Casenote: Barker v Commonwealth Bank [2012] FCA 942

  • Author : Tim Donaghey - 11-09-2012

Background

Mr Barker (‘Employee’) was an employee of the Commonwealth Bank. After working in more junior positions, he was employed in a senior position of relationship manager. After November 2003, the Employee became an executive manager, reporting to the general manager.

The Employee signed a new contract in mid-2004. It stated that the Employee was employed under ‘the Bank’s Executive employment conditions and remuneration arrangements’. The written terms of the Employee’s employment included that:

  • the parties may terminate employment by agreement in writing at any time;
  • in circumstances of misconduct, by four weeks’ written notice. The Bank was able to pay in lieu of notice; and
  • in either case, no reason for termination would be required.

Benefits on termination included:


 

This clause applies only where the employee was already employed by the Bank immediately preceding the date of this agreement. In the case where the position occupied by the employee becomes redundant 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 – ...

The balance of the agreement dealt with age of retirement, superannuation, leave and other matters. There was also a series of policies, including HR Policies, including a Redeployment Policy, and the Personnel Manual, incorporated by the contract of employment.

Redundancy

In 2 March 2009, the Employee was told that his position with the Bank had been made redundant. Present at the meeting were two other bank officers, Mr Formichella and Mr Davis.

Mr Barker was told certain things and given documents, including a Retrenchment Assistance Kit. The documentation provided assumed the Employee would leave the Bank on 20 March 2009. Mr Davis told Mr Barker to work out the day, clear his desk, hand in his keys and mobile telephone and go. I find that Mr Davis told Mr Barker that he would be on paid leave during the redeployment period. Mr Formichella and Mr Davis told Mr Barker that the Bank’s preference was to redeploy him. The meeting ended.

After that meeting the Employee was directed to a Mr Andrewartha. Mr Andrewartha handed the Employee another letter, also dated 2 March. They had a discussion, and Mr Andrewartha stated he would support the Employee through the redundancy process and into his next career. He said nothing about redeployment.

The employee retained some Bank property, but returned other property. not return to work the following day. The Bank ended the Employee’s access to its intranet and email facilities. The Bank engaged in minimal efforts to redeploy the Employee.

Hearing

The Employee sued in the Federal Court, on two bases, with his Honour Besanko J hearing the trial. The first was in reliance on the Redeployment Policy, as he said this founded an obligation on the Bank to redeploy him. The second basis was in reliance upon an implied term of ‘trust and confidence’ which the Employee maintains had been breached. There were other claims not relevant to this note.

His first claim was in contract. The Employee argued that his contract of employment was terminated on 6 April or 9 April 2009. Besanko J the Bank repudiated Mr Barker’s contract of employment on 9 April 2009 when it purported to terminate his contract other than in accordance
with its provisions (that is, by giving notice or payment in lieu). Mr Barker accepted the Bank’s repudiation.

In relation to ‘trust and confidence’ Besanko J reviewed the authorities, including Russell v Catholic Church [2008] NSWCA 217, and other cases such as McDonald v Parnell Laboratories (Aust) Pty Ltd [2007] FCA 1903; (2007) 168 IR 375 in which no implied term was found to
exist. Besanko found there was an implied term of mutual trust and confidence between the Employee and the Bank. His Honour did not explain how the implication of this term occurred in the employment agreement signed by the Employee and the Bank, other than to find it implied by law. His Honour referred only to the authorities which had found, or which had doubted, the existence of the term.

Whilst finding that the policies were not contractual (in the sense that they were not a part of the employment agreement) the trial judge did find that a contravention by the Bank, in failing to redeploy the Employee, was a breach of the obligation of mutual trust and confidence.

Rationale of the decision

It is not clear how a non-contractual (in the sense of non-binding) document ancillary to the employment agreement, and which was liable to be unilaterally changed could found a breach of any term in an employment agreement. This does not follow in a rational sense.

Unfortunately, Besanko J’s decision suffers from the difficulty of many single-judge decisions about the chimerical ‘implied term’. It is not clear how the implication of a term like the ‘trust and confidence’ term can survive authorities on the basis of terms implied at law, particularly
the judgment of McHugh and Gummow JJ in Byrne and Frew (1995) 185 CLR 410, to the effect that the term serves the purpose of preserving the subject matter of the contract, and enabling the rights which were negotiated by the contract, or preventing those rights conferred by the contract from being ‘rendered nugatory, worthless, or perhaps be[ing] seriously undermined’. It is submitted that this case does not meet such a test.

This decision is almost certain to be appealed.

About the Author

Tim Donaghey

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