Australia: High Court decision on mutual trust and confidence: CBA v Stephen Barker

Last Updated: 15 September 2014
Article by Charles Power and Rebecca Byun

Most Read Contributor in Australia, September 2016

Commonwealth Bank of Australia v Stephen Barker [2014] HCA 32

The Claim

Mr Barker's primary claim was that that the CBA's failure to follow the redundancy policy in the lead up to the redundancy of his position was a breach of an implied term of mutual trust and confidence.

On this basis, it was claimed that the CBA had thereby repudiated the employment contract and damages were sought for loss of opportunity as well as for hurt, distress and loss of reputation.

The Redundancy

November 1981 Stephen Barker commences employment with the CBA.
August 2004 Written employment contract executed by Mr Barker and the CBA.
Late 2008 – February 2009 The CBA undergoes restructure including the collapse of Mr Barker's team. Out of five possible team manager positions, the CBA decides to make Mr Barker's position redundant.
August 2008 The CBA's HR Reference Manual is uploaded onto the intranet site but the express provision that the policies do not form part of the employment contract is mistakenly omitted.
2 March 2009 Mr Barker is advised of the redundancy of his position. He is also advised that the CBA's preference is to redeploy him, but that if he is not redeployed by 2 April 2009, later extended to 9 April 2009, his employment will be terminated. At the end of the day, Mr Barker is asked to clear his desk, return his office keys and go home on paid leave. Access to work emails and usage of his mobile phone is also withdrawn.
5 March 2009 – 31 March 2009 The CBA's redeployment officer attempts to contact Mr Barker numerous times to offer an alternative position without knowing that Mr Barker's work email and mobile phone use has been withdrawn. After almost one month, Mr Barker is ultimately offered the position of Executive Manager – Service Excellence but does not apply.
9 April 2009 Mr Barker's employment is terminated by reason of redundancy.
27 July 2009 The express provision in the CBA's HR Reference Manual that the policies do not form part of the employment contract is re-inserted into the policies on the intranet.

The Decisions

Decision at First Instance Full Federal Court decision
Is there an implied term of mutual trust and confidence?

Yes - Following the position in the UK, Justice Besanko held that there was an implied term of mutual trust and confidence in employment contracts unless expressly provided otherwise.

It was held that Mr Barker's employment contract did not expressly exclude the implied term and that this term had been breached by the CBA.

Yes - The majority upheld the decision at first instance.

The majority considered the implied 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": [13].

The majority took care to note that English authorities restricted the operation of the implied term to conduct "separate from and anterior to the termination": [15].

How was the implied term breached by CBA?

By the CBA's serious breach of its redundancy policy, despite it not being found to be incorporated into the employment contract.

The CBA's breach of its redundancy policy was 'serious'considering:

  • its failure to consult with Mr Barker including with respect to redeployment options within a reasonable period of time.
  • Mr Barker was an executive who had been employed with the CBA for 27 years; and
  • Mr Barker was asked to go home and access to his intranet and work email was withdrawn on the same day as being advised of the redundancy of his position.

Disagreed with Justice Besanko's reasons for why the implied term was breached.

The conduct in question was the same (i.e. failure to properly consult with Mr Barker regarding his redeployment and immediate withdrawal of work email and phone usage), however it was considered as a breach of the implied term regardless of it being in breach of the redundancy policy.

The majority also considered the length of Mr Barker's employment with the CBA, but also that:

  • the CBA is a large corporation with therefore many redeployment opportunities; and
  • a clause in Mr Barker's employment contract that indicated redeployment was a possibility.
Damages awarded

Economic damages of $317,500 awarded for the loss of opportunity.

No damages were awarded for hurt, distress and loss of reputation.

Damages reassessed to be $335,623, due to miscalculation in primary judgment.

The High Court

The High Court noted the arguments in support of the recognition of the term were predicated on a contemporary view of the employment relationship, being one involving common interests and akin to a partnership. Given the recognition of the term favoured a particular view of social conditions and desirable social policy, its recognition should be determined by parliaments not courts. The High Court acknowledged that while a similar term had been recognised in the United Kingdom that was in a different context to Australia and should not be followed here.

In particular, the Court concluded an employment contract does not need to impose a positive mutual trust and confidence obligation on the parties in order for the employment contract to operate. On the other hand, the recognition of the term would create uncertainty. For example,given it would be imposed on employees as well as employers, you might have a situation where an employee breaches his or her implied duty of mutual trust and confidence by conduct which was neither intentional nor negligent, but objectively caused serious disruption to the conduct of their employer's business.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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