Commonwealth Bank of Australia v Barker [2014] HCATrans 73 (8 April 2014)

Last Updated: 8 April 2014

[2014] HCATrans 073

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Adelaide No A1 of 2014

B e t w e e n -

COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)

Appellant

and

STEPHEN JOHN BARKER

Respondent

FRENCH CJ
KIEFEL J
BELL J
GAGELER J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 8 APRIL 2014, AT 10.15 AM

Copyright in the High Court of Australia

MR B.W. WALKER, SC: May it please the Court, I appear with my learned friend, MR C.D. BLEBY, SC, for the appellant. (instructed by Minter Ellison Lawyers)

MR R.C. KENZIE, QC: If it please the Court, I appear with my learned friends, MR P.A. HEYWOOD-SMITH, QC, MR S.J. MITCHELL and MR M.A. IRVING, for the respondent. (instructed by Pace Lawyers)

FRENCH CJ: Yes, Mr Walker.

MR WALKER: May it please the Court. Your Honours, the implied term which was held to exist by majority in the Full Court of the Federal Court in these proceedings has not been the subject of any such holding in this Court. It follows, of course, that neither have the consequential questions that we note in paragraphs 2 and 3 of our – I should say the second and third of the issues that we raise in paragraphs 3 and 4 of our written submissions have not been the subject of decision in this Court.

In a nutshell, in our submission, the error by the majority below was to depart from the orthodox means by which a term could be implied. At the outset we need to point out, not least because of the notice of contention filed by our friends, that there are two of the perhaps three methods of implying a term into a contract which are in question in this case. The third to which I have made fleeting reference and will make no more reference is by what might be compendiously called “custom”.

The first or primary way in which the matter has been considered in the courts below and is the burden of – the bulk of the arguments in writing before your Honours concerns that form of implication which is known as implication by law. I will come to this Court’s approach to that matter very shortly. The second is variously named implication in or as a matter of fact, or implication ad hoc. The principal difference between the two, as your Honours well appreciate, is that the first is generic or by class and the second is for a particular contract in the circumstances in which it is made.

Having said that, as if it were a clear distinguishing feature, of course, as the authorities themselves have noted, there are cases where there are reasons to see a lack of clarity, a fuzziness to the distinction between the classes, and there are historical reasons for that, to which I am about to come.

In our submission, they also have this in common, though it may be more verbal than substantive, that is, both are said to be triggered by, made out by, satisfaction of a so-called test of necessity and though the word “necessity” is to be found in all the authorities and discussions for each of those modes of implication, it seems clear that not least because of the generic as opposed to particular aspect of those different forms of implication, “necessity” has a somewhat different guise in the former from the latter.

However, in our submission, it is clear from the authorities in this Court and also clear from the principles to which they refer and upon which they must be based that something in the nature of necessity, and conveniently and appropriately using the word “necessity”, that must inform implication as a matter of law.

In our submission, the Full Court departed signally from that, radically from that, in the approach they took in matters to which we will come after we have been to the orthodox doctrine in this Court. In particular, regard was had and a lead was perceived as available from a number of disparate authorities in this country based in turn - those in support of the so-called implied term - based in turn on a number, also disparate, of decisions in England and Wales.

As your Honours have seen from our written submission and, again, in a nutshell, it is our submission that the reason there is error that ought to be corrected below is that following that English lead is following a lead which is radically different in principle from the necessity-based approach which is the law in this country. In particular, the English approach can be seen to be based in a way which is not always clearly, at least, at the time it was first adumbrated, to be understood in terms which are recognisable as a common law implication as a matter of law.

FRENCH CJ: Before we go further into the question of the implication, could I ask whether there was any consideration at any level of the range of the class of employment contract to which the implication is applied, because the notion of what constitutes an employment contract, as you know, has shifted and I have in mind the kind of multifactorial test referred to in cases like Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21.

MR WALKER: The short answer is no. Now, that is not to say that the reasoning in the courts below can be seen to have embraced in any fully explained way that this is a term that is by law implied into each and every contract which can be called a contract of employment. I cannot say that, although it would obviously be a powerful criticism if without explanation that is the result. It seems to be that that is the result of this decision, though no doubt if it were to stand uncorrected by this Court, later attempts to apply the Full Court’s reasoning would involve an attempt to extrapolate what the class or genus of the contract is, to which this implied term applies. That has not been done.

FRENCH CJ: The contract we are dealing with in a sense is easy. It sits at the centre of what we would call an employment contract.

MR WALKER: Quite.

FRENCH CJ: But out at the boundaries there is a lot of grey.

MR WALKER: Yes. Now, we call that vagueness in aid, and that is vagueness at several levels, not only as to the content in application of this term, particularly in that phase of a contract which is its termination phase, particularly in a contract where there may be termination without cause mutually on notice, even more particularly where the employer may terminate without cause on notice, but dispensing with a capacity to dispense with notice upon proffer of payment.

Now, I will come back to those aspects of the Full Court’s decision, but for the present our answer to the Chief Justice is, no, there is not a consideration of how one may classify or categorise or characterise arguably different kinds of employment contracts for the purposes of testing whether the implication of this term is appropriate. The most that can be said in favour of the decision below in that regard is that they had a particular contract before them and for whatever class, however expressed to which that contract applied, the decision stands.

Your Honours, the English approach, again by way of opening description is one which, in our submission, particularly can be seen to be affected, indeed, arguably infected, by a very special reference to, and relevance of, United Kingdom statutory regulation of, among other things, so-called unfair dismissal. The later authorities in the United Kingdom, to which we will come, contain an explanation retrospectively of how the so-called implied term came into existence, which we will attempt to show your Honours is quite at odds, radically different from what the jurisprudential theory in this country would see as the requisite necessity test.

Against that opening background, may I take your Honours quite directly to a couple of passages in authorities in this Court? There is no challenge indicated either by any of the argument below or in the argument in this Court to any of this authority. We do not suggest for a moment that there is anything abstruse or arcane about these matters.

May I start with a passage familiar to your Honours in Byrne v Australian Airlines 185 CLR 410 at 422 to 423? In the reasons of the plurality Chief Justice Brennan and Justices Dawson and Toohey under the subheading “Implied term”, none of which I will read, extending over onto the top of the next page up to the next subheading, there is a passage which it must be said more closely resembles a discussion of the ad hoc or factual implied term, a term implied by law. However, in the embedded quotation from Hawkins v Clayton of Mr Justice Deane at about point 8 on page 422, one sees a statement which it may well be, with respect, is as appropriate for implication by law as implication by fact.

However, notwithstanding that observation about how the plurality saw the matter in Byrne, on page 423 at the end of the passage I have drawn to attention, there is reasoning in the three sentences, the first of which commences with the word “Plainly” about an inch from the top. Again, I will not read it. That is a passage which, in our submission, is a valuable indication that the concept of necessity is tied or must be based on, and must be deployed in relation to, the operation of the contract, rather than as a means by which the contract can be itself transformed into something which is, as it were, more socially desirable or more favourable to one party or another.

Could I then go to the reasons of Justices McHugh and Gummow in the same authority? At 440 their Honours turn generally to the subject of implied term starting with the possibility of custom, upon which I will not dwell. At 441 under the subheading of “Business efficacy” what might be called the Moorcock or factual or ad hoc implication is discussed, and in passing may I draw to attention some of the considerations that their Honours regarded as important in that employment case, Byrne, in ruling against the putative implied term with respect to procedures for dismissal. At the foot of page 442, over to the top of page 443, there is a reference by way of objection to the implication to operation in what is called “a partisan fashion”.

On page 443 at about point 7 or thereabouts in the paragraph containing reference to Ridge v Baldwin there is the reference to the New Zealand authority which their Honours describe, being an authority from 1985. Their Honours note that the New Zealand Court of Appeal talked of the common law – that:

the common law “may come to recognise” a duty” –

and as their Honours said, such comment did “not take matters very far”.

Could I then take your Honours finally in relation to the discussion by Justices McHugh and Gummow of the ad hoc or factual implication to page 446 where there is a conventional, with great respect, statement of the necessity test in the paragraph towards the foot of the page commencing “Nor could it said”.

There then commences at page 447 in the discussion by their Honours under the heading “Implications independent of intention” what might be called the class or category or implication by law approach and we point, in particular, at page 448 to the approving citation from the reasons of Justice Hope in Castlemaine Tooheys 10 NSWLR 468 at 487. I will come back to that in just one moment.

Staying with Justices McHugh and Gummow, the discussion which then ensues over to the top of page 453, not all of which, of course, I will read, includes the approach to this class or category of contract which one sees on page 449 in the paragraph commencing with the phrase “However, the more modern and better view”.

Their Honours note what they saw as force in the suggestion that what now could be classified as terms implied by law in particular classes of case had their origins as implications based on the intention of the parties, and I interpolate that is why one might say that historically, implication by law and implication by fact are plainly related and may not always be clearly distinguishable. Then picking up their Honours again:

but thereafter became so much a part of the common understanding as to be imported into all transactions of the particular description.

Now, much lies in those last words, of course. What is the particular description, what is the level of generality, what are the defining or typical characteristics in question? But, leaving that just to one side for one moment and looking at the substance of the matter, in our submission, that is part of an understanding of what might be called the necessity test as applied to implication by law, and one sees that it is, as it were, reflected or manifested in, for those class of contracts, the term becoming:

so much a part of the common understanding as to be imported into all transactions of the particular description.

Now, one thing can be said about the English position, as well as the Australian position, at all relevant times, and that is that there is nothing that can be observed in the case law, nor for that matter in any of the relevant scholarship, which comes anywhere near that acceptance of such a term becoming “so much a part of the common understanding as to be imported into all transactions of the particular description”. That is a description of a judicial technique which, as it were, recognises a phenomenon rather than creating one.

On page 450, in the middle of the page, their Honours use terms which are commonly used to explain the notion of necessity in this context, in the paragraph commencing “Many of the terms”. Your Honours, I draw to attention in particular, the notion of the:

enjoyment of the rights conferred by the contract –

I stress, “conferred by the contract” -

would or could be rendered nugatory, worthless, or perhaps, be seriously undermined.

The “perhaps”, with great respect, is an indication that this is a rule of necessity and serious undermining “perhaps” may not achieve satisfaction of that test; certainly “nugatory” and “worthless” would. Then their Honours summarise that:

Hence, the reference in the decisions to “necessity”.

Their Honours, two paragraphs down, describe that as being:

crucial in the modern cases in which the courts have implied for the first time a new term as a matter of law.

Their Honours then turn, on pages 451 and 452 to the top of 453, to a discussion of what falls out from some English cases of a kind which, in our submission, gets scanty if any real consideration in the English authorities that have been relied upon for the implication of the term which brings us to this Court.

In particular, your Honours will be familiar with the facts of Irwin, the modern - well, not so modern phenomenon, it occurred in Ancient Rome - but the building of residences in the air, so you own strata, to which of course you must climb, or be carried, has a certain necessity about it in terms of enjoying it as a residence. This is an almost paradigm example of how one applies the notion of necessity. One does not engage in fantasy about being parachuted into your living room, it is obviously a species of what might be called reasonable necessity.

Lord Wilberforce, in the passage quoted on page 451, was able to say about the easements necessary, not only to be available but also to be kept available by maintenance, to get to those high rise council dwellings:

they are essentials of the tenancy without which life in the dwellings, as a tenant, is not possible.

language which, with all due weight given to practicalities rather than theoretical fantasy, which is language of necessity as the law understands it. There is then reference to another decision that your Honours will see referred to throughout not only the party’s submissions here but the decisions below, and that is Scally, which turned upon the somewhat striking context of parties to a contract having become parties to that contract in terms of which they were not aware, by reason of the trade union representation through which the contract had been made.

Now, for some reason or other, which I cannot explain to your Honours, Scally does not include the question, which presumably never occurred to the trade union, that perhaps the remedy for the parties in that case was against the agent who had not communicated the term of the contract as negotiated.

However, the issue in the case in Scally was whether there was an implied term that the party who would benefit from the ignorance of a particular provision available to the doctors in that case, whether there was an implied term requiring communication of that benefit to the possibly involved parties. Again, one can see how the concept of necessity informed the decision. Unless you knew about something you could never avail yourself of it, it would be rendered worthless or nugatory.

Then in the middle of page 452, Justices McHugh and Gummow, having noted those approaches, posed the relevant question, quoting from Scally, as:

Was the term a “necessary incident of a definable category of contractual relationship”?

They held that:

where a contract of employment, negotiated between employers . . . there was an implied obligation on the employer to take reasonable steps to publicise the term -

my words, not theirs, obviously otherwise the worth of that term would be zero to those who knew nothing of it in time. Then their Honours turn back to the case of the allegedly delinquent airline employees in Byrne itself. They relied upon this concept of necessity. They said:

employment contracts were a well-recognised “class” of contract -

that general. That was conceded, so also was the proposition that:

law imported various incidents into the relationship of employment, one of them being the entitlement of the employer to terminate the employment at will on giving reasonable notice and to dismiss summarily for misconduct.

Now, we interpolate that if those are, at least concededly, as noted in that passage of argument, implications by law, it would be odd if another implication of law in some way rivalled or entrenched upon them. Nothing has ever been observed in the case law or, for that matter, commercial practice to which a court might turn in order to understand what has become accepted as a matter of common understanding is necessary in all such cases to that effect.

Their Honours then continued:

However, there is no “necessity” for such a step in the sense in which that term was applied in cases as Irwin and Scally. The contract of employment is not, from the viewpoint of the employee, rendered nugatory if the existing provisions thereof remain, as a matter of contract, to operate concurrently with the regime established by the Award and deriving its authority from statute.

There is no necessity for the contract to borrow from the statute or from an award given force by the statute. Now that is an important observation when one considers the rather crabwise and indirect route by which in England a similar term has apparently been recognised - I say apparently because of the observations to which I am going to come soon, in England itself. The difference in particular is that in this country for reasons which, which great respect, appear to be solidly based in common sense, it is difficult to say that there is a necessity for a contract to include a term conveying a benefit which is already available as a matter of statute. That seems to be the antithesis of necessity. Your Honours - - -

FRENCH CJ: I suppose the more broadly framed the implication, the greater the difficulty of justifying it by reference to necessity.

MR WALKER: Yes, quite so, and one see the two examples of the conceded implications by law for contracts of employment: summary dismissal for misconduct, so the term goes no broader than what I might call, the mischief, it being unthinkable to anybody that you must keep a misconducting person on; and termination on reasonable notice, where the word “reasonable” surely answers the question both as to necessity and as to in accordance with general policy, and it goes no further than the exigency of preventing what might be called lifetime or perpetual employment.

FRENCH CJ: How does the implication found here differ from an implication of good faith? Is that a subset or is it just a manifestation?

MR WALKER: It is impossible to see from the reasons below, any factor which would distinguish the supposed implied term in this case from something as broad as a notion of good faith. The next thing I say is this. It is difficult with broad notions of good faith, when one is talking only through the contractual prism, putting aside other sources of that obligation - it is difficult not to test the matter by turning it into its negative, that is, the obligation to behave in good faith is rather easily stated as an obligation not in effect to be dishonest; that is, to act in bad faith. If there is any other zone or scope of conduct controlled by an obligation of good faith, apart from that negative obligation, it is quite impossible to see it articulated in any relevant authority.

Now, I stress I am leaving aside those things which are almost traditionally sui generis such as uberrimae fidei in insurance policies. I am not saying that is not contractual, but it is so special in its history and place that perhaps it deserves to be looked at sui generis.

FRENCH CJ: Good faith may import a positive obligation to act conscientiously, diligently in the discharge of the obligations - - -

MR WALKER: Yes.

FRENCH CJ: - - - the exercise of the powers and discretions that are conferred, not just an obligation not to be dishonest.

MR WALKER: Yes, but if I can put it thus. You have still got to be careful as to whether one has simply invented some formless mass under the title of being obliged to be obliging, that one must go out of one’s way. Now, I use that language because this is all about a contract. These terms are putatively part of a contract. In a sense they subserve - I do not mean in a subordinate fashion, but they subserve or arise because of the content of the express terms and the other implied terms, including inferred terms or matters which appear as a matter of interpretation. That is the construct which in contest is being served or not by dent of the test of necessity by the putative implied term.

Now, if it is just good faith, then, in our submission, it is very difficult to see how it can detract from what I am going to call the definitional limits of obligation found in the express terms. So, for example, if there is an obligation to do something within 10 days, and what I might call social decency would propose it could be done within two days to the decided advantage of the other party to the contract, good faith would not, in our submission, step in, assuming it was an implied term, to put the party in breach of the obligation for taking three days, well within the 10 but outside the two.

It is for those reasons, in our submission, that, to pick up a comment the Chief Justice made earlier, the greater the generality, the broader the extent of the supposed obligation imposed by the implied term, and the more it is approaching what might be called a generalised attitude of benevolence by one party to the other, then, in our submission, the more difficult it is to see what work it does in relation to any of the express terms. It cannot contradict any of them, it cannot qualify any of them, it does not cut any of them down, and one asks, with respect, apart from the negative obligation not to be dishonest, which is not only contractual but in many cases will also be tortious, it is difficult to see what place it has to play as a matter of necessity. That, with respect, is really what Justices McHugh and Gummow were pointing out in their culminating passage to which I have just drawn attention.

Your Honours, very briefly and without dwelling on it, you will have seen from our written submissions that we have drawn to attention a similar passage which contains, we submit with respect, some equally useful language to advance the relevant concepts. That is Breen v Williams 186 CLR 71. The passage we have drawn to attention and which I will take your Honours to now is at 102 to 103 in the reasons of Justices Gaudron and McHugh. Of course, this is the case about the medical records, the obligation or not between doctor and patient. At the foot of page 102 in a passage I will not read commencing “The common law draws a distinction”, your Honours see familiar matters. Could I draw to attention the collection of various expressions that their Honours set out on the first half of page 103? Some I have already drawn to attention; others are to similar effect.

Your Honours, it is not suggested by our learned friends for the respondent that there is anything wrong in the description of the common law contained in those passages or that they do not represent the common law in Australia. It bound the Full Court and, in our submission, it should have led the Full Court to reject the approach taken in England.

Before going to what the Full Court did, may I, as I said I would, take your Honours briefly to a passage in Castlemaine Tooheys v Carlton and United Breweries (1987) 10 NSWLR 468. The passage I wanted to draw to attention, which includes that which was quoted in Byrne, commences at the foot of page 486 in the reasons of Mr Justice Hope that were agreed in by Justices Samuels and Priestley and under that heading “Implications of terms by law and otherwise” at letter F on that page there is a discussion which again is in familiar terms. At page 487 just above letter D, one sees a reference to the typical classes for such implication including:

contracts between master and servant –

and then his Honour says - it might be described, with respect, as a masterly understatement - at the end of that paragraph just after letter D -

the difficult question is to determine what test should be applied before the courts imply such a term for the first time.

I will not read what follows but, with great respect, we urge the continued cogency of the considerations set out by his Honour as various possibilities are canvassed. Can I, as it were, bring it to ground in a way which favours our argument at page 489 between C and D, in the passage commencing with the phrase:

The most common ground accepted in this decision as the basis for implication by law was that stated by Bowen LJ in Miller v Hancock, that the term was one which “the parties . . . must have intended by necessary implication, as a basis without which the whole transaction would be futile”.

The test so stated seems to be properly reflected in Lord Wilberforce’s one word test – necessity.

In our submission, as one can see from the reference to those reasons in this Court, that ought to be regarded as an authoritative and helpful source of guidance as to the test that has to be applied to answer what may well be but nonetheless has to be answered, the difficult question of implying for the first time. None of that process applying the test of necessity was done by the Full Court in this case.

May I take your Honours - it is reproduced in volume 2 of the appeal book, its citation is [2013] FCAFC 83; 214 FCR 450 - to the reasons of the majority. They start in the appeal book at page 470. If your Honours will permit me I will use the Federal Court references from now. Could I take you first to FCR 450 – I am sorry, to FCR 463 - - -

FRENCH CJ: It does assist those of using electronic records to give us the appeal book page as well.

MR WALKER: I will do that entirely, your Honours.

FRENCH CJ: Thank you.

MR WALKER: I am sorry, whatever is convenient. Page 483 appeal book. This relevant part I want to take you to starts under the subheading “Term implied by Law?” preceding paragraph 88. One sees a reference to the University of Western Australia v Gray. That will be picked up later in a way that is of some significance. At the foot of page 483 appeal book, in paragraph 93 of the decision their Honours note the recognition of necessity as “central to the rationale”.

They go on to say that is where the difficulty arises, and there is a reference to what “the Full Court pointed out in Gray”, namely, “necessity is an elusive concept”. May we interpolate to say not ultimately elusive, sufficiently understood both to be named and to be used, and on the highest of authority, said to be the recourse required in such cases. It might be difficult in borderline cases. It may involve judgments in the nature of evaluative assessment. So be it.

There is a reference to policy considerations. It is, of course, to be borne in mind that policy considerations cut both ways, that so-called policy considerations are as often, perhaps more often, used to put an end to the so-called implication by necessity of particular putative terms rather than promoting it.

KIEFEL J: Do their Honours anywhere identify what policy considerations they had in mind?

MR WALKER: By implication I think I should say, perhaps, I am going to try and persuade your Honours, no, not in reality, but there is a passage I am about to come to which I concede may involve, properly understood, a kind of policy. It is between the lines, I will come to it in just one moment. In paragraph 94 one sees a reference to what the Full Court in McDonald, that is the Full Court of the Supreme Court of South Australia in McDonald, had observed about England, which is the body of case law to which I will be coming fairly soon, and one sees at about the third-last line of that paragraph 94 a reference to matters being:

all informed by policy considerations referable to the nature of the relationship –

One does not find, with respect, apart from what we will call circular assertion, if you like, conclusion assuming, one will not find in the English case law a discussion of those so-called policy considerations seen through the prism of necessity, necessity in aid of the contract.

Now, in paragraph 95, and your Honours will have seen we have picked this up in our written submissions, one sees that for the majority in the court below it was something in the nature of a consistency that was cardinal to the reasoning. In our submission that is a falling away from the rigor required by necessity. There is a reference to:

the development of the implied term is consistent –

with what is called “the contemporary view of the employment relationship”. The difficulty with the reversion to what might be regarded as being in substance a use of the passive voice here is, whose view, and on the basis of what materials, and with what level of what might be called virtual unanimity, so as to achieve an “it is accepted on all sides” culmination, which is surely the threshold that has to be crossed to satisfy the test of necessity, and there will not be answers to any of those questions in any of this material. Now, paragraph 95 concludes with a reference to what their Honours call:

the explanation of the explanation of the necessity test stated . . . in Gray.

We will deal with that briskly as follows. There is no explanation of the necessity test found in Gray. There are, with respect, interesting questions raised about it. There is an avowed acceptance of the authority of this Court, binding on all other courts including the Full Court in Gray, that the test is necessity. There is no, as it were, gloss or teasing out of the way in which it would apply in a case like the present at all to be found in Gray.

We then come to the way in which for this case the term was seen by the majority as requiring to be implied as a matter of law. It comes in the passage which perhaps shows the lack of footing in proper principle for the conclusion - - -

FRENCH CJ: Sorry, I think in Gray there was a question whether there is an implication by law for a class of employment contract where you have somebody, for example, who is hired on terms that involve, for example, a duty to invent, carried over to the particular class of contract where you have an academic working for a university and other - so it slipped pretty closely into the ad hoc area.

MR WALKER: Quite so. In fact, Gray is a very good example of where either in the nature of things or perhaps unfortunately, a distinction is not completely observable.

FRENCH CJ: But the problem there was the employer, as it were, nailed their colours to the mast of implication by law and did not go to an implication as a matter of fact, which is what the Full Court pointed out.

MR WALKER: Quite. For present purposes, it suffices to advance our argument to say that that last sentence in 95 in the decision under appeal is Delphic, with respect. There is not really an explanation and certainly, if I can put it this way, their Honours do not explain how that explanation provides reasons for their conclusion.

Could I come then to the subheading which perhaps has jumped ahead too much in their Honours’ reasoning, “The content of the duty in the present case” found before paragraph 109. The first way in which the rationale for their conclusion is expressed - and this is part of my delayed answer to Justice Kiefel’s question - is in paragraph 111, “the fact that Mr Barker was a long-term employee” – one - “of a large corporate employer” – two - “is a relevant circumstance which” - the phrase is “informs the operation of the implied term”. It seems, with respect, already to have come into existence by this stage of the reasoning. “So too, the operation of that term is informed by the provisions of cl 8 – three.

Now, those are the matters to which their Honours return, but may I pause to elaborate at this point? The first of those two may, on one reading, contain within them notions of policy, that there is a policy that sees significance for the purposes of this putative implied term in somebody being what is called a “long-term employee” and somewhat having what is either the fortunate or misfortune, depending upon your social views, of being such an employee of a so-called “large corporate employer”.

It may be said, perhaps a bit facetiously, that certainly those are factors which are sufficiently vague to answer the description of the kind of policy considerations that outside a courtroom might be the subject of political debate, and we would stress controversy. In different times and places and perhaps still differently among different people with different opinions, the advantage of being employed by a large employer, which may include a large body of employees, might justify, as it used to for those who would urge their children to take a job in the Public Service, might justify a lower salary by reason of the greater security of tenure hoped for by what might be called the organisational inertia of a large organisation. There could be a reverse approach taken based upon what one might describe as the capitalistic acumen and aim of the large organisation and the need to share in massive profits; not true of the Public Service yet.

But those are matters of controversy and a universe away from the notion of the general acceptance which will satisfy the necessity test for implication by law into a class of contract. The next and obvious observation is that if there is any policy behind long-term employee and large corporate employer, it is not any more adumbrated than the reading between the lines that I have just assayed.

There are, of course, criticisms to be made if they were thought to be self-evidently persuasive in support of the implication of the term, namely how long does one serve before one’s contract accrues by some kind of juristic barnacle approach, this implied term. You started off as a short-term employee without it and then you become a long-term employee. Bearing in mind that this is a term which in this case was held to regulate the events of not many days, it is something which either operates or does not. There is no penumbra effect. You either have its benefit or you do not. None of that is answered or addressed by their Honours.

The same is true, of course, of what is a large corporate employer. It is not the technique of the common law to look at the Fortune 500 or the local equivalent thereof. It is not the technique of the common law to construct statistical banding of employers in order to determine what willy-nilly their actual intention and subject only to express terms to the contrary will be terms of their contracts of employment. As to the third one, there can be no possible policy explanation of a reference to clause 8.

KIEFEL J: That is the curiosity of paragraph 111 in their Honours’ reasons, perhaps, but if one reads that second - what they call the second limb of paragraph 111, which does not seem to have regard to any real policy considerations, and the beginning of paragraph 112, it would seem that their Honours are postulating an implied term which operates upon the express terms of a contract and requires the employer to do something.

MR WALKER: Yes, yes, it does.

KIEFEL J: At the beginning of paragraph 112, are their Honours talking about the situation such as that referred to in Secured Income Real Estate, where the parties are required to co-operate and do what is necessary to give effect - to give the other party the benefit of the contract and here it would be to make something out of the redeployment notion that underlies clause 8.

MR WALKER: Yes, we think so, to all of that, and one sees in particular paragraph 119. Now, true it is there their Honours are referring to reasons with which they are respectfully disagreeing, and may I just say here – perhaps I only need to say it once - we, with great respect, adopt and urge not only the scholarly analysis of the case law, but also the reasoning as a matter of analytical principle in Justice Jessup’s reasons and, in our submission, in fact Justice Jessup points out why Mackay v Dick, which is another way of naming Secured Income Real Estate as a principle, does not do what is necessary to be done to imply this term.

KIEFEL J: But are you saying this is not the ratio of their Honours’ decision?

MR WALKER: It is very difficult to know - - -

KIEFEL J: How it fits in with the particular implied - the wider implied term that their Honours - - -

MR WALKER: Quite. It comes under the heading “An alternative approach” and perhaps I can jump to where I was going to go very soon anyhow - I will come back to clause 8 itself, but could I take you to 127? Because of the subheading that precedes 129, this seems to be the part of their Honours’ reasoning which, as it were, completes or concludes their explanation for why there is a term, and query what its content is, because next they are going to move to breach.

But in 127, they refer back to 111, the 23 years approximately of employment because the contract was, as it were, a latter day iteration of that relationship and then the contemplation of redundancy and redeployment as an alternative to termination in clause 8. I am bound to point out that another way of saying that equally accurately is the contemplation of termination as an alternative to redundancy and redeployment, in clause 8. Indeed, that is the primary reading of clause 8 to which I will come, and then the:

very large corporation with a huge workforce and many and varied positions within the Bank -

That was the other paragraph to which I was going to refer in answer to Justice Kiefel’s question about policy for the same reasons as I have already put. It may be that between the lines there are matters of policy that are being, as it were, advanced implicitly but again one need only note, taking the “many and varied positions”, apparently the idea as a matter of policy is that for such an employer, I do not know the right epithet, it is possible or convenient or not too much trouble to find somewhere for this person.

Of course, as a matter of policy, the policy of the law, sometimes called public policy but in this court of law is not special to a particular employee, let alone to a particular employer and it looks at a genus of employment contracts, including surely the public policy of new contracts being made with and for people who have never had them before, in other words, the employment of young, highly qualified people in the place of somebody whose position has been made redundant, whose skills are not there and then obvious to the employer as appropriate to be deployed in their enterprise. In other words, there is controversy of a kind which would classically call for parliamentary fiat if there is to be any alteration or adjustment of common law contractual rights at all.

FRENCH CJ: The size of the organisation, of course, and the opportunities within it might be seen as a kind of factual observation about the amount of room that the employer has to move in - - -

MR WALKER: Quite.

FRENCH CJ: - - - implementing clause 8, and I wonder whether there is a distinction to be drawn between the application of the implied term to this particular case and the application of the constructional approach in Mackay v Dick - not saying that Mackay v Dick supports the implication - - -

MR WALKER: No, no.

FRENCH CJ: - - - but just looking in terms of outcomes.

MR WALKER: Of course, Mackay v Dick approaches the matter in a way that does not leave any difference about which doctrine would care whether you call it interpretation or implication, but having agreed to a sale on conditions which involve trial, there must be the capacity to conduct the trial and there must be those things which are prerequisite to that trial being carried out. Whether one call that implication of the duty of co-operation or interpretation of that which was expressly agreed between the parties as including that which truly goes without saying because it is part and parcel of the obligation probably does not matter.

KIEFEL J: I think it was referred to by Justices Gummow and McHugh in Byrne as a rule of construction.

MR WALKER: It was indeed, quite so.

KIEFEL J: Probably one derived from civilian notions of good faith.

MR WALKER: Quite and, equally though, their Honours are, if I may put it this way, not categorical about that. They offer it as an understanding of the development of the matter. My last comment is intended to be to the same effect that these, no doubt, come from deeper historical, intellectual routes which will not answer to the description of interpretation of contract or implication in fact of a term in a contract but they do all have this common feature of those matters which, as it were, are involved integrally in the obligation which is the given. The given is that something be done. What is involved integrally in that? Now, that can obviously be done as a matter of interpretation. It might be done by way of what might be called a freestanding principle regardless of interpreting words, simply saying this is what the law requires if you agree to such and such.

KIEFEL J: Accepting that one may put aside questions of categories, on one view if there was that approach to clause 8 and the obligations necessary to give effect to it or to be seen as provided for within it, there was no need for their Honours to search for a wider implied term. We are in notice of contention territory here, I think.

MR WALKER: It may be, although as we understand it, the notice of contention has tended to be The Moorcock not interpretation, we think.

KIEFEL J: Yes, I was not sure which way it went.

MR WALKER: No, that is the way it went, your Honour. It is framed in terms of The Moorcock.

KIEFEL J: It is just that the notice of contention part of the respondent’s written submissions is preceded by the implied duty of co-operation by reference to Secured Income and clause 8. I was not sure whether that was the lead in to the notice of contention. I should not construe written submissions - - -

MR WALKER: Your Honour might be right but I perhaps made the elementary error of reading the notice of contention itself. It is expressed in The Moorcock terms and there we are. Perhaps I should keep my powder dry on that. Your Honours, could I then come back to paragraph 128 in the Full Court? Your Honours will remember in 111, as it were, they jumped to the position of saying that these three circumstances informed the operation of the implied term as if it was already in place.

In paragraph 128 it is somewhat differently put, namely, that those factors are sufficient to give rise to the implied obligation. So it is there supplied as the foundation. That is why I have perhaps overlaboured at this question of is there policy, referred to by their Honours. This is what is referred to by their Honours. It may or may not be policy. It is certainly not policy through the required prism of necessity. It is certainly – it does not otherwise contain any justification in terms of necessity as is familiar in our law.

Could I take your Honours now to clause 8 itself in volume 1 of the appeal book, page 131? I want to take you to clause 6 first. It is truly very plain.

This agreement may be terminated -

by agreement in writing between the parties at any time; or

except in circumstances of misconduct, by four weeks’ written notice by either party to the other party.

Bank may make a payment of an amount equivalent to four weeks’ pay in lieu of notice.

So, that is an agreed term. As it happens, it is quite similar, subject to the stipulation for the notice, that is, the length of notice, it is quite similar to what would have been implied by law. Then, very importantly:

In either circumstance, reason for termination shall not be required.

Now, clause 7 then deals with what I will call a general case:

Where termination of employment is initiated by the Bank other than for misconduct or unsatisfactory performance –

So, that will include the four weeks’ notice –

the Bank will, in addition to payments made under Clause 15 –

which are, as it were, accrued entitlements –

pay to the Employee compensation of an amount equivalent to 0.25 times Base Remuneration as set out in the Annexure.

So, the “initiated by the Bank” is in the nature of, may not be wholly confined to, redundancy. It certainly will include redundancies of position. Then one sees at the end of clause 7 at the top of page 132 of the book:

The Bank will not be under any obligation to pay any further compensation on termination other than as set out in this Clause –

I repeat, that incorporates clause 15 –

or in Clause 8.

So, we come to clause 8, which is the clause that applies in this case because of Mr Barker’s position. Clause 8 says:

This Clause applies only where the Employee was already employed by the Bank immediately preceding the date of this Agreement.

That is his case:

In the case where the position occupied by the Employee becomes redundant –

That is also his case –

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 –

Then one sees a guaranteed minimum, in effect, of “$107,815.67”, the parties had agreed with extraordinary exactitude. That is in addition to clause 15 payments, and it is a guaranteed minimum because you see it is the greater of that or what would be provided for under clause 7, and clause 7 does not apply where it is made under this clause.

Now, the relation of those clauses - 6, 7 or 8 and 15 - lead to these observations, that if there had been any obligation in relation to trying to place the employee in an alternative position, and that must be what this case is about, it must be what the implied term found against us would involve, if there had been full and handsome compliance with that and an inability, then one sees the cap agreed between the parties financially on the compensation payable by reason of that redundancy, and this is a redundant position; there is no challenge to that.

It is to be recalled that, what I am going to call the policies compendiously found in writing and passages that your Honours have seen in the reasons below, were not in the Full Court held to be incorporated in, that is, to be contractually the subject of promises between the parties. No right of Mr Barker; no obligation of my client in relation to those policies of redeployment.

So, this is a case where, in our submission, this implied term approach has been used to put at nought the careful reasoning by which those matters which were reduced to writing, after all, were not included in the express terms between the parties, but what might be regarded as some attributes of the conduct referred to in those policies appears to be inextricably involved in the content of the conduct said to be required by this implied term. That is at least peculiar, bearing in mind the overt rejection of that conduct as being the subject matter of any contractual promise.

The other observation to be made, of course, is that there is a right to terminate on four weeks’ written notice, which is subject to the possibility of, in the event of redundancy - which is the event that applies in this case - the guaranteed payment for a previously employed contracting party, employee, under clause 8.

KEANE J: So, do you say that if the bank was, in fact, able to place the employee in an alternative position, it could just give him four weeks’ notice?

MR WALKER: Yes.

KEANE J: Could it give him four weeks’ notice and avoid paying what clause 8 requires?

MR WALKER: No, because the case - the clause 6 termination, would still be a termination to which clause 8 applies. His position has been declared redundant, which has happened. So, there is a right to terminate clause - - -

KEANE J: No, but clause 8 does not apply, does it, because the bank is able to place him in an alternative position.

MR WALKER: I am so sorry, but if he is able, there has been no termination on the ground of redundancy. He could only - if there was then a clause 6 termination, it would only be if it was not on the ground of redundant position that clause 8 would not apply. If clause 6 termination was by reason of the position occupied by the employee becoming redundant, to use the words of the second line of clause 8, then the guaranteed minimum under clause 8 would still be payable.

KIEFEL J: The obligations in clause 8 would arise?

MR WALKER: Quit so, and all obligations imposed by clause 8 are applicable in the case of the position becoming redundant.

KIEFEL J: Does that extend to attempting to redeploy the employee, attempting to find a position?

MR WALKER: No, there is an event which is expressed in terms of the bank is unable to place the employee, but proving that he - - -

KIEFEL J: Does that not suggest that the bank is required to try?

MR WALKER: There is no question that proving that event has occurred will mostly involve proving something about efforts. By the way, not always. Positions may be redundant which involve such specialised skills that there is simply nowhere else, even in the very large corporation – in other words, there are efforts and efforts. It may simply require - - -

KIEFEL J: The clause could not operate in the factual scenario, that is the kind of - - -

MR WALKER: Well, there would then be very clearly an inability to place the employee in an alternate position.

KIEFEL J: Yes.

MR WALKER: But, your Honour is of course right about the likely evidentiary role of what I am going to call efforts, because the event is inability to place. We certainly cannot avoid the payment of the guaranteed minimum by, as it were, truculently taking the position that we are not saying whether we are able or unable to place. If we wish to declare the position occupied by the employee redundant and have done so, the minimum payment will be required to be paid, it says it will be calculated, but the word is “payment”, so there is an obligation to pay as well, by way of compensation, that is for loss of the position, meaning the termination of the employment, if we do not place. In other words, if we do not even try, we cannot possibly be in a worse position than if we did try. It would be absurd to read that as meaning somebody who has tried is in a worse position than somebody who has not tried.

KIEFEL J: Is there an issue in this case about whether the appellant has taken steps?

MR WALKER: Yes, yes. To use the vernacular, it looks as if we dropped the ball for a little while, yes, yes.

FRENCH CJ: This is because of all the business of emails to the terminated email address and so on. Can I just, sorry, I want to be sure that I have not misunderstood your characterisation of the Full Court’s approach. As I understand it, they found liability on the basis of the intersection between the implied term and clause 8. They did not deploy the redeployment policy in aid of that determination.

MR WALKER: Not in terms, no.

FRENCH CJ: No.

MR WALKER: No, and it is not part of the contract.

FRENCH CJ: Yes.

MR WALKER: We were not successfully sued for breaching an obligation - - -

FRENCH CJ: Yes.

MR WALKER: - - - which emerges from clause 8 as a matter, say, of interpretation, to try harder than we did. What that would amount to in damages, of course, would depend upon whether the attempts would prove fruitful, because if they did not prove fruitful, there is the clause 8 compensation.

FRENCH CJ: It is all clause 8 and the implied term. The redeployment policy does not play any part in their Honours’ reasoning.

MR WALKER: That is right, that is right. Could I then take you, in volume 1 of the appeal book, to page 135 which is the letter of 2 March 2009 which contains, as it were, the state of affairs at the beginning of the period that marks our supposed failure to do what the supposed implied term required?

It refers to a discussion regarding employment. It says in the fourth paragraph that as a result of some changes Mr Barker has not been allocated to a position within the corporate financial services structure, the direct impact of that being that his current position of regional executor is to be made redundant. That will be effective straightaway.

Then there is a declared preference to redeploy and a statement of intent to explore in consultation appropriate options, an offer of “services”, an encouragement of what is called “proactive steps” in seeking redeployment by Mr Barker himself, a statement of intent to begin the redeployment process immediately and to continually review options and then in terms, an understanding of if there is an inability to identify a suitable position, and that obviously includes and indeed is mostly directed to, the inability notwithstanding efforts:

and the decision is made to retrench you, you will be paid redundancy entitlements in accordance with –

what we know is clause 8. Then there is a reference to matters that might flow thereafter and finally a description of the whole of this as being a “process” in the last paragraph about which he is encouraged to be in touch. In our submission, what that letter says, and not surprisingly how could it otherwise, is that redundancy of his position will lead to one of two possibilities in relation to his employment. It will be continued in a different position if one can be found – that is the preference – or it will be terminated.

This is plainly a letter about the possibility of termination as much as it is about the possibility of redeployment. It is a binary outcome of possibilities. That is important, obviously, in terms of the third of the issues that we have raised which, in England, has become known as an exclusion or exclusion zone or exclusion area.

Your Honours, can I now come to those English authorities? I want to start with one that is variously named in the writings on this topic. The first of the appellants named in the report is Malik, but the one whose name is usually used in English references is Mahmud. They are both appealing against their former employee in liquidation, the late and unlamented BCCI [1997] UKHL 23; [1998] AC 20.

Now, one thing to say generally about this case is it is not in any conventional terms upon a reading of it alone easily seen, if at all capable of being seen, as the source of authority in any understanding of stare decisis of which we are aware for this implied term. The first and obvious reason why that is so is easily picked up by the opening sentence attributed to the counsel for the applicants at page 23. It was common ground, it was not a matter of argument in the Lords at all that this term applied, and that is echoed in the opening words of the speech of Lord Nicholls on page 33, just after letter H at the foot of that page:

In the Court of Appeal and in your Lordships’ House the parties were agreed that –

Then one sees at the top of the page, 34, letter A, the:

implied term to the effect that the bank would not, without reasonable and proper cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.

Under the subheading on page 34 of “A dishonest and corrupt business”, which I think is a handy way of summarising the objection to BCCI by its employees after the event of their termination, his Lordship between F and G sets out what he calls an “intuitive response”, about which we would make this comment. Another way, whether it is intuitive or not, to respond to those matters would be to observe that there simply cannot be a contract which requires participation in crime, one cannot form a contract that the law will recognise, let alone enforce, and that perhaps might have been a simpler, a doctrinal rather than intuitive response.

At the top of page 35 there is an interesting expression for the obligation which was agreed or common ground, in other words, not established by this decision at all. His Lordship talks about the implied obligation not to conduct a dishonest or corrupt business. With respect, that is a very tenuous way of teasing out the content of a term. In any event, presumably it would extend to falsifying the company’s tax returns. Where would it end, one does not know. His Lordship says:

This implied obligation is no more than –

what he calls –

one particular aspect of the portmanteau, general obligation not to engage –

et cetera. In our submission, no doubt explained by the fact that there was no contest between the parties about this supposed term, it can be seen immediately that there is simply no footing or basis or root here displayed in relation to this term which ties it to necessity. By tying it to necessity, of course, it is shaped and confined only to the exigency in question, and none is ever identified in this reasoning and it later turns out that, oddly, this is seen as the authority. There are precursors, to which reference is made, but this is seen as the authority. In our submission, it is not something which this Court would seek in any respect, either as to technique or outcome, to emulate.

A difficulty of a kind which was prescient bearing in mind what comes up later in the so-called Johnson exclusion zone is foreshadowed on page 36 between D and E, the passage headed “Premature termination losses”. I will not read it, but one sees the observations concerning causation of loss where there is a termination which, in our submission, is relevant in this case.

Now, there is some discussion of what might be called a policy kind, certainly not couched in terms of necessity in relation to a contract, the terms of which are being considered. At the foot of page 37, just before letter G and following - I will not read it - nothing in that discussion, such as it is, is informative of an approach requiring the necessity test to be satisfied. As your Honours know Addis v Gramophone was the fulcrum around which much of the argument and reasoning of this and other decisions turned. I will pass over most of that, not because it is irrelevant to the decisions; it was quite central, but because it is peripheral to our concerns.

Could I take your Honours then to page 45? In the differing reasons of Lord Steyn, here there are references to what might be understood as being policy matters. Under the heading “The implied term of mutual trust and confidence”, just after letter C, His Lordship refers, see letter D, to the argument relying:

on a standardised term implied by law, that is, on a term which is said to be an incident of all contracts of employment -

Now, the reference to Scally, of course, is to a case which produced a somewhat different term. Anyhow, His Lordship goes on, they:

operate as default rules.

Now, that means unless otherwise provided.

The parties are free to exclude or modify them. But it is common ground that in the present case the particular terms . . . could not affect –

So, again, it simply had not been argued in that case. At the foot of that page 45 there are some interesting, perhaps, with great respect, incomplete references to history. Just above letter H, following his Honour’s reference to a useful anthology:

The evolution of the term is a comparatively recent development.

Now, what one does not see in any of the versions of that comparatively recent development is any of the kind of occasion that this Court has expected to see with what might be called the first time recognition by implication of law satisfying the rule of necessity in the way that Mr Justice Hope discussed. Then one sees the reason for the development being attributed by Lord Steyn to being:

part of the history of the development of employment law in this century.

Then there is a statement which, with great respect, must be an overstatement. It is not true in this country:

The notion of a “master and servant” relationship became obsolete.

Now, we are not talking about rhetoric here or language. If one is talking about a contract of employment that used to be in all the digests headed “Master and servant”, it is not obsolete. There is huge statutory incursion. We call that in aid, as your Honours know, in much of our argument, in the area of employment but it is not true in Australia that the law of master and servant has become obsolete.

There is then a citation from Lord Slynn in Spring v Guardian Assurance which, with great respect, suffers from the vice of being overly general, that is, excessively general to be possibly called in aid or enlisted in support of a necessity test being satisfied, repetition of the illustration from Scally’s Case and then a last sentence in that paragraph which, with respect, ought not to be reproduced in this Court, a reference in the most general possible terms with, we are bound to point out, no real particulars to what is called a change in legal culture, so a change in legal culture making possible the evolution.

Apparently this is something that precedes the evolution because without it, the evolution could not have gone on. Nothing is identified. It may be His Lordship is doing no more than couching in these grandiloquent terms the asserted existence or coming into existence of such a term. It is, with respect, assuming a conclusion or entirely circular. Against that background, it is somewhat remarkable then to see the paragraph next to the letter E on page 46 in Lord Steyn. It is a familiar one that has been quoted:

The evolution of the implied term of trust and confidence is a fact.

Now, it was not argued in this case, it was assumed in common ground and perhaps that is why it is only by reference to the scholarship that there is any explanation of it in particulars. His Lordship says:

It has not yet been endorsed by your Lordships’ House. It has proved –

what is called –

a workable principle in practice.

That is not the language of necessity. That, with respect, is akin to saying it is a good idea.

It has not been the subject of adverse criticism in any decided cases -

That is also a pale imitation, indeed, of anything approaching satisfaction of the rule of necessity -

and it has been welcomed in academic writings.

Perhaps I should not make any further comment about that. His Lordship then says -

I regard the emergence of the implied obligation of mutual trust and confidence as a sound development.

Now, that is a value judgment expressed in terms which deliberately or otherwise can be seen to eschew the kind of analysis called for by this Court for the common law in this country. Now, his Lordship is doing this notwithstanding because it is a matter of law, notwithstanding the agreement or lack of contest between the parties, in order to produce the conclusion that you will see on page 46 just before the letter H where, subject to what he is about to embark upon, examining the merits of suggested limitations, he is content to accept. The last two words of the phrase are one of the circularities in this area - “as established”.

Could I leave then those speeches which did what they did and did not do what they did not do in relation to explaining the common law implication as a matter of necessity by law of such a term and come to a case where some of the same judges confronted difficulties that had emerged doctrinally and otherwise in relation to this supposed implied term. This is the decision in Johnson v Unisys [2003] 1 AC 518.

At 526, can I take you to the speech of Lord Nicholls which constitutes paragraph 2 of the reasons? There is a reference - five years after Malik, Mahmud, there is a reference to the employee using as the legal foundation of his argument the decision of the House in Mahmud. In principle, the employee’s argument has much to commend it and there is a reference to the obiter observations I have already drawn to attention in Mahmud. Then, significantly, and this explains the split in the Lords in Johnson itself:

there is an insuperable obstacle: the intervention of Parliament –

That is important because it, as we urge it on your Honours, takes the side of the angels in relation to the rule of necessity and statutory legislative activity. It will contraindicate necessity where rights are available under legislative enactment. It will also, of course, indicate the kind of controversy or debatable policies subject to electoral influence which is not the hallmark of the common law’s implication by law in a class of contract. Then, his Lordship, between C and D, having said that he is:

persuaded that a common law right embracing the manner in which an employee is dismissed –

and one could interpolate, such as making insufficient effort to redeploy upon a redundancy of position -

cannot satisfactorily coexist with the statutory right not to be unfairly dismissed -

because the statutory right is fully worked out with balances of different rights of interests, particularly social interests and economic interests including, just as in this country and in this case, a cap or ceiling on the income of somebody in terms of their eligibility to benefit from the statutory scheme. His Lordship then says:

A newly developed common law right of this nature –

so whenever it happened in that common law jurisdiction - it was newly developed in 2003 - it certainly got no signs of having been, as it were, metastasised to Australia, that is independently springing into action from some earlier common source at some other time in this country. His Lordship refers to as “newly developed”:

covering the same ground as the statutory right, would fly in the face of the limits –

Then there is a reference to Parliament’s prescription. Now, the speech of Lord Steyn is dissenting on critical matters. Could I take you first to paragraph 18 on page 531? This is what might be called a very compressed synoptic view of legal, perhaps social history by his Lordship. There is a reference to 1909 as:

the heyday of a judicial philosophy of market individualism in respect of what was then called the law of master and servant.

I will not read on but, in our submission, these are generalisations that do not find support in the common law of the employment relation in Australia. Then there is – I am going to call it, with great respect, an assertion. It is certainly a debateable generalisation, that:

Since 1909 there has been a fundamental change in legal culture.

Now, it is the epithet “fundamental” that is, in our submission, highly controversial and not useful for this Court in its analysis. The fundamental nature of the common law of contract as generally informing the law of employment contracts has not fundamentally changed. There have been changes that might be described by politicians as fundamental by dint of statutory regimes, but it is not suggested that that has produced any fundamental change in the law of contract – the common law of contract in this country.

The divergence in short in judicial technique between what is being advanced in the House of Lords in 2003 and what is the approach of this Court is already radical and apparent. On page 532, still in paragraph 18, there is this statement of the matter:

One of the most important of those developments is the evolution since the mid-seventies –

That is the 1970s –

of the obligation of trust and confidence in contracts of employment and its unanimous and unequivocal endorsement in Mahmud’s case.

I have already drawn to your attention what in fact was the position there. Then there is a reference to some controversy still about its nature, which I do not need to pursue. In paragraph 19, again using what some might have seen as a golden age but it was here seen as an historical watershed, 1909, Addis, his Lordship gives an extremely abbreviated reference to some well-known developments. There is a reference to “realism” in relation to adopting “the best medical insight”.

Now, we would interpolate none of that alters the law. It may affect critically the characterisation of what is shown by evidence from time to time and case to case on one or other side of a fact relevant for the application of the legal rule, but it has not changed the legal rule. His Lordship, however, just above letter D, says that, “These considerations”, which include staying up to date with proper medical evidence:

are testimony to the need for –

We think, with respect, that is the only, as it were, semantic approach to the notion of necessity that one will find in these cases. It has nothing in common with the necessity necessary for our law –

implied terms in contracts of employment protecting employees from harsh and unacceptable employment practices -

to which the tart answer in Australia, as, with great respect, could have been made in Great Britain as well, is that Parliament had already stepped in in great detail, and extensively, by an iterative process characterised by amendments, repeals, wholesale replacements from time to time, of non-common law statutory relief against so-called harsh and unacceptable employment practices. None of that has anything to do with the concept of implication in answer to the test of necessity. The foot of that paragraph therefore concludes:

The need for protection of employees through their contractual rights, express and implied by law, is markedly greater than in the past.

With great respect, that is jejune in the extreme. What of the 11-year-old coal miner in 1810? This, with respect, is not the kind of analysis that even begins to approach an application by reference to a contract of that which the law regards as necessary in the sense explained in this country.

GAGELER J: Where was the necessity in Scally?

MR WALKER: Doing the best I can, your Honour, it was located in you cannot have recourse to a term if you do not know of it.

GAGELER J: You could not know that from a number of different sources.

MR WALKER: Well, that is why I made the comment I did in Scally. In Scally the union had negotiated the contract for the unionists. There must be a lot in Scally that, as it were, does not find its way into explicit explanation, your Honour. Totally guessing, one is very tempted to think that perhaps underlying is that these particular workers are too busy to be bothered about their terms of their own employment. One cannot help thinking that might have informed it.

Certainly the absence of any suggestion of their agent to negotiate their contract, having a duty to inform the principal of the outcome entirely absent, that rather suggests that, lo and behold, no one at the trade union thought that they should have volunteered the trade union as the person to be sued to make good the incapacity by lapse of time to take advantage of a term that the doctors had never heard of, or the workers had never heard of.

So, in answer to your Honour’s question, as we see that case, it was seen as necessary, notwithstanding the comments I have just made, it was seen as necessary by the explicit reasoning in that case to be informed of a term lest the worth of that term be useless or worthless to you because you did not know of it to use it in time. That is doing the best I can.

Now, however, it has to be said that whether or not that is a highly dubious application of the test of necessity - your Honours will gather from our submission we submit it is - Scally’s Case did not to the slightest degree suggest that they were not engaged in a search for fulfilment of a test of necessity. That is why with - a better and more straightforward case is Irwin. Scally was not suggested to be doing anything at common law different from what was being done in Irwin.

Of course, as I said earlier in relation to the evaluative assessments and the judgments involved in determining whether something is necessary in the sense that this Court has described it for the purposes of this doctrine, there will be cases about which no doubt reasonable minds may differ, and it may be, with great respect, that that is one way to see Scally.

Your Honours, can I take you – sorry, in paragraph 20 on page 532, the first two sentences are, in our submission, sentences provocative of disagreement in this country rather than assent. A contract of employment, obviously, because one can use that categorical description, is obviously different in some ways from so-called commercial contracts. One could be forgiven for thinking that the higher you climb a corporate hierarchy, the less that difference matters.

One thing which is correct is that they may be equated insofar as they both depend upon the law of contract for the creation of rights and correlative obligations. They may be equated in that regard. In any event, that sentence is not further elaborated, it provides nothing useful in support of the present controversy in this country.

The second sentence is somewhat curious if the notion of a relational contract is some kind of hybrid between status and contract, to use a hackneyed distinction, or hackneyed dichotomy. In our submission, it is a phrase that advances analysis not at all, not merely only a little way, but not at all. All contracts create a relation between the parties to it, and we are not talking about a relational contract in the sense that once upon a time marriage was seen. In our submission - - -

FRENCH CJ: I suppose the higher up hierarchies one goes, the more one comes across the contract for services rather than the contract of service in the sense that you might have a particular officer providing services through a corporate structure and so forth to - - -

MR WALKER: Quite so, and at that point - - -

FRENCH CJ: I mean, this goes back to the problem I have mentioned in opening with you.

MR WALKER: Yes. It does, your Honour. Could I then take you forward, please, to page 539, now in Lord Hoffmann’s speech. One sees, in paragraph 35, again in this case there was no test of the existence, at least in what his Lordship calls a general way, second and third lines:

about which is a general way there is no real dispute -

Then his Lordship starts by referring to the commonality at common law of the contract, this being regarded as a contract:

no terms would be implied unless they satisfied the strict test of necessity applied to a commercial contract.

Now, pausing there, nothing in this country has ever essayed a description of the test of necessity with that doubting epithet stripped as if something which is stripped is inappropriate as modern common law. but, to be fair, neither did his Lordship pursue that thought that may have been started by that language. The test of necessity is not demonstrated by his Lordship’s ensuing explanations as having, for the common law of contract, ceased to be of moment.

One sees again this dichotomy which is perhaps conclusion assuming between employment contract and commercial contract in that case. There is then a reference to relative strength of parties which, of course, gives rise to well-known matters of doctrine, including statutory, none of which is relevant to the present question. Then there is an assertion, and we respectfully submit it is nowhere shown to be anything other than that, that over the last 30 years or so - that takes us back to the mid-70s in the, what turns out to be the statutory tribunal in the United Kingdom, the nature of the contract of employment has been transformed.

Well, it turns out that that means that its incidents have been greatly affected, both as to making an application and as to rights dehors the contract by statutes enacted by Parliament in answer to the Royal Commission, normally called after its chairman, Donovan. Then there are, again, with respect, assertions that are anachronistic if they are intended, that is, they are wrong, historically, if they are intended at least for this country to describe something which was a phenomenon only of about the last 30 years or so.

A person’s employment is usually one of the most important things in his or her life. It would be news to the shearers of the 1890s in this country that that was not true for them. It gives not only a livelihood - nothing is slight about a livelihood, with respect, your Honours, but an occupation, an identity and a sense of self-esteem. These, with respect, are not matters which are novel or recognisable in the mass of individual activities which constitutes the society being observed by this judge only in the last 30 years, at least not in this country.

So, none of this reasoning, in our submission, finds any footing in anything which is securely and properly part of the material that your Honours can look to in examining the necessity for the purposes of our law of contract of such a term. Then, in any event, his Lordship points out that which Lord Nicholls takes a decided view about, namely, most of the changes have been made by Parliament.

Changes made by Parliament, with great respect, your Honours, can affect what people do in their social dealings, including their employment relations, but they are not the whole of the story. So, changes at the level of these sociological, almost ideological, matters that his Lordship has referred to, identity and sense of self-esteem, they are not, as it were, created by the fiat of Parliament.

Then significantly, having referred to the municipal legislation, his Lordship then refers to European community law having made a substantial contribution. There is no analogous source for this Court to draw upon in relation to necessity, notwithstanding that we are, of course, nationally party, and long have been, to the ILO and treaties related to it. Then there is a sentence which, in our submission, provides no sure guide for this Court and should not be emulated. His Lordship says:

And the common law has adopted itself to the new attitudes -

presumably, the attitudes pronounced by Parliament and by European norm setting bodies –

proceeding sometimes by analogy with statutory rights.

Now, with respect, that is radically different from a perception of necessity, because, as we put earlier, if I already have something under a statute, there is no need for me to have it twice and in the same terms, and not contradicting it under a contract.

Then, in paragraph 36, his Lordship simply describes as “the most far reaching” the implied term, which we think is meant to be the corresponding version of what is proposed in this country in this case and his Lordship actually refers to “the contribution of the common law” to what is called the “employment revolution”. In our submission, this is not useful language for the undertaking of the relevant common law analysis.

In paragraph 37, without reading it, the observations there about a constraint on judicial law making are of course, and with great respect, unexceptionable, but, with respect, perhaps a little ponderously so, because the notion that the common law cannot pronounce rights and obligations contrary to the way in which the same matter has been disposed of by Parliament is elementary and does not need elaboration.

An interesting military metaphor is essayed in paragraph 38, in Lord Hoffmann’s speech, in what might be regarded as the earlier phase of the 30-year revolution:

the courts were advancing across open country -

including, of course, not enough opposition, we would observe. There is a useful citation, with great respect, from Justice McLachlin from Canada in paragraph 39 which bespeaks as to the aspect, the subject of that particular quote, the kind of orthodoxy that we would respectfully urge and not surprisingly, one finds the same set out in the classical passage from Lord Reid in Mallock, quoted in paragraph 40.

For those reasons, the actual conclusions that one finds in paragraphs 42 and 43 of Lord Hoffmann are very important conclusions in considering the position as to the third of the issues that we say this case raises. How, bearing in mind the way in which termination on notice, including payment out, is dealt with by the contract here; how, bearing in mind the ceiling on compensation in the event of inability to redeploy, how is there room for this implied term? We would, with great respect, draw to attention the phrase “very difficult” in the third line of paragraph 42 of Lord Hoffmann and suggest perhaps in reality that should read impossible.

In paragraph - - -

FRENCH CJ: There is a suggestion that good faith might have done the job. I think that is the next paragraph.

MR WALKER: That is in relation to what is called judicial creativity. Now, far be it from me to suggest that there is no such thing as judicial creativity, but where the common law is expressed in terms of a test of necessity, it is quite clear the creativity is not, as it were, at large in a policy sense.

Could I draw to attention the way in which the problem of termination which led to the eponymous Johnson exclusion zone or area was seen by Lord Hoffman in paragraph 46, which I will not read, and then in paragraph 47 considerations which draw to attention that there are matters to be urged on both sides as matters of what I am going to call policy. We respectfully suggest that it is not useful to contemplate, as is apparently contemplated in paragraph 47, the jurisprudential possibility of implying a term which would not be wise. That seems to be a contradiction in terms.

An evocative summary of the British history can be seen starting on page 543 in paragraph 54, and this is why, with respect, none of these decisions provides a proper platform for what has occurred in this case. His Lordship is drawing to attention perceived, what His Lordship calls “recognised deficiencies” of the common law and the fact that the Executive through a Royal Commission and taken up by Parliament, sought to address that and in particular sought to change or affect what is called the balance between employees and employers, and also taking into account what is called the general economic interests of the community.

These are matters, of course, which are the stuff of electoral contest and of statutory repeal, amendment and experiment; not the stuff of common law test of necessity and, hence, it is understandable on page 544, paragraph 58 that His Lordship clearly saw a boundary to judicial creativity well before what had been sought in that case.

Lord Millett turns to the questions of history which again illustrates how very different the route of it is in that country from here - page 547, commencing in paragraph 72 and continuing over to page 549. I will not read it, with respect. We urge that as a particularly informative description of the way in which changes were made of a kind that simply cannot be distorted into, as it were, into coincidental satisfaction of the common law test of necessity.

However, can I pick up His Lordship’s reasoning at 549, paragraph 77? In general terms perhaps there is not too much to object to in this country in the first two sentences of 77. It does excite this comment, but it all depends upon what is being assayed in the particular case.

There is, again, this notion of contracts of employment as being no longer regarded as purely commercial contracts. With great respect, it is difficult to see in any of the 19th century cases that they ever were. Then there are statements of a kind that I have already uttered enough criticisms without repeating them. Then there is a curious passage, with respect, starting after the reference to the Canadian decision of Wallace. His Lordship says:

This change of perception –

and we interpolate to challenge that as a mere assertion that there is not material upon the basis of which this Court should join in such an assessment –

is, of course, partly due to the creation by Parliament of the statutory right not to be unfairly dismissed. If this right –

That is the statutory right –

had not existed, however, it is possible that the courts would have fashioned a similar remedy at common law –

This is a possible hypothetical common law development –

though they would have proceeded by implying appropriate terms into the contract of employment. It would have been a major step to subject the employer’s right to terminate the relationship on proper notice to an obligation not to exercise the right in bad faith, and a still greater step to subject it to an obligation not to exercise it without reasonable cause . . . Even so, these are steps which, in the absence of the statutory right, the courts might have been prepared to take, though there would have been a powerful argument for leaving the reform to Parliament -

not least because, far from necessity, political controversy would have been the most obvious feature of such endeavours. His Lordship goes on:

If the courts had taken the step themselves, they could have awarded common law damages . . . because such damages would be awarded for the breach of an implied but independently actionable term . . . and not for wrongful dismissal.

Here it is difficult to see, with respect, how Mr Barker could get more than is available for termination for the fleeting failure over not many days properly to pursue efforts to redeploy. They end up in termination. They end up in the termination. His Lordship continues - and this is the so-called difficult boundary that they have referred to:

But the courts would have been faced with the difficult task of distinguishing between the mental distress and other non-pecuniary injury consequent upon the unfairness of the dismissal (for which the employer would be liable) and the similar injury consequent upon the dismissal itself (for which he would not). In practice, they would probably have been reduced to awarding conventional sums by way of general damages much as the employment tribunals do.

With respect, this is an unsatisfactorily diffuse way in which to detect the existence of matter of common law in England and Wales of something which ought to be imitated in this country.

FRENCH CJ: So, the general proposition is, anyway, there is an inadequate foundation for the implication - - -

MR WALKER: Quite so.

FRENCH CJ: - - - to the extent it is referred to here and, secondly, it arises in a different statutory setting, including by reference back to Malik, the influence of European community law.

MR WALKER: Quite so. In paragraph 78 there is a statement, about letter H, which is very significant for the termination matter:

The implied obligation cannot sensibly be used to extend the relationship beyond its agreed duration -

which includes here, four weeks’ termination on notice. Then two paragraphs, 79 and 80, both starting with the word “But” and ending, in the case of paragraph 80, with a reference to “a recipe for chaos” and coherence being lost, I will not read it, but, in our submission, they are matters which are cognate with concerns that ought to be raised by consideration of the way in which the Full Court proceeded in this case, we say, to sidestep the necessity of necessity.

Your Honours, finally as to detailed treatment, can I take your Honours to the last of the House of Lords decisions which is Eastwood [2004] UKHL 35; [2005] 1 AC 503, which I can do, I hope, more quickly - again, some of the same judges. Lord Nicholls in paragraphs 1, 2 and 3 sets the common law statutory stage. On page 522 in paragraph 4, there is an explanation of something that happened in England and Wales which simply has no footing for a similar process or outcome here:

These provisions in the 1971 Act prompted a development in the common law. The statutory remedy of unfair dismissal was available only if an employee was dismissed. If an employer behaved in a way no employee could be expected to tolerate, and the employee then resigned in the face of such behaviour, the employee had no remedy.

This is a reference to what might be called a deficiency in the statute. It reminds one of the approach judges took to statutes many hundreds of years ago looking for its equity, as it were:

He had not actually been dismissed by his employer. In order to claim he had been constructively dismissed the employee had to be able to point to a breach of contract by his employer which he was entitled to treat as a repudiation . . . Showing that the employer had behaved unreasonably was not sufficient.

The Employment Appeal Tribunal led the way in finding a means to bring such cases within the reach of the unfair dismissal legislation.

Whatever comment one may say about that as a form of government, that is not the common law implication of a term by applying the test of necessity. That is, as I have said, something more akin to judicial legislation to detect the equity of a statute and expand or perhaps even contradict the terms of the statute itself. When one sees then the explanation that culminates in the last sentence of paragraph 5 and in the whole of paragraph 6, one sees a jurisprudential phenomenon that has no parallel in this country and certainly should not be treated as - - -

KEANE J: Insofar as the development that Lord Nicholls is describing there is a development based on the 1971 discovery of a new province for law and order in England, we made that discovery at the turn of the century - - -

MR WALKER: Quite so.

KEANE J: - - - and had statutory provisions that established - - -

MR WALKER: Yes, the whole award system stands in historical longstanding historical contrast.

KEANE J: - - - for three quarters of a century before this - - -

MR WALKER: Yes.

KEANE J: - - - and the common law developed in Australia as it did in a way that does not reflect the kind of reaction that seems to have been produced in England - - -

MR WALKER: Your Honour is, with respect, too kind.

KEANE J: - - - by the 1971 provisions.

MR WALKER: Your Honour is too kind. Our law developed oppositely. In particular, there was consideration given to and rejection of the notion that if something was in an award it was ipso facto as a matter of common law in the contract.

I can, perhaps, be briefer when one looks then at the attempt in Eastwood to confront the difficulties. This was a case where having dealt with the exclusion for the implied term in Johnson, now the question was where there is an express term is there also an exclusion. The difficulties mounting on each other are of a kind that we have never had and we should not be importing.

The passage starting in paragraph 12, in particular, the observations in paragraph 14 and what we would characterise as understatement in paragraph 15 are all indications of the undesirability of any degree of imitation in this country of the English approach. Boundary line problems are attended to in the passage starting at page 528, paragraph 27 and at paragraph 31 there are observations which can be applied to the difficulties that arise in the third issue that we have addressed in our written submissions, chopping artificially into separate pieces a continuing course of conduct, a process that 2 March 2009 letter spoke of in our case in order to fit this procrustean framework of this peculiar common law in England and Wales.

Paragraph 36 again, with respect, an understatement about Johnson having left employment law in an unsatisfactory state, and the last sentence of paragraph 39 that, in our submission, is as it were, a death set example. Paragraph 50 on page 536 in Lord Steyn’s reasons, again, there is a suggestion, surely not merely a matter of nomenclature which picks up matters to which the Chief Justice has drawn attention this morning, namely, where his Lordship says it would be “conducive to clarity” in that jurisdiction if “the implied obligation of good faith” were generally used for the whole of the area in question. I have already said what I want to say about that.

Paragraph 51, again, with its plea for a re-examination by Parliament is, as far as can be imagined from this as being a matter for implication as a matter of necessity at common law. Your Honours, I do not need to take you to but may I give you some references to the much more recent decision of Edwards [2011] UKSC 58; [2012] 2 AC 22. The theme, with respect, is the same as that which we have been advancing by those three earlier decisions. This is the decision of the Supreme Court and at pages 30, paragraph 1, 41, paragraph 39 and paragraphs 40 to 41, one finds references again to the history and setting of the problem.

Perhaps I should take you to page 42, paragraph 42 only – I am sorry, paragraph 43, I meant, on page 42, another description of the history, a reference to the Donovan Report. In our submission, that makes clear to demonstration that this is a process which produced the implied term in that jurisdiction which has nothing of value for this jurisdiction.

Your Honours, that completes what I want to say about the authorities upon which, as Justice Jessup has painstakingly demonstrated, the Australian decisions called in aid by the respondent were, if I may put it this way, based. It is an utterly insecure foundation and in relation to the test of necessity it is, with great respect, of significance that Justice Buchanan and Justice Jessup, of huge industrial experience each, did not perceive, either in the authorities or in the circumstances available to be considered by a court of law, undertaking the common law exercise, the necessity required.

Your Honours, that leaves the issues which in our outline move to the alternative mode of implication at paragraph 13. We do not wish to add to what we have said in our written submissions, particularly our reply at paragraphs 32 and 33 about that, subject to hearing the way my learned friend advances the contention. At this stage, in chief, we would simply say for elementary reasons in relation to Moorcroft or BP or Codelfa, the right

of termination, the redundancy payment under clause 8, are not terms that permit the creation of a term breach of which gives an unlimited lifetime calculated right to damages.

As to the alternative proposition, if we are wrong in our primary position, they are those noted in our outline in paragraphs 14 to 17, I have made some references from time to time to what I call the third issue which has to do with the applicability of the putative term when it comes to bringing the relationship to an end. It is obviously not a breach – could not be a breach – to determine to terminate somebody’s employment any more than it is a breach by the employee to determine to give notice, so that much can be put to one side.

It is not a breach to declare a position redundant. Again, I am putting to one side dishonesty – pretending to declare redundancy – that has got nothing to do with it. For those reasons, in our submission, there is no necessity in the Moorcroft sense – let alone reasonableness, let alone going without saying, let alone consistency with express terms – of a kind necessary to support the ad hoc or factual implication. May it please the Court?

FRENCH CJ: Thank you, Mr Walker. Yes, Mr Kenzie.

MR KENZIE: Thank you, your Honour, if it please the Court. The Court has our summary of submissions, we trust.

FRENCH CJ: Yes.

MR KENZIE: Your Honours, I propose to deal with those submissions in the following order. I firstly need to say something about the authorities concerning the implication of the contractual term by law, which is addressed in Part A of our submissions, particularly at paragraph 16 and 18 to 20, including the approach relevant to determining whether a suggested implied term is appropriate or necessary, and the relevance of considerations, what are sometimes called the wider considerations to that issue.

I want to then go to some of our submissions in relation to the nature of the contract of employment, identifying those features which we submit, and which features are common to features which were discussed in authorities overseas, which support the appropriateness of necessity in the relevant sense, including those features which were specifically identified in Malik, admittedly against a different background, but having a generality that is reflected in an approach to the contract of employment overseas, in other countries, and reflected in decisions in Australia.

I want to then go to the relationship between the implied term of trust and confidence and other terms implied in a contract of employment, particularly the matter recently addressed by my learned friend in relation to issues going to termination of the contract of employment, express or implied rights of termination, and I then want to advance some submissions about a consideration supporting the conclusion as to why the approach taken in Malik should be accepted as appropriate in this Court. I then want to go to some questions about coherence in the law, which address the suggestions in our friend’s submission that because Parliament has spoken, that has implications for a question as to whether an implied term of law should be recognised.

Could I commence with the relevant legal principles? As our friend has identified, the legal principles summarised in our written submissions are well established, and our friend has referred to Breen v Williams as identifying that terms implied by law are described as legal incidents of the particular class of contract to which they respectively relate. And, to the recognition in that authority and others, that where terms are implied by law, they are implied in all contracts of a particular class and, specifically, the recognition that they are not based on the actual or presumed intention of the parties, or the express terms of any written contract, and nor are they founded on the need to give business efficacy to a contract.

There are different considerations at play, once one recognises the two streams, the two lines of authority. Your Honours, I only want to ultimately ask your Honours to open, or reopen, two cases here, but before I do could I just make the observation that the well-established principles which underpin cases like Breen and Codelfa flow from significant cases like Lister and Irwin, to which I will come, as well as Scally in the United Kingdom. Those cases are discussed, picked up, and referred to with approval, in cases such as Codelfa and Breen and Byrne itself, and I will ask your Honours to reopen Byrne in a moment in relation to that.

Those cases include Scally, which has been referred to by our friend, which is one of the cases which identifies, as referred to in Codelfa, that the search for an implication in law involves wider considerations than those that are relevant to implication of law – implication in fact, and Scally recognises that those wider considerations involve, amongst other things, a recognition of whether a term is a necessary incident of a definable category of contractual relationship. Your Honours, those wider considerations have been identified as not only involving considerations of the nature and type of the contact in question, but also considerations of justice and policy, and a recent example of that in an Australian context is University of Western Australia v Gray, which is the second of two cases I am going to ask your Honours to open in a moment.

Your Honours, it is convenient to go first to Byrne and, I am sorry, your Honours, I know that my friend has gone to this, but I want to go to it with a different intent. Your Honour, obviously the approach in Byrne is heavily relied on by the appellant in supporting its approach to what it describes as the approach to necessity. I want to go, in particular, to the judgment of Justices McHugh and Gummow, which picks up salient aspects of the relevant authorities which underpin any consideration of whether a term is to be found to be implied by law.

Your Honours, I know I am repeating to an extent, and I apologise, but from page 447 their Honours deal with the matter under the heading “Implications independent of intention”. Your Honours, at 449, point 6, their Honours look at the position in relation to co-operation, that is a matter that has been mentioned this morning already as involving potentially issues of construction, and I pass over that. At page 450, point 4, their Honours are here conducting an examination of various approaches to implications in law, and at 450, point 4, they say that:

Many of the terms now said to be implied by law in various categories of case reflect the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined. Hence, the reference in the decisions to “necessity”.

Now, your Honours, it is important to understand that, as is clear from the frame of the judgment, that their Honours were not in that passage saying that this approach represented the parameters of an inquiry into whether an implication in law would be recognised, they were simply giving an explanation as to the approach that had been taken in relation to some of the terms now said to be recognised. Immediately after, at 450, point 6, they went on to say that an example of the above concept lies in the implication of a “covenant for quiet enjoyment” where there is a relationship of landlord and tenant, and said that:

The reason for this appears to be that, originally, the common law courts would not recognise the tenant as having any estate in the demised land and would not reinstate the tenant if ejected by the landlord; the remedy in covenant remedied the position of the tenant who otherwise, if ejected, would have been without recourse.

That example that their Honours were giving, of course, was one in which the need for the implication flowed from the fact that the tenant had no right recognised by the common law, so that the right of reinstatement would not otherwise exist. The implication in that case was not anchored in any right that was identified, but arose because a relevant right did not exist as a result of the creation of the relationship. That is the sense in which the notion of necessity was used at 450, point 7.

Your Honours, at 451, point 2 they refer with approval to the passage from Justice Mason in Codelfa which identifies the distinction between “an implied term necessary to give business efficacy to a particular contract” and an “implied term which is a legal incident of a particular class”, picking up both Irwin and the earlier decision in Lister, including the acceptance that:

the search for the second category of implied term as being based ‘upon more general considerations’ –

That approach, your Honours, has not been doubted in any decision of this Court, including Byrne. Your Honours, their Honours then referred at 451, point 2 to Irwin which concerned a formal written tenancy agreement which did not spell out all its terms and considered the obligations of the landlord to tenants and whether a term should be implied to impose an obligation on the landlord in relation to the maintenance of common areas. Their Honours Justice McHugh and Gummow say that:

The matter was approached by identifying the rights conferred upon the tenants and then considering that activity by the lessor which would be necessary to avoid the impairment of the essentials of the grant –

and that is at 451, point 5, your Honours. That is an unexceptional analysis as long as it is borne in mind that the reference to the “rights conferred upon the tenants” were not rights which themselves supported or suggested any particular conclusion in that matter. Their Honours were referring to a result ultimately supported by reference to the nature of the relationship and not any point of contractual anchorage within the relationship. If it is read as involving some narrower approach and requiring a point of anchorage to give rise to an approach of necessity, it would be inconsistent with other authority and inconsistent with Irwin, in our respectful submission.

It would be inconsistent with the passage from Irwin which immediately follows where their Honours refer to Lord Wilberforce at 451, point 6. Lord Wilberforce identified that it was a matter of determining what the nature of the contract itself implicitly required. The common areas were described as:

essentials of the tenancy without which life in the dwellings, as a tenant, is not possible.

The conclusion that a contractual obligation on the part of the landlord was required was mandated because a contrary result was said by Lord Wilberforce to be one which would be inconsistent totally with the nature of the relationship. The quoted passage concludes:

The subject matter of the lease . . . and the relationship created by the tenancy demand, of their nature, some contractual obligation on the landlord.

It was the nature of the landlord/tenant relationship that required the recognition of some contractual obligation. Again, not some particular point of contractual anchorage - - -

FRENCH CJ: I wonder whether the term “the nature of the relationship” is not overbroad in terms of the implication and the necessity needed to support it. It is simply you have a right to occupy something 15 storeys up, you cannot exercise it unless you can get up there. It has not to do with the nature of the relationship. It has to do with the nature of the right conferred upon the tenant, does it not?

MR KENZIE: Yes, your Honour, I am coming to that. That is obviously so. The point about Irwin, in Irwin the acceptance – the choice that the House of Lords was faced with was a choice between the alternative set out in the judgment - that was either the acceptance of an implied easement without any obligation on the part of the landlord or an implied easement coupled with an obligation for maintenance - but neither of those alternatives would have led to the result that the contract could not operate. The selection of neither of those alternatives was necessary for the purpose of having the contract operated. It was simply a choice as to what should be the right result.

Your Honours, we have provided the Court with references from Treitel, 13th edition, page 234, who explains Irwin in terms. This explains that the basis for the decision was not necessity because there was no necessity in the decision. The term was clearly obviously not implied in fact, nor was the implication necessary to give business efficacy but, more particularly, as Treitel says correctly, in our respectful submission:

The implication arose because the nature of the relationship made it desirable to place some obligation on the landlord as to the maintenance of the common parts of the premises.

Your Honour, that is the proper explanation of Irwin. That result was not mandated. You did not need to come to that result for the purpose of preserving the tenancy or having the tenants be able to get up to the top floor. It was a policy decision that came out of the relationship.

So, in answer to your Honour, the Chief Justice, it was an appeal to the relationship and it was not an appeal to necessity in the narrow sense. Your Honour, that is the approach that was picked up with approval.

Your Honours, Justices McHugh and Gummow then went on to refer to Scally with approval. That is a case where we would respectfully submit you would have to strain for the conclusion that the result was supported as a matter of necessity, but it might not be as clear as an example as Scally. Finally, in relation to the decision of Justices McHugh and Gummow, your Honours, it is important to bear in mind what implication the appellants were seeking to have drawn in Byrne.

In Byrne, if you look at page 452, point 9, the specific – what was being submitted was that the existence of the award and, in particular, the specific provision providing that employment should be not be harsh, unjust or unreasonable, required the provision to be imported, and so this was almost the opposite of the sort of approach that is being argued in this case. In Byrne it was being argued that the statute provided an active foundation for importation, not a barrier to importation. Unsurprisingly, their Honours rejected that approach, having no difficulty in finding that there was nothing in cases like Irwin and Scally that could possibly support that conclusion. The award sat side by side with the contract, and there was no necessity in that sense for incorporation.

Your Honours, their Honours did go on to say in language which is the same of that used back at page 450, point 4, that a provision such as sought was necessary less the contract be deprived of its substance, seriously undermined or drastically devalued, and, of course, that was in a pre-Malik context. No one was contending in Byrne that the approach to the contract of employment was affected by the considerations ultimately relied on in Malik or this case.

The final thing I would observe about Byrne and their Honours’ judgment is that, again, at that point of the judgment they were not, any more than they were on page 450, attempting to define the parameters of the relevant inquiry; plainly the case was not analogous to Scally. Secondly, notions of the contract being deprived of its substance seriously undermined or drastically devalued in an important respect appeal to more general considerations than the question of whether there is a particular term anchoring the implication. It is referrable, in our respectful submission, to a wider inquiry related to the nature of the contact as a whole.

Our submission is that Byrne is one of the cases that leads to the conclusion, accepted in the authorities, that the notion of necessity in the context of implications in law has a different shade of meaning from that which it has in formulation to the business efficacy test. It requires attention to wider considerations. That was emphasised not only, your Honours, by Viscount Simonds in Lister, but also by Lord Wilberforce in Irwin and the Australian authorities, the authorities of this Court, pick up the notion of wider considerations, which you will not find reflected in the particular way in which Justices McHugh and Gummow needed to go to, to address the particular concerns in Byrne.

Your Honours, the scope of the necessity approach, we do respectfully submit, is well illustrated in the more recent case of University of Western Australia v Gray [2009] FCAFC 116; 179 FCR 346 which our friend has referred to in his submissions. In Gray, the appellant university was alleging there was an implied term at law in the respondent’s employment contract that the rights in relation to inventions developed during the course of employment belonged to the appellant in circumstances where existing authority supported the conclusion that such a term was generally implied at law in other employment contracts.

At first instance, it had been determined that the relationship between the University and its academic employees raised such distinctive considerations that it was inappropriate to accept that the implied term would be applicable. On appeal, the appellants challenged the appropriateness of the trial judge’s recourse to a number of those considerations which had informed the decision. Those attacks were rejected by the Full Court applying the principles which we do respectfully submit are the correct principles, which are set out in paragraphs 135 to 147 of the Full Court judgment.

FRENCH CJ: At page?

MR KENZIE: Page 375 to 376, your Honour. Your Honour, I do not re-read all those. Most of them are well known and it would be repetitious, but in addition to reinforcing the dichotomy of the two approaches, they specifically identify at paragraph 139 that the necessity approach as described in Byrne:

had its modern provenance in observations of Lord Wilberforce in Liverpool City Council v Irwin –

They set out the passage from Irwin including the two alternatives available to the House of Lords in Irwin and the references to the nature of the contract itself as well as the relationship accepted by the parties. At 140, they refer to the necessity test in cases such as Byrne and Breen and they identify a difficulty with the test, particularly if it is narrowly conceived. They accept specifically at 142 that it:

is clear that necessity in this context has a different shade of meaning from that which it has in formulations of the business efficacy test –

They refer to the “more general considerations” as endorsed by Lord Wilberforce and they say, correctly, in our respectful submission:

Those more general considerations that regard be had “to the inherent nature of the contract and of the relationship thereby established” . . . those very considerations themselves can raise issues of “justice and policy” -

At 143, they refer to Lister as illustrating “the significant role that public policy can have in the matter”. They refer to the speech of Viscount Simonds relating to social consequences and the discussion in Treitel, and “Gummow Js citation of Treitel’s views on implication in Breen”. At 144 they say that:

The necessary tie between implication in law and considerations of policy has been widely acknowledged in –

both England and Australia, as well as difficulties in accommodating such notions with those of necessity. At 145 they refer to Australian authority acknowledging that:

considerations of policy can, and do, have a part to play in determining whether or not –

Those words are important, your Honours, “whether or not” –

it is necessary that a contractual obligation should be implied in law in a given class of contract.

In other words, in passing, contrary to the suggestions of our learned friend that policy considerations can only have a negative impact on attempts to imply, their Honours correctly identify that policy is policy and, if you are entitled to look at policy considerations for the purpose of implication, it can inform you one way or the other; an unsurprising result one would think.

Your Honours, that is the approach to the authorities, but the resolution of the matter in Gray - and I do not want to spend too much time on this because it is an example but it is a clear example that has particular resonance – the resolution of the matter in Gray was significant for present purposes in two respects.

First, consideration of the appropriateness or otherwise of the implication involved recognition that the issue before the court required appreciation that the master-servant relationship which underpinned the general implication had given way to a relationship in which acceptance of the implied term was not appropriate, and that emerges from paragraph 151 of the decision on page 380, and a reference to the fact that the general implication was deeply rooted in the general character of what in times past was described as the master/servant relationship, references to Viscount Simonds and in particular to Lord Reid, something which had legal consequences in terms of the implication.

Secondly, there was lengthy consideration of the matter to which regard had been had at first instance and a determination that these matters were all totally consistent with a search for implication in law. Your Honours, the references – there are a number of them. I will content myself with giving your Honours some paragraph references, if I might, but 168 and 169, these are picking up all of the matters that were had regard to in determining the question of the scope of the implication and applying the principles that their Honours discussed.

FRENCH CJ: Perhaps you can give us those references after lunch, Mr Kenzie.

MR KENZIE: Thank you, your Honour.

FRENCH CJ: We will adjourn until 2.15.

AT 12.47 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

FRENCH CJ: Yes, Mr Kenzie.

MR KENZIE: Thank you, your Honour. Before the luncheon adjournment I was coming to the last aspect of Gray that I wanted to direct the Court’s attention to and it was the range of matters that were addressed in relation to the question of the implication, or rather the range of the implication, of the term and the matters that the Full Court ultimately held consistent with the authorities that they identified were appropriately factored into account in reaching that determination.

Your Honours, I will provide the page reference as well as the paragraph reference if I may, there are a number of them - paragraph 168, page 384, 169 on the same page, 173 on page 386, 185 and 187 on page 389 as well as 188. At paragraph 202 on page 392 the Full Court accepted that the trial judge was describing the known context and shared expectations of the parties in relation to an aspect of the relationship. Paragraph 206 on page 393, paragraph 209 on page 394 where the Full Court said that:

it was not only proper but also necessary for his Honour to have regard to the more general issues of policy suggested by that material . . . which would arise if the implication was, or was not, to be made.

I know that is in the context of determining the range of the implication but the authorities that are being applied are the authorities that are in question and our submission here is that the authorities, including Byrne, have to be reconciled with an approach which undoubtedly supports recourse to policy considerations as well as a narrow approach which focuses on an anchor point in terms of any particular term or terms of the contract.

That is not to deny that an understanding of the scope of the contract and the rights in a more general sense would not inform a decision as to implication, but that is to say no more than an analysis of an employment contract which included the realisation that part of the relationship behind that was the earning of wages also gives rise to rights which inform the question of implication in the same way.

Now, your Honours, I want to turn then to the next aspect of the submission which deals with the nature of the employment contract and aspects which inform the question, or questions, relating to the necessity in the expanded sense of implying the term. I am here referring to paragraphs 21 to 29 of our original submission. Those are the paragraphs that identify central aspects of employment relationships. There is nothing new or magical in those matters.

It is not suggested there that issues identified, including the issue that, of course, a contract of employment is a personal relationship, that it involves a right of control of one party over another, and issues of vulnerability are new. There is nothing new under the sun in relation to the matters that we identify in those paragraphs. They are simply characteristics of employment relationships which are the class that we seek to address.

It is decisions of this Court as to what is implicit in those contractual relationships, decisions of this Court and other courts as to how those relationships that have changed and decisions of courts, including the House of Lords but not only the House of Lords, as to the impact of change in relation to the way in which contracts of employment should be approached that underpin what we would submit is an approach of necessity in the expanded sense.

KIEFEL J: What is the change that is said to be relevant here?

MR KENZIE: Well, not only in Malik, but in decisions in other countries, the courts have accepted that there have been fundamental changes in relation to the significance of the contract of employee, the expectations of employees in relation to what they take out of a contract of employment, and in this Court - and I will come to these authorities, your Honour - this Court has had no difficulty in accepting changes in relation to the way in which the contract of employment is regarded for the purposes of determining the application of principles of law, for example, vicarious liability. The approach to vicarious liability has been described by this Court as one that reflects changes and recognises changes to the contract of employment, changing the relationship of the employee and the role of the employee in relation to the performance of the contract of employment.

KIEFEL J: I still have difficulty, I know that you say that there are general considerations that inform these so-called policies, but I still do not know which realm we are in. What considerations or changes, and when did they occur and how do they inform the contract that you are talking about here?

MR KENZIE: Well, your Honour, it is no more possible to answer a question as to when changes of the nature discussed in Hollis and other authorities took place in this case than it was in cases like that. There are a host of cases in which change to the way in which employment is regarded have been recognised, but those changes have been recognised as taking place over time, and I am coming to some of other authorities, your Honour, but they involve and include questions of expectations of persons out of contracts of employment.

The House of Lords and other courts have said that there has been a fundamental change in relation to the way in which the courts have regarded contracts of employment in terms of the expectation of employees in a way that mirrored the decision in Gray. There is a commonality about this, your Honour, it is not simply the House of Lords that is saying that contracts of employment have changed over the years, courts in other countries have said the same thing. This Court has said the same thing. When did it all happen? It happened over time, but the situation is the situation.

KIEFEL J: Well, if we restrict ourselves to the particular term that you say ought to be implied here, Mr Walker has gone to the English authorities and said that there is no basis evident from the authorities in the House of Lords which contend for this term which appears to have arisen by agreement between various parties to litigation.

MR KENZIE: Yes.

KIEFEL J: There is no historical or stated basis. What do you say to that?

MR KENZIE: We say this. It is acknowledged that the environment in which Malik was determined has some differences from the environment in which the case arises in this Court. The legislative and other history has differences that can be identified, and we are not seeking to have the Court slavishly follow Malik. Our submissions are directed to demonstrating why the approach in Malik - - -

KIEFEL J: To follow it we would have to understand the foundations for it, that is the question.

MR KENZIE: Well, indeed, and I am coming to this matter, your Honour. I am sorry to be cryptic, but I am going to do three things. I am going to identify what we have to say about the characteristics of a contract of employment. I am going to identify what this Court has said those characteristics include, and that includes a recognition that it is a relationship of confidence. I am going to identify what the courts have said about the changes to the concept of employment as developing over time.

I am going to put ultimately a submission that necessity in the relevant sense is established because there is a need in the current environment to actually have a reciprocity of the obligation which exists presently on one side of the ledger but not the other and I am seeking to do that against a background of what this Court, amongst other courts, has accepted as part and parcel of the employment relationship over the years. I am coming to Blyth and I am coming to Shepherd. I am coming to Concut but principally Blyth and Shepherd in that regard. So that is the nature of the submission, your Honour.

KIEFEL J: Could I ask you just for a moment to jump ahead, just to answer this question? Assuming for the moment that there is a term to be implied that an employer or employee should not conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between the parties, how is it actually applied in this case? How does it play out? What does it mean when you say the employer, as the bank, must not or should do – how do you actually factually, concretely apply it?

MR KENZIE: Yes, your Honour, at least in this respect. Your Honour has been taken, not by me yet, but to clause 8 which deals with the ultimate entitlement to compensation as assessed within the clause, if redeployment does not take effect, and that means if the bank is unable, is the word in clause 8, to effect redeployment. In the context of this case, at the very least, the implied duty of trust and confidence would require the bank to take the steps to determine whether it is unable to redeploy, because that is the gateway to the entitlement to compensation that Mr Barker was entitled to.

KIEFEL J: Well, then two questions arise from that, I think. The first is, you have not relied, as I understand, in your pleadings, on clause 8.

MR KENZIE: Not as giving rise to an independent obligation. That is a contractual right in itself. That is so.

KIEFEL J: But the implied term to which you were referring would inform the contractual obligation of clause 8. That is really what you are saying.

MR KENZIE: The question of whether the implied term has application is a matter which would have to be determined, like any general duty or term, on the basis of the facts of the case, no different from a fiduciary relationship or the corresponding obligation of an employee.

KIEFEL J: The second question which arises I think is, assuming for the moment that there was an issue properly raised on the pleadings about clause 8, why would you need to have an implied term as wide as the one you are referring to? Why would you not just have a narrow implied term which says that you have to attempt to deploy? Why would you need to go any wider than that?

MR KENZIE: Perhaps you would not for the purposes of this case.

KIEFEL J: We have.

MR KENZIE: Well, your Honour, the case – that is right, the case that was mounted is a case that seeks to have an implication of the implied term, of the term drawn generally and that is because we seek to mount submissions in support of why that term is a generally applicable term. Could it have been addressed more narrowly in the particular case? Perhaps, but the fact that it could have been addressed more narrowly in this particular case is only one argument as to the necessity of the term. In other words, if there could have been an alternative solution found for Mr Barker in this case meaning that he does not need the implied term, that does not gainsay the submissions that the term should be implied generally.

KIEFEL J: Do you accept that clause 8, this version of clause 8, does not form part of your notice of contention, that that is a separate point?

MR KENZIE: Yes, I do. Clause 8 is bound up in what might be described as the alternate method that the Full Court described, but I accept what your Honour says.

KIEFEL J: Are you saying that the Full Court articulated an entirely distinct line of reasoning relating to clause 8 - when I say “distinct”, set apart from the implied term which I have outlined earlier which has regard to the relationship of confidence and trust?

MR KENZIE: Yes, they appear - - -

KIEFEL J: I thought it was bound up in it, not separated from it.

MR KENZIE: Well, yes, I understand. There is a dispute about this, your Honour, and it comes down to this and I am going to this, I can assure the Court. There is no doubt that the Federal Court under the heading of “An alternative approach” or words to that effect, dealt with the implied duty of co-operation and reached a decision as to the application of that implication.

KIEFEL J: What it did not do was apply a construction of clause 8, which is really the area that we might be in set apart from the questions of implied terms.

MR KENZIE: Yes, well, that may be so, your Honour. I want to say some things about that.

KIEFEL J: I have taken you away from the - - -

MR KENZIE: That is quite all right, your Honour, I am coming to that.

KIEFEL J: - - - line of your argument. But could I just express my concern that I think you might be already alive to? My concern is that there are distinct questions about clause 8 and I think the only one that you squarely raise is clause 8 in the context of the implied term relating to the relationship of confidence and trust, and not a narrower view about the operation of clause 8, which I understand never to have been an issue in these proceedings.

MR KENZIE: There was certainly no submission that clause 8 in terms gave rise to a contractual right which was breached in itself. That has never been done. The relevance of clause 8 in relation to the implied duty of co-operation is perhaps another matter to which I was going to – about which I was going to say something.

KIEFEL J: I think the way in which you approach it might be to reverse the order. I think, when I say “you”, the Full Court has used clause 8 to inform or support the notion of an implied term rather than looking first to clause 8 and see what was needed in addition to the words of clause 8 to make it work. I think that is how it is gone about.

MR KENZIE: I think that is fair enough, your Honour. I wanted to address some submissions to clause 8 in the context of co-operation. There is a dispute between the parties as to this, your Honour. We read the majority decision as having articulated separately that an implication to co-operate was established and then we further read, although this is where the dispute arises, the majority as having said, because of what they said about breach, as applicable to both co-operation and the implied term. But I will have to take your Honour to the clause about that.

KIEFEL J: No, I have taken you away from your argument for too long.

MR KENZIE: That is quite all right, your Honour.

FRENCH CJ: Just to get it right, the way it was pleaded - I think it is paragraph 58 on page 15 - you swept up all of the conduct of the Bank pleaded in paragraphs 19 to 52 and said that was in breach of the – sorry, it is paragraph 56 of the – so you say the applicant repeats paragraphs 19 to 52 here and - asserts the conduct of the Bank was in breach of the implied term of mutual trust. So that is sort of almost like a grab bag pleading.

MR KENZIE: Yes.

FRENCH CJ: Then the trial judge dealt with it on the basis of the influence of the redeployment policy.

MR KENZIE: That is right.

FRENCH CJ: The Full Court differed from - - -

MR KENZIE: That is correct again.

FRENCH CJ: Took a different approach to what constituted the breach of the implied term.

MR KENZIE: That is correct again, your Honour. Indeed, that is all certainly correct, your Honour. So it has had a little bit of a meandering history, to which I will return. Could I then, briefly, take the steps I had indicated - remind the Court that we have focused attention in our submissions, paragraphs 21 to 29, relating to the employment contract and these submissions are about all employment contracts and are general in their nature, accordingly. Those submissions include the submission that the employer’s right to control, involving the assumption of the responsibilities that go with the right of the power to control, exists on the one hand and on the other hand the employee has a duty not to undermine the employer’s business interests and to render obedient and loyal service.

So, the duty of the employee to undermine the employee’s business interests or not to engage in conduct that is destructive of the relationship has been accepted for many – for a long time. That duty is a duty which has been picked up and referred to in Blyth Chemicals v Bushnell, which is in – which we have actually quoted in - I do not think it is on our list for reading, your Honour, but it is quoted in paragraphs 46 and 47 of our submission, where Justices Starke and Evatt said that in relation to an employee manager, that if he “acted in a manner incompatible” – and this is the passage at paragraph 46 of the submission:

if he acted in a manner incompatible with the due and faithful performance of his duty, or inconsistent with the confidential relation between himself and the appellant -

he might be dismissed. Justices Dixon and McTiernan said that if the employee engages in:

Conduct which in respect of important matters is incompatible with the fulfilment of the employee’s duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal.

BELL J: It would be surprising if it were not, but what is the reason for the reciprocity that you assert. One can see obvious reasons informing the employee’s duty in dealing with his employer’s property, but what supports a duty, an implied duty, which gives rise in this instance, to damages calculated in the way that they were?

MR KENZIE: Because the relationship of confidence between the parties is mutual and, as accepted in Shepherd, to which I will come - - -

BELL J: But is - - -

MR KENZIE: - - - and because in relation to matters of confidence, for reasons again to which I will come, the employee is completely vulnerable to a host of actions on the part of the employer which are capable of having exactly the same effect on the other side of the ledger. Your Honour, ultimately, the question that requires to be asked is that if there is a relationship between the parties of confidence and if it is mutual, what is the basis for the recognition of a general duty? It is not defined, any more than the implied duty of trust and confidence is on one side of the ledger, but not on the other.

Your Honour, it is at that point of time that the discussion in the authorities of the significance of the way in which the courts have regarded the contract of employment comes into play because, contrary to our learned friend’s submissions, there are pronouncements, judicial pronouncements, which recognise that whereas in former times the contract of employment was to be approached in a narrow way, the way we look at the contract today is in a broader sense and these are noises that have come not just from the House of Lords, but by this Court, from this Court. Those are the considerations that factor into the question of whether an absence of mutuality in terms of obligation continues to be appropriate.

BELL J: Noises coming from Canada came to a different conclusion, did they not?

MR KENZIE: They did.

BELL J: So that in Canada one sees some recognition of a notion of an obligation of good faith and dealing in the manner of dismissal but leading to a quite confined measure of damage.

MR KENZIE: Yes, more confined in some respects and broader in others, they had a different view about Addis but, yes, your Honour, different.

BELL J: That is in Wallace v United Grain Growers Ltd [1997] 152 DLR 1.

MR KENZIE: Correct. Your Honour, I am coming to Wallace. Indeed, the result was different, but the underpinnings are the same. The underpinnings of the reasons in Malik and the underpinnings of the reasons in Wallace are similar and they recognise similar considerations in relation to the attitude to the modern contract of employment and they say that these things should have consequences in terms of contractual obligation, different consequences in the case of Wallace, but consequences all the same.

So they are the questions that require to be asked and answered, in our respectful submission. If we are wrong – if the House of Lords was in error in referring to these matters as relevant, if the Canadian courts in Wallace were in error in referring to these matters as relevant to a consideration of the range of contractual obligations, if the South Australian Full Court was in error in McDonald in referring to the modern law of employment or that these considerations were irrelevant, then we are wrong, but our submission is that they were not wrong.

Our submission is that the constancy of recognition of a changing attitude to contracts of employment, factoring into the way in which courts have addressed issues of contractual liability, represents a part of the basis for accepting in the broad sense that there needs to be a look at the mutuality of obligation in circumstances where there is a mutuality of confidence.

FRENCH CJ: Now, the way the Full Court approached it – the application, and this helps us to perhaps try to get a handle on the nature of the implication, at paragraph 111 I think at page 485 of the appeal book and following, is that they identify a contractual benefit even though it may not be a contractually binding – there may be no contractual duty to provide that benefit, in this case to be found in clause 8. That is the chance for redeployment as a way of, as it were, averting termination. Then they apply the implied term to that benefit and say there are – the implied term means they have to take positive steps to try and ensure that he has a reasonable chance of enjoying it. Am I putting it correctly?

MR KENZIE: Well, your Honour, to put that they have gone to clause 8 first and then gone to the implied term - - -

FRENCH CJ: Well, that is what the implied term was operating on. The implied term had to operate on something in the contract as I understand it, in the way that they reason.

MR KENZIE: Yes. The implied term - - -

FRENCH CJ: Paragraph 112, “in these circumstances”, and the circumstances refer back to things including the engagement of clause 8.

MR KENZIE: Yes.

KIEFEL J: Their Honours are looking at clause 8 because they are not accepting that the redeployment policy was a benefit either for the application of the implied term or for their alternative approach which follows from paragraphs 118 and the implied duty of co-operation.

MR KENZIE: Yes. What they did from paragraph 96 was to discuss the nature and content of the implied term, picking up the authorities, including the authorities to which I have referred, and then they came to the heading, “The content of the duty in the present case”, and so by the time they came to discuss clause 8, your Honour, they were saying there is a duty but, of course, in order to understand its application it has got to be seen in context, and at that part of the decision they recognised correctly, in our submission, that clause 8 was part of the context in which - - -

KIEFEL J: Yes, and something I have overlooked at paragraph 118, 111, they probably importantly say “cl 8 was engaged”, so the approach of the Full Court is taken as to apply the wider implied term that you have spoken of as drawn from the English cases and then, as an alternative, narrowed it to the implied duty of co-operation to which secured income real estate referred - - -

MR KENZIE: That is correct, your Honour.

KIEFEL J: - - - and, again, make that operate on clause 8.

MR KENZIE: That is correct.

KIEFEL J: That was not the approach taken by the primary judge.

MR KENZIE: No. Well, the primary judge considered the policy and said there was serious breach of the policy. The Full Court majority said that it was difficult for them to understand how that could be done in circumstances where the policy was expressly said not to be part of the contract. We would submit that that would not have necessarily followed because an implied term could operate on context but, in any event, that is what the Full Court did, your Honour is quite correct, but they considered - - -

KIEFEL J: You are relying on the implied duty of co-operation and the alternative.

MR KENZIE: We read the Court as having independently formed a view that the implied duty of cooperation arose, and I keep promising, your Honour, I will come to that.

FRENCH CJ: It was breached that they - paragraph 130.

MR KENZIE: It was breached, yes, there is that paragraph, I think it is 131, which - - -

FRENCH CJ: Paragraph 130, I think.

MR KENZIE: Yes, that is right, your Honour. Well, I was thinking of 129 and 130, both of which refer to the - - -

FRENCH CJ: All those paragraphs read together up to 132.

MR KENZIE: Yes, your Honour. Your Honour has the point. It is not terribly neat, but what appears to have happened is this, as to the alternative approach, the majority found at paragraph 126 that:

the contract of employment in the present case, when properly construed in light of all the relevant circumstances, does confer a benefit which gave rise to the operation of the implied term.

KIEFEL J: Therein lies the confusion, if I might interrupt you, because at paragraph 118, the implied term is clearly enough, the wider implied term, and it would seem their Honours’ reasoning - is it the implied duty of cooperation you are referring to or the - - -

MR KENZIE: Yes, your Honour. I understand why your Honour is - - -

KIEFEL J: That is how I had originally read it - - -

MR KENZIE: It is the implied term of co-operation - - -

KIEFEL J: - - - to refer back to the wider implied term.

MR KENZIE: No, your Honour. Our understanding of what their Honours were doing, in paragraph 118 to 128 they were discussing the implied duty of co-operation and when they referred to the implied term in 126 - - -

KIEFEL J: That is what they are referring to.

MR KENZIE: - - - they were talking about the implied duty of co-operation. They said that the implied duty of co-operation arose, or at least the contract gave rise to that implied duty, and in 128 they said that the circumstances were:

sufficient to give rise to the implied obligation of co-operation –

Then in 129 and 130 they made findings of breach which, although referring to the implied duty of trust and confidence, seemed fairly obviously to involve a finding of breach in relation to both of the duties that they were discussing because the duty of co-operation involved the duty to take positive steps which they found in 129 and 130 had not been taken. That is the way we have read the judgment, your Honour.

So it involved, firstly, an acceptance in the case of the implied term of trust and confidence a broad acceptance. It accepted then a consideration of how that actually translated to the facts in the given case, in the instant case. Clause 8 is part of the factual framework at that stage and relevant both to the implied term of trust and confidence and the duty of co-operation.

So, your Honours, more generally, if it be accepted that, consistent with the authorities, consistent with Blyth and Shepherd, that there is a duty on the part of the employee to maintain a contract and that that duty has been accepted for a long, long period of time, are there considerations - - -

KEANE J: Neither of those cases actually say that though, do they? They actually put it in terms of a breach of an obligation of the contract which is destructive of the employer’s ability to have confidence in the employee, given that the employee is in a position to harm the employer in its property or its liabilities to third parties.

MR KENZIE: Yes, but it has contractual obligations because it has been long accepted that if the employee acts in a manner destructive of the contract, the contractual consequence is at the least that the employer can terminate the employee.

KEANE J: But is not that just another way of saying, if the employee breaches the contract? If the employee breaches an obligation which he or she owes to the employer, the employer can terminate.

MR KENZIE: No, your Honour, it is not, decidedly not. It is a duty, which as the authorities we have put into our submissions disclose, is a duty that goes beyond, certainly beyond matters relating to terms of the particular contract or issues of fiduciary duty. The range of cases in which an employee has been found to be able to be dismissed are legion and completely transcend considerations of whether the employee is breaching the contract.

The duty of the employee described carefully in those cases is one that is not associated with breach of a particular term of a contract. Cases include cases where the employee has acted externally to the employer but has taken a bank employee trading illicitly with another bank, doing things that are damaging to the employer but not breaching his contract. There are matters of a sexual nature outside work - - -

KEANE J: Except that one is familiar the notion, the obligation of fidelity.

MR KENZIE: Correct.

KEANE J: It is fidelity, it is a one-way street.

MR KENZIE: No, your Honour. It goes - - -

KEANE J: No, in the cases which talk about fidelity, it is a one-way street.

MR KENZIE: Yes, it is.

KEANE J: None of those cases talk about an obligation on the part of the employer of fidelity to the employee. The employer has the obligation to take reasonable care for the employee’s safety and to pay his or her wages and possibly to provide him or her with work.

MR KENZIE: Correct, your Honour. If one is talking about fiduciary duties and this is the point – one of the points that Justice Jessup made in his judgment. He was saying if you are talking in the range of fiduciary duties then it is all one way and so trust and confidence is all one way in a fiduciary sense. Do not talk about reciprocity and whatever changes exist in the contract of employment does not affect that fundamental consideration.

Your Honour, that deals with part of the picture. The cases which establish that employees have duties not to destroy the employment relationship go way beyond that and go way beyond anything that could be possibly described as a fiduciary duty. The law on the other side of the ledger recognises the vulnerability of an employer to acts of an employee which transcend breaches of contract and reflect vulnerability and reflect the relationship. That has been the case for a long time. They are terms of the contract. They are implied terms of the contract.

We know that in Concut and other cases this Court has said that obligations in contract have a number of sources in equitable sources, including fiduciary duties, but we are talking here about terms of a contract and we are talking about a contractual liability of an employee if the employee undertakes actions which destroy the relationship described in Shepherd which is the mutual – which is a relationship of trust.

It begs the question as to why this goes one way. Why, particularly, having regard to what courts have said about contracts of employment and their role in life today, it should go one way, leading to questions of whether there is vulnerability on the other side of the ledger, whether there are policy reasons for embracing in the 21st century a notion that non-reciprocity in relation to these things is not appropriate.

GAGELER J: Has there ever been reciprocity in the circumstances in which an employer can terminate the contract of employment on the one hand, and an employee can terminate the contract of employment on the other?

MR KENZIE: Well, reciprocity in the sense that subject to any express terms that might exist, the contract on both sides of the ledger is terminable on reasonable notice. The answer is yes, your Honour. So, your Honour, essentially, they are the questions that we ask, rhetorically, and the questions that the House of Lords was addressing, and we hear what our friend says about the level of investigation into necessity but, nonetheless, the question that the House of Lords was addressing in Malik when it talked about the vulnerability of employees in today’s contract of employment. And, whether one accepts or not, the validity of what it is that the House of Lords was saying about those matters, those matters are relevant to a consideration of necessity, on our submission, I think, not our friend’s, and that is a point of departure as we would see it, your Honour.

KEANE J: In the cases which talk about the obligations of confidence between – owed by an employee to an employer, where the obligation or, if you like, the relationship of confidence is destroyed, the remedy of the employer in the cases is to terminate the employment.

MR KENZIE: That is certainly a remedy. You would not expect to find too many cases where there were suits for damages, it is theoretically possible, but that is generally so. Whether that is the extent of the remedy may be another question, but there is a contractual remedy.

KEANE J: The remedy that you claim is not to terminate the contract. You claim a freestanding right to damages.

MR KENZIE: Correct. There is no reason in principle why, if an employer - if an employee took action which was destructive of the business, if that employee was a valuable employee, there would appear to be nothing in principle to prevent action being taken about the employee in reverse. But, your Honour is right, we seek not only the recognition of a duty and a term, but the recognition that there is a right to sue in damages by an employee who seeks to actually maintain his or her contract, to affirm it, and to sue in damages, rather than accept, for example, repudiation.

BELL J: With the result that that right respecting damages is more full-blooded than the right that at the time this contract was formed was available for employees whom the Parliament considered needed protection from wrongful dismissal, including, at that time, by recognition that the failure to consider redeployment options might constitute unfair dismissal.

MR KENZIE: That is all correct, your Honour, the federal legislation provides, as our friends have pointed out in their submission, that if you have a situation that culminates in dismissal, but involves a non-genuine redundancy because there was an opportunity for redeployment, then that set of circumstances can lead to an unfair dismissal action, on the part of an employer who falls within the statutory limit, and we do not flee from this, your Honour. Of course, Mr Barker is not caught by that. Mr Barker is one of the large number of people out there who is not caught by any such consideration, and puts the submission that, contrary to our friend, that simply because the Parliament has passed an unfair dismissal law applicable to people who earn less than $129,000 that does not involve the paralysis of the common law. We do not flee from that, your Honour. We put that submission.

Your Honour, we say a number of things. We say in paragraph 26 of our submission that the contract of employment is one that involves the personal performance of work with the potential for an employer to take action which without reasonable cause seriously undermines the relationship and the performance of the contract, defeating the capacity to earn wages. Of course, wages here, the analogy is general rights under leasehold or the right of quiet enjoyment, those things that are the subject matter of the contract, the right of the employee to earn or continue to earn those wages is compromised if the employer can take action which effectively destroys the relationship leaving the employee without a remedy, so Mr Barker here.

It was not a fleeting matter with Mr Barker, as our friend suggested. Mr Barker was horribly let down by the Bank in relation to his long-term career. He is like one of many employees who can be affected by action of an employer which on any analysis would be seen to be destructive of the relationship. His is only an example. It is a good one, but there are a very – the ground is very fertile in this regard. The authorities since Malik in relation to the capacity of employers to destroy the relationship giving rise where there is relief to a remedy, the list is long.

KEANE J: They are all cases of constructive dismissal.

MR KENZIE: They may or may not be cases of destructive - - -

KEANE J: In England, perhaps not in Australia, but in England they are cases of constructive dismissal.

MR KENZIE: Yes. Well, they are certainly not all cases which would give rise to constructive dismissal in Australia. An employer who engages in sexual harassment might be more than happy to go on with the employment, go on paying as though nothing has happened. The employee is left in the situation where the employee can either put up with it or resign, but the employee should not have to put up with it or resign. The employee has a contract and if you accept the fundamental principle that that contract is valuable to an employee, the employee should not have to put up with that.

The employee should be able to say no, I have got a contract which is important in my life and I am not going to treat it as repudiated. I am affirming it and I am taking action against you, the same as you would take action against me if I acted in a manner destructive of my relationship with you. So, your Honour, yes, it might be a little different in England but you can envisage many cases without difficulty that would not involve a constructive dismissal. Malik was not a constructive dismissal case but, in any event, you can think of many cases that would not amount to a constructive dismissal in Australia.

KIEFEL J: But you would not need resort to an implied term about destruction of the relationship in the case of sexual harassment, would you? It would be a breach of the law and it would be an implied term that you have to provide a working relationship which does not involve breaches of the law.

MR KENZIE: Perhaps, perhaps.

BELL J: Is not a workplace affected by sexual harassment something that falls short of the obligation of the employer to provide a safe system of work?

MR KENZIE: Arguably. That might be correct. But, your Honours, the list is still long. Eastwood v Magnox is a pretty grim example of an employer taking action to actually load up an investigation against an employee to actually suborn witnesses and to actually make life as intolerable for the employee, in an investigative, not a dismissal context – arbitrarily denying people benefits given to other employees that may not be contractually binding, providing unjustifiable warnings, capricious relocation, which may or may not be a breach of contract.

Bliss’ Case was an unjustified request to undergo a psychiatric examination. It does not need a lawyer, your Honours, to – the ground is fertile here. The range of control is very large. The opportunity for employers to be damaged by employees and to have the relationship destroyed is considerable. The importance of a contract of employment to an employee today has been, rightly or wrongly, recognised as contractually significant by many courts, not only here, but overseas. If that is wrong, well, as I said before, then everyone has been wrong and these things do not affect questions of necessity as understood in the authorities.

FRENCH CJ: One talks about the employment relationship and the implication by reference to the nature of that relationship and that, of course, raises the question what are the necessary incidents of the relationship or the incidents of the relationship that attract the implication. Now, the difficulty in this case is that we are in a particular aspect of that relationship which is not the kind of circumstance, if you like, that even in Malik I think they would have had in mind, and that is a kind of twilight zone where the employer and the employee’s relationship is now one with two outcomes. One is termination, the other is continuation.

MR KENZIE: Yes.

FRENCH CJ: Now, if by the employer failing to take appropriate steps termination results, the termination itself is not a destruction of the relationship. It is the failure of the employer to take appropriate steps to give the employee an opportunity of continuing the employment relationship as distinct from termination.

MR KENZIE: Yes.

FRENCH CJ: So it is a rather odd zone for the application of this implication, is it not, assuming it exists?

MR KENZIE: Yes, your Honour, and it is the zone that our learned friend addressed by reference to Johnson.

FRENCH CJ: I am not saying it is the exclusion zone, so-called, but it is just a question whether it applies.

MR KENZIE: It is a twilight zone, or may be. But, your Honour, once again in Johnson and Magnox, more particularly, the English courts, although they accepted a Johnson exclusion zone, they have accepted that in what might be called the twilight area there might be questions that need to be asked but they have had no difficulty in accepting the maintenance of the principle in relation to the zone that your Honour the Chief Justice is talking about. Yes, it might give rise to questions as to whether you are in the zone or not but there is nothing magical about that.

Your Honours, in the context of redeployment and redundancy, our friend’s approach is to say, look, it is all a process - redundancy, redeployment, termination, it is all part of a process. But it is not a simple process. These are very different concepts, and I will not ask your Honours to open the respondent’s redeployment policy now. It is only an example of what we are talking about. The notion of redundancy is position redundancy. What happens is that the employer says, “I don’t need anyone to do the work in your position any more”, and that gives rise to the duality of possibilities. But those are not to be regarded as simply two possibilities which have the same characteristics. They have very different characteristics. The characteristic of redeployment is that the employment is not terminated. If you redeploy, as you should, the employment relationship goes on. Had the bank taken steps to redeploy Mr Barker, I think the finding fell short of saying he would certainly have been redeployed.

The court assessed his prospects of being redeployed by virtue of the fact that it was a very big bank and although he was a senior person, there was a pretty significant chance he would have been. But had he been, he would not have been terminated. It is a very different process to termination. One is employment and one is not employment. It is true that they can be said to be a sequence, but then work can be said to be a sequence, too. It is not simply a sequence. It is two very different things, which is picked up and reflected in Magnox, amongst other cases, which reflects the fact that if you can show that you have a cause of action prior to termination, you have got a cause of action.

To answer your Honour Justice Bell’s question further, it is a cause of action which would exist for everyone, but in Mr Barker’s case he is a million miles away from the federal scheme. So, your Honours, Justice Jessup saw nothing in changes to the modern contract of employment that bore on this question. He said, “Well, I hear these are slogans. These are words. They don’t have any effect. They don’t give me anything concrete on which I could say that there is a need for change to reflect this sort of issue, even if I accepted it”.

But, your Honours, statements from courts, various courts, are to a different effect. Your Honours, my friend has read extensively from Johnson and the English authorities, and I do not think I need to ask your Honours to reopen those authorities, but to remind your Honours of the key aspects of decisions in, for example, Johnson, which reflected the sorts of considerations that we are talking about. At paragraph 35, Lord Hoffman made observations about the nature of the contract of employment having been transformed. These matters have been read. Lord Hoffman said that a contract:

gives not only a livelihood but an occupation, an identity and a sense of self-esteem. The law has changed to recognise this social reality.

Lord Hoffman is not alone in recognising this. This did not come out of, as it were, left field or just the particular considerations that are applicable in the United Kingdom. Lord Millet said words to the same effect at paragraph 77 where he said, amongst other things, that:

“work is one of the defining features of peoples’ lives:”; that “loss of one’s job is always a traumatic event”; and that it can be “especially devastating” when dismissal is accompanied by bad faith –

As far as Australian courts are concerned, there are cases going some way back in relation to recognising changes in the nature and perception of contracts. An early example, which I do not again – I will not open, your Honours, because I can give you the reference, is the case of Attorney-General v Perpetual Trustee [1955] HCA 9; (1955) 92 CLR 113 at 123, point 3, and 130, where the Privy Council said that the action of per quod in relation to a Crown servant was no longer relevant because of changes to the nature of service. In other words, it might have been okay one time when it was servitude, but life had moved on. Your Honours will see that at that stage.

On our list, we have put Hollis v Varbu, and if I can ask your Honours to go to Hollis v Varbu briefly, this is reported at [2001] HCA 44; 207 CLR 21. It was the case that involved the bicycle courier and the question of whether there was vicarious liability in relation to a person who had a considerable degree of freedom of action and very few of the traditional indicia of employee, such that Justice McHugh, in dissent, said that it was really quite wrong to try and change the view of the contract of employment to accommodate cases like this.

Nonetheless, the majority in Hollis said that:

the company was vicariously liable for the negligent act of the bicycle courier –
because of a development of the law of vicarious liability to accommodate change, and as recognising the circumstance that if someone was representing the enterprise, there should be a corresponding obligation. In doing that, and I know it is not contract, but the majority identified at paragraph 33, under the paragraph referring to:

The tokens – “employer”, “employee”, “principal” –

they identified in paragraph 34 that:

The nature of employment relationships has changed greatly since the age of feudal status. This is particularly true over the course of the last century, in which not only the character of employment, but also the common law of negligence developed apace.

They then went on to talk about the way in which Stevens v Brodribb had been applied to change the approach to contract law. So in relation to the distinction between employee and independent contractor, discussed at paragraph 36, they came to issues of control at paragraphs 43 and 44 and explained how changes in relation to the nature of control impacted on the decision as to the extent of the legal obligation.

They pointed out in paragraph 43 that in Stevens v Brodribb the Court was adjusting the notion of control to circumstances of contemporary life and in doing so continued the developments in Zuijs v Wirth Brothers and they referred in the same paragraph to Justice Dixon’s recognition that things had changed in the employment environment over time where we are today operating in circumstances where far from the past where the employer would actually be in a position of control because he would know what the employee knew, things were very different today. I will not read that second paragraph of Justice Dixon. Against the background of Brodribb, Justice Mason said in paragraph 44:

“the common law has been sufficiently flexible to adapt to changing social conditions by shifting the emphasis in the control test from the actual exercise of control to the right to exercise it, ‘so far as there is scope for it’, even if it be ‘only in incidental or collateral matters’ . . . Furthermore, control is not now regarded as the only relevant factor. Rather it is the totality of the relationship between the parties which must be considered.”

Again, I know it is a different context, but the Court was addressing change in employment and it was giving it legal consequences. The same is true, though in a statutory context, in the case of Blackadder [2005] HCA 22; (2005) 221 CLR 539. Your Honour, this is a case which was dealing with the statutory notion of the reinstatement. It is said against us that this is not a very helpful authority in terms of telling you anything much about anything because all the Court was doing was working out whether Mr Blackadder, who was a boner in an abattoir, had been effectively statutorily reinstated.

It can be said again us, and we accept, that of course it is a statutory case, but nonetheless, in the course of dealing with the statutory case, the Court had to come to grips with the notion – or members of the Court had to come to grips with the notion of what reinstatement actually meant in the real world. Justice Kirby at paragraph 32 - - -

FRENCH CJ: Page?

MR KENZIE: On page 549, I am sorry, your Honour. This is a case where they took the employee back but they provided him with no work and Justice Kirby dealt with the practical question as to whether this fitted within the language of reinstatement at paragraph 32. He said look, not giving him work, not allowing him to actually do what the contract of employment is all about, does not permit the appellant to increase his income which:

could be increased incrementally, based on the quantity of boning work . . . it denies him the satisfaction of employment, the feeling of self-worth that it can generate and the maintenance of his skills to which their exercise would contribute –

and it denies him the aspect of reinstatement which I pass over. In paragraph 80, and this did not lead to a decision, but certainly involved recognition of the significance of what Justice Kirby was talking about, your Honours, Justices Callinan and Heydon said that it was:

unnecessary to consider whether the categories of cases in which at common law actual work must be provided for an unlawfully terminated employee or contractor, are closed, although one might question the current relevance of judicial pronouncements made more than sixty years ago in the United Kingdom as to the extent to which an employer might be obliged to dine at home in order to provide work for his cook -

These are the cases about no duty to provide work, as your Honours will see -

It may be that in modern times, a desire for what has been called “job satisfaction”, and a need for employees of various kinds, to keep and to be seen to have kept their hands in by actual work have a role to play in determining whether work in fact should be provided.

Now, they did not decide that, but the point again is that they were not consigning these considerations in relation to the modern law of employment to the dustbin, they were saying that these are real things, and they inform decisions that have to be made one way or the other.

Now, that is what the House of Lords was doing in Malik. It is true, it did not conduct the most forensic of examinations in relation to the history of necessity. The question of necessity will have to be put by us in this Court, we do not invite this Court to slavishly follow Malik regardless of what is in it, nor could we, but they were appealing to the same considerations and again, we submit, correctly. We submit that it is appropriate to have regard to the value of a contract of employment in today’s world to the work that it allows to be done, to the value to the person’s life, to the pursuit of the occupation, in a way that is a million miles removed from old notions of master and servant. That is the issue that is raised by the claim for reciprocity of treatment.

Your Honours, we have referred in our submissions to overseas authorities, and I have said in answer to a question from Justice Bell that different result, but same motivating force is apparent. Your Honours, all we wanted to say about paragraph 33 of our submission is that independent of the decision in Malik overseas courts have responded to considerations like this. In 1982 the New Zealand Court of Appeal in Telecom South v Post Office Union, which is referred to in our submission, recognised that the contract of employment is a special relationship under which workers and employers have mutual obligations of confidence, trust and fair dealing. That is a direct appeal to the considerations which we say underpin our submissions.

Your Honours, your Honour Justice Bell has referred me to Wallace, picked up in our submission. Your Honours, our submission summarises Wallace. The Canadian court said that employers had an obligation of good faith and fair dealing in the manner of dismissal, the breach of which would be compensated for by adding to the length of the notice period, different remedy, and that is because the Canadian cases had a different attitude to Addis and the like.

But Wallace’s Case relies specifically on a recognition of a power imbalance between the parties and the consideration and the words are similar. In paragraphs 91 to 93 of the decision:

Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being -

It specifically identified that for most people work is one of the defining features of their lives and at 95 of the decision said -

the law ought to encourage conduct that minimizes the damage and dislocation . . . that result from –

in that case, dismissal; in our case, conduct that destroys the relationship. This Court should encourage conduct that minimises the damage that can flow to vulnerable employees in a host of ways because of the power that is reposed in employers, which can be exercised for good reason or bad, sometimes unintentionally, but with potentially devastating effect on employees regardless of whether you are otherwise talking about a breach of contract.

FRENCH CJ: You sound like you are inviting us to legislative action on the basis of desirable social policy.

MR KENZIE: Well, I am calling in aid considerations of policy consistent with the authorities, your Honour, as did this Canadian court. I am submitting that that is an appropriate response to the position that prevails and has been recognised in relation to the modern law of employment.

FRENCH CJ: When I say that I am directing myself to the kind of argument you put in the last few sentences of that submission.

MR KENZIE: Yes. Well, your Honour, I was paraphrasing the approach that was taken, a non-legislative approach, in the Supreme Court which said that acceptance of this submission will encourage, and this Court should do that, but yes, that is all I am intending to do, your Honour.

GAGELER J: Mr Kenzie, is the Wallace duty of good faith a duty of the same content as the Malik duty? Is there any examination of the difference between them?

MR KENZIE: No, your Honour. It is not an examination of Malik or anything like it. They went their own way. If there is a reference to Malik in the decision, I would doubt it.

BELL J: In going their own way, they depart from Addis.

MR KENZIE: Yes, they do.

BELL J: Yes.

MR KENZIE: They departed from Addis and they felt free accordingly to intervene more directly in relation to the process of dismissal because of that and so, again, a different remedy but, your Honour - - -

GAGELER J: Well, also different language, perhaps even a different concept.

MR KENZIE: Yes, different concept. Your Honour, I think resort to questions of good faith as opposed to the implied duty raise questions of the relationship of the implied duty of trust and confidence to good faith more generally. It may have been suggested in my learned friend’s answer this morning, but good faith might be seen as related more to the fulfilment of duties or obligations or discretions that are part and parcel of a contractual provision, whereas the implied term of trust and confidence is advanced as an incident of the employment and of a different character.

Now, I know that there are some judicial discussion which tends to roll the two together, not in the Canadian case, but I think there is a case of Russell where Justice Basten on appeal in the Supreme Court of New South Wales suggested a relationship between the two but one can conceive as to why they are distinct.

GAGELER J: So what do we get out of Wallace and the subsequent Canadian case of Keays for the purpose of your argument?

MR KENZIE: Only that the underpinnings of change were the same underpinnings that informed the change in Malik. In other words, courts might have responded in different ways but they have all accepted the significance of the reason for action to protect the employee. They have responded in different ways, but the language of Wallace, the language of Justice Kirby, the language in the House of Lords, these are not slavish followings, these are all courts that have actually responded to the sorts of changes which we have been endeavouring to identify. Your Honours, they can be dismissed, in one sense, as words.

KIEFEL J: The appellant says at paragraph 20 of its reply that each of the international decisions to which you refer, Wallace apart, simply adopt the United Kingdom position.

MR KENZIE: Yes, that is incorrect, your Honour. A New Zealand case was 1992 and the Canadians were in a different category again.

KIEFEL J: It says apart from Wallace, all the other cases simply adopt the UK position, is that correct?

MR KENZIE: The New Zealand position clearly did not.

KIEFEL J: Does not.

MR KENZIE: It was 1992, your Honour. The underpinnings of the Post Office Case in 1992 were decidedly not informed by Malik. It might have been informed by some of the thinking that led to Malik, your Honour.

FRENCH CJ: I think judgment was actually June 1991.

MR KENZIE: Thank you, your Honour. So, your Honours, in this case a radical departure and difference between the parties and Justice Jessup’s position and our submissions on the one hand is the appropriateness of addressing matters like that, or not, as part of the inquiry as to the discovery of an implied term. We submit that we have made our submission.

Your Honours, reference has been made to the fact that the implied term has been referred to in judgments of this Court. They are identified in our submissions. They are Concut and Koehler v Cerebos. Your Honours, Koehler 222 CLR 44 and the extract in question is at paragraph 24 where, in the course of dealing with English authorities, paragraph 23, the Court, Justices McHugh, Gummow, Hayne and Heydon said at the bottom of the page:

As Lord Rodger of Earlsferry pointed out in his speech in the House of Lords in the appeal in one of the cases considered in Sutherland . . . it is only when the contractual position between the parties (including the implied duty of trust and confidence between them) “is explored fully along with the relevant statutory framework” that it would be possible to give appropriate content to the duty of reasonable care –

Now, Justice Jessup dealt with that passage in his Honour’s judgment and said the court was really picking up a passage from an English authority and you cannot read too much into that. Your Honours, all that we can say about it is that it was certainly picked up without apparent disapproval and without questioning the nature of a contractual position involving an implied duty of trust and confidence between the parties. It is a dangerous thing to put more, and I will not, but it is not resonant with the suggestion that there is something wrong with this term or something illogical about the term.

KIEFEL J: At paragraph 24 of Koehler, the reference to the words in parentheses “(including the implied duty of trust and confidence between them)”, is that not a reference to what was said in Barber v Somerset County Council?

MR KENZIE: Yes, your Honour, that is the point I made. I am sorry, your Honour, I was not clear enough.

KIEFEL J: Yes, I am sorry, yes.

MR KENZIE: That is the point that Justice Jessup picked up, your Honour.

KIEFEL J: But they are the actual words used?

MR KENZIE: Yes, that is right. Justice Jessup said please do not read too much into that, because the court was attempting to capture something that was otherwise said and picked up the notion with it and, your Honours, I cannot - - -

FRENCH CJ: You say that they did not treat it as though there was some radioactive glow around it.

MR KENZIE: Exactly right, your Honour, that is so, that is so and I think that that is as much as can be said about it. The only other reference we can see is the reference in Concut which will not take the matter too much further, your Honour, but I should give your Honours the reference - Concut [2000] HCA 64; 75 ALJR 312, and I do not think it has reached the Commonwealth Law Reports, your Honour.

But at paragraph [26] where, in the course of an analysis which included recognition of the importation of equitable obligations into contracts of employment, the Court – I am sorry, your Honours, that is the wrong reference. It is paragraph [25] in the judgment of Chief Justice Gleeson, Justice Gaudron and Justice Gummow where there is reference to Pearce v Foster in paragraph [25], the reference to Blyth, which I mentioned before and there is a footnote reference in footnote 20 which picks up Viscount Simonds in Sterling, Lister v Romford and says cf Scally and Malik referred to in footnote 20.

Again, I do not suggest that these are earthshaking matters, your Honours, but we did think that we ought to direct your Honours’ attention specifically to cases where the matter had been referred to.

Now, your Honours, that takes me to the question of coherence with two things: firstly, the unfair dismissal regime relied on by our friend, the federal unfair dismissal regime; and, secondly, legislation more generally. As briefly as I can, can I indicate what our position is in relation to the federal regime? Your Honour our fundamental position in relation to the federal regime is outlined in paragraph 43 of our submission, and that is the implied term of trust and confidence is an inherent feature of the relationship of employer and employee which does not survive the ending of the relationship.

It is a submission that is consistent with what is said in Johnson at page 549, letter G, which is exactly the same point. It, accordingly – if we be successful, if Malik is accepted – does not apply to conduct that consists of the exercise of a right to terminate the contract, whether such right is expressed or implied, and the exercise of a right to terminate is not conduct that destroys or undermines the relationship without reasonable cause. It is what the parties have agreed to. It cannot fall within the implied term.

If you terminate someone on the basis of an express right then the implied term has nothing to say. If you have an implied right of termination on notice the implied term has nothing to say. If you terminate wrongfully, so take a person who is not caught by the unfair dismissal regime, if you terminate wrongfully, you give someone no notice and you dismiss them immediately without cause that is a wrongful dismissal and a breach of contract in any event. The implied term has nothing to say. It has nothing more to say in circumstances like that than any other term, express or implied, of a contract of employment that is designed to subsist during its operation.

The duty of an employee not to do anything to destroy the relationship has to sit alongside the power of the parties to terminate the relationship. The duty to provide a safe system of work is a duty to provide a safe system of work so long as the relationship ends pursuant to its terms. So there is nothing special about the implied duty discussed in Malik in this regard. There are not special problems created by the implied duty. It is simply another duty that if it is recognised it exists during the subsistence of the contract.

KIEFEL J: But is it not put against you that your reliance upon the implied term in the way that the English cases approach it is analogous to a wrongful dismissal claim and the point is that the legislation draws the boundaries around the people who will have access to the statutory cause of action?

MR KENZIE: It is. It is put in a couple of ways. It is firstly put that there is an unfair dismissal regime and, because there is an unfair dismissal regime, ignoring for the moment what it says about redundancy and the like, its presence somehow indicates a parliamentary desire not to reach out any further and operates in its own right as a discouragement for the development of the common law.

It is further put against us that part of the dismissal regime can include the matters discussed before, namely, that it can be a wrongful dismissal – an unlawful dismissal under the federal regime to wrongfully make available redeployment opportunities and, if you do that, you do not have a genuine redundancy and you can then be processed under the regime. So, it is further put against us that the regime reaches back a little further into the world of the actual operation of the contract.

Our submission in relation to that is that that regime does not operate until there is a dismissal. It does not matter that the causes that might be picked up in that regime might relate back. It does not have any work to do unless there is a dismissal. If you have a cause of action, that is, arises before the dismissal, then we appeal to the reasoning in cases like Magnox which say if you had a cause of action arising, you had a cause of action arising, and recognition in England of the Johnson exclusion zone did not lead to the further conclusion that Malik was set aside. It did not. Malik survived because it was dealing with the life of the contract. So, yes, your Honour, those matters are put against us and that is our answer.

Now, your Honours, the matter that I was addressing in that answer arose from what was said in Eastwood at paragraph 27 of the decision in Lord Nicholls’ speech where he said in discussing the Johnson exclusion area – I will give your Honours the reference in a moment, I am sorry – [2004] UKHL 35; [2005] 1 AC 503, and I am going to paragraph 27.

BELL J: Which is on 528.

MR KENZIE: Thank you, your Honour. I am looking at the passage that commences with the words “The statutory code”:

The statutory code provides remedies for infringement of the statutory right not to be dismissed unfairly. An employee’s remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute. If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom. By definition, in law such a cause of action exists independently of the dismissal.

That was the reasoning that was picked up by the majority in the Federal Court in this case.

So, in a sense, the notion or the existence or otherwise of a regime of unfair dismissal, in a sense does not matter. The submission would be the same if there was no unfair dismissal regime. The implied term simply does not go into the world of dismissal. In this case Mr Barker had a cause of action well prior to his retrenchment and that was recognised by both the majority and Justice Jessup.

Now, your Honours, some of the passages in Johnson – let me withdraw that. We say there is no further need to address the unfair dismissal consideration for the reasons that we have advanced. It really does not help in this context, but if it is thought that further attention needs to be given to that area it is necessary to make these submissions, that the legislative position being discussed in Johnson and in the passages of those read by our learned friend this morning was that it was a virtual code.

FRENCH CJ: We are looking now at 62 of your written submissions, I think, are we not?

MR KENZIE: Yes, your Honour. I am looking at those and I am looking at Johnson at page 526 at paragraph 2 where Lord Nicholls referred to Malik and talked about the “common law right of this nature, covering the same ground as the statutory right”. At page 542, paragraphs 51 to 53, Lord Hoffmann describes the UK legislation then in existence and you can see that it applied to everyone with the exception of those who had not yet had one year’s contract of service, section 108, and “those over normal retiring age or 65”.

The legislation provided for reinstatement or compensation, which was capped, and it provided for administration by a court as opposed to an administrative tribunal. So, Mr Barker would not have had any trouble in that regime. It covered everyone. It was designed to cover the low paid, the high paid and everyone as long as they had not been in a position of employment for a very short time or retired. It was described in the authorities as a code.

In Australia, the position is very different. Unlike the system in the United Kingdom, applicants earning annual remuneration of more than $129,300 are excluded. Can I give your Honours the references – I will open the Act if your Honours are troubled, but there are limitations which are plain and I do not think that there are matters of interpretation involved so if I could be forgiven for just telling your Honours what they are.

There is a remunerative cap. It would be capable of catching a goodly part of the population, it is true, 129,000, but anyone over that, like Mr Barker and countless other people are excluded. Section 382B(3) – unless you are covered by a modern award or an enterprise agreement in 382. Claimants who have made a claim under other federal legislation, for example, general protection or discrimination laws are precluded. Applicants delaying beyond 21 days are precluded in section 394 and applicants dismissed on completion of a contract for specified periods are excluded in section 386(2).

The primary remedy is giving reinstatement. It is legislation where the primary relief is in relation to people who are the lower paid people, giving them reinstatement. You can get compensation if you fail to get reinstatement, which is set not at a very high level, but it is the secondary remedy. Its purpose is to give people what, in former times in this Court was called a drastic right of interference with contract, namely to get back into work.

Your Honours, co-existence of the common law contract of employment and statutory rights flowing from the federal industrial legislation was a feature underpinning the decision of Justices McHugh and Gummow in Byrne, as I reminded the Court this morning. Their Honours rejected the contention that the existence of the statutory scheme had implications for the content of the contract of employment. They said there was no necessity for the incorporation of the contractual term. They simply existed side by side.

Now, their Honours were then dealing with the compulsory award system, but the principle is the same. Likewise, the unfair dismissal regime is not one that proceeds on the basis of a determination of the question of whether people have complied with their contract on employment. You can get an unfair dismissal result even if you are in breach of your contract if it is unfair. It is not about regulating contracts of employment. So, like the situation contemplated in Byrne, the common law of employment sits side by side with the unfair dismissal regime, for reasons independent of the reach of the implied term. If it please the Court.

Now, your Honours, in relation to other legislation, our friend has referred orally, in his oral submissions to the fact that there is a lot of other legislation. His written submissions in reply identified some of that legislation. I need to spend, I promise, a short time, your Honours, saying something about it because it is raised against us and I will be as brief as I can in relation to this, I assure the Court.

The range of regimes include the Fair Work Act itself, the general protections provisions, adverse action cases discussed in Barclay’s Case in this Court, workers compensation legislation, discrimination legislation and the like. The point being made against us, as we apprehend it is, look, there is a lot of legislation that impacts on employees at the time that they work so there is no need, no necessity in that sense, for the implication of the term.

Your Honours, can we make some general submissions about it as briefly as we can? That legislation, most of it, was in existence at the time of the decision in Malik. The corresponding legislation in the UK was in existence at the time of Malik, discrimination legislation and the like, and has co-existed with the implied term over many years. It is undoubted that the legislation that is relied on does apply, unlike the unfair dismissal legislation, during times that people are employed, so it departs from the unfair dismissal legislation in that respect.

But it varies in scope and purpose. In some cases, the relief is penal. In some cases, relief is provided that has nothing with employer and employee. In some cases, there is relief provided that simply is addressed at stopping the conduct. But one thing that legislative regimes raised by our friends have in common is that none of them manifest any form or intention to cover the field of contract law or to suggest that the common law of contract is to be set in stone and not further developed according to changes in society’s needs.

FRENCH CJ: You do not apply a sort of “covering the field” test, though, do you - - -

MR KENZIE: No, no.

FRENCH CJ: - - - to decide that the existence of statutory provisions regulating the employment relationship may be a factor weighing against the implication of a new term.

MR KENZIE: That is right, your Honour. Could I put, hopefully against myself, it is not sufficient to answer the point that is made to say that the things can live side by side, and do. It is not sufficient for the purposes of this argument to say, look, people are out there going to the Supreme Court every day, having unfair dismissals.

FRENCH CJ: In a sense, putting it perhaps too simplistically, in a sense, Parliaments have shown a great interest in the employment relationship and there have been a succession of legislative schemes and arrangements at both Commonwealth and State level over many years and, having regard to that level of interest and level of legislative activity, one would be justified in taking a cautious approach to the implication of a term which could significantly affect that employment relationship.

MR KENZIE: That would be the submission and it means that things operate somewhat differently when you are talking about arguments about expanding or changing the common law, as opposed to living side by side. That is accepted. I just wanted to direct your Honours to a couple of authorities that do bear on that. In one sense, it is a very large question, not a five to four question, your Honour.

FRENCH CJ: I do not want you to feel unduly rushed, Mr Kenzie; just put your argument.

MR KENZIE: Thank you. Your Honour, I have said that the legislation does a host of things. It does answer the description that your Honour the Chief Justice put to me. It demonstrates a manifestation of interest in things that can intersect with employment. The Fair Work Act is directed to employment. Other pieces of legislation are more general, but include an overlap with what might happen in the workplace.

The occupational health and safety legislation was referred to by Justice Jessup as not really leaving too much room for the term in the context of occupational health and safety. It is a penal regime and the fact that it left little room for the operation of provisions in relation to misconduct in the workplace would have been demonstrated by the recent introduction of the next piece of legislation relied on by the appellant, which is the very recent anti-bullying legislation which you will find in section 789 of the Fair Work Act.

Of course, bullying is one of the obvious candidates for the sort of thing we are talking about. The anti-bullying legislation provides no relief, save in the case of proof that bullying is ongoing and will continue. It is completely irrelevant to action that has taken place simply in the past, an act of bullying which might constitute the destruction of a relationship. It is a regime about the actual controlling of bullying and so the whole world of bullying, other than the ongoing bullying and including bullying which falls short of having an occupational health and safety impact, is outside the reach of the legislation. So it has got some impact but it is a limited impact in the way that the legislation describes. There is plenty of work for the implied term to do in that context.

Policies underpinning the laws relating to age, sex and disability discrimination have a statutory purpose of preventing the prescribed conduct but obviously are not directed to the law of contract per se. They are simply not designed to affect that topic. There is nothing in the anti-discrimination legislation that is in any way reflective of the view that it is designed to affect or control the law of contract.

The anti-discrimination provisions within the Fair Work Act are in a similar vein, your Honours. It is there related to the achievement of a purpose of preventing antisocial conduct and stands apart. The general protection provisions are relied on by the respondent as constituting a true intervention into workplace behaviour. Your Honour, these are the adverse action provisions that your Honours will be familiar with from Barclay. They deal with adverse action and they are designed to protect freedom of association and the enjoyment and exercise of workplace rights.

Adverse action is a broad concept, it is admitted. The Patrick Stevedore’s Case says that adverse action is broad. It is broadly defined. Proceedings can result in relief which includes injunctive relief and compensation as well as reinstatement but, your Honours, it is only designed to address conduct which is undertaken because of the possession of the desired characteristic, that is, union membership or interference with a workplace right.

It is designed to protect the particular statutory interests that form part of the Fair Work Act, so it speaks in a case where X sacks Y because he or she is a member of a union. It speaks when X sacks Y or prejudices Y, I should say, by adverse action if you actually – because you are exercising a workplace right, but it does not otherwise speak.

It is completely silent in respect to people who take disinterested malevolent action for reasons that are central to the implied term. So it does not tell you, when you look at it, when Parliament did this it was intending to speak about the law of contract otherwise it tells you that Parliament was concerned with protecting the interests – the particular interests in terms of freedom of association or workplace rights.

The Fair Work Act has some provisions that intersect with contract, but where it wants to intersect with contract it says so and does not generally purport to control contracts of employment even in respect of those people who are caught by the various provisions; they vary in coverage and scope. Now, your Honours, what we have to say is that in those circumstances the legislation, whilst it manifests an interest of a general nature, does not take our friends to the next step they need to get to, which is hands off the common law, as it were.

Your Honours, examples of circumstances in which this Court has resisted attempts to proceed by analogy, that is, from the proposition that legislation partially has covered a subject but should be construed as having a wider effect, are many. They include Esso v Commissioner of Taxation in [1999] HCA 67; 201 CLR 49 and, your Honours, in this case there was an attempt to suggest that the common law should be modified by analogy to accord with section 118 and 119 of the Evidence Act, and an attempt to reason on the basis put forward by reference to Professor Atiyah at paragraph 20, and the questions of reasoning by analogy were met by the Court saying in paragraph 23 on page 61 that there was:

a fundamental difficulty with this line of reasoning. The legislation in question does not apply throughout Australia. At present, it applies only in federal courts, and in the courts of New South Wales and the Australian Capital Territory. In Lange v Australian Broadcasting Corporation this Court said that “[t]here is but one common law in Australia which is declared by this Court as the final court of appeal”. Certain legislatures in Australia have enacted legislation concerning privilege which differs in a number of respects from the common law principles –

and the like. At the bottom of that paragraph, after a reference to Mann v Carnell:

The fragmentation of the common law implicit in the qualification . . . is unacceptable –

and so on. So, it is but one case where the Court resisted an attempt to reason by analogy. Your Honours, I want to very briefly refer to Hollis v Vabu in this regard as well. Your Honours, Hollis I have referred to at [2001] HCA 44; 207 CLR 21, and at 59, 60 of Hollis, reliance was placed on the fact that there had been consideration of questions of the law, but legislation has not been enacted, and suggestions of deferral to the legislative inactivity, reference to Esso, where the Court said it is one thing to defer:

It is another proposition that the common law should stand still because the legislature has not moved. Nevertheless, this proposition might have some attraction if this Court were contemplating the reformulation of basic doctrine –

They said it did not apply in relation to cases where the vicarious liability was being extended in the way, or treated in the way, that they were covering in Hollis v Vabu.

Finally, your Honours, as far as the cases are concerned, could I give your Honours a reference to Brodie [2001] HCA 29; 206 CLR 512. This is the case where, at paragraph 31, Chief Justice Gleeson referred to the symbiotic relationship between the common law and statute, but what I wanted to take your Honours to, however, was page 571, at paragraph 132, where his Honour said that:

The legislation does not present an occasion for the analogical use of statute law to develop the common law . . . There are obvious difficulties in subjecting the common law of Australia to paralysis by reason of the provisions of a State law giving particular protection to the activities of a public authority of that State.

So, an example of what was being put forward in Lange. In our materials that we have provided, we have given your Honours a reference to two articles by Professor Finn, the first of which is – and I will just give your Honours a reference - - -

FRENCH CJ: A very well-known article “Statutes and the Common Law”.

MR KENZIE: Your Honour, it is Professor Finn who has very recently commented on Brodie and said that a message like that is that the courts are still very much in charge.

FRENCH CJ: A very comforting proposition.

MR KENZIE: Yes, it is Professor Paul Finn “Statutes and the Common Law: The Continuing Story” and pages 59 and 60 of the article which we have provided to the Court which basically say that considerations like those discussed in Brodie suggest that it is the common law – it is the courts that are in charge of this debate and notions of judicial trepidation are affected by the considerations discussed in Lange.

Your Honours, could I say something about the implied duty of co-operation by reference to clause 8 of the contract? I took your Honours before to what the Full Court had to say about the implied duty of co-operation and to the fact that the court had identified clause 8 as part of the circumstances which gave rise to the content.

The thing about clause 8 that is significant - 131 of the materials - is that it provides in its terms for the availability of compensation payment calculated in accordance with the term, 107,000 et cetera, but that amount is payable in circumstances:

where the position occupied by the Employee becomes redundant –

that was Mr Barker’s position -

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 skill and experience –

That step is a step towards the entitlement to the compensation payment identified in clause 8. If the Bank does not take steps to determine whether or not it is able to place the employee in that position, the compensation payment is not available. Clause 8 provides a basis for a duty of co-operation to apply in the context of Mr Barker and, your Honour, what the court ended up doing in paragraphs 130 and 131 is to say that the Bank had taken no steps as it was required to do.

FRENCH CJ: Now, is this a kind of fall-back position because the Full Court did not make a finding of breach of implied term of co-operation, did it?

MR KENZIE: Well, your Honour, that - - -

FRENCH CJ: You explored this earlier with Justice Kiefel.

MR KENZIE: I did and, your Honour, what they actually did – it is true that paragraphs 130 and 131 are cast in terms of the implied term of trust and confidence. There is no doubt about that. But what the majority did was to say in relation to the duty of the implied term of co-operation, in paragraph 126 the term operated. At paragraph 127, they referred to the circumstances including clause 8. In paragraph 128, they said:

that was sufficient to give rise to the implied obligation of co-operation in a way that is analogous to the duty of the employer to take the positive steps identified in Scally.

Then in paragraphs 129 and 130, they asked whether there was a breach of the implied term and there is no running away from the fact that in those paragraphs they referred to the “breach of the implied term of mutual trust and confidence”. But, in paragraph 131, they said that the term required the Bank to:

take positive steps to consult with Mr Barker about alternative positions and to give him the opportunity to apply for them. Instead, it failed to make contact - - -

FRENCH CJ: Does that involve some sort of sub silentio assumption that if there is a breach of the implied obligation of co-operation in these circumstances it is necessarily a breach of the implied term of trust and confidence?

MR KENZIE: I would not read it that way, your Honour. It rather appears to be the Court taking an alternative approach that they first - - -

KIEFEL J: Perhaps this is where paragraph 118 becomes important, because, I must say, on the way I originally had read it, I had read their Honours’ alternative approach regarding the implied duty of co-operation as simply supporting the widely implied term in relation to mutual confidence.

MR KENZIE: Could I submit to your Honour that what they did in those paragraphs was to say, look, it is suggested that the duty that we are talking about grew out of the duty of co-operation, or at least there is a suggestion to that effect, in paragraphs 118 and 119.

KIEFEL J: Well, perhaps another question that needs to be asked is, was the alternative of an implied duty of co-operation argued in the Full Court?

MR KENZIE: It appeared – we cannot find it in the pleadings, your Honour, and so it was not put at the outset but it was – it is impossible to read those paragraphs in any other way than a consideration of the application of the term and not simply as feeding into, in our respectful submission, a debate about the implied term of trust and confidence in itself and that is because paragraphs 120 through to 128 are paragraphs about the implied duty of co-operation and not paragraphs about the implied duty of trust and confidence.

GAGELER J: What is the implied duty here? Is it implied duty to co-operate to allow Mr Barker to have the benefit of the payment in clause 8?

MR KENZIE: The implied duty is to co-operate in taking the step that it is a precondition to his receipt of the compensation. So, they have to decide that they are unable to redeploy him. The implication is that they have to take steps to determine that they are unable to redeploy him and they have to co-operate in relation to that.

KEANE J: Is it limited to that, though, because surely if they take steps to redeploy him and succeed the consequence is the benefit he obtains is not the terminating payment but it is that he remains in employment. He remains unterminated.

MR KENZIE: Yes, or avoids termination. It has wider - - -

KEANE J: That is why one of the questions is in relation to clause 8, if the steps are taken they may be successful. What if they are successful? If they are successful, he is not terminated, one would think.

MR KENZIE: Indeed, that is the basis of the relief obtained by Mr Barker, ultimately. The court found that there was a breach of the implied term of trust and confidence. That term meant that in the circumstances of the case, there was a duty to take the steps that were identified. They were not taken. Accordingly, there was a breach of the duty and that led to a conclusion that Mr Barker’s employment was terminated in circumstances where there had been no step taken towards redeployment and he received damages on the basis that he had been fundamentally damaged in that respect.

KEANE J: Do you say that the damages he is entitled to recover are not limited to the formula in clause 8 because to allow that to occur would be to allow the Bank to take advantage of its failure to take the steps that clause 8 contemplates?

MR KENZIE: We say two things - yes, well, clause 8 was not activated because it never reached that stage but notice was not given to Mr Barker in accordance with clause 6. Justice Besanko found that his contract entitled him to get notice in writing. There had been no notice in writing so the issue of four weeks’ notice went off the table so he was a person who had not been terminated. At that time, he was a person who was entitled to the benefit of clause 8, insofar as it went.

KIEFEL J: Justice Besanko assessed damages on the basis of a loss of chance of redeployment.

MR KENZIE: He assessed damages on the basis - that is right, that he had a 30 per cent chance of staying in the job.

KIEFEL J: That is applying the policies which the Full Court did not apply but, nevertheless, the same factual position would maintain, would it not?

MR KENZIE: It would. His Honour was simply applying.....and saying there is a loss of opportunity. If these had taken place as they should, his Honour assessed that he would have had a realistic opportunity of redeployment, and that was circumstances where the Bank said they wanted him kept in employment, and that took the Court to the question of the relationship between the damages that were sought and the impact of the capacity of the employer to terminate on four weeks’ notice. The Court said - and Justice Jessup discusses this in his Honour’s judgment; I will give your Honours a reference - that the case was to be approached on the basis that the four weeks’ notice of termination was not the parameters of the entitlement to recovery because the Bank wanted him to stay and, had the breach not taken effect, he would have had an expectation of staying, and he had never been given four weeks’ notice under the contract.

FRENCH CJ: Mr Kenzie, as I said earlier, I did not want to see you rushed unduly in the last stage of your argument, so I think it might an appropriate time now to adjourn and we will adjourn until 10.15 tomorrow morning.

MR KENZIE: Certainly, thank you, your Honour.

AT 4.19 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 9 APRIL 2014