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Commonwealth Bank of Australia v Barker

Commonwealth Bank of Australia v Barker

Federal Court of Australia, Full Court 82 (6 August 2013)

In a significant decision on Australian employment contract law, a full court of the Federal Court has found that the Commonwealth Bank breached an implied term of trust and confidence when it failed to consider redeployment opportunities for one of its executive managers shortly prior to dismissing him.  

In the majority judgement, Justices Peter Jacobson and Bruce Lander, said the implied contractual term had "obtained a sufficient degree of recognition, both in England and Australia, that it ought to be accepted by an intermediate court of appeal".  Justice Chris Jessup handed down a dissenting judgment.

The bank dismissed the manager on April 9, 2009 after notifying him on March 2 that his position had become redundant. The full court was dealing with the Bank's appeal from Justice Anthony Besanko's decision of September last year that it contravened the implied term of trust and confidence when it committed a serious breach of the redeployment policy as contained in its HR manual. He Justice ruled that there was an "an implied term of mutual trust and confidence in the contract of employment" between the executive and the bank, consistent with the approach taken in England and by four High Court judges in Koehler v Cerebos 214 (2005) CLR 335. 

The full Court said the bank's failure to take steps to enable the manager to obtain redeployment were "separate from and anterior to" the termination of his employment, "the line is drawn in favour of the application of the implied term" and Justices Jacobson and Lander said the implied term "which had been stated in most of the authorities is that the employer will not, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee", citing Malik v Bank of Credit and Commerce International SA [1997] UKHL 23

In comments that give the implied term a broad application, the judges said it was an unduly narrow reading of Malik to suggest that it was not authority for the proposition that such a term is implied by law into "all contracts of employment in England".  The majority judges said relevant circumstances informing the operation of the implied term in this case were the fact that the manager was a long-term employee of a large corporate employer and a clause in his contract of employment that said his employment may be terminated if the Bank were unable to place him in an alternative position.  "It seems to us that in these circumstances the implied term required the Bank to take positive steps as from 2 March 2009 to consult with the Manager about the possibility of redeployment and to provide him with the opportunity to apply for alternative positions within the Bank," the judges said. 

Instead, they noted that the bank had withdrawn the manager's email and mobile phone facilities without telling the redeployment officer.  Justices Jacobson and Lander said they took a different approach to Justice Besanko, who held that a serious breach of the bank's redeployment policy amounted to a breach of the implied term.  "We do not, with respect, see that this can be correct because, as his Honour accepted, the terms of the redeployment policy were not part of the contract of employment," the majority judges said.  But they said the circumstances required the bank to take positive steps to consult with the manager and inform him of suitable employment options. "In our opinion, these obligations fell within the content of the implied term." 

The judges said the manager had been employed by the bank for approximately 23 years when the contract was entered into.  The contract "contemplated the possibility of redundancy and redeployment within the Bank, as an alternative to termination".  "The Bank is a very large corporation with a huge workforce and many and varied positions within the Bank at various locations throughout Australia," the judges noted.  They said the bank's actions from March 2 to March 26, 2009 when his email and phone were cut off, were sufficient to amount to a breach of its duty not to engage in conduct likely to destroy or seriously damage the relationship of confidence that existed between it and the manager.  "Put simply, and perhaps in the vernacular, the left hand of the bank did not know what the right hand had done until the penny dropped on 26 March 2009", the judges said. 

The judges said damages were recoverable for breach of the implied term, "at least where the breach is anterior to and independent of termination". They also accepted the Mr Barker's cross appeal that Justice Besanko had made a miscalculation in his assessment of his loss, and increased his compensation to a total of $335,623.

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