Commonwealth Bank of Australia v Barker

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: French CJ,Bell,Keane JJ,Kiefel J,Gageler J
• Judgment Date: 10 September 2014
• Neutral Citation: [2014] HCA 32
• Docket Number: A1/2014
• Date: 10 September 2014

[2014] HCA 32

HIGH COURT OF AUSTRALIA

French CJ,, Kiefel, Bell, Gageler and Keane JJ

A1/2014

Commonwealth Bank of Australia

Appellants

and

Stephen John Barker

Respondents

Representation

B W Walker SC with C D Bleby SC for the appellants (instructed by Minter Ellison Lawyers) R C Kenzie QC with P A Heywood-Smith QC, S J Mitchell and M A Irving for the respondents (instructed by Pace Lawyers)

Commonwealth Bank of Australia v Barker

Contract — Employment contract — Implied terms — Employee's position made redundant — Employer's conduct denied employee opportunity of redeployment — Whether term of mutual trust and confidence should be implied by law in employment contracts.

Words and phrases — ‘duty of cooperation’, ‘employment contract’, ‘employment relationship’, ‘necessity’, ‘relational contract’, ‘term of mutual trust and confidence’, ‘terms implied by law’, ‘terms implied in fact’.

ORDER

1. Appeal allowed.

2. Set aside paragraphs 1 (save as to costs) and 2 of the order of the Full Court of the Federal Court of Australia made on 6 August 2013 and, in their place, order that:

(a) the appeal be allowed; and

(b) paragraphs 1 and 2 of the order of the Federal Court of Australia made on 3 September 2012 be set aside and, in lieu thereof, order that:

(i) judgment be entered for the applicant against the respondent in the sum of $11,692.31; and

(ii) the respondent pay the applicant interest in an amount to be determined by a judge of the Federal Court of Australia if not otherwise agreed.

3. Appellant to pay the respondent's costs of the appeal and of the application for special leave to appeal.

French CJ, Bell and Keane JJ.

Introduction

1 The employment relationship, in Australia, operates within a legal framework defined by statute and by common law principles, informing the construction and content of the contract of employment. This appeal raises the question whether, under the common law of Australia, there is a term of mutual trust and confidence to be implied by law in all employment contracts. For the reasons that follow, that implication is a step beyond the legitimate law-making function of the courts. It should not be taken. This appeal, against a decision of the Full Court of the Federal Court of Australia 1, which made the implication, should be allowed.

Factual history

2 The respondent, Mr Stephen Barker, commenced employment with the appellant, the Commonwealth Bank of Australia (‘the Bank’), in November 1981. He continued with the Bank until his employment was terminated by reason of redundancy on 9 April 2009. At the time of his dismissal, Mr Barker occupied the position of Executive Manager Adelaide Corporate Banking, Institutional and Business Services, South Australia. His employment at the time was governed by a written agreement (‘the Agreement’), which came into effect on and from 1 July 2004 2.

3 Clause 6 of the Agreement provided for termination at any time by written agreement between the parties or, except in circumstances of misconduct, by four weeks' written notice by either party (or by the Bank paying four weeks' salary in lieu of notice). Clause 8 provided for compensation payable on termination in the event that the employee's position became redundant and the employee could not be redeployed:

‘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.

Clause 7 does not apply in any case where a payment is made under this Clause.’ 3

This appeal is concerned with the Agreement. There is a distinction, relevant in cases of wrongful dismissal, between the employment relationship and the contract of employment, such that the contract may persist when the relationship is at an end 4. That distinction is not relevant in the present case, which is concerned with the contractual question of the existence of an implied term in law.

4 In February 2009, the Bank decided to make Mr Barker's position redundant as part of a nationwide restructuring of the Corporate Financial Services (‘CFS’) teams within the Bank. On 2 March 2009, Mr Joe Formichella, the General Manager of CFS South Australia/Northern Territory, and Mr Glen Davis, the Bank's Executive Manager — Strategic Human Resources, so informed Mr Barker. They told him that the decision was not related to his performance, but that if he was not redeployed within the Bank, which was the Bank's preference, his employment would be terminated approximately four weeks thereafter. He was required to work out the day, clear out his desk, hand in the keys and the mobile phone which the Bank had issued to him and not return to work. His access to his Bank email account, voicemail and the intranet was terminated.

5 Mr Davis sent an email to Mr Barker's Bank email address on 20 March 2009 urging him to take steps, in conjunction with Ms Helen Breccia in the Career Support team, to seek out redeployment opportunities. In the event that a

redeployment opportunity could not be found and the decision was made to retrench him, his effective exit day would be 30 March 2009. Mr Barker, having been deprived of access to his Bank email address, did not see that message until it was received at his personal email address on or about 23 March 2009.

6 On 2March 2009, Mr Barker received an email from Ms Breccia advising that she had been trying to contact him for several weeks with respect to redeployment support. She included a position description for the position of ‘Executive Manager — Service Excellence’, one for each region of CFS, which was to be circulated within the Bank the following day. Until advised by Mr Barker's solicitor that he had had no access to his Bank email account or voicemail since 2 March, Ms Breccia seemed to be unaware of that fact. She did not speak to Mr Barker at any time during the redeployment period. Ms Jade Baines, who was a recruitment consultant for CFS at the time, was involved in facilitating the recruitment process. At no time did she communicate with Mr Barker.

7 It was only on receiving Ms Breccia's email of 26 March 2009 that Mr Barker became aware of the Service Excellence position. The possibility of retraining for the role was never discussed with him. In any event, it was unlikely that an application by him would have been successful. Mr Formichella did not consider him suitable for the position.

8 On 7 April 2009, the Bank wrote to Mr Barker's solicitor advising her that his exit date had been extended to 9 April ‘to give him every chance to participate in the redeployment process.’ On 9 April, the Bank wrote to Mr Barker advising him that his employment ‘will be terminated by reason of redundancy effective from the close of business today.’ His retrenchment payments amounted to $182,092.16. They were calculated on the basis that he had received four weeks' notice of termination of his employment and ‘one extra week's notice due to [his] being over the age of 45.’

The proceedings in the Federal Court

9 Mr Barker commenced proceedings against the Bank in the Federal Court on 17 November 2010. He alleged that the terms of the Agreement incorporated the Bank's ‘Redundancy, Redeployment, Retrenchment and Outplacement Policy’ (‘the Redeployment Policy’) and its Equal Employment Opportunity Policy (‘the EEO Policy’). He also alleged in par 14 of his amended statement of claim that:

‘The following further terms were implied into the Contract to give the same business efficacy and arising from the mutual intentions of the parties namely that:

14.1. The Bank would maintain trust and confidence with the Applicant; and

14.2. The Bank would not do anything likely to destroy or seriously damage the relationship of trust and confidence without proper cause for so doing.’

10 Under the heading ‘Breach of Implied Terms’, Mr Barker claimed that the Bank had failed to conduct the termination or redundancy process in a bona fide and/or proper manner, thereby breaching, inter alia, the Redeployment Policy and the EEO Policy, and, on that account, breaching the Agreement. He alleged in par 56:

‘The Applicant … asserts that the conduct of the Bank was in breach of the implied term of mutual trust and confidence and resulted in the Applicant being denied the opportunity of redeployment and the opportunity to thereby retain his employment with the Bank. The Applicant thereby lost a chance.’

11 The primary judge, Besanko J, held that there was a term of mutual trust and confidence implied in the Agreement which would be breached if a party, without reasonable and proper cause, engaged in conduct likely to destroy or seriously damage the relationship of trust and confidence between employer and employee 5. He held that the Bank's failure, after 2 March 2009, to take meaningful steps with respect to Mr Barker's redeployment, within a reasonable period, was a serious breach of the Redeployment Policy and thereby a breach of the implied term 6. Mr Barker's damages were assessed at $317,500, based upon discounted past and future economic loss 7.

12 The Full Court of the Federal Court, by majority (Jacobson and Lander JJ, Jessup J dissenting), also held that a term of mutual trust and confidence was implied by law into the Agreement 8. The majority adopted the language of the House of Lords in

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