Byrne v Australian Airlines Ltd
High Court of Australia · 1995
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
Two baggage handlers were sacked after a video showed them with a thief. An award said dismissal must not be harsh, unjust or unreasonable. Could they sue for damages as if the contract said so too?
The joint reasons of French CJ, Bell and Keane JJ at [29] adopted McHugh and Gummow JJ's description of necessity, quoting both of the passages set out above, and added that necessity reminds courts that implications in law must be kept within the limits of the judicial function: they are a species of judicial law-making, are not to be made lightly, and must be justified functionally by reference to the effective performance of the class of contract concerned. Implications that might be thought reasonable are not, on that account only, necessary. So in an answer, use Byrne for the meaning of necessity and Barker for the constraint that goes with it; do not argue that a term is implied in law because it is fair or desirable.
What happened?
Mr Byrne and Mr Frew were baggage handlers for Australian Airlines at Sydney airport, with about 20 and 25 years of service respectively. They were dismissed on 28 March 1989. The primary judge, Hill J, found that a fellow member of their loading team had been searching customer baggage to steal from it and that each appellant knew of it and helped, on the strength of a video-tape of the loading operation and the evidence at trial. The employer had put the allegation to them at a meeting, invited an explanation, and received none on the substance.
Their pay and conditions were governed by the Transport Workers (Airlines) Award 1988. Clause 11(a) provided that termination of employment by an employer "shall not be harsh, unjust or unreasonable". The appellants sought a penalty for breach of the Award, and, in the Federal Court's accrued jurisdiction, damages: for breach of contract (on the footing that cl 11(a) had become a term of their contracts), for breach of statutory duty, and on the argument that a dismissal in breach of the clause was void so that the contract was repudiated and they could accept the repudiation and sue.
Hill J dismissed the claims, finding no breach of the Award. A five-member Full Court of the Federal Court found a breach of cl 11(a), because the employer's procedure had been unreasonable, but held there was no right to damages. The employees appealed to the High Court on the damages claims, and the employer cross-appealed against the finding of breach.
What did the Court decide?
The Court gave two joint judgments: Brennan CJ, Dawson and Toohey JJ, and McHugh and Gummow JJ. The orders were that the appeals were dismissed, special leave to cross-appeal was granted, the cross-appeals were allowed, the Full Court's orders one to four were set aside, and the matters were remitted to the Federal Court to be reconsidered in the light of the High Court's reasons.
All five Justices rejected each route by which the appellants sought damages: the clause was not a term of the contract of employment, it did not found an action for breach of statutory duty, and a dismissal in breach of it was not a nullity that left the contract on foot. All five also allowed the cross-appeal: the Full Court should not have found a breach on the employer's procedure alone without deciding whether the primary judge was right to find the appellants complicit in the pilfering.
The two joint judgments gave different reasons on some of the contract questions, so each point below is attributed to the judgment it comes from.
Proposition
What is the principle?
Implication in fact (all five Justices). Brennan CJ, Dawson and Toohey JJ said that an award operates with statutory force, so that there is no need to convert its terms into contractual terms. They also applied the test, taken from Deane J, of whether implication of the term is "necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case", and held that it was not. McHugh and Gummow JJ rejected a term from custom for want of evidence, and a term from business efficacy because, without the clause, the employer's general-law entitlement to terminate on reasonable notice or to dismiss summarily for misconduct remained, so there was no "gap" to fill. Their Honours added that, where the contract is "oral or partly oral or it appears that the parties themselves did not reduce their agreement to a complete written form, caution is required against an automatic or rigid application of the cumulative criteria identified in BP". The first task is then to find the express terms and any terms inferred from a course of dealing or custom, and the question is whether implication of the particular term is necessary for the reasonable or effective operation of the contract in the circumstances of the case.
Necessity for a term implied in law (McHugh and Gummow JJ). Under the heading "Implications independent of intention", their Honours distinguished a term unique to a particular contract from terms implied by law in all contracts of a class, and said that many of the latter reflect the concern that, without the term, "the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined". They gave quiet enjoyment in a lease as an example and said that the contract of employment was not rendered nugatory, and was not "deprived of its substance, seriously undermined or drastically devalued in an important respect", by leaving its existing terms to operate alongside the award. Brennan CJ, Dawson and Toohey JJ recorded that terms may be implied by law as an incident of a class of contract but did not understand that to be argued, and did not decide it. So this is two Justices' reasoning, which the joint reasons in Barker later adopted.
Harsh, unjust or unreasonable (McHugh and Gummow JJ, and the cross-appeal). In construing cl 11(a), McHugh and Gummow JJ said: "It may be that the termination is harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap." They illustrated this with a termination that is unjust because the employee was not guilty of the misconduct acted on, unreasonable because it rested on inferences that could not reasonably have been drawn from the material before the employer, and harsh in its consequences or disproportionate to the gravity of the misconduct. They called the distinction between procedure and substance "elusive" and unhelpful in applying cl 11(a). Procedure may bear on whether the termination was harsh, unjust or unreasonable, but the question is whether, in all the circumstances, it was. Brennan CJ, Dawson and Toohey JJ agreed that an unfair procedure may make a dismissal harsh, unjust or unreasonable, but said that depends on the whole of the circumstances, including whether the misconduct was in fact established. McHugh and Gummow JJ said the task was to construe the Award and that their reasons did not necessarily determine the phrase's meaning in any other setting.
Why does this case matter?
The employees lost on every damages claim even though the Full Court had found the award clause breached. The practical lesson is about remedies: the statutory enforcement scheme for awards provided a penalty of at most $1,000 for a breach under s 178 of the Industrial Relations Act 1988 (Cth), payable to an employee if the court so ordered under s 356, and the Court treated that scheme, and not the law of contract or an action for damages, as the means by which the award was to be enforced. An employee whose claim sits in an award rather than in the contract must therefore ask what remedy the enforcing statute gives, before assuming that ordinary contract damages follow.
It is also a case students are tempted to cite from a secondary source for one sentence. Two of its best-known sentences come from a decision whose main business was a claim for damages and an award clause, and neither was written as a free-standing rule. Reading the surrounding reasons shows what the judges were deciding when they wrote them.
Exam and application relevance
For a question on implied terms in employment, say which kind of implication is claimed. A term sought for this particular contract is tested against the circumstances and the need for the term; a term said to follow from the class of contract is tested by necessity. If the contract is oral or partly oral, say that McHugh and Gummow JJ warned against applying the BP Refinery conditions rigidly.
Do not say the whole Court laid down a test for implication in law in Byrne.
Do not argue that a term is implied because the contract would be fairer with it, or because the employee would otherwise have only a statutory remedy. The Court treated the contract and the award regime as capable of operating side by side.
For the three words, use the passage for what it says, that the words are not a single composite standard, and cite it as McHugh and Gummow JJ's construction of an award clause, not as a general rule laid down for every statute using the phrase. The article on unfair dismissal deals with the statutory test.
Do not say the Court held that procedural unfairness is irrelevant. The Court said it may be relevant, but a finding on it alone, without deciding whether the misconduct was proved, was an error.
Do not use this case for the statement that every dismissal contrary to an award is void; the Court held it was not.
Check your understanding
1. The appellants claimed damages for breach of contract on the footing that the award clause was a term of their contracts. On what reasoning did the two joint judgments reject that, and which of the two said that caution is needed for oral or partly oral contracts? 2. Whose reasons contain the passage about the enjoyment of contractual rights being rendered nugatory, and what did the other three Justices say about implication in law? 3. Why did the employer's general-law right to terminate on reasonable notice matter to the question of necessity? 4. Why was the Full Court's finding of breach set aside, and what did the cross-appeal not decide? 5. In what setting did McHugh and Gummow JJ say the three words had been construed, and what limit did they place on the reach of their reasons?