Implied Terms In Commonwealth Bank of Australia v Barker [2014] HCA 32
Wednesday 10 September 2014 @ 12.45 p.m. | Industrial Law
The High Court has overturned a decision from the Full Federal Court of Australia to hold that under the common law of Australia,there is not a term of mutual trust and confidence that can be implied by law in all employment contracts. In Commonwealth Bank of Australia v Barker [2014] HCA 32, the Court unanimously decided that the implication of such a term was “a step beyond the legitimate law-making function of the courts” and “should not be taken”.
Facts
The case was initially brought by Mr Stephen Barker, who had been employed by the Commonwealth Bank of Australia (“the Bank”) since November 1981. He was made redundant in March 2009 as a consequence of the restructuring of the Corporation Financial Services (“CFS”) teams within the bank. At the time, he was informed that if he was not redeployed within the Bank, his employment would be terminated in four weeks time. Mr Barker had to hand in his keys and mobile phone and his access to his Bank email account, voicemail and intranet was cut off. He thus did not receive a number of emails that were sent to him to highlight different role openings for redeployment. After the four weeks (plus an additional week) had expired, the Bank terminated his employment.
Mr Barker commenced proceedings in 2010 alleging that the terms of his employment agreement incorporated the Bank’s Redeployment Policy, and also that the contract should be read as having implied terms to conduct the termination or redundancy process in a bona fide matter.
At First Instance
Besanko J, the primary judge, dismissed the first part of the argument relating to the Redeployment Policy, but did find that a term of mutual trust and confidence should be implied into the judgment. He found the Bank’s failure to take any meaningful steps to redeploy Mr Baker or attempt to contact him directly was a serious breach of the Redeployment Policy and thus a breach of the implied term.
At The Full Federal Court
As previously discussed on TimeBase, the majority of the Full Federal Court agreed that a term of mutual trust and confidence should be implied by law into the agreement, and adopted the language of the House of Lords in Malik v Bank of Credit and Commerce International SA (In Compulsory Liquidation) [1998] AC 20. They found that the implied term required 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” [at 12]
Jessup J dissenting, finding that there was no basis to assume the implication of such a term was necessary.
The High Court
The High Court issued separate judgments but concurred in the result. French CJ and Bell and Keane JJ emphasised that the implication of terms was not something to be taken lightly by the courts. They stated that implying the term would “[impose] mutual obligations wider than those which are "necessary", even allowing for the broad considerations which may inform implications in law.”
They also pointed to the reasoning in Byrne v Australian Airlines Ltd (1995) 185 CLR 410, where McHugh and Gummow JJ:
“emphasised that the "necessity" which will support an implied term in law is demonstrated where, absent the implication, "the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined" or the contract would be "deprived of its substance, seriously undermined or drastically devalued"” [at 29].
Kiefel J also used Byrne to conclude that the implication of the term was not necessary. He dismissed arguments that the requirement of necessity was “elusive”, saying:
“It is fundamental to the basis for implications. It is not uncertain. It has the meaning referred to in Irwin and in Byrne. It has the advantage of providing objectivity to the test employed by the courts.” [at 85]
Gageler J, in a short judgment, also felt that the implication of such a term would unduly interfere with currently existing laws against unfair dismissal, in “an area of frequent, detailed and often contentious legislative activity” [at 118].
TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.
Sources:
Commonwealth Bank of Australia v Barker [2014] HCA 32 (10 September 2014) and judgment summary
