Commonwealth Bank of Australia v Barker
High Court of Australia · 2014
Commonwealth Bank of Australia v Barker [2014] HCA 32
A bank executive was made redundant, locked out of his email and phone, and missed the redeployment process. In England a term of mutual trust and confidence is implied in employment contracts. Did the High Court imply it here?
What happened?
Mr Barker joined the Commonwealth Bank in November 1981 and was an Executive Manager in its Adelaide corporate banking business when, in February 2009, the Bank decided to make his position redundant as part of a nationwide restructuring ([2], [4]). His written employment agreement had a clause 6, which allowed termination by four weeks' written notice or payment in lieu, and a clause 8, which dealt with redundancy where the Bank could not place the employee in an alternative position ([3]).
On 2 March 2009 he was told of the decision and that the Bank preferred to redeploy him, but he was required to hand in his keys and mobile phone and not return to work, and his access to his Bank email, voicemail and the intranet was ended ([4]). An email urging him to pursue redeployment was sent on 20 March to the Bank email address he could no longer read, and he saw it only when it reached his personal address about 23 March ([5]). His employment was terminated for redundancy on 9 April 2009 ([8]).
He sued in the Federal Court, alleging among other things an implied term that the Bank would maintain trust and confidence with him and would not, without proper cause, do anything likely to destroy or seriously damage that relationship ([9]). Besanko J held that such a term was implied, found it breached by the Bank's failure after 2 March to take meaningful steps about redeployment, and assessed damages at $317,500 ([11]). The Full Court of the Federal Court, by majority (Jacobson and Lander JJ, Jessup J dissenting), also held that the term was implied by law ([12]-[13]).
What did the Court decide?
The Court allowed the Bank's appeal. There were three sets of reasons: the joint reasons of French CJ, Bell and Keane JJ, the reasons of Kiefel J, and the reasons of Gageler J. All five Justices agreed in the orders, which set aside the Full Court's orders and the primary judge's damages order and entered judgment for Mr Barker for $11,692.31 with interest, the amount the Bank conceded for breach of cl 6, with the Bank to pay his costs ([44], [111]-[112], [120]).
Proposition
What is the principle?
Trust and confidence (all five Justices, by different routes). All five Justices rejected the term. The joint reasons of French CJ, Bell and Keane JJ framed the question as whether the term is implied by law in all employment contracts, answered it in the negative, and said it "should not be accepted as applicable, by the judicial branch of government, to employment contracts in Australia" ([15], [41]). They gave connected reasons: the term imposes obligations wider than those that are necessary, it goes to the maintenance of the relationship rather than to performance of the contract, it would bind employees as well as employers, who were not heard on that burden, and its policy considerations are more appropriate for the legislature ([37]-[41]). Kiefel J said that contracts of employment do not require the implication for their effective operation, that the term could create anomalies given the statutory unfair dismissal scheme, and that, if it were implied in this Agreement, a general obligation of redeployment would contradict cl 6 ([99], [109]-[110]). Gageler J, summarising the points he took from Jessup J's dissent in the Full Court, said the term ought not to be imported into the common law of Australia because of its statutory origin in the United Kingdom, its uncertain content, and its intersection with the Australian law of unfair dismissal ([115]-[118]). Implication in fact was also rejected: counsel pointed to no feature of the Agreement supporting it ([43]), and Gageler J agreed with the joint reasons on that ([119]).
Necessity for implication in law (accounts that overlap but differ). The joint reasons said that the implications in law are not at large but are limited by the criterion of necessity, and that "Implications which might be thought reasonable are not, on that account only, necessary" ([28]-[29]). They are a species of judicial law-making, to be justified functionally by reference to the effective performance of the class of contract concerned ([29]). They adopted the Byrne description of necessity ([29]). Kiefel J treated necessity in the Byrne sense as fundamental to the basis for implications ([60], [85]). Gageler J described the necessity inquiry as informed by what is needed for the effective working of contracts of the class but not exhausted by it, as not excluding considerations of justice and policy, and as requiring considerations that are compelling ([114]).
The duty to cooperate and good faith (joint reasons and Kiefel J). The joint reasons held that the duty to cooperate satisfies the criterion of necessity, but that the trust and confidence term cannot be treated as a particular application of it ([37]). They said their conclusion should not be taken as reflecting on whether there is a general obligation to act in good faith in the performance of contracts, or whether contractual powers and discretions may be limited by good faith and rationality requirements; those questions were not before the Court ([42]). Kiefel J said that whether a standard of good faith should apply generally to contracts has not been resolved in Australia ([107]).
Why does this case matter?
Mr Barker's dispute felt unfair, and an English decision supported him, which is the setting in which students most often reach for a general duty of fair dealing in employment. The usable skill in this case is identifying where an employer's obligation in a redundancy or dismissal dispute does come from: the express terms of the contract, a statute, or a specific implied duty. Mr Barker still recovered damages on the breach of cl 6 that the Bank conceded, so the case is also a reminder that losing the implied term did not leave him without a contractual remedy.
It is also the case to which later arguments for any new term implied in law are measured, so an answer that proposes a new implication has to say what the High Court looks for before it makes one. And because the Justices reached the same result by three different routes, a sentence that begins "the High Court said" needs to be checked against which Justices said it.
Exam and application relevance
For a question about an implied term of mutual trust and confidence, say that the High Court declined to imply it by law in Australian employment contracts in Barker, and say which Justices gave which reasons if the question turns on them. The Malik decision is English authority and it was the model the respondent relied on.
Suppose an argument that a proposed term would make employment fairer or more modern. That is an argument about reasonableness, so the answer has to go on to say what contracts of the class need for their effective operation. Kiefel J's contrast is the landlord's covenant for quiet enjoyment, which is a necessary incident of the landlord and tenant relationship ([57], [86]). If the question invites it, add that Gageler J would also weigh considerations of justice and policy ([114]).
Suppose a problem in which an employer ends employment on notice under a clause like cl 6 and the employee says the employer should have acted fairly or tried to redeploy first. Kiefel J said a general obligation of redeployment before termination would contradict the termination clause ([110]), and that the redeployment obligation in Barker's own contract came from the express cl 8 ([89]). Start with the express terms and the unfair dismissal legislation, and treat any good faith argument as resting on authority other than Barker, which left the question open.
Where the facts suggest one party prevented the other from receiving a benefit under the contract, consider the duty to cooperate, which the joint reasons held satisfies the necessity criterion, together with the express terms. In Barker the Court did not treat the prospect of redeployment as a benefit in the relevant sense for the duty to cooperate ([27]).
Check your understanding
1. What was the term the Full Court majority implied, and on what footing did the High Court hold it could not be implied by law in Australian employment contracts? Name each set of reasons. 2. Which Justice said the necessity inquiry does not exclude considerations of justice and policy, and how does that differ from the way the joint reasons put the justification for an implication in law? 3. Why did the joint reasons say the trust and confidence term cannot be treated as an application of the duty to cooperate? 4. What did the Court leave undecided about good faith, and what did Kiefel J say about whether the question is resolved in Australia? 5. Why did Mr Barker nevertheless obtain judgment for $11,692.31 with interest?