Australia: High Court: No Implied Term of Mutual Trust and Confidence = Confidence for employers?


Employers can breathe a sigh of relief now that the High Court has unanimously held that a term of mutual trust and confidence is not implied by law into Australian employment contracts.

Commonwealth Bank of Australia v Barker [2014] HCA 32 is the much anticipated appeal decision of the decision of the Full Federal Court which found that an implied term of mutual trust and confidence existed in employment contracts. The High Court has allowed the appeal, dismissing the necessity for an implied term of mutual confidence to prevail in Australia's highly regulated employment space and overturning the award of damages of $317,000 awarded to Mr Barker.

However, is this the confidence employers have been waiting for? Has the 'Trojan horse'1 really been dismantled or do employers need to continue to be cautious?

Background to the decision

Mr Barker was a long term employee of Commonwealth Bank of Australia (CBA), having worked at the bank from 1981 to 2009. Throughout his time at CBA, Mr Barker rose through the ranks, becoming an Executive Manager. In 2009, CBA advised Mr Barker that his position had been made redundant. Mr Barker was placed on paid leave and later advised that his employment was to be terminated. CBA had a redeployment policy that provided that certain steps should be taken by CBA to ensure that employees affected by redundancy were redeployed. Mr Barker's employment contract expressly excluded this policy.

Mr Barker claimed that CBA had breached an implied term of mutual trust and confidence through its alleged failure to make proper efforts of redeployment. At first instance, the Federal Court found in favour of Mr Barker, deciding that an implied term of mutual trust and confidence did exist in his employment contract.

The Federal Court decision was subsequently upheld on appeal by the Full Federal Court. Special leave to appeal to the High Court was granted. The High Court, for the reasons articulated in further detail below, has held, that no implied term of mutual trust and confidence exists.

The Full Federal Court drew on United Kingdom legal developments in reaching its decision.

United Kingdom vs Australia

The High Court contrasted Australia's workplace environment and framework to that of the United Kingdom (where the implied term exists) and determined that "the history of the development of the term in the United Kingdom is not applicable to Australia" [35].

While noting that there is a background of approving references to UK law in decisions of Australian state and federal Courts, their honours stated that "...this Court must determine the existence of the implied duty by reference to the principles governing implications of terms in law in a class of contract" [35].

Implied term not necessary – no gap to fill

The High Court went on to canvass the long standing principle that terms are normally implied into contracts only where a necessity exists to fill a "gap" which the express terms may leave open. Contrasting the necessity of the already clear implied duty to cooperate, Chief Justice French and Justices Bell and Keane found that "the implied term of mutual trust and confidence, however, imposes mutual obligations wider than those which are "necessary", even allowing for the broad considerations which may inform implications in the law..." [37].

The Justices outlined that in the present case implication of such a term was not necessary "to give business efficacy" to the contract.

The High Court commented on the need for a cautious approach to implying terms into a contract, confirming that an element of necessity must exist if the common law is to impose an implied term.

Is legislative intervention required?

In the opening paragraph of the judgment, Chief Justice French and Justices Bell and Keane note that the implication of the term of mutual trust and confidence into all employment contracts "is a step beyond the legitimate law-making function of the courts". This is a recurring theme throughout the judgment. Is this then "a matter more appropriate for the legislature than for the courts to determine"2 as the High Court has suggested? And, if so, is a legislative response on the horizon?

Although a legislative response may at first seem like an unusual concept, a legislative approach has been taken by New Zealand by incorporating an object into the Employment Relations Act 2000 (NZ), being the "promotion of good faith in all aspects of the employment environment and of the employment relationship ... by recognising that employment relationships must be built not only on the implied mutual obligations of trust and confidence, but also on a legislative requirement for good faith behaviour."3

As the High Court of Australia has ruled out judicial recognition of the implied term of mutual trust and confidence, it remains to be seen whether Parliament will act to fill the space. A legislative response is inevitably subject to the political landscape in place and given the Prime Minister's commitment not to introduce changes to the existing workplace relations laws in this Government's first term, legislation at the Federal level seems unlikely in the next few years.

Incorporation of mutual trust and confidence obligations in awards or enterprise agreements

Given that the door has been shut on a common law implied term of mutual trust and confidence, it will be interesting to see how employees and unions react.

Will unions try to achieve similar outcomes by insisting on the inclusion of clauses in enterprise agreements imposing express obligations of mutual trust and confidence on employers? Alternatively, will unions seek to include such terms in awards as part of the modern award review process?

Were such a clause to be incorporated and an employee considered that the employer had acted other than in accordance with that clause in any aspect of the employment relationship, the employee could utilise the dispute resolution procedure in the applicable enterprise agreement or award which could lead to a multitude of disputes being raised.

If this approach is taken by unions, employers should carefully consider the implications for their workplace and seek legal advice. Inclusion of such obligations in an enterprise agreement could expose employers to penalties for breach.

Management of current and potential proceedings alleging breach of the implied term

How does this decision impact on current proceedings on foot alleging a breach by the employer of the implied term? What action can be taken by employers if employees continue to lodge claims alleging breach of the implied term?

Australian courts will be bound by the High Court's decision and if a court were to find that such a term was implied by law, this would constitute an appealable error. It does not necessarily follow that employees will cease making such claims and no longer press claims currently on foot. For example, specific terms in a particular contract may make it easier to argue for implication of the term than was the case in Barker.

If a proceeding alleging breach of the implied term is commenced against an employer or is currently on foot, employers should seek legal advice in relation to the implications of the High Court's decision on the proceeding.

Concluding comments

While the High Court's decision has provided some much needed confidence for employers, the full impact of the decision remains to be seen.

Employers should continue to remain vigilant to ensure that they act consistently with their contracts, policies and procedures to minimise the risk of legal claims. The High Court has made it clear that the rejection of the implied term is not a reflection on the question of whether there is a general obligation to act in good faith in the performance of contracts.


1In the Full Federal Court decision Commonwealth Bank of Australia v Barker [2013] FCAFC 83 Jessup J in dissent described the implied term as a 'Trojan horse', at [79].
2Commonwealth Bank of Australia v Barker [2014] HCA 32 at [40] per French CJ, Bell and Keane JJ.
3Employment Relations Act 2000 (NZ) s 3(a)(i)

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.