Jurisdiction - Australia
News
Australia – CBA-V-Barker.

26 February, 2015

 


The Australian High Court held that a duty of mutual trust and confidence is not implied as a term of employment contracts in Australia.

Introduction

On 10 September 2014, the High Court of Australia handed down its decision in Commonwealth Bank of Australia-v-Barker. This was the first High Court decision to fully consider whether a duty of mutual trust and confidence is implied into employment contracts. The decision confirms that there is no such duty implied into employment contracts, under Australian common law.

Facts

Mr Barker was employed as an executive manager at the Commonwealth Bank of Australia (CBA). On 2 March 2009, Mr Barker was advised that his role was being made redundant and that his employment would end in one month if he could not be redeployed to a suitable role. Mr Barker was told it was CBA’s preference to redeploy him, and that appropriate options would be explored.

Mr Barker’s employment was eventually terminated on 9 April 2009. He brought proceedings in the Federal Court of Australia alleging that CBA had breached an implied term of trust and confidence of his employment contract (Contract) by failing to make proper efforts to redeploy him.

Earlier Proceedings

At first instance, the Federal Court found that there was an implied duty of mutual trust and confidence in the Contract. On appeal, the Full Federal Court also held (by majority 2:1) that the Contract included an implied term of mutual trust and confidence and held that such a term will ordinarily be implied in employment contracts under Australian law.

The High Court Decision

CBA appealed to the High Court. In a unanimous decision, the High Court held that there is no implied duty of mutual trust and confidence under Australian law.

In their joint judgment, French CJ and Bell and Keane JJ said that the common law in Australia must evolve within the limits of judicial power and that implying such a term in all employment contracts would be “a step beyond the legitimate law-making function of the courts”.

Their Honours noted that a term must be necessary to be implied into a contract, and that the proposed term would impose obligations wider than those that were necessary.
In a separate judgment, Kiefel J agreed that a term must be necessary to be implied into a contract. Her Honour further said that:

  • generally, it is the relationship of employer and employee that identifies what is necessary as to the operation or fulfilment of employment agreements; and
  • a specific requirement to attempt to redeploy an employee would not arise from and is not an incident of the legal relationship between an employee and employer.

In a short judgment, Gageler J relied on the reasons given by Jessup J in his dissenting judgment in the Full Federal Court decision. His Honour said there were three critical points to Jessup J’s dissent:

  • the lack of commonality between the statutory history in the United Kingdom that led to the emergence of the implied term in that jurisdiction, and the statutory history in Australia; the inherent uncertainty regarding what the obligation imposed by the implied term would actually require of employers and employees; and
  • the intersection of the implied term with the law of unfair dismissal and the intrusion that the implied term would make into an area of frequent, detailed and often contentious legislative activity.

It should be noted that various other implied duties continue to be recognised as part of all employment contracts in Australia. These include, for example, the duty of fidelity owed by employees to their employer and the duty of care owed by employers to their employees. Indeed, the complicated intersection between these implied duties and the mutual trust and confidence obligation (were it found to exist) formed part of the reasoning in the case. Both parties must continue to be mindful of these other duties in the course of the employment.

Ashurst Logo

 

For further information, please contact:

 

George Cooper, Partner, Ashurst

george.cooper@ashurst.com

 

Sumin Ahn, Ashurst

sumin.ahn@ashurst.com

 

Jennifer Goedhuys, Ashurst

jennifer.goedhuys@ashurst.com

 

Comments are closed.