Commonwealth Bank of Australia v Barker [2013] FCAFC 83: Employment Contract

In Commonwealth Bank of Australia v Barker [2013] FCAFC 83 (6 August 2013) the Full Court of the Federal court has made an important decision with respect to contracts of employment and the incorporation of company policies as part of such contracts.

Background

Mr Stephen John Barker (the respondent) was employed by the Commonwealth Bank of Australia (the appellant) as an executive manager in the Bank's corporate banking section in Adelaide under a written contract of employment which permitted the Bank to terminate his contract without cause after four weeks' written notice. On 2 March 2009 at a meeting with a number of officers of the Bank the respondent was handed a letter which informed him that his current position was to be made redundant with effect from the close of business that day. The letter stated:

"It is the Bank's preference to redeploy you to a suitable position within the Bank and we will explore, in consultation with you, appropriate options."

The respondent was told on 2 March 2009 that if he was not redeployed within the Bank his employment would be terminated on 2 April 2009 a date later extended to 9 April 2009 on which date the respondent was informed that his employment was terminated by reason of redundancy with effect from the close of business on that day.

In 2010 the respondent brought proceedings against the appellant Bank for breach of his contract of employment and for damages under the Trade Practices Act 1974 (Cth) s 82.

The respondent's claim in contract included a claim that certain written policies of the Bank which covered, among other things, the issue of redundancy, were incorporated into his contract of employment. The respondent claimed that the Bank breached those policies by failing to inform him of a possible alternative position within the Bank and that he thereby lost that opportunity.

At Trial

At trial the primary judge found that the policies were not incorporated into and did not form part of the respondent's contract of employment. However, the trial judge found that an alternative claim made by the respondent based on an implied term of mutual trust and confidence in the contract of employment between the appellant and the respondent was established. The trial judge went on to find that the appellant had been "almost totally inactive in complying with its policies during a reasonable period of notifying [the respondent] of his redundancy".  The trial judge found that this was a "serious breach of the implied term of mutual trust and confidence which sounded in damages".  At trial the respondent was awarded damages of $317,000 for loss of the opportunity to be redeployed to a suitable position within the appellant Bank.

Key Issues on Appeal

A key issues in the case on appeal was whether trial judge erred in finding implied term of mutual trust and confidence and whether the principles in Malik v Bank of Credit and Commerce International SA (in liq) [1998] AC 20 applied in Australia.

An other issue on appeal was whether the primary judge erred in finding that the appellant breached the implied term where the implied term was not applicable to dismissal.

Result

The principle in Malik v Bank of Credit and Commerce International SA (in liq) [1998] AC 20 with respect to the implied termwas  held to form part of Australian employment contracts. An implied term was to be "moulded according to the nature of the ongoing employment relationship" and a breach of implied term was upheld to be due to appellant's failure to take positive steps to provide the respondent with the opportunity to seek redeployment. The respondent was entitled to damages for loss of chance to be redeployed.

Sources:

• Decision in Commonwealth Bank of Australia v Barker [2013] FCAFC 83 (6 August 2013) 

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