13 March 2007
Key Points:
The recognition that the implied obligation of trust and confidence exists in Australian jurisprudence has ramifications for employers and employees and will be an issue which will continue to be considered by the courts for some time.
For some time, English jurisprudence has recognised the implied obligation upon an employer not to breach the relationship of trust and confidence between it and its employees. While there had been some Australian obiter discussing the issue, there had been no authoritative decision. However, the recent decision of Justice Rothman in Russell v The Trustees of the Roman Catholic Church Archdiocese of Sydney [2007] NSWSC 104 may have significantly altered the Australian landscape.
Background
David Russell, a lecturer at the Conservatorium of Music, commenced employment in 1976 as Director of Music at St Mary's Cathedral in Sydney. Mr Russell was employed until 1999 when he was alleged to have committed acts of gross misconduct. He was charged and arrested and, following an investigation, Mr Russell's employment was terminated on 31 January 2003.
Mr Russell commenced unfair dismissal proceedings seeking reinstatement under the unfair dismissal regime. The Commission found that Mr Russell's termination of employment was harsh, unreasonable and unjust, and reinstatement was ordered "with restitution of wages and continuity of service for all purposes".
Proceedings were then commenced in the Supreme Court of NSW for a breach of the implied terms in the contract of employment. It was argued that the Church had a duty to act in good faith regarding the administration of the contract of employment, and to not conduct itself "in a manner likely to destroy or seriously damage the relationship of confidence and trust between the parties", or "without reasonable or proper cause".
An implied duty to act in good faith
Justice Rothman was required to consider the possible implication trust and confidence, as it would "be drawing too long a bow to suggest the implication of good faith, or for that matter the implied duty not to conduct oneself so as to destroy trust and confidence, is recognised as part of the law relating to contracts of employment in Australia".
Justice Rothman held that employment contracts should be treated no differently from any other contract, and that it was impossible to imagine that the contract could operate without a duty of good faith. His Honour held that to decide otherwise would be contrary to significant authority.
An implied term of mutual trust and confidence
Justice Rothman held that "trust and confidence, reposed by each of the employer and employee in the other, is a necessary concomitant of the right to control...without trust and confidence there is no contract of employment". While a final clarification of the implication of these terms awaited consideration by an appellate court, according to Justice Rothman such implied terms arise under Australian common law.
Damages as a result of the breaches: Breach of the implied duties
Justice Rothman held that the Church acted in breach of its implied duties, neglecting to properly interview a witness and thus failing to do "that which an employer, acting with prudence, caution and diligence, and balancing its rights against the potential disadvantage to its employee, should have done". However, there was nothing to suggest that interviewing the witness would have led to a "different outcome to the inquiry" and accordingly, the breach of this duty by the Church occasioned no damage.
Additional damages claim
The Court held that as there was no express contract of employment, there was no common law right to pay out the notice period, and, as Mr Russell was reinstated, there was no loss of income. Damages for expenses incurred from the bad publicity of the termination were denied as it "was publicity generated by the proceedings in the Commission", and "not expenses in mitigation of the damage". Justice Rothman held that the Church had breached its duties, but that no damages were payable.
Implications
While English law may recognise implied duties/obligations, the only Australian cases which considered the issue prior to Russell did so on an interlocutory basis (strike out applications), and some decisions simply left the question unanswered. The recognition that the implied obligation of trust and confidence exists in Australian jurisprudence has ramifications for employers and employees and will be an issue which will continue to be considered by the courts for some time.
Thanks to Abraham Ash for his help in writing this article.
For further information, please contact Joe Catanzariti.
