not incorporated into, and did not form part of, Mr Barker’s contract of employment.
7 However, his Honour found that an alternative claim made by Mr Barker based upon an implied term of mutual trust and confidence in the contract of employment between the Bank and Mr Barker was established. His Honour found that the term was consistent with the approach taken in England in cases such as Malik v Bank of Credit and Commerce International SA (in liq) [1998] AC 20 and that the existence of such a term has been assumed by four Justices of the High Court of Australia in Koehler v Cerebos (Aust) Ltd (2005) 222 CLR 44 at 54-55 [24].
8 The learned primary judge said at [330] that:
The term only operates where a party does not have reasonable and proper cause for his or her conduct and the conduct is likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. Furthermore, in this case I am not deciding whether the term applies at the point of dismissal.
9 His Honour went on to find at [352] that the Bank had been almost totally inactive in complying with its policies during a reasonable period of notifying Mr Barker of his redundancy. He found that this was a serious breach of the implied term of mutual trust and confidence which sounded in damages. His Honour awarded Mr Barker damages of $317,000 for loss of the opportunity to be redeployed to a suitable position within the Bank.
10 The Bank appeals against the order for damages made by the primary judge in favour of Mr Barker. Two critical issues arise on the appeal. The first is whether the contract of employment contained the implied term. The second is whether, if it did, the Bank’s breach of its own policies constituted a serious breach of the relationship of trust and confidence upon which the term is founded.
11 We have had the benefit of reading in draft the detailed reasons of Jessup J. His Honour has comprehensively reviewed and analysed all of the relevant English and Australian authorities on the existence of the implied term asserted by Mr Barker and found by the primary judge.
12 As a result of his extensive examination of the authorities, and his consideration of the juridical basis for the implication of the term as a term implied by law, Jessup J has come to the view that the term does not form part of the common law of Australia. His Honour has also reached the conclusion that, even if the implied term exists, the Bank’s failure to comply with its own policies did not amount to a breach.
13 Notwithstanding the apparent force of the views expressed by Jessup J, in our opinion the implied term has obtained a sufficient degree of recognition, both in England and Australia, that it ought to be accepted by an intermediate court of appeal.
14 As the primary judge pointed out, the key issue in the present case is not whether the term applies at the point of dismissal, but whether it operated at a point of time anterior to the termination of Mr Barker’s employment. Employment is more than the result of a contract of employment. It is a continuing relationship which is brought to an end by dismissal of the employee, although this act may not put an end to the contract: Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 427-428.
15 The boundary line between acts which occurred prior to an employee’s dismissal and the dismissal itself, may be difficult to draw. But where, as here, the Bank’s actions in failing to take steps to enable Mr Barker to obtain the possibility of redeployment were separate from and anterior to the termination of Mr Barker’s employment, in our opinion the line is drawn in favour of the application of the implied term.
16 The warnings sounded, most notably by Spigelman CJ in State of New South Wales v Paige (2002) 60 NSWLR 371 at [141] – [145] against the implication of the implied term as “an inappropriate judicial step”, do not seem to be applicable in the present case where the claim is not for wrongful dismissal.
17 Moreover, since the claim for damages in this case is not for loss flowing from termination, no question arises of sidestepping the rule in Addis v Gramophone Co Ltd [1909] AC 488: cf Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (2008) 72 NSWLR 559 at [63]-[64].
18 We are also unable to agree with the conclusion reached by Jessup J on the question of breach.
The Facts, Part I – The Contract
19 The facts are fully recorded in the judgment of Jessup J, commencing at [166] below. His Honour sets out the terms of the Bank’s redundancy policy, and related policies, noting that the Bank’s Reference Manual specifically states that the Manual is not incorporated as part of an industrial award and does not form any part of an employee’s contract of employment.
20 Mr Barker’s contract of employment with the Bank appears to be a standard form document. Immediately above the description of the contract as an Employment Agreement between the parties, the words “All Blanks to be Completed” appear in small font.
21 The parties are described in the heading in bold. Mr Barker is described as “Stephen Barker 109188 (Employee)”. The significance of the number 109188 was not explained but, presumably it was Mr Barker’s employment number in the Bank. If not otherwise obvious from the identity of the Bank as an employer, the employee number makes it plain that Mr Barker was employed in a very large organisation.
22 Clause 1 of the contract provides that where the employee is employed in the Bank immediately preceding the date of the Agreement, the employee and the Bank agree to vary the terms and conditions of employment “to those set out herein”.
23 Mr Barker was employed by the Bank prior to the date of the Employment Agreement which was signed on 6 August 2004 by Mr Barker and on 10 August 2004 by the Bank. His employment commenced some 23 years earlier when he was employed in a junior position straight out of high school. The Employment Agreement was the culmination of a series of promotions over that period through various management positions within the Bank.
24 The Employment Agreement goes on to provide that the employee is to serve at any location where the Bank or one of its related bodies corporate operate.
25 Clause 3 provides that the Agreement came into effect on 1 July 2004. Clause 4 provides that the employee is to be employed as “an executive of the Bank”.
26 Clause 6 of the Employment Agreement provides for termination without cause “except in circumstances of misconduct” by four weeks’ notice in writing by either party. The clause also states that the Bank may make a payment equivalent to four weeks’ pay in lieu of notice.
27 Clause 8 recognises the possibility of the employee’s position becoming redundant. The clause only applies where the employee was already employed by the Bank immediately preceding the date of the Agreement. The clause therefore applied to Mr Barker.
28 Clause 8 goes on to provide that where the position becomes redundant and the Bank is unable to place the employee in an alternative position with the Bank or one of its related bodies, in keeping with the employee’s skills and experience, the compensation is to be calculated on the basis set out in the balance of the clause.
29 The cash remuneration and other benefits constituting the employee’s “Base Remuneration package” are not set out in the Employment Agreement but are set out in an annexure. The annexure was not before us in the appeal papers.
30 Clause 12 provides that the employee shall be entitled to retire from the Bank’s service at any time after attaining the age of 55, subject to giving the stipulated period of notice.
31 The only other clause which should be mentioned is cl 14 which provides that the employee’s remuneration is to be regarded as satisfying all entitlements other than annual leave, long service leave and other stipulated leave entitlements.
32 There is nothing in the Employment Agreement that expressly or impliedly excludes the term which is sought to be implied by operation of law.
The Facts, Part II – Background facts
33 The relevant background facts are set out at paragraphs [166] to [204] of the judgment of Jessup J. The principal factual matters concern the period between 2 March 2009 and 9 April 2009.
34 The salient paragraphs of the letter of 2 March 2009 to which I referred above are set out in the judgment of Jessup J at [175].
35 Mr Barker was given other documents at the meeting on 2 March 2009. A presentation was made to him at the meeting which identified Ms Helen Breccia as his manager of “Career Support”.
36 As Jessup J observes, the primary judge found that it was made clear to Mr Barker at the meeting that the Bank’s preference was to redeploy him, but failing redeployment, the date of termination of his employment would be 2 April 2009.
37 Nevertheless, Mr Barker was told at the meeting that he should clear out his desk, hand in his keys and mobile phone and not return to work. His email facilities and access to the Bank’s intranet were terminated immediately but he was permitted to retain the SIM card for his mobile phone for a short time. He was required to return the SIM shortly after Saturday 7 March 2009.
38 It is clear that Ms Breccia, who was responsible, with the human resources section of the Bank, for managing Mr Barker’s redeployment process, was unaware until 26 March 2009 that Mr Barker no longer had access to his business email or his business mobile phone. She made a number of unsuccessful attempts during the period from 5 March 2009 to contact Mr Barker by those means. So too did Mr Glen Davis who was the executive manager of Strategic Resources.
39 Put simply, and perhaps in the vernacular, the left hand of the Bank did not know what the right hand had done until the penny dropped on 26 March 2009 when Ms Breccia was able to communicate with Mr Barker to inform him of a role within the Bank that would be suitable to his skill set.
40 The position about which Ms Breccia had been endeavouring to contact Mr Barker was the role of “Executive Manager – Service Excellence”.
41 Mr Barker did not apply for the Service Excellence position, although the effective date for termination of his employment was extended to 9 April 2009.
42 On 9 April 2009 Mr Barker was advised in writing that his employment was terminated by reason of redundancy with effect from close of business that day. He was advised that his retrenchment payments would be an amount slightly in excess of $182,000.
The decision of the primary judge
43 The primary judge found that the Bank repudiated Mr Barker’s contract of employment on 9 April 2009 when it purported to terminate his contract without giving the requisite period of notice, or payment in lieu. His Honour found that Mr Barker accepted the Bank’s repudiation.
44 The primary judge then turned to Mr Barker’s alternative case of loss of the opportunity to be redeployed. His Honour found, in accordance with Full Court authorities, that the Bank’s policies, and in particular, its redeployment policies, were not terms of Mr Barker’s employment contract.
45 What was decisive against Mr Barker on this issue was the statement in the Bank’s Human Resources Reference Manual that the policies did not form part of an employee’s contract of employment. His Honour found that there were no countervailing factors to negate the effect of that statement.
46 His Honour then turned to the implied term. He said it is clear that in England there is an implied term of trust and confidence in a contract of employment so that an employer must not without reasonable and proper cause conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. He cited Malik, and two more recent decisions of the House of Lords to which we will refer later, as well as a number of other English authorities in support of that proposition.
47 His Honour observed that the “exclusion zone” of that term, as accepted in the House of Lords, is that it does not apply at the point of dismissal.
48 The primary judge referred to the position in Australia. He said the existence of the term was assumed by McHugh, Gummow, Hayne and Heydon JJ in Koehler v Cerebos at [24]. He also referred to another High Court authority, Concut Pty Ltd v Worrell (2000) 75 ALJR 312.
49 His Honour referred to a number of authorities of intermediate appellate courts where the court did not need to decide the point. He said that a number of single judges have expressed reservations about the existence of the term but that its existence was accepted by the Industrial Relations Court of Australia, as well as at first instance by Allsop J in Thomson v Orica Australia Pty Ltd (2002) 116 IR 186.
50 The learned primary judge observed that, if there is an implied term of mutual trust and confidence in contracts of employment it is a term implied by law, and may be excluded by express terms or because it would operate inconsistently with the express terms of the contract.
51 His Honour went on to find at [330] that there was an implied term of mutual trust and confidence in Mr Barker’s contract. I set out earlier, part of the paragraph in which his Honour stated the formulation of the term and pointed out that he was not deciding whether it applies at the point of dismissal. He went on to say that the critical question was whether a serious breach of the Bank’s Redeployment Policy between 2 March 2009 and 9 April 2009 was a breach of the implied term. He pointed out that the term was not being invoked to qualify the Bank’s power of termination on four weeks’ notice.
52 His Honour considered that a claim for damages for breach of the implied term was not a “back door” method of avoiding the effect of the statement that the redundancy policies were not terms of the contract. This was because:
… it is only a serious breach that could give rise to a breach of the implied term.
53 The primary judge reached the conclusion that, in all the circumstances, the Bank did commit a serious breach of the implied term. His Honour considered the significant circumstances to be that Mr Barker was an employee of the Bank for approximately 27 years, he was asked to leave the Bank’s premises almost immediately and his access to the Bank’s intranet and email facilities were almost immediately withdrawn. He continued as follows:
[351] … In that context, although it was not incumbent on the Bank to redeploy Mr Barker, it was incumbent on it to take timely and meaningful steps to comply with its own policy. It did not do that. It did not contact Mr Barker because of an internal error. When it did contact him, it was very late in the piece. I accept that by 31 March 2009, it was reasonable for Mr Barker to consider that there were no reasonable prospects of redeployment.
[352] The Bank’s almost total inactivity within a reasonable period means that its breach of its Redeployment Policy was a serious breach and that it was in breach of the implied term of mutual trust and confidence.
54 As to the question of loss or damage caused by the breach, his Honour was not satisfied that Mr Barker would have secured the Service Excellence position, even if the Bank complied with the Redeployment Policy.
55 Nevertheless, the primary judge was satisfied that if the Bank had made a timely and genuine effort to comply with its policy, Mr Barker would have been advised of a position or positions for which he may have been considered suitable. His Honour assessed Mr Barker’s chances of redeployment, in accordance with well established authorities, as 25%.
56 His Honour calculated future economic loss upon the footing that Mr Barker would retire at the age of 60 (allowing for his contractual entitlement to retire at 55) and applied a 30% reduction to take account of residual earning capacity.
57 The primary judge dismissed Mr Barker’s claim for damages for loss of reputation resulting from breach of the implied term. He considered that any such loss would flow from the fact of dismissal so an award of damages would be contrary to the principle in Addis v Gramophone.
58 Finally, his Honour dismissed Mr Barker’s claim under the Trade Practices Act in so far as the claim relied on s 52, on the ground that the relevant representations were not made in trade or commerce.
The UK authorities
59 As Jessup J points out, the introduction of the implied term into English employment law in the late 1970’s was the common law’s response to the need to define what constituted a dismissal for the purpose of the statutory wrongful dismissal laws.
60 This was clearly explained in the speech of Lord Nicholls in Eastwood v Magnox Electric plc [2005] 1 AC 503. The relevant passage is set out at [214] below.
61 When the issue of the implied term first came before the House of Lords in Malik, the parties were agreed that the relevant contracts of employment each contained an implied term of trust and confidence that was binding on an employer. The formulation of the term was that the employer would not, without reasonable and proper cause, conduct itself in a manner likely to destroy or seriously damage the relationship of trust and confidence between employer and employee. This can be seen in the speeches of Lord Nicholls at 33-34 and Lord Steyn at 45-46.
62 In our respectful view, it is an unduly narrow reading of their Lordships’ speeches in Malik to suggest that Malik is not authority for the proposition that such a term is implied by law into all contracts of employment in England.
63 It is true that the House of Lords was not required to rule on the existence of the term after a contested hearing on that issue. But it is not possible to read the speeches without coming to the view that their Lordships accepted the existence of such a term. Indeed, as Lord Steyn said at 46, the implied obligation is a question of pure law and their Lordships were not bound by the agreement of the parties or by the acceptance of the obligation by the primary judge or the Court of Appeal.
64 Nor do we think that anything turns on the differences between the explanations for the evolution of the term that were given by Lord Nicholls and Lord Steyn. In our view both give a sufficient juridical basis for the existence of the term.
65 It seems to us to be implicit in Lord Nicholls’ speech that he regarded the term as one that is implied by law as a matter of necessity in the modern employment context. He said at 37 that the purpose of the term is to preserve the employment relationship.
66 He went on to say that employment is a matter of vital concern to most people. Jobs are less secure than in earlier times and an employment contract creates a close personal relationship where there is often a disparity of power between the parties.
67 Lord Steyn considered that the obligation probably has its origin in the duty of co-operation between contracting parties. His observation that the notion of “master and servant” is obsolete and has been replaced by that of employer and employee is apt. The fact that the two descriptions may refer to the same type of legal relationship is not to the point. The change in language merely reflects changes which have undoubtedly taken place in employment law, as Lord Steyn pointed out: see at 45-46.
68 The term implied by law in the contract of employment considered by the House of Lords in Scally v Southern Health and Social Services Board [1992] 1 AC 294 was, as Lord Steyn said in Malik at 46, a striking example of these changes.
69 The same theme was taken up in the speech of Lord Hoffmann in Johnson v Unisys Ltd [2003] 1 AC 518. His Lordship said at [35] that over the last 30 years the nature of the contract of employment has been transformed in recognition of the social reality that a person’s employment is usually one of the most important things in his or her life. He said that most of the changes have been statutory but the common law has adapted itself to the new attitudes: see also at [77] per Lord Millett.
70 Johnson v Unisys was an appeal against an order striking out a claim. The claim was for damages for wrongful dismissal arising from the manner in which the employee had been dismissed. The appeal failed, not because of the way in which their Lordships approached the principle in Addis v Gramophone, but because they did not consider it proper to permit the development of a common law right which covered the same ground as that which was contained in statutory wrongful dismissal laws: see at [2] per Lord Nicholls; at [57]-[58] per Lord Hoffmann; at [80] per Lord Millett; cf at [28]-[29] per Lord Steyn.
71 But what seems to us to be important is that all of their Lordships in Johnson v Unisys proceeded on the basis that the implied term of trust and confidence referred to in Malik was an incident of the relationship of employer and employee: see at [2] per Lord Nicholls; at [18], [24] per Lord Steyn; at [47] per Lord Hoffmann; at [78] per Lord Millett.
72 The difficulty which arose in Johnson v Unisys was, as Lord Hoffmann explained most clearly at [46]-[47], the implied term is concerned with preserving and continuing the relationship of employer and employee. It is not appropriate to use the term in connection with the way in which the relationship is terminated: see also at [37].
73 The most recent decision of the House of Lords on the question of the implied term is Eastwood v Magnox Electric plc [2005] 1 AC 503. The essential issue in the case turned on whether the employee’s claim fell within the “Johnson exclusion area”, that is to say, whether the employees sought to use the implied term to recover damages for, or in relation to, their dismissal.
74 Lord Nicholls (with whom Lords Hoffmann, Rodger and Brown agreed) recognised that the decision in Johnson v Unisys gives rise to “demarcation” problems. He observed at [15] that, if the implied term applies to events leading up to a dismissal, but not to the dismissal itself, unsatisfactory results follow. Nevertheless, he considered that it is possible to identify a boundary line.
75 In that regard, Lord Nicholls said at [27] that if an employee has acquired a cause of action, whether for breach of contract or otherwise, before the dismissal, the cause of action remains unimpaired by a subsequent unfair dismissal and any statutory rights that flow from it.
76 Lord Steyn also recognised at [35] that a cause of action may accrue to an employee before and independently of a dismissal.
The Australian authorities
77 We agree with Jessup J that no High Court authority has determined the question of whether the implied term forms part of employment contracts in Australia.
78 We also agree with his Honour that the existence of such a term does not form part of the ratio decidendi of any of the eleven intermediate decisions of appellate courts in which the question has been discussed.
79 However, the weight of authority points in favour of the acceptance of such a term. A Full Court of the Supreme Court of South Australia (Doyle CJ, White and Kelly JJ) undertook a comprehensive review of the authorities in South Australia v McDonald (2009) 104 SASR 344. Their Honours identified at [225] only three Australian decisions, all at first instance, in which the implication of the term has been doubted.
80 A fourth authority may now be added in which Buchanan J reiterated his earlier view that the term does not exist in Australian law. Jessup J refers to his Honour’s observations at [278] below.
81 It is true that in McDonald at [236] the Full Court ultimately considered it was inappropriate to determine the employer’s submission that the implied term does not form part of Australian employment contracts. But their Honours referred to English and Australian authorities of high standing before stating at [231] that:
The development of the implied term can be seen as consistent with the contemporary view of the employment relationship as involving elements of common interest and partnership, rather than of conflict and subordination.
(references omitted)
82 The reference to “partnership” in the abovementioned quote should not, in our opinion, be taken as referring to that concept in its strict sense. What seems to us to be important is that their Honours went on at [232] to state that it is plain that the duties which may be required of an employer under the implied term are still being developed. They said that this is inevitable because of the open-ended nature of the way in which the duty is expressed.
83 Doyle CJ, White and Kelly JJ also pointed out at [238] that the authorities indicate that the relevant statutory regimes which apply after dismissal may be decisive in the determination of the remedies available for breach of the term.
84 Thus, as Basten JA observed in Russell v Trustees of the Roman Catholic Church of the Archdiocese of Sydney (2008) 72 NSWLR 559 at [63], a claim for damages for steps taken up to a dismissal would be likely to be inconsistent with statutory remedies for unfair dismissal and would allow the rule in Addis to be sidestepped. The same approach is reflected in the observations of Spigelman CJ in Paige (referred to above) at [133]-[155].
85 In Paige at [132]ff Spigelman CJ emphasised the need for coherence in the law of employment, in particular at the intersection between the common law and statute where the law is heavily regulated at the State and Commonwealth level.
86 But we do not read his Honour’s remarks in Paige as addressing the question of whether the term applies to conduct that is independent of the act of dismissal. This seems to us to be borne out by his endorsement of the observations of Lord Hoffman in Johnson v Unisys. Those observations were directed at the primacy of statute law on the question of unfair dismissal but left untouched the authority of Malik on the application of the implied term of trust and confidence to an ongoing employment relationship.
87 Spigelman CJ’s conclusion at [154] referred only to a refusal to expand the common law to provide an alternative cause of action for unfair dismissal. His concluding remarks at [155] are to similar effect. However, on one view his Honour’s observation at [155] about matters concerning the “creation and termination” of contracts of employment may be thought to pick up, albeit indirectly, the question of whether the term is to be implied into the contract at its inception.
Term implied by law?
88 As a Full Court (Lindgren, Finn and Bennett JJ) observed in University of Western Australia v Gray (2009) 179 FCR 346 at [136], it is well accepted that terms implied by law are implied into all contracts of a particular class as a legal incident of that class of contract: see Breen v Williams (1996) 186 CLR 71 at 103 per Gaudron and McHugh JJ; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 448 per McHugh and Gummow JJ.
89 Employment contracts are such a class but a term will not be implied where it has been expressly excluded or is inconsistent with the express terms of the contract: Byrne at 448; Gray at [136].
90 The test that has been most commonly applied is that of “necessity” which has been referred to with approval by the High Court: Byrne at 450; Breen at 103; Gray at [139]. As their Honours observed in Gray, that test owes its provenance to the observations of Lord Wilberforce in Liverpool City Council v Irwin [1977] AC 239 at 254.
91 It was not difficult to see in Irwin why the easements for the use of the common facilities by the tenants were accompanied by an implied obligation on the part of the landlords to maintain the facilities so that they were available for the tenants’ use. The facilities were a “necessity”, in the sense that without those facilities, life in the dwellings as a tenant was not possible.
92 This rationale for the implication of terms by law finds expression in the observations in Byrne at 450 and Breen at 103 that many terms are implied by law to prevent the enjoyment of rights conferred by contract being rendered nugatory, worthless, or seriously undermined.
93 But in each of those statements their Honours recognised that “necessity” is central to the rationale for the implication of a term by law. And it is here that the difficulty arises because as the Full Court pointed out in Gray at [141]-[147], necessity is an elusive concept which takes into account a range of considerations including the inherent nature of the contract and the relationship which is established as well as policy considerations that relate to the particular class of contract.
94 The Full Court in McDonald observed at [228] that in England a variety of bases have been suggested as indicating the necessity of the implied term of trust and confidence. It seems to me that the various bases (other than the implied duty of co-operation to which we will refer later) are all informed by policy considerations referable to the nature of the relationship between employer and employee. This was implicitly recognised in the speeches of Lords Hoffman and Millett in Johnson v Unisys at [35], [37] and [77].
95 In our opinion it is these policy considerations which underlie the statement in McDonald at [231] that the development of the implied term is consistent with the contemporary view of the employment relationship. That approach seems to us to be in accordance with the explanation of the necessity test stated by the Full Court of this Court in Gray.
The nature and content of the implied term
96 The essential question in the present case is to identify the content of the implied term. In our opinion that is a relatively straightforward exercise because the issue which arises is as to the application of the term to an ongoing relationship.
97 It is not concerned with the implication of a term applicable in relation to dismissal or to steps which are inextricably bound up with dismissal.
98 The term which has been stated in most of the authorities is that the employer will not, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee: see for example Malik at 34.
99 Some of the authorities appear to suggest that the term is one which implies duties of loyalty, confidentiality and mutual trust: see for example Basten JA’s characterisation of the trial judge’s description of the relationship of employer and employee in Russell at [31].
100 If that formulation of the term is intended to suggest that an employer and employee owe fiduciary duties to each other, it seems to us to be contrary to established authority.
101 It is true that in Hospital Products Ltd v US Surgical Corporation (1984) 156 CLR 41 at 96, Mason J described employee and employer as one of the accepted fiduciary relationships. But it is the employee who owes fiduciary duties to the employer. This is clear from what Mason J said at 96-97 about the critical feature of the established fiduciary relationships.
102 The critical feature is that the fiduciary undertakes to act for and on behalf of the interests of another person in the exercise of a power which will affect the other person in a legal or practical sense. Thus the hallmark of the fiduciary relationship is that it gives the fiduciary a special opportunity to exercise the power to the detriment of the other person who is vulnerable to abuse of the fiduciary’s position: Hospital Products at 96-97.
103 As Mason J went on to say at 97, contractual and fiduciary relationships may co-exist but it is the contract that regulates the rights of the parties; the fiduciary relationship, if it exists, must be accommodated to the terms of the contract. There is nothing in the express terms of the contract in the present case to which any fiduciary duties of the employee would need to be adapted.
104 In Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 at 81, Dixon and McTiernan JJ described the contractual obligations of an employee in terms that are reminiscent of fiduciary duties. Their Honours spoke of the duty of the employee not to engage in conduct that impedes the faithful performance of the employee’s obligations, “or is destructive of the necessary confidence between employer and employee”. See also at 72-73 per Starke and Evatt JJ.
105 The plurality (Gleeson CJ, Gaudron and Gummow JJ) in Concut Pty Ltd v Worrell (2000) 75 ALJR 312 referred at [26], with apparent approval, to the statement in Finn PD, Fiduciary Obligations (2nd ed, LawBook Company, 1977) at 267 that the formulation of the obligations of an employee in Blyth Chemicals is a re-expression of equitable obligations in terms of implied contracts.
106 In Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359, Dixon J described the contractual obligations of an employee, sales representative, in similar terms to those stated in Blyth Chemicals. But it is notable that his Honour’s explanation at 378 included the following statement:
Moreover, the contract established a relation between the parties intended to subsist for a period, and it involved some degree of mutual confidence and required a continual co-operation.
107 The reference in this statement to “mutual confidence” seems to me to recognise that an employer may be under an obligation to the employee not to engage in conduct that is inconsistent with the employer’s duty of confidence in the employee. A contractual obligation so expressed is not far removed from the duties imposed on an employer under the formulation of the implied term in Malik. But it begs the question of the content of the duty, particularly in light of Professor Finn’s observation that formulations such as this are a re-statement of equitable obligations.
108 Nevertheless, as the Full Court said in McDonald at [232], the duties of an employer under the implied term are still being developed. Perhaps all that can be said is that, while the employer’s duty under the implied term should not be described as fiduciary, the content of the implied contractual duty must be moulded according to the nature of the relationship and the facts of the case: Hospital Products at 102.
The content of the duty in the present case
109 In the present case the contract of employment described the relationship in very general terms. Mr Barker was employed “as an executive of the Bank”. His duties were not spelled out in any specific way.
110 But he was a senior employee of nearly 23 years’ standing when the contract was entered into. It was not suggested that the contract was not a new and discrete agreement or that the terms of his earlier employment contract continued to apply even though the contract was described in cl 1 as a variation of the terms of his employment: cf Concut v Worrell at [19]-[20].
111 However, the fact that Mr Barker was a long-term employee of a large corporate employer is a relevant circumstance which informs the operation of the implied term. So too, the operation of that term is informed by the provisions of cl 8 which contemplated that Mr Barker’s employment may be terminated if the Bank were unable to place him in an alternative position. Importantly, cl 8 was engaged because Mr Barker was already employed by the Bank at the time when he entered into the contract.
112 It seems to us that in these circumstances the implied term required the Bank to take positive steps as from 2 March 2009 to consult with Mr Barker about the possibility of redeployment and to provide him with the opportunity to apply for alternative positions within the Bank. Indeed, in its letter of 2 March 2009, the Bank acknowledged that it was the Bank’s preference to redeploy Mr Barker and that it would explore, in consultation with him, appropriate options for redeployment to a suitable position within the Bank.
113 The approach which we take differs from that which was adopted by the primary judge. His approach, at [330], was to hold that a serious breach of the Bank’s Redeployment Policy amounted to a breach of the implied term. Thus, he treated the content of the implied term as co-extensive with an obligation to observe the Redeployment Policy.
114 We do not, with respect, see that this can be correct because, as his Honour accepted, the terms of the Redeployment Policy were not part of the contract of employment. Thus, Mr Barker’s position was different from that which applied in Scally v Southern Health and Social Services Board [1992] 1 AC 294 where the contract of employment conferred a valuable right on an employee, contingent upon action being taken by him to avail himself of its benefit.
115 In Scally, the House of Lords held at 307 that since the employee could not be expected to be aware of the benefit unless the term was brought to his attention, there was an implied obligation on the employer to take reasonable steps to bring the term to the attention of the employee. The term was implied as a matter of law upon the basis of necessity, not upon the ground of business efficacy.
116 Here, the terms of the Redeployment Policy could not be described as a valuable contractual benefit because they were not contractually binding. Even if they were, Mr Barker could be expected to know that the Bank had certain policies pertaining to redundancy so that we do not consider it was incumbent upon the Bank to bring the policy to his attention.
117 Nevertheless, the circumstances to which we referred above seem to us to be sufficient in the present case to require the Bank to take positive steps to consult with Mr Barker and inform him of suitable employment options. In our opinion, these obligations fell within the content of the implied term.
An alternative approach: the implied duty of co-operation
118 One of the various bases for recognition of the implied term was stated by Lord Steyn in Malik at 45. He considered that the employer’s obligation probably has its origin in the general duty of co-operation between contracting parties.
119 As Jessup J points out, the duty of co-operation between contracting parties has been accepted by the High Court. The principle stated by Mason J in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 is drawn from the rule of construction stated by Lord Blackburn in Mackay v Dick (1881) 6 App Cas 251 at 263. See also the discussion by McHugh and Gummow JJ in Byrne at 448-449. Their Honours observed that what used to be described as a rule of construction is now more aptly called an implied term, that is to say, a term imported into all transactions of a particular description.
120 The principle stated by Lord Blackburn calls for the implication of a duty of co-operation where both parties have agreed that something is to be done, which cannot effectually be done unless both concur in doing it.
121 An alternative formulation of the principle, drawn from earlier High Court authority, was set out by Mason J in Secured Income at 607. It states the implied obligation as one which requires a party to a contract to do all things necessary to enable the other party to have the benefit of the contract.
122 Both formulations of the term emphasise that the duty of co-operation is anchored upon the need for one party to take a positive step without which the other party is unable to enjoy a right or benefit conferred upon it by the contract.
123 The decision of the House of Lords in Scally may be explained as an application of that principle.
124 The difficulty in the present case is, as Jessup J points out, to identify the benefits conferred on Mr Barker under the contract which give rise to the implied obligation on the Bank to take the necessary steps towards redeployment. We agree with his Honour that the benefits cannot be the observance of the implied term itself. Rather it is necessary to identify a benefit conferred by the contract, upon which the implied term can operate.
125 It follows that the relevant benefit cannot be the Redeployment Policy itself because that was not a term of the contract.
126 However, it seems to us that the contract of employment in the present case, when properly construed in light of all the relevant circumstances, does confer a benefit which gave rise to the operation of the implied term.
127 As we said above, Mr Barker had been employed by the Bank for approximately 23 years when the contract was entered into. The contract, in cl 8, contemplated the possibility of redundancy and redeployment within the Bank, as an alternative to termination. The Bank is a very large corporation with a huge workforce and many and varied positions within the Bank at various locations throughout Australia.
128 In our opinion, that was sufficient to give rise to the implied obligation of co-operation in a way that is analogous to the duty of the employer to take the positive steps identified in Scally.
Was there a breach of the implied term?
129 The primary judge dealt with the question of breach by considering whether the Bank was in serious breach of its Redeployment Policy. He found at [352] that there was such a breach and that it amounted to a breach of the implied term of mutual trust and confidence.
130 For reasons stated above, we do not approach the matter as one where it is necessary to consider the Redeployment Policy. Rather, it seems to us that the Bank’s actions on and from 2 March 2009 to 26 March 2009 were sufficient to amount to a breach of the Bank’s duty not to engage in conduct likely to destroy or seriously damage the relationship of confidence that existed between the Bank and Mr Barker.
131 What was required by the Bank was that it take positive steps to consult with Mr Barker about alternative positions and to give him the opportunity to apply for them. Instead, it failed to make contact with him for a period which the primary judge found to be unreasonable. The Bank was unable to do what was required of it because it withdrew Mr Barker’s email and mobile phone facilities without telling the person charged with the responsibility of contacting Mr Barker of those facts.
132 In our opinion that was sufficient to constitute a breach of the implied term.
Does the breach sound in damages?
133 Different views are expressed in the authorities as to whether a breach of the implied term gives rise to a claim for damages.
134 Malik is authority for the proposition that a breach of the term sounds in damages, subject to the application of the ordinary rule that an employee must establish the loss that was caused by the breach.
135 In Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144, a Full Bench (Wilcox CJ, von Doussa and Marshall JJ) of the Industrial Relations Court of Australia, expressed a different view. Their Honours, in obiter remarks at 154, doubted whether a breach of the implied term is capable of giving rise to a liability for damages. Other authorities have stated a similar view.
136 It may be accepted, as the Full Court observed in McDonald at [213] that the implied term was developed in England to enable access by employees to the statutory unfair dismissal régime. But it does not follow that the term cannot give rise, in an appropriate case, to a claim for damages in the same way as damages are ordinarily available for breach of a term of a contract. Damages should be recoverable for breach of the implied term, at least where the breach is anterior to and independent of termination.
137 The present case is one of a loss of a chance which fell to be considered under well established principles. The primary judge referred to the well-known authorities of the High Court in Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 103-104 and Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 349.
138 The primary judge’s approach to this question was an orthodox application of established principles. We see no error in the conclusion that he reached.
The Cross-Appeal
139 Mr Barker raises five grounds in his notice of cross-appeal which we will deal with below.
Ground 1 – Redeployment before 2 March 2009
140 This ground was not addressed in Mr Barker’s written submissions and it is unclear whether it was pursued.
141 The ground is difficult to understand. As we understand it, Mr Barker contends that the primary judge was in error in failing to find that the Bank was under a “legal obligation” to take steps to redeploy Mr Barker before 2 March 2009.
142 The short answer to this contention is the finding made by his Honour at [345], the effect of which is that Mr Barker was given the earliest practicable advice of his redundancy.
Ground 2 – Mr Barker would have been redeployed
143 Mr Barker seeks to challenge the finding made by the primary judge at [366] in which his Honour said he was not satisfied on the balance of probabilities that, if the Bank had followed its Redeployment Policy, Mr Barker would have been redeployed.
144 Related to this is the ground raised in Ground 3 in which Mr Barker seeks to challenge the primary judge’s assessment of his chances of redeployment at 25%.
145 Both of these grounds go beyond an attack upon ordinary factual findings. They seek to challenge the primary judge’s findings as to the likelihood of something occurring if the situation had been different. Those findings involve elements of degree, opinion and judgment as to which it cannot be said that there is only one correct answer: see Frost v Sheahan as Trustee of the Bankrupt Estate of Allen Gordon Frost [2012] FCAFC 46 at [16] (Finn, Cowdroy and Flick JJ); see also Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [24] (Allsop J).
146 As the primary judge observed at [354], Mr Barker identified four possible redeployment opportunities. His Honour explained at [355]-[365] his reasons for coming to the view that he was not satisfied on the balance of probabilities that, even if the Bank followed the Redeployment Policy, Mr Barker would have been redeployed.
147 The gravamen of Mr Barker’s contention on the appeal was that the primary judge ought to have found, as a “near 100% certainty” that Mr Barker would have been redeployed to one of the opportunities identified by him, namely, the Agribusiness role.
148 That issue turned upon the evidence of Mr Champion. However, the primary judge observed at [363] that Mr Champion’s evidence must be seen in the context that he had not worked with Mr Barker and had limited knowledge of Mr Barker’s abilities. This finding was not challenged on the appeal.
149 The constraints imposed by the nature of the appellate process upon the issue raised by Mr Barker are larger than those described in Fox v Percy (2003) 214 CLR 118 at [22]-[25]. It is clear in our view that no error has been demonstrated in the primary judge’s finding.
Ground 3 – assessment of the chance of redeployment
150 This ground fails for the reasons stated in relation to Ground 2.
Ground 4 – calculation of past economic loss
151 This ground was conceded by the Bank. The effect of the concession was that, if the Bank fails in the appeal, as in our opinion it does, the correct assessment of the damages to be ordered is $335,623.57.
Ground 5 – general damages for hurt, distress and lost reputation
152 Mr Barker’s fifth ground of cross-appeal was that the primary judge erred in finding that general damages for hurt, distress and loss of reputation were not recoverable. Those findings were made at [373]-[374] of the primary judgment.
153 His Honour approached the claim for damages for hurt and distress as a claim for damages for breach of the Redeployment Policy. The claim appears to have been pleaded more broadly but it is clear from the primary judge’s reasons at [373]-[374] that this aspect of the claim was not made as arising from breach of the implied term.
154 The primary judge found at [373] that the Bank’s redeployment policies were not created in order to give employees peace of mind. In our opinion, that finding was correct. The effect of it was that damages for hurt and distress were not recoverable for breach of contract because the object of the contract was not to provide peace of mind: Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 365, 371-372, 382, 387 and 394.
155 Counsel for Mr Barker sought to overcome this difficulty by relying on the decision of Wilcox J in Nikolich v Goldman Sachs JB Were Services Pty Ltd [2006] FCA 784. His Honour held at [317] that the object of a policy which was incorporated into the contract of employment was to provide peace of mind to the employee. His Honour’s orders, other than costs, were upheld on appeal but the question of the “object” of the contract was not considered: Goldman Sachs JB Were Services Pty Ltd v Nikolich (2007) 163 FCR 62. This judgment is discussed by Jessup J at [368].
156 Even if the view adopted by Wilcox J was correct, it turned on the terms of the policy in that case. It has no application to this proceeding.
157 The balance of Mr Barker’s claim was for damages for loss of reputation. The primary judge found at [374] that any injury to Mr Barker would necessarily flow from the fact of his dismissal. Accordingly, he held that an award of damages under this head could not be made, citing the principle in Addis, as well as the observations of Basten JA in Russell at [63]-[65].
158 In our opinion, his Honour’s finding was correct for the reasons which he gave.
Conclusion and Orders
159 We order that the appeal and the cross-appeal each be dismissed with costs.
160 The cross-appeal must be allowed, in part, to give effect to the error in the calculation mentioned under ground 4. However, Mr Barker was substantially unsuccessful in the cross-appeal and he should be ordered to pay the costs.
I certify that the preceding one hundred and sixty (160) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jacobson and Lander. |
Associate:
IN THE FEDERAL COURT OF AUSTRALIA | |
SOUTH AUSTRALIA DISTRICT REGISTRY | |
GENERAL DIVISION | SAD 241 of 2012 |
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
BETWEEN: | COMMONWEALTH BANK OF AUSTRALIA Appellant
|
AND: | STEPHEN JOHN BARKER Respondent
|
JUDGES: | JACOBSON, LANDER AND JESSUP JJ |
DATE: | 6 august 2013 |
PLACE: | ADELAIDE |
REASONS FOR JUDGMENT
Jessup J
161 This is an appeal from a judgment of a single Judge of the court given on 3 September 2012, wherein his Honour entered judgment for the present respondent, Stephen John Barker, against the present appellant, Commonwealth Bank of Australia, in the sum of $317,500, plus interest and costs. The damages were for financial loss suffered by the respondent in consequence of the breach by the appellant of the contract of employment which subsisted between them until terminated by the appellant on 9 April 2009 because the position in which the respondent had been employed became redundant. The breach of contract was constituted not by the act of dismissal itself, but by antecedent conduct on behalf of the appellant which, as the primary Judge held, gave rise to a breach of the implied term of confidence and trust referred to by the House of Lords in Malik v Bank of Credit and Commerce International SA (in liq) [1998] AC 20 (“Malik”) (“the implied term”). The essence of the conduct which his Honour held to be in breach of this term was what he found to be a “serious breach” by the appellant of its own redeployment policy, constituted by failing to take the necessary steps to redeploy the respondent to another position before taking the final step of terminating his employment. Damages were calculated with respect to the remuneration which would have been available in a position to which the respondent might have been redeployed, to the period of time during which the respondent would most probably have remained in such a position, and to the likelihood, on a “loss of a chance” basis, that the respondent would in fact have secured such a position, which his Honour fixed at 25%.
162 The appellant has three grounds of appeal against the judgment of the primary Judge, namely:
1. The respondent’s contract of employment did not contain the implied term.
2. Alternatively, the appellant’s breach of its redeployment policy did not constitute a breach of the implied term.
3. The maximum damages to which the respondent was in any event entitled was referable to the 4-week notice period referred to in the express terms of his contract of employment.
163 The respondent has cross-appealed against the primary Judge’s judgment, contending that –
1. the appellant’s obligations under its redeployment policy arose earlier than the date upon which the respondent was notified that his position was redundant;
2. the respondent would in fact have been redeployed had the appellant followed its policy;
3. alternatively, the respondent’s chance of redeployment was more than 25%; and
4. the respondent should have been awarded damages for hurt, distress and loss of reputation.
As argued, these points were condensed to two: whether the primary Judge ought to have assessed the respondent’s prospects of redeployment at greater than 25%, and whether damages for hurt, distress and loss of reputation should have been awarded.
164 The respondent also contended that the primary Judge had miscalculated the damages to which he was entitled, even if otherwise his Honour’s judgment was free of error. The appellant accepted that there had been a miscalculation and that, if the appeal and the cross-appeal both failed, the respondent was entitled to the sum of $335,623.57 by way of damages.
165 We gave leave to Timothy Daniel Lyons, Assistant Secretary of the Australian Council of Trade Unions, to intervene in the appeal for the purpose only of making submissions on the general question whether the implied term was part of Australian contract of employment law.
The Facts of the Case
166 At the time of his dismissal, the respondent was employed by the appellant as “Executive Manager Adelaide Corporate Banking, Institutional and Business Services, South Australia”. He had signed an “Employment Agreement” which set out the terms and conditions of employment upon which the appellant agreed to employ him, and he agreed to serve the appellant. In that agreement, the respondent agreed to serve at any location where the appellant or one of its related bodies operated. The respondent agreed to “observe and be subject to the provisions of [the appellant’s] instructions”, except as they were varied in the agreement. The agreement could be terminated at any time by a further agreement in writing between the parties, or –
… except in circumstances of misconduct, by four weeks’ written notice by either party to the other party.
Bank may make a payment of an amount equivalent to four weeks’ pay in lieu of notice.
A reason for termination was not required.
167 The agreement also provided as follows:
This Clause applies only where the Employee was already employed by the Bank immediately preceding the date of this Agreement. In the case where the position occupied by the Employee becomes redundant and the Bank is unable to place the Employee in an alternative position with the Bank or one of its related bodies, in keeping with the Employee’s skills and experience, the compensation payment for the Employee will be calculated on the basis of the greater of –
– the amount of $107815.67 (in addition to payments made under Clause 15); or
– an amount equivalent to 0.25 times Base Remuneration as set out in the Annexure.
168 At the time of the respondent’s appointment in 2004, the appellant’s policies were communicated to its staff in its “HR Reference Manual”. In the introductory passage under the heading “Scope and Purpose of the Manual”, it was stated as follows:
The manual is not in any way incorporated as part of any industrial award or agreement entered into by the Bank, nor does it form any part of an employee’s contract of employment.
In May 2008, this manual was transferred to the appellant’s Intranet site, a process that was completed on 22 August 2008. Relevant policies of the appellant were, from that date, published to its staff by way of the Intranet site. The primary Judge noted that, for reasons unknown, the passage quoted above was not included when the manual was transferred to the Intranet site, and was re-introduced only on 27 July 2009, well after the termination of the respondent’s employment.
169 The relevant section of the manual dealt with the subject “Redundancy, Redeployment, Retrenchment and Outplacement policy” (“redeployment policy”). The introductory passage contained the following provisions:
1.1. Context
This policy is designed to maintain a fair and consistent approach to redundancy, redeployment, retrenchment and outplacement while recognising particular issues to be managed in the context of major organisational changes in the Commonwealth Bank Group (the Group) (eg. mergers, acquisitions, restructures)
• The capacity of an organisation to manage, effectively and fairly, the ongoing process of organisation change impacts directly on shareholder value and the well being of employees.
• People with the capability and potential to make the greatest contribution to the Group should be retained.
• In the change process, involuntary job losses should be kept to a minimum and existing conditions for redundancy contained in policies, applicable registered industrial agreements, and individual contracts of employment should be honoured.
1.2. Purpose
The purpose of this policy is to have an open, well-communicated and consistently applied process through which all employees affected by redundancy, redeployment and/ or retrenchment are treated with fairness and dignity.
….
1.4. Principles
The principles that underpin this policy can be summarised as follows:
• Decisions on redundancy of a role and on redeployment and retrenchment of employees will be at the discretion of the authorised manager following a review of staffing needs that is in accordance with the business reorganisation plan for the division or BU concerned.
• As the change proceeds, employees should be kept informed about the process. Where practicable, employees should be given early advice of the likelihood of redundancy, redeployment and/or possible retrenchment.
• As part of BU organisation planning, employees should be given an opportunity to express their interest in their future career progression and to nominate their preferred work areas and as appropriate to express their interest in retrenchment.
• As appropriate, employees should be reassigned and retrained, and natural attrition used to manage reduced employment needs of the Group.
• Decisions regarding redeployment and retrenchment are to be based on merit.
• Appropriate assistance will be provided to employees to support management of retrenchment and career transition.
• Prior to re-hiring (i.e. including temporary staff and contractors) a retrenched employee approval is required from the Business Unit head and the Group Executive, Human Resources and Group Services. Normally before any re-engagement would be considered, the period since retrenchment would have to be significant (for example, 2 years) and the reasons for re-engaging the individual would have to be strong (for example, a skill-set otherwise not available to the Group).
170 Next, the policy dealt with matters relevant to the decision to make a role redundant. After that followed provisions with respect to consultation, covering principles, minimum standards and process accountabilities.
171 In the policy, there followed a section with which the case before the primary Judge was substantially concerned, headed “Redeployment”. It provided as follows:
4. Redeployment
4.1 Principles
• Where possible, employees should be reassigned and retrained, and natural attrition used to manage reduced employment needs of the Group.
• Decisions regarding redeployment of employees are to be based on merit.
4.2 Minimum Standards
• Employees whose roles are likely to be made redundant should be consulted in relation to their options for redeployment, including, when appropriate, their ability to be re-trained for alternative roles.
• If redeployment is appropriate for an employee, the Group will abide by applicable industrial agreements and individual contracts of employment.
• The process for managing employees who decline to accept redeployment to a position will be in accordance with any applicable industrial agreements and individual contracts of employment.
• In redeploying an employee with a disability, consideration must be given to any reasonable adjustment to the role and/ or the workplace that would assist the employee to achieve the required performance standards.
4.3. Process Accountabilities
Employee
• forward resume to Recruitment – Career Support to be matched to existing vacancies
• apply for internal vacancies as appropriate
Manager
• seek advice from BU HR and MoR regarding redeployment options and process.
• consult with employees regarding redeployment options.
• advise HR and MoR re potential redeployee(s).
• support the implementation of any required training.
• maintain records of discussions.
• forward relevant information to Human Resources
MoR
• develop a redeployment plan for their area of accountability.
• implement the redeployment plan.
BU HR
• provide advice to managers and MoRs regarding the appropriate processes and conditions for redeployment in the Group, including what is appropriate alternative employment.
• provide information about potential redeployees to the relevant HR contact in other BUs.
Redeployment Services
• track redeployment pool and match skills to vacancies.
• actively market candidates in other departments or BUs.
• maintain redeployment information for all employees in the Group.
172 There followed provisions with respect to retrenchment as such, and to “outplacement”, the latter provisions being the following:
6. Outplacement
6.1. Principles
• Appropriate assistance should be provided to employees to support management of retrenchment and career transition.
6.2. Minimum Standards
• Employees who are retrenched should be provided with outplacement services and, where provided for in applicable industrial instrument, time to attend interviews.
• The accountabilities of the Group cease at the point of termination of employment.
• Outplacement services should continue in accordance with the procedure put in place with the outplacement service providers.
6.3. Process Accountabilities
Manager
• advise BU HR of need for outplacement services at the appropriate time
• support the provision of outplacement services and provide time off work where appropriate.
MoR
Ensure outplacement arrangements are implemented.
Human Resources
• facilitate outplacement services and manage the relationship with outplacement service providers.
• be a source of support and advice to employees regarding outplacement services.
173 It is necessary next to turn to the respects in which, as found by the primary Judge, the appellant did not observe so much of the policies referred to above as related to the matter of redeployment. Because of the limited nature of the primary Judge’s findings which favoured the respondent, and because of the scope of the appellant’s grounds of appeal and of the respondent’s Notice of Contention (to each of which I shall turn), it will not be necessary to canvass the substantial body of factual material which was said to have provided a basis for a number of the respondent’s claims which were rejected by his Honour, and which, in those and other respects, provided a context for the events which are now immediately relevant.
174 Those events commenced with a reorganisation of the appellant’s business, the result of which was that a number of client portfolios were “collapsed”. The majority of those portfolios were in the team which reported to the respondent, and it was decided that the respondent’s team as such should likewise be collapsed, with the remaining portfolios in that team being allocated to other managers. Although it seems that it did not necessarily follow that the respondent himself would be the manager to be made redundant as a result of this reorganisation; that was the point at which the appellant arrived. In circumstances where one of the managers was to be made redundant, the view was taken that the respondent was not “as good a performer” as the only other manager whose retention was under consideration.
175 On 2 March 2009, the respondent was called to a meeting with Joe Formichella, the Adelaide General Manager of the Corporate and Financial Services (“CFS”) business unit of the appellant and the respondent’s own direct manager, and Glen Davis, the Executive Manager of Strategic Human Resources of the appellant. The respondent may have had a premonition about the purpose of the meeting, since he said, seemingly at the start of the meeting, that it looked like he needed a lawyer. Mr Davis responded that he could get one if he wanted. The respondent was handed a letter from the appellant, as to which the primary Judge made the following findings:
203. In its letter, the Bank advised Mr Barker that it had undertaken a review of the CFS business and that Mr Barker was aware of that fact. The Bank referred to the moving of certain portfolios and changes to the structure of CFS which were necessary. The Bank said that, as a result, Mr Barker had not been allocated to a position within the CFS structure. The Bank continued as follows:
The direct impact of this is that your current position Regional Executive is to be made redundant. This will be effective as at COB today.
It is the Bank’s preference to redeploy you to a suitable position within the Bank and we will explore, in consultation with you, appropriate options. At your discretion, I can have Helen Breccia or one of her team from Career Support contact you shortly to outline their services. I would also encourage you to take proactive steps in seeking redeployment, by using your internal network and applying for suitable vacant positions that are advertised.
We will begin the redeployment process from today and will continually review options. If we are unable to identify a suitable position for you and the decision is made to retrench you, you will be paid redundancy entitlements in accordance with your current employment contract.
In the event you are retrenched we will support you through this change by providing career transition support with one of our preferred outplacement providers – Audrey Page.
Should you have any questions in relation to the process please do not hesitate to talk a [sic] representative from the B&PB (CFS) Human Resources team, Glen Davis on 02-8292-4234, Diane Rosser on 02-8292-4236 or Filippo Ragusa on 02-8292-4235.
176 Together with that letter, the respondent was given a “Retrenchment Assistance Kit” and a PowerPoint presentation entitled “Career Support Presentation”. From the latter, the primary Judge referred to the following items:
Overview
• Career Support makes contact shortly following employee notification and conducts phone meeting (or arranges suitable time). Phone meeting covers off redeployment process and candidate preferences.
• Introductory email forwarded to candidate containing links to Redeployment Campaign, Redeployment Policy and Career Planning Services.
• Contact relevant Team Leader/Manager to complete internal reference checks, then upload strong references onto candidate file in Page Up.
• Candidates register on Redeployment Campaign, enabling Career Support to capture skills and monitor job applications.
• Candidates to attend Resume and Interview Skills Workshops.
• Career Support to provide progress reports to BU HR about outcomes of initial contact, feedback from candidates and probability of redeployment outcome.
• Career Support to reverse market candidates to Recruitment Consultants and other BU, contact internal networks.
Career Support
Career Support provides the following services to assist employees:
• Redeployment Services: 1:1 Intensive support
Redeployment campaign
Complete reference checks
Recruitment of Staff for project roles
• Career Planning Services: Strategies to assist you in identifying your next role
Resume Workshops
Interview techniques
That presentation identified Helen Breccia, referred to in the letter from which an extract is set out above, as the manager of Career Support.
177 The respondent’s redundancy, and the circumstances generally, were discussed at the meeting on 2 March 2009. It seems that the respondent was informed that the appellant was implementing a new business model, with many changes, and that it did not see him as “part of the business structure going forward”. Nonetheless, as the primary Judge found, it was made clear to the respondent that the appellant’s preference was to redeploy him. He was told that, failing redeployment, the date for the termination of his employment would be 2 April 2009.
178 The respondent was told that he should work for the remainder of the day, then clear out his desk, hand in his keys and mobile telephone, and not return to work. He was told that he would be on paid leave during the redeployment period. He acted in accordance with those instructions, but was, it seems, permitted to retain the SIM card from his mobile phone. The appellant terminated the respondent’s access to its Intranet and email facilities. According to his Honour, the appellant justified the latter step as conformable with its practice of protecting itself from disparaging comments to clients by employees who had been notified that their roles had become redundant.
179 On the same day as the meeting at which the respondent was informed of his redundancy, Monday 2 March 2009, he instructed a solicitor, Julia Adlem of Adelaide Legal, to represent him.
180 Also on 2 March 2009, Mr Davis provided the respondent’s work contact details to the appellant’s career support section, of which Ms Breccia was the manager. That section was responsible for assisting employees who had been made redundant to find alternative roles within the appellant’s organisation. Ms Breccia’s duties involved liaising with redundant employees and assisting them in finding alternative positions. Together with the human resources section and the respondent’s managers, Ms Breccia was responsible for the redeployment process in relation to him. Her function was to facilitate the respondent’s access to job opportunities within the appellant’s organisation by distributing career circulars and being a line of communication between the respondent and recruitment staff. Ms Breccia could not, however, remember the respondent’s case.
181 On Tuesday 3 March 2009, Ms Adlem wrote to the appellant on the respondent’s behalf. Her letter was addressed to Mr Formichella, and it seems that it was not provided to Mr Davis or Ms Breccia. In her letter, Ms Adlem claimed that her client had been told that he “was not seen as part of the structure going forward”. Ms Adlem asked for the documents relevant to the selection of her client to lose his position when two executive manager positions remained. Ms Adlem said that she noted the appellant’s preference to redeploy the respondent to a suitable position. She said that, in the event that her client was not redeployed, his entitlements exceeded the indicative retrenchment figures set out in the document given to him.
182 Unrelated (at the time) to the respondent’s circumstances, on 4 March 2009 Mr De Luca, Executive General Manager of the CFS business unit, gave the “go-ahead” for the appointment of four positions of Executive Manager, Service Excellence, with a note in relation to the position that would be based in Adelaide as follows: “potentially Michael van Lierop”. Jade Farrell, a recruitment consultant employed in the CFS business unit, was informed that the appellant would hire employees to these service excellence positions.
183 On Thursday 5 March 2009, Ms Breccia attempted to contact the respondent by telephone, but that attempt was unsuccessful. On the same day, she sent an email to the respondent’s work email address (an address to which the respondent no longer had access). She said that she had tried to telephone the respondent, but had been unable to do so. She asked the respondent to contact her.
184 On Friday 6 March 2009, Amelia Peters, a solicitor employed by the appellant, wrote an email on the appellant’s behalf to Ms Adlem. She said that Ms Adlem’s letter to Mr Formichella (of 3 March 2009) had been passed on to her, and that she would provide a formal response shortly.
185 On Saturday 7 March 2009, Mr Davis sent the respondent an email (transmitted to the latter’s personal email address) in the following terms:
Further to our discussion could you please have the mobile and sim card returned to Fiona by early next week[?] Please feel free to call if you require any additional assistance.
186 At some point hereabouts, the appellant decided to put the service excellence position or positions on hold from 9 March to 26 March 2009. Ms Farrell made inquiries as to whether any of the executive managers in the redeployment pool would be suitable for the position. Mr Formichella responded by saying that he did not consider that the respondent would be appropriate for the service excellence role, and that he and Sinead Taylor had already met with Mr van Lierop who would be an “ideal candidate” for the role.
187 On Tuesday 10 March 2009, Ms Adlem acknowledged receipt of Ms Peters’ email of 6 March 2009.
188 On Wednesday 11 March 2009, Ms Adlem wrote to the appellant and returned, among other things, various SIM cards. On the same date, Ms Peters wrote to Ms Adlem on behalf of the appellant. Ms Peters said that the respondent’s request for documents was refused “because these documents are confidential”. Ms Peters referred to the notice period referred to in clause 8 of the respondent’s employment agreement and continued: “As such, your client is not entitled to ‘reasonable notice’ in the event that he is unable to be redeployed to a suitable position within the Bank.”
189 On Wednesday 18 March 2009, and from time to time thereafter, the respondent met Mr Andrewartha, an outplacement consultant engaged by the appellant. But Mr Andrewartha never spoke to the respondent about redeployment.
190 On Friday 20 March 2009, Mr Davis tried to send an email to the respondent’s work email address (which he, Davis, agreed was a mistake) in the following terms:
As indicated in your signed notification letter, ‘it is the Bank’s preference to redeploy you to a suitable position within the Bank’, however if we are unable to identify a suitable position for you and the decision is made to retrench you, than [sic] your effective exit date will be 30/3/2009. Your final payment will be processed in the next fortnightly payment date post your exit.
In the interim I encourage you to take proactive steps, in consultation with Helen Breccia in the Career Support team and your respective manager, in seeking redeployment opportunities.
Please feel free to raise any issues with either Helen Breccia and/or your manager during the redeployment period.
On Monday 23 March 2009, Mr Davis was advised by Mr Formichella’s executive assistant (Ms Pashley) that the respondent no longer had access to his email, and asked if he wanted his email of 20 March sent to “Legal or his home email”. Mr Davis requested Ms Pashley to send the email to the respondent at his home email address. The respondent did receive the email on that day, or (as the primary Judge put it) “shortly thereafter”.
191 Also on 23 March 2009, Mr Davis sent an email to Ms Breccia asking her to contact the respondent to ensure that he was aware of a “service excellence” position that was going to be advertised. There was, it seems, to be one of these positions in respect of South Australia and the Northern Territory, as well as corresponding positions elsewhere. I shall refer to the positions as advertised in their appropriate chronological place below. Mr Davis, in consultation with Mr De Luca or Mr Formichella, decided to extend the date on which the respondent would formally leave the employ of the appellant, and the closing date for applications for the service excellence position, in order to allow the respondent additional time to seek an alternative role within the appellant’s organisation.
192 It was also on 23 March 2009 that Mr Davis sent two other emails that the primary Judge described as “important”. The first, to his own manager Brigid Gibson, was as follows:
The Sales Excellence roles for Brisbane, Adelaide/Perth and Melbourne have been put on hold as the business finalises [its] segmentation issues, however Corporate NSW/ACT have already commenced their advertising internally.
The roles for Corporate QLD, Corporate Vic/Tas and Corporate SA/NT and WA will commence next week with advertising internally. I am aware that an external candidate has been spoken to, however only in respect to an informal coffee side chat. All of these roles will report directly through to Sinead in CFS Strategy with a dotted line to the respective GMs.
As you are aware the issues we have is that three EMs have been displaced as a result of the recent segmentation exercise in SA, QLD and Vic. In Corp QLD we may have a hopeful win-win as Mark Toon is looking to discuss the role with Patrick Bell (current EM), all going well if Pat accepts we will have the option of moving David Laing-Short (EM displaced) into the role vacated by Pat, hence saving one staff member. However we will also advertise internally conscious of obligations.
In Corp Vic/Tas Ross Bottomly [sic] will likely apply for the EM Sales Excellence role in Vic/Tas and Steve Barker may apply for the Sales Excellence role for Corp SA/NT and WA. The feedback is that given what Rob is seeking for these roles it is unlikely that they will be successful based on merit (talent, skills, abilities and experience), however at least we are being clear and transparent and providing the option to apply.
In essence no one will be appointed until we go through the internal process as per the Appointment to Roles Policy and also any decision making is based on policy guidelines, namely that any external candidate must be demonstrably superior.
Please let me know if this is all OK, if not happy to amend/discuss as required.
The second email, to Ms Farrell, with a copy to Ms Breccia, was as follows:
Can we start the internal advertising for these remaining EM Sales Excellence roles. Do you have a P/D for these roles that you can give Helen.
Helen can you please avail both Ross Bottomley and Steve Barker that these roles are going up on the internal circular next week. I believe that Ross has already applied for the NSW role.
193 On Tuesday 24 March 2009, Ms Breccia was given the respondent’s mobile telephone number, but it seems that the number was for the telephone provided to him by the appellant (which he no longer had). When Ms Breccia attempted to contact the respondent on that number, he did not answer. There were “incoming call restrictions”.
194 On 26 March 2009, Ms Adlem wrote to Ms Peters responding to the latter’s letter of 11 March 2009. Ms Adlem claimed that there had been impropriety in the process whereby the respondent was selected for redundancy. She said that, absent satisfactory resolution of the matter, she had instructions to issue proceedings within 14 days.
195 Also on Thursday 26 March 2009, the respondent received an email from Ms Breccia at his personal email address, in the following terms:
I have been attempting to contact you for some weeks now regarding offering redeployment support.
Unfortunately I have been unable to reach you by phone or your business email address.
I apologise for not speaking to you personally – but hope this will reach you as I wanted to offer you the opportunity to apply for a role that may be of interest and would possibly suit your skill set (not having spoken to you or received your CV I am unable to determine this).
Please find following the PD and tomorrow’s circular – where you will see the reference to the role.
If you are interested in applying for this or any other role in the circular please advise and email me your CV so that I can onforward to the relevant recruiter.
I have also included an email which provides more information about the service I/my team provides.
If you have any questions or I can be of any assistance please contact me.
Acknowledgement of your receipt of this email would be much appreciated.
There were three attachments to this email, the first two of which were a “Position Description” for the role of “Executive Manager – Service Excellence” and a Career Circular with an issue date of 27 March 2009. The respondent forwarded the email to Ms Adlem, with instructions to respond to Ms Breccia “regarding redeployment”.
196 The Career Circular of 27 March 2009 set out many employment opportunities within the appellant’s organisation. There was a position of “Executive Manager – Service Excellence” in each of Sydney, Melbourne, Brisbane and Adelaide. The “Position Description” – referred to as “PD” in Ms Breccia’s email – described the purpose of the role as follows:
Reporting to the State General Manager, the purpose of the Sales Coach role is to co-ordinate and execute the implementation of best practice Strategic Sales upskilling and coaching across the Corporate Financial Services business. The Sales Coach should at all times demonstrate a passionate commitment to driving positive behavioural change and the Sales & Service ethos, to help us achieve our strategic vision of being number 1 in client satisfaction by June 2010.
197 Also on 26 March 2009, Ms Breccia received an application for the service excellence position from an employee of the appellant who had been made redundant in early 2009, Ross Bottomley. Ms Breccia provided Mr Bottomley’s application to Ms Farrell.
198 On the same day again, Mr Davis advised Ms Breccia by email that the appellant was extending the respondent’s “redeployment final date” to 9 April 2009.
199 On Monday 30 March 2009, Ms Adlem emailed Ms Breccia, and referred to her email of 26 March 2009 to the respondent. She asked Ms Breccia to contact her.
200 On Tuesday 31 March 2009, Ms Breccia attempted to make that contact with Ms Adlem, by telephone. Ms Adlem did not answer her telephone, so Ms Breccia left a message. Ms Breccia also sent an email to Ms Adlem, referring to her telephone message, and advising her of a time at which she was available. She sent an email to Ms Adlem (the primary Judge did not say, but it may have been the same email as that referred to in the previous sentence) to which was attached a Careers Circular, described as “this week’s job circular” which had an issue date of 20 March 2009.
201 Eventually, it seems, but still on 31 March 2009, Ms Adlem and Ms Breccia did converse by telephone. Ms Breccia said that she had tried to contact the respondent on his business mobile telephone number and at his business email address for several weeks, leaving messages for him by voicemail and email. She said that the respondent had not responded. In response, Ms Adlem expressed surprise that Ms Breccia did not seem to be aware that the respondent had not had access to his business voicemail or email since 2 March 2009 as the appellant had required him to return his mobile telephone and SIM cards, and had terminated access to his business email. Ms Adlem asked questions about the appellant’s redeployment policy and the role of interest referred to in Ms Breccia’s email of 26 March 2009, but she was not able to elicit any information. Ms Breccia told Ms Adlem that there would be a separate facilitator for redeployment. She said that she was not involved with redeployment or retrenchment processes, and she suggested that Ms Adlem refer the query back to the “business unit”. Ms Breccia told Ms Adlem to let her know if the respondent was interested in any roles in the “weekly circular”.
202 On Tuesday 7 April 2009, Ms Peters wrote to Ms Adlem advising her that the respondent’s exit date had been extended to 9 April 2009 “to give him every chance to participate in the redeployment process”.
203 By Wednesday 8 April 2009, it seems that the view had been taken that none of the applications received for the Adelaide-based service excellence position (which did not, I infer, include an application from either the respondent or Mr van Lierop) was appropriate. In the circumstances, Ms Taylor sent an email to Ms Farrell asking her how quickly she could get an offer out to Mr van Lierop. At no time did Ms Farrell communicate with the respondent.
204 On Thursday 9 April 2009, the appellant wrote to the respondent advising him that his employment “will be terminated by reason of redundancy effective from the close of business today”. He was advised that his retrenchment payments totalled $182,092.16. He returned his vehicle on that day.
The Decision of the Primary Judge
205 The primary Judge held that the appellant’s letter to the respondent of 2 March 2009 did not constitute written notice of termination of employment as required by the respondent’s employment agreement. There being no other such notice, it followed that the appellant repudiated the contract of employment when it terminated the respondent’s employment on 9 April 2009. His Honour held that the respondent accepted that repudiation. Were there nothing else to the case, the respondent would then have been entitled to damages equal to four weeks’ salary, and other benefits for which his agreement provided in the circumstances, including the redundancy payment which he received on 9 April, and which was uncontroversial.
206 But there were other aspects of the case. The respondent’s case below was that the appellant’s policies were incorporated into his contract of employment, and that the appellant had acted in breach of those policies, first, by selecting him for redundancy when he ought not to have been so selected and, secondly, by failing to comply with the redeployment policy. The primary Judge held that the policies were not so incorporated, either as express terms or implicitly by practice and usage. His Honour held that the statement in the HR Reference Manual, where the policies were contained, to the effect that the manual did not form part of an employee’s contract of employment was “decisive against [the respondent’s] case in the absence of any countervailing factor”, of which there was none. His Honour also held that the omission between 22 August 2008 and 27 July 2009 of that statement from the manual was of no significance. He did not accept “that the policies were not part of the contract of employment in August 2004 but became part of an existing contract by reason of the omission of that statement in August 2008”. His Honour considered that the policies were not incorporated into the respondent’s contract by implication of fact because the business efficacy test was not satisfied: “[The respondent’s] contract of employment operates reasonably and effectively without the [appellant’s] policies”. His Honour also held that there was “no basis to suggest that the policies were implied as a matter of law, that is to say, as a legal incident of all employment contracts”.
207 The primary Judge then turned to the implied term, on which the respondent relied in the alternative. Here his Honour reached a number of conclusions. First, he held that the implied term was part of the respondent’s contract of employment with the appellant. His Honour said:
In my opinion, I should hold that there is an implied term of mutual trust and confidence in the contract of employment between [the respondent] and the [appellant]. That would be consistent with the approach taken in England and with the basis assumed by four Justices of the High Court in Koehler v Cerebos [(2005) 222 CLR 44, 54-55 [24])]. Such a term does not interfere with the parties’ freedom of contract as they are free to exclude the term if they wish. The term only operates where a party does not have reasonable and proper cause for his or her conduct and the conduct is likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. Furthermore, in this case I am not deciding whether the term applies at the point of dismissal. On 2 March 2009, [the respondent] was advised that his position had been made redundant. On 9 April 2009, the [appellant] terminated the employment relationship between it and [the respondent]. As will become clear, the critical question in this case is whether the [appellant] breached its Redeployment Policy between those two dates, that is to say, before the purported termination on 9 April 2009. Put another way, the term is not being invoked to qualify the [appellant’s] power of termination upon 4 weeks’ written notice or payment in lieu. It is being invoked at the earlier stage. For these reasons, to hold that a serious breach of the Redeployment Policy amounts to a breach of the implied term is not inconsistent with the [appellant’s] express power of termination under the written employment contract.
208 Secondly, and as appears from the final sentence of the above extract, the primary Judge held that a serious breach by the appellant of its redeployment policy would amount to a breach of the implied term in the respondent’s contract. Thirdly, his Honour held that, before 2 March 2009 there had not been, but that on and after that date there had been, a serious breach of the policy. As to the earlier period, his Honour held that the appellant’s decision to make the respondent redundant was not a breach of the redundancy policy, and that there was no breach of the redeployment policy before the appellant’s announcement that the respondent would in fact be redundant. As to the later period, his Honour held that the appellant had committed a serious breach of its redeployment policy in relation to the respondent. He said:
In terms of particular matters in the Redeployment Policy, there was no consultation with [the respondent], the possibility of retraining was not raised or discussed with [the respondent], advice about redeployment options and process was not sought by Mr Formichella and there was no redeployment plan developed or implemented.
On the other hand, [the respondent] himself did very little in terms of taking what the [appellant’s] letter of 2 March 2009 referred to as, “proactive steps in seeking redeployment”. It is necessary to consider whether his lack of activity affected the [appellant’s] obligations in some way. In his evidence, he sought to explain his inactivity in various ways. I think all of his explanations came back to a view on his part that the [appellant] was not genuine in stating that it wished to redeploy him. He referred to Mr Formichella’s statement on 2 March 2009 that he was not seen as part of the business going forward, the fact that he had been asked to leave the [appellant] on 2 March 2009 and felt that he had been dismissed, and the fact that he considered that the Career Support section would contact him. He said that he did not apply for the service excellence position once he heard from Ms Adlem that on 31 March 2009 Ms Breccia had referred him back to the business, that is to say, to Mr Formichella.
In other circumstances, inactivity by an employee might excuse the [appellant] from taking any steps, or any further steps after a certain point, under its Redeployment Policy. However, I think that the significant circumstances in this case are that [the respondent], an employee of the [appellant] for approximately 27 years, was advised that his position was redundant and asked to leave the [appellant] and return items associated with his employment on the very day he was given such advice. Furthermore, his access to the [appellant’s] intranet and email facilities were immediately withdrawn. In that context, although it was not incumbent on the [appellant] to redeploy [the respondent], it was incumbent on it to take timely and meaningful steps to comply with its own policy. It did not do that. It did not contact [the respondent] because of an internal error. When it did contact him, it was very late in the piece. I accept that by 31 March 2009, it was reasonable for [the respondent] to consider that there were no reasonable prospects of redeployment.
The [appellant’s] almost total inactivity within a reasonable period means that its breach of its Redeployment Policy was a serious breach and that it was in breach of the implied term of mutual trust and confidence.
So the appellant’s failure to abide by its redeployment policy was held to be a breach of the respondent’s contract of employment.
209 The primary Judge then turned to the question of damages. His Honour had evidence of employment opportunities within the appellant’s organisation that were available in the period leading to 9 April 2009. He found that, had the appellant made “a timely and genuine effort to comply with its Redeployment Policy, [the respondent] would have been advised of a position or positions for which he may have been considered suitable.” His Honour assessed at 25% the chance that the respondent would in fact have been appointed to one of these positions. There was, apparently, evidence of the salary that the respondent would have earned in that capacity, since his Honour found that “future economic loss to age 60 years is $1,484,000, and to age 65 years is $1,833,000”. Although there was some uncertainty as to the date at which the respondent would have chosen to retire in such a scenario (he being able to retire at any time over the age of 55), the primary Judge took the midpoint between these two figures, applied “a 30 per cent reduction to take account of residual earning capacity” and then applied the 25% loss of a chance factor.
210 Finally on the contract claim, the primary Judge rejected the respondent’s claim for “general damages for hurt, distress and loss of reputation, and aggravated damages for the manner of his dismissal”.
The Implied Term in the United Kingdom
211 Because of the particular circumstances which surrounded the treatment of the implied term by the House of Lords in Malik (to which I shall refer further below), it is useful to commence with the emergence of the term under the law of employment in the United Kingdom. As at the mid-1970s, it would seem that the term was unknown. Standard texts of that era tended to classify the duties which the parties to an employment relationship had to each other, rather than identifying implied terms in specific wording. The twenty-third edition of Chitty on Contracts, published in 1968, noted that the duties of the employee included those to exercise skill (ie in the case of an employee who held himself or herself out as skilled to do a certain type of work), to exercise reasonable care, to obey the employer, to serve the employer with fidelity and in good faith, not to disclose confidential information, and to account (see Vol 2, Specific Contracts, pp 345-353). The duties of the employer included those to remunerate, to provide for the safety of the employee, and to indemnify in appropriate circumstances (pp 353-366). In the third edition of Halsbury’s Laws of England, the duties of the employee were said to include those to obey lawful orders, to serve the employer faithfully, to perform work with reasonable care and not to be absent from work without good cause (paras 894-897), while the duties of the employer were said to include those to take reasonable care not to expose the employee to unnecessary risks and, in some circumstances, to provide work (paras 904-905). The implied term was not mentioned by M R Freedland in The Contract of Employment, published in 1976. Neither was it mentioned in the second edition of Employment Law, by B A Hepple and Paul O’Higgins, also published in 1976. In E I Sykes’ and H J Glasbeek’s Labour Law in Australia, published in 1972, Prof Sykes, who wrote the section on the contract of employment, classified the duties of the employee as the duty to obey lawful commands, the duty to display skill and/or care, the duty of fidelity or “good faith” and the duty not to commit misconduct (pp 51-63). The duties of the employer were the duty to pay remuneration, the duty to indemnify (in some situations), the duty to provide work and the duty not to expose the employee to situations involving a reasonable possibility of death or personal injury (pp 63-68). To like, although perhaps less categorical, effect was the treatment given to the subject in The Common Law of Employment by Macken, Moloney and McCarry, published in 1978.
212 My purpose in referring to the texts which pre-dated the emergence of the implied term in England in the late 1970s is not to demonstrate that that development must have been in error, but to provide a context for the respondent’s, and the intervener’s, argument in the present case that the term is implied in all contracts of employment as a matter of law, irrespective of the parties’ intentions (unless they specifically exclude it), because of necessity. I shall return to that argument, but I note at this point that it seems that the law of employment managed quite satisfactorily without the implied term for many years.
213 In the present case, counsel for the appellant suggested that the term had its genesis in the decision of the English Employment Appeal Tribunal in Courtaulds Northern Textiles Ltd v Andrews [1979] IRLR 84 (“Courtaulds”), made on 7 December 1978. Counsel for the respondent were not heard to contest that proposition, and I would accept that Courtaulds was the first occasion when the term received an articulation corresponding to that which was later given to it in Malik. Over about two years previously, however, there had been some indications that a contractual obligation somewhat akin to what became the implied term was being recognised: see eg Fyfe & McGrouther Ltd v Byrne [1977] IRLR 29; Robinson v Crompton Parkinson Ltd [1978] ICR 401; and Wood v Freeloader Ltd [1977] IRLR 455.
214 It will be necessary to return to Eastwood v Magnox Electric Plc [2005] 1 AC 503 (“Eastwood”), but the speech of Lord Nicholls in that case explains the circumstances in which the implied term found its way into English employment law in the late 1970s. His Lordship referred to the common law position as it existed prior to the enactment of the Industrial Relations Act 1971 (UK) (the “1971 Act”) with respect to the dismissal of employees. Under the common law contract, so long as sufficient notice were given, an employer could dismiss an employee for any reason, for no reason and/or in circumstances which were, objectively viewed, manifestly unfair. The introduction of statutory unfair dismissal laws by the 1971 Act was accompanied by the need to define what constituted a dismissal. In Eastwood, Lord Nicholls said ([2005] 1 AC at 522, [4]-[6]):
4. These provisions in the 1971 Act prompted a development in the common law. The statutory remedy of unfair dismissal was available only if an employee was dismissed. If an employer behaved in a way no employee could be expected to tolerate, and the employee then resigned in the face of such behaviour, the employee had no remedy. He had not actually been dismissed by his employer. In order to claim he had been constructively dismissed the employee had to be able to point to a breach of contract by his employer which he was entitled to treat as a repudiation of the contract of employment: Western Excavating (ECC) Ltd v Sharp [1978] QB 761. Showing that the employer had behaved unreasonably was not sufficient.
5. The Employment Appeal Tribunal led the way in finding a means to bring such cases within the reach of the unfair dismissal legislation. It is a well established principle that a servant owes a duty of loyalty and faithfulness to his master. Thus, in a modern context an employee will be in breach of contract if he “works to rule” in such a way as to frustrate the commercial objective of his contract of employment: Secretary of State for Employment v ASLEF (No 2) [1972] 2 QB 455 . From here it was a short step to recognise that both parties to an employment contract owe a duty to conduct themselves in a way which will enable the contract to be performed. The developed formulation of this duty became, so far as the employer is concerned, a duty that an employer will not, without reasonable and proper cause, conduct himself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. This formulation of a wide-ranging “trust and confidence” implied term emerged in the late 1970s and the 1980s in cases such as Woods v W M Car Services (Peterborough) Ltd [1981] ICR 666, affirmed [1982] ICR 693 .
6. This term, implied as a legal incident of employment contracts, provides the means by which an employee who resigns in response to outrageous conduct by an employer may obtain redress. Such conduct is a breach of a fundamental term of the contract of employment, and an employee who accepts this breach as a repudiation of the contract by the employer is "constructively" dismissed by the employer. The employee can, accordingly, make a complaint of unfair dismissal to an employment tribunal.
I would add, in passing, that Secretary of State for Employment v ASLEF (No 2) [1972] ICR 19 (“ASLEF”) also owed its result to the interaction between the 1971 Act and the common law of contract, the question being whether a work to rule amounted to a breach of the contracts of employment of the employees concerned for the purposes of s 33(4) of that Act.
215 Returning to Courtaulds, that was an unfair dismissal case in which the question was whether the employee concerned had terminated his contract of employment “in circumstances such that he is entitled to terminate it without notice by reason of the employer’s conduct” within the meaning of para 5(2)(c) of Sch 1 to the Trade Union and Labour Relations Act 1974 (UK) (“the 1974 Act”), which relevantly re-enacted the corresponding provision of the 1971 Act. The Employment Appeal Tribunal (Arnold J presiding) referred to the ruling which had been given by the Court of Appeal in Western Excavating (ECC) Ltd v Sharp [1978] ICR 221 that the terms of para 5(2)(c) were invoked only where the employee was entitled, as a matter of contract law, to treat the employer’s conduct as repudiatory, and went on to say ([1979] IRLR at 85 [10]):
Now the first question is, what was the contract? The contract, as we have already mentioned, was a contract partly expressed (though we have not dealt with the expressed terms or indeed had our attention drawn to them) and partly, as must always be the case, consisting of implied terms. The test must be, as we think, that one implies into a contract of this sort such additional terms as are necessary to give it commercial and industrial validity. One of the ways in which it is put forward in the cross-notice by the solicitors for Mr Andrew is to say that it was an implied term of the contract that the employers would not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between the parties. That term is really criticised on behalf of the employers only in one regard – they say that ‘calculated’ (in addition to ‘likely’) casts the net rather too wide, in that it might involve there being a breach of the implied term where the likelihood was wholly, or at any rate partly, attributable to circumstances for which the employers were not responsible. But we do not read it thus. We think that, thus phrased, the implied term (as regards ‘calculated’) extends only to an obligation not to conduct themselves in such a manner as is intended, although not intended by itself, to destroy or seriously damage the relationship in question. It is confined in those terms and it does not seem to us to be stated too widely.
216 About 18 months later, the Employment Appeal Tribunal (Talbot J presiding) decided Post Office v Roberts [1980] IRLR 347 (“Roberts”). The significance of that decision was that it rejected the proposition that, to amount to a breach of the implied term, the employer’s conduct had to be deliberate and intentional, or prompted by bad faith. Referring to statements, and applications, of the rule in previous cases, the Tribunal was unable to find any requirement of deliberation, intent, or bad faith. The Tribunal said ([1980 IRLR at 352 [49]):
There are threads then running through the authorities whether it is the implied obligation of mutual trust and confidence, whether it is that intolerable conduct may terminate a contract, or whether it is that the conduct is so unreasonable that it goes beyond the limits of the contract. But in each case, in our view, you have to look at the conduct of the party whose behaviour is challenged and determine whether it is such that its effect, judged reasonably and sensibly, is to disable the other party from properly carrying out his or her obligations. If it is so found that that is the result, then it may be that a Tribunal could find a repudiation of contract.
217 About a year later, in Woods v W M Car Services (Peterborough) Ltd [1981] ICR 666 at 670-671 (“Woods”), the Employment Appeal Tribunal (Browne-Wilkinson J presiding) stated the matter in the following terms:
In our view it is clearly established that there is implied in a contract of employment a term that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee: Courtaulds Northern Textiles Ltd. v. Andrew [1979] I.R.L.R 84. To constitute a breach of this implied term it is not necessary to show that the employer intended any repudiation of the contract: the tribunal’s function is to look at the employer’s conduct as a whole and determine whether it is such that its effect, judged reasonably and sensibly, is such that the employee cannot be expected to put up with it: see British Aircraft Corporation Ltd. v. Austin [1978] I.R.L.R 332 and Post Office v. Roberts [1980] I.R.L.R 347. The conduct of the parties has to be looked at as a whole and its cumulative impact assessed: Post Office v. Roberts.
As it happened, Woods was decided adversely to the employee upon the basis that it had not been shown that the original decision of the Industrial Tribunal that the employer’s conduct was not, on the facts, repudiatory was wrong in point of law. That conclusion was upheld by the Court of Appeal (Woods v W M Car Services (Peterborough) Ltd [1982] ICR 693) and, although the case was decided upon the assumption that the implied term existed and, had the facts been otherwise, would have provided a remedy for the employee on account of her constructive dismissal, neither Watkins nor Fox LJJ dealt with the jurisprudential justification for the existence of the term (although Lord Denning MR, like Browne-Wilkinson J in the Employment Appeal Tribunal, clearly had no doubt about the situation). The Tribunal’s formulation of the term was approved by the Court of Appeal in Lewis v Motorworld Garages Pty Ltd [1986] ICR 157, 167 per Neill LJ and 169 per Glidewell LJ.
218 A case concerning the implied term came before the Court of Appeal again in Bliss v South East Thames Regional Health Authority [1987] ICR 700 (“Bliss”). The question which arose was whether the employer’s requirement of the employee, a consultant orthopaedic surgeon, to submit himself to a psychiatric examination, when there was no mental or pathological illness but merely a severe breakdown of personal relationships, and suspending the employee in the meantime, amounted to a repudiation of the contract of employment between them. Giving the reasons of the Court of Appeal, Dillon LJ noted ([1987] ICR at 714) that it was common ground on the pleadings that it was an implied term of the contract of employment that the employer would not without reasonable cause conduct itself in a manner likely to damage or destroy the relationship of confidence and trust between the parties as employer and employee. His Lordship said that there was “ample authority in employment cases to warrant the implication of such a term”. His Lordship also accepted the judgment of the trial Judge that the employer’s conduct had breached that term. The other questions which arose in the case were whether the breach was repudiatory, and if so whether the employee had disentitled himself to relief by electing to affirm the contract. It is sufficient for present purposes to note that the existence, or not, of the implied term was not a matter which the Court of Appeal was called upon to decide.
219 In 1990 and 1991 there were two judgments upon which the respondent relied as instances of the application of the implied term in situations other than those of constructive dismissal. The first was the judgment of Browne-Wilkinson V-C in Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd [1991] ICR 524. One of the questions which came before the Chancery Division in that case related to the power of an employer, whose consent to an amendment of the rules of its contributory pension fund to allow for an increase in pensions higher than the lesser of the rate of inflation or 5% was required, to give or withhold that consent purely by reference to its own interests. His Lordship held so, but subject to the implied term, which he described in shorthand as “the implied obligation of good faith”. Although it was not suggested that the employer’s position was a fiduciary one apropos the members of the fund, his Lordship seemed to say that the implied obligation did not rest in contract alone. There seemed to be some deficiency in the state of the evidence with respect to whether the employer had defaulted on this obligation, in the light of which the only order which his Lordship made was a declaration that the employer’s right to give or to withhold consent was “subject only to the restriction that such right is not validly exercisable in breach of the obligation of good faith”.
220 The second judgment was that of the House of Lords in Scally v Southern Health and Social Services Board [1992] 1 AC 294. Counsel for the respondent submitted that, in that case, their Lordships had “recognised the obligation, within the concept of the implied term, to inform employees of the existence of pension benefits”. That was not so. The case had nothing to do with the implied term. It was decided by reference to the conventional jurisprudence for the implication of a term by law (to which I refer at paras 284-290 below); and the term then implied was not the implied term.
221 That brings me to Malik, which was the first occasion upon which the implied term came before the House of Lords. Before coming to that judgment, however, it is useful to visit the judgment of the Court of Appeal, reported as Mahmud v Bank of Credit and Commerce International SA [1996] ICR 406. The facts of the case were unusual. They arose out of the 1991 collapse of the Bank of Credit and Commerce International SA, to which Morritt LJ referred as “BCCI”. The appellants in the case (both in the Court of Appeal and later in the House of Lords) were two of the employees of BCCI whose employments had been made redundant by the provisional liquidators about three months after their (the liquidators’) appointment. During that period, according to Morritt LJ, “it became public knowledge that in the view at least of the regulatory authorities BCCI’s business had for a number of years been carried on fraudulently” ([1996] ICR at 408). The appellants alleged that they had since been unable to obtain employment in the financial services industry because of the stigma attaching to them as former employees of BCCI. Claiming compensation, they submitted proofs of debt in the liquidation. The liquidators rejected the claim, and the appellants appealed therefrom to the court. A preliminary point was there taken by the liquidators that the evidence in support of the claim “failed to disclose a reasonable cause of action or a sustainable claim for damages” ([1996] ICR at 408). For the interlocutory purposes with which they were then concerned, the parties relied upon an agreed statement of facts as follows ([1996] ICR at 409):
The facts and matters upon which the applicants rely are as follows: (a) the applicants were employees of B.C.C.I.; (b) B.C.C.I. operated in a corrupt and/or dishonest manner; (c) the applicants were innocent of any involvement in B.C.C.I.’s corruption and/or dishonesty; (d) following the collapse of B.C.C.I. its corruption and/or dishonesty has become widely known; (e) in consequence the applicants are now at a handicap on the labour market because they are stigmatised by reason of their previous employment by B.C.C.I.; ….
The judge in the Chancery Division approached the question as he would have done on a strike-out application ([1996] ICR at 410), re-formulated a term which would best express the case which the appellants wanted to run, and held that such a term was not implied in contracts of employment in England.
222 In the Court of Appeal, the appellants argued that the primary Judge had been in error to have reformulated the term upon which their claim was based. The term for which they contended was that “the employer will not, without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee” ([1996] ICR at 409-410). The liquidators did not dispute that a term in these terms was implied into the relevant contracts of employment; nor that such a term might be broken by conduct which, “when viewed objectively, is likely seriously to damage the relationship of employer and employee. But the liquidators contended ([1996] ICR at 411) –
… that there can be no breach of such a term unless three implied limitations are satisfied, namely, (1) that the conduct complained of is conduct which involves the treatment of the employee in question, (2) that the employee is aware of such conduct whilst he is an employee and (3) that such conduct seriously damages or destroys the trust and confidence between the employer and the employee.
223 In giving what was effectively the judgment of the Court of Appeal, Morritt LJ said that he would not dispose of the appeal on the grounds advanced on behalf of the liquidators “because this is a striking out application” ([1996] ICR at 412). Speaking of those three grounds, or limitations on the implied term, his Lordship said ([1996] ICR at 412):
I do not think that the first suggested limitation either does or should add anything to the third. If the effect of the conduct satisfies the third condition because, regarded objectively, it seriously damages or destroys the mutual trust and confidence between employer and employee then in principle that should suffice to constitute a breach of the implied term and because of that effect may be regarded as “treatment” of the employee. It is true that the authorities to which we have been referred are all instances of conduct which might be described as conduct involving rather more direct treatment of employees; but we have not been referred to any case in which the claim for wrongful dismissal has failed because the conduct, though destructive of mutual trust and confidence, did not fall within that description.
As far as the second and third conditions are concerned it seems to me that they are, by definition, necessary ingredients of any breach of the implied term as formulated. But it is inherent in conduct of the kind which we are required to assume in this case that, if it is to be successful, it is secret and hidden from most of the employees as well as the rest of the world. So long as it remains secret it can have no effect on the trust and confidence of the employee from whom it is concealed. Moreover, not only could there be no breach without knowledge, there could be no stigma damage either until the fraud was revealed. Once the employee has left his employment the subsequent revelation of the fraud can have no effect on the trust and confidence for, by definition, it has ceased anyway.
224 In the circumstances, as Morritt LJ pointed out ([1996] ICR at 413) central to the appeal in the Court of Appeal was the liquidators’ Addis v Gramophone Co Ltd [1909] AC 488 (“Addis”) point. His Lordship held it to be a good point, and the other members of the court agreed ([1996] ICR 420 and 421 respectively). It followed that the appeal had to be dismissed. The Addis point is not directly relevant to the matter presently under discussion, but it should be noted that the bases upon which the Court of Appeal resolved the case were: (1) the liquidators’ agreement that the implied term had formed part of the employees’ contracts; (2) the rejection of the three limitations on what would amount to a breach of the implied term proposed by the liquidators; and (3) the rejection of the employees’ damages claim because of the Addis line of authority.
225 On appeal to the House of Lords, the liquidators maintained the position which they had advanced in the Court of Appeal, and their three proposed limitations were likewise rejected. It may be presently relevant to note what the two members of the House to give reasons, Lords Nicholls and Steyn, said about the first of those limitations, namely, that there would only be a breach of the implied term where the conduct involved the “treatment” of the employee in question. Lord Nicholls said ([1998] AC at 35):
Second, I do not accept the liquidators’ submission that the conduct of which complaint is made must be targeted in some way at the employee or a group of employees. No doubt that will often be the position, perhaps usually so. But there is no reason in principle why this must always be so. The trust and confidence required in the employment relationship can be undermined by an employer, or indeed an employee, in many different ways. I can see no justification for the law giving the employee a remedy if the unjustified trust-destroying conduct occurs in some ways but refusing a remedy if it occurs in others. The conduct must, of course, impinge on the relationship in the sense that, looked at objectively, it is likely to destroy or seriously damage the degree of trust and confidence the employee is reasonably entitled to have in his employer. That requires one to look at all the circumstances.
Lord Steyn said ([1998] AC at 47):
First, counsel for the bank submitted that the dishonest behaviour of the bank was directed at the defrauding of third parties and that therefore there could be no breach of the implied obligation. The conclusion is not warranted by the premise. The implied obligation extends to any conduct by the employer likely to destroy or seriously damage the relationship of trust and confidence between employer and employee. It may well be, as the Court of Appeal observes, that the decided cases involved instances of conduct which might be described “as conduct involving rather more direct treatment of employees:” [1996] I.C.R. 406, 412. So be it. But Morritt L.J. held, at p. 411, that the obligation:
“may be broken not only by an act directed at a particular employee but also by conduct which, when viewed objectively, is likely seriously to damage the relationship of employer and employee.”
That is the correct approach. The motives of the employer cannot be determinative, or even relevant, in judging the employees’ claims for damages for breach of the implied obligation. If conduct objectively considered is likely to cause serious damage to the relationship between employer and employee a breach of the implied obligation may arise. I would therefore reject the first limitation as misconceived.
226 For reasons already stated, their Lordships in Malik were not required to rule on the primary question whether there was such a term implied into all contracts of employment, and Lord Nicholls did not deal with the subject. In the speech of Lord Steyn, however, an attempt was made to identify the source, and the jurisprudential justification, of the term. Strictly speaking, this part of his Lordship’s reasons was obiter (as his Lordship himself recognised: [1998] AC at 46), but his analysis is both relevant and persuasive – and, I would add with respect, useful – on the present occasion.
227 Lord Steyn said ([1998] AC at 45) that the “evolution” of the term was “a comparatively recent development”. He thought that the obligation arising from the term “probably” had its origin “in the general duty of co-operation between contracting parties”, citing in this context pages 134-135 of the fourth edition (1981) of the work by Hepple and O’Higgins to which I referred in para 211 above. His Lordship continued ([1998] AC at 45-46):
The reason for this development is part of the history of the development of employment law in this century. The notion of a “master and servant” relationship became obsolete. Lord Slynn of Hadley recently noted “the changes which have taken place in the employer-employee relationship, with far greater duties imposed on the employer than in the past, whether by statute or by judicial decision, to care for the physical, financial and even psychological welfare of the employee:” Spring v. Guardian Assurance Plc. [1995] 2 A.C. 296, 335B. A striking illustration of this change is Scally’s case [1992] 1 A.C. 294, to which I have already referred, where the House of Lords implied a term that all employees in a certain category had to be notified by an employer of their entitlement to certain benefits. It was the change in legal culture which made possible the evolution of the implied term of trust and confidence.
With respect – and here I speak, of course, of Australian rather than of English law – I would not regard a distinction between the master-servant relationship and the employer-employee relationship as particularly illuminating, or as helpful in explaining the doctrinal justification for the emergence of the implied term. In this country, these two identifiers have for years been recognised as referring to one and the same thing: Amalgamated Society of Carpenters and Joiners, Australian District v The Haberfield Pty Ltd (1907) 5 CLR 33, 39; Federal Commissioner of Taxation v J Walter Thomson (Australia) Pty Ltd (1944) 69 CLR 227, 229; Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539, 551; R v Foster; Ex parte Commonwealth Life (Amalgamated) Assurances Ltd (1952) 85 CLR 138, 153. For myself, neither would I regard the judgment of Lord Bridge in Scally as an illustration, striking or otherwise, of the imposition upon an employer of a duty “to care for the physical, financial … [or] psychological welfare” of employees.
228 Lord Steyn touched upon the matter of the “possible interaction” of the implied term with “other more specific terms implied by law”, as to which there had been “some debate at the hearing”. His Lordship accepted that the term added little to the employee’s duty to serve the employer loyally and not to act contrary to the employer’s interests. The “major importance” of the term lay “in its impact on the obligations of the employer”. His Lordship continued ([1998] AC at 46):
And the implied obligation as formulated is apt to cover the great diversity of situations in which a balance has to be struck between an employer’s interest in managing his business as he sees fit and the employee’s interest in not being unfairly and improperly exploited.
229 Ultimately, Lord Steyn’s explanation for the evolution of the implied term in the United Kingdom was that it was made possible by “the change in legal culture”, and that it was “a fact”: [1998] AC at 46. In the latter respects, no doubt his Lordship was referring to what had by June 1997 become a considerable body of practical authority at the level of the Employment Appeal Tribunal by which the implied term had provided the foundation for conclusions that employees had terminated their contracts of employment in circumstances where they were entitled to do so by reason of the relevant employers’ conduct for the purposes of para 5(2)(c) of Sch 1 to the 1974 Act and corresponding successor provisions. No doubt also that that explained the tethering of the implied term to the “conduct” of the employer. In a more immediate sense, the existence of the term was a “fact” in Malik because it was common ground as between the parties to the appeal. Each of these considerations of course, speaks less persuasively in an Australian proceeding, and one in which the very existence of the term is put directly in contest by one of the parties.
230 I would complete this part of my reasons by noting that, if one were looking for an authority in which the introduction of the implied term, as a matter of law, into all contracts of employment was categorically upheld after a contested hearing, that authority would not be Malik.
231 The implied term next came before the House of Lords in Johnson v Unisys Ltd [2003] 1 AC 518 (“Johnson”), in which an employee had been dismissed “for some alleged irregularity” ([2003] 1 AC at 538 [31] per Lord Hoffmann) and paid a month’s salary in lieu of notice. An industrial tribunal upheld his statutory unfair dismissal claim upon the ground that the employer “had not given him a fair opportunity to defend himself and had not complied with its disciplinary procedure” ([2003] 1 AC at 583 [31]). The former employee then commenced proceedings on the contract against his former employer, alleging that the manner and fact of his dismissal had been in breach of the implied term, and claiming damages for a mental breakdown which he suffered (he alleged) as a result. The County Court Judge upheld a strike-out application made by the employer on the ground that the facts alleged did not disclose a cause of action at common law. The plaintiff’s appeal to the Court of Appeal was unsuccessful: Johnson v Unisys Ltd [1999] ICR 809.
232 So was his further appeal to the House of Lords. Lord Hoffmann, with whose reasons Lords Bingham and Millett agreed, and Lord Nicholls held that the general question of the fairness of the way in which a dismissal was effected was so comprehensively regulated by statute as to leave no space for the common law to introduce, by implication, a term that an employer would not exercise his or her power of dismissal in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence between employer and employee. Lord Hoffmann said ([2003] 1 AC at 544 [57]-[58]):
57. My Lords, I do not think that it is a proper exercise of the judicial function of the House to take such a step. Judge Ansell, to whose unreserved judgment I would pay respectful tribute, went in my opinion to the heart of the matter when he said:
“there is not one hint in the authorities that the ... tens of thousands of people that appear before the tribunals can have, as it were, a possible second bite in common law and I ask myself, if this is the situation, why on earth do we have this special statutory framework? What is the point of it if it can be circumvented in this way? ... it would mean that effectively the statutory limit on compensation for unfair dismissal would disappear.”
58. I can see no answer to these questions. For the judiciary to construct a general common law remedy for unfair circumstances attending dismissal would be to go contrary to the evident intention of Parliament that there should be such a remedy but that it should be limited in application and extent.
Lord Millett (with whose reasons Lord Bingham also agreed) said of the development of the common law for which the plaintiff contended ([2003] 1 AC at 550 [80]):
80. But the creation of the statutory right has made any such development of the common law both unnecessary and undesirable. In the great majority of cases the new common law right would merely replicate the statutory right; and it is obviously unnecessary to imply a term into a contract to give one of the contracting parties a remedy which he already has without it. In other cases, where the common law would be giving a remedy in excess of the statutory limits or to excluded categories of employees, it would be inconsistent with the declared policy of Parliament. In all cases it would allow claims to be entertained by the ordinary courts when it was the policy of Parliament that they should be heard by specialist tribunals with members drawn from both sides of industry. And, even more importantly, the coexistence of two systems, overlapping but varying in matters of detail and heard by different tribunals, would be a recipe for chaos. All coherence in our employment laws would be lost.
233 Subject to one of the appellant’s arguments to which I shall turn, so much of the judgment in Johnson as depended upon the statutory regulation of dismissals in the United Kingdom is not directly applicable in the present case. However, an aspect of the reasoning of each of Lords Hoffmann and Millett is. Their Lordships gave attention to the question whether the implied term could, or should, apply in dismissal situations even in the absence of a specialised statutory framework. Lord Hoffmann said ([2003] 1 AC at 541-542 [46]-[47]):
46. It may be a matter of words, but I rather doubt whether the term of trust and confidence should be pressed so far. In the way it has always been formulated, it is concerned with preserving the continuing relationship which should subsist between employer and employee. So it does not seem altogether appropriate for use in connection with the way that relationship is terminated. If one is looking for an implied term, I think a more elegant solution is McLachlin J’s implication of a separate term that the power of dismissal will be exercised fairly and in good faith. But the result would be the same as that for which Mr Johnson contends by invoking the implied term of trust and confidence. As I have said, I think it would be possible to reach such a conclusion without contradicting the express term that the employer is entitled to dismiss without cause.
47. I must however make it clear that, although in my opinion it would be jurisprudentially possible to imply a term which gave a remedy in this case, I do not think that even if the courts were free of legislative constraint (a point to which I shall return in a moment) it would necessarily be wise to do so. It is not simply an incremental step from the duty of trust and confidence implied in Mahmud v Bank of Credit and Commerce International SA [1998] AC 20. The close association between the acts alleged to be in breach of the implied term and the irremovable and lawful fact of dismissal give rise to special problems. So, in Wallace v United Grain Growers Ltd 152 DLR (4th) i, the majority rejected an implied duty to exercise the power of dismissal in good faith. Iacobucci J said, at p 28, that such a step was better left to the legislature. It would be “overly intrusive and inconsistent with established principles of employment law”.
Lord Millett said ([2003] 1 AC at 549-550 [78]):
78. I agree with Lord Hoffmann that it would not have been appropriate to found the right on the implied term of trust and confidence which is now generally imported into the contract of employment. This is usually expressed as an obligation binding on both parties not to do anything which would damage or destroy the relationship of trust and confidence which should exist between them. But this is an inherent feature of the relationship of employer and employee which does not survive the ending of the relationship. The implied obligation cannot sensibly be used to extend the relationship beyond its agreed duration. Moreover, manipulating it for such a purpose would be unrealistic. An employer who summarily dismisses an employee usually does so because, rightly or wrongly, he no longer has any trust or confidence in him, and the real issue is: whose fault is that? That is why reinstatement or re-engagement is effected in only a tiny proportion of the cases that come before the industrial tribunals.
These observations have served to mark out an area from which the implied term is excluded, namely, where the conduct complained of is the act of dismissing, or deciding to dismiss, the employee in question.
234 The next development in this area of the law occurred in Eastwood. The nature of that development was identified by Lord Nicholls as follows: ([2005] 1 AC at 524 [15]
15. As was to be expected, the decision in Johnson v Unisys Ltd [2003] 1 AC 518 has given rise to demarcation and other problems. These were bound to arise. Dismissal is normally the culmination of a process. Events leading up to a dismissal decision take place during the subsistence of an employment relationship. If an implied term to act fairly, or a term to that effect, applies to events leading up to dismissal but not to dismissal itself unsatisfactory results become inevitable.
The “boundary line” between the area in which the implied term would operate and the area in which it would not operate was marked out by his Lordship as follows ([2005] 1 AC at 528 [27]):
If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom. By definition, in law such a cause of action exists independently of the dismissal.
The speech of Lord Nicholls in Eastwood attracted the assent of Lords Hoffmann, Rodger and Brown and contained, therefore, the reasons of the House in the case as such.
235 As his Lordship recognised, it would not often be easy to differentiate the circumstances leading to an employee’s dismissal from the dismissal itself, particularly in a case in which the dismissal was a constructive one brought about by those very circumstances. As is apparent from the second of the passages quoted in the previous paragraph, the discrimen for differentiation was given by the answer to the question whether the employee had acquired a cause of action under the implied term before he was dismissed. If so, the remedy following from the employer’s breach would not be affected by the fact of the dismissal. Thus, for example, if the way in which the employer followed its disciplinary process was such as was likely seriously to damage the relationship of trust and confidence, the employee would be entitled to damages for any psychiatric illness which resulted, even if the result of the process was the uncontroversial conclusion that the employee should be dismissed. Lord Nicholls recognised the difficulties created by these demarcations, but tended to see them as the result of the statutory cap on unfair dismissal compensation in the industrial tribunals ([2003] 1 AC at 529 [33]) rather than as inherent in the very high-level, sweeping, terms in which the implied term had come to be expressed in the English courts and the need to put the term to work in the low-level fact situations which are regulated by contracts of employment in many different industries and occupations.
The Implied Term in Australia
236 The implied term, and whether it forms part of contracts of employment in Australia, has never been considered by the High Court. However, on two occasions, reference to the term – direct or indirect – has found its way into High Court judgments concerned with other matters. The first was Concut Pty Ltd v Worrell (2000) 176 ALR 693 (“Concut”), the substantial question in which was whether the employment of an employee had been terminated when he and his employer executed a new service agreement. During the course of the original agreement, on the view of the facts upheld in the High Court, the employee had engaged in conduct inconsistent with his duty of fidelity to the employer. In a paragraph which referred to Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66, Gleeson CJ, Gaudron and Gummow JJ cited the statement by Lord Esher MR in Pearce v Foster (1886) 17 QBD 536, 539 that it was a rule of law that “where a person has entered into the position of servant, if he does anything incompatible with the due or faithful discharge of his duty to his master, the latter has a right to dismiss him” (176 ALR at 700 [25]). In a footnote to that reference, their Honours cited Sterling Engineering Co Ltd v Patchett [1955] AC 534, 543-544 and Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555, 575-576, adding “cf Scally v Southern Health and Social Services Board [1992] 1 AC 294 at 306-307 …; Malik v Bank of Credit and Commerce International SA (in liq) [1998] AC 20 at 34-35, 45-46 ….” The latter references were, of course, to so much of the reasons of Lords Nicholls and Steyn in Malik as dealt with the implied term.
237 The other occasion upon which the implied term was mentioned by Justices of the High Court was Koehler v Cerebos (Aust) Ltd (2005) 222 CLR 44 (“Koehler”). In that case, the employee alleged that the nature and quantity of the duties which she had been asked to perform had given rise to a psychiatric injury, and that the employer should be responsible in damages. Those claims were rejected, as was the proposition, said to be based on the decision of the English Court of Appeal in Sutherland v Hatton [2002] 2 All ER 1, that, where an employee claimed damages from an employer for negligently inflicted psychiatric injury, the only question which needed to be considered was whether harm of that kind to that employee was reasonably foreseeable. In rejecting that proposition, McHugh, Gummow, Hayne and Heydon JJ said (222 CLR at 54-55 [24]):
But neither the particular issues identified in Hatton nor the question from which they stem (was this kind of harm to this particular employee reasonably foreseeable?) should be treated as a comprehensive statement of relevant and applicable considerations. As Lord Rodger of Earlsferry pointed out in his speech in the House of Lords in the appeal in one of the cases considered in Sutherland v Hatton, Barber v Somerset County Council [2004] 1 WLR 1089 at 1101 [35]; [2004] 2 All ER 385 at 398), it is only when the contractual position between the parties (including the implied duty of trust and confidence between them) “is explored fully along with the relevant statutory framework” that it would be possible to give appropriate content to the duty of reasonable care upon which an employee claiming damages for negligent infliction of psychiatric injury at work would seek to rely.
The parenthetical reference to “the implied duty of trust and confidence between them” in this passage was said by the primary Judge in the present case to amount to an assumption by their Honours that the implied term existed as such.
238 The House of Lords judgment to which their Honours referred in Koehler, Barber v Somerset County Council [2004] 1 WLR 1089 (“Barber”), was likewise concerned with an employer’s duty of care in the context of the prospect of an employee suffering psychiatric injury. In the passage to which their Honours referred, Lord Rodger said ([2004] 1 WLR at 1101 [35]):
When the contractual position, including the implied duty of trust and confidence, is explored fully along with the relevant statutory framework, your Lordships may be able to give appropriate content to the duty of reasonable care upon which employees, such as Mr Barber, seek to rely. But the interrelationship of any such tortious duty with the parties’ duties under the contract of employment has not been examined in any depth in the cases to which we were referred and was not analysed in this appeal. For that reason I would not wish to express any view on the content of the council's duty of care in this case.
That is to say, the expression used parenthetically by their Honours in Koehler had in fact been part of the reasons of Lord Rodger. It is perhaps unsurprising that his Lordship would have included that passage – almost by way of aside though it was – in the light of what had become, by 2004, the position in England with respect to the implied term. Standing as a reference to the words of Lord Rodger as they were, I do not think that the reasons of their Honours in Koehler convey an assumption (the correctness of which had, on any view, not been investigated in Koehler) that the implied term was part of Australian law. For the sake of completeness, I would also note that the speech of Lord Rodger in Barber, though concurring, did not stand as the majority reasons of their Lordships.
239 So far as the submissions of the parties in the present appeal, and such researches as I have been able to undertake, reveal, the implied term has come under observation in an intermediate appellate court in Australia on 11 occasions, namely: Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144 (“Burazin”); Perkins v Grace Worldwide (Aust) Pty Ltd (1997) 72 IR 186 (“Perkins”); Blood Transfusion Service of the Australian Red Cross v Raffoul [1998] FCA 1497 (“Raffoul”); Hollingsworth v Commissioner of Police (1999) 47 NSWLR 151 (“Hollingsworth”); Easling v Mahoney Insurance Brokers (2001) 78 SASR 489 (“Easling”); State of New South Wales v Paige (2002) 60 NSWLR 371 (“Paige”); Irving v Kleinman [2005] NSWCA 116 (“Irving”); Delooze v Healey [2007] WASCA 157 (“Delooze”); Russell v Roman Catholic Church, Sydney (2008) 72 NSWLR 559 (“Russell”); State of South Australia v McDonald (2009) 104 SASR 344 (“McDonald”); and Shaw v State of New South Wales [2012] NSWCA 102 (“Shaw”). However, on no occasion has it been held, in the sense of amounting to part of the ratio decidendi, that the implied term is, or is not, a feature of contract of employment law in Australia.
240 Burazin was a judgment of the Full Court of the Industrial Relations Court of Australia in which it was held that the distressing and humiliating treatment to which an employee had been subjected in association with, and directly preceding, her dismissal was compensable under s 170EE(2) of the Industrial Relations Act 1988 (Cth) (“IR Act”), consequently the Workplace Relations Act 1996 (Cth) (“WR Act”). The employee had also claimed that that treatment had constituted conduct by the employer in breach of the implied term. It should be noted that the Full Court came to the question after the judgment of the English Court of Appeal in Malik (sub nom Mahmud v Bank of Credit and Commerce International SA [1996] ICR 406) but before the judgment of the House of Lords in the same case.
241 The Full Court agreed with the trial Judge that there was “ample English authority for the implication of the suggested term”, referring in this regard to Roberts, Woods (at first instance and, on appeal), Bliss, United Bank v Akhtar [1989] IRLR 507 and Malik in the Court of Appeal. But their Honours in the Full Court continued (142 ALR at 151):
However, none of these decisions supports the view that damages are available for breach of the implied term. In each of the three Employment Appeal Tribunal cases [Roberts, Woods and Akhtar] the implied term was used by the employee as a basis for a successful submission that the employer had constructively terminated the employee's employment. In each case, the employer's conduct was held to have undermined the employment relationship so fundamentally as to amount to a repudiation of the employment contract, which the employee accepted by resigning. Damages for breach of contract, as such, were not sought.
The Full Court noted that damages had been sought in the two cases which went to the Court of Appeal, Bliss and Malik. In each instance, it had been held that the rule in Addis stood in the way of an award of damages. In relation to Bliss, the Full Court opined (142 ALR at 152) that it was “difficult to see why [the implied term] should not be regarded as a term designed ‘to provide peace of mind or freedom from distress’, just as much as the contracts in the holiday cases”. Neither, it may be gathered from the terms of their Honours’ reasons, was the Full Court greatly impressed by the Court of Appeal’s linking of the facts of Malik with the rule in Addis, in circumstances where “the claimed breach was not in connection with the termination of the employment contract but in relation to actions during its subsistence” (142 ALR at 153).
242 In Burazin itself, the Full Court upheld the submissions that the implied term existed in the contract of employment which was before it, and that it had been breached in the circumstances of the case. However, their Honours continued (142 ALR at 153-154):
Two issues have to be addressed in determining whether damages are recoverable for distress caused by a breach of the implied term: whether the breach is one capable of giving rise to a liability for damages, as distinct from founding a right to repudiate the contract; and, if so, whether the damages are limited by the rule in Addis.
As it seems to us, there ought to be little doubt about the answer to the second question. Having regard to the purpose of the implied term, it is difficult to dispute that distress is a natural and probable effect of a breach. So if damages are an available remedy, Addis ought not apply. But we have a doubt about the first question. Although it might seem strange to concede the existence of an implied contractual term but deny its capacity to give rise to liability in damages, it must be remembered that the term is intended to bolster an ongoing relationship. To permit an action for damages during the currency of the employment relationship, it might be argued, would be antithetical to the reason for implying the term; the action itself would presumably cause a further deterioration in the relationship. That argument would not apply in a case like Malik, where the relationship had already come to an end. But in some such cases, the implied term will have played its part in enabling the employee to improve his or her legal position by placing responsibility for the termination on the employer.
However, the Full Court ultimately did not decide any of the questions which arose on the contract of employment. Because of their conclusion that the dismissed employee was entitled to statutory compensation sufficient to cover her claimed loss and damage (including for distress and humiliation), their Honours left “open” the common law issue which had been argued in the case (142 ALR at 154).
243 Perkins was also a judgment of the Full Court of the Industrial Relations Court of Australia which involved s 170EE(2) of the IR Act (consequently the WR Act). The trial Judge had held that reinstatement of the dismissed employee was impractical, largely because the employee had been a senior one and the manager to whom he reported continued to hold a reasonable belief that the allegations in respect of which he had been dismissed were true. His Honour accepted the manager’s evidence that he had “lost all confidence” in the employee (72 IR at 187). The Full Court upheld the employee’s appeal against the trial Judge’s refusal to reinstate. The case was not concerned with the implied term as such, but in the course of their reasons the Full Court observed that “[t]rust and confidence is a necessary ingredient in any employment relationship” (72 IR at 191). That was said to be the reason why “the law imports into employment contracts an implied promise by the employer not to damage or destroy the relationship of trust and confidence between the parties, without reasonable cause”, for which Burazin was given as authority (72 IR at 191).
244 Raffoul, a judgment of the Full Court, was an appeal from a judgment of a single Judge of the court in which it had been held that the termination of the employee’s employment had been in breach of s 170DE(1) of the IR Act, in that there had not been a “valid reason” for the termination. The Full Court set out a passage from the primary Judge’s reasons in which reference was made to the implied term, but the term itself made no contribution to the Full Court’s conclusion that the appeal should be dismissed.
245 Hollingsworth was a judgment of the New South Wales Industrial Relations Commission in Court Session in which it was held that the dismissal of a trainee police officer for having omitted to disclose certain antecedents on her application for employment was, in the circumstances, harsh, unreasonable or unjust. The statutory remedies to which she was entitled included an order for her reinstatement. In the course of a lengthy judgment, Wright and Hungerford JJ, having observed that it was common ground before them that contracts of employment did not fall within the class of contracts that required utmost good faith, continued (47 NSWLR at 190):
Nevertheless, it is timely to observe that an implied term of great importance in the employment relationship once established is that employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee; employees have a corresponding duty to act with fidelity and good faith: see Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84, Woods v W M Car Services (Peterborough) Ltd [1981] ICR 666 at 670-672 and Robinson v Crompton Parkinson Ltd [1978] ICR 401 at 402 as applied in this jurisdiction in Day v Lumley Life Ltd (Hungerford J, 31 March 1999, unreported).
Save for being the subject of that timely observation, the implied term formed no part of their Honours’ reasons.
246 Easling was a constructive dismissal case. By a majority, the Full Court of the Supreme Court of South Australia held that the conduct of the employer towards the employee (which involved a change in duties) was not repudiatory. Dissenting on that question, Olsson J noted (78 SASR at 514 [99]) referred to his own judgment in Blaikie v SA Superannuation Board (1996) 65 SASR 85 and to the implied term in the context of what was sufficient to give rise to a constructive dismissal. His Honour said:
Suffice to reiterate that the notion of constructive dismissal implies the existence of conduct on the part of an employer which is plainly inimical to a continuance of a contract of employment according to its express or implied terms. The authorities establish the concept that there is implied in a contract of employment a term that the employer will not, without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. An intention to repudiate need not be proved. Rather, it is a matter of objectively looking at the employer's conduct as a whole and determining whether its effect, judged reasonably and sensibly, is such that the employee cannot be expected to put up with it.
247 Paige was a tort case, the nature and result of which are sufficiently indicated in the following passage from the headnote of the report:
The duty of care of an employer to provide a safe system of work cannot be extended to encompass the provision of a safe system of investigation and decision making with respect to procedures for discipline and termination of employment under the Teaching Services Act 1980 and the Teaching Services (Education Teaching Service) Regulation 1994 so as to avoid psychiatric injury. Issues of compatibility with other duties of care and of coherence with employment law and administrative law preclude such a development.
An aspect of what was there described as “coherence with employment law” was how the duty of care for which the employee in the case contended would lie alongside conventional terms in contracts of employment and the statutory regulation of dismissals in Australia.
248 In reasons with which Mason P and Giles JA relevantly agreed, Spigelman CJ referred to Johnson, which had recently been decided by the House of Lords. His Honour identified (60 NSWLR at 397 [141]-[143]) three matters that “render[ed] the imposition of … the … implied term an inappropriate judicial step”, namely, “the creation of specialist tribunals as part of the United Kingdom's legal system to hear and determine unfair dismissal cases … [t]he limitation of the class of applicants who could bring an action … [and the] limitation on the size of the award that [could] be made under the legislation.” His Honour examined the Australian State and Federal legislated systems for relief against unfair dismissals (to use a generic term that was not universally adopted in this country) and concluded (60 NSWLR at 400 [154]):
The area of unfair dismissals is heavily regulated in both the State and Commonwealth contexts. It represents a particular and carefully calibrated balancing of the conflicting interests involved namely, between preserving the expectations of employees on the one hand and enabling employers to create jobs and wealth, on the other hand. The arguments and factors accepted in Johnson v Unisys are directly applicable to the legislation examined above and the same conclusion, namely a refusal to expand the duty of care in negligence to provide an alternative cause of action for unfair dismissals, should be the result.
249 Irving was a judgment of the New South Wales Court of Appeal in which the primary Judge’s refusal to strike out a pleading invoking the implied term was upheld. Hodgson JA, with whose reasons Ipp and Tobias JJA agreed, held ([2005] NSWCA at [27]) that –
… Eastwood and Hollingsworth are sufficient to show that a pleading alleging an implied term that the employer will not, without reasonable and proper cause, conduct itself in a manner likely to destroy or seriously damage the relationship of trust between employer and employee, should not be struck out or summarily dismissed.
250 Delooze was not an employment case at all. It was a case in which a student in a yoga-teaching class had been summarily dismissed from the class because of his behaviour. The contract between the student and the teacher dealt with exclusion from classes, but not in terms that would have justified the action taken by the teacher. In a judgment with which Steytler P agreed, Wheeler JA noted ([2007] WASCA at [32]) the duty which bound an employee to render faithful service, and not to do anything which was inconsistent with the continuance of confidence between the employer and the employee and the duty by which employers were bound under the implied term, and applied the latter by analogy to the contract between the teacher and the student. With respect to the implied term, her Honour referred to the judgment of Olsson J in Easling and to that of Allsop J (as he then was) in Thomson v Orica Australia Pty Ltd (2002) 116 IR 186 (“Thomson”). Technically, however, her Honour relied upon the principles in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (“BP Refinery”) for the implication which she favoured.
251 Russell was a judgment of the New South Wales Court of Appeal, on appeal from the judgment of Rothman J reported at 69 NSWLR 198. It is convenient to say something first about the case at first instance. It involved a claim by a dismissed employee for common law damages after he had taken “unfair dismissal” proceedings in the Industrial Relations Commission of New South Wales. He was successful in those proceedings, and secured an order for reinstatement. He was reinstated in his employment accordingly, and received the pay he had lost during the period of his exclusion from that employment. In his common law case, he claimed damages for the matters identified in his affidavit as follows (69 NSWLR at 213-214 [67]):
My dismissal from my employment and the events relating thereto including the proceedings in the Industrial Relations Commission were very upsetting and distressing to me. My dismissal attracted a considerable degree of media attention and I was extremely distressed, embarrassed and humiliated by the conduct of the Defendants in respect of the events leading up to and my dismissal from my employment. Such distress, embarrassment, and humiliation has continued to be experienced by me throughout the Industrial Relations Commission proceedings which I found to be extremely difficult indeed. I further say that the Industrial Relations Commission proceedings were conducted in such a way that virtually every issue raised by me was the subject of strict proof and the said proceedings became quite protracted and to put it bluntly, in my respectful opinion, bitter.
He also sought to recover the costs of the proceedings in the Commission.
252 Notwithstanding the terms of the employee’s affidavit, Rothman J made it clear that the conduct complained of, and said to be in breach of the implied term, was not the dismissal as such, but the employer’s investigation of the employee’s conduct, the result of which was the dismissal of the employee (69 NSWLR at 233 [142]). Thus, although his Honour noted the “coherence” reasoning of Spigelman CJ in Paige (69 NSWLR at 232-233 [139]-[140]), he apparently did not consider that it stood in the way of the relief which the employee sought.
253 Although he identified some “issues [which] await[ed] definitive clarification by an appellate court” (69 NSWLR at 232 [134]), Rothman J held that the implied term was imported into contracts of employment by the common law in Australia. In so doing, his Honour relied upon the English authorities (down to and including Johnson), on Thomson and on the High Court judgment in Concut. It is less clear, with respect, whether there was any aspect of the employer’s conduct which his Honour held to have been in breach of the term. But perhaps that was a moot point, since his Honour rejected the employee’s claim for damages substantially on the ground that, had the employer complied with the implied term in the conduct of the investigation which led to the employee’s dismissal, there was nothing in the evidence to suggest that the outcome of the investigation would have been any different (69 NSWLR at 237 [167]).
254 In the Court of Appeal, the employee challenged Rothman J’s conclusion that he was not entitled to damages. Further, and importantly for present purposes, the respondent employer put in a notice of contention, by which it challenged Rothman J’s conclusion that the implied term was part of the employee’s contract of employment. Each member of the Court of Appeal assumed, but did not decide, that there was such a term. Basten JA, with whose reasons Giles and Campbell JJA agreed, referred (72 NSWLR 567 [32]) to the speech of Lord Nicholls in Eastwood, which had by then been decided by the House of Lords. His Honour said (72 NSWLR 567 [33]):
Recognising that an employer may act with reasonable and proper cause to pursue its own interests, whether or not they are adverse to those of the employee, and may terminate the employment at any time without cause on giving notice, casts some uncertainty on the scope and extent of the implied duties. In Australia, they have enjoyed more limited recognition than in the UK and have usually been called in aid to identify the kind of conduct of an employer sufficient to constitute “constructive dismissal”, which the employee can treat as a repudiation of the contract of employment ….
and referred to Easling, Thomson, Martech International Pty Ltd v Energy World Corporation Ltd (2007) 248 ALR 353, Hem v Cant (2007) 159 IR 113 (“Hem”) and Delooze. Referring to Burazin, Basten JA added (72 NSWLR 568 [34]) that it was –
… unclear to what extent the breach of such a term may permit relief by way of damages, consistently with the principle in Addis v Gramophone Co Ltd [1909] AC 488, precluding damages for the manner of a wrongful dismissal and the distress thereby occasioned to the employee, except in the limited circumstances identified in Baltic Shipping Company v Dillon (1993) 176 CLR 344 ….
Basten JA did, however, move on to the question whether the employee’s appeal against Rothman J’s refusal to award damages should be upheld, and in so doing appears to have left open the direct question raised by the employer’s notice of contention.
255 With respect to the claim for damages by way of loss of reputation and injury to feelings in consequence of the breach of the implied term (assuming there to be one), Basten JA said (72 NSWLR 574-575 [63]-[64]):
To uphold a claim to damages because of steps taken by an employer leading up to a dismissal, has three consequences which require consideration. The first is that, because the loss will almost inevitably flow from the termination of employment, rather than the manner in which the decision to terminate was made, the effect will be to sidestep the rule in Addis and hence authorities (including Baltic Shipping) upholding the rule as the law in this country. Secondly, as recognised by the House of Lords in Eastwood, such a course is likely to be inconsistent with the statutory remedies for unfair dismissal, a principle applied by this Court in State of New South Wales v Paige (2002) 60 NSWLR 371 at 395 [133]–[154], albeit in the context of a proposed duty of care in tort. Thirdly, as also noted in Eastwood, the provision of damages for breach of such an implied term otherwise than in relation to termination of employment, creates significant anomalies, for example, by creating a right to recover in the less serious case of suspension of employment, but not in the case of dismissal: see Eastwood at 528 [30]–[33].
In this country, the continued adherence to Addis supports the avoidance of any variation in principle which would have anomalous consequences. Indeed, the creation of such a consequence suggests that any development of the common law having that effect is itself inconsistent with the statutory scheme with respect to unfair dismissals. Just as the legislature has limited the quantum of relief which may be obtained in a case of unfair dismissal, so it may equally be said that the legislature has limited the basis of relief to unfair dismissal, rather than providing a more general remedy for the unfair administration of an employment contract.
It followed, his Honour said (72 NSWLR 575 [65]), that, “even assuming success in relation to the existence of the implied term and breach thereof, there was no basis for an award in the present case of general damages for distress, humiliation, injury to feelings or loss of ‘reputation’.”
256 McDonald was a judgment of the Full Court of the Supreme Court of South Australia upholding the appeal of the employer from an award of damages in a breach of contract case brought by a former employee who had ended his employment as a teacher by informing the employer that “I dismiss myself”. As might be gathered from the tenor of that message, the employee’s case was effectively one of constructive dismissal, the Full Court summarising it as follows (104 SASR at 349 [6]):
Mr McDonald’s claim rested mainly on an assertion that the Minister had persistently refused to comply with three provisions of the contract of employment, thereby entitling Mr McDonald to treat the contract as at an end. The provisions are an implied term requiring the Minister to take reasonable care for Mr McDonald’s health and safety, and in particular to take reasonable care to provide a safe place and system of work; an implied term that the Minister would not act “in a manner likely to damage or destroy the relationship of mutual trust and confidence between the parties as employer and employee”, and a further implied term that the Minister would exercise his powers in relation to Mr McDonald fairly and reasonably ….
The Full Court referred to the English authorities on the implied term, and to the Australian authorities in which the term had been “either endorsed or acknowledged”, including, but extending beyond, those mentioned above in these reasons (104 SASR at 384-390 [212]-[233]). Their Honours rounded off their discussion of the subject in the following terms (104 SASR at 389-390 [231]-[233]):
The development of the implied term can be seen as consistent with the contemporary view of the employment relationship as involving elements of common interest and partnership, rather than of conflict and subordination. [Here citing B.W. Napier, “Judicial Attitudes Towards the Employment Relationship — Some Recent Developments” (1977) 6 ILJ 1 at 17]
It is plain that the duties which may be required of an employer under the implied term of mutual trust and confidence, or perhaps the conduct from which an employer should refrain, are still being developed. This seems inevitable given the open ended nature of the way in which the duty is expressed. In England, the implied term of mutual trust and confidence has evolved into a duty by employers to treat their employees fairly. [Here citing Eastwood [2005] 1 AC 503 at 523 [11]] Basten JA appeared to approve of this evolution in Russell ((2008) 72 NSWLR 559). But other authorities have resisted the notion that the implied term connotes an obligation which is closely related to that of fairness, namely, an obligation by employers to treat employees reasonably. [Here citing Clark v Nomura International Plc [2000] IRLR 766; Roberts [1980] IRLR 347.]
It may be that the better view is that the implied term operates in a variety of circumstances within an employment relationship to restrain abuses of an employer’s power. This purpose of the term is suggested by the authors of Macken’s Law of Employment [Sappideen et al, “Macken’s Law of Employment” (6th ed 2009) Law Book Co at [5.70]:
Whilst the duty may add little to the obligations of the employee, its importance lies in the extent of obligations it imposes on the employer. It provides a means by which “a balance [is] struck between an employer’s interest in managing his business as he sees fit and the employee’s interest in not being unfairly and improperly exploited”. In a climate of reduced collective bargaining, it protects the vulnerable employee by imposing limits on the managerial prerogative.
257 In part because the employee in McDonald was self-represented and resolution of the question whether contracts of employment generally in Australia contained the implied term “would require a closer analysis of the basis of the term, the nature, scope and effect of the term, and of the interrelationship of the term with other established terms and conditions of employment relationships” (104 SASR at 390 [234]) than the Full Court had attempted in its reasons, their Honours did not seek to resolve that question, but answered only the question whether the employee’s own contract contained the term. They held that it did not, because the statutory and regulatory framework which governed the relationship between the employer (the State) and the employee (a government employed teacher) made the implication of any such term unnecessary (104 SASR at 398 [270]).
258 Shaw was a judgment of a 5-member Court of Appeal in New South Wales allowing an appeal from a District Court judgment in which certain paragraphs of the plaintiff’s Statement of Claim had been struck out. The appellants had been employed on probation under the Teaching Service Act 1980 (NSW), but their appointments as such were annulled. Their case was that, some months before the annulment, certain conduct for which the employer was responsible was in breach of the implied term and, therefore, amounted to a repudiation of their contracts. They said that they accepted the repudiation by leaving the school where they had been working. The District Court had, it seems, taken the view that the employees’ claims for damages could not, in the light of Johnson and the observations of Spigelman CJ in Paige, succeed. The Court of Appeal approached the matter on the basis that a “high degree of certainty” was required to attend a conclusion that allegations should be struck out of a Statement of Claim, referring in this respect to Agar v Hyde (2000) 201 CLR 552, 575-576 [57]. In the light of the English and Australian cases which had either upheld the existence of the implied term or left the question open, there could be no such certainty that the implied term was not, at the general level, part of Australian law.
259 At the specific level, the employer’s case was that, if it were part of Australian law, the implied term was excluded from the employees’ contracts because of the detailed regulatory code to which they were subject, very much in the way found by the Full Court of South Australia in McDonald. However, the employees, as probationers, had had their employment annulled, and did not have available to them the range of regulatory mechanisms to challenge their involuntary separations which would have been available to permanent employers in like circumstances. Giving a judgment with which the other members of the court agreed, Barrett JA said ([2012] NSWCA 102 at [59]-[60]:
Certain protective incidents favourable to employees that formed part of the regime applicable to other teachers thus did not apply to the appellants as probationary employees. The denial of the favourable incidents means one of two things: that effect must simply be given in an unqualified way to a statutory intention that their employer may treat persons of the relevant kind in a way that is, by comparison, disadvantageous; or that the absence of the protective incidents in relation to those persons leaves, in those respects, a gap in the statutory coverage that allows potential scope for the operation of the implied term of mutual trust and confidence.
The correctness of the latter approach rather than the former is, in my opinion, arguable with sufficient cogency to establish the triable quality of the proposition that the implied term forms part of the appellants’ contracts. There is a plausible basis for arguing that the gap in the statutory coverage in relation to probationary teachers is of the kind that caused Layton J to conclude in Lennon v South Australia [[2010] SASC 272] that the implied term applied. All-embracing statutory substitutes of the kind on which the decision in Johnson turned are arguably absent.
Having considered the employer’s reliance upon the rule in Addis, Barrett JA concluded that the relevant paragraphs in the Statement of Claim ought not to have been struck out.
260 There have been many more instances of the implied term falling under observation in first instance judgments in Australia, but, aside from situations of constructive dismissal, only once were damages awarded for a breach of the term. It is neither necessary nor appropriate to visit the reasons of the courts concerned in all of these judgments, but the following ones encompass all to which we were referred by counsel in the present case (save those which went on appeal in the cases to which I have already referred), and then some: Blaikie v South Australian Superannuation Board (1995) 65 SASR 85 (“Blaikie”); Carrigan v Darwin City Council [1997] IRCA 101 (“Carrigan”); Jager v Australian National Hotels Pty Ltd (1998) 7 Tas R 437 (“Jager”); Daw v Flinton Pty Ltd (1998) 85 IR 1 (“Daw”); Thomson; Morris v Hanley (2003) 173 FLR 83 (“Morris”); Heptonstall v Gaskin (No 2) (2005) 138 IR 103 (“Heptonstall”); Hem; McDonald v Parnell Laboratories (Aust) Pty Ltd (2007) 168 IR 375 (“Parnell Laboratories”); Downe v Sydney West Area Health Service (No 2) (2008) 71 NSWLR 633 (“Downe”); Quinn v Gray (2009) 184 IR 279 (“Quinn”); Van Efferen v CMA Corporation Ltd (2009) 183 IR 319 (“Van Efferen”); Lennon v State of South Australia [2010] SASC 272 (“Lennon”); Rogan-Gardiner v Woolworths Ltd (No 2) [2010] WASC 290 (“Rogan-Gardiner”); Wright v Groves [2011] QSC 66 (“Wright”); Gillies v Downer EDI Ltd (2011) 218 IR 1 (“Gillies”); Dye v Commonwealth Securities Ltd [2012] FCA 242 (“Dye”); Visscher v Teekay Shipping (Australia) Pty Ltd (No 4) [2012] FCA 1247 (“Visscher”).
261 Blaikie appears to have been the first occasion on which the implied term came under notice in a superior court in Australia. That was a case of constructive dismissal. A very senior public servant had, following a change of State government, signed a form of resignation, the result of which was that he was not entitled to benefits from his superannuation scheme which would apply in the case of someone who had been dismissed. Olsson J held that, because of the pressure that the public servant was under to resign, it was a case of constructive dismissal. His Honour noted (65 SASR at 104-105) the approach which had been taken to a situation of this kind in Auckland Shop Employees Union v Woolworths (NZ) Ltd [1985] 2 NZLR 372, in which context Woods was referred to. However, although mention is made of the implied term, the focus of Olsson J’s concern was on the principles by reference to which a court should recognise whether a constructive dismissal had taken place. The term itself was given no substantial attention.
262 The former employee whose circumstances came before von Doussa J in Carrigan had suffered an injury at her workplace which led to an extended period of partial, and at times total, incapacity. Although ultimately the employee had resigned, this occurred only after failures by the employer, as his Honour held, to observe its rehabilitation obligations under the applicable occupational health and safety legislation and, to some extent, to pay the wages to which the employee was on any view entitled. His Honour took the view that the employer’s conduct “demonstrated a plain case of the employer acting in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee”. There had been, therefore, a termination of employment at the initiative of the employer, and the former employee was entitled to compensation under s 170EE(2) of the IR Act. In reaching his conclusion, von Doussa J referred to Burazin, to Bliss, to Woods, and to Malik in the Court of Appeal.
263 In Jager, Slicer J was prepared to accept, for the purposes of his judgment, that the implied term had been recognised in Australia (his Honour then having the benefit of the Full Court judgment in Burazin), but he held (7 Tas R at 457) that there was “no evidence that the defendant engaged in conduct likely to undermine trust and confidence”. His Honour’s judgment was later reversed on appeal for reasons which had nothing to do with the implied term: Australian National Hotels Pty Ltd v Jager (2000) 9 Tas R 153.
264 Daw was another case under what had been, at the time of the events to which it related, s 170EA of the IR Act. The question was whether the employees concerned, who had resigned from their employment, had been constructively dismissed because it seems that management had discussed with them the question whether they wanted to continue in employment. Von Doussa J proceeded on the basis that the implied term was part of the relevant contracts of employment, and said (85 IR at 4) that the question to be addressed was: “was the employer’s conduct such that the employees could not be expected to put up with it?” (borrowing from Browne-Wilkinson VC in Woods). On the facts of the case, this question had to be answered in the negative. There had not, therefore, been a constructive dismissal.
265 Thomson was a judgment of single Judge of the Federal Court upholding the case of an employee who was, on her return from maternity leave, placed into a position “of significantly lower status by reference to her proposed tasks, duties and responsibilities” (116 IR at 223 [136]) than that of the position which she had occupied before going on leave. Allsop J held that this was a breach of the employer’s own maternity leave policy and of the implied term. For the proposition that such a term was implied into the employee’s contract of employment, his Honour relied on Burazin, and the English cases cited in it, upon Daw (85 IR at 3), and upon the judgments of Olsson J in Blaikie (65 SASR at 102-106) and in Easling (78 SASR at 514, [99]). The significance of the implied term having been breached by the employer was that the employee had been constructively dismissed: indeed, in Allsop J’s treatment of the matter (116 IR at 224-225 [141]-[148]), his Honour’s focus was on the contribution which a breach of the implied term made to the conclusion, which he reached, that the employee had been constructively dismissed. The only declaration which his Honour relevantly made related to the dismissal of the employee (see 116 IR at 231). His Honour’s judgment did not deal with the question of the availability of damages.
266 Morris was a case in the Supreme Court of New South Wales in which breach of fiduciary duty was alleged. The plaintiff appears to have relied on the implied term, but did not make a claim under her contract of employment. Accordingly, she could not succeed on the implied term. In the course of his reasons, Hamilton J accepted (173 FLR at 106 [48]) that the implied term had “of late years been recognised by the law”, but continued:
As to the degree to which damages are available as a remedy for breach of the obligation not to damage the relationship of trust and confidence, the extent of this remains elusive in England. It was further discussed by the House of Lords in Johnson v Unisys Ltd [2001] 2 WLR 1076 … but without any conclusion material to the present case. The judgment of the Full Court of the Industrial Relations Court [in Burazin] … makes it plain that it is not clearly established that it gives rise to damages in Australia ….
The case was decided between the House of Lords’ judgments in Johnson and Eastwood, and without reference to the Court of Appeal judgment in Paige, which had been handed down about 12 months previously.
267 Heptonstall was also a case in the Supreme Court of New South Wales, the question this time being whether the plaintiff should be given leave to amend to introduce a pleading based on the implied term. Applying what was, in effect, the reverse of the test in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, Hoeben J allowed the amendment. His Honour did, however, have “reservations” about the term (138 IR at 116 [30]), expressing them in the following terms (the context for which was that the plaintiff was a teacher whose employment was, to an extent, governed by statute) (138 IR at 116 [29]):
The strongest argument on behalf of the third defendant is whether an implied “trust and confidence” term can operate in the context of the Teaching Services Act and the investigatory steps required to be carried out pursuant to that Act. On one approach the very carrying out of those investigatory steps involves a breach of the suggested implied term. Of equal force is the submission that the coherence of the law of employment both in relation to tort, wrongful dismissal and administrative law as it presently stands could be significantly undermined by the operation of an implied “trust and confidence” term in the contract of employment.
His Honour also said (183 IR at 116 [31]):
I am also mindful that the amendment does raise not only a novel question of law but an important one in that it relates to employment contracts generally. The strong support for the existence of a “trust and confidence” implied term in contracts of employment by the highest court of the United Kingdom has to be given due weight. Whether such an implied term forms part of the law of Australia is a decision which should be made by an appellate court not by a judge at first instance on an interlocutory application. To better enable an appellate court to consider the question it is best that the matter go to trial so that findings of fact can be made. An appellate decision on the question would thus be made on real, as distinct from assumed or hypothetical facts.
268 Hem was a judgment of a single Judge of this court allowing the claim of a former employee of a company under administration. Finkelstein J found that the former employee had been constructively dismissed when, without justification, he was accused of being a thief. His Honour relied on Easling and upon Thomson, but his discussion of those cases did not go beyond what was necessary to uphold the former employee’s constructive dismissal claim.
269 Parnell Laboratories was a judgment of a single Judge of this court in a case which included allegations of wrongful dismissal and contravention of Commonwealth anti-discrimination legislation. One of the allegations on the contract was that the implied term had been breached. Buchanan J did not need to determine the latter aspect. However, his Honour did express some reservations about the implication of such a term. His Honour said (168 IR at 399 [84]):
Cases such as Blyth Chemicals and Shepherd accept a “tacit condition” of faithful service. However they do not imply, in my view, a term or condition requiring the maintenance of mutual trust and confidence, breach of which gives rise to some free standing claim for damages or some other remedy. A failure by an employee to faithfully discharge duties provides grounds for termination of the contract. No doubt a failure by an employer to faithfully observe its own obligations under a contract would justify resignation by an employee, if necessary without notice, although in most cases this will be of much less practical significance than the right of an employer to terminate.
After giving attention to some of the Australian authorities in the area, Buchanan J expressed a certain disquiet as to how the implied term might, after many years of lying dormant, now be seen to satisfy the tests for implication in BP Refinery.
270 The plaintiff in Morton v Transport Appeal Board (No 1) (2007) 168 IR 403 had a case on the contract as well as an application to quash a decision of an appeal board which had dismissed his appeal from a decision of his employer to dismiss him on account of circumstances which had involved a physical altercation between him and another employee. The plaintiff succeeded on the latter aspect of his case, but failed on the contractual aspect. Berman AJ did, however, find that the implied term was part of the plaintiff’s contract of employment, relying in this regard upon the first instance judgment of Rothman J in Russell. I would note, however, that the employer accepted, indeed submitted, that the implied term was part of the contract.
271 Downe involved the purported suspension of the plaintiff from performance of duty as Director of the Neonatal Intensive Care Unit at Nepean Hospital in Penrith. Rothman J held that that act had been in breach of the plaintiff’s contract of employment. His Honour held that the suspension of the plaintiff had been in breach of the plaintiff’s contract of employment on a number of bases, and that the applicable legislation did not give the employer the right to suspend the plaintiff without a provision authorising it in the contract. Relying on Burazin, Perkins and Morton, upon his own first instance judgment in Russell, upon the first instance judgment which went to the South Australian Full Court as McDonald and upon Taske v Occupational & Medical Innovations Ltd (2007) 167 IR 298, his Honour held that the plaintiff’s contract did include the implied term. However, I do not find, in his Honour’s lengthy reasons, any conclusion that the conduct of the employer had been in breach of such a term.
272 Quinn was a judgment of a single Judge of the Supreme Court of Victoria refusing applications for leave to appeal from an arbitrator’s interim award pursuant to s 38 of the Commercial Arbitration Act 1984 (Vic). I mention it because, as we were informed by senior counsel for the respondent, it appears to have been the only occasion in Australia upon which damages have actually been awarded (although not by the court) in respect of a breach of the implied term, other than for conduct which amounted to a repudiation of the relevant contract of employment. The arbitration concerned the circumstances of the defendant who had been dismissed from her employment with insufficient notice. An aspect of the award, it seems, relied upon the implied term. The arbitrator had found that the employer had breached the implied term by failing to advise the defendant that the outcome of an inquiry which had been undertaken in relation to her conduct could result in the termination of her employment, and by failing to afford the defendant an opportunity to respond to all of the material which the employer had received. On the application for leave, Byrne J held (184 IR at 282-283 [13]) that there was “abundant authority to support” the existence of the implied term, referring to Perkins and to the judgment of the Court of Appeal of New South Wales in Russell. His Honour emphasised that he was bound by s 38(5) of the Commercial Arbitration Act 1984 (Vic) to grant leave only if he was satisfied that there was a “manifest error of law on the face of the award”. In relation to the existence of the implied term as such, it seems that the two authorities referred to were regarded as amply sufficient to preclude him from being so satisfied.
273 In Van Efferen, one of the grounds upon which the applicant challenged the legality of the termination of his employment was that it had been done in breach of the implied term, which was alleged to have been part of his contract of employment. Tracey J upheld the applicant’s claim, and awarded damages, on other grounds, but his Honour proceeded to make some “short observations” (183 IR at 337 [80]) on the applicant’s case to the extent that it relied on the implied term. His Honour said (183 IR at 337 [82]) that the Court of Appeal judgment in Russell “went no further than holding that such terms may be implied in contracts of employment”, and that, had it been necessary, he would have applied the remarks of Buchanan J in Parnell Laboratories, notwithstanding that they were obiter.
274 Lennon was a judgment of Layton J in the Supreme Court of South Australia dismissing an action by a former employee whose claims included that she had been constructively dismissed and that the employer had breached the implied term. Her Honour noted ([2010] SASC 272 at [168]) that there had been “considerable debate in Australia” as to whether the term should be implied and, although there were a number of first instance cases in which the term had been adopted, “the views of Courts of Appeal have been somewhat ambivalent”. However, her Honour had the benefit of the Full Court judgment in McDonald and of the survey of the authorities contained in it. This enabled her Honour to conclude ([2010] SASC 272 at [177]) that “there is ample authority to support that a term of mutual trust and confidence can be implied into employment contracts at law”. But her Honour found that there had, on the facts of the case, been no conduct in breach of the term.
275 Rogan-Gardiner involved allegations that an employee whose position had been abolished, as part of an organisational restructuring, while she was on maternity leave, and who lost her job as a result, had been the victim of conduct in breach of the implied term. Having reviewed a number of the authorities down to the time of the judgment, Hall J said ([2010] WASC 290 at [125]):
In my view, the following principles can be distilled from the cases I have referred to:
1. an employment contract will generally include an implied term that an employer will not, without reasonable and proper cause, act in a manner calculated or likely to cause serious damage to the relationship of trust and confidence between it and its employee;
2. such a term applies to conduct during the currency of the employment;
3. the term does not apply to dismissal or the manner of dismissal;
4. where an employee claims for loss on the basis of an alleged breach of the good faith term it will be necessary to prove that such loss was caused by conduct of the employer which preceded, and was independent of, any subsequent dismissal.
Given that the dismissal of the plaintiff from her employment as such could not be the subject of the implied term, his Honour turned to consider whether the employer’s conduct leading up to the dismissal, largely, it seems, related to attempts to find another position that might be suitable for the plaintiff, had been in breach of the term. His Honour found the employer’s conduct to have been “explicable and adequately justified” ([2010] WASC 290 at [139]), and that there had been, therefore, no breach of the term.
276 Wright concerned the coach of a team in a national basketball competition whose contract of employment had some time to run. The licensee of the franchise, who employed the coach, encountered financial difficulties and asked the coach to accept a reduction in pay. The coach made that request public, and gave interviews to the media about the situation. The team did cease to play in the competition, and the coach’s contract was cut short by some time. As part of his defence to an action by the coach for damages, the employer alleged that the media interviews had amounted to a breach of the implied term. The case therefore had the unusual (indeed, so far as I know, unique) feature of involving an allegation by the employer that the employee had breached the implied term. Ultimately, Peter Lyons J, in the Supreme Court of Queensland, held that the coach had had “reasonable cause” for the interviews which he gave, which was sufficient to reject the employer’s allegation. In the course of his discussion of the law, however, his Honour concluded ([2011] QSC 66 at [53]) that “this area of the law in Australia is unsettled”.
277 In Gillies, Rothman J held that the implied term was part of the contract of employment with which the case was concerned, but rejected the plaintiff’s claim under the term because the employer’s relevant conduct was “conduct in effecting the termination of his employment and cannot be qualified by the implied duty not to destroy or to damage seriously the relationship of trust and confidence” (218 IR 1 at 43, [201]).
278 The applicant’s case in Dye involved, to a substantial extent, allegations of sexual harassment. Those allegations were rejected by Buchanan J, who held also ([2012] FCA 242 at [600]) that the applicant’s invocation of the implied term as a basis for an alternative cause of action could not succeed on the facts. In the course of a brief discussion of the jurisprudence which had developed in Australia with respect to the implied term, and specifically with reference to the Full Court judgment in McDonald, his Honour confirmed the reservations which he had expressed in Parnell Laboratories ([2012] FCA 242 at [611]). His Honour said:
I remain of the view, in light of the reluctance of the Full Court to rule against the argument that the term does not exist in Australian law, that it is not correct to imply such a term generally into contracts of employment. The outcome in that case illustrates that there will be cases where that is not appropriate. In any event, it would always be necessary for the term to be given practical and effective content.
279 Visscher was an instance of constructive dismissal by demotion. It concerned an employee who had been contracted to serve as chief officer of a vessel and who was later required to serve as second mate. In considering whether this amounted to a constructive dismissal, Katzmann J referred to Western Excavating, to Easling, and to Thomson. However, her Honour focused on the demotion as such – relying in that regard upon the factual similarity of the case with Thomson – rather than basing her conclusion that there had been a constructive dismissal on broader concepts of trust and confidence.
280 Summarising with respect to the Australian position, it is apparent that the question whether the implied term is part of the law of contracts of employment in Australia has never been answered in the affirmative by an Australian appellate court in the sense of being part of the ratio decidendi. With respect, I do not think we are now bound to do so by reason of the fragmentary references which were made to the term in the two High Court cases mentioned at paras 236-237 above. Of the judgments of the intermediate appellate courts discussed above, in three the term was referred to, but it played no real role in the determination of the issues at hand (Perkins, Raffoul and Hollingsworth), in two the existence of the term was recognised only to the extent of holding that the plaintiff had a case that could reasonably be argued (Irving and Shaw), one was not an employment case (Delooze), and one involved the recognition of the implied term in a dissenting judgment only (Easling). That leaves Burazin, Paige, Russell and McDonald. In Paige and Russell, although (as in the other cases) the question did not have to be directly determined, there was an unmistakeable note of caution in the terms in which the implied term was discussed. Their Honours seemed to be of the view that it was not at all obvious that the term existed as part of employment law in Australia.
281 Indeed, it is the absence of any ready consensus as to the existence of the implied term in Australia that is most striking in the appellate authorities to which I have referred. At that level it has, I gather, often been regarded as unsatisfactory to dispose of the question merely by proclaiming that “there is ample authority”. As my survey of the first instance cases above should illustrate, proclamations of this kind eventually become self-sustaining. If one drills down into the body of authority which is sometimes described as “ample”, one finds that the judgment of the Full Court in Burazin has played a significant part, directly or indirectly, in the conclusions of later courts which did provide an affirmative answer to the above question. Infrequently, with respect, does one find recognition of the circumstances of Burazin that, first, it was decided before the House of Lords gave judgment in Malik, secondly, it was there considered that the breach of the implied term would not sustain a claim for damages in an ongoing employment situation and, thirdly – and most importantly –what their Honours said about the implied term was not part of the ratio decidendi of the case.
282 Like Buchanan J in Dye, I take the view, with respect, that the judgment of the Full Court of South Australia in McDonald provides “a perceptive analysis of the origins and legal foundation for the suggested implication” ([2012] FCA 242 at [606]). What I attempt to do in my reasons which follow is to take up the invitation to undertake the “closer analysis” which their Honours implicitly proffered at para 234 of their reasons.
Did the respondent’s contract contain the implied term?
283 The question raised by the appellant’s first ground of appeal is whether contracts of employment in Australia contain the implied term. If the answer to that question is in the affirmative, it will be because of the features of such contracts as a class, rather than because of any particular aspect of the respondent’s contract or of his relationship with the appellant. We are not concerned with the implication of terms by inference to the facts of the case at hand, which would be governed by cases in the BP Refinery line of authority. Rather, our concern is with the broader question of implication as a matter of law.
Necessity
284 The test for the implication of a term into a contract of a particular class is necessity. Elaboration upon that simply-stated formula is to be found in the authorities. It is unnecessary to go further back than Liverpool City Council v Irwin [1977] AC 239, in which Lord Wilberforce said (at 254) that “such obligation should be read into the contract as the nature of the contract itself implicitly requires” and (at 256) that that would be “what is necessary having regard to the circumstances”. Lord Salmon also held that the test was one of necessity and, although he did not in terms so confine it, his Lordship did opine (at 263) that a term would be necessary if it were one “without which the whole transaction would become futile, inefficacious and absurd”. In a concurring speech, Lord Edmund-Davies associated himself (at 268) with what had been said by Bowen LJ in Miller v Hancock [1893] 2 QB 177 at 181, namely, that the term in that case (a promise to maintain premises) would be implied because “the whole transaction would be futile” without it.
285 In the facts of Scally, certain pension rights were available to employees under their contracts of employment only if they took a particular step to invoke their entitlements by a particular cut-off date. The question was whether the employer was under an implied obligation to inform the employees of those rights, and of the timing requirement. It was held that it was. The reasoning of Lord Bridge, with whom other members of the House of Lords agreed, was that, unless the employees were so informed, the rights which arose under their contracts would be worthless to them. Subject to confining the term to be implied by reference to specific circumstances, Lord Bridge said ([1992] 1 AC at 307):
But I take the view that it is not merely reasonable, but necessary, in the circumstances postulated, to imply an obligation on the employer to take reasonable steps to bring the term of the contract in question to the employee's attention, so that he may be in a position to enjoy its benefit (emphasis added).
286 Both Irwin and Scally were referred to, with approval, by McHugh and Gummow JJ in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 451-452 (“Byrne”). Introducing the relevant section of their reasons, their Honours said (185 CLR at 450):
Many of the terms now said to be implied by law in various categories of case reflect the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined (Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635 at 647-648, 659). Hence, the reference in the decisions to “necessity”.
287 In University of Western Australia v Gray (2009) 179 FCR 346 (“Gray”), 375-379 [135]-[147], the Full Court observed that giving practical content to the notion of “necessity” in a particular case may often involve considerations of “justice and policy” and the need to have regard to the consequences of implying, or not implying, the term, including the “social consequences” thereof (179 FCR at 377 [142]). Their Honours stressed that policy considerations may often be significant in “negativing the making of an implication, or else in demonstrating that the issues raised by the proposed implication are of such a character or complexity as to make it inappropriate for a court, as distinct from a legislature, to impose the obligation in question” (179 FCR at 379 [146]). In the context of the present discussion, these observations strike an immediate chord with anyone who has considered the House of Lords judgment in Johnson and the remarks of Spigelman CJ in Paige.
288 What is striking about the English and Australian cases to which I have referred earlier in these reasons is the circumstance that the inclusion of the implied term into all contracts of employment by reference to the test of necessity has never been the subject of detailed attention by an appellate court. That attention was not given to the matter in Malik, presumably because the liquidators did not take the point. Since then, it has been, in effect, a given that the implied term exists in contracts of employment in the United Kingdom. In the first Australian appellate judgment on the subject, Burazin, the Full Court relied upon the “ample English authority” for the existence of the term (which to that point included the Court of Appeal judgment, but not the House of Lords judgment, in Malik) but did not consider for itself whether the test of necessity was satisfied.
289 If one goes back to the first English first instance judgment on the subject, Courtaulds, one finds that the Employment Appeal Tribunal said that “such additional terms as are necessary to give [a contract of employment] commercial and industrial validity” should be implied. But, even in that case, there was, so far as the report shows, no serious attention given to why the implied term was necessary to achieve that result. The employers’ only criticism of the term was that the reference to “calculated” in the way it was formulated might cast the net wide enough to encompass circumstances for which an employer was not responsible. That was not that case, of course, the employers being clearly responsible for the conduct which was held to entitle the employee to terminate the contract. From all that appears, the way that the employers conducted the case was such as necessitated little or no examination of the basis for the implication of the implied term by reference to the test of necessity.
290 That is an examination for which the circumstances of the present case call. Understanding the concept of “necessity” in the extended sense explained in Gray, it is useful nonetheless to observe that the absence of any mention of the implied term in the decided cases, and in the texts, until Courtaulds in 1978 raises a real doubt, to say the least, about the proposition, accepted in that case, that the implication of the term was necessary to give contracts of employment commercial and industrial validity. It may be that the term was always there, lying unnoticed until the unfair dismissal provisions of the UK Acts of 1971 and 1974 provided a practical setting for litigants to have recourse to it. But Lord Steyn did not, apparently, think so in Malik: his Lordship considered that the “evolution” of the term was made possible by “the change in legal culture”. This, with respect, was not the language of necessity as articulated in Irwin.
Relevant features of the contract of employment
291 So the question remains: what are the features of a contract of employment that would make it necessary – within the extended sense of the word as explained above – to imply the implied term? Despite the modernisation of our understanding of the employment relationship, such a contract remains one of service in the sense that the employee is required to follow the lawful directions of the employer with respect to the work to be done and the manner of its performance. Indeed, that circumstance is definitional. Not being contracted merely by reference to the execution of a particular task or job, the employee’s responsibility to the employer is to be at the latter’s lawful disposal – within the range of work that he or she has agreed to perform – for the contracted period of time. So far as the employer’s obligations are concerned, the most basic one is to take the employee into, and thereafter to keep the employee in, his or her service – as counsel for the intervener put it, to “maintain the relationship”. Thus it can be seen that the contract of employment is more than merely a contract to perform work and (correspondingly) to pay for the work. As Prof Freedland put it in the work to which I referred at para 211 above (at p 20):
Hence the contract has a two-tiered structure. At the first level there is an exchange of work and remuneration. At the second level there is an exchange of mutual obligations for future performance. The second level – the promises to employ and be employed – provides the arrangement with its stability and with its continuity as a contract. The promises to employ and to be employed may be of short duration, or may be terminable at short notice; but they still form an integral and most important part of the structure of the contract. They are the mutual undertakings to maintain the employment relationship in being which are inherent in any contract of employment properly so called.
The introduction, 27 years later, of a more developed analytical framework in Prof Freedland’s substantial revision of his 1976 book – Freedland, M R, The Personal Employment Contract, OUP, 2003 – did not derogate from his original thesis that, in one of its aspects, the contract of employment involved a promise by the employer to employ the employee (see pp 91-92 of the later work).
292 In return for serving the employer in the sense described above, the employee becomes entitled to remuneration. The nature of that entitlement will, of course, depend on the terms of the particular contract and on any applicable statutory provisions. Some employees, for example, are remunerated substantially by commissions or tips, or on a piece-work basis. However, to take the simplest case – which must be the point of reference because of the universal application of the implied term on the respondent’s case – an employee becomes entitled to wages when he or she works or, in some cases, is required to “stand and wait” (Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435, 466 per Dixon J). That is to say, wages are the return for work. A ready and willing employee who, by the fault of the employer, is held out of the opportunity to work is entitled to damages, but not to wages as such (Watson, 72 CLR at 465).
293 The law has supplemented these features of contracts of employment with terms implied into such contracts as a class. Since the employee must perform his or her tasks personally – as distinct from sending in a deputy or delegate – there is a term that the employer is to take reasonable care for the safety of the employee (an obligation now considerably overwritten by statute). There is also a term that the employer will not require the employee to perform an illegal act (which may, perhaps, be viewed as another way of stating the limitation on the employee’s duty to obey directions to those which are lawful). Each proceeds from the fundamental premise that the contract of employment is one which requires the employee himself or herself to perform work personally in accordance with directions, and in physical and regulatory environments, over which he or she presumptively has no control. I shall elaborate upon the need for these terms, and their significance in any discussion of the subject of trust and confidence, later in these reasons.
294 What then is the premise upon which the implied term is based? As it seems to me, there are two silent propositions which, working together, provide the principled basis for the term. The first is that employment involves a relationship, not merely a contractual exchange of work for remuneration. The parties are under conventional obligations not to terminate the relationship otherwise than as provided for in the contract. The employee may be dismissed only for cause or upon proper notice. Beyond that, the conduct of either party may be such as to entitle the other to treat the contract as at an end, that is, in the case of conduct by the employer, what has become known as constructive dismissal. Given the particular statutory provenance of the implied term in the United Kingdom, presumably what the creators of the implied term had in mind by the concepts of “destroying” and of “seriously damaging” the relationship was conduct of that character by the employer.
295 Merely to propose that the employer could not, otherwise than conformably with the terms of the contract, bring the relationship to an end, or damage it with effectively the same outcome, would not, however, reflect either the justification for or the content of the implied term. It would hardly be enough to explain Malik itself. It is here that the second proposition makes its contribution. That proposition, as it seems to me, must be that the relationship of employer and employee is one of trust and confidence. With respect to the obligations of the employee to the employer, the validity of this proposition is well-established (albeit within the limits to which I shall refer presently). But, as was recognised in Malik, the practical impact of the implied term lies in the obligations thereby imposed on the employer. At the core of the implied term is the premise that the employer owes duties of trust and confidence to the employee. If this premise is not valid, the case for the existence of the implied term is seriously compromised if not mortally wounded. It is, therefore, convenient to move next to what was a central element in the submissions made on behalf of the respondent and the intervener in the present appeal: that the employer’s duties of trust and confidence should be recognised because they expressed as a mutual obligation the employee’s duty of fidelity.
Correspondence with employee’s duty of fidelity
296 It was submitted that there was, and had for a very long time been, a term to the effect that an employee may not engage in conduct that, as expressed by Dixon and McTiernan JJ in Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 at 81 (“Blyth Chemicals”), was “destructive of the necessary confidence between employer and employee”. Counsel for the intervener submitted that the implied term was “a modern restatement” of that principle, “expressed as a mutual obligation”. Likewise, counsel for the respondent submitted that the implied term “derives” from the employee’s traditional obligation of fidelity.
297 Blyth Chemicals was a case in which the manager of the appellant’s business also had a controlling interest in another company which, although not directly competitive with the appellant, was, it seems, using technology which might, without great complications, be used to make a competitive product. The Board of the appellant had insisted on the manager giving certain written undertakings and, although the manager was prepared to go a deal of the way towards the terms upon which the Board insisted, ultimately there was no agreement reached, and the manager was dismissed for misconduct. The major issue which engaged the High Court was whether the dismissal was justified in circumstances where the manager had not actually done anything which amounted to misconduct – he had merely, at the highest, declined to give the undertaking which the Board sought.
298 Dixon and McTiernan JJ said (49 CLR at 81-82):
In these circumstances, it is said, the appellant was not bound to wait until its reasonable apprehensions were realized, but might avert the danger by dismissing the respondent. Conduct which in respect of important matters is incompatible with the fulfilment of an employee's duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal (Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 Ch D 339; English and Australian Copper Co. v. Johnson (1911) 13 CLR 490; Shepherd v Felt and Textiles of Australia Ltd. (1931) 45 CLR 359. But the conduct of the employee must itself involve the incompatibility, conflict, or impediment, or be destructive of confidence. An actual repugnance between his acts and his relationship must be found. It is not enough that ground for uneasiness as to its future conduct arises.
It will be seen, first, that this was a wrongful dismissal case and, secondly, that their Honours’ identification of the conduct for which an employee might be dismissed was not, in point of content, the matter of controversy with which they were concerned.
299 The cases to which Dixon and McTiernan JJ referred were all ones of wrongful termination of engagements, although not all of those engagements were employments. Boston Deep Sea Fishing & Ice Co v Ansell (1888) 39 Ch D 339 was. In that case, the passage to which, I think, Dixon and McTiernan JJ were referring was the following (39 Ch D at 357, per Cotton LJ):
…[W]hat I say is this, that where an agent entering into a contract on behalf of his principal, and without the knowledge or assent of that principal, receives money from the person with whom he is dealing, he is doing a wrongful act, he is misconducting himself as regards his agency, and, in my opinion, that gives to his employer, whether a company or an individual, and whether the agent be a servant, or a managing director, power and authority to dismiss him from his employment as a person who by that act is shewn to be incompetent of faithfully discharging his duty to his principal.
English and Australian Copper Co v Johnson (1911) 13 CLR 490 was a fairly clear case: dismissal of a manager for dishonesty (the main interest in the case being, it seems, whether the fact that the particular act of dishonesty was to the benefit of the employer would make any difference). Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 was not an employment case at all, although the principles by reference to which it was decided apply both to employees and to agents. Of the nature of the contract of agency in the case, Dixon J said (45 CLR at 378):
Moreover, the contract established a relation between the parties intended to subsist for a period, and it involved· some degree of mutual confidence and required a continual co-operation. Its object was the increase of the sale of the respondent’s manufactures, and to that end the extension of the respondent’s business connection. Such an agreement inevitably imported a tacit condition that the appellant should perform the services faithfully which he contracted to give the respondent, and should not endeavour to impede or defeat the respondent in the sale of its manufactures at the prices it might think proper to ask.
300 The grouping by Dixon and McTiernan JJ, in Blyth Chemicals, of employer/employee cases with cases involving a principal and agent, and the terms in which the applicable contractual obligations were expressed in those cases, leads naturally to the principles which have evolved in equity with respect to relationships of that kind. In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 (“Hospital Products”), Mason J said (at 96-97):
The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf. Phipps v. Boardman ([1967] 2 A.C 46, at p 127)), viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions “for”, “on behalf of”', and “in the interests of” signify that the fiduciary acts in a “representative” character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal.
That is to say, and relevantly to the matter presently of interest, the critical feature of the relationship between employee and employer – the one which makes it a relationship of trust and confidence – is that the employee agrees to act for or on behalf of or in the interests of the employer in the exercise of a power or discretion which will affect the interests of the employer in a legal or practical sense.
301 In the employment context, there will always be a contract to which the fiduciary relationship must accommodate itself: Hospital Products 156 CLR at 97; Meagher et al, Equity – Doctrines and Remedies, 4th ed, 2002, pp 161-162. But there is also a sense in which the contract reflects the nature of the relationship and the fiduciary duties which arise in it. Such an alignment between contractual and fiduciary obligations was noted by Gleeson CJ, Gaudron and Gummow JJ in Concut. Having referred (176 ALR at 700 [25]) to Pearce v Foster (1886) 17 QBD 536, 539 and to Blyth Chemicals, their Honours said (176 ALR at 700-701 [26]):
Contractual obligations and fiduciary duties have different conceptual origins, “the former”, in the words of McLelland J, “representing express or implied common intentions manifested by the mutual assents of contracting parties, and the latter being descriptive of circumstances in which equity will regard conduct of a particular kind as unconscionable and consequently attracting equitable remedies”. Formulations of the obligations of an employee in terms such as those in Pearce and Blyth Chemicals may be understood, Professor Finn has pointed out, as the re-expression of equitable obligations in terms of implied contracts. If so, the importation is well established and beneficial, and nothing turns upon it for present purposes.
The significance of that acknowledgement for present purposes is that the legal principles to which Dixon and McTiernan JJ referred in Blyth Chemicals reflect the position of trust which an employee occupies.
302 Both the nature of the fiduciary duty and the content of the employee’s duty of fidelity will, of course, depend on the facts of the case, particularly the nature of the position which the employee occupies and the duties which he or she is obliged to perform. The situation of an employee who is entrusted with the employer’s money (retail sales clerk, bank teller, etc) is an obvious one which requires no elaboration. So too is that of an employee who is entrusted with an employer’s property, or has authority to acquire or to dispose of it. The duty will also be relevant to the circumstances of an unsupervised employee who is entrusted to use the time for which the employer is paying in a productive way. Generally, it may be said that the employee will, to varying degrees depending on the circumstances, be operating with the employer’s tools, equipment and property; may, in some cases, sign the employer’s cheques; will have access to the employer’s information and records; and will often perform actions for which, if things go wrong and damage is caused, the employer may be vicariously liable.
303 It is a feature of the employee’s duty of fidelity that it operates in one direction only. Because the law treats the position of the employer analogously with that of a beneficiary, there is no sense in which the trust and confidence which he or she necessarily reposes in the employee represent corresponding obligations owed in the other direction. The sense in which it may accurately be asserted that the contract of employment involves mutual obligations is only that the contract regulates the relations of the parties over time, and each has obligations to the other. There is no sense in which these obligations must be, or are, the same for each of the parties or symmetrical as between them. The promises involved in a contract of employment reflect the different positions which the parties occupy, and the exchanges which they make.
304 That is sufficient for present purposes, but I would add that the employee’s duty of fidelity has never been framed in terms which came to find expression in the implied term in the late 1970s and subsequently. It was never considered necessary to do so. The existing law dealt with the situation, and it did so on its own conceptual and jurisprudential bases – and subject to its own limitations. If it were now to be suggested that the implied term applies to the conduct of employees, there would, in my view, be a number of difficult issues at the points of intersection, or overlap, as between the term and existing law. Those issues would arise in a case where an employee is held not to be in breach of his or her fiduciary duty, such as, for example, where conduct which would otherwise involve less than full and frank disclosure on the subject of his or her self-interest was permitted because it took place in the context of the negotiation of his or her own terms of employment: see Stoelwinder v Southern Health [2001] FCA 115. They would also arise in a case in which the employee’s conduct was likely to cause serious disruption to the conduct of the employer’s business but, unlike ASLEF, where the conduct was not wilful. That is to say, if the jurisprudence associated with the employer’s obligations under the implied term were to be applied similarly to the obligations of the employee, one might have a situation in which the employee was liable in damages for the consequences of his or her conduct which was neither intentional nor negligent but which, objectively, caused such a disruption. I do not understand that ever to have been suggested.
305 I take the view that, if the premise referred to above (that the employer owes duties of trust and confidence to the employee) be valid, it must be on some basis other than the need to express as a mutual obligation the obligation of trust and confidence which has traditionally been borne by employees. Another possibility which has been suggested is that the employer’s relevant obligation came about by way of extension to, or development of, the implied duty of co-operation between contracting parties.
The contractual duty of co-operation
306 As noted at para 227 above, it was Lord Steyn in Malik who surmised that the origin of the implied term lay in the duty of co-operation, seemingly on the basis of the treatment of the subject in Hepple and O’Higgins. For my own part, I cannot find in that text any analysis of the growth of the new implied term from the long-established principle of co-operation. It is true that the authors chose to introduce into the section of their work which dealt with the duty of co-operation a treatment of the then emerging constructive dismissal jurisprudence in the Employment Appeal Tribunal. They said (at p 134): “Moreover, an employer must not destroy the mutual trust and confidence on which co-operation rests …”; and followed that statement with a series of examples from the cases. Aside from the much more limited formulation of the term which Hepple and O’Higgins offered (ie in comparison with that which was common ground in Malik), there was, so far as I can see, little by way of justification for an extension of the duty of co-operation into the obligation conveyed by the term.
307 In Australia, the duty of co-operation was stated by Griffith CJ in Butt v M’Donald (1896) 7 QLJ 68, 70-71 and confirmed in the High Court in Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, 607 (per Mason J, Gibbs, Stephen and Aickin JJ concurring):
It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.
Clearly, in the application of this rule, one commences with the contractual benefits to which the presumptively innocent party is entitled under the contract. What are the benefits which make the imposition of duties of trust and confidence upon the employer a step towards the achievement of contractual co-operation? If the argument is not to become circular, the benefits cannot be those that would derive from observance of the implied term itself. It is necessary to locate within the contract some other benefit for the employee, the enjoyment of which makes it necessary for the employer to act consistently with the implied term.
308 Although not always located within the rubric of the duty of co-operation, there were a number of benefits, or advantages, which the respondent and the intervener (the latter more clearly) submitted were the entitlement of the employee under the contract of employment and which, in their submission, would be lost if the implied term were not part of the contract. It is convenient to deal with them here.
309 It was first said that, since the right to remuneration depended on the existence of the relationship, for the employer to destroy or to seriously damage the relationship would (in the terms of the submission made on behalf of the intervener) “render worthless, or seriously undermine, the employee’s right to earn wages”. In my view, this circumstance does not supply the need for the implied term in contracts of employment. In the first place, as noted above, the right to wages as such flows from the performance of work. If, by destroying or seriously damaging the relationship, the employer prevented a ready and willing employee from working (and refused to pay the wages that would have been earned had work been performed), the employee would have a remedy in damages, measured by the extent of the remuneration foregone. Indeed, being repudiatory, conduct of this kind on the part of the employer would entitle the employee to treat the contract as at an end. If he or she chose not to do so, his or her remedy in damages would remain, subject, of course, to the conventional rules on mitigation. In these respects, the existing law is well-established and, now at least, uncontroversial. Far from the introduction of the implied term being necessary to address situations of this kind, such a step would, in my view, introduce new confusions into that body of law.
310 More controversial than the situation described above, at least in recent years, is that in which the employee, whilst being excluded from work, continues to be paid his or her remuneration. The question occasionally arises whether that would amount to a breach of contract on the part of the employer, and if so, of what term. Counsel for the intervener submitted as follows:
Third, the consideration received by the employee for performance of service is more than simply wages. The common law accepts that through employment employees gain job satisfaction, a sense of identity, self-worth, emotional well-being and dignity. [footnote omitted]. The implied term … recognises these additional interests. When an employer, in a calculated manner, destroys the relationship it seriously undermines the employee’s right to this additional consideration.
To the extent that counsel should here be understood as submitting that the provision of job satisfaction, a sense of identity, self-worth, emotional well-being and dignity are elements of the consideration moving from employer to employee under a contract of employment, that very circumstance would make it unnecessary to go further and introduce the implied term, the content of which is not limited to these benefits. To the extent that the submission should be understood as suggesting something less – which appeared to have been accepted during the course of argument – I would say that benefits of this kind may indeed be amongst the consequences of having a good job in a company run by good management, something to which every employee would aspire. However, emotions such as senses of identity, self-worth and dignity are felt in the breast of the employee, are highly subjective and would, necessarily, be felt to differing extents by different employees within the same working environment. I do not believe that the common law has come close to making the employer responsible for emotions of this kind, or to giving legal consequences to the fact that they are not generated in a particular situation.
311 In the intervener’s written outline, a large number of cases, in different jurisdictions, were cited as authority for the proposition contained in the first sentence of the extract above. The most authoritative for present purposes (and amongst the more recent) was Blackadder v Ramsey Butchering Services Pty Ltd (2005) 221 CLR 539, in which the question was whether an order made by the Australian Industrial Relations Commission under s 170CH(3) of the WR Act which required a dismissed employee to be “reinstated to the position in which he was employed” had been complied with when the employer took the employee back into employment and paid him his basic pay, but gave him no work to do. The High Court held not. The decision was concerned only with the operation of s 170CH(3) and with the terms of the reinstatement order made by the Commission. In their submissions, counsel for the intervener referred to the following passage in the joint reasons of Callinan and Heydon JJ (221 CLR at 566-567 [80]):
The circumstances of this case are covered by the federal statutory regime established by the Act and the Federal Court of Australia Act. Decisions in other jurisdictions under other statutory regimes are of little assistance. Nor are the decisions of other courts or this Court at common law. It is accordingly unnecessary to consider whether the categories of cases in which at common law actual work must be provided for an unlawfully terminated employee or contractor, are closed, although one might question the current relevance of judicial pronouncements made more than sixty years ago in the United Kingdom as to the extent to which an employer might be obliged to dine at home in order to provide work for his cook. It may be that in modern times, a desire for what has been called “job satisfaction”, and a need for employees of various kinds, to keep and to be seen to have kept their hands in by actual work have a role to play in determining whether work in fact should be provided. Nor is it necessary to have regard to the fact, which appears to have been overlooked by the Full Court, that the appellant's remuneration here could be affected by the actual work that he did, a matter which might of itself at common law justify an order that he be provided with actual work to do. The order for enforcement of the order of the Commission for reinstatement should be understood in the way in which it has been explained in these reasons.
There is nothing here that would sustain the notion that, under the common law, the consideration provided by the employer under a contract of employment includes job satisfaction etc. Neither would such a notion derive sustenance from the reasons of McHugh J or of Hayne J who, in separate judgments, supported the orders proposed by Callinan and Heydon JJ.
312 Turning from the statutory to the contractual context, the situation which I described above as controversial is not, in my view, appropriately addressed by the imposition of the omnibus obligation conveyed by the implied term into all contracts of employment. Whether a right to work, in addition to a right to be remunerated, arises under the contract is a highly fact-specific question. There are some established categories where the answer will be in the affirmative: see eg Devonald v Rosser & Sons [1906] 2 KB 728; Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337; William Hill Organisation Ltd v Tucker [1999] ICR 291. The law has not to date, however, provided such an answer in the general run of cases. As things stand, the existence of a right to work cannot, at the general level, be relied on to supply the need for the implied term: indeed, in my view, for the term to be introduced into employment contracts generally might well stifle more pragmatic, fact-specific, approaches to the resolution of this important question.
313 In this part of their submissions, counsel for the intervener referred also to Johnson, but I do not find anything of present relevance in the speeches of Lords Hoffmann and Millett, to which specific reference was made, beyond observations to the effect that, had it not been for extensive statutory intervention, the common law might have moved in the direction of making it implicit in a contract of employment that the employer would not exercise the power of dismissal in bad faith ([2003] 1 AC at 549 [77]).
314 What is important, of course, is that our attention was drawn to no judgment of authority on the present occasion where a court consciously sought to give effect to benefits of the kind presently under discussion by formulating a concrete obligation, to be borne by the employer, in terms of the implied term. The desirability of benefits such as these may be one thing. For judges, rather than legislators, to seek to introduce them by giving effect to a new implied obligation of universal application, and to do so without any proper basis for having confidence in the success of such endeavour, would, in my view, be another thing altogether. The authorities to which counsel for the intervener referred would not justify taking that step.
315 Returning to the duty of co-operation, it must be recognised that there are situations in which the effective enjoyment of a contractual entitlement of the employee requires some kind of facilitative step to be taken by the employer. Scally was an example. Another may be where the employee’s remuneration is in part determined by the results of a company-wide bonus scheme administered by the employer. So too would be the case where an otherwise redundant employee was entitled to apply for positions elsewhere in the employer’s organisation (such as the present case, had the right to consideration for redeployment been contractual); or, for that matter, where there was a right to apply generally for transfers to other parts of the organisation (the Roberts situation, for example). In each case, because the underlying entitlement was contractual, the corresponding duty of the employer would be the duty of co-operation. As I understand the case being advanced by the respondent and the intervener, the implied term would have the effect of imposing upon the employer a corresponding duty to act in the absence of any contractual point of anchorage. The premise would be, rather, that the employer owes a duty of trust and confidence to the employee unrelated to any other, substantive, entitlement of the latter under the contract. The introduction of such a duty would, in my view, take the law of contract beyond any principled development of the duty of co-operation.
Personal nature of the relationship
316 Counsel for the intervener submitted that the relationship of employer and employee was a personal one, and that the need for trust and confidence to exist as between the parties explained equity’s traditional reluctance to order specific performance of a contract of employment. That reluctance was carried into the analogous statutory area of reinstatement orders in the judgment at first instance in Perkins ((1996) 40 AILR 3-418) and, in principle at least, was accepted as relevant in that area on appeal (72 IR at 191). Counsel’s submissions continued:
When an employer destroys the relationship of trust and confidence, it razes the necessary structure on which the contract is based. That conduct is “inconsistent totally with the nature of the relationship” [Liverpool City Council v Irwin [1977] AC 239 at 254]. It is necessary for a term to regulate conduct inconsistent with the nature of the relationship.
Under the modern law of employment, it is the relationship which is based on the contract, and not vice-versa as proposed in the passage above. The structural metaphor is, therefore, not an apt one. That aspect apart, however, it seems to me that the submission goes no further than to draw attention to respects in which the existing state of the law – ie without any input from the implied term – recognises the existence or absence of trust and confidence in fact as relevant to the specific remedies, positive or negative, that equity may be prepared to grant in particular situations. The significance of trust and confidence in this context cannot be gainsaid. But it does not, it seems to me, take the case for the implication of the term any further. Indeed, it may be viewed as an instance in which the existing state of the law is well-established.
The content problem
317 A major source of concern, if I may so observe with respect to those who have not seen the matter this way, is the very high level at which the implied term is expressed. As such, the term makes no attempt to come to grips with the practical realities of a particular employment relationship. Although the term refers to the “conduct” of the employer, it would extend to omissions. The present case is an example of the latter. Further, the term would appear to apply to conduct (including omissions) that was (or were) neither wilful nor even, necessarily, intentional. That derives, of course, from the jurisprudential compartment in which the term operates, namely, that relating to contractual promises. How that circumstance would be accommodated by the “abuse of power” basis for the term suggested in McDonald is unclear.
318 It is apparent that the Full Court in McDonald recognised that the practical impact of the implied term lay in the identification of the “conduct from which an employer should refrain”. That subject was, their Honours observed, “still being developed” (104 SASR at 389 [232]). That circumstance, of which there could be little doubt, derives, in my view, from the high-level, almost legislative, way in which the term has been expressed. The unwary jurist who sees nothing but wholesomeness in the term may find that the term operates in practice as a kind of Trojan Horse, wherefrom a miscellany of unforeseen obligations emerge to govern the ex-post disposition of a dispute which has arisen in a concrete setting. The Full Court did not put the matter in this way, of course, but its understated reference to the way in which the term is expressed makes, in my view, such a metaphor an apt one. The fact that the identification of the obligations which the implied term would impose is “open-ended”, and is still the subject of development, speaks against the proposition that the implication of the term is necessary in all contracts of employment.
319 Because of the approach taken by the liquidators, the House of Lords in Malik was not required to grapple with problems of this kind. Had the situation been otherwise, the question would, in my view, almost inevitably have been asked whether an employer owes a duty to its employees not to operate its business in a corrupt or dishonest way. An affirmative answer to that question was implicit in the outcome in Malik, but the question itself was never confronted. It was sufficient to hold it to be arguable (on a strike-out basis) that the conduct of such a business amounted to a breach of the implied term. By not being limited to the question I have identified, Malik became – in the submissions of the respondent and the intervener – the source of a new line of jurisprudence throughout the common law world with application to all manner of situations having nothing to do with the conduct of a corrupt or dishonest business, or the significance of that in the context of the contractual duties owed by the employer to its employees.
320 Thus in the present case, to take an example, the question whether the appellant owed a duty to its employees to observe its non-contractual redeployment policy lay, or should have lain, at the centre of the respondent’s case. As discussed elsewhere in these reasons, attention might have been given to whether an affirmative answer was required because of the operation of the contractual duty of co-operation; or it might have been investigated whether the appellant was estopped, as against the respondent, from denying the binding force of the policy. But the matter was not decided – and, I presume, was not advanced – along these lines. Where the central question itself was not confronted, the implied term, like a biological enzyme, was utilised to achieve the desired outcome by an indirect, albeit a less problematic, pathway.
321 Counsel for the intervener, who had, it seems, surveyed what were said to be about 200 (presumably mostly English) cases in which conduct in contravention of the implied term had been found, submitted that offending conduct fell into a number of broad categories. The first was situations which involved humiliation, intolerable or abusive language and attacks on the employee’s integrity, all on the part of the employer. It was submitted that “employers who persistently discuss the sexual prowess of the employee’s wife” was an example which fell within this category. The second category was described as failure to respect the employee’s position, such as when the employer says, “I don’t care what your statutory rights are. We’re not having annual leave here.” Other instances would be when the employer persistently tried to have the employee agree to an alteration of his or her terms and conditions of employment. Counsel suggested that “persistent sexual harassment” would come within this category, but it may, in my view, be a more obvious member of the first category. The third category was made up of cases in which an employee was singled out for less advantageous treatment, such as by being the only person in the workplace not favoured with a pay rise. Conduct in each of these categories, according to counsel for the intervener, had the real potential to undermine the relationship of trust and confidence.
322 I would make a number of observations about these categories. The first is that they each involve wilful conduct by way of commission (or, in the case of the third category perhaps, wilfully determined omission) rather than a failure to act in a way that would have been more beneficial to the employee. The conduct referred to in each category is conspicuously more egregious than anything done, by omission, by the appellant in the present case.
323 The second observation relates to conduct in the first category. The image most naturally evoked by the conduct there referred to is that of an employee entitled to treat the contract as repudiated, and to leave his or her job immediately. Where the law does not recognise a right to damages for distress, humiliation etc occurring as a result of a breach of contract, conduct in this category does not seem apt for compensatory treatment by a pecuniary award. My view of this category reflects the comment that has occasionally been made in the cases, such as Burazin and Parnell Laboratories, that, whatever else may be its role, the implied term is ill-adapted to provide a foundation for contractual damages.
324 The third observation also relates to so much of counsel’s categories as concerned harassment, humiliation and like conduct. In contemporary times, particularly since the Commonwealth’s legislative competence to regulate the conduct of trading and financial corporations has now been accepted, the statutory protections available to employees against conduct of this kind – and the vicarious liability imposed upon employers in that regard – are extensive. In these circumstances, there is, in my view, a real question whether the courts should take it upon themselves, by the development of the common law, to engage in law reform for a better social order. There is a view (which, as it happens, I hold) that the measures which society considers appropriate for needs of this kind should remain a matter for its elected representatives. I shall elaborate upon this concern later in these reasons.
325 The fourth observation relates to the second category, or at least to the first example proffered under it. If the employee has statutory rights, they may be enforced. No extension to the employer’s contractual obligations is necessary. If the employer sought to victimise the employee for seeking to enforce his or her statutory rights, the employee may – I do not suggest necessarily would – have recourse to a remedy under such provisions as ss 792(1) and 793(1)(j) of the WR Act (to take an instance of legislation that was on the statute books at the time of the respondent’s employment by the appellant). My concern, here again, is that the court is being asked to endorse a norm of conduct that would apply to all employment relationships in Australia, yet we do not have the advantage, which the legislature enjoys, of being able to consider the practical implications of the change across all areas and the points of intersection between that norm and existing statutory obligations.
326 The fifth observation is that there is no reference, in any of counsels’ categories, to the employer’s failure to comply with its own policies. Pursuant to the conditions which attached to the intervener’s application to be heard, counsel made no submission about the circumstances of the present case. However, the facts remain, first, that there appears to be no instance of the implied term having been invoked in a case such as the present where the conduct in question was the failure of the employer to comply with its own policies without more, and, secondly, that a failure of that kind, without more, would seem to lack the conspicuously odious features of all of the examples of conduct which were referred to in counsels’ categories. I say “without more” in this context because I recognise that, in Thomson, Allsop J held (116 IR at 225 [146]) that a breach of company policy “in a serious way … would be a matter assisting in the conclusion” as to whether the implied term had been breached. There were aspects of that case that would make it no authority for the broader proposition referred to above, namely, the explicitly promissory terms of the policy in question (see 116 IR at 217 [124]) and the way in which the employee was treated in the workplace on her return from maternity leave (as summarised by his Honour at 116 IR at 225 [147]). It may be that I am here touching the question whether the implied term has been breached rather than whether it exists as part of an employee’s contract, but the discussion demonstrates the intrinsically indeterminate nature of the content of the implied term in practical settings, a circumstance which weakens the general case that the term should be implied in all circumstances.
327 It is convenient next to return to McDonald, where the Full Court gave detailed attention to the question of the content of the implied term. As indicated in the passage from the Full Court’s reasons extracted above (at para 256), their Honours commenced by observing that the “… development of the implied term can be seen as consistent with the contemporary view of the employment relationship as involving elements of common interest and partnership, rather than of conflict and subordination” (104 SASR at 389 [231]). For that proposition, their Honours referred to an article by Napier published in 1977, the year before Courtaulds. I think that the passage in the article to which their Honours referred was the following (in the “Conclusion” – 6 ILJ at 17):
On the other hand, it would be a mistake to fail to recognise that changes have taken place, albeit not at this fundamental level. In such matters as the standard of behaviour justifying summary dismissal, the rights of the employer to dismiss without giving the opportunity of a hearing and to determine job mobility, and the right of the employee to be given work to do, the common law has developed to the employee’s benefit. Further, under the influence of unfair dismissal law, there are indications of a movement towards a “unitary” view of industrial relations in which common interest and partnership (and not conflict and subordination) are emphasised as features of the employment relationship. The attainment of all these improvements in the common law lot of employees can, of course, be dismissed as “a guerilla war against the effects of the existing system,” (K. Marx, Wages, Price and Profit (Foreign Languages Press ed.), p 78) but, within this limitation, it does represent an important shift in the whole tenor of judicial thinking on the subject of individual employment law. Perhaps one can go further than identifying these changes as instances of piecemeal judicial reform, and, having particular regard to the cases where administrative law principles have been applied in employment cases, one may discern a growing unwillingness to condone as legitimate the arbitrary or unreasonable exercise of the power which the employer is recognised to enjoy. However, decisions such as Thompson v. Eaton [1976] ICR 336 and Simmons v. Hoover Ltd [1976] IRLR 266 are a caution to the danger of over-emphasising this point.
In the present case, counsel for the intervener eschewed any suggestion that the relationship of employment had, in recent years, been assimilated to that of partnership, in the legal sense at least. It was also accepted that “subordination” remained an apt compendious description of the employee’s modern position to the extent that he or she remains, by definition, bound to comply with the lawful directions of the employer. These qualifications, and similar ones that might also be made, expose the unwisdom of attempting to guide the development of the common law by reference to non-legal metaphors and analogies, themselves introduced as high-level summaries of the trend of prior judicial decisions in individual cases. It may indeed have been possible to see the development of the implied term as consistent with a particular view of the employment relationship, but such a view, to the extent that it existed, did not, at least literally, reflect the legal characteristics of the relationship, and, as should be clear from the authorities to which I have referred above, was not responsible for the emergence of the implied term in the United Kingdom.
328 The Full Court also referred to the following from the speech of Lord Nicholls in Eastwood ([2005] 1 AC at 523 [11]):
Mr Johnson’s claim was not without attraction. The trust and confidence implied term means, in short, that an employer must treat his employees fairly. In his conduct of his business, and in his treatment of his employees, an employer must act responsibly and in good faith. In principle, this obligation should apply as much when an employer exercises his right to dismiss as it does to his exercise of other powers of his which affect a subsisting employment relationship. It makes little sense, for instance, that the implied obligation to act fairly should apply when an employer is considering whether to suspend an employee but not when the employer is proposing to take the more drastic step of dismissing him. Considerations of this nature suggest that the natural, continuing development of this aspect of the common law should be that the implied obligation to act fairly applies to dismissal decisions. This would mean that if an employee were treated today in the same shameful way as Mr Addis he would have a remedy at common law for breach of contract.
In the Full Court, their Honours said that this passage justified the conclusion that, in England, “the implied term of mutual trust and confidence has evolved into a duty by employers to treat their employees fairly” (104 SASR at 389 [232]). With respect, I do not think that that was what Lord Nicholls was saying. Rather, as the opening sentence of the paragraph above makes clear, his Lordship was here concerned to identify the characteristics of the claim of the employee in the earlier case of Johnson. That sentence was not included in the extract from Eastwood cited by Basten JA in Russell, which their Honours in McDonald said “appeared to approve of [the] evolution” of the common law to which, in their perception, Lord Nicholls had given expression. Indeed, immediately after the passage set out above, his Lordship stated that the development of the common law for which the employee in Johnson contended faced the “overriding difficulty” that “… [f]urther development of the common law along these lines cannot co-exist satisfactorily with the statutory code regarding unfair dismissal” ([2005] 1 AC at 524 [12]).
329 In the final paragraph of the extract from McDonald set out in para 256 above, their Honours made another suggestion (for which they found support in an established text), namely, that the term “operates in a variety of circumstances within an employment relationship to restrain abuses of an employer’s power” (104 SASR at 389-390 [233]). “Abuse of power” connotes conspicuously wrongful conduct which is either wilful or engaged in in circumstances that would warrant firm disapprobation. If this be the purpose of the implied term, the recognition of the term should, in my respectful view, await circumstances to which its prohibitions would be more proximately relevant than those of the present case. A cautious approach along those lines would reflect the method of the common law. On any view, the present occasion is ill-fitted for an examination of what constitutes an “abuse of power” on the part of an employer, and of how any implied contractual prohibition thereon should be expressed. The appellant may have exercised a “power” when it terminated the employment of the respondent on 9 April 2009, but the “conduct” on which the primary Judge’s conclusion was based – and his Honour made this absolutely clear – was the appellant’s failure to comply with its redeployment policy, not the termination of the respondent’s employment.
330 I would conclude this part of my reasons by noting that there are indeed respects in which, in any employment relationship, the employee is entitled to have trust and confidence in the employer. Here I return to the subjects of safety and lawfulness first mentioned briefly at para 293 above. Because of the obligation borne by the employee to perform his or her work personally, he or she must have trust and confidence in the employer to provide a safe working environment. There is no better way to describe the proper expectations of, for example, an operator who climbs into the cabin of a tower crane, or a miner who travels far beneath the surface of the earth, in compliance with the employer’s directions. The employee must also have trust and confidence that the employer will not require him or her to perform an act that is unlawful or contrary to some applicable code of conduct, such that, for example, a truck driver could not be required to travel over a distance that would inevitably require him or her to break the speed limit, and an employed athlete could not be required to ingest dietary supplements that were contrary to the code governing his or her sport. But the trust and confidence to which these circumstances relate is reflected in the implied obligations to which I have already referred. Those obligations are well-justified by necessity.
The intersection problem
331 There are some respects in which the omnibus obligation introduced by the implied term would render irrelevant the boundaries of other, established, principles of the common law, or of equity, having potential application in the employment context. In the present case, for example, the effect of the judgment of the primary Judge was to impose a duty of co-operation unrelated to any benefit to which the respondent was entitled under his contract of employment. The judgment may also be seen as delivering an outcome to the respondent the equivalent of holding the appellant to an assumption that the redeployment policy would be adhered to, but without any need to show that the assumption was induced by the appellant or that the respondent relied on it. The limitations implicit in these principles have been scrupulously laid down in the cases over the years, and it is not, in my view, consistent with them that a new omnibus obligation should be laid over them without a much more thorough consideration of the various points of intersection than is evident in the authorities to date.
332 Equally, if not more, important in a democratic society are the points at which the implied term would intersect with legislated norms of conduct, the scope of which is now much more comprehensive than when the traditional implied terms of the contract of employment evolved in the courts. Taking first the area of termination of employment, in the United Kingdom it was soon found that the implied term could not co-exist with the detailed regime for the treatment of dismissals that had become the subject of legislation. Thus one now has the somewhat ironic position in which the implied term, itself the courts’ response to a need for a comprehensive approach to the subject of constructive dismissal under the Acts of 1971 and 1974, has been excluded from service in relation to the act of dismissal itself. The cases since Johnson tell their own rather unhappy story with respect to the dividing line between what was, and what was not, to be considered as part of the dismissal process for the purpose of the operation of the implied term. Although dissenting, the judgment of Baroness Hale in Edwards v Chesterfield Royal Hospital NHS Foundation Trust [2012] 2 AC 22, 58-62 exposes some of the conceptual issues involved (the interest in which, for present purposes, is not lessened by reason of the case being concerned with the express terms of employees’ contracts, rather than with the implied term itself). The British experience, if I may call it that, exposes the unwisdom of courts venturing into areas which might well have been, and to an extent (but a limited extent) have in fact been, the subject of legislation.
333 As noted by Spigelman CJ in Paige, Australia too has, and has for some time had, legislated provisions with respect to the broad area which has come to be known as unfair dismissal. The position which existed under State law in 1984 was summarised by the Australian Conciliation and Arbitration Commission in Termination, Change and Redundancy Case (1984) 8 IR 34, 38-41. As a result of that case, which was a test case, a provision was inserted into federal awards that provided that termination of employment by an employer “shall not be harsh, unjust or unreasonable”: see 9 IR at 118. This provision was considered apt to impose an obligation upon an employer to investigate alternative courses before dismissing an employee for failure to maintain his membership of a trade union: Gregory v Philip Morris Ltd (1988) 80 ALR 455, 473-474. By the Industrial Relations Reform Act 1993 (Cth), comprehensive provisions as to the “requirements for lawful termination of employment” were introduced into the IR Act: see Pt IVA, Div 3, Subdiv B of the IR Act as so amended. Those requirements included that there be a “valid reason” for the dismissal of an employee, being a reason that was “connected with the employee’s capacity or conduct or based on the operational requirements of the undertaking, establishment or service”: see s 170DE of the IR Act. These provisions were amended a number of times in the years that followed, but there remained statutory norms of conduct that applied to terminations of employment, and specific remedies which were available in the event of a breach of those norms. At the time of the month or so within which the appellant was held by the primary Judge in the present case to have contravened the implied term, the provisions were to be found in Pt 12, Div 4 of the WR Act. A dismissed employee was entitled to apply to the Australian Industrial Relations Commission for relief in respect of his or her dismissal on the ground that it was “harsh, unjust or unreasonable”, or that it had been done in breach of various statutory protections which related to specific characteristics of the employee, including absence due to illness, race, colour, religion, sex, trade union membership and others: see s 643 of the WR Act. These protections were not available to an employee who was not “employed under award-derived conditions” (s 638(1)(f)) and whose remuneration exceeded the rate specified for the purpose under the regulations (s 638(6)). These provisions, which in 2009 applied to employees of trading and financial corporations, reflect detailed legislative attention to the question of unfair dismissal, and imply very careful discriminations as between categories of employees and the protections available to them.
334 It may be said that the implied term does not apply to the act of dismissal as such. That circumstance was recognised by the primary Judge in the present case, who was specific in his finding that the appellant’s objectionable omissions occurred prior to the unlawful termination of the respondent’s employment, and thus were not caught by the Johnson exclusion. But this demarcation as between what is and what is not an aspect of the dismissal, which has been so problematic in the United Kingdom, is not so readily apparent within the industrial relations jurisprudence which has come to be associated with the notion of a “harsh, unjust or unreasonable” dismissal. It could hardly be denied that the failure of an employer to investigate opportunities for redeployment, when standard protocols in that regard were in place, before dismissing an employee would have the very real potential to contribute to a finding that the dismissal was harsh, unjust or unreasonable. Neither are these areas of overlap rendered the less difficult because it might be the case in a particular situation that the employee concerned was excluded from the statutory protections on account of, for example, the level of his or her income. The present question is whether the implied term is part of all contracts of employment in Australia, and to answer it in the affirmative would, in my view, introduce an additional layer of regulation with respect to processes, including omissions, leading to the dismissal of an employee that could never have been in the contemplation of the legislature when the provisions to which I have referred were enacted.
335 Another area of potential intersection relates to occupational health and safety. During the period of the respondent’s employment by the appellant, an employer’s obligation to ensure, so far as was reasonably practicable, that every employee was safe from injury and risks to health was stated in s 19(1) of the Occupational Health, Safety and Welfare Act 1986 (SA), and corresponding legislation in the other States and Territories. Now, that obligation is to be found in s 19(1) of the Work Health and Safety Act 2012 (SA), and corresponding legislation in the other States and Territories, following as it does the template in the Work Health and Safety Act 2011 (Cth). While these legislative provisions complement, rather than replace, the contractual and tortious duties of care, the existence of them, and of those other duties, leaves little scope for the contention that the implied term is a necessary part of contracts of employment insofar as occupational health and safety is concerned.
336 The now widespread legislative prohibitions on various forms of workplace discrimination and harassment should also be mentioned in the present context. By s 14(2) of the Sex Discrimination Act 1984 (Cth) (“Sex Discrimination Act”), it is unlawful for an employer to discriminate against an employee on the ground of, amongst other things, the employee’s sex, marital status, pregnancy or potential pregnancy in the terms or conditions of employment that the employer affords the employee, by denying the employee access, or limiting the employee’s access, to opportunities for promotion, transfer or training, or to any other benefits associated with employment, by dismissing the employee or by subjecting the employee to any other detriment. By s 28B(2) of the same Act, it is unlawful for an employee to harass sexually a fellow employee or a person who is seeking employment with the same employer; and, where such sexual harassment occurs, the relevant employer is, unless all reasonable steps to prevent the harassment were taken, vicariously liable (s 106(1)(b)). Relevantly, “sexual harassment” includes making an unwelcome sexual advance, an unwelcome request for sexual favours, to the person harassed, or engaging in other unwelcome conduct of a sexual nature in relation to that person (including making a statement of a sexual nature to the person, or in the presence of the person, whether the statement is made orally or in writing), in circumstances in which a reasonable person, having regard to all the circumstances, would have anticipated that that person would be offended, humiliated or intimidated (s 28A). These norms of conduct apply to trading corporations (s 9(1), (11) and (12)).
337 The Sex Discrimination Act is not intended to exclude or limit the operation of a law of a State or Territory that is capable of operating concurrently with it (s 10(3)). By s 30(2) of the Equal Opportunity Act 1984 (SA), in force at the time of the termination of the respondent’s employment, it was unlawful for an employer to discriminate against an employee on the ground of sex, chosen gender or sexuality in the terms or conditions of employment, by denying or limiting access to opportunities for promotion, transfer or training, or to any other benefits connected with employment, by dismissing the employee or by subjecting the employee to any other detriment. By s 87(1) of the same Act, it was unlawful for an employee to subject a fellow employee, or a person seeking employment with the same employer, to sexual harassment; and, where such sexual harassment occurred in the course of the harasser’s employment, and the relevant employer instructed, authorised or connived at the act of harassment, that employer was, unless all reasonable steps were taken to ensure that the agent or employee would not act in contravention of the Act, vicariously liable (s 91(1), (2) and (3)). Relevantly, “sexual harassment” included subjecting the person harassed to an unsolicited and intentional act of physical intimacy, demanding or requesting (directly or by implication) sexual favours from that person, and making, on more than one occasion, a remark with sexual connotations relating to that person, where the act in question was done in such a manner or in such circumstances that the person felt, and it was reasonable in all the circumstances that he or she should have felt, offended, humiliated or intimidated (s 87(11)).
338 I have referred, in some detail, to the provisions of legislation which would be potentially applicable to a breach of the implied term which involved some measure of sex discrimination or sexual harassment because of the instances of objectionable conduct on the part of an employer – or, presumably, a co-worker for whose conduct the employer would be responsible – to which counsel for the intervener referred in their submissions. At the level of principle, however, the problem presented by the overlap of the term with legislated standards of conduct for employers might just as well arise in situations covered by, for example, the Racial Discrimination Act 1975 (Cth), the Disability Discrimination Act 1992 (Cth) and the Age Discrimination Act 2004 (Cth).
Conclusion
339 Looking at the matter against the test proposed by McHugh and Gummow JJ in Byrne (see para 286 above), I would not hold that the implied term was necessary to prevent “the enjoyment of the rights conferred by the contract [being] … rendered nugatory, worthless, or, … seriously undermined”. To the extent that the implied term has as its focus the integrity of the employment relationship as such, clearly it is not necessary to prevent the employer from (at least wilfully) taking action to destroy or to seriously damage it. That would be repudiatory. To the extent that the term has as its focus the “enjoyment of the rights conferred by the contract”, it is not clear what further useful part it would, or could, play beyond that played by the duty of co-operation. Indeed, that duty is itself responsive to the kind of necessity to which their Honours referred in Byrne. By contrast, the implied term is not obviously responsive to any existing term of the contract. That may be the explanation for the respondent’s decision, which I assume was at some point made on his behalf, not to rely on the duty of co-operation in the present appeal: once one enters the realm of the “rights conferred by the contract”, one immediately confronts the express exclusion of the appellant’s redeployment policy from the respondent’s contract of employment.
340 Whether the test is necessity in the strict sense or necessity in the broader policy sense, it will be apparent from what I have written above that I would not support the development of the common law in Australia by the introduction of the implied term. I would summarise my views as follows:
(a) Despite the passage of 25 years since the first articulation of the implied term in England, there has, on my reading of the authorities, been no wholly satisfying defence of the term, locating it within the norms, obligations and entitlements which arise under the contract of employment.
(b) I can find no solid basis for the premise, implicit in the implied term, that, under the contract of employment, the employer owes a duty of trust and confidence to the employee beyond those duties which are already conventionally associated with contracts of that class.
(c) The proposition that the introduction of the implied term is justified as the mutualisation of the employee’s duty of fidelity to the employer does not withstand examination.
(d) Neither can the implied term be justified as a principled development of the implied duty of co-operation as between the parties to the contract.
(e) Of its nature, the implied term is a mechanism for the regulation of the conduct of employers. It is prescriptive, and speaks prospectively, but, as expressed, the term is content-free and has the potential to act as a Trojan horse in the sense of revealing only after the event the specific prohibitions which it imports into the contract.
(f) The term would enable defined limits in the existing fabric of common law and equitable remedies to be sidestepped.
(g) The term would overlap a number of legislated prohibitions and requirements in particular dimensions of the employment relationship, thus tending to compromise the democratically-drawn architecture of the relevant obligations.
341 Finally, although the present question does not fall to be addressed under the BP Refinery line of authority, the law’s preparedness to imply terms by reference to the facts of particular cases is not irrelevant to the answer to the question with which we are presently concerned. To the extent that the actual circumstances of a particular employment contract might be accommodated within the principles articulated in BP Refinery, the case for the broader implication, taking no account of the parties’ intentions as it does (at least in the absence of agreement otherwise) is that much the weaker.
342 It follows from my reasons above that I would uphold the appellant’s first ground of appeal.
If the respondent’s contract contained the implied term, was it breached?
343 The premises by reference to which this part of my reasons proceeds is that the primary Judge was correct to hold that the appellant’s redeployment policy was not contractual but that the implied term was part of the respondent’s contract of employment. The question which then arises is whether the appellant’s failure to comply with its own policy was calculated or likely to destroy or seriously to damage the relationship of trust and confidence which is presumed otherwise to have existed between the parties in the period after 2 March 2009. This question must be considered in a context in which the primary Judge made no finding that the failure was wilful or intentional and no finding that the respondent relied upon an assumption that the policy would be followed.
344 The nature and particular features of an employment relationship will always depend (perhaps amongst other things) on the terms of the contract by which the relationship is sustained and defined. The contract is especially significant in a case of the present kind because the implied term itself is a contractual artefact, and it was a contractual remedy which the respondent secured at first instance. What amounts, in a particular case, to conduct calculated to destroy the relationship of trust and confidence will always be responsive to the terms of the contract in question. It would never, in my view, amount to a breach of the implied term for the employer to engage in conduct for which the contract provided, or which the contract contemplated.
345 The present case is concerned with a policy of the appellant. Such a policy, of its nature, is a unilateral statement by a business owner of the course that should be followed, and the steps that should be taken, in a particular situation. Because the more important businesses, and employers, are organisations, policies are necessary to ensure that those who serve in them at all levels do so in ways that are consistent yet appropriately responsive to events, and reflective of the intentions of management. Some policies deliver benefits to employees – indeed, they are intended to do so, such as policies designed to maintain safe and harmonious working environments. The cases show that the question whether policies of this kind are contractually enforceable against employers at the suit of employees who would, were the policies adhered to, derive such benefits has been problematic: see Yousif v Commonwealth Bank of Australia (2010) 193 IR 212. However, I do not believe that it has ever been held that an appropriately clear statement by the employer, in or in connection with a particular policy, that the policy was not contractual would not be sufficient to protect the employer from contractual liability for a breach of the policy. The employer does not need the employee’s agreement to any such reservation, since policies of their nature are not consensual. They are unilateral statements, indications or instructions by the employer, and any reservation which accompanies their promulgation must be given effect according to its terms. The approach taken by the primary Judge to the question whether the appellant’s redeployment policy formed part of the respondent’s contract of employment was entirely consistent with what I have said here.
346 But his Honour held that the appellant’s failure to comply with the redeployment policy amounted to a breach of the implied term, notwithstanding the reservation which accompanied the promulgation of that policy, to the terms of which I referred at para 168 above. His Honour’s reasons for this holding were relatively brief, and may conveniently be set out in full:
331 In my opinion, to hold that a serious breach of the Redeployment Policy is a breach of the implied term of mutual trust and confidence is not inconsistent with the conclusion that the policy itself is not a term of the contract. That might be so if the policy was expressed in entirely aspirational or descriptive terms, because it would then be difficult to establish a serious breach, but that cannot be said of the Redeployment Policy. It is not a “back door” method of avoiding the effect of the statement in the introduction to the policies because it is only a serious breach that could give rise to a breach of the implied term.
332 The Bank issues the policies and it has the right to amend or vary them. I do not need evidence to infer that it does so to protect its own interests and to make employment at the Bank attractive. There are likely other reasons but these are sufficient for the purposes of the present point. The Bank makes them available to employees and they assist in working out matters that arise or relate to the employment relationship. Each party expects that the policies will be adhered to, subject to the fact that some of the statements are no more than aspirational or descriptive. I think that a serious breach of the Redeployment Policy by the Bank does give rise to a breach of the implied term of mutual trust and confidence (see Thomson v Orica Australia Pty Ltd [2002] 116 IR 186 per Allsop J at 225 [146]).
In the first of these paragraphs, the primary Judge anticipated, and dealt with, objections of the kind now raised by the appellant, while in the second paragraph his Honour articulated the positive case for the conclusion which he reached.
347 As I read his Honour’s reasons, at the core of that conclusion were the inferences that the appellant issues, and from time to time amends, its policies “to protect its own interests and to make employment at the [appellant] attractive”; that the policies “assist in working out matters that arise or relate to the employment relationship”; and that “each party expects that the policies will be adhered to”. The primary evidence which supported the drawing of these inferences, so far as I can see, was the fact of the policies themselves, and their promulgation within the appellant’s organisation. That the appellant would expect its policies to be adhered to goes without saying. As a member of the group to whom the policies were addressed, the respondent, while a manager employed by the appellant, would also have expected that the policies would be adhered to. Indeed, it is self-evident that the appellant would have expected the respondent himself to adhere to the policies when staff in his own section were confronted with circumstances to which the policies related.
348 But the expectation, justified by the terms and promulgation of the policies themselves as it was, could not have risen higher than its source. In the reservation to which the policies were subject, the appellant made it clear that the policies were not contractual as between itself and individual employees. That was an indication that, while employees might expect the policies to be followed, they were not entitled, as against the appellant, to have them followed. Put another way, the policies stood outside the bundle of rights and obligations that existed as a matter of contract between employer and employee. As his Honour accepted, when the appellant failed to adhere to the redeployment policy in the respondent’s case, it was a failure which had no direct contractual consequences.
349 But his Honour went on to hold that it had indirect contractual consequences, in the way I have outlined above. In my respectful view, he was wrong to have done so. In the light of the reservation which accompanied the policy, I cannot understand how a failure to adhere to the policy could be regarded as either calculated or likely to destroy or seriously damage the relationship of trust and confidence established pursuant to the contract. In relevant respects, the characteristics of the relationship – including such trust and confidence as is presumed to exist – had to accommodate themselves to the terms of the reservation, which left no scope for any confidence on the respondent’s part, and no proper basis for him to have trust, that the redeployment policy provided benefits to which he was legally entitled as against the appellant.
350 The conclusion which I have reached on this point can be reached another way. Had the appellant been a small business with a few employees only, and had the manager thereof sat down with the respondent, at the commencement of his employment or at some appropriate stage, and explained that there was a policy of redeploying employees whose positions had become redundant, but that the policy was company practice only and the benefits thereof were not the entitlement of employees, would there have been any basis for the respondent to have had trust or confidence in the appellant that the benefits of the policy would be available to him? As I would see it, clearly not. He might have been optimistic that the benefits of the policy would be made available to him if his position did become redundant, but that would not, in my view, be enough to attract the operation of the implied term. In essence, and with modifications necessary to accommodate the circumstances of a large organisation, this hypothetical example corresponds with the facts of the present case.
351 This does not mean that the implied term, assuming it to exist as such, has no role to play with respect to aspects of the relationship between employer and employee that lie outside the terms of the contract between them. In many of the cases in the United Kingdom in which the term has been invoked, the offending conduct of the employer has, factually, been unrelated to anything agreed contractually with the employee. Indeed, in one sense, circumstances of that kind originally led to the development of the term: it was the term itself which provided the contractual element necessary for there to have been a repudiation and thus recourse to the statutory unfair dismissal remedies. But typical of the conduct with which such cases have been concerned was that to which we were referred in the submissions of the intervener, which I mentioned at para 321 above. By contrast, the foundation for the submission that the appellant’s conduct breached the implied term was a policy accompanied by a reservation that its terms were not contractual. No aspect of that conduct other than failure to comply with the policy informed the primary Judge’s conclusions that there had been a breach. For reasons I have given, I take the view that the presence of the reservation in the policy did not, in the particular circumstances of the case, leave any scope for the conclusion that by merely failing to comply with the policy the appellant breached the implied term.
352 For the above reasons, I would uphold the appellant’s second ground of appeal.
Were the respondent’s damages limited to the contractual period of notice required for a dismissal?
353 Under the express term of the respondent’s contract of employment, the appellant could dismiss him on four weeks’ notice, or payment in lieu. The appellant submitted that, even if the respondent were otherwise successful in the case, his damages could not be assessed at a sum greater than that which would be represented by the remuneration to which he would have been entitled under a dismissal on four weeks’ notice. This proposition was put in two ways. First, it was said that the “least burdensome principle” applied, that is to say, that, in the calculation of damages, the counterfactual must be that the appellant would have dispensed with the services of the respondent under the least burdensome circumstances that were lawfully available to it. Secondly, it was said that, although the breach of contract identified by the primary Judge related to the appellant’s failure to follow its redeployment policy, in fact the damage which the respondent suffered as a result fell in at the point at which he was dismissed: only then was he in receipt of no income at all, which was the situation implicitly invoked as the counterfactual against which the remuneration which the respondent would have had a 25% chance of earning had the policy been followed was compared.
354 The appellant’s invocation of the least burdensome principle encounters an immediate obstacle in the facts of the case. The least burdensome principle takes it as a given that the party otherwise in default would seek to do, or at least to achieve the effect of, what was done irregularly. The appellant had no desire to terminate the respondent’s employment. On 2 March 2009, he was told that it was the appellant’s preference that he be redeployed to another position. It was not until 9 April 2009 that the appellant dismissed the respondent, but by then the breach of contract for which damages were assessed by the primary Judge was complete. In respects relevant to that breach, the case was not one in which the appellant made an ineffective attempt lawfully to terminate the employment of the respondent. It is not, therefore, a situation in which we should assume that the appellant would have adopted the least burdensome method of lawfully doing what it attempted to do. The question was not whether there was a means of dispensing with the services of the respondent that would not involve a breach of contract. The omissions which the primary Judge held to constitute a breach of contract on the part of the appellant were not by way of attempts to terminate his services. In my view, the least burdensome principle had no role to play in the assessment of damages in the present case.
355 Turning to the appellant’s second point, it is true that the value of a 25% chance of the respondent securing ongoing employment with the appellant was measured against the position in which he found himself after 9 April 2009, namely, one in which he was in receipt of no remuneration from the appellant at all. But that was the natural consequence of the facts as they existed. Had there been no question of redundancy, had the respondent applied for a position available on promotion, and had the appellant, in breach of contract, overlooked his application, then the damages to which he would have been entitled, on a loss of a chance basis, would have used his existing remuneration as a baseline. In the facts as they existed, however, the appellant’s assumed obligation to give effect to its redeployment policy arose in the context of the respondent’s position having become redundant, and the normal consequence of him not securing redeployment would be, and was, the termination of his employment. Put another way, there was a 25% chance that the respondent would have secured redeployment, rather than not having a job at all. In this respect, I consider that the primary Judge’s approach was unobjectionable.
356 For the above reasons, I would reject the appellant’s third ground of appeal.
THE CROSS-APPEAL
357 The respondent has two grounds of cross-appeal. The first is divided into four parts, the fourth of which refers to a calculation error on the part of the primary Judge, and, as the appellant accepted, must be upheld. Jacobson and Lander JJ have addressed this aspect, and I have nothing to add. The first part involves an allegation that the primary Judge erred in holding that the legal obligation to consider, and to take steps directed to, the redeployment of the respondent did not arise before 2 March 2009. If, which must be the case, this allegation is based on the terms of the redeployment policy, it was scarcely developed in the submissions made on behalf of the respondent. Nothing put on the cross-appeal came close to impugning the reasoning of the primary Judge in this respect.
358 It was upon the second and third parts of the first ground that counsel for the respondent focussed in their submissions on the cross-appeal. They involve an attack on the primary Judge’s finding that, had the redeployment policy been followed, the chance of the respondent securing a position at the relevant salary level was 25% only. It is said that it should have been held, on the probabilities, that the respondent would have been redeployed (this being the second part of the ground), or that the chance of redeployment was greater than 25% (this being the third part of the ground). As presented by counsel for the respondent in their submissions on appeal, the two parts were effectively run together: it was said that the chance of redeployment should have been assessed at something close to 100%, and in any event at more than 25%.
359 As counsel for the respondent made clear, there is no challenge to his Honour’s findings of primary fact. The challenge is to the inferences which his Honour drew. Furthermore, the inferences in question related not to events which had occurred, but to the likelihood of future events having followed a particular course had something happened which did not happen (the appellant observing its redeployment policy). Counsel attempted to clear this high persuasive bar by directing us to evidence of positions that were said to be available at about the time that it was decided that the position occupied by the respondent was redundant and of the perceived suitability of the respondent in relevant respects. However, it was not suggested that the primary Judge overlooked or mistook any of this evidence. So far as I can see, counsel’s project was, in effect, to re-agitate the submissions that presumably were made to his Honour, with a view to having us reach a different conclusion. Because of the nature of the subject-matter, this was not, in my view, a situation in which first-instance error might be demonstrated by such an approach.
360 Counsel’s submissions were also characterised by a focus upon every aspect of the evidence below which favoured the case then being advanced on behalf of the respondent. That might well have been apposite before the primary Judge, but on appeal it was, in my view, inadequate as a means of demonstrating error. To do the latter, it was necessary for the unfavourable things which his Honour took into account also to be addressed; and, I would add, to be convincingly discounted. This was not done. Here one needs to go no further than the following paragraph in the primary Judge’s reasons:
The Bank was not obliged to redeploy Mr Barker. The Bank was not obliged to keep Mr Barker on for an indefinite period in order to see if he could be redeployed. Nor was it required to exclude from its decision-making broader commercial considerations. Mr De Luca and Mr Formichella had concerns about Mr Barker’s behaviour. There were a limited number of positions and many of them were interstate. For these reasons, I am not satisfied on the balance of probabilities that had the Bank followed its Redeployment Policy Mr Barker would have been redeployed.
There were, I would have to say, two silent premises running through the respondent’s case on this aspect of the cross-appeal, namely, that the appellant was obliged to adjust the normal timing of job vacancies to give the respondent an opportunity to be part of the field, and that the notification of an opening to the respondent would, somehow, be tantamount to an offer of the position in question. Those premises were not justified by the terms of the redeployment policy, as his Honour recognised in the above passage.
361 That passage also makes sense of his Honour’s conclusion that there was only a 25% chance of the respondent being redeployed against his finding that, had the redeployment policy been followed, the respondent “would have been advised of a position or positions for which he may have been considered suitable”. Counsel for the respondent submitted that, in the light of that finding, it would then have been only a matter for the respondent himself to decide whether to take up the position concerned (and they submitted that it should be regarded as unlikely that he would have declined to do so, as that would have imperilled his entitlement to redundancy pay in the event that no other position were found for him). But being advised of a position for which the respondent may have been considered suitable would not have been the same as being offered the position in question.
362 On the cross-appeal, counsel for the respondent drew attention to six specific roles which had been mentioned in a table produced by the appellant setting out vacant positions which had been advertised internally, when that had been done, when the positions had been filled and other details. Because of their specific mention, I assume that they represented the respondent’s strongest cases for redeployment. The first was based in Perth, and was advertised only on 8 June 2009. The second had been advertised on 24 February 2009 and was filled on 8 March 2009. The third was based in Melbourne, and was not advertised until 29 April 2009. The fourth was also based in Melbourne, and was not advertised until 15 June 2009. The fifth was based in Sydney, and was not advertised until 24 April 2009. The sixth was also based in Sydney, and was advertised only on 7 April 2009. The respondent’s contention was that the appellant’s organisation was so large, and that the occurrence of vacancies in potentially relevant areas so commonplace, as to make it quite unlikely that his chance of securing one such vacancy was 25% only. The timing of the vacancies – and of the filling of them – however, demonstrates the weakness of that contention. Only one of those referred to would have been relevant to the respondent’s prospects of redeployment. But no detailed, as distinct from high-level, attention was given to that one vacancy.
363 Another factor referred to by the primary Judge in the passage set out above with which the respondent’s submissions simply did not come to grips was that there were concerns about the respondent’s “behaviour”. We were invited, in effect, to depreciate the significance of his Honour’s finding in this regard upon the ground that it was also established on the evidence that the appellant’s preference was to redeploy the respondent, but no notice of contention disputing the finding was filed. How the two, seemingly antagonistic, considerations referred to in the previous sentence would have played out in practice had the appellant made a timely attempt to redeploy the respondent was not given detailed attention in the submissions made on his behalf.
364 Everything considered, the respondent has not come close to establishing a basis from which to attack the primary Judge’s 25% finding. To the extent that it relates to the second and third parts to which I have referred, I would reject the first ground in the cross-appeal.
365 The respondent’s second ground of cross-appeal is that the primary Judge was in error to have held that “general damages for hurt, distress and loss of reputation were not recoverable”. His Honour did so hold. His Honour did not make any finding of fact with respect to “hurt, distress and loss of reputation” or, in that context, with respect to causation. In the circumstances, the only question which now arises is whether his Honour erred as alleged in the Notice of Cross-Appeal.
366 The starting point, of course, is the breach of contract which the primary Judge held to have occurred. That was a breach of the implied term. It was not a breach of the redeployment policy, which, his Honour held, was not contractual. In that part of his reasons which dealt with the damages point presently under discussion, the primary Judge said:
As to general damages for hurt and distress, I do not think such damages are recoverable. The Redeployment Policy discloses an intention to benefit both the employer and employee. There is not, as Mr Barker suggests, an unambiguous intention to create the policies in order to give employees “peace of mind”: compare Baltic Shipping Co v Dillon (1993) 176 CLR 344; Quinn v Gray (2009) 184 IR 279 and Wilcox J in Nikolich v Goldman Sach (sic) JB Were Services Pty Ltd [2006] FCA 784 at [317]. For example, as counsel for Mr Barker pointed out in closing submissions, in addition to the obvious benefit it confers on employees who find their role has been made redundant, the Redeployment Policy benefits the employer as it ensures a redundancy payment will not have to be paid in circumstances where another suitable position exists.
By his reference to “peace of mind”, the primary Judge invoked what had been said by Bingham LJ in Watts v Morrow [1991] 1 WLR 1421, 1445, quoted by Mason CJ, Brennan J, Deane and Dawson JJ and McHugh J in Baltic Shipping Co v Dillon (1993) 176 CLR 344 (“Baltic Shipping”) at 364, 371, 382 and 402 respectively :
Where the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation, damages will be awarded if the fruit of the contract is not provided or if the contrary result is procured instead.
Otherwise, damages for detriments of these kinds, even if flowing directly from the breach of contract in question, are not available. Specifically in relation to a breach of the implied term, it was held in Bliss that damages for “frustration and mental distress” were not available: [1987] ICR at 717-718.
367 As against that, counsel for the respondent relied upon what had been said in Burazin with respect to the question whether Addis stood in the way of an award of damages for breach of the implied term. As I have already noted, what their Honours said on the contractual point in that case must be regarded as obiter, but it does, of course, deserve the greatest respect. Nonetheless, I could not, with respect, agree that the implied term is a term designed to provide peace of mind or freedom from distress. It will be clear from my reasons above that I am not persuaded that the term rests on a satisfactory jurisprudential foundation, but, whatever that foundation is, the term should not, in my view, be regarded as involving a promise by the employer to provide the employee with peace of mind, freedom from distress, or the like. The Court of Appeal did not so regard it in Bliss, and I do not share the reservations of the Full Court in Burazin as to the correctness of their Lordships’ conclusion in relevant respects.
368 Counsel for the respondent referred to two other authorities in support of their attack on the primary Judge’s holding that damages for hurt and distress arising from a breach of the implied term were not available. The first was a comment made by Wilcox J at first instance in Nikolich v Goldman Sachs J B Were Services Pty Ltd [2006] FCA 784 at [317]:
The present case does not concern a pleasure cruise. However, it is strongly arguable that it comes within the principle applied in Dillon. The purpose of the relevant sub-sections of WWU was to provide assurance to existing and prospective GSJBWS employees concerning the manner in which they would be treated in their workplace and, in particular, about the support they would be offered by their employer. The ‘very object’ was to provide peace of mind.
“WWU” was a document produced by the employer in that case (referred to by Wilcox J as “GSJBWS”) called “Working With Us”. His Honour had held that some sections of that policy were contractual, and that the employer had breached them. Those sections were headed “Health and Safety”, “Harassment” and “Concerns or Grievances”. On appeal – Goldman Sachs J B Were Services Pty Limited v Nikolich [2007] FCAFC 120 – it was held that the latter two sections of the policy were not contractual, but Wilcox J’s award of damages (now referable to the first section only) was not disturbed. What is important for present purposes is that those damages were not awarded on account of the employee’s hurt feelings, distress or agitation of mind, but on account of a diagnosed psychiatric illness. Much less was the case concerned with the implied term. The case is, therefore, of no relevance to the present question.
369 Counsel referred also to Quinn (see para 272 above), in which the arbitrator had, it seems, included in his damages a component for “distress and disappointment” on the basis that the term in question – the implied term – involved a promise of freedom from such detriments and therefore fell within Baltic Shipping. Byrne J said ([2009] VSC 136 at [28]-[30]):
In the particular circumstances of this case, then, the ACA's contract required that it act with mutual trust and confidence in its fact-finding functions, and that it have regard to the prospect that an unfair inquiry with adverse findings might affect the interests of Dr Gray — her professional interests, obviously enough, and also, given her physical condition at the time, her psychological interests. It is not difficult to see that the term of mutual trust and confidence had as its objective in these circumstances the prevention of such a result.
Leaving aside the circumstances of the termination of her employment, it was open to the arbitrator to find, as he did, that damages for her distress and disappointment were recoverable in accordance with ordinary contract principles enunciated in Hadley v Baxendale.
I have not overlooked the body of authority to which I was referred in which these damages have not been awarded in the context of an employment contract. I have considered how the arbitrator analysed these cases which were referred to in his reasons, and have considered also those further cases to which I have been referred. I am mindful that, in a contract of employment these damages might rarely arise as a matter of fact, but I am not concerned with this because the arbitrator has made the findings of fact. I am mindful also of the dangers of accepting and applying a proposition which might be thought to run counter to the line of authorities starting with Addis v Gramophone Co Ltd, so that a distinction must be drawn between those authorities and those cases where non-physical loss is suffered otherwise than for breach of contractual provisions dealing with wrongful dismissal.
It does not appear whether Bliss was amongst what his Honour described as “the body of authority to which I was referred”, but I would have to say that that judgment of the English Court of Appeal does appear to stand four-square in the way of the approach which the arbitrator had, it seems, taken in Quinn. In the circumstances, I would, with respect, regard Quinn as unsatisfactory authority for the result which the respondent seeks in the present case.
370 With respect to so much of the second ground as relates to damage to the respondent’s reputation, the primary Judge noted that there was no evidence of any such damage. That finding was not the subject of any notice of contention on behalf of the respondent. In the circumstances, there is no credible basis for the respondent’s submission that his Honour was in error not to have awarded damages for loss of reputation.
371 For the above reasons, I would reject the respondent’s second ground of cross-appeal.
I certify that the preceding two hundred and eleven (211) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup. |
Associate:
Dated: 6 August 2013
