In the much anticipated decision of the High Court in Commonwealth Bank of Australia v Barker [2014] HCA 32 (10 September 2014) a majority of the High Court held there was no common law duty of mutual trust and confidence implied as a term in an employment contract and overturned the Full Federal Court’s $317,000 damages award to a bank executive who brought the claim against the bank.

The High Court considered whether, under the common law of Australia, employment contracts contain a term that neither party will, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of trust and confidence between them.

High Court moves away from judicial law making

In a decision that will be welcomed by employers around the country, the majority of the High Court said the creation of a new standard of that kind was a form of ‘judicial-law making’ and ‘not a step to be taken lightly’.

The majority went on to find that the implied term of mutual trust and confidence imposes mutual obligations ‘wider than those which are “necessary”, even allowing for the broad considerations which may inform implications in law. It goes to the maintenance of a relationship’.

Other implied duties concerning the conduct of employers and employees remain in employment contracts

The majority of the High Court said that its rejection of the implied duty of trust and confidence did not affect the existing implied duty of cooperation, which prohibits conduct that would frustrate the performance of a contract.

Further, Chief Justice French and Justices Bell and Keane said their rejection of the implied term of mutual trust and confidence does not impact on the question of whether there is a general obligation to act in good faith in the performance of contracts.