Byrne v Australian Airlines Limited; Frew v Australian Airlines Limited

[1994] HCATrans 415

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S24 of 1994

B e t w e e n -

GEORGE ALBERT BYRNE

Applicant

and

AUSTRALIAN AIRLINES LIMITED

Respondent

Office of the Registry

Sydney No S25 of 1994

B e t w e e n -

GEORGE MORTIMER FREW

Applicant

Byrne 1 8/8/94

and

AUSTRALIAN AIRLINES LIMITED

Respondent

Applications for special leave

to appeal

MASON CJ
GAUDRON J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 8 AUGUST 1994, AT 11.00 AM

Copyright in the High Court of Australia

MR B.J. GROSS, QC:  May it please the Court, I appear with

MR R. REITANO for the applicants in each case.

(instructed by Carroll & O'Dea)

MR D.F. JACKSON, QC:  If the Court pleases, I appear with my

learned friend, MR L.S. KATZ, for the respondent in each matter. (instructed by Freehill Hollingdale &

Page)

MASON CJ: Yes, Mr Gross.

MR GROSS:  Your Honours, these cases raise questions

concerning the relationship between the federal

award requirements and contractual employment

obligations. We would submit also that the

Full Bench decision leaves inadequate scope for

implied terms in contracts of employment, whether

one sees such terms as being of the particular type

in this case or of other kinds.

Your Honours, the Full Bench found against the applicants on a number of bases which we submit are open to challenge. The Full Bench found that there

was no term implied in law which was imported into

the employment contract. In relation to that, we

would submit that the Full Bench erred. The Full

Bench largely contented itself with distinguishing

or reading down dicta or holdings by the High Court

in, I think, five cases. Having rejected the

authority of those propositions, the court then

proceeded to find no residual basis for a term
implied in law.

Your Honours, we would submit that some of the analysis of the court was infected by

Byrne 2 8/8/94

considerations which are relevant to implied terms

which are presumed from the relationship between

the parties in that the court said it was

unnecessary for such a term to be implied, given

the existence of rights under the award. We would

submit that there should not have been this

infecting influence in relation to the question of

whether the term is implied in law.

We would submit that the Full Bench also erred

in looking to some signs of intention behind either

the award or the Act itself for importing such a

term implied in law.

MASON CJ: Did you submit that the provisions of the award

were incorporated by reference into the award as

distinct from submitting that they were implied

according to a BP v Shire of Hastings-type

implication.

MR GROSS:	Yes, Your Honour.
MASON CJ:	You did?
MR GROSS:	Yes, we make that submission and we have made it

in the past, Your Honour.

The nature of the problem that is protecting

the security of employment of employees governed by
the award is one which is appropriately dealt with

as a term implied in law because that concept is

used to apply to classes of contracts rather than

individual particular contracts. Further,

Your Honours, there is scope under that heading to

give proper effect to the policies of the law,

including the common law in its development and its

application to workers, apart from matters such as

the award and the Act.

It is traditional in this area of employee

protection that one defines obligations of the

employer or rights of the worker in terms of

generic expectations, given the existence of the

relationship and, of course, into that is imported

modern concepts which are receiving world-wide

recognition of the dignity of the worker and of the

need to provide qualified job security.

Your Honours, we would submit that the effect

of the Full Bench decision is to greatly reduce the

scope for general legal concepts of this kind in

employment contracts. The alternative basis, that

is the presumed intention of the parties in the

circumstances, was rejected by the Full Bench.

There appears to have been two fundamental bases

for this rejection: one that such an implied term

was not necessary to give business efficacy to the

Byrne	8/8/94 contract because the award provided, in terms, for
the particular right and, presumably, there was a
remedy provided by virtue of the fine; the second
basis was that an employer would scarcely agree to
his freedom being fettered in this way.

Concerning that question of whether such an

implied term was necessary to give business

efficacy to the contract, we would submit that it

was necessary since otherwise - - -

MASON CJ: But, surely, implication here is not a matter of

business efficacy, is it? Would you not be looking

rather to a Liverpool City Council v Irwin basis

implication?

MR GROSS:  Your Honour, we have already formulated that

under the heading of implied in law. I was moving

from that particular concept to the question of

whether it is implied in fact from the actual

transactions between the parties and, Your Honours,

on the question of whether it is an implied term of

the second variety - that is of the sort dealt with

in the BP Refinery case - we submit the Full Bench

itself fell into particular errors.

In asking whether business efficacy is given

to the contract, one asks whether or not there is

worthwhile protection given to the employee in the

circumstances. The employee, in the absence of

some such implied term, has to rely upon his award

rights and the machinery for enforcement of those
rights under the award and Act.

The employee has to incur costs and delay in

pursuing such a remedy. The maximum remedy

possible is a $1000 fine and, of course, that

provides for the fine being anywhere between naught

and $1000. There were no costs orders made in

respect of such proceedings. There is a discretion	as to who shall receive the benefit of the penalty.	It may go, under section 352 of the Act, to
consolidated revenue, it may go to the worker or, if in fact, the union is the one suing, to them.
What we would submit is that there is no real protection if, in fact, the award protection is
illusory so far as the worker himself is concerned and, of course, there is no meaningful sanction on
the employer who can take the risk, having regard to the small amount of financial penalty which is
entailed, following a successful prosecution.

The second basis upon which we would attack

the Full Bench's analysis is that if the award

rights were not incorporated into the contract, it leaves the employment contract with a gap in it in

Byrne 4 8/8/94

relation to a fundamental matter, that is, the

circumstances in which the employment can be

terminated by the employer.

Your Honours, the Full Bench decision does not address the problem that if it is right the

contract of employment either has no term as to the

circumstances in which the employment can be

terminated or, alternatively, it has a term

expressed in general language but which would

necessarily either be contradicted by or qualified

by the terms of the award. So that, Your Honours,

circumstances in which an employment contract can

be terminated would ordinarily be part of the

employment contract. It would be odd if, in fact,

one has running parallel a general entitlement

under the contract and a more specific and refined

criterion set out in the award. We would submit

that the award necessarily must qualify the

contract. If it is to do so it would do so by

modification of the contract rather than by having

two independent sources of correction of wrongful

termination of employment.

Your Honours, the third matter we would raise in relation to this part of the case is that the

implied term of the relevant kind - in this case in

terms of the language of the award - became a

crystallized custom of the industry; that is, that

termination would only occur in accordance with

clause ll(a).

The point has been made in our learned

friend's submissions that we did not argue such

matter before the Full Bench. I have given my

learned friend a copy of the written submissions

and we did, in fact, raise the point based on

usage which, of course, is the same as custom.

The concept of crystallized custom explains

much of the reality of employment conditions and how they are considered as tacitly embodied in	relevant contracts of employment. This approach
appears to have been adopted to a large degree in
England and we would submit that that is an
alternative way of approaching the problem.

There is the further question raised that

there was error in the Full Bench decision on the question of whether or not the terms of the award operated so as to render purported termination in breach of its requirements not only illegal but

void and, for that purpose, the Full Bench

distinguished the decision of this Court in

Automatic Fire Sprinklers Pty Limited v Watson.	We
would submit that there was no valid basis for so
distinguishing that case and we would submit that

Byrne 8/8/94

this case does raise the question as to the

applicability of the doctrine laid down by this

Court in that case.

Your Honours, we have also raised, in our

written submissions, the question which, in our

submission, ought be explored as to whether

termination of the employment contract can give

rise to a tortious remedy. We know that my learned friend, in his submissions, says this was not dealt

with in the court below and, by implication, was
not argued. However, once again, we have given my

learned friend a copy of the written submissions

made before the Full Bench and the matter is

explicitly raised in paragraphs 19 and 20 of those

submissions.

The Full Bench did not deal with the matter

but, Your Honours, we submitted in the court below
that the award obligation may arguably be seen as
either varying or giving definitive content to the

traditionally implied obligation on the part of the

employer to deal with his employee on the basis of

good faith and fair dealing in relation to the

issue of termination of employment. It matters not

whether the employer's duty is thereafter defined

in terms of contract or by reference to a new tort

and we then refer to Gibson v Parkes District

Hospital, the decision of Justice Badgery-Parker,

where it was held that the remedy was tortious

rather than contractual.

On that issue, Your Honours, we note that the

House of Lords has expressed preference for the

concept that it is contractual rather than tortious

and we have adopted that position ourselves in

argument throughout. But nevertheless, we would

submit that the inter-reaction between contractual

concepts and tortious concepts in this area is a

matter that the Court may wish to expound upon.

been developments in other countries concerned with Your Honours, we acknowledge that there has	the obligation to act fairly to an employee. There
is, of course, a body of doctrine concerned with
the mutual obligation of confidence and trust as between employer and employee, as the New Zealand Court of Appeal recognized in the case of
Marlborough Harbour Board v Goulden.

In the end, Your Honours, we gain comfort from

these developments but we would submit that where,

in fact, one has an express stipulation in terms of

the nature of the employer's obligation it is more

appropriate for the purposes of the case to

formulate the duty in that more refined way defined

by the award rather than by reference to general

Byrne 6 8/8/94

concepts of fairness or, to adopt the language in

some of the other cases, the implied mutual

covenant of good faith and fair dealing. But,

Your Honours, where the Full Bench says that these

matters were not argued or relied upon, those

assertions are contradicted by the written

submissions.

Your Honours, a further question - and this is

- was whether or not the applicant's action comes within the concept of breach of statutory

also addressed in the written submissions to the with

duty. Once again, my learned friend has the copy

of the submissions now.

We asserted that the appellants' actions would

appear to fit in with what is generally regarded as

being the requisite ingredients of an action for a

breach of statutory duty; that is, where an action

is brought for violation of interest protected by

statute. The question of breach of statutory duty

has not been our most favoured submission, in terms

of how we have emphasized matters or how the courts

have responded, but nevertheless the question of

whether a breach of statutory duty can arise in the

circumstances is a matter, we submit, worthy of

consideration.

Your Honours, the question of whether one is

dealing with contractual remedies or tortious

remedies when one is dealing with breach of

obligations of good faith and fair dealing or

equivalently expressed obligations has been dealt

with in England by the House of Lords in Scali.	It
has been dealt with very incisively, we would
submit, in the American cases and we have given
Your Honours some references to that literature.
Your Honours, the point made by my learned friend in submission is that legislation has
overtaken matters; that is that the Industrial

Relations Act has been amended so as to provide an

express limited remedy. We would submit that that

proposition does not survive examination of the

amending Act or of the second reading speech.

Might I hand up for Your Honours' brief examination

the extracts from the second reading speech and the

relevant legislation.

Before Your Honours go to that material, can I

put the following points. First, that Act only
operates from 30 March 1994 and, of course, does

not affect dismissals occurring prior to that time.

The amendments were originally in 1993 and, of

course, there was subsequent curtailing of

employees' remedies by the amendments in 1994.

Byrne 7 8/8/94

That has the effect that employees earning over

$60,000 per annum do not have remedies of this

kind. So that we would submit that apart from the

question of lack of retrospectivity to terminations
occurring before 30 March 1994, there is the

further consideration that this legislation only provides remedies to employees earning less than

$60,000 per annum.

Your Honours, the further point we would make

is that Your Honours will see that the legislation

was not intended to displace existing remedies.

Your Honours will see from the second reading

speech by Mr Brereton - that was made on
28 October 1993 at a stage when Gregory v Philip

Morris was still the law and before the Full Bench

had overruled that particular decision. If

Your Honours would go to the marked page in yellow,

on page 4, it was said:

The termination provisions will apply

where employees have no protection that

adequately meets our international

obligations, such as the protection already

widely available through the 1984 termination,

change and redundancy test case.

That, of course, is the case which gave rise to the

award provisions of the kind which we see in the

present case.

Your Honours, just two sections, if I may,

section 170DE is the express provision in respect

of "Harsh, unjust or unreasonable termination".

MASON CJ: It is 170DE and 170EB.

MR GROSS:  Yes, Your Honours have it. We would submit that

it is appropriate that one does have the two

entitlements, that is the entitlement under the Act

and the entitlement which we argue proceeding

alongside each other, and it seems to have been the	intent of the legislature that both should continue
rather than that one should cancel out the other.
I think that completes my submissions.

MASON CJ: Thank you, Mr Gross. Yes, Mr Jackson.

MR JACKSON:  Your Honours, the principal ground of

opposition to the grant of special leave is that

the decision is not attended by sufficient doubt.

May I come to that in just a moment. We would also

draw attention to the fact that whilst there are,

no doubt, some cases in being under the Act in its

form before the amendment, the issue in this case,

in our submission, has disappeared for the future.

Byrne 8/8/94

Could I just say something about the position

in the future. Your Honours, the position is, for

the future, that section 170DE(l), by its own
force - not as being part of an award but by its
own force - prevents there being termination
without valid reasons of the kind there referred to

and subsection (2) deals with harsh, unjust or

unreasonable terminations and 170EE provides

remedies, including some provision for

compensation.

One also has section 179 which gives a right to an employee to recover moneys due pursuant to an

award and that has always relevantly existed as has

the provision in section 178(4) for a penalty. The

combination of those provisions shows that whatever

might have been the position in the past, the

position for the future, in a sense, is established

as a new and different thing.

Your Honours, may I turn then to the question

whether the judgment below is attended by

sufficient doubt. The first thing I mention, if I

may, in passing, is that at pages 105 and 106 the

Chief Justice in the Federal Court deals with a

matter germane, I think, to a question raised by

Your Honour the Chief Justice this morning about

whether some duty should be implied. That appears
under the heading Other Matters on page 105,

towards the bottom of the page, and you will see

that His Honour says:

the appellants sought a declaration that the

respondent owed them a duty to treat them

fairly ..... does not appear to have been

developed before Hill J and was not the

subject of argument on appeal.

On the next page, going down to line 15 on that

page, His Honour referred to there being:

implication of terms as a legal incident of

contracts of employment.

He refers to developments in England and New

Zealand and then goes on to say, between lines 13 and 15:

There was, however, no argument specifically

directed to this very important question, nor

was there any precise formulation of the

suggested implied term of general application.

If I could just deal for a moment with the question

of implied terms, it is undoubtedly true, speaking
as a broad proposition, that the+e are various

circumstances which may result in the implication

Byrne 9 8/8/94

of terms. It may be, in the ordinary contractual

way that one sees in BP (Westernport) v Hastings;

it may also be by virtue of the circumstances of

the relevant relationship, something implied, as it

were, by law in the rather stricter sense to which

I think Your Honour was referring earlier.

But, Your Honours, in either case, the

situation is one which does depend on the type of

agreement and, although one may classify them as

legally two separate things, in fact the

considerations which, in a case such as this would

militate in favour or against the implication of

such a term, would overlap and, indeed, for

practical purposes, in our submission, be the same.

One has a situation where there is a statute

empowering the making of awards; there is a body

which then has a power to make the awards; the

awards have application in the context of employer

and employee; and the question which then arises is

whether, as a matter of law, for one reason or

another, there should be such an implication.

Your Honours, the matters that would be of

significance in that regard, in either event, would

be two - or perhaps principally two. One would be

the question whether if one looked at the position

of those affected by it it might be expected that

they would treat it as such; that is a relevant but

not a decisive consideration. The other is the

question whether it is necessary to do so; and

necessary, one can treat as being "necessary"

meaning simply what the word means. Another way of

treating it is by saying it is a matter of business

efficacy.

But, Your Honours, in either event, as we seek

to submit in paragraph 24 of our summary of

argument, it may well be that the parties to a

contract of employment should be treated in a

colloquial sense as having agreed to be bound by

that the agreement is something which should be	the terms of the award. But it does not follow
treated, or they should be taken to have agreed to
be treated as something attracting contractual as
well as statutory sanctions.

McHUGH J: What is the jurisprudential analysis of a

situation where the employer starts up business

after the award has been made and is not a member

of a respondent employer's organization?	I am
talking about a federal award.	Do the terms of the

award become part of the contract in that

situation? If they do, on what basis?

Byrne 10 8/8/94

MR JACKSON:  Your Honour, in the ordinary course of events,

it is complicated by the constitutional limitation,

of course, on Commonwealth power. Perhaps if one
did a State case, Your Honour - perhaps Your Honour

is thinking of a Commonwealth case.

MCHUGH J:	I was, yes.
MR JACKSON:	Your Honour, in the case of a Commonwealth

award, then their not being parties to the
dispute - that is the first possibility, they are

not bound - - -

McHUGH J: Yes, so that goes out.

MR JACKSON:  That goes out. The second situation,

Your Honour, is that they can be persons who are
members, say, of an organization which is bound by
it and let us say they are then bound by the

award - - -

McHUGH J:  So assuming that neither the employer nor the

employees are members of any of the respondent

organizations to the award.

MR JACKSON:  Then, Your Honour, the award does not bind as a

matter of statutory law nor as a matter of contract

by itself. Of course, it is possible that there

would be an agreement that the terms on which they

would be employed are terms that are similar to

those in the award and, Your Honour, one talks a

little in the past, I suppose, because separate

agreements are now more common than was the. fact in

the past. But in circumstances where there is an

agreement to be employed on terms of the award,

then it is perhaps easier to say those terms are

implied as a matter of contract.

If one has a situation though where one is

talking about people who are bound by the award,

there is not, Your Honour, we would submit, any

than that; that is that both sides are bound by the	real basis for saying that there is any more to it
award, obligations, either side, to be enforced in the manner provided for by it without there being
liability for contractual remedies, on either side,
if there is a breach of it. Your Honour, I do not know that I can - - -

MCHUGH J: Yes.

MR JACKSON:  Your Honours, the last thing I mentioned, is,

of course, a matter of some significance because it

is very easy to say - if one is looking at it from

the point of view of the employee - the right thing

is that the employee should have the benefit

contractually as well as anything else. But the

Byrne 11 8/8/94

coin does have a second, perhaps, less attractive

side and that is that the employee may be liable to

damages for breach and, Your Honours, some of the

damages that could be the result of employees'

breaches, in particular cases, could be very very

substantial; the works are brought to a halt. If

by reason of the negligence of an employee if the

employee's obligation to take care is made
contractual then there is a possibility of
contractual suit for all sorts of things; or simply

employees not turning up on time and the machinery

becomes overheated, fuses and so on.	I will not
multiply examples.

So, Your Honours, in relation to the question of implication of a term as a matter of law, the

two possible ways, in our submission, overlap as a

practical matter and we would refer Your Honours to

the passages referred to in paragraph 23 of our

summary of argument, namely the view taken at

pages 168 to 170 by Justices Beaumont and Heerey

and also the passage quoted by Mr Justice Keely at

page 112. Could I go to page 168 for just a

moment, Your Honours.

Your Honours will see there, in a passage

commencing at line 5 which goes through to page 170

line 19 and the points that are made seem to be

these - on page 168 line 20:

each contract of employment would still have

business efficacy if the terms of the Award

were not be implied into it.

That is elaborated upon at the bottom of the page.

At the top of the next page there is a discussion

of the situation prior to 1984 and then, between

lines 10 and 14:

Countless such contracts were perfectly

workable and effective despite the absence such a term. Then, at line 17, not -	of -
something that "goes without saying" -

and Your Honours will see the development of that

in the last few lines on that page and the top of

the next page. That is referring to the position

of the employer but, of course, a converso.

Your Honours, if one moves from the

implication of a term by one means or another and

one goes to the question whether there is some kind

of crystallized custom in relation to it, that

appears to be a matterthat, whilst it is true that

Byrne 12 8/8/94

the written submissions on behalf of the present

applicants in the Court of Appeal referred to the

possibility of there being a custom though by

another name or the usage as it was put - that does

not appear to have been something that attracted

the members of the Full Court at all. The issue

does not seem to be dealt with at all and that

seems to be really a very unsuitable vehicle to be

put for the court to base its decision on.

Your Honours, so far as the next basis that

was relied upon, that is the termination being

illegal and valid, that appears to depend upon the

matters to which we have referred in our written

submissions at paragraph 17, and that is the

decision of the court in Automatic Fire Sprinklers
Pty Limited v Watson.

That case was one dealing with the provision of the wartime manpower regulations and what was

said in that case was that it was held to be, as a

matter of construction of Regulation 14(1), that a

termination in contravention of that regulation was

ineffectual.

We have given Your Honours the references in

the various pages to where the issue was dealt with

and it is, in our submission, apparent enough that if one looks at those what the court was doing was

to say if one looks at the terms of the regulations it is obvious they intended to prevent this kind of

activity happening; the relationship would not come

to an end and, Your Honours, one can understand

that if one looks at the particular type of

regulation that was involved.

But, Your Honours, when one comes to the present case, what one sees is that all that there

is is a clause in the award which provides that a

termination shall not contravene the clause of the

award - that is all it says.	The Act under which
it is made provides then for there to be sanctions

in respect of it and we would submit that it is

really not possible to draw the inference that the
termination not merely attracts the sanctions
provided for by the Act but also has the effect

that the employment continues. But, in any event,

Your Honours, that surely must be no more than a

question of construction of the particular award in

the particular case.

So, Your Honours, our submissions are, for the

reasons which we have set out in our written

submissions, that the decision of the court below,

the decision of majorities on the various issues,
are not sufficiently attended by doubt and the case

does not merit the grant of special leave.

Byrne	13	8/8/94
MASON CJ:	The Court need not trouble you, Mr Gross.	There

will be a grant of special leave to appeal.

MR GROSS: If the Court pleases.

McHUGH J: This is probably addressed to Mr Gross.

Mr Gross, one thing that causes me a little concern

with the Full Court judgment is the Shepparton Felt

& Textiles point. On the analysis of the award,

and seeing that the Full Court takes the view that
if procedural fairness is denied then there is a
breach, and the termination would be set aside,
even if subsequently there came to light the

clearest possible evidence suggesting that the

employee was guilty of, say, stealing, or whatever

the particular facts indicate. I must say on an

argument on appeal I would want to hear some

argument about that. I do not know whether that is

Mr Jackson or you that that should be addressed.

MR GROSS:  Your Honour, we are happy to do so. Your Honour,

can I say that this problem has come up a bit in

relation to resume fraud overseas where the

employee comes under notice, then it is realized

that there has been some prior conduct that would

have, if known, justified terminating for that
reason. So, we have the problem of subsequently

acquired knowledge. It has been dealt with in the

English cases, Your Honour, but we would be very

happy to address that consideration. Your Honours,

can I say that the Full Bench - - -

McHUGH J:	The reason I draw attention to that is because of the findings of fact of Justice Hill in this
particular case.

MR GROSS:  Yes. Your Honours, there was an extra problem

that Justice Hill found that it was both

substantively fair and procedurally fair, but then

when the Full Bench dealt with it it dealt with the

procedural unfairness, left untouched the

problem in this case, because were the matter to go	substantive findings and so that creates a bit of a
back, or were this Court to overturn the Full Bench
decision, we still have the problem that we have
not defined whether or not the applicants were
guilty of the conduct alleged or not, and that
depended upon inferences to be drawn in effect from
celluloid evidence.

MASON CJ:  You may have to give attention to the grounds in

your notice of appeal.

MR GROSS:  Yes, Your Honour, we will, and we realize that

they will require adjustment to deal with all

relevant matters.

Byrne 14 8/8/94

MASON CJ:  Do you wish to say anything about that,

Mr Jackson?

McHUGH:	It is probably in your interests, I think.
MR JACKSON:	Your Honour, the position is just this, that there is no doubt that the primary judge made a
finding substantively against our learned friend's
clients. That was not dealt with by the Full Court
and it is perhaps a little difficult to work out
why it was not. There was an appeal against it and
that does not seem to have been dealt with. They
said it was not necessary to deal with it.
Your Honours, we would be urging, of course, but it
may only be a matter that in the end goes to the
quantum of damages, that if it be that there be a
procedural failure, the situation would yet be one
where any damages which could be awarded would only be small because - relying on Shepparton Felt
& Textiles' analogous concepts perhaps - the
situation was one where the dismissal was something that was appropriate anyway.

So, Your Honour, that is the way in which we

would be seeking to put that. It does not take

away the anterior point to which my learned friends referred, but it does make the case somewhat messy.

I should also say, Your Honours, that there may be

other matters that we would seek to rely on at the

hearing, the hearing before this Court, of which we

have given notice to our learned friends, in

relation to some of the views taken by the courts

below.

McHUGH J: Are you going to argue the procedural point as

well? You did in the courts below?

MR JACKSON:  Yes, Your Honour.

MASON CJ: Thank you, Mr Jackson. There will be a grant of

special leave to appeal in each of these cases.

AT 11.41 AM THE MATTER WAS ADJOURNED SINE DIE

Byrne 15 8/8/94