The Court of Appeal has handed down its decision in what has been the latest in a succession of proceedings brought by Mr Shaw and Ms Salt against the State of New South Wales (State) seeking damages or compensation following the annulment of their probationary appointments as school teachers at Bourke Public School .

The Court of Appeal overturned the decision of the primary judge and found in favour of the State that there had been no implied term of mutual trust and confidence in each of Mr Shaw and Ms Salt's employment contracts.  This decision followed the recent High Court decision of Barker . However, it is of relevance to note that the decision of the primary judge was handed down before the High Court decision in Barker.

Although the primary judge held that there was an implied term of mutual trust and confidence which had been breached by the State when the school principal handed particular documents to Ms Salt, his Honour made no award of damages.  Mr Shaw and Ms Salt were however awarded costs.

 The State appealed the whole of the decision of the primary judge (except the primary judge's decision that there was no repudiatory conduct by the State in relation to the employment contracts and no award of damages).  Mr Shaw and Ms Salt lodged a cross-appeal seeking to uphold the primary judge's decision and contending that they were entitled to damages.

Background

In 1999, Mr Shaw and Ms Salt, a married couple, were both appointed as probationary teachers assigned to the Bourke Public School.  The State was deemed to be their employer.

A number of incidences occurred at the school involving Mr Shaw and Ms Salt which resulted in 18 staff members signing a petition which expressed their concerns in relation to interactions that they had had with each of Mr Shaw and Ms Salt.  The petition was handed to the school principal.

The school principal tried to hold meetings with each of Mr Shaw and Ms Salt to discuss not only the various incidents which had occurred with other staff members but also their performance as teachers.  However, on each occasion, neither of Mr Shaw or Ms Salt attended the scheduled meetings, which were re-scheduled a number of times.

On 26 November 1999, the school principal handed to Ms Salt, at Ms Salt's request, an envelope containing a bundle of documents, including the petition signed by the staff members and a number of other documents relating to various incidences that had occurred, being matters which affected her probation.  Ms Salt showed Mr Shaw the bundle of documents and the two walked out of the school and did not return.

Court of Appeal Decision

The issues for determination before the Court of Appeal are summarised as follows:

  • Whether or not there was an implied term of mutual trust and confidence and/or an implied term of good faith in each of Mr Shaw and Ms Salt's employment contracts;
  • Whether or not the Teacher's Handbook was contractual in nature in relation to the employment of each of Mr Shaw and Ms Salt; and
  • Whether or not the State had repudiated the employment contracts of the teachers.

Implied Terms

The Court of Appeal, having regard to the decision of the High Court in Barker said that it was not persuaded that the probationary nature of Mr Shaw and Ms Salt's employment required, for the efficacy or worth of their employment contracts, that a term of mutual trust and confidence be implied.  Further, the probationary appointments did not distinguish this case from Barker.

The Court of Appeal said that if probationary teachers have complaints as to the adequacy of counselling or support in their role or as to the manner in which criticisms of their teaching performance or interpersonal skills are drawn to their attention or dealt with, there are established grievance procedures which are available to them (and which Mr Shaw and Ms Salt themselves had already evoked).  Therefore, it was unnecessary to imply a term of mutual trust and confidence for the efficacy of the employment agreements.

Mr Shaw and Ms Salt also argued that there was an implied term of good faith in their employment contracts which had been breached by the State when the principal handed to Ms Salt the envelope of documents (including the petition signed by other teachers) which Ms Salt argued was done to humiliate and cause distress to her.

The Court of Appeal found that there was no unfairness or any lack of good faith on the part of the principal.  The documents were not provided to Ms Salt with an intention to humiliate her, further they were provided to her at her request.

Did the Teachers Handbook form part of Mr Shaw and Ms Salt's Employment Contracts?

The State argued that the relevant test to be applied for determining whether the Teacher's Handbook formed part of Mr Shaw and Ms Salt's employment contracts was the test referred to in Goldman Sachs JB Were Services Pty Limited v Nikolich [2007] FCAFC 120.  In Goldman Sachs, the test as to whether a contract incorporates provisions of an external document was stated by reference to the party's objective intention; namely whether a reasonable person, in the position of a promisee will conclude that a promisor intended to be contractually bound to by a particular statement.

The State argued that there was no evidence to support any finding that Mr Shaw and Ms Salt had read or relied upon the Teacher's Handbook in coming to the decision to accept their appointment.  Further, even if Mr Shaw and Ms Salt had relied on the Teacher's Handbook to form part of the agreement, the relevant provisions of the Handbook were described as a "suggestive criteria" only and therefore were aspirational guidelines and nothing more.

The Court of Appeal held that Goldman Sach's test had not been satisfied and therefore the Teacher's Handbook did not form part of Mr Shaw and Ms Salt's employment contract.

Repudiation of the Employment Contracts

Mr Shaw and Ms Salt argued that the conduct of the principal in handing the envelope of documents to Ms Salt amounted to a repudiation of their contracts of employment which Mr Shaw and Ms Salt accepted as bringing the contracts to an end on that date.  Further, that Mr Shaw and Ms Salt were entitled to damages on that basis.

The Court of Appeal held that the principal's conduct, in providing the documents to Ms Salt and knowing that she would show the documents to Mr Shaw, did not demonstrate an unwillingness or inability by the State to perform the contract and held that a reasonable person would not have concluded that the conduct in question amounted to a repudiation of those contracts.

Mr Shaw and Ms Salt left the school stating words to the effect that:

"Two aboriginal teachers are walking out of this school"

Mr Shaw and Ms Salt said that these words indicated an acceptance of the alleged repudiation by the State (the alleged repudiation of the employment contracts occurred when the principal handed Ms Salt the bundle of documents).

It was held that this statement did not amount to a clear acceptance of any repudiation by the State.Further, after walking out of the school, Mr Shaw and Ms Salt had:

  • accepted payment of their salaries;
  • submitted leave forms for several periods of unauthorised absences; and
  • at the request of the State, attended meetings with the school.

These actions indicated that they had not accepted any alleged repudiation of their contracts of employment.

Comments on this case

Terms will only be implied into an employment contract insofar as is necessary to give efficacy to the employment contract.  It is up to the employee to argue that the terms of their particular employment contract require a term of mutual trust and confidence be implied into the agreement to give effect to the agreement.  However, it is likely to become increasingly difficult for employees to argue that there should be an implied term of mutual trust and confidence in light of the decision in Barker.

In relation to policies, procedures and handbooks, it is best to include a term in an employment contract which requires employees to comply with company policies however expressly states that the policies do not form part of the employment contract.  This means that the company can update its policies as and when necessary, without amending the employment contracts.