n this case, the Supreme Court of New South Wales found that a term in an employment contract which permitted summary termination where, “in the opinion of” the employer, the employee had engaged in serious misconduct required only that the employer formed the opinion (without any implied qualifications on the formation of that opinion) and not proof of the serious misconduct. Parties to a contract (in particular, an employment contract) should take care when drafting termination rights which are tied to the opinion of a party to express any qualifications on the formation of that opinion as Courts may be reluctant to imply any qualifications.
Mr Bartlett was an executive of the Australia and New Zealand Banking Group Limited (ANZ). Mr Bartlett’s employment contract (Contract) stated that “ANZ may terminate your employment at any time, without notice, if, in the opinion of ANZ, you engaged in serious misconduct…”. It was alleged that Mr Bartlett leaked to a journalist a confidential internal email which reflected the concern of ANZ management that its Institutional Property Group was becoming too reliant on loan exposure, and that he also doctored the email to state: “No more lending. We are closed for business. Do not tell the market or our clients”.
Adamson J in the Supreme Court of New South Wales found that to terminate the Contract pursuant to the relevant clause, ANZ need only prove that it held the opinion that Mr Bartlett was guilty of serious misconduct (and need not prove actual guilt of serious misconduct). In so finding, Her Honour:
- held that the words “in the opinion of” are not gratuitous and there is nothing surprising or uncommercial about giving the words their full force and effect having regard to the nature of the Contract and the capacity of Mr Bartlett’s conduct to affect ANZ’s reputation;
- stated the tests for the implication of a term, namely that: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; and (5) it must not contradict any express term of the contract; and
- rejected Mr Bartlett’s submissions that:
- there was an implied term in the Contract that the opinion was required to be “correct”;
- there was an implied term in the Contract that the opinion must be formed in accordance with ANZ’s Performance Policy. (The Contact expressly provided that (unless expressly stated), policies were not incorporated); and
- there was an implied term in the Contract that the opinion must be reasonable, formed in good faith, and neither capricious nor arbitrary. Adamson J found this question more difficult as the question of whether contractual powers and discretions may be limited by good faith and rationality requirements adopted and adapted from public law is not settled. Nonetheless, Her Honour held that such terms did not meet any of the tests.
Adamson J was ultimately satisfied that the ANZ held the opinion that Mr Bartlett was responsible for sending the doctored email and it was common ground that this amounted to misconduct.