No implied term of good faith either

State of New South Wales v Shaw [2015] NSWCA 97

 HEADNOTE –

[This Headnote is not to be read as part of the judgment]

In 1999, Mr Shaw and Ms Salt (the respondents/cross-appellants) were appointed as probationary teachers assigned to the Bourke Public School. The State of New South Wales (the appellant/cross-respondent) was deemed to be their employer pursuant to s 42 of the Teaching Services Act 1980 (NSW) (“the Act”). On 20 March 2000, the respondents’ respective probationary appointments were annulled pursuant to s 48(2) of the Act, and a determination was made pursuant to s 48(4) of the Act that they cease to be employed in the NSW Education Teaching Service.

The respondents brought proceedings in the District Court against the State, claiming damages for, among other things, breach of their employment contracts. They alleged, and the primary judge found, that there had been a serious breach by the State of a term of mutual trust and confidence that was implied into the respondents’ contracts of employment. Judgment was entered in their favour but they were awarded no damages. The primary judge rejected their claim that the contracts had been repudiated and, further, accepted the State’s alternative submission that even if there had been such a repudiation, the respondents’ conduct was inconsistent with an acceptance of any such repudiation. His Honour nevertheless awarded costs in favour of the respondents on the basis that they had been the successful parties in establishing a point of legal principle (as to the implication of a term of mutual trust and confidence as a matter of law into contracts of employment).

Pursuant to leave granted by the Court of Appeal, the State appealed from the whole of the primary judge’s decision on liability, other than the findings that there was no repudiatory conduct by the State of the contracts of employment, no acceptance by the respondents of any repudiation and no entitlement of the respondents to damages. The State also appealed against the costs decision, other than in respects that were in its favour.

The respondents filed a notice of contention seeking to uphold the judgment as to liability and costs and cross-appealed contending that the primary judge had erred in not finding that their contracts were repudiated by the State and in not finding that they were entitled to damages for the loss of an opportunity to have a teaching career.

After the District Court judgment was handed down, the High Court ruled that there was no term of mutual trust and confidence implied as a matter of law into all employment contracts. On this appeal, the respondents nevertheless maintained that such a term was properly found to be implied into their probationary employment contracts and that the primary judge’s decision on liability was correct on the basis that there had been a serious breach of an implied term of good faith, the content of which mirrored (and had been subsumed in the pleading of) the term of mutual trust and confidence.

The Court (Beazley P, Ward JA and Gleeson JA) held, allowing the appeal and dismissing the cross-appeal:

  1. the probationary nature of the respondents’ employment did not require, for the efficacy or worth of their employment contracts, that a term of mutual trust and confidence be implied (Ward JA at [105]; [111], Beazley P at [1] and Gleeson JA at [207] agreeing).

Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 applied.

Commonwealth Bank of Australia v Barker [2014] HCA 32 applied.

Commissioner of Police v Eaton [2013] HCA 2 considered.

  1. it was not demonstrated that a probationary common law contract of employment would be rendered nugatory or worthless or would be seriously undermined or devalued because of the absence of a term of mutual trust and confidence. The fact that employment is of a probationary character does not provide a meaningful point of distinction from the conclusion reached in Commonwealth Bank of Australia v Barker [2014] HCA 32. Such a term does not meet the test in Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 (Ward JA at [111], Beazley P at [1] and Gleeson JA at [207] agreeing).

Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 applied.

Commonwealth Bank of Australia v Barker [2014] HCA 32 considered.

  1. had it been necessary to decide whether a duty of good faith was to be implied as a matter of law, by way of necessity, into the respondents’ probationary employment contracts, it would have been concluded that it was not, on the basis that it would not have been necessary that a term of good faith be implied in order to give the respondents’ probationary contracts effective operation in circumstances where a statutory and industrial regime regulated their employment contracts (Ward JA, obiter, at [130], [135] – [136] Beazley P at [1] and Gleeson JA at [207] agreeing).

Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2007] NSWSC 104; (2007) 69 NSWLR 229 distinguished.

Commonwealth Bank of Australia v Barker [2014] HCA 32 considered.

  1. had a term of good faith, to the effect particularised in the pleading, been found to have been implied by way of necessity into the respondents’ probationary contracts, the findings made by the primary judge did not support a conclusion that there was a breach of any such obligation (Ward JA, obiter, at [137], [155], Beazley P at [1] and Gleeson JA at [207] agreeing).
  2. the primary judge erred in finding that the evaluative provisions of the Teacher’s Handbook were incorporated into the respondents’ probationary contracts (Ward JA at [172], Beazley P at [1] and Gleeson JA at [207] agreeing).

Goldman Sachs JB Were Services Pty Ltd v Nicholich [2007] FCAFC 120; (2007) 163 FCR 6 applied.

Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410; Commonwealth Bank of Australia v Barker [2014] HCA 32 referred to.

  1. the primary judge did not err in concluding that there was no repudiation of the respondents’ employment contracts by the State. No reasonable person would have concluded that the conduct of the principal was a renunciation either of the probationary employment contracts as a whole or of a fundamental obligation of those contracts (Ward JA at [181]-[183], Beazley P at [1] and Gleeson JA at [207] agreeing).

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 applied.

Protector Glass Industries Pty Ltd v Southern Cross Autoglass Pty Ltd [2015] NSWCA 16 referred to.

  1. the primary judge did not err in concluding that, if there had been a repudiation of the employment contracts by the State as contended for by the respondents, any such repudiation had not been accepted by the respondents as their conduct did not amount to an unequivocal communication that they were treating their contracts of employment as being at an end (Ward JA at [184], [187] – [190]; Beazley P at [1] and Gleeson JA at [207] agreeing).

Heyman v Darwins Ltd [1942] AC 356; Ryder v Frohlich [2004] NSWCA 472 applied.

  1. the loss of a teaching career arose not from any acceptance by the respondents of repudiatory conduct by the State but from the annulment of their appointments (with the decision to dispense with their teaching services) and their decision not to make any submissions as to why those decisions should not stand; any damages for breach of an implied duty of good faith would have been limited to the period from 26 November 1999 to the annulment of their contracts on 20 March 2000 but no such damage was shown or claimed (Ward JA at [193], Beazley P at [1] and Gleeson [JA] agreeing).
  2. had the respondents maintained on appeal the finding that there had been a breach of an implied term of mutual trust and confidence on the part of the State, the decision as to costs by the primary judge was so unreasonable, in light of the respondents’ undoubtedly Pyrrhic victory at first instance, as to bespeak error in the House v The Kingsense (Ward JA, obiter, at [203]; Beazley P at [1] and Gleeson JA at [207] agreeing).

Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 referred to.

 

David Cormack – Brisbane Barrister & Mediator

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