A recent decision1 of the Supreme Court of New South Wales has demonstrated how carefully drafted employment agreements can make it easier for employers to summarily dismiss employees. In this case, the manner in which the employment agreement was drafted meant that the employer, Australia and New Zealand Banking Group Limited (ANZ) only had to hold an “opinion” that the employee, Mr Bartlett, had engaged in serious misconduct, rather than having to demonstrate that he actually committed serious misconduct.  

THE FACTS

On 15 August 2012, ANZ terminated Mr Bartlett’s employment without notice on the basis of serious misconduct; at the time Mr Bartlett was the Director of ANZ’s Institutional Property Group (ANZ IPG) for New South Wales. Mr Bartlett brought legal action against ANZ suing for damages for breach of contract and alleging that he was not guilty of serious misconduct, and as a result, ANZ should not have been able to terminate his employment without notice. Mr Bartlett was claiming damages of $9 million in respect of lost remuneration and bonuses on the basis that he would have continued to work for ANZ for another ten (10) years.

The most contentious issues in the proceedings were whether Mr Bartlett was responsible for sending a doctored email to a journalist from the Australian Financial Review (AFR).

On 20 June 2012, Mr Law, Head of ANZ IPG sent an email addressing concerns that the IPG was becoming too reliant on loan exposure. Consequently, ANZ IPG proposed a tightening of its requirements for proposed loans.

This email was printed and sent to ten (10) recipients, one being Mr Bartlett.  In June 2012, a journalist from AFR informed ANZ that he had received an email in the post.

The email sent to the journalist was the email from Mr Law dated 20 June 2012; however, the email was doctored to include:

‘No more new lending. We are closed for business. Do not tell the market or our clients.’

Given the serious nature of the matter, an investigation was commenced to identify the person who sent the doctored email. Interviews were conducted on the ten recipients. The interviewers found that the other recipients were ‘relaxed and matter-of-fact.’ However, Mr Bartlett appeared ‘nervous, red-faced and flustered.’ Further, one of the recipients Mr Blake, State Director of Victoria ANZ mentioned that Mr Bartlett was concerned about the proposal, which would impact his ability to obtain capital for his deals, and hence his yearly bonuses. The financial motive for the doctored email was to relax the loan restrictions.

The interviews also revealed that Mr Bartlett was the only recipient to have had any dealings with the journalist. This was a significant finding as the journalist’s mailing address was not found on the AFR website. A handwriting expert was engaged to review the handwriting on the envelope; the expert concluded that it was highly probable that Mr Bartlett wrote on the envelope that was received by the journalist. The interviewees were also given a statutory declaration in relation to their involvement in the doctored email. Of the interviewees, Mr Bartlett was the only one who was hesitant in signing without legal advice.

During this period, ANZ IPG was also undergoing a restructure and some senior executives had their jobs at risk. During the restructure, it was proposed that Mr Bartlett’s position was to be merged with another. IT investigations also discovered that Mr Bartlett had been communicating with the Commonwealth Bank of Australia (CBA) for a position.

Mr Bartlett’s employment was terminated without notice for serious misconduct on 15 August 2012. ANZ’s contract for employment provides:

‘ANZ may terminate your employment at any time, without notice, if, in the opinion of ANZ, you engage in serious misconduct.’

Mr Bartlett initially contended that ANZ had to prove his guilt. In addition, he stipulated with regards to termination, that an implied term existed with respect to ‘ANZ’s opinion’ and had to be ‘reasonable, correct, and with proper regard to the plaintiff’s interests.’ He argued that it was implied that such an opinion had to be formed in good faith and be neither capricious, arbitrary nor unreasonable.

The New South Wales Supreme Court found that with reference to Clause 14 - Termination by ANZ, the company did not need proof to terminate employment. Rather, termination was entitled if ANZ had the opinion that Mr Bartlett was guilty of serious misconduct. The Court rejected Mr Bartlett’s arguments concerning implied terms that must be construed within the contract. It held that the test for an implied term failed in this instance because it would contradict an express term in the contract.

THE DECISION

The Court concluded that ANZ did hold the opinion that Mr Bartlett engaged in serious misconduct and that they were entitled to terminate his employment without notice.

WHAT DOES THIS MEAN FOR EMPLOYERS?

This case highlights the importance of careful drafting in employment contracts. It is important that employment contracts contain clear and certain terms. This decision has reinforced the court’s reluctance to imply a term that is inconsistent with express terms in a contract.

It is an opportunity for employers to consider the effect that their misconduct and termination clauses will have and whether they are sufficiently clear. Employers may consider revising their termination and misconduct clauses to be broader so that they have greater opportunity and scope to summarily terminate employees for serious misconduct.