Commonwealth Bank of Australia v Barker [2013] HCATrans 325 (13 December 2013)

Last Updated: 16 December 2013

[2013] HCATrans 325

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Adelaide No A23 of 2013

B e t w e e n -

COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)

Applicant

and

STEPHEN JOHN BARKER

Respondent

Application for special leave to appeal

KIEFEL J
KEANE J

TRANSCRIPT OF PROCEEDINGS

FROM MELBOURNE BY VIDEO LINK TO ADELAIDE

ON FRIDAY, 13 DECEMBER 2013, AT 2.00 PM

Copyright in the High Court of Australia

MR P.W. COLLINSON, SC: If the Court pleases, I appear with my learned friend, MR C.D. BLEBY, SC, for the applicant. (instructed by Minter Ellison Lawyers)

MR P.A. HEYWOOD-SMITH, QC: If the Court pleases, I appear with my learned friend, MR S.J. MITCHELL, for the respondent. (instructed by Pace Lawyers)

KIEFEL J: Yes, Mr Collinson.

MR COLLINSON: Your Honours, in relation to special leave question 1, there are three headings I wish to address; public importance, the differences of judicial opinion, and the question of proper vehicle. As to public importance, the vast preponderance of Australian employees work in the private sector. As such, their terms and conditions are regulated by contract.

Since about 1978, beginning with a decision of the English Employment Appeal Tribunal in Courtaulds, English law has recognised the implied term which we have identified in the special leave question. It was an odd birth. It appears to have been proposed by the solicitors for the employee and lay essentially unchallenged by the employers. In any event, given the wide-ranging scope of such an implied term and its application to most Australian employees, it is our submission that there is a question of public importance which arises.

KIEFEL J: But essentially, your case is that the test for an implication ought to be that of necessity?

MR COLLINSON: We may not need to go that far, but we say that that - - -

KIEFEL J: Well, there must be some test - - -

MR COLLINSON: - - - is a more attractive alternative to deal - - -

KIEFEL J: - - -which can be applied to the employment setting in a particular case.

MR COLLINSON: Yes. One strand of our arguments, I expect, would be that the appropriate means of dealing with the obligations of an employer to an employee would be to utilise BP v Hastings.

KIEFEL J: But in the present case, the majority applied the test of necessity to the contractual and employment setting of the particular case, did they not? They did not imply the term as a matter of cause because there happened to be a contract – a relationship of employer and employee.

MR COLLINSON: No, as we read the majority judgment, the term was implied by the majority as a matter of law on the basis that it fell into the category of contracts, being employment contracts, that attracted that implied term.

KIEFEL J: Well, perhaps we shall need to have a look at that, because I had understood their Honours, I think at paragraph 90, to apply the test of necessity.

MR COLLINSON: The test of necessity was applied but, in our submission, that is because necessity is the critical criterion for determining whether or not a term should be implied as a matter of law.

KIEFEL J: But applying the term of necessity requires regard to be had to the particular case. Of itself, it would necessarily exclude the term applying generally to any, here, relationship of employer and employee.

MR COLLINSON: No. We would take your Honours to, if we might, paragraph 13 of the majority judgment at application book page 111. It is paragraphs 12 and 13 where their Honours refer, in paragraph 12, to the dissentient, Justice Jessup, coming to the view that:

the term does not form part of the common law of Australia –

and at paragraph 13 –

Notwithstanding the apparent force of the views expressed by Jessup J, in our opinion the implied term has obtained a sufficient degree of recognition, both in England and Australia, that it ought to be accepted by an intermediate court of appeal.

KIEFEL J: That is really a reference back, I think, to paragraph 7, and to Koehler v Cerebos, where it appears clearly enough that the existence of such a term was assumed in contracts of a certain type.

MR COLLINSON: Justice Jessup deals with those decisions and, in our submission, we adopt his Honour’s reasoning that the references by the High Court in those decisions was very much in passing.

KIEFEL J: I take your point to be that the Court has not dealt with it in any detail.

MR COLLINSON: Yes.

KIEFEL J: I do not know whether “in passing” is a way to describe a fairly clear assumption, but I take your point to be that there has not been substantial argument upon it, or at least reflected in the judgments to date.

MR COLLINSON: Yes, but the gravamen of our submission is that it is common ground that necessity is the key criterion for implying a term at law - - -

KIEFEL J: But you say it was not implied in the judgment in this case?

MR COLLINSON: The majority applied the criterion of necessity in accordance with the requirement that to imply a term as a term of law, one needs to look at necessity, which goes back to Byrne’s Case in the High Court. But they did not apply BP v Hastings because to apply BP v Hastings, one has to look at the five criteria identified by the Privy Council and the whole debate, in our submission, between the dissentient and the majority is whether or not that term should be implied in all contracts of employment.

KIEFEL J: I am sorry, I am not quite following you. In that part of the majority’s decision, starting at special leave book 122, paragraph 88 of the judgment under the heading “Term implied by law?” are you saying that the reasoning of the court is to imply a term in all contracts of this type, employer and employee, and not to consider the contractual setting of the particular case. That is your argument?

MR COLLINSON: Yes, and I would be surprised if that was contested by my learned friend. If one looks at paragraph 89, the majority continues by referring to Byrne’s Case:

Employment contracts are such a class but a term will not be implied where it has been expressly excluded or is inconsistent with the express terms - - -

KIEFEL J: But how does your argument that their Honours applied a term universally applicable to employment cases, given that their Honours determined the nature and content of the implied term in this particular case in the section which follows, and the content of the duty in the present case in the section which followed that at paragraph 109 and following.

MR COLLINSON: Yes. That is because if one adopts the implied term – and by the implied term, I mean the term of trust and confidence – it is expressed at such a high level of abstraction that when the court turns to determining whether or not there is a breach in a particular case, it has to determine the content of the duty in that case. What the majority have fastened upon was the status of the respondent as a senior employee of nearly 23 years standing, and the fact that the applicant is a large corporation. But that was only to determine, in effect, breach, because the court goes on to determine that there was in fact an obligation derived from the broader implied term of trust and confidence, but it was breached in this instance because the applicant failed to consult with the respondent in relation to redeployment opportunities.

KIEFEL J: At paragraph 108, their Honours say in the last three lines:

the content of the implied contractual duty must be moulded according to the nature of the relationship and the facts of the case –

That would not suggest that an implied term which is invariable was applied. Their Honours seem to be saying that whatever general ideal there is, you have to determine the actual scope and content of a term to be implied in each case.

MR COLLINSON: It is the last bit we disagree with your Honour, respectfully, on. It rests upon a prior finding by the court that there is a duty of mutual trust and confidence. That is the starting point. Then when the court comes to consider content, it has to determine whether or not on the facts in that case, breach is made out. It is a little confusing because one of the critiques one could make of the implied term in all contracts of employment is that it leaves for later decisions the process of determining the content of that very broad implied term in particular cases, and when one turns to consider those particular cases, it would be our submission that BP v Hastings is a better approach and there should not be a prior assumption that there is an implied term of trust and confidence, but the court should simply approach the contractual relations with an open mind to determine whether or not a particular implied term is made out.

One of the leading decisions in the United Kingdom is of course Mahmud’s Case where the House of Lords found in favour of the implied term of trust and confidence, and the breach was said to be in the conduct by the employer of a dishonest and corrupt business in banking. But plainly, the House of Lords found that the relevant term was much broader. The content that they found was breached was an obligation not to conduct a dishonest and corrupt business, but the prior finding is that there is this broader implied term. But it is the very size of this term and its reach across almost all Australian employees which is the foundation for the submission that it raises a question of public importance. If this of course was a BP v Hastings case, we would not be here.

KEANE J: If it was, if that were the test that was applied – I am looking at paragraphs 111 and 112 at pages 126 and 127, if one applied a Mackay v Dick/SIRE v St Martins type test that the obligation of each party is to give the other party the benefit of the bargain, looking at paragraphs 111 and 112 which refer to clause 8, why would not the result be the same; that is, that your client breached the obligation to give the employee the benefit of his bargain by, in effect, one section of the bank not letting another section of the bank know that redeployment was possible?

MR COLLINSON: Yes, because the first point that should be made about clause 8 is that it was not referred to by any of the parties in submissions to the Full Court. The submission at trial and at the Full Court on behalf of the respondent was that there was a redeployment policy, and it was submitted that that redeployment policy was a contractual term. The primary judge rejected the employment policy as a contractual term but still said it was relevant in framing the content of the implied term of trust and confidence. On appeal, the majority said “we reject the proposition that the redeployment policy can be relevant to framing the content of the implied term because, by definition, it is non-contractual.” So you should start from the assumption that it is not there at all.

The majority then went to three factors to found the content of a duty to consult in this instance, the first being the length of service of the employee, the second being the size of the employer, and the third being clause 8. But certainly clause 8 was not the subject of submissions. But even if it were, clause 6 of the employment agreement confers an entitlement upon the employer and the employee to terminate the employment on four weeks’ notice. That has been interpreted over many years of history in the common law as entitling the employer to dismiss an employee for no reason at all or capriciously. The submission that would be advanced on appeal, were leave to be granted, in relation to content would include reference to the fact that there cannot be a duty to consult in relation to redeployment in the context of a term that entitles an employer to dismiss the employee for reasons that may be no more than capricious.

KEANE J: Might another way of putting that be that in the light of clause 6, the liability for breach could never be greater than the liability arising under clause 6?

MR COLLINSON: Yes, that would be another way to approach it. This takes the matter, were leave to be granted, into the second ground of appeal, which is where we address the question of content and in particular the question of an area of debate in the law, particularly in the United Kingdom, known as the Johnson exclusion area. What the House of Lords said in Johnson v Unisys was that with the implied term of trust and confidence, if it be accepted, it cannot be allowed to operate in such a way as to work inconsistently with the rights of dismissal conferred upon an employer.

In that case, the House of Lords found that the statutory regime in the United Kingdom about unfair dismissal meant that it worked against the operation of the implied term of trust and confidence in the steps or processes leading to the decision to terminate. But Lord Hoffmann went further and observed that the term of trust and confidence could not impinge upon the decision-making in relation to termination of a contract even in the absence of an applicable statutory regime.

Here, we say that clause 6, which effectively is a common law regime agreed by contract, confers upon the employer the power to dismiss the employee on four weeks’ notice. Formerly, at least, the primary judge, Justice Besanko, had the redeployment policy to point to, which has obligations within it to consult with the employee in relation to redeployment, but the majority correctly held that that falls away if the policy is not itself contractual. One strand of our submissions in relation to the second ground of appeal is that there is nothing to lay purchase upon in relation to a contention that there is an obligation to consult.

Your Honour Justice Keane has identified one clause that at least refers to redeployment, but that has to be set against the absence of a redeployment policy and the fact that clause 6 confers this unfettered right to terminate without cause. Frankly, it was not a matter that was the subject of submissions, as I have mentioned. But then the other matters which the majority referred to must be open to question, in our submission, that merely the length of service of the employee and the size of the employer can somehow manufacture an obligation to consult about redeployment, absent anything in the contract between the parties about redeployment.

KIEFEL J: Mr Collinson, in the event that leave were granted, what do you say to the respondent’s comments at paragraph 15 of the written submissions concerning the extension of the undertaking, on the basis that this is a test case?

MR COLLINSON: If it were to be the case that the Court said to me that special leave would not be granted absent an undertaking in respect - - -

KIEFEL J: That would be applying far too much pressure, Mr Collinson.

MR COLLINSON: If that is where things lie - - -

KIEFEL J: But if it is a test case, it would be the usual course that costs below not be disturbed, unless you say it is not a test case.

MR COLLINSON: Our submission is that it does not fall within the kind of cases one sees considered arising out of administrative law - - -

KIEFEL J: But you say this is of general importance.

MR COLLINSON: Yes, we do, but the matter we point to is that the respondent’s case was primarily put on the basis of the policy of redeployment being contractual. They did that in the face of the manual which expressly stated that it was non-contractual. They say in their submissions that they only found out about that shortly before the trial. We say that goes nowhere because they pressed on with the trial. They failed on that case, of course, because the policy was held to be non-contractual. They failed with the contention based upon misleading and deceptive conduct, and the case hung by the bare thread of the implied term of trust and confidence. No BP v Hastings term was advanced on behalf of the respondent.

We say that this is a case where at the least the question of the impact upon the costs below ought to be reserved until the hearing of the appeal. We say it has features which are also a straightforward breach of contract in the employment case. Plainly, my client has undertaken to pay for the costs of this application and the appeal.

KIEFEL J: From this point, yes. Yes, I see the light.

MR COLLINSON: If your Honours please.

KIEFEL J: Yes, Mr Heywood-Smith.

MR HEYWOOD-SMITH: If the Court pleases, I think if one looked at the first special leave question, it would be difficult for me to advance to the Court that that did not raise a leave issue per se. What the respondent says, however, is that when one goes beyond that, everything else about this case suggests that it is not an appropriate case for leave to be granted. We say that for this reason. It was the case, with respect to my friend, that the respondent advanced to the courts below that term should be implied in law and as a matter in fact in this instance that the plaintiff was a man who had been employed for 27 years by the bank in a senior executive position. That was not accepted by the courts below, but it would be a point of contention necessarily in the High Court if leave were to be given.

Further, the applicant in this matter in special leave grounds 2 and 3 seeks to agitate the issue of the Johnson exclusion zone. That is addressed in our friend’s submissions in three cases, of Johnson v Unisys, Eastwood v Magnox and Russell in the Australian jurisdiction. Each of those cases.....the issue of dismissal following disciplinary investigations. In other words, the exclusion zone, we say, is confined – that area where an employer has, in the words of Lord Justice Millett in Eastwood, lost trust and confidence in the employee.

If the Court goes to application book page 166, top of the page, the extract from the speech of Lord Millett in Eastwood notes that the implied terms ceases to have work to do when an employer has lost trust and confidence in the employee. That is where the exclusion zone operates. Here, in this particular case, if the Court turns to application book page 49, the Court will see that the bank approached the termination of employment of Mr Barker not for any reasons of conduct, but the Court will see in the letter that he was given at line 14:

It is the Bank’s preference to redeploy you to a suitable position within the Bank –

So the respondent’s position is that the implied term always has work to do when there is a potential workable relationship existing, and clearly in this case there was such a relationship existing, and it was the failure of the bank to invoke its redeployment policy or to give the consideration that the majority in the Full Court indicated should be given in reliance upon clause 8 of the contract that resulted in the courts below finding that the plaintiff succeeded.

Should leave be granted, we would also indicate that the respondent would necessarily have to, by notice of contention, seek to restore Justice Besanko’s ruling that the redeployment policy per se and breach of it would be a breach of this implied term. The Court might get some idea as to the strength of that argument if it actually considers the redeployment policy itself. If the Court were to go to page 254 of the application book, the policy as it then existed is – and if the Court would note, for example, the context of the policy, the third dot point just before halfway down the page:

The purpose of this policy is to have an open, well-communicated and consistently applied process –

Then if the Court were to turn to page 259 and consider the principles by which the policy was implemented, in 4.1 - - -

KIEFEL J: You would not be arguing on any appeal that the existence of the policy assisted the implication of the term or supported it?

MR HEYWOOD-SMITH: No, I do not believe that we would be entitled to do that. But it is for those reasons that we say that, accepting per se that the first question is a proper special leave question, this is not an appropriate vehicle. It is unlikely that the appeal would be successful in any event because of the obvious problems that the appellant would have elsewhere. Can I speak very briefly to the undertaking? This is a - - -

KIEFEL J: We cannot force the applicant’s hand about that.

MR HEYWOOD-SMITH: No, I understand that, but the Court can make leave conditional upon the undertaking. In our submission, this is a case that falls very squarely within the policy of this Court as evidenced, we say, by the cases appearing at paragraphs 18 and 19 of our outline of submissions. There is a list of cases there that deal with test cases involving, for example, with Sutherland Shire Council v Heyman, the liability for municipal council to ratepayers in respect of inadequate footings; Regie Nationale, the liability of a vehicle manufacturer to a person who is injured in a motor vehicle accident; New South Wales v Lepore, the case of the liability of a school authority in respect of a pupil; BHP Billiton v Schulz, again, the liability of an employer - - -

KIEFEL J: Mr Heywood-Smith, what do you say, though, to the submission that the question of costs below involved more than just the test point? Are you saying that to permit the applicant to take the true test point of law forward should not be able to undo what has been obtained below?

MR HEYWOOD-SMITH: Yes, we do, for the reasons that we have indicated, namely firstly, this was an applicant who could approach the court confidently at first instance on the basis, firstly, that the redeployment policy was contractual because the applicant here had not disclosed the manual with the disclaimer in it until immediately prior to trial, and it could also approach the court on the basis that the implied term of mutual trust and confidence was generally accepted in this country, as has been found by three of the Federal Court judges below. We say that for the Court to allow leave to be granted in this matter is to send a signal to employees who might wish to litigate against their employer that they may be starting on a course which could end up having very grave consequences for them, and the chilling effect of that, we say, is discouraging proper litigants, people with proper claims, from bringing claims. We say that this is a clear case where the Court would not grant leave without such an undertaking by the applicant. Those are really the submissions of the respondent. Unless the Court has any further questions.

KIEFEL J: Thank you, Mr Heywood-Smith. Anything in reply, Mr Collinson?

MR COLLINSON: Just briefly, your Honours. We say that the second and third grounds of appeal ought to go as well. They raise a point of public importance about the Johnson exclusion area. My friend has addressed on that. Whether he is right or not, it is a matter for submission. We say that redeployment is the reverse side of.....determination, and that

gives rise to the potential application of the Johnson exclusion area, which is a matter of public importance as well.

We also say that there is no basis for our friend’s submission that we will not be successful in any event. If we were successful in showing that the content did not extend to an obligation to redeploy, then we would win even if it be the case that there is an implied term of trust and confidence.

Finally, the courts and litigants are crying out for identification of what it means to move from the generality of the term of trust and confidence expressed in very high-flown terms to identifying the content on particular occasions. It has morphed in some cases to something as general as the duty to act fairly. What is needed, in our submission, is its application to particular facts.

KIEFEL J: Thank you. There will be a grant of special leave in this matter. The Court notes the undertaking given by the applicant not to seek costs on the appeal but is minded to condition the grant of special leave to the applicant’s paying the respondent’s costs, and also not seeking to disturb orders for costs made in the court below which were favourable to the respondent. Time estimates, Mr Collinson? Is it more than a day, or a day should do it?

MR COLLINSON: I am sorry, the only reason I hesitate, your Honour, is I am not briefed for the appeal. Mr Walker is. My feeling is that knowing – I would suggest it is a day.

KIEFEL J: Yes, but no more. Mr Heywood-Smith?

MR HEYWOOD-SMITH: I would suggest it would be two days, if the Court pleases. I am not sure whether the Court has had the opportunity of reading Justice Jessup’s judgment but he traverses a great deal of prior litigation. I would be surprised if it could be concluded in a day.

KIEFEL J: When you say two days, is it likely to go over into a second day. That is what you are concerned about? I cannot see it as a full two-day matter.

MR HEYWOOD-SMITH: It is certainly likely to go into a second day, I would believe.

MR COLLINSON: My junior, who has been involved in the matter since inception, urges me to put to the Court that we do not dissent from that.

KIEFEL J: All right. I will have the matter indicated as a day and a half matter, so as not to encourage you to go too far. The parties will of course check with the Registrar about the timetable for submissions before they leave today.

MR COLLINSON: If the Court pleases.

KIEFEL J: Yes, thank you.

AT 2.34 PM THE MATTER WAS CONCLUDED