Concut Pty Ltd v Worrell

Case [2000] HCA 64

HIGH COURT OF AUSTRALIA

GLEESON CJ,
GAUDRON, McHUGH, GUMMOW AND KIRBY JJ

CONCUT PTY LTD  APPELLANT

AND

IVOR WORRELL & ANOR       RESPONDENTS

Concut Pty Ltd v Worrell [2000] HCA 64
14 December 2000
B85/1999

ORDER

1.        Appeal allowed with costs.

2.Set aside orders 1 and 2 made by the Court of Appeal of the Supreme Court of Queensland on 5 February 1999 and in place thereof, order that the appeal to that Court be dismissed with costs.

On appeal from the Supreme Court of Queensland

Representation:

P A Keane QC with A K Herbert for the appellant (instructed by Hopgood Ganim)

J S Douglas QC with P D T Applegarth for the respondents (instructed by Mullins & Mullins)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Concut Pty Ltd v Worrell & Anor

Contract – Employee under oral contract of employment executed written contract with employer – Employee guilty of serious misconduct before date of written contract justifying summary dismissal under oral contract – Employer summarily dismissed employee not knowing of misconduct – Whether written contract a new and discrete contract that entirely replaced oral contract or whether oral contract varied – Whether written contract removed employer's right under oral contract to dismiss employee summarily – Whether terms in written contract relating to dismissal had prospective operation only – Terms implied by law into contract of employment.

  1. GLEESON CJ, GAUDRON AND GUMMOW JJ.   This appeal raises issues respecting the application of general principles of the law of contract to the termination of an employment relationship.

  2. At the relevant times, the appellant ("Concut") carried on in several States and the Australian Capital Territory the business of concrete sawing, concrete drilling, grooving of concrete and other surfaces, and the texturing of concrete and other surfaces.  The respondents succeeded the Official Trustee in Bankruptcy in the administration of the bankruptcy of Geoffrey John Wells, a former employee of Concut.  The affairs of Mr Wells had been administered by the Official Trustee from on or about 2 July 1997, after the commencement of the present litigation.  The respondents were appointed joint and several trustees in place of the Official Trustee by resolution passed at a meeting of the creditors of Mr Wells' estate held on 28 April 1999.

  3. In the period before 1980, Mr Wells was employed by a related corporation of Concut as a sales representative.  He moved to Brisbane in November 1980 and became Queensland Branch Manager for Concut.  At this stage, the terms of the employment relationship between the parties were not reduced to writing.  However, on 1 December 1986, Concut and Mr Wells executed a document headed "SERVICE AGREEMENT" ("the Service Agreement").  Recital B thereof stated that Mr Wells "is an employee of and shareholder in [Concut]" and recital C stated that they "have entered into this Agreement to record the terms and conditions of the employees [sic] employment with [Concut]".  At the…

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Details
AGLC
Concut Pty Ltd v Worrell [2000] HCA 64
Case
[2000] HCA 64
Decision Date

CaseChat Overview and Summary

Concut Pty Ltd appealed to the High Court of Australia against a decision of the Court of Appeal of the Supreme Court of Queensland. The dispute concerned the summary dismissal of an employee, Mr Worrell, by his employer, Concut Pty Ltd. Mr Worrell had engaged in serious misconduct prior to the execution of a written employment contract, which misconduct would have justified his summary dismissal under an earlier oral contract of employment. However, Concut Pty Ltd was unaware of this misconduct at the time of dismissal.

The central legal issues before the High Court were whether the written contract of employment entirely replaced the prior oral contract, thereby extinguishing the employer's right to dismiss for pre-contractual misconduct, or whether the written contract served to vary and supplement the oral agreement. The Court was also required to determine whether the terms relating to dismissal within the written contract had only prospective operation and whether any implied terms in the oral contract were abrogated by the written agreement.

The High Court reasoned that the written Service Agreement was intended to vary and supplement, rather than rescind, the oral employment agreement. The Court applied objective contractual interpretation, considering practical and commercial realities, to conclude that the parties did not intend for the Service Agreement to wholly discharge the former oral agreement and excuse all later discovered misconduct. The Court found that the Service Agreement did not contain sufficiently explicit provisions to deprive the employer of its common law remedies for serious breaches of fundamental implied terms, such as fidelity and good faith. The Court held that the employer was entitled to rely on its common law rights, which were not inconsistent with the Service Agreement, to dismiss the employee for the discovered misconduct.

The High Court allowed the appeal, setting aside the orders of the Court of Appeal and dismissing the appeal to that Court with costs.

Orders

Orders of the court

1. Appeal allowed with costs.

2. Set aside orders 1 and 2 made by the Court of Appeal of the Supreme Court of Queensland on 5 February 1999 and in place thereof, order that the appeal to that Court be dismissed with costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

GLEESON CJ, GAUDRON AND GUMMOW JJ (dissent) HUGH J KIRBY J (dissent)
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. [73]Gill v Colonial Mutual Life Assurance Society Ltd [1912] VLR 146; Bell v Lever Brothers Ltd [1932] AC 161 at 227-228; Sybron Corp v Rochem Ltd [1984] Ch 112 at 121, 123, 128, 130; McCarry, "The Employee's Right to Silence", (1983) 57 Australian Law Journal 607 at 612; cf Collins, "Implied Duty to Give Information During Performance of Contracts", (1992) 55 Modern Law Review 556.Conclusion 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 I agree in the orders proposed by Gleeson CJ, Gaudron and Gummow JJ[74].[74]Reasons of Gleeson CJ, Gaudron and Gummow JJ at [39].

Ratio Decidendi

Legal Principle Established

Established by: HUGH J,

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.[71]Notably cll 2, 8, 11, 13 as described in the reasons of Gleeson CJ, Gaudron and Gummow JJ at [21].[72]cf Houssein v Under Secretary of Industrial Relations and Technology (NSW) (1982) 148 CLR 88 at 94: it is "a valuable servant, but a dangerous master"; Colquhoun v Brooks (1888) 21 QBD 52 at 65.The governing consideration of the parties' intention 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. 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.