Bartlett v Australia & New Zealand Banking Group Ltd

Court of Appeal (NSW)|2015-09-15|Before: Macfarlan JA, Meagher JA, Simpson JA, Adamson J

00 K & M Prodanovski Pty Ltd v Calliden Insurance Ltd [2012] NSWCA 117 Maredelanto Compania Naviera SA v Bergbau-Handel GmbH; The Mihalis Angelos [1971] 1 QB 164 Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd [2015] FCAFC 127 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (No 2) [2014] NSWCA 425 Murray Irrigation Ltd v Balsdon [2006] NSWCA 253; 67 NSWLR 73 New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 New Zealand Shipping Co Ltd v Société des Ateliers et Chantiers de France [1919] AC 1 Russell v The Trustees of the Roman Catholic Church for the Arch-Diocese of Sydney [2008] NSWCA 217; 72 NSWLR 559 Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84; 117 ALR 393 TCN Channel Nine Pty Ltd v Hayden Enterprises Pty Ltd [1989] 16 NSWLR 130 United Group Rail Services Ltd v Rail Corporation New South Wales [2009] NSWCA 177; 74 NSWLR 618 Water Board v Moustakas [1988] HCA 12; 180 CLR 491 Wiki v Atlantic Relocations (NSW) Pty Ltd [2004] NSWCA 174; 60 NSWLR 127 Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381 Category: Principal judgment Parties: Paul William Bartlett (Appellant) Australia & New Zealand Banking Group Ltd (Respondent) Representation: Counsel: A J Sullivan QC/T Brennan (Appellant) C J Murdoch (Respondent)

Solicitors: A R Conolly & Company (Appellant) Ashurst Australia (Respondent) File Number(s): CA 2014/370134 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Common Law Division Citation: Bartlett v Australia and New Zealand Banking Group Limited [2014] NSWSC 1662 Date of Decision: 24 November 2014 Before: Adamson J File Number(s): SC 2012/351555

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] On 15 August 2012 the respondent Bank summarily dismissed the appellant, Mr Paul Bartlett, from his employment with it. Mr Bartlett was the State Director of the Bank's Institutional Property Group in New South Wales. The Bank's letter of termination of that date stated that, following an investigation, it had found that Mr Bartlett had amended a copy of a confidential internal email and posted it to Mr Matthew Cranston, a journalist employed by the Australian Financial Review. The letter alleged that this constituted serious misconduct warranting Mr Bartlett's summary dismissal. Thereafter Mr Bartlett commenced proceedings in the Common Law Division of the Supreme Court claiming damages for wrongful dismissal. Following a hearing in November 2014, Adamson J rejected Mr Bartlett's claim and directed the entry of judgment for the Bank ([2014] NSWSC 1662). Her Honour found that Mr Bartlett was responsible for the doctoring of the email and its posting to Mr Cranston, and that his summary dismissal was therefore justified. If her Honour had found for Mr Bartlett on liability, she would have assessed his damages at $74,495, on the basis that if the Bank had not purported to dismiss Mr Bartlett summarily it would, as it would have been entitled to do, have terminated his employment without cause on four months' notice (or by making payment in lieu of notice). On appeal, Mr Bartlett challenged her Honour's findings both as to liability and damages. For the reasons given below, the Court considered that the appeal on liability should be allowed and that the damages assessed by her Honour should be varied only by a limited amount which was the subject of agreement between the parties. Held, allowing the appeal (per Macfarlan JA, Meagher and Simpson JJA agreeing): (1) When construed in its context, the Bank's power to summarily terminate depended upon the objective occurence of "misconduct" of Mr Bartlett, not simply the opinion of the Bank that that had occurred ([30]-[34]). (2) The Bank did not discharge its onus of proving that Mr Bartlett had engaged in the alleged misconduct because the handwriting evidence upon which it relied did not warrant that conclusion ([75]-[76]). (3) Even if it had been sufficient that the Bank was of opinion that Mr Bartlett had engaged in the alleged misconduct, the Bank was obliged in forming the opinion to act reasonably, at least in the Wednesbury sense and at least so far as its process, as distinct from the result, was concerned. It did not do this, as a result of deficiencies in its investigation of the alleged misconduct ([49]). (4) If the Bank had not wrongfully summarily terminated Mr Bartlett's employment, it would have exercised its contractual right to terminate his employment by giving him four months' pay in lieu of notice ([80]-[85]). (5) (Per Macfarlan JA and Meagher JA; Simpson JA not deciding) that the Bank's power to terminate on notice was not subject to a requirement that it act reasonably ([87] and [106]-[107]). (6) For these reasons, Mr Bartlett is entitled to damages for the Bank's breach of contract in wrongfully dismissing him. Those damages are equivalent to four months' pay, plus interest ([92], [98] and [108]).

Judgment

MACFARLAN JA: On 15 August 2012 the respondent Bank summarily dismissed the appellant, Mr Paul Bartlett, from his employment with it. Mr Bartlett was the State Director of the Bank's Institutional Property Group in New South Wales. The Bank's letter of termination of that date stated that, following an investigation, it had found that Mr Bartlett had amended a copy of a confidential internal email and posted it to Mr Matthew Cranston, a journalist employed by the Australian Financial Review (the "AFR"). The letter alleged that this constituted serious misconduct warranting Mr Bartlett's summary dismissal.
Thereafter Mr Bartlett commenced proceedings in the Common Law Division of the Supreme Court claiming damages for wrongful dismissal. Following a hearing in November 2014, Adamson J rejected Mr Bartlett's claim and directed the entry of judgment for the Bank ([2014] NSWSC 1662). Her Honour found that Mr Bartlett was responsible for the doctoring of the email and its posting to Mr Cranston, and that his summary dismissal was therefore justified.
If her Honour had found for Mr Bartlett on liability, she would have assessed his damages at $74,495, on the basis that if the Bank had not purported to dismiss Mr Bartlett summarily it would, as it would have been entitled to do, have terminated his employment without cause on four months' notice (or by making payment in lieu of notice).
On appeal to this Court, Mr Bartlett challenges her Honour's findings both as to liability and damages. For the reasons given below, I consider that the appeal on liability should be allowed. The damages assessed by her Honour should be varied only by a limited amount which is the subject of agreement between the parties.

FACTUAL CIRCUMSTANCES

For the purposes of this appeal, it is sufficient to give the following brief summary of the factual circumstances. A detailed description of them is contained in her Honour's judgment ([2014] NSWSC 1662 at [4]-[110]).
On 20 June 2012 Mr Eddie Law, the head of the Bank's national Institutional Property Group (the "IPG"), sent an email to the IPG's State Directors and Heads of Research Analysis concerning changes to the Bank's policies for the remainder of the financial year which was to conclude on 30 September 2012. The email fixed 3.00pm on that day as a time for Mr Law to speak by telephone from Melbourne with various Bank employees in Sydney to whom the policy changes were relevant. About 40 or 50 people gathered in the Sydney Office at that time. As Mr Bartlett was the most senior employee present, he outlined the changes using a copy of the email as a speaking note. The copy was printed by Ms Fiona Martinez who was Mr Bartlett's executive assistant. Mr Law then addressed the meeting by telephone.
On 3 July 2012 Mr Cranston of the AFR telephoned Mr Lawrence, the IPG's Queensland State Director, and told him that he had received by post a copy of an email dated 20 June 2012 from Mr Law to Mr Lawrence. Mr Cranston subsequently provided a copy of the copy email to Mr Law, together with a scanned copy of the handwritten envelope in which he had received it. The copy email was an amended version of Mr Law's actual email of 20 June 2012. Its amended form was as follows, the portions added to the original being shown in bold: "FROM: Law, Eddie SENT: Wednesday, 20 June 2012 1:10 PM TO: Lawrence, Matthew; CC: Subject: Re: ANZ Balance Sheet is Closed for Remainder of Year for Property Deals The key discussion points from the announcements from Mike Smith and Alex Thursby are as follows: Focus going forward is on Balance Sheet productivity. No more new lending. We are closed for business. Do not tell the market or our clients. This means that we will need to prioritise deployment of new capital. In order to do so we may seek to free up capacity by non renewal/ sale of assets. Selling down existing exposure and prioritisation of future exposure may negatively impact the revenue line, however this has been provided for. Rgds Eddie Law Global Head Commercial Property Group, ANZ Sydney"
At the instance of Mr Kevin Corbally (the Bank's Head of Relationship Banking and Mr Law's superior), Mr David McGowan (the Bank's Head of Group Investigations) was appointed to conduct an investigation into the doctoring of the email and the despatch of a copy to Mr Cranston. He was to be assisted by Mr Michael Smith.
Thereafter, Mr McGowan conducted an investigation, professing to comply with the Bank's protocol dated 3 May 2012 entitled "Performance Improvement & Unacceptable Behaviour Policy". This provided for both "substantive and procedure fairness" to be afforded to employees. The "Process Overview" in the document included the following: "Depending on the nature of the allegation, the Investigation should include the following steps: . . . 4. Give the employee a reasonable opportunity to respond. This includes the opportunity to: - respond to each and every allegation made against them - respond to any evidence that may be relied on to make a finding through evidence of their own - raise any mitigating factors or other information they want taken into account - provide a written response if they wish."
The investigation commenced with the identification of the 10 addressees of the email (including Mr Bartlett) as the "persons of interest". It included IT investigations carried out by Mr Dean Thompson of the Bank's IT Department. The primary judge summarised Mr Thompson's conclusions as follows: "29 Mr Thompson's unchallenged findings as a result of the searches he had conducted of ANZ's electronic systems were: (1) The 20 June 2012 email was only printed once, by Ms Martinez at 2.37 pm on 20 June 2012. (2) No one received an electronic copy of the 20 June 2012 email other than the named recipients and none of those recipients sent it to anyone else electronically. (3) Of the recipients of the 20 June 2012 email, only Mr Blake and Mr Wiltshire were able to copy data onto USB drives. Such copying was not possible for the other recipients. (4) No records of alterations to the 20 June 2012 email could be found on the computer or laptop hard-drives of the recipients of the email either in current or deleted files. (5) No versions of the doctored email had been sent to an internal or external ANZ email address to be printed to a non-ANZ printer. 30 Mr Thompson's unchallenged evidence was that CSIRT's system was only able to identify documents that had been printed if the documents had been saved onto a computer or laptop before or after the document had been printed. If someone had printed an unsaved document, an electronic search would not be able to identify that the document had been printed. I accept Mr Thompson's conclusion that this was how the doctored email was created and why there was no record of its having been created or printed."
Because the envelope posted to Mr Cranston was posted in Sydney, Mr McGowan inferred that it was highly likely that it was sent by one of the six Sydney recipients of the email. As a result, Mr Smith conducted interviews with those recipients, who included Mr Bartlett. Further, he obtained a report from Ms Michelle Novotny, a forensic document and handwriting examiner, who was provided with a copy of the doctored email, a copy (but not the original which remained in Mr Cranston's possession) of the envelope in which the copy email was sent and specimen documents said to have been written by Mr Bartlett, who by this stage was the focus of Mr McGowan's investigation.
Mr Novotny's one page report (dated 9 August 2012) concluded as follows: "The examinations are limited by the reproduction nature of the envelope to consideration of only the pictorial features of the handwriting that are evident on the copy submitted. A detailed examination of the original document could also take into account the finer details of structure and dynamic qualities (such as the order of strokes and fluency). As a result, the conclusion expressed is qualified. In the absence of the original envelope, it is also necessary to assume that the copy submitted is a true depiction of the document it purports to represent (i.e. that it is not a reproduction of a document that is the product of some form of manipulation) I observed numerous pictorial similarities between the questioned handwriting and the Bartlett specimens. While not all elements in the questioned handwriting could be accounted for in the available Bartlett specimens, I did not observe any fundamental or consistent differences between them. There are several letters appearing in the questioned handwriting that appear only a few times or not at all in the Bartlett specimens so their consideration in the examination was limited or precluded altogether. Within the limitations of the reproduction nature of the handwritten envelope, I concluded that it is highly probable that the questioned handwriting was written in original form by the writer of the Bartlett specimens."
She explained that the expression "highly probable" meant: "I am almost certain that the questioned writing/signature was written by the writer of the specimens. However, some limiting factor, often the amount of writing in question and/or when the questioned document is a reproduction, has reduced the level of certainty attainable, and I cannot entirely eliminate the possibility of this being another person's writing, but consider this to be highly unlikely."
Thereafter, Mr McGowan and others interviewed Mr Bartlett again. Mr McGowan declined to provide Mr Bartlett, who was accompanied to the meeting by his solicitor, with a copy of Ms Novotny's report but Mr McGowan read Ms Novotny's conclusion to him, as well as her explanation of the meaning of the term "highly probable" (see [12] and [13] above). Mr Bartlett sought, but was denied, the opportunity to obtain an expert report in response.
The transcript of the interview includes the following record of observations made by Mr McGowan to Mr Bartlett: "The document examiner makes a finding that it's highly probable it's your handwriting. There [were] 10 people that received the email, of which you were 1. There were 6 people in Sydney that could have mailed it here, of which you were 1. You're the only person in that group who has admitted having knowledge of the journalist Matthew Cranston."
Mr Bartlett denied doctoring the email and sending it to Mr Cranston and asserted that he had no motive to do so.
Mr McGowan's report dated 13 August 2012 concluded as follows: "Conclusion We are satisfied there is sufficient circumstantial evidence to show Paul BARTLETT was responsible for this media leak, as a consequence BARTLETT's actions are in breach of the ANZ Code of Conduct & Ethics, principles 1,2 & 7. The basis for this conclusion is: BARTLETT was one of 10 staff who received the original email on 20/6/2012. BARTLETT was one of 6 Sydney based staff who could have posted the article in NSW. BARTLETT was the only one who acknowledged knowing Matthew Cranston. BARTLETT's handwriting was matched to the envelope used to post the offending material. BARTLETT appears to have a motive to cause damage to Eddie Law's reputation and standing. BARTLETT was aggrieved by the decision to reduce available capital and felt it would impact his sales targets?"
On 15 August 2012 Mr Bartlett and his solicitor met with Mr Corbally and another Bank officer. Again a request by Mr Bartlett for a copy of Ms Novotny's report and the opportunity to obtain a response was declined.
Mr Corbally then asked Mr Bartlett to explain why, in April 2010, he had been issued with a warning by the Bank about a breach of its policy relating to the completion of training courses. Mr Corbally also asked Mr Bartlett whether he had been considering leaving the Bank. On the primary judge's findings, Mr Corbally concluded that Mr Bartlett lied to him in responding to both questions and Mr Corbally no longer felt that he could trust Mr Bartlett (Judgment [105]-[106]). After a break in the meeting, Mr Corbally told Mr Bartlett that his employment with the Bank was terminated without notice for serious misconduct. The Bank's confirmatory letter of 15 August 2012 gave the reason for the termination as the Bank's findings that Mr Bartlett had doctored the confidential internal email and posted it anonymously to Mr Cranston at the AFR.

Mr Bartlett's contract with the Bank

The parties to the proceedings accepted that the terms of Mr Bartlett's contract of employment were set out in the Bank's letter to him of 25 November 2008. Presently relevant terms were as follows: "10. Codes, Policies and Procedures, Performance Management Plans 10.1 Codes, Policies and Procedures In addition to the terms and conditions contained in this employment agreement, ANZ has codes, policies and procedures that apply to your employment (although, unless stated otherwise, they are not specifically incorporated into this employment agreement). These codes, policies and procedures may be varied by ANZ from time to time. You must read, and be familiar with, all ANZ codes, policies and procedures as varied from time to time. … 13. Disciplinary Action If you fail to comply with the provisions of your employment agreement or any other ANZ performance requirements, ANZ may take disciplinary action which may include suspension with or without pay and, in certain circumstances, termination of your employment with ANZ (see clause 14). 14. Termination of Employment 14.1 Termination Entitlements Your termination entitlements will depend upon the circumstances of the termination and are set out in this clause. Your entitlement (if any) to deferred shares and options upon termination of employment will be determined in accordance with the terms of the Employee Share Acquisition Plan (ESAP) and the Employee Share Option Plan (ESOP), as varied from time to time at ANZ's sole discretion. No other entitlements, benefits or any other form of compensation will be payable to you upon the termination of your employment with ANZ. 14.2 Resignation You may resign from your employment by giving ANZ 2 months' written notice. You and ANZ may agree on a lesser period of notice, or ANZ may in its discretion waive the notice period or any part of it. If ANZ waives the notice period or any part of it, ANZ will pay you an amount in respect of the waived period (or part of the period) up to a maximum of 2 months pay, calculated on the basis of your Total Employment Cost (TEC), as described in Schedule A. During the notice period or any part of it, ANZ may direct you not to perform all or part of the duties of your position, to cease communication with customers, suppliers, employees and contractors of ANZ and not to attend your principal place of work. 14.3 Termination by ANZ a) Termination with Notice ANZ may terminate your employment for any reason by giving you 4 months' written notice. Alternatively, ANZ may elect to provide you with payment in lieu of notice or a combination of notice and payment in lieu of notice. Payment in lieu of notice made under this clause will be calculated on the basis of your Total Employment Cost (TEC) as described in Schedule A. During the notice period or any part of it, ANZ may direct you not to perform all or part of the duties of your position, to cease communication with customers, suppliers, employees and contractors of ANZ and not to attend your principal place of work. b) Immediate Termination Without Notice ANZ may terminate your employment at any time, without notice, if, in the opinion of ANZ, you engage in serious misconduct, serious neglect of duty, or serious breach of any of the terms of this employment agreement. In such circumstances, you will be entitled to payment of your Total Employment Cost (TEC) (as described in Schedule A) up to the date of termination only."
Schedule A, to which Clause 14.3 referred, identified the Total Employment Cost ("TEC") as comprising a combination of salary, superannuation and other agreed benefits, stated to total $250,000 in 2008. By 15 August 2012 the TEC was $330,000 (Judgment [178]). A document entitled "ANZ Equity Grants - Conditions of Grant" stated that, unless the Bank's board otherwise determined, deferred shares issued to Mr Bartlett would be dealt with as follows: "In case of dismissal for serious misconduct, then all unvested Deferred Shares and any vested shares remaining in trust will be forfeited. … In case of termination on notice, all unvested Deferred Shares, as at the time notice of termination is received by you, will be forfeited."
The reference to "unvested" Deferred Shares was stated to be to those shares in respect of which the specified deferral periods had not been completed.

The judgment at first instance

The primary judge noted that Mr Bartlett's primary submission was that the Bank was only entitled to terminate his contract summarily if it could prove that he was in fact guilty of serious misconduct. Conversely, the Bank contended that it was sufficient that it held the opinion that there had been serious misconduct (provided as it accepted on appeal, that the opinion was held bona fide). As her Honour also noted, the difference was potentially important because Mr Bartlett adduced expert handwriting evidence at the hearing before her that contradicted the conclusions in the report of Ms Novotny obtained by Mr McGowan, and the Bank tendered further reports from Ms Novotny. If the Bank's position was correct, this evidence would be irrelevant because the question would simply be whether, when the Bank terminated Mr Bartlett's employment, it bona fide believed that Mr Bartlett had been guilty of serious misconduct, even if he had not been.
The primary judge rejected Mr Bartlett's submission that to justify the termination the Bank had to prove that, as a matter of objective fact, he had been guilty of serious misconduct, concluding as follows: "134 In my view, the words "in the opinion of" are not gratuitous. There is nothing surprising or uncommercial about giving the words their full force and effect, having regard to the nature of the contract and the capacity of the employee's conduct to affect the reputation of the ANZ, both in its capacity as an employer and as a bank …"
Her Honour called in aid the decision of this Court in Interstar Wholesale Finance Pty Limited v Integral Home Loans Pty Ltd [2008] NSWCA 310; 257 ALR 292 and that of the High Court in Australian Workers' Union v Bowen (No 2) [1948] HCA 35; 77 CLR 601.
In Interstar, a loan origination and management agreement permitted its termination in circumstances which included the following: "(c) where the Originator or Originator's Representative has engaged in any proven deceptive or fraudulent activity in relation to an Application or a Settled Loan or Interstar considers, in its reasonable opinion, that the Originator or Originator's Representative has engaged in deceptive or fraudulent activity in relation to an Application or a Settled Loan." (see [18]).
The Court held that the second branch of this provision turned upon Interstar's "reasonable opinion" as to the relevant conduct. The structure of the provision left no doubt that this was so, as the first branch was explicitly concerned with whether activity had been engaged in as a matter of objective fact.
In Australian Workers Union v Bowen, the rules of a trade union provided that various of its committees could "dismiss from membership any member of the union who in its opinion is guilty of misconduct … " (at 606). The Court treated the relevant question as whether the committee in question bona fide held the opinion that the applicants had been guilty of misconduct, not whether that misconduct had in fact occurred. There does not appear to have been any contextual matter which could have supported a different view of the construction of the provision.

The correct construction of Clause 14.3(b)

On appeal, Mr Bartlett, without objection from the Bank, put an argument that was not put to the primary judge. That was that Clause 13 (see [20] above) is an important part of the context of Clause 14.3(b) and when regard is had to it, the conclusion should be drawn that termination by the Bank under Clause 14.3(b) requires the objective existence of "misconduct", not simply the opinion of the Bank that that has occurred. For the following reasons, I accept that argument.
Clause 13 permitted the Bank to take disciplinary action, including suspension of employment and, "in certain circumstances, termination". The pre-condition to the Bank taking such action was stated to be a failure to comply with the agreement or with any performance requirements. Satisfaction of that pre-condition was dependent upon an actual breach of the employment agreement (or performance requirements), not upon the Bank's opinion as to whether such a breach had occurred. Accordingly, Clause 13 only permitted termination where there had been a breach that could be established objectively and, even then, the right of termination was said to be available only "in certain circumstances".
To construe Clause 14.3(b) as permitting termination where there had in fact been no misconduct or other breach, but only the opinion of the Bank that that had occurred, would be to render the two provisions in conflict. Such conflict can be avoided by treating the "opinion of ANZ" referred to in Clause 14.3(b) as applicable to the seriousness of the misconduct or other breach, not to its existence. This construction would conform to the contemplation of Clause 13 that, where there was a breach, termination could only occur "in certain circumstances". On this approach, the "certain circumstances" would have been constituted by the Bank's formation of an opinion that objectively occurring misconduct or other breach was "serious". In my view this is an available construction of the words used in Clause 14.3(b).
Adoption of this approach would pay due regard to the severe consequences that would flow to Mr Bartlett from summary termination of his employment. As noted above, payment to him of his "Total Employment Cost" was to cease on the date of summary termination and any expectation of receiving a discretionary bonus would no doubt be dashed on summary termination. Moreover, any entitlement to Deferred Shares, whether unvested or vested, would cease upon summary dismissal (see [20] above) and Mr Bartlett's reputation would also be likely to suffer significant damage. As was said in Horkulak v Cantor Fitzgerald International [2004] EWCA Civ 1287; (2005) ICR 402 at [25], quoting Lord Hoffmann in Johnson v Unisys Ltd (2001) ICR 480 at 495, "a person's employment is usually one of the most important things in his or her life. It gives not only a livelihood but an occupation, an identity and a sense of self-esteem".
Another relevant consideration is that the agreement was entered into against the background that at common law an employer's right to summarily dismiss an employee is a narrow one. It will only arise where the employee has engaged in conduct "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" (Blyth Chemicals Ltd v Bushnell [1933] HCA 8; 49 CLR 66 at 81). Whilst parties may, by contract, confer a broader right to dismiss summarily, their contract should be scrutinized carefully before concluding that they have done so.
These considerations provide powerful reasons for adopting a construction of Clause 14.3(b) favourable to Mr Bartlett if, as I consider to be the case, it is amenable to more than one construction and Clause 13, with which it needs to be harmonised, is not.
For these reasons, I therefore take a different view to that taken by the trial judge concerning the construction of Clause 14.3(b) but note that what I consider to be the decisive argument (being that based on Clause 13) was, as I earlier mentioned, not put to her Honour. In neither of the case authorities that her Honour relied upon (see [25]-[28] above) did the relevant provision appear in a context that included another provision comparable to Clause 13 in the present agreement.
The consequence of accepting Mr Bartlett's construction of Clause 14.3(b) is that, for the Bank to succeed, it must establish that Mr Bartlett in fact engaged in the conduct that the Bank considered serious. Whether it established that is to be determined not simply by reference to the information obtained by the Bank's investigations through Mr McGowan, such as Ms Novotny's report of 9 August 2012, but by the whole of the evidence before the primary judge, including, most importantly, the evidence of Mr Bartlett's handwriting expert, Mr Stephen Dubedat, and Ms Novotny's supplementary evidence.
As the Bank accepted on appeal, if the Court construed Clause 14.3(b) favourably to Mr Bartlett, it could not succeed unless the Court was satisfied that the expert handwriting evidence established that Mr Bartlett wrote the name of the addressee and the address on the envelope sent to Mr Cranston. I shall turn to that handwriting evidence later.
Before doing so, I shall briefly address Mr Bartlett's fallback argument that, if the Court did not construe Clause 14.3(b) as I have construed it, the Bank's power under that provision should be held, either as a matter of its construction or implication of a term, as only exercisable if the Bank acted in good faith and not arbitrarily or unreasonably in exercising it. As noted above, the Bank accepted that it was required to act in good faith. However Mr Bartlett did not contend that it had not done so. By implication, the position is the same in relation to any requirement that the Bank refrain from acting arbitrarily. That leaves as an issue, to which I now turn, the question of whether the Bank was required to act reasonably, a concept that the Bank did not accept is embraced by the duty to act in good faith.

Whether the Bank was required to act reasonably

I commence with a brief review of some of the relevant authorities.
Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84; 117 ALR 393 concerned an agreement relating to the publication of a service station industry magazine. Gummow J found against the implication into the agreement of a broad term requiring the parties to act in good faith but said, relevantly to the present case, that: "Where one party has an express power the exercise of which will significantly affect the interests of the other party (eg by cancellation of their supply contract) if the holder of the power is satisfied that a certain state of affairs exists, the words of the contract are fairly readily construed (and the more so when the parties have given such a power to a third party) as requiring a reasonable as well as honest state of satisfaction: see the authorities referred to by Priestley JA and Handley JA in Renard Constructions, supra, at 260, 279-280, and see also Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527 at 532, 542-3; 92 ALR 601 and in the High Court, (1991) 104 ALR 1, 66 ALJR 123 at 135. But this is a result arrived at by a process of construction of the express terms in the setting of the contract as a whole. It is best not seen at all as the implication of a further term" (403-404).
Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; 69 NSWLR 558 concerned disputes between the parties to a franchise agreement. The franchisee contended that the franchisor's purported termination of the agreement was ineffective because the alleged breaches of contract upon which the franchisor relied to found the termination had not occurred. To support this contention, the franchisee alleged inter alia, that the franchisor was in breach of implied contractual terms to act reasonably and in good faith. This Court held that the agreement contained such terms (at [186]) but considered that there was "no distinction of substance between the implied term of reasonableness and that of good faith" (at [169]).
In United Group Rail Services Ltd v Rail Corporation New South Wales [2009] NSWCA 177; 74 NSWLR 618, Allsop P referred to the concept of good faith having been recognised by this Court in Burger King Corporation and other cases as "part of the law of performance of contracts" (at [58] and [62]).
In Commonwealth Bank of Australia v Barker [2014] HCA 32; 253 CLR 169, the employment of a bank employee was terminated for redundancy. The employee claimed damages, alleging that the bank was in breach of an implied duty of trust and confidence by not taking appropriate steps to redeploy the employee in the bank's business. The High Court found that the term should not be implied but noted that its decision was not to be taken as "reflecting upon the question whether there was a general obligation to act in good faith in the performance of contracts" nor reflecting upon the related question of "whether contractual powers and discretions may be limited by good faith and rationality requirements analogous to those applicable in the sphere of public law" (at [42]). The decision is thus not determinative of the question under consideration in the present case which relates to the construction of a specific power of termination, that on the Bank's case, is contingent upon the formation of an opinion by the Bank as to the conduct of Mr Bartlett. In Barker there was no express obligation on the bank to arrange redeployment. Rather, the employee contended that the obligation was part of an alleged general duty of trust and confidence owed by the bank.
In Intico (Vic.) Pty Ltd v Walmsley [2004] VSCA 90 a company general manager claimed damages from his employer on the grounds that the employer's summary dismissal of him was unjustified. The Victorian Court of Appeal rejected his claim that the employer was subject to an implied duty to afford him procedural fairness before dismissing him, holding that "whether the employer is contractually entitled to dismiss his employee depends upon whether the facts emerging at trial demonstrate breach of contract; it does not depend on whether the employer has heard the employee in his own defence" (at [17]). The decision does not dictate the answer to the question in the present case as there was there no issue as to the construction of an express contractual provision conferring a power of termination in the event of the employer's formation of a particular opinion.
The same comment is applicable to the decision of the Queensland Court of Appeal in Gramotnev v Queensland University of Technology [2015] QCA 127. In this case a self-represented litigant unsuccessfully contended that his contract contained general implied terms, including a duty of his employer "to exercise honest (sic), fairness, prudence, caution and diligence in the performance of the employment contract" (at [10]), to support an allegation that his employer was required to comply to his benefit with various of its policies and procedures that were found to be non-contractual.
In Braganza v BP Shipping Ltd [2015] UKSC 17; 1 WLR 1661, a contract of employment provided for payment of compensation to the widow of a deceased employee if the employer or its insurers formed a particular opinion concerning the circumstances of his death. The Supreme Court of England and Wales held that the employer was obliged to act reasonably in the Wednesbury Corporation sense (see Associated Provincial Pictures Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 at 233-4) in forming the opinion. Application of the Wednesbury standard invalidates a decision that is "so unreasonable that no reasonable [decision-maker] would ever have come to it" (Braganza at [24]).
Relevant to the present case is the observation of Lady Hale that the essence of a review for the purposes of applying this test is consideration of "the rationality of the decision-making process rather than [concentration] upon the outcome" (at [29]). The decision is consistent with the Victorian Court of Appeal decision in Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd [2014] VSCA 179; 288 FLR 374 (at [93]) in which a contractual duty to consider a certain matter was found to require compliance with the Wednesbury standard of reasonableness.
Further, Braganza is not inconsistent with the decision in Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd [2015] FCAFC 127 in which the Full Federal Court, whilst accepting (at [122]) that case authority supported the implication of a duty of good faith into the subject contract, declined to give it greater content in the context of that case than a duty of the parties to the contract to co-operate (at [150]). Again, the decision did not concern the construction of a termination provision such as that presently under consideration.
This review of relevant authorities leads me to the conclusion that, in forming an opinion under Clause 14.3(b) of Mr Bartlett's employment agreement, the Bank was obliged to act reasonably, at least in the Wednesbury sense and at least so far as its process, as distinct from the result, was concerned. The 1993 decision of Gummow J in Service Station Association v Berg Bennett stands unaffected by subsequent authority and warrants a conclusion that Clause 14.3(b) required "a reasonable as well as honest state of satisfaction" (see [40] above) on the part of the Bank. This conclusion is supported by the decision in Braganza and, in a more general way, by the decision in Burger King. It is not inconsistent with Barker because, as noted above, in that case the High Court specifically disclaimed the expression of a view on the present question.

Whether the Bank acted unreasonably

As, for the reasons that I have indicated, the answer to this question is not determinative of Mr Bartlett's appeal, I shall deal with it briefly, as I have done with the question of whether the Bank was required to act reasonably.
It is sufficient to conclude, as I do, that amongst a number of criticisms that Mr Bartlett made of the Bank's investigation upon which its purported summary termination of Mr Bartlett's employment was based, at least two were well-founded criticisms that demonstrate that the Bank did not act reasonably and that the extent of its departure from the standard of conduct which could be expected from a reasonable corporate employer was such as to satisfy the Wednesbury test (see [46] above).
First, the Bank's limitation of its investigation to the 10 recipients of the email and one other employee (Ms Danielle McCormack) was unwarranted. Mr Bartlett's Personal Assistant printed out a copy of the email for his use at the meeting on 20 June 2012, which some 50 to 60 people attended. Mr Bartlett told the investigators that he could not recall what he did with that copy, although in his evidence he said he gave it to named individuals. However, whichever be the case, the copy was unaccounted for by the investigation and by the evidence at the subsequent hearing. It may or may not have been the copy that was found in the filing tray of another Personal Assistant some weeks later. Whatever the source of the latter, there was ample opportunity for any one of a large number of people to take it, make a further copy and doctor it by one means or another. Counsel for the Bank accepted on the appeal that someone in possession of a photocopy of the email could have scanned it, put it on a computer and manipulated it, leaving no record of the email if it was not saved on the computer. This reflected the qualifications in [30] of the IT Department's Report to its conclusions in [29] (see [10] above).
Secondly, it was unreasonable for the Bank not to provide Mr Bartlett with a copy of Ms Novotny's handwriting report, and the opportunity to obtain advice about it and to respond to it. This is particularly important given that her report was brief (its body being only one page), was expressed to be a "Summary Advice" and was subject to a number of qualifications (see [12] above), including that her finding that it was "highly probable that the questioned handwriting was written in original form by the writer of the Bartlett specimens" was "subject to confirmation and possible strengthening following a detailed examination of the original handwritten envelope". There is no reason to suppose that the finding might not equally have been weakened following the postulated "detailed examination of the original handwritten envelope".
The Bank's own Performance Policy (see [9] above) emphasised a need to afford procedural fairness to a person in Mr Bartlett's position. It required any employee faced with serious disciplinary action to have a reasonable opportunity to respond not only to each of the allegations that were made against him or her but also to "respond to any evidence that may be relied on to make a finding through evidence of their own". (The latter was attracted by the Bank's reliance on handwriting specimens provided by Mr Bartlett). The Bank failed to apply this policy in relation to evidence that it treated as fundamental to its enquiry, that is, Ms Novotny's report, and in my view acted unreasonably.
It follows that I do not agree with the contrary view expressed by the primary judge that it was not unreasonable to deny to Mr Bartlett the opportunity to obtain an expert report in response to that of Ms Novotny (Judgment [147]). Her Honour said that it was reasonable for Mr Corbally to act on the basis of Ms Novotny's opinion "which was expressed in sufficiently strong terms to entitle him to be comfortably satisfied that the plaintiff was the culprit" (ibid).
Her Honour did not address the first criticism to which I have referred above (see [52]), presumably because it was not put to her in the way in which it was put to this Court on appeal.

The handwriting evidence

At the hearing at first instance, the Bank tendered not only Ms Novotny's summary report of 9 August 2012, upon which Mr Bartlett's summary dismissal was based, but also her further reports of 18 October, 29 October and 19 December 2013. Mr Bartlett tendered reports of Mr Dubedat of 15 April and 27 August 2013 and 9 April 2014. In addition, a joint report of 25 July 2014 was tendered and the experts gave joint oral evidence spanning some 100 pages of the transcript.

The judgment at first instance

The primary judge commenced by noting the Bank's acceptance that "because of the gravity of the allegation, it is appropriate to apply the principles referred to by the High Court in Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336" (Judgment [153]). These principles are reflected in s 140 of the Evidence Act 1995 (NSW). That section permits the Court to take into account in determining whether a case has been proved on the balance of probabilities: "(a) The nature of the cause of action or defence; and (b) The nature of the subject-matter of the proceeding; and (c) The gravity of the matters alleged."
Not explicitly referred to but nevertheless within the general terms of this provision and specifically mentioned by Dixon J in Briginshaw v Briginshaw at 362 is also "the gravity of the consequences flowing from a particular finding".
These principles are important in the present case because, first, the allegation against Mr Bartlett was that he had engaged in serious dishonest conduct to the potential detriment of the Bank and, secondly, because the consequences to him of his summary dismissal were likely to have been severe, both from a financial and a reputational point of view.
Her Honour reasoned as follows to the conclusion that the Bank had established that Mr Bartlett was the author of the handwriting on the envelope sent to Mr Cranston and was therefore responsible for the doctoring of Mr Law's email: "154 The principal disagreement between the experts relates to their opinion regarding the letters 'G', 'B' and 'J'. Mr Dubedat considered these letters in the specimen documents to be consistently different in structure from those in the questioned document. Both experts were provided with the plaintiff's notebook as well as other documents that comprised the specimen handwriting with which a comparison with the questioned handwriting was to be made. 155 Mr Dubedat extracted examples of the contested letters from the first forty pages of the notebook only and then compared these with the questioned handwriting. He adopted a mechanical approach of confining the comparison by a strict 'like for like' rule. Accordingly, he refused to countenance a comparison between cursive and printing, or upper case and lower case. He referred to texts in support of his 'rules'. 156 However, Mr Dubedat agreed with the following propositions from the seminal text, Wilson R Harrison, Suspect Documents - their scientific examination, (1966, Sweet & Maxwell London): 'This rule must not be applied blindly. For example, the dissimilarity must be present in some feature which is known to the examiner to be fundamental to the structure of the handwriting. The presence of initial strokes to some of the letters of one specimen of handwriting and their absence in the other is not fatal to expression of opinion that they're of common authorship for the experienced examiner is aware that many writers vary their habits with respect to initial strokes to certain letters. The type of dissimilarity which is regarded as most significant is that which has to be sought for in the structure of the handwriting and whose presence may well be overlooked by those inexperienced in the critical examination of handwriting.' 157 Ms Novotny's approach was more nuanced. She described the task she performed as being a matter of examining the specimen material and the questioned material and determining whether or not the features and range of variation in the latter could be accounted for by what appears in the former. In her view it could be a matter of judgment whether a letter was upper or lower case or cursive or printed and that, in some circumstances, a comparison could usefully be made between letters in different categories. She regarded the specimen and questioned handwriting as containing a mixture of styles, both printed and cursive and connected printing. Her interpretation of the "like with like" principle is that an expert needed to consider each case on its own merits and that it was a matter of judgment whether it would be appropriate to make a cross-comparison. She referred to the same texts as had been relied upon by Mr Dubedat and pointed to passages that permitted such judgments to be made. 158 Further, unlike Mr Dubedat, Ms Novotny considered there to be sufficient examples in the question[ed] writing to make a judgment based on the comparison with the specimen handwriting. She did not regard the limitation in the number of characters and numerals in the question[ed] writing as a significant limitation on the strength of her conclusion that it was almost certain that the plaintiff wrote the envelope. 159 Mr Fernon sought to impugn Ms Novotny's evidence on the basis that she had not recorded her observations and reasoning process sufficiently. I accept her response as follows: 'There can always be more detail in the written notes in any one case file but the notes that are prepared are notes to reflect parts of my thoughts that identify features that I need to come back to and spend more time assessing. But in order to produce a set of notes that completely reflected all aspects of my consideration of the examination would be volumes. For even the smallest of handwriting jobs, it would be a very big and large task.' 160 Ms Novotny agreed that a fundamental and consistent difference between the questioned handwriting and the specimen handwriting amounted to powerful evidence of a different hand. However, she explained that there was commonly an issue whether a difference ought be characterised as a 'fundamental' one (which implied different writers) or an 'unaccountable' one, which could be caused by a number of reasons, including accident, insufficient sample, self-serving specimen writing, disguise, illness or nervousness. 161 Mr Fernon put to Ms Novotny that the value of experience ought not be overstated. Her response, which I accept, was: 'It's a very important part of the learning process of how to interpret the significance of observations. It's one thing to be able to assess and compare a questioned handwriting with a specimen handwriting and say this is similar, this is different, but what it comes down to is what are the significance of those similarities and those differences. So … the determination of similarity and difference is somewhat objective. It's the interpretation which is where the experience comes into it, and that's, that's why there's not a lot of detail in it, in the textbooks, because you can't learn it from a textbook. You need to learn it from practical experience.' 162 It was suggested to Ms Novotny that the opinions she gave in reports subsequent to her first report of 9 August 2012 were, in substance, designed to substantiate the opinion expressed in her first report. I accept Ms Novotny's response as it appears in the following exchange in her cross-examination: FERNON: You'd agree, wouldn't you, it would've been embarrassing for you if you had withdrawn or reduced your opinion of highly probable given on 9 August 2012? WITNESS NOVOTNY: Not at all. If, if I thought there was scope or need for me to change my opinion in a direction other than strengthening it, then I would've done so. 163 I prefer the evidence of Ms Novotny, principally on the basis of what I consider to be her greater expertise. She impressed me as a truly independent witness who was neither defensive nor partisan. Her expression of a relatively strong view that the plaintiff wrote the envelope is, in my view, not only reliable, but also compelling. Although I accept that Mr Dubedat was not able to come to such a conclusion, I consider that his tentativeness and diffidence was a result of his lesser expertise when compared with that of Ms Novotny."
I make the following comments on this reasoning.
The experts agreed on the correctness of the following statement of principle to be found in Mr Harrison's text on Suspect Documents that her Honour referred to as seminal (Judgment [156]): "The rule is simple - whatever features two specimens of handwriting may have in common, they cannot be considered to be of common authorship if they display but a single consistent dissimilarity in any feature which is fundamental to the structure of the handwriting, and whose presence is not capable of reasonable explanation" (at 343).
Mr Dubedat found dissimilarities of this type. In these circumstances, unless Mr Dubedat's view was rejected on properly reasoned grounds, or there was a reasonable explanation for the differences that he identified, there should have been a finding that the Bank had not established to the requisite degree of satisfaction that Mr Bartlett was the author of the questioned writing. In my view, there were errors in the primary judge's reasons for rejecting Mr Dubedat's evidence that should have led to this finding being made.
First, her Honour criticised Mr Dubedat for adopting "a mechanical approach" to the application of the "like for like" rule. Mr Dubedat gave the following description of that rule in his report of 9 April 2014: "The fundamental rule in handwriting comparisons is that only like material can be compared with one another. Comparing a lower case letter to an upper case letter or cursive writing is not standard methodology. I refer to Roy A Huber and A M Headrick's 'Handwriting Identification: Facts and Fundamentals' at page 35 which states 'The task of comparison, however, is more complex than it may seem. Any matter must be compared with like matters, apples with apples, oranges with oranges, so to speak. In handwriting examination, this means that discriminating elements must be compared with like discriminating elements. These are elements that are not only covertly similar in form or design, but rendered under similar circumstances'. … I also refer to Jess E. Dines 'Document Examiner Textbook' at page 267 which states; 'Obtain exemplars using the same writing style as the questioned document. This includes handwriting to handwriting, printscript to printscript, typewriting to typewriting, etc. Also, if possible, the writing instruments should be the same; pencil with pencil, ballpoint with ballpoint, etc'".
Ms Novotny departed from this rule by comparing cursive and print writing and upper case and lower case writing. Neither Ms Novotny nor the Bank cited any authority to justify this approach or to contradict Mr Dubedat's statement of the rule or the authorities to which he referred in that statement. The primary judge called in aid a passage from Harrison's text (Judgment [156]) which commenced by saying that "[t]his rule must not be applied blindly". However, Mr Harrison's reference was not to the "like for like" rule but to the rule concerning the existence of a "single consistent dissimilarity" described in the passage that I have quoted in [63] above. Her Honour accordingly erred in concluding that Ms Novotny applied generally accepted principles.
Secondly, her Honour said that Ms Novotny supported her interpretation of the "like with like" principle by reference to passages in the same texts as relied upon by Mr Dubedat (see the last sentence of Judgment [157] quoted at [61] above). On the appeal, Mr Bartlett's senior counsel submitted that Ms Novotny had not been able to identify any passages which supported her approach and counsel invited the Bank to say where they were to be found, if it asserted that they existed. The Bank did not identify any such passages.
Thirdly, the primary judge said that "Ms Novotny agreed that a fundamental and consistent difference between the questioned handwriting and the specimen handwriting amounted to powerful evidence of a different hand" (Judgment [160]). Ms Novotny, however, attached considerably less significance to such a difference, as she said: "Notwithstanding any similarities present, if there is a single fundamental and consistent difference between two pieces of handwriting it cannot be concluded in absolute terms (i.e. without some qualification) that they were written by one person. Such a situation does not apply to isolated differences; the difference must be significant and unexplainable" (emphasis added).
Ms Novotny's statement of principle is inconsistent with the authoritative statement in Harrison's text that two specimens of handwriting cannot be considered to be of common authorship if they display a single relevant and consistent difference which is not capable of reasonable explanation.
Fourthly, as stated in Judgment [163], the primary judge preferred the evidence of Ms Novotny over that of Mr Dubedat principally on the basis of "her greater expertise". It is not clear to what her Honour was referring in this respect. If it was to the experts' experience, the observation was unjustified. Mr Dubedat commenced employment in the Document Examination Section of the NSW Police Service in 1987, with his formal study and training commencing in April 1987. His involvement in that field has been continuous except perhaps for the period 1996 to 1998. On the other hand, Mr Novotny commenced her full-time employment and training in the field of forensic document examination in October 1997. Ms Novotny has had extensive experience in the field but it cannot be said that her experience has been greater than Mr Dubedat's. If anything, the contrary is the position.
It may be that in referring to Ms Novotny's "greater expertise", the primary judge was referring to what she discerned from Ms Novotny's reports and evidence because, immediately after the reference, her Honour referred to Ms Novotny being "a truly independent witness who was neither defensive nor partisan" (Judgment [163]). Her Honour contrasted Mr Dubedat's "tentativeness and diffidence", which she said was a result of his "lesser expertise".
As the following authorities demonstrate, resolution of the conflicts between the expert evidence of Ms Novotny and Mr Dubedat on this basis was in error.
In Wiki v Atlantic Relocations (NSW) Pty Ltd [2004] NSWCA 174; 60 NSWLR 127, Ipp JA (with the concurrence of Bryson JA and Stein AJA) described the circumstances in which the demeanour of expert witnesses may be important in resolving conflicts between them. Those circumstances include situations in which an expert witness "has given dishonest or misleading evidence, or has become an advocate for a party, or where the evidence given is inherently unreliable for other reasons" (at [60]). However, at least in the case of experts, resort to the Court's observations of the demeanour of witnesses should be a last resort as a means of choosing between their evidence. Where the differences between witnesses are capable of being resolved by rational analysis the judge should engage with the issues and provide a reasoned decision (ibid [61]-[64]; see also K & M Prodanovski Pty Ltd v Calliden Insurance Ltd [2012] NSWCA 117 at [24]). Although a primary judge has an advantage in seeing and hearing expert witnesses give their evidence and the normal restraints on appellant intervention are accordingly applicable, the Court may intervene if this has not occurred (Wiki at [66]-[68]).
In the present case there was no suggestion of dishonesty, lack of qualifications or any other such factor that would have required importance to be attached to the expert witnesses' demeanour. Rather, the issues between them were capable of being resolved by rational analysis. In resolving them principally on the basis of what her Honour considered to be Ms Novotny's greater "expertise", her Honour erred. Moreover, to the extent that her Honour resolved them by concluding that Ms Novotny, rather than Mr Dubedat, applied appropriate principles of handwriting analysis, I consider that her Honour again erred. In two important respects Mr Dubedat, rather than Ms Novotny, was supported by what both experts and the primary judge treated as the authoritative texts. First, the texts supported Mr Dubedat's strict application of the "like for like" rule. The Bank did not cite any authority to support Ms Novotny's more relaxed approach to that rule (see [67] above). Secondly, the texts supported Mr Dubedat's view that one relevant difference between handwriting specimens was sufficient to require the conclusion that the authors were different, rather than Ms Novotny's view that such a difference precluded a conclusion "in absolute terms (i.e. without some qualification)" that the authors were different (see [68] above).
The result of these considerations is that, by reason of her misapplication of principles of fundamental importance to her analysis, Ms Novotny's evidence should have been rejected. That left Mr Dubedat's evidence standing, without any good reason being demonstrated for its rejection. Moreover, the Bank did not file any Notice of Contention seeking to support the rejection of Mr Dubedat's evidence on grounds different to those given by the primary judge.
In considering whether the Bank had discharged its onus of proof, the Court was required to have regard to the seriousness of the allegations sought to be supported by Ms Novotny's evidence and the gravity of the consequences to Mr Bartlett that would flow from its acceptance. As the Bank did not establish that Mr Dubedat's evidence should be rejected, the primary judge should have found that the Bank had not demonstrated on the balance of probabilities that Mr Bartlett's handwriting appeared upon the envelope posted to Mr Cranston. The Bank accepted that without a contrary finding it could not contend that it had established on the balance of probabilities that Mr Bartlett was responsible for the doctoring of Mr Law's email and the posting of a copy to Mr Cranston.
It follows that the Bank failed to establish that it was entitled to terminate Mr Bartlett's employment summarily. I turn therefore to the question of damages.

When would Mr Bartlett's employment have been terminated but for the breach of contract?

The judgment at first instance

The Bank contended before the primary judge that if it had not purported to terminate Mr Bartlett's employment summarily, it would have exercised its right under Clause 14.3(a) to terminate it by giving him four months' pay in lieu of notice. On the other hand, Mr Bartlett submitted that, but for that termination the Bank would have continued Mr Bartlett's employment until at least 15 August 2022, because he was a valued employee.
The primary judge noted that Mr Bartlett accepted (because Clause 14.3(a) allowed termination on notice "for any reason") that the Bank could have terminated his employment at any time by giving him four months' notice (or pay in lieu) and that damages were to be assessed by determining what would have been likely to have occurred in the absence of the purported summary dismissal (Judgment [181] referring to TCN Channel Nine Pty Ltd v Hayden Enterprises Pty Ltd [1989] 16 NSWLR 130; and see now also Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381 at [117]-[121]).
For the following reasons, the primary judge concluded that had the purported summary dismissal not occurred, the Bank would have terminated Mr Bartlett's employment on 15 August 2012 (the date of the purported summary dismissal) by giving him four months' pay. "184 In light of the evidence of Mr Corbally and Mr Law I am satisfied that, after the meeting of 15 August 2012, there was no real prospect of the plaintiff remaining as an employee of the ANZ. I accept Mr Corbally's evidence set out above that once he felt that he could no longer trust the plaintiff or have confidence in his word, the employment relationship was, effectively, unworkable, whatever the plaintiff's skills and capacities in other areas. I also accept Mr Corbally's evidence in the following exchange in cross-examination: Q. . . . if it was that on an examination of the original, Ms Novotny adhered to her view, and another handwriting expert was of the view that the conclusion was inconclusive as to whether the author of the questioned document was the same as the author of the specimen handwriting, you wouldn't have terminated, would you? A. No, I disagree, given the handwriting report that I had received from - from our own forensic examiner, given the investigation work that was undertaken and the report, and given the discussions that I had with Mr Bartlett, I'd lost trust and confidence in Mr Bartlett and he would have been terminated. Q. That would have been a decision based upon the coincidence of which particular handwriting expert you preferred, wouldn't it? A. We - we had an independent - as I understood it, it was an independent handwriting expert who was - I was led to believe was one of the best in the country, and she had provided us with an opinion, and the opinion said that it was highly probable that it was Paul."
On appeal, Mr Bartlett challenged this finding by referring to himself as "a consistent and strong performer" as an employee of the Bank. He referred to his history of receiving large bonuses and positive feedback from the Bank and to his appointment, during the course of the investigation into his conduct, to a more senior position with the Bank. He submitted that the primary judge should have found that he would have continued working for the Bank for at least a period of 10 years.
In his supplementary written submissions on damages Mr Bartlett asserted that, for the purposes of assessment of damages, "the effect of Ms Novotny's report and the investigation and the investigation report must be eliminated" (paragraph [12]).
I do not agree that this is the correct approach. The hypothetical circumstance to be considered is one in which the Bank did not purport to dismiss Mr Bartlett summarily. No other fact or circumstance should be assumed to be changed. Accordingly, the relevant hypothetical situation was one in which the Bank investigation occurred and Mr Corbally received and considered the investigation report but realised, or was advised, that Clause 14.3(b) did not in the circumstances authorise summary termination. In particular, there is no warrant for assuming, contrary to the facts, that the investigation did not occur. For a variety of reasons, but principally the doctored email issue, Mr Corbally wanted the Bank to terminate Mr Bartlett's employment. The Court should not assume, contrary to his actual opinion, that Mr Corbally did not believe that Mr Bartlett was guilty of serious misconduct. The fact that the Bank has subsequently failed to prove that he was guilty of serious misconduct does not change the fact that Mr Corbally believed he was.
In these circumstances, Mr Bartlett's history with the Bank is not of significance as it can be assumed to have been known to Mr Corbally, yet it did not cause him to stay his hand on Mr Bartlett's summary dismissal. Further, the fact that Mr Corbally may have been wrong in the adverse views he took of Mr Bartlett's answers to him concerning the training course investigation and his contact with the Commonwealth Bank (see [19] above) does not matter. For better or for worse, Mr Corbally held those opinions.
Unless the Bank was obliged to act reasonably (a question to which I will come shortly), it is to my mind clear that the evidence justified the primary judge's conclusion that, if the Bank had not purported to dismiss Mr Bartlett summarily, it would have terminated his employment immediately by giving him four months' pay. Once it is accepted that the only difference between the actual and hypothetical circumstances is the absence of a purported summary dismissal in the latter (presumably because the Bank realised or was advised that it had no contractual power to effect such a dismissal) the conclusion is inevitable.
In his post-hearing supplementary written submissions on damages, Mr Bartlett contended that any exercise by the Bank of the power under Clause 14.3(a) to terminate "for any reason" on four months' notice had to be reasonable. This submission does not appear to have been made at first instance because, as the primary judge noted and as mentioned above, Mr Bartlett accepted that the Bank could have terminated his employment at any time by giving four months' notice. On appeal, Mr Bartlett did not suggest that that observation was erroneous and did not put the present reasonableness argument either in his pre-hearing written submissions or orally on appeal. It was, most unsatisfactorily, advanced for the first time in the post-hearing written submissions, at a time when the Court had no opportunity to test the submission by discussion with counsel.
Nevertheless, it is possible to reject the submission, as I do. In my view, none of the authorities to which I have referred at [40] to [48] above, nor any other to which Mr Bartlett referred, warrants the implication of any restriction on the Bank's power under Clause 14.3(a) to terminate on notice "for any reason". Such a restriction would be inconsistent with those quoted words. Unlike Clause 14.3(b), that subclause does not require the Bank to form a specified opinion as a pre-condition to the exercise of the power.
Another argument advanced in Mr Bartlett's post-hearing written submissions was that the primary judge's limited reliance in [184] of her judgment (see [80] above) on the evidence of Mr Law was unjustified as Mr Law said he was not involved in the decision to terminate Mr Bartlett's employment. However, although of considerably less significance than the evidence of Mr Corbally, who did make the decision, Mr Law's evidence that he had not trusted Mr Bartlett since November 2010 was of some relevance to the question of what action the Bank would or would not have taken if it had realised or was advised that summary termination was not open to it. That is, Mr Corbally might have consulted Mr Law before terminating Mr Bartlett's employment on notice. It was not therefore inappropriate for the primary judge to refer to Mr Law's evidence.
Finally, I reject Mr Bartlett's submission, made in his pre-trial written submissions, that, failing all else, the Bank's termination on notice would have, or at least should have, been somewhat delayed to enable the requirements of the Bank's performance policy to be given effect by affording Mr Bartlett an opportunity to respond to the allegations against him (paragraph [144]). Termination on notice under Clause 14.3(a) "for any reason" cannot reasonably be regarded as disciplinary action to which the performance policy requirement of procedural fairness was applicable. In any event, the question is not what the Bank ought to have done but what it would have done. I see no reason to infer that the Bank would have given Mr Bartlett any opportunity to respond to a proposed dismissal by the Bank on notice further to what it gave him when it considered his summary dismissal.

Forfeiture of shares

Mr Bartlett pointed out that in stating that all unvested shares to which Mr Bartlett was entitled were forfeited at the time that his employment was terminated the primary judge overlooked the Bank's board's power to decide that that should not occur. Mr Bartlett submitted that the Court should not assume that that power would not have been exercised in his favour in the absence of the Bank demonstrating that. However Mr Bartlett's submissions assumed in this context, as they did in relation to the principal issue concerning damages, that the hypothesis upon which damages were to be assessed was that the Bank did not believe that Mr Bartlett was the author of the doctored email. However, for the reasons that I have earlier given, it is to be assumed that the Bank believed that he was. On that basis, there is no reason to think that the Bank would, in the hypothetical circumstance, have acted any differently than it did in the actual circumstance, when it did not exercise its discretion favourably to Mr Bartlett to forestall forfeiture of his shares.
It is not of determinative significance that the Bank did not adduce any evidence of how the discretion would or would not have been exercised in the postulated circumstance. Such evidence would have been of limited weight in light of its hypothetical nature. The position is very different from one where a party has exclusive knowledge of actual facts but fails to lead evidence of them.

Conclusion on damages

The primary judge assessed Mr Bartlett's damages at $74,495 on which pre-judgment interest would be payable from 15 August 2012. The parties agreed that this amount was net of taxation and that taxation should not have been deducted. The agreed correct judgment amount is $110,000 plus interest.

COSTS

Both parties have been successful in significant respects. Mr Bartlett has succeeded in challenging the finding against him of serious misconduct and challenging his summary dismissal. Irrespective of the amount of damages to which he is entitled, this success is of considerable importance from a reputational point of view.
On the other hand, the Bank has succeeded in limiting Mr Bartlett's damages to $110,000 plus interest, as against his claim for in excess of $9 million.
Taking into account the considerably greater time occupied on appeal in dealing with the liability, as distinct from the damages, issues, I consider that the Bank should be ordered to pay 50% of Mr Bartlett's costs of the appeal. I have also taken into account the fact that the contract construction argument on which Mr Bartlett succeeded was not put to the primary judge. However the significance of that fact is diminished by the further fact that, on my analysis, Mr Bartlett would in any event have succeeded on his fallback argument alleging breach by the Bank of an implied duty to act reasonably.
Turning to the costs of the proceedings at first instance, the appropriate order is in my view that the Bank pay Mr Bartlett's costs. Mr Bartlett successfully challenged the Bank's finding against him of serious misconduct and his summary dismissal, and has obtained a damages award of $110,000 plus interest. The failure of a plaintiff to obtain the full amount for which he or she sues is not ordinarily a reason for depriving the plaintiff of costs (Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (No 2) [2014] NSWCA 425 at [27]-[28]). Mr Bartlett's recovery was not insignificant and there is no other reason for departure from that general rule.

ORDERS

For the reasons above, I propose the following orders: 1. Allow the appeal. 2. Set aside the orders made by Adamson J on 24 November 2014. 3. Note that the appellant will be entitled to a judgment in the sum of $110,000 together with interest under s 100 of the Civil Procedure Act 2005 (NSW) from 15 August 2012 to the date of judgment. 4. Direct the parties to lodge with the Court within 14 days of the date of this judgment a form of consent order providing for the entry of a judgment inclusive of interest in accordance with (3) above. 5. Order the respondent to pay the appellant's costs of the proceedings at first instance. 6. Order the respondent to pay 50% of the appellant's costs of his appeal.
MEAGHER JA: I have had the benefit of reading in draft the reasons of Macfarlan JA. For those reasons, and the additional observations which follow, I agree that the orders his Honour proposes should be made.
These observations are directed to the appellant's challenge to the primary judge's finding (Judgment at [185]) that if the respondent bank had not purported to terminate his employment without notice for serious misconduct on 15 August 2012, it would have done so with effect on that day by paying him four months' salary in lieu of notice.
The present case is not one in which the appellant sought damages for loss of the benefit of a contract assessed by reference to a period which extends beyond the fixed term of the repudiated contract and on the basis that the contract would have been renewed: cf New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68; Murray Irrigation Ltd v Balsdon [2006] NSWCA 253; 67 NSWLR 73. His damages were claimed on the basis that he had lost the benefit of an employment contract which, unless terminated earlier, would have continued until at least August 2022 (Judgment at [183]). The legal principles relevant to the assessment of damages in such a case were not in dispute and are summarised in the judgment of Macfarlan JA (Ward and Leeming JJA relevantly agreeing) in Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381 at [117]-[118].
In such a case, expressed broadly (see TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 154 (per Hope JA) and Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64 at 93 (per Mason CJ and Dawson J)) the relevant inquiry is whether, had the breach or repudiatory conduct not occurred, the party in breach nonetheless would have exercised a right to terminate which depended on its 'unrestricted volition'. This inquiry directs attention to the circumstances as they existed at the time the breach or repudiatory conduct occurred, but on the hypothesis that such conduct had not occurred.
The primary judge found that following the meeting between the appellant and Mr Corbally on 15 August 2012, "there was no real prospect of the [appellant] remaining as an employee of the ANZ" (Judgment at [184]). At that time Mr Corbally, who made the decision to terminate the appellant's employment, had the benefit of the investigations and subsequent report of Mr McGowan and the report compiled by Ms Novotny. He was also in a position to draw his own conclusions concerning two matters discussed with the appellant during that meeting. Those matters are referred to by Macfarlan JA at [19] and include the circumstances in which he received an earlier written warning in April 2010 and his contact with the Commonwealth Bank of Australia (CBA) in June 2012 about possible future employment.
The primary judge accepted Mr Corbally's evidence that, at the conclusion of that meeting (and after considering an earlier investigation report concerning the first of those matters), he believed that the appellant had lied to him about the circumstances resulting in the warning of possible disciplinary action and as to who had initiated his communication with the CBA. For those reasons Mr Corbally said that he did not trust the appellant and that would have been his position irrespective of whether the appellant was not, in fact, responsible for the preparation and posting of the doctored email and envelope (Judgment at [105]-[107]). The primary judge also accepted Mr Corbally's evidence "that once he felt that he could no long[er] trust [the appellant] or have confidence in his word, the employment relationship was, effectively, unworkable, whatever [his] skills and capacities in other areas" (Judgment at [184]). Finally, the primary judge accepted Mr Corbally's evidence that even if he had received another handwriting expert's report which was inconclusive as to whether the appellant was the author of the questioned envelope, the position remained that he had "lost trust and confidence in [the appellant] and he would have been terminated" on that basis alone (Judgment at [184]).
The appellant challenges the primary judge's conclusion that, had the bank not purported to terminate his employment for alleged serious misconduct and without notice, it would have done so by payment in lieu of notice in accordance with cl 14.3(a). The arguments made in support of that challenge did not include that the primary judge had erred in the findings made as to Mr Corbally having lost trust and confidence in the appellant and the reasons why he had done so.
The two principal arguments made were as follows. First, it was said that the circumstances in which the bank might have considered the exercise of its right to terminate by notice, or with payment in lieu of notice, would not have included the investigation, the investigation report or Ms Novotny's report. It is not apparent why the relevant factual hypothesis does not include these circumstances. Following the provision of the doctored email to Mr Cranston in early July 2012, there is every reason to think, given the seriousness of the matter, that it would have been referred for investigation and report by Mr McGowan (as occurred) and that in the course of that investigation the services of Ms Novotny's firm would have been obtained (as occurred). There is also no reason to conclude that the findings of those investigations and reports would have been any different or that they would not have led to a meeting between Mr Corbally and the appellant for the purpose of allowing Mr Corbally to raise matters of concern with the appellant and to ascertain his response. I agree that this argument should be rejected.
No submission was made that any of the circumstances upon which Mr Corbally based his conclusion that he could no longer trust the appellant constituted or were the result of a breach by the bank of an obligation arising under the contract of employment in relation to the conduct of the investigation such that the bank's reliance on those circumstances as justifying a termination by notice was an attempt to take advantage of its own wrong (see New Zealand Shipping Co Ltd v Société des Ateliers et Chantiers de France [1919] AC 1 at 9 per Lord Atkinson). The appellant's argument that the exercise of the power in cl 14.3(b) was subject to an implied obligation that the bank act in good faith and reasonably was not maintained if the correct construction of that sub-clause is (as has been held) that it requires the objective existence of "misconduct".
Secondly, it was said that the exercise of the power to terminate pursuant to cl 14.3(a) was "limited by requirements that the termination be reasonable and the decision to terminate be made in good faith". I agree for the reasons given by Macfarlan JA at [86]-[87] that this argument should be rejected. That makes it unnecessary to consider the further proposition that any purported exercise of that power to terminate would have been unreasonable. The final argument made on behalf of the appellant (that the bank would have delayed in making any decision to terminate by notice) is addressed by Macfarlan JA at [89] and I agree with his Honour's conclusion.
SIMPSON JA: I have had the advantage of reading in draft the judgments of Macfarlan JA and Meagher JA. I agree with the orders proposed by Macfarlan JA, and, with the exception with what follows, with his Honour's reasons. The issue with which I have difficulty is the construction of cl 14.3(a) of the Contract of Employment.
That is the clause pursuant to which the Bank had the right to terminate the employment of the appellant "for any reason" by giving four months' notice, or alternatively, by payment in lieu of notice. The question the appellant now seeks to raise is whether, in exercising that right, the Bank was under an obligation to act reasonably and/or in good faith.
Before embarking on a consideration of that question, I should set out my understanding of the factual circumstances that give rise to it. I do not, except as necessary to explain my reasons, propose to restate the remaining facts, which are fully set out in the judgment of Macfarlan JA. In what follows, it has generally not been necessary to go beyond the facts as stated in the reasons of Adamson J. I assume a familiarity with the facts as outlined by Macfarlan JA.
The appellant's employment with the Bank commenced on 8 December 2008. He held a senior position. His employment terms were contained in the contract to which reference has been made. In late 2009 his performance review placed him in the top 5 per cent of senior executives. In 2010 he was disciplined for conduct reasons. A "behavioural flag" and a formal warning were issued. The employment of another employee who had engaged in similar conduct was terminated. The difference between the two was that the appellant admitted his wrongdoing. (I mention this because it gives an indication of the gravity with which the Bank regarded the nature of the wrongdoing involved.) At least partly as a result of that incident, the appellant's next performance review, also in 2010, resulted in a downgrading. He was placed in the top 6-20 per cent of senior executives.
In 2011, he maintained that position, although not without dissent. Indeed, it was by Mr Corbally's decision, contrary to the views of other representatives of the Bank engaged in the performance review process, that he avoided a further downgrade. There were other concerns about the appellant's "attitude and behaviour".
It was against that background that the issue concerning the "doctored" email arose and the process of investigation took place resulting in the termination of the appellant's employment.
I agree, for the reasons given by Macfarlan JA, that that process was flawed. I agree also that cl 14.3(b) of the Contract of Employment required proof, objectively, that the appellant was responsible for the alteration of the email, and that the Bank's evidence failed to meet that requirement. The result of that conclusion is that damages must be assessed. Quantification of the damages to which the appellant is entitled depends largely on the construction of cl 14.3(a) of the Contract of Employment.
Notwithstanding the view she took of cl 14.3(b) and the validity of the Bank's termination of the appellant's employment on serious misconduct grounds, the primary judge proceeded to assess damages. In doing so, she had the benefit of written and oral submissions from the parties.
In the written submissions provided on behalf of the Bank, reference was made to cl 14.3(a). The submission was made: "300. Insofar as the claim for damages for the relevant period is concerned, it is important to note that the Plaintiff's employment was able to be lawfully terminated for any reason on the basis of the Plaintiff being given four months' written notice, or at the election of the Defendant, the Plaintiff being provided with a payment in lieu of notice, or a combination of notice and payment in lieu of notice …"
Reference was then made to the decision of this Court in TCN Channel Nine Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130, in which Hope JA said (at 150): "… where a defendant in proceedings to recover damages for breach of contract has a right under the contract to alternative methods of performance, the Court should, indeed must, assume that the defendant would have performed the contract in the way least advantageous to the plaintiff and most advantageous to the defendant …"
So far as can be gleaned from the materials before this Court, no written reply to this submission was made on behalf of the appellant. In particular, no suggestion was made that there was any limitation on the basis upon which the right of termination pursuant to cl 14.3(a) could be exercised. This Court was referred to no oral submission that challenged the interpretation placed (at least implicitly) by the Bank on cl 14.3(a), that is, that the right given to the Bank could, essentially, be exercised "for any reason", without any requirement of procedural fairness, reasonableness, or good faith. I have found no such submission. This is not intended to be a criticism of counsel: the focus at first instance was upon the construction of cl 14.3(b), and the factual issue of the "doctoring" of the email. However, the fact is that no contrary construction of cl 14.3(a) was put to the primary judge, and her Honour accepted that construction. So much is apparent from [185] of the reasons, where her Honour said: "185 Accordingly, I am satisfied that the assumption that the defendant would act in the way most advantageous to it … is consistent with the facts and circumstances in the present case. The ANZ would have, in this event, terminated the plaintiff's employment by paying his remuneration for four months in lieu of notice." In making that finding, her Honour referred to Maredelanto Compania Naviera SA v Bergbau-Handel GmbH; The Mihalis Angelos [1971] 1 QB 164, to the same effect as TCN Channel Nine, cited on behalf of the Bank.
The Notice of Appeal ran to 56 grounds. The first six grounds, in various ways, assert that cl 14.3(b) ought to be construed as containing an implied term of reasonableness and good faith. Grounds 7-34, 49 and 50 assert various factual errors. Grounds 35-48 and 51-53 assert errors in the reasoning process. Grounds 54 and 55 are as follows; "54 Her Honour erred in finding that the most likely alternative scenario, but for summary dismissal, was that the Appellant would have been paid out in lieu of notice on 15 August 2012. 55 Her Honour should have concluded that the most likely alternative scenario, but for summary dismissal, was that the appellant would not have been terminated or would have been paid out in lieu of notice on a date after 15 August 2012."
These grounds assert error in the factual conclusions drawn by her Honour. Those factual conclusions were drawn on the basis that cl 14.3(a) gave the Bank an unfettered right to terminate the appellant's employment. No ground of appeal complains of the construction placed by the primary judge on cl 14.3(a).
The written submissions to this Court proceeded on the same basis as the Notice of Appeal.
It was, as Macfarlan JA has pointed out, only when supplementary submissions with respect to the quantification of damages were filed, after the conclusion of the hearing of the appeal, that an issue was raised as to the proper construction of cl 14.3(a), and whether the right given to the Bank by that clause was to be exercised reasonably and/or in good faith. Three authorities were cited in support of these submissions. They are: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; 128 FCR 1; Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903; ATPR 41-703; Kellogg Brown & Root Pty Ltd v Australian Aerospace Ltd [2007] VSC 200.
Each of those cases involved a commercial contract containing a "termination for convenience" clause. Kellogg Brown involved an application for an interlocutory injunction to restrain the defendant acting on a termination for convenience clause. It was conceded that the facts of that case raised a serious question to be tried as to whether a term of good faith and fair dealing was to be implied in the commercial contract under consideration. Notwithstanding that concession, Hansen J discussed the authorities: see [49]-[61].
Garry Rogers also involved an application (which failed) for an interlocutory injunction. The contract under consideration was a dealership in motor vehicles. Finkelstein J noted that an argument in support of the application was based upon "the alleged implied term of good faith and fair dealing", and that the respondent was prepared, for the purposes of the interlocutory application, to accept that implication. However, his Honour went further and endorsed the proposition. He said: "34 … It could hardly do otherwise. Recent cases make it clear that in appropriate contracts, perhaps even in all commercial contracts, such a term will ordinarily be implied; not as an ad hoc term (based on the presumed intention of the parties) but as a legal incident of the relationship … 35 If such term is implied it will require a contracting party to act in good faith and fairly, not only in relation to the performance of a contractual obligation, but also in the exercise of a power conferred by the contract. There is no reason to think, prima facie at least, that the obligation of good faith and fair dealing would not act as a restriction on a power to terminate a contract, especially if that power is in general terms." (internal citations omitted)
GEC Marconi was, again, a case concerning alleged breach of a commercial contract. The contract contained a termination for convenience clause. With respect to such a clause, Finn J said: "753 … I am also influenced in my conclusion by the distinctive nature of a termination for convenience clause. Though I accept that the exercise of such a clause would, as of course, be subject to a duty of good faith and fair dealing … the clause itself, unlike a termination for convenience clause, seems otherwise unconditioned and unconstrained save for its notice requirement." (internal citations omitted)
If these authorities can be taken to support the proposition that a term of good faith and fair dealing is to be implied in termination clauses in commercial contracts, it is difficult to see why a similar position ought not to apply to contracts of employment.
However, no case was cited to support the application of these principles to contracts of employment. That question has arisen, although it may not yet be finally decided. In Heptonstall v Gaskin (No 2) [2005] NSWSC 30, Hoeben J (as his Honour then was) was dealing with an application for amendment to a statement of claim. The plaintiff claimed damages for psychological injury as a result of the conduct of his employment over a period of time. The purpose of the amendment sought was to plead implied terms in a contract of employment. The proposed implied terms (in an abbreviated form) sought to be imposed into the contract of employment were that the employer and employee would maintain a relationship of mutual trust and confidence between employee and employer. Hoeben J said: "17 It is submitted on behalf of the plaintiff that decisions in the United Kingdom make it clear that as a matter of law there is now to be implied into a contract of employment a term of mutual trust and confidence. Such an approach is the law of Australia, or alternatively is arguably the law of Australia. 18 It seems beyond argument that the implication of such a term is now part of the law of the United Kingdom … 19 … 20 The background to the implication of such a term in the United Kingdom is important. It contrasts with the situation in Australia. In Australia the same result has been brought about by the tort of negligence … 21 Accordingly there has been no need in Australia to rely upon a 'trust and confidence' implied term in the contract of employment to enable employees to succeed in claims against employers for purely psychiatric injury suffered in the course of employment … 22 What is not at all clear is whether a 'trust and confidence' implied term in the contract of employment forms part of the law of Australia. In Burazin v Blacktown City Guardian Pty Ltd [1996] IRCA 371; (1996) 142 ALR 144 the full Federal Court left open the question of the existence of such an implied term (at 154). Similarly, Spigelman CJ in Paige [State of NSW v Paige [2002] NSWCA 235; 60 NSWLR 371] (at [135]) left that same question open. In a somewhat different context the full bench of the Industrial Relations Commission of NSW in court session implicitly approved the implication of such a term (Hollingsworth v Commissioner of Police (1999) 47 NSWLR 151 at 190) as did Allsop J in Thomson v Orika Australia Pty Ltd [2002] FCA 939 para 141. The implication of such a term in employment contracts in Australia remains controversial and awaits clarification by an appellate court. 23 Given the way in which the 'trust and confidence' implied term has evolved in the United Kingdom against a legislative background and an approach to tort law different to that in Australia I doubt whether such an implied term in a contract of employment does form part of the law of Australia. I cannot, however, say that such is not the case and I certainly cannot say that the existence of such an implied term is not arguable." (italics for emphasis added; some internal citation omitted)
His Honour considered (at [31]) that the proposed amendment raised an important and novel question of law relating to employment contracts generally. He permitted the proposed amendment to be made.
In Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217; 72 NSWLR 559, Basten JA observed that uncertainty then existed in Australia as to "the scope and intent" of any implied duty of trust and confidence in employment contracts (at [33]).
Jarratt v Commissioner of Police (NSW) [2005] HCA 50; 224 CLR 44 was a decision of the High Court that has some (limited) bearing on the question. It should first be noted that the case is distinguishable from the present in two respects - first, it involved public employment (of a senior police officer), and second, the contention was that, before the right of dismissal could be exercised, the employer was obliged to afford procedural fairness. (The latter is not, in my opinion, a major point of distinction - I can see little difference in principle between a requirement to afford procedural fairness and a requirement to act reasonably, and/or in good faith in the use of a contractual term that permits termination of employment.) Nevertheless, the judgments in Jarratt suggest that the powers conferred by a contract of employment are to be exercised fairly.
The uncertainty observed by Basten JA in Russell concerning the scope and extent of any implied duty of mutual trust and confidence in employment contracts has largely been removed by the decision of the High Court in Commonwealth Bank of Australia v Barker [2014] HCA 32; 253 CLR 169. The High Court unanimously and firmly rejected the proposition that there should be implied into a contract of employment an obligation "of mutual trust and confidence". The vigour with which the proposition was rejected might suggest that the decision foreclosed the present question. However, what is here proposed is considerably narrower than what was, in Barker, proposed. It is limited to "reasonableness and good faith" in the exercise of the right of termination. Whether that is covered by the reasoning in Barker is a very large question, and not one able to be resolved in the circumstances I have outlined at some length above. And the plurality in Barker (French CJ, Bell and Keane JJ) observed that the obligation there sought to be implied was directed to the relationship between employer and employee rather than the performance of the contract (at [41]). Their Honours went on to say (at [42]) that the conclusion should not be taken as reflecting on whether there is a general obligation to act in good faith in the performance of contracts.
Whether the obligation now sought, on behalf of the appellant, to be imported into cl 14.3(a) should be seen as coming within, or falling outside, the reasoning in Barker is a question which this Court should not address in the absence of full and considered debate. That debate has not taken place. Indeed, the foundational proposition, that terms of good faith are to be implied in commercial contracts, was not the subject of submissions on behalf of the respondent.
It follows from the above that I cannot agree with Macfarlan JA that the appellant's proposition that the Bank was under a duty to act reasonably and/or in good fath, in exercising its right under cl 14.3(a) should be rejected. Nor can I accept, as a fact, that, if the Bank had an obligation to act reasonably and/or in good faith, it would have nevertheless terminated the appellant's employment. That is a question of fact not fully explored in the hearing before Adamson J; it is a fact that cannot be fully explored unless the construction of cl 14.3(a) is settled. This readily illustrates why it would be quite unfair to the respondent to accept the construction proposed on behalf of the appellant.
That brings me back to the factual matters identified above. The appellant's disciplinary offence in 2010 did not result in the termination of his employment. I do not accept that it would have been reasonable for the Bank to have relied upon the handwriting evidence that established (to the satisfaction of the Bank, but erroneously) that the appellant was responsible for "doctoring" of the email. For the same reasons as that evidence was not available to establish serious misconduct, it would not be available to satisfy a reasonableness or good faith test.
Notwithstanding the above, I agree with the orders proposed. That is because the question that is now sought to be argued has been raised for the first time, in submissions filed after the conclusion of the hearing of the appeal: see Water Board v Moustakas [1988] HCA 12; 180 CLR 491. The authorities cited in support of the argument are not sufficient, in my opinion, to establish the proposition that the relevant duties, applicable to commercial contractual relationships, should be imported into a contract of employment. (I am far from convinced that they should not; such a proposition is simply unsupported by authority and not the subject of adequate argument.) The proposition has not been the subject of consideration by the primary judge. The respondent has not had a fair opportunity to respond to it.
For these reasons I agree with the orders proposed by Macfarlan JA.

Amendments 22 November 2016 - Coversheet: Civil Procedure Act 2005 (NSW) substituted for Supreme Court Act 1970 (NSW) and in [97], order (3). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 November 2016

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