Concut Pty Ltd v Worrell and Another
[2000] HCA 64(2000) 176 ALR 693
(Decision by: Kirby J)
Concut Pty Ltd
vWorrell and Another
Judges:
Gleeson CJ
Gaudron J
McHugh J
Gummow J
Kirby J
Subject References:
Employment
Contract
Oral contract of employment and subsequent written contract
Whether second contract terminated and replaced first contract
Whether second contract removed or compromised employer's right to dismiss employee
Whether duty on employee to disclose past faults.
Employment
Unfair dismissal
Employer not aware of misconduct at time of summary dismissal
Whether misconduct available to employer to resist action for damages for wrongful dismissal.
Contract
Agreement
Oral contract of employment and subsequent written contract
Whether second contract terminated and replaced first contract.
Legislative References:
Trade Practices Act 1974 (Cth) - 52
Industrial Relations Act 1971 (UK) - The Act
Case References:
Coulton v Holcombe (1986) - 162 CLR 1; 65 ALR 656
Griffin v London Bank of Australia Ltd - (1919) 19 SR (NSW) 154
Gordon & Gotch (Australasia) Ltd v Cox (1923) - 31 CLR 370
Byrne v Australian Airlines Ltd (1995) - 185 CLR 410; 131 ALR 422
Stratton v Illawarra County Council - [1979] 2 NSWLR 701
Meek v Port of London Authority - [1918] 2 Ch 96
Stocznia Gdanska SA v Latvian Shipping Co - 1 WLR 574; [1998] 1 AllER 883
Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd - [1974] AC 689
Holland v Wiltshire (1954) - 90 CLR 409
Taylor v Raglan Developments Pty Ltd - [1981] 2 NSWLR 117
Sterling Engineering Co Ltd v Patchett - [1955] AC 534
Scally v Southern Health and Social Services Board - [1992] 1 AC 294
Malik v Bank of Credit and Commerce International SA (in liq ) - [1998] AC 20
Lever Brothers Ltd v Bell - [1931] 1 KB 557
Demagogue Pty Ltd v Ramensky (1992) - 39 FCR 31
Blyth Chemicals Ltd v Bushnell (1933) - 49 CLR 66
Adami v Maison de Luxe Ltd (1924) - 35 CLR 143
Shepherd v Felt and Textiles of Australia Ltd (1931) - 45 CLR 359
Official Trustee in Bankruptcy v Concut Pty Ltd - [1999] QCA 3
Employment Secretary v Associated Society of Locomotive Engineers and Firemen (No 2) - [1972] 2 QB 455
Vine v National Dock Labour Board - [1957] AC 488
Hill v C A Parsons Ltd - [1972] Ch 305
Automatic Fire Sprinklers Pty Ltd v Watson (1946) - 72 CLR 435
Qantas Airways Ltd v Christie (1998) - 193 CLR 280; 152 ALR 365
Ryder v Foley (1906) - 4 CLR 422
Fletcher v Nott (1938) - 60 CLR 55
Kaye v Attorney-General (Tas ) (1956) - 94 CLR 193
Reedman v Hoare (1959) - 102 CLR 177
Coutts v Commonwealth (1985) - 157 CLR 91; 59 ALR 699
English and Australian Copper Co Ltd v Johnson (1911) - 13 CLR 490
Independent Management Resources Pty Ltd v Brown - [1987] VR 605
Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) - 132 CLR 373
Timber Engineering Co Pty Ltd v Anderson - [1980] 2 NSWLR 488
Printing Industry Employees Union of Australia v Jackson & O'Sullivan Pty Ltd (1957) - 1 FLR 175
Boston Deep Sea Fishing and Ice Co v Ansell - (1888) 39 Ch D 339
Clouston & Co Ltd v Corry - [1906] AC 122
Re Rubel Bronze and Metal Co Ltd and Vos - [1918] 1 KB 315
Orr v University of Tasmania (1957) - 100 CLR 526
Lucy v Commonwealth (1923) - 33 CLR 229
Automatic Fire Sprinklers Pty Ltd v Watson (1946) - 72 CLR 435
Pan Foods Co Importers & Distributors Pty Ltd v Australian and New Zealand Banking Group Ltd (2000) - 170 ALR 579; 74 ALJR 791
Colquhoun v Brooks - (1888) 21 QBD 52
Gill v Colonial Mutual Life Assurance Society Ltd - [1912] VLR 146
Bell v Lever Brothers Ltd - [1932] AC 161
Sybron Corp v Rochem Ltd - [1984] Ch 112
Suggested reading:
Hearing date: 20 June 2000
Judgment date: 14 December 2000
Canberra
Decision by:
Kirby J
[46] In Shepherd v Felt and Textiles of Australia Ltd [47] Starke J observed that an employee is "bound to render faithful and loyal service to the [employer], and not to do anything inconsistent with the continuance of confidence between them". [48] This appeal requires this court to reconsider that dictum in contemporary circumstances and in the particular facts of this case. Those facts are sufficiently stated in the reasons of Gleeson CJ, Gaudron and Gummow JJ. [49]
A surprising outcome needing clear legal authority
[47] The outcome of the decision of the Court of Appeal of Queensland [50] immediately strikes one as surprising. Mr Wells (the employee) was formerly employed in a responsible and senior management position by Concut Pty Ltd (the employer). He was dismissed summarily following alleged "significant misconduct" in the use, for his own private purposes, of the employer's property and the services of its employees. Yet the Court of Appeal held, by majority [51] that, although such misconduct was established, the employer was not, in law, justified in summarily terminating the employee's services as it did.
[48] By inference, then, the employer was obliged to retain and tolerate the dishonest employee. [52] It was required to maintain its daily dealings with him; to engage with him in the many transactions common to the employment relationship; and to trust him with a position giving him access to its funds and the direction of its employees. If it wished to get rid of him at once, it was inherent in the Court of Appeal's conclusion that this could only be done lawfully by mutual agreement or by paying him his "entitlements" under the service agreement (the agreement) which it had executed with him. That agreement was executed after the employee acted dishonestly, while he was still employed by the employer, but before those acts were known to the employer.
[49] In the event, the employer, in fact, dismissed the employee summarily. The primary judge concluded, upon finding the relevant misconduct on the employee's part, that not only was the employer entitled to dismiss him in the peremptory way that it had, but that the employee was liable, on a counter-claim by the employer, to refund to the employer the costs involved in the employee's private use of its property and the services of its employees.
[50] Given the nature of an ordinary employment relationship, at least as here in the case of a senior employee serving as the Queensland Branch Manager of a private company with national operations, the result reached by the primary judge seems unsurprising and appropriate. The notion that an employer, in such a case, does not enjoy a right summarily to terminate the relationship with such a senior employee, would appear to be an odd one: one out of step with common sense. To suggest that the common law would effectively insist that such parties continue in the personal, and often quite close and trusting, relationship of employment, as if nothing had happened, would seem remarkable. [53] The effect of this would be to demand the employer put out of mind (as it were) the discovery of the misconduct, and continue to pay the employee under the supervening service agreement as if nothing had occurred. This is a conclusion to which a court would need to be driven by clear legal authority or by singular factual circumstances of the case, so far undisclosed in this matter.
Five applicable legal propositions
[51] Five basic starting points may be stated for the elucidation of the applicable law. I did not take them to be disputed by the parties:
- 1.
- No statutory provision, regulation or industrial award governed the case, obliging an outcome different from that derived from the application of the principles of the common law of employment. [54] In Australia it will sometimes be the case that a federal or state statute or award will control what may be done in a case of employment termination. [55] This was not the case here.
- 2.
- Nor was this a case governed by any special body of common law, such as, for example, the prerogatives of the Crown and its successors in the engagement and dismissal of employees in some positions in the public domain. [56] In such cases the employee may serve at the will of the Crown or its successor. Subject to statute or special agreement, the Crown may then terminate such service at will. Again, the present was not such a case.
- 3.
- The ordinary relationship of employer and employee at common law is one importing implied duties of loyalty, honesty, confidentiality and mutual trust. At common law: [57]
[c]onduct which in respect of important matters is incompatible with the fulfilment of an employee's duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal. [58] ... [T]he conduct of the employee must itself involve the incompatibility, conflict, or impediment, or be destructive of confidence. An actual repugnance between his acts and his relationship must be found. It is not enough that ground for uneasiness as to its future conduct arises.
In the present case, the findings at trial went beyond mere uneasiness as to the future. They necessitated, or at least warranted, a conclusion that the "confidence" essential to the relationship of employer and employee had been destroyed. [59] Instead of pursuing the interests of the company and its shareholders, the employee had pursued his own private interests. Not only was the employee in breach of his duty of fidelity and trust owed to the employer, he had remained in breach of that duty to the date of the trial. Until that time he had not accounted for the benefits wrongly appropriated by him. Indeed, he had denied any wrongful appropriation. The issue so tendered at the trial was determined against the employee. [60] He was then subject to the employer's counter-claim for an order to make a refund. Such order was duly made at trial. [61] It was not contested on appeal. Given his senior status in the company's service and the nature and extent of the misconduct disclosed in the evidence and accepted by the primary judge, it was open to him to find that the employee had undermined the confidence essential to the ongoing relationship of employment. Prima facie, this had afforded a legal justification for the employee's summary dismissal.
- 4.
- It is, however, only in exceptional circumstances that an ordinary employer is entitled at common law to dismiss an employee summarily. [62] Whatever the position may be in relation to isolated acts of negligence, incompetence or unsuitability, [63] it cannot be disputed (statute or express contractual provision aside) that acts of dishonesty or similar conduct destructive of the mutual trust between the employer and employee, once discovered, ordinarily fall within the class of conduct which, without more, authorises summary dismissal. Exceptions to this general position may exist for trivial breaches of the express or implied terms of the contract of employment. [64] Other exceptions may arise where the breaches are ancient in time and where they may have been waived in the past, although known to the employer. [65] Some breaches may be judged irrelevant to the duties of the particular employee and an ongoing relationship with the employer. [66] But these exceptional cases apart, the establishment of important, relevant instances of misconduct, such as dishonesty on the part of an employee like Mr Wells, will normally afford legal justification for summary dismissal. Such a case will be classified as amounting to a relevant repudiation or renunciation by the employee of the employment contract, thus warranting summary dismissal. [67]
- 5.
- The particular misconduct of the employee, upon which the employer relied in this case, was not known to the employer at the time of the employee's dismissal. It was discovered later and relied on at the trial. However, as a matter of law, it was certainly open to the employer to rely on it. The question was not whether the employer was aware of grounds to justify the course which the employer adopted. It was whether such grounds and justification existed . [68]
The supervening contract did not extinguish the earlier agreement
[52] Because the employer had in fact purported to terminate the employment relationship, the only relevant legal issues at trial were whether the employer was entitled in law to so act and, if it was not, what was the measure of the employee's damages. [69] The employee's argument against the employer's exercise of its asserted right to dismiss him summarily was based, essentially, upon three related propositions: (1) that the relevant term of his employment was governed by the service agreement and was for a fixed period; (2) that the right to terminate that employment short of that term was the subject of a specific provision in the service agreement which therefore governed the case; and (3) that the conduct in question occurred during a different, earlier, oral contract and thus did not attract the express provisions for termination afforded by the service agreement. It will be observed that these arguments rest upon the hypothesis that the employment contract between the employer and the employee was relevantly defined, and exhaustively defined, by the service agreement. I would reject this hypothesis.
[53] It is true that the service agreement between the employer and the employee contained detailed provisions for dismissal for misconduct. It is also true that some of the provisions of the agreement would, on the face of things, appear to attract a prospective construction directed at the ongoing employment relationship. Clause 6 of the agreement states that the appellant may summarily dismiss the respondent without notice "[i]f at any time during his employment ... the Employee ... (a) [s]hall be guilty of any serious misconduct ... [or] (f) [s]hall dispose of ... any of [the appellant's] property other than in the ordinary course of the business of [the appellant] without the written consent of [the appellant]". This would limit the application of the service agreement to the time of the employment pursuant to the agreement itself and not before.
[54] However, viewing the matter in a practical and businesslike way as befits such a service agreement with such an employee, [70] it seems scarcely likely that the written provision for dismissal for misconduct (cl 6) was adopted by the parties with a purpose of depriving the employer of any accrued rights under the term implied into the employment relationship between the parties constituted by the former oral agreement between them. It is impossible to accept that the execution of the service agreement was intended, during the operation of the agreement, to deprive the employer of remedies otherwise available to it for breach of such an implied term, subsequently discovered. There is no express provision to such effect in the terms of the service agreement itself. There is no recital that the service agreement had been negotiated and concluded between the parties in discharge of rights and obligations accrued before it came into effect. The essential character of the relationship between the parties before and after the service agreement commenced remained the same, namely that of employment. Indeed, the employment description, by which the employee was maintained in the employer's service, remained precisely the same: namely Queensland Branch Manager.
[55] The foregoing facts are given emphasis by provisions in the service agreement which contemplated, and acted upon, the continuation of the previous oral agreement between the parties, at least for some purposes. [71] In such circumstances, it would be yet another illustration of impermissible expressio unius reasoning [72] to conclude that the express provisions of the service agreement, such as cl 6, were intended to replace whatever legal consequences flowed from the previous oral agreement between the parties, including for any breach of such agreement. The better, more practical and commercially realistic view is that the service agreement was intended to vary and supplement the oral employment agreement between the parties, not to rescind it.
The governing consideration of the parties' intention
[56] Problems of the present kind are usually resolved by the law of contract by reference to the imputed intention of the parties to the contractual relations, as expected here in the successive oral and written agreements. Of course, that "intention" is to be ascertained objectively. In a case such as the present, ordinary practical and commercial considerations militate strongly against a conclusion that the service agreement wholly discharged the former oral agreement and excused every later discovered instance of misconduct that had occurred during the currency of the employment, however serious. The service agreement simply did not deal with the problem which later arose. It would take much more explicit provisions in the service agreement to persuade me that it was intended, objectively, to deprive the employer of the remedies normal to the discovery by it of such a breach by a senior employee of one of the most basic terms ordinarily implied in an employment contract. This is particularly so given the essential character of an employment relationship recognised by the common law, which continued from the commencement of the oral contract until the employee's dismissal, regardless of the intervening execution of the service agreement.
[57] Once this conclusion is reached, most of the other points argued in this appeal fall away. The case is revealed for what it is: nothing more than the invocation of an ordinary remedy belonging to an employer who discovers a serious breach by, in this case, a senior employee of a fundamental term implied into an employment contract by force of law. This is the term that such an employee will exhibit fidelity and good faith in dealing with the employer and its assets and property, avoiding conduct incompatible with the continuing trust between them. The special terms of the service agreement were not inconsistent with the continuing operation of that implied term. Nor were they incompatible with its availability to the employer who discovered a breach of such term during the currency of the service agreement.
[58] No question therefore arises, in this case, as to the obligation of an employee to disclose past misconduct to the employer when the latter contemplates a fresh contract with him. [73] Such questions may be presented by way of defence to an attempt by an employee to enforce a contract with a new employer made in ignorance of supervening misconduct. But here, the employer was not new and the employee was summarily dismissed. The only question was whether the employer was entitled in law to act as it did. If it was so entitled, no further question is presented as to the employee's entitlements whether by reference to the service agreement or otherwise.
Conclusion
[59] The employer in this case did not have to rely on the service agreement for the dismissal. It relied, as it was entitled to do, on its rights at common law. Those rights were not incompatible with the service agreement. The primary judge was correct to so hold. The majority in the Court of Appeal erred in disturbing the judgment which followed that conclusion at trial. Such judgment should be restored.
Orders
[60] I agree in the orders proposed by Gleeson CJ, Gaudron and Gummow JJ. [74]