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Pendlebury Workplace Law is a specialist workplace relations and employment law legal practice based in Sydney.

Court confirms implied term of ‘confidence and trust’ as part of Australian law

A significant decision was handed down on Tuesday, 6 August 2013, by the full court of the Federal Court, on Australian employment contract law: Commonwealth Bank of Australia –v- Barker [2013] FCAFC 83 (6 August 2013)

The Full Court has found that the Commonwealth Bank breached an implied term of ‘confidence and trust’ when it failed to consider redeployment opportunities for one of its executive managers, shortly prior to dismissing him.

In their majority judgment, Justices Jacobson and Lander said the implied contractual term had, “obtained a sufficient degree of recognition, both in England and Australia, that it ought to be accepted by an intermediate court of appeal“.  Justice Jessup dissented, saying the implied term had not made its way into Australian law, and the Bank would not have breached it in any event.

This is the first major case in which an appeal court in Australia has supported the existence of the implied duty and found that it has been breached.

Adelaide University’s Professor Andrew Stewart said it was highly likely that the decision would be challenged in the High Court and he hoped that the Court would grant leave to appeal “so that we can get some certainty” about the law.

The Full Court was dealing with the Bank’s appeal from the decision of Justice Besanko in September last year. The decision that the Bank had contravened the implied term when it committed a serious breach of the redeployment policy in its HR manual.

Justice Besanko ruled that there was an “an implied term of mutual trust and confidence in the contract of employment” between the executive and the Bank.  The Bank dismissed the manager on 9 April 2009, after notifying him on 2 March 2009 that his position had become redundant.

Justices Jacobson and Lander said the implied term “which had 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“, citing the House of Lords decision in Malik v Bank of Credit and Commerce International SA (in liq).

The majority judges said relevant circumstances informing the operation of the implied term in this case were the fact that the manager was a long-term employee of a large corporate employer and a clause in his contract of employment that said his employment may be terminated if the Bank were unable to place him in an alternative position. 

 The majority judges said, “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 [the manager] about the possibility of redeployment and to provide him with the opportunity to apply for alternative positions within the Bank“. 

Instead, they noted that the Bank had withdrawn the manager’s email and mobile phone facilities without telling the redeployment officer.

The majority judges said the circumstances required the Bank to take positive steps to consult with the manager and inform him of suitable employment options, “In our opinion, these obligations fell within the content of the implied term.”

The judges noted the manager had been employed by the Bank for approximately 23 years when the contract was entered into. 

The contract “contemplated the possibility of redundancy and redeployment within the Bank, as an alternative to terminationThe Bank is a very large corporation with a huge workforce and many and varied positions within the Bank at various locations throughout Australia,” the judges noted.

They said the Bank’s actions from 2 to 26 March 2009 (when the manager’s email and phone were cut off) were sufficient to amount to a breach of its duty not to engage in conduct likely to destroy or seriously damage the relationship of confidence that existed between it and the manager.

The judges said damages were recoverable for breach of the implied term, “at least where the breach is anterior to and independent of termination“. 

They increased the damages awarded by $18,000, bringing the total to $335,623.

ACTU Assistant Secretary, Tim Lyons welcomed the decision.
”There have been plenty of examples where employers have simply walked away from what are expressed as their obligations in policy documents, from what they express to be their culture or from what on any view any reasonable person would say is the decent and respectful way to behave in given circumstances…While each case will turn on specific facts, the Court finding that there is a duty on employers not to unreasonably destroy or damage the relationship of trust and confidence is a very important one,” Lyons said.

Brooke Pendlebury
Thursday, August 8, 2013
Dismissal, News