Byrne v Australian Airlines Ltd

High Court of Australia Brennan CJ Dawson, Toohey, McHugh and Gummow JJ Byrne v Australian Airlines Ltd [1995] HCA 24

(a) Respondent's application for special leave to cross-appeal granted. Cross-appeal allowed.

(b) Paragraphs one, two, three and four of the order of the Full Court of the Federal Court set aside.

(c) Remit the matter to the Full Court of the Federal Court for reconsideration in the light of this Court's reasons for judgment.

11 October 1995 Brennan CJ, Dawson and Toohey JJ.

The appellants were employed by the respondent as baggage handlers at Sydney airport. On 28 March 1989, they were dismissed from their employment for pilfering. They sought relief in the Federal Court, claiming that their dismissal was harsh, unjust or unreasonable and, for that reason, in breach of cl 11(a) of the Transport Workers (Airlines) Award 1988. That clause provided: "Termination of employment by an employer shall not be harsh, unjust or unreasonable. For the purposes of this clause, termination of employment shall include terminations with or without notice." Each appellant sought an order under s 178 of the Industrial Relations Act 1988 Cth (the Act) for the imposition of a penalty and an order under s 356 for the payment of the penalty to him. The maximum penalty available in each case was $1,000. Invoking the accrued jurisdiction of the Federal Court, the appellants also sought damages for breach of contract and for breach of statutory duty.

The trial judge found that the respondent's conduct in terminating the appellants' employment was not harsh, unjust or unreasonable and dismissed the claims. On appeal, the Full Court found to the contrary, but held that the appellants were not entitled to damages for breach of contract or breach of statutory duty [1] . The matters were remitted to the trial judge to deal with the claims in relation to penalty. The appellants now appeal to this Court against the rejection by the Full Court of their claims for damages.

1. The decision, Byrne v Australian Airlines Ltd (1994) 47 FCR 300, overruled a previous decision of the Full Court of the Federal Court in Gregory v Philip Morris Ltd (1988) 80 ALR 455. The latter case had been applied in Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20; Wheeler v Philip Morris Ltd (1989) 97 ALR 282 and Lane v Arrowcrest Group Pty Ltd (1990) 27 FCR 427.

The appellants' right to damages for breach of contract arose because, it was said, cl 11(a) became a term of the contract of employment. According to the appellants' argument, this occurred, first, because the provision was "imported" into the contract by force of the award, independently of the intention of the parties. Next, the argument ran, such a term was an implied term of the agreement between parties. Then, it was said, cl 11(a) embodied a "crystallised custom" of the industry in which the parties were engaged and for that reason became a term of the contract. The appellants also claimed damages for breach of a statutory duty said to be imposed by cl 11(a). The appellants further argued that even if cl 11(a) did not become a term of the contract, the purported termination of their employment was in breach of that clause and for that reason was illegal and void. The consequence was, it was said, that the contract was left on foot, but repudiated by the respondent so that the appellants were able to accept the repudiation and claim damages for its breach.

In putting the first argument the appellants relied upon Mallinson v Scottish Australian Investment Co Ltd [2] . In that case, an employee sought to recover in the New South Wales District Court the difference between the award rate which bound his employer and the lesser amount which he had been paid. This Court held that the District Court had jurisdiction to entertain the claim, which was by way of action of debt pursuant to an obligation created by statute. The Court said [3] :

The new right created in the employee by the [Conciliation and Arbitration Act 1904 Cth] operating on the award made under it is to receive from his employer wages at a rate not less than the minimum rate fixed by the award. This is apparent from the terms of s 40(1)(b) of the Act, which provides that the Court by its award may prescribe a minimum rate of " wages or remuneration ". It is important to observe that the alteration which the [Conciliation and Arbitration] Court is thus empowered to make in the rights and liabilities of the parties is not an alteration in the character of the payment but in its amount. The amount is still to be paid as " wages or remuneration," and this necessarily imports that the employee shall have a right to receive, and if necessary to recover, from the employer payment of the amount calculated according to the rate fixed by the award. The right conferred being a right to receive from a designated person a liquidated sum of money, the question is whether the Act contains provision forbidding the recovery by appropriate legal proceedings of the amount payable. The Court went on to determine that the provision of a penalty for breach of the award and the power given to the court imposing the penalty to order it to be paid to the employee were not inconsistent with a right of recovery in a civil action. 1. (1920) 28 CLR 66. 2. Mallinson v Scottish Australian Investment Co Ltd (1920) 28 CLR 66 at 72.

There is, in our view, nothing in Mallinson to suggest that the award's prescription of a minimum rate of pay became a term of the contract of employment. The award effected an alteration in the rights and obligations of the parties to the contract, but it did so by force of the Conciliation and Arbitration Act. The debt which arose as a consequence was a debt which owed its origin to the statute and not to the contract. That is why the Court examined the Conciliation and Arbitration Act in order to determine whether it contained anything inconsistent with recovery by way of civil action. It is also why the Court referred to Groves v Wimborne [4] , a case which involved a cause of action for damages for breach of statutory duty. A similar examination of the statute was undertaken in that case to ascertain whether the penalty provided was inconsistent with an action for damages for breach of the statutory duty.

In Amalgamated Collieries of WA Ltd v True [5] , the respondent was employed by the appellant as a miner. The contract of employment, though oral, contained an express term that the respondent be paid at tonnage rates, and not at day rates, upon the terms and conditions of an award made under the Industrial Arbitration Act 1912 WA. The respondent sued for payment at full tonnage rates. In this Court it was held by a majority that his action was barred by s 176 of that Act, which declared that he was entitled to payment of an amount in accordance with the award, but provided that any action to recover such amount must be commenced within twelve months from the time when the cause of action arose. The decision was reversed in the Privy Council [6] where it was held that the respondent was able to sue upon the contract without resort to s 176 and so was not bound by the limitation which it imposed.

1. (1938) 59 CLR 417. 2. True v Amalgamated Collieries of WA Ltd [1940] AC 537.

The appellants relied upon the observations of Dixon J, who was in the majority in this Court, in the following passage [7] :

The right to payment of award wages is really a term imported by statute into the contract of employment, and imported independently of the intention of the parties The distinction between express promise and obligation imputed by statute relates only to the juristic source of the obligation. It does not touch the character of the sum sued for nor the purpose of the proceeding. 1. Amalgamated Collieries of WA Ltd v True (1938) 59 CLR 417 at 431.

However, we do not understand Dixon J to be saying in that passage that "a term imported by statute into the contract of employment" loses its statutory character and becomes incorporated in the contract as one of its terms. On the contrary, he recognises the distinction between an obligation originating in a statute and an obligation arising from a contract. In his view, the distinction was not of importance in that case, but it is crucial in the present one. No doubt there are terms which are incorporated by statute in contracts of a particular kind so that the ordinary remedies for breach of contract are available in relation to them [8] . And apart from statute, a term may be implied by law as an incident of a particular class of contract [9] , but we do not understand the appellants to be submitting that any such implication arises here. They rely upon the statutory force given to the award and say that, because the relationship between the parties is contractual, the provisions of the award - or at least some of them including cl 11(a) in this case - become terms of the contract enforceable by the use of contractual remedies as well as the remedies provided by statute.

1. eg, the Sale of Goods Acts. 2. See Lister v Romford Ice & Cold Storage Co Ltd [1957] AC 555 at 576; Liverpool City Council v Irwin [1977] AC 239; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 345-346.

A right to the payment of award rates is imported by statute into the employment relationship, which is contractual in origin, and, express promise apart, it is only in that sense that it can be said that award rates are imported into the contract of employment. The award regulates what would otherwise be governed by the contract. But award rates are imported as a statutory right imposing a statutory obligation to pay them. The importation of the statutory right into the employment relationship does not change the character of the right. As Latham CJ points out in his judgment in Amalgamated Collieries of WA Ltd v True [10] , the legal relations between the parties are in that situation determined in part by the contract and in part by the award. And as the judgment of the Privy Council in that case suggests, a provision in an award may also be made a term of the contract by agreement between the parties, but that is only to emphasise the distinction between an obligation imported by statute and one arising by agreement.

This distinction was not adverted to in a passage in R v Gough; Ex parte Meat and Allied Trades Federation of Australia [11] where, in speaking of a clause in an award relating to the termination of employment, Windeyer J said:

the first paragraph of the clause would create new rights as between master and servant superimposed on the common law incidents of their relationship. It seems therefore that an action for wrongful dismissal or for a refusal of employment might be brought at common law by an employee based upon a non-compliance with the clause. Certainly proceedings could be instituted in the Industrial Court, or proceedings for a penalty taken in one of the courts mentioned in s 119 of the [Conciliation and Arbitration] Act. However, that passage is obiter and the view which is expressed is somewhat tentative. Windeyer J does not specify the basis upon which any action at common law might be brought. In particular, he does not appear to have turned his mind to the way, if any, in which a term of the contract of employment corresponding to the clause of the award might arise such that its breach would found an action for damages. The correct view, in our opinion, is that reflected by the remarks of Isaacs J in Josephson v Walker [12] , a case in which an employee claimed the unpaid balance of wages due under an award. Isaacs J said [13] : And the unpaid balance is claimed as due by virtue, not of a common law contract, but of the statutory obligation which subsists notwithstanding any agreement to the contrary - no man being capable under the Statute of contracting himself out of his rights or obligations in this respect. The right claimed is a new right. It is a right which was unknown before to the law: a right to receive from an employer more than was bargained for. 1. (1969) 122 CLR 237 at 246. 2. (1914) 18 CLR 691. 3. Josephson v Walker (1914) 18 CLR 691 at 700.

In a system of industrial regulation where some, but not all, of the incidents of an employment relationship are determined by award, it is plainly unnecessary that the contract of employment should provide for those matters already covered by the award. The contract may provide additional benefits, but cannot derogate from the terms and conditions imposed by the award [14] and, as we have said, the award operates with statutory force to secure those terms and conditions. Neither from the point of view of the employer nor the employee is there any need to convert those statutory rights and obligations to contractual rights and obligations. There is, therefore, an insuperable obstacle in the way of the appellants' second argument that the terms of an award such as cl 11(a) are implied terms of the contract of employment.

1. See Kilminster v Sun Newspapers Ltd (1931) 46 CLR 284.

The implication which the appellants seek to make is based upon the presumed or imputed intention of the parties. In that context, the remarks of the majority in the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [15] are frequently called in aid: "(1) [the implication] must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract." In laying down those criteria, it was recognised that there was a degree of overlap. Further, as Deane J has observed [16] , the cases in which the criteria in BP Refinery (Westernport) Pty Ltd v Shire of Hastings have been applied in this Court are cases in which there was a formal contract, complete on its face. He pointed out that a rigid approach should be avoided in cases, such as the present, where there is no formal contract. In those cases the actual terms of the contract must first be inferred before any question of implication arises. That is to say, it is necessary to arrive at some conclusion as to the actual intention of the parties before considering any presumed or imputed intention. And the test to be then applied was in a later case formulated by Deane J in these terms [17] :

The most that can be said consistently with the need for some degree of flexibility is that, in a case where it is apparent that the parties have not attempted to spell out the full terms of their contract, a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case. That general statement of principle is subject to the qualification that a term may be implied in a contract by established mercantile usage or professional practice or by a past course of dealing between the parties. 1. (1977) 180 CLR 266 at 283. 2. See Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 121. 3. See Hawkins v Clayton (1988) 164 CLR 539 at 573.

That is, we think, the appropriate test to apply in this case and the answer must be that it is not necessary to imply a term in the form of cl 11(a) for the reasonable or effective operation of the contract of employment in all the circumstances. In the absence of any provision in the award and of any express provision in the contract of employment the law would regard it as a legal incident of the contract that it should be terminable upon reasonable notice or summarily for serious breach. Clause 11(a) may alter that position, but there is no reason to presume that any alteration was intended by the parties to form a term of their contract, nor any reason to impute such an intention to them. Plainly, the fact that the inclusion of such a term would, if it were breached, support an action for damages by the employee is no ground for saying that the term is necessary for the reasonable or effective operation of the contract. The contract is capable of operating reasonably and effectively in the absence of such a term and in the presence of an award provision offering limited remedies in the event of breach. The argument that cl 11(a) constituted an implied term of the contract of employment should be rejected.

The term "crystallised custom", upon which the appellants base their third argument, appears to have been coined by Professor Sir Otto Kahn-Freund [18] to explain how, in the United Kingdom, the terms of collective bargains between employers and unions might become terms of individual contracts of employment between employers and employees. The legal basis of the theory propounded by Kahn-Freund must lie in the recognition by the law of contract of implied terms based upon custom or usage. It is there that the appellants' argument strikes immediate difficulty. Whatever may, as a matter of implied agreement, flow from collective bargains into individual contracts of employment, a term of an award derives its force, not from agreement between the parties, but from statute. That being so, if a contract of employment is made in reliance upon a provision of an award, it is not a reliance which requires the provision to be made a term of the contract because it already has statutory force. It is not something "so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract" [19] . The existence of a custom or usage that will justify the implication of a term into a contract is a question of fact and there must be evidence of its acceptance such that it is "reasonable to assume that the parties contracted on the basis of the custom, and that it is therefore reasonable to import such a term into the contract" [20] . Just as there can be no implied or presumed intention of the parties in this case to include a provision of an award as a term of their contracts of employment, there can be no assumption that they contracted upon the basis of the inclusion of an award provision. There would be no need for them to do so because the award operates of its own force. Whatever may be the situation with the terms of collective bargains, which at least involve a measure of agreement albeit not with individual employees, there can in our view be no basis for treating a provision of an award as a "crystallised custom" and implying a term to its effect into a contract of employment.

1. Davies and Freedland, Kahn-Freund's Labour and the Law, 3rd ed (1983), pp 166-184. 2. See Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 236. 3. Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 237.

Nor do we think that the appellants succeed in establishing the existence of a cause of action for damages for breach of statutory duty consequent upon a breach of cl 11(a). Clearly Mallinson v Scottish Australian Investment Co Ltd [21] is no authority for the existence of such a cause of action. In that case the nature of the cause of action which was held to arise was that of debt, the obligation giving rise to the debt being statutorily created. Debt is a form of action for a liquidated sum and not for damages [22] .

1. (1920) 28 CLR 66. 2. See Maitland, The Forms of Action at Common Law (1936), p 51.

A cause of action for damages for breach of statutory duty arises where a statute which imposes an obligation for the protection or benefit of a particular class of persons is, upon its proper construction, intended to provide a ground of civil liability when the breach of the obligation causes injury or damage of a kind against which the statute was designed to afford protection [23] . The question is one of the construction of the statute, although as Dixon J pointed out in O'Connor v S P Bray Ltd [24] , an examination of the statute "will rarely yield a necessary implication positively giving a civil remedy". One generalisation that can be made is that where the persons upon whom the statutory obligation is imposed are under an existing common law duty of care towards the persons whom the statute is intended to benefit or protect, the statutory prescription of a higher or more specific standard of care may, in the absence of any indication of a contrary intention, properly be construed as creating a private right [25] . Thus it is that Factories and Shops Acts and other legislation designed to protect the health and safety of employees in the workplace have been held to impose duties the breach of which gives rise to a right to sue for damages [26] .

1. See Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397 at 404, 405. 2. (1937) 56 CLR 464 at 477-478. 3. O'Connor v S P Bray Ltd (1937) 56 CLR 464 at 478. 4. See, eg, Groves v Wimborne [1898] 2 QB 402; cf R v Deputy Governor of Parkhurst Prison; Ex parte Hague [1992] 1 AC 146.

The legislation in this case, the Industrial Relations Act as it stood at the relevant time, is of a very different kind. There have been significant amendments to the Act in the meantime, but it is convenient here to speak of it (as it existed) in the present tense. The principal object of the Act is expressed in s 3 to be the promotion of industrial harmony and co-operation among the parties involved in industrial relations in Australia by the doing of a number of things which include the provision of a framework for the prevention and settlement of industrial disputes by conciliation and arbitration in a manner which minimises the disruptive effects of industrial disputes on the Australian community as a whole. The function of making awards is vested in the Industrial Relations Commission by s 111 and in exercising that function the Commission is required under s 90 to take into account the public interest and, for that purpose, to have regard to the objects of the Act and the likely effects on the economy of any award it is considering or proposing to make, with special reference to the likely effects on the level of employment and on inflation. The Act does not prescribe the content of the awards which the Commission is empowered to make in the settlement of industrial disputes.

Having regard to the public aims of the legislation, its scope and purpose is not such as to disclose any intention to benefit or protect employees or any other class of persons by conferring on them a right of action at common law for breach of an award obligation. However, in pursuit of those aims the Act does provide for the enforcement of awards thereby giving them statutory force. The appellants' argument tended to focus upon the award itself rather than the Act. But an award is not a statute [27] and if a duty imposed by an award is to be regarded as a statutory duty enforceable by way of a civil action for damages, then the necessary intention that it should be so regarded must ultimately be found in the Act and not the award. The Act discloses no such intention and, indeed, cannot do so in the absence of any specification of the duties which might be imposed by an award. On the other hand, the Act can and does disclose a contrary intention in providing a means for the enforcement of awards which does not contemplate the existence of private rights enforceable by way of an action for damages.

Section 178 imposes a penalty for the breach of an award which might be sued for and recovered by, amongst others, a party to the award or a member of an organisation who is affected by the breach. Under s 356 a court that imposes a penalty may order that it be paid to a particular organisation or person. Section 178 also provides that where, in a proceeding against an employer under the section, it appears to the court concerned that an employee of the employer has not been paid an amount to which the employee is entitled under an award, the court may order the employer to pay to the employee the amount of the underpayment. And s 179 provides that an employee entitled to the benefit of an award may sue for wages and other payments due under it. The maximum penalty which may be imposed for a breach of an award is the relatively modest sum of $1,000 which, when regard is had to the fact that a court may order it to be paid to a member of an organisation affected by the breach, is plainly inconsistent with a right to unlimited compensation by way of damages. So also is the express provision for the recovery of underpayments and of wages under awards inconsistent with a right to sue for damages for breach of an award.

Even if it were permissible (and we do not think that it is) to seek the creation of a statutory duty giving rise to private rights in the award itself without regard to the Act, we do not think that as a matter of construction they would emerge. Awards are made in settlement of industrial disputes and represent the degree of compromise necessary to effect such settlements. They are required to be made having regard to the objects of the Act which, as we have observed, extend beyond the interests of the parties to the dispute. The obligations which awards impose are various and are not wholly for the protection or benefit of any one class of persons, be they employers or employees or the organisations which represent them. In those circumstances, as a matter of construction, awards cannot in our view be regarded as conferring private rights enforceable by way of an action for damages. When regard is had to the enforcement mechanism provided by the Act, the situation is even plainer.

The appellants' final argument was of a different kind. They contended that, even if they had no claim for damages based upon the breach of cl 11(a) as a term of their contracts of employment or as imposing a statutory duty, nevertheless the purported termination of those contracts, being in breach of cl 11(a), was illegal and void. The appellants were entitled in those circumstances, so the argument ran, to treat their dismissal as a repudiation of the contracts, to accept it as putting an end to them and to sue for damages. In support of that argument, the appellants referred to the decision of this Court in Automatic Fire Sprinklers Pty Ltd v Watson.

In that case, a war-time regulation [29] provided that an employer carrying on a protected undertaking should not, without the permission in writing of the Director-General of Man Power or of a person authorised by him, terminate the employment of a person employed in the undertaking. The appellants employed the respondent in such an undertaking and purported to dismiss him without obtaining the permission of the Director-General. Contravention of the regulation was an offence against the National Security Act 1939 Cth. The Court (Rich, Dixon, McTiernan and Williams JJ, Latham CJ and Starke J dissenting) held that the purported dismissal was ineffectual in law to terminate the respondent's employment. But the decision of the majority was arrived at by the application of two English decisions [30] concerning legislation which was thought not to be materially different from the Australian regulation. Dixon J said [31] :

I am afraid that, but for the guidance of authority, I should have regarded the Regulations as attempting to prevent the unpermitted discharge of a man from employment only by penalising it and not as making the relationship legally infrangible. But I think that we should apply the two decisions I have mentioned to the Man Power Regulations. 1. National Security (Man Power) Regulations (SR 1942 No 34; 1944 No 175), reg 14(1). 2. George v Mitchell & King Ltd (1943) 59 TLR 153; [1943] 1 All ER 233; Woolley v Allen Fairhead & Sons Ltd [1946] KB 461. 3. Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 471.

In speaking of "the relationship", Dixon J had in mind the relationship of employer and employee as distinct from the contract of employment. It does not appear to have been doubted in this country that a wrongful dismissal terminates the employment relationship notwithstanding that the contract of employment may continue until the employee accepts the repudiation constituted by the wrongful dismissal and puts an end to the contract. That was accepted by both the majority and minority in Automatic Fire Sprinklers Pty Ltd v Watson [32] . As Latham CJ said [33] :

An employer terminates the employment of a servant when he dismisses him, though, as I say hereafter, such a dismissal does not put an end to the contract between the parties. An argument that a dismissal because wrongful was a nullity was raised and rejected in both Williamson's Case [Williamson v The Commonwealth] [34] and Lucy's Case [Lucy v The Commonwealth] [35] . And as Dixon J said [36] : there is nothing in the general law preventing the wrongful dismissal of a servant operating to discharge him from service, notwithstanding that he declines to accept the dismissal as absolving him from further performance but keeps the contract open and remains ready and willing to serve. 1. See also Turner v Australasian Coal and Shale Employees Federation (1984) 6 FCR 177 at 191-192 and Siagian v Sanel Pty Ltd (1994) 122 ALR 333 at 342-345. 2. Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 454. 3. (1907) 5 CLR 174 at 185. 4. (1923) 33 CLR 229 at 237, 248, 249, 252, 253. 5. Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 469.

In England, the position was for a time not so clear, although the view taken in Australia appears now to be accepted there [37] . Of course, even if an employee who is wrongfully dismissed chooses to keep the contract of employment on foot, he or she cannot claim remuneration in respect of any period after the wrongful dismissal because the right to receive remuneration for services is dependent upon the services having been rendered [38] . The employee is also under a duty to mitigate any damage [39] . Moreover, a court will not, save in exceptional circumstances, order specific performance of a contract of personal service. The possible continuation of the contract of employment after a wrongful dismissal will, therefore, ordinarily be of no real significance [40] as it will for all practical purposes be at an end.

1. See Gunton v Richmond-upon-Thames London Borough Council [1981] Ch 448. 2. See Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 465; Gunton v Richmond-upon-Thames London Borough Council [1981] 1 Ch 448 at 468. 3. Gunton v Richmond-upon-Thames London Borough Council [1981] Ch 448 at 468. 4. However, cf Hill v C A Parsons & Co Ltd [1972] Ch 305; Thomas Marshall (Exports) Ltd v Guinle [1979] Ch 227.

There is no reason to doubt that in the present case the dismissal of the appellants by the respondent rightly or wrongly put an end to the employment relationship. In Automatic Fire Sprinklers Pty Ltd v Watson the majority felt constrained by authority to say that the regulation in question prevented that from happening. We are bound to say that we prefer the reasoning of the minority to the contrary on the point. As Latham CJ said [41] : "the fact that a statute prohibits the doing of an act under a penalty does not show that the act cannot be done." Indeed, as Mason J said in Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [42] :

There is much to be said for the view that once a statutory penalty has been provided for an offence the rule [role?] of the common law in determining the legal consequences of commission of the offence is thereby diminished. Short of a law deeming an employment relationship to exist when it does not, the question whether or not it continues to exist seems to us to be a question of fact. 1. Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 454. 2. (1978) 139 CLR 410 at 429.

But even if the decision of the majority in Automatic Fire Sprinklers Pty Ltd v Watson be correct, there is sufficient distinction between the regulation in that case and cl 11(a) to reach a different conclusion here. The regulation directly prohibited the termination of the employment without the required permission. Clause 11(a), on the other hand, merely provides that the termination shall not be harsh, unjust or unreasonable. That does not suggest that failure to observe the requirements of the clause renders a de facto termination a nullity. Moreover, cl 11(f) makes cl 41 of the award applicable. Clause 41 provides a procedure to be followed for the settlement of disputes or claims arising under cl 11. Again, that does not suggest that termination of employment in breach of cl 11(a) is to be regarded as a nullity. In our view, cl 11(a) cannot be read in the way in which the majority in Automatic Fire Sprinklers Pty Ltd v Watson read the regulation in that case, which was to render the termination of employment in breach of its terms a nullity.

Termination of employment in breach of cl 11(a) is, of course, a breach of the award, but since cl 11(a) is not, unless made so, a term of the contract, it is not a breach of contract. It is a different question whether a dismissal, if wrongful, otherwise amounts to a breach of contract sounding in damages. In the absence of anything to the contrary and putting to one side the provision in the award for notice, at common law a contract of employment for no set term is to be regarded as containing an implied term that the employer give reasonable notice of termination except in circumstances justifying summary dismissal [43] . Clause 11(d) of the award prescribes periods of notice varying according to the length of service and the age of the employee. If that provision were not to preclude the implication of a term that reasonable notice be given, it might provide evidence of what constitutes reasonable notice at common law. Upon the basis of such an implied term, the appellants might possibly have been able to mount a claim for damages for wrongful dismissal because of the failure to give them the appropriate notice [44] . But it is unnecessary for the purposes of these appeals to determine the point.

1. Richardson v Koefod [1969] 1 WLR 1812; [1969] 3 All ER 1264; Thorpe v South Australian National Football League (1974) 10 SASR 17 at 29. 2. See Addis v Gramophone Co Ltd [1909] AC 488 at 490-491; Gunton v Richmond-upon-Thames London Borough Council [1981] Ch 448 at 469.

The claim which the appellants advance is not a claim for wrongful dismissal based upon a failure to give reasonable notice. It is a claim for damages for loss of employment for, it would seem, an indefinite period, based upon the inability of their employer, because of cl 11(a), to terminate the employment relationship. There is, of course, an immediate difficulty because the claim is also based upon the appellants' acceptance of the respondent's repudiation of the contract and that would have brought the contract to an end. However, for the reasons which we have given, cl 11(a) did not preclude the termination of that relationship even if the termination amounted to a breach of the clause, and the claim for damages upon that basis must fail.

In the Full Court a majority held that the termination of the appellants' employment was unreasonable because they had been denied procedural fairness. The majority were of the view that there was undue delay in bringing to the appellants' attention a video said to be evidence of the involvement of the appellants in pilfering. They were also of the view that the nature of the appellants' alleged misconduct was inadequately specified and that another member of the appellants' loading team ought to have been interviewed. In reaching their conclusion, the majority did not consider whether the trial judge was correct or in error in reaching his decision that there was sufficient evidence to establish the appellants' misconduct.

The respondent seeks special leave to cross-appeal against the finding in the Full Court that the dismissal of the appellants was unreasonable. The ground advanced by the respondent is that, whilst the adoption of an unfair procedure may render a dismissal harsh, unjust or unreasonable, whether it does so or not must depend upon the whole of the circumstances. The respondent contends that, having failed to consider whether the evidence established that the appellants had been involved in pilfering, the majority in the Full Court were in no position to determine whether the procedure adopted resulted in their dismissal being unreasonable. In our view that contention is plainly correct.

Save for the prescription of periods of notice, cl 11 does not require the adoption of any particular procedure for the dismissal of an employee. However, it is clear that the use of an unfair procedure may result in a dismissal being harsh, unjust or unreasonable. For example, the failure to afford an employee the opportunity to explain apparent misconduct where there is an innocent explanation available would result in the dismissal of the employee being in breach of cl 11(a) [45] . On the other hand, if an employer were to observe the actual misconduct of an employee in circumstances which allowed no innocent explanation, a summary dismissal might not be in breach of cl 11(a). And facts which existed at the time of a dismissal, but which come to light only subsequently, might justify the dismissal when otherwise it would be harsh, unjust or unreasonable [46] .

1. Gregory v Philip Morris Ltd (1988) 80 ALR 455 at 471, 473, per Wilcox and Ryan JJ; Wheeler v Philip Morris Ltd (1989) 97 ALR 282 at 306-307, per Gray J. 2. See Lane v Arrowcrest Group Pty Ltd (1990) 27 FCR 427 at 456.

It was not, therefore, a permissible approach for the Full Court to reach a conclusion adverse to the respondent based upon the procedure employed in dismissing the appellants without considering whether the trial judge was correct in reaching the conclusion that there was sufficient evidence to establish that the appellants were involved in the misconduct alleged against them. Special leave to cross-appeal should be granted and each of the cross-appeals allowed. The matters should be remitted to a Full Court of the Federal Court to be reconsidered in the light of this Court's reasons. The appeals should be dismissed.

These appeals, which are brought from the Full Court of the Federal Court of Australia, were heard together.

Each appellant had been employed by the respondent to handle, load, stow and unload cargo and baggage at Sydney airport. The appellant in the first matter, Mr Byrne, had been employed by the respondent for about twenty years and the appellant in the second matter, Mr Frew, had been employed for about twenty-five years. They were dismissed on 28 March 1989.

The appellants had been paid wages by the respondent pursuant to the Transport Workers (Airlines) Award 1988 (the Award) and its predecessors. The earlier awards had been made pursuant to the Conciliation and Arbitration Act 1904 Cth (the 1904 Act). The Award also was made whilst this statute was still in force. With the commencement on 1 March 1989 of the Industrial Relations Act 1988 Cth (the 1988 Act), the Award continued as if it had been made under the 1988 Act. This result was achieved by s 7 of the Industrial Relations (Consequential Provisions) Act 1988 Cth. Clause 11(a) had been inserted in the Award as a sequel to the Termination, Change and Redundancy Case [47] , decided by the Australian Conciliation and Arbitration Commission on 2 August 1984.

1. Amalgamated Metals, Foundry & Shipwrights' Union v Broken Hill Pty Co Ltd, Whyalla (1984) 8 IR 34.

In the Federal Court there were no findings as to any express terms of the relevant contracts of employment, save what is implicit in the general findings of fact. The appeal was argued on the footing that, except for the term contended for by the appellants, the contracts had those incidents otherwise implied by the general law.

After their dismissal, both Mr Byrne and Mr Frew commenced proceedings in the Federal Court and their applications were heard together. They sought imposition of a penalty pursuant to s 178 of the 1988 Act and an order under s 356 of the 1988 Act that the penalty be paid to them rather than into the Consolidated Revenue Fund.

The appellants asserted that the termination of their employment was in breach of a term of the Award identified by them as "Cl 11(a)". Clause 11 is headed " Termination of Employment " and subcll (a) and (b) are headed "Unfair dismissals". The text of subcll (a) and (b) is as follows:

(a) Termination of employment by an employer shall not be harsh, unjust or unreasonable.

For the purposes of this clause, termination of employment shall include terminations with or without notice.

(b) Without limiting the above, except where a distinction, exclusion or preference is based on the inherent requirements of a particular position, termination on the ground of race, colour, sex, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction and social origin shall constitute a harsh, unjust or unreasonable termination of employment.

It will be necessary later in these reasons to refer to other provisions of the Award.

The appellants also sought damages on claims brought in the accrued jurisdiction of the Federal Court. Each appellant contended that cl 11(a) had become a term of his contract and that the termination of his employment was in breach of contract because it was "harsh and/or unjust and/or unreasonable". Each appellant further claimed that (i) in terminating the contract of employment, the respondent had been in breach of a statutory duty created by the 1988 Act which sounded in damages for contravention of cl 11(a) and (ii) cl 11(a) rendered void at general law the purported termination by the respondent of the contracts of employment with the appellants, giving rise to actions for breach of contract at the suit of the appellants. There was no common law claim for wrongful dismissal.

At no stage in the litigation has anything turned upon the circumstance that the employment of the appellants antedated the commencement of the Award and the insertion of cl 11(a). In so far as the appellants submit that cl 11(a) had contractual force, this is on the apparent footing that it applied as a variation of pre-existing terms of their employment.

The appellants submitted that the requirement that termination be not harsh, unjust or unreasonable carried with it an obligation on the part of the respondent to afford them procedural fairness by giving them an opportunity to be heard in reply to any charges put against them, before terminating their services. They contended that the failure to observe that requirement had the result that the termination was harsh, unjust or unreasonable with the consequence that the dismissal was wrongful, thereby entitling the appellants to damages.

The primary judge (Hill J) concluded that the appellants had not succeeded in showing that the termination of their employment was harsh, unjust or unreasonable. It followed that their claims failed and that it was unnecessary to reach any considered conclusion on the questions of penalty and damages. The applications were dismissed.

The appeals to the Full Court were heard by a five member Bench [48] . It was held by the whole Court that the orders of the primary judge dismissing the applications should be set aside and in place thereof a declaration be made that, in terminating the employment of the appellants, the respondent had acted in breach of the provisions of cl 11(a). The proceedings were remitted for the purpose of dealing with any claim by the appellants for penalty for breach of the Award and any other issue in connection therewith.

1. Byrne v Australian Airlines Ltd (1994) 47 FCR 300; Black CJ, Keely, Beaumont, Gray and Heerey JJ.

However, by majority (Keely, Beaumont and Heerey JJ, Black CJ and Gray J dissenting), the Full Court held that there was no implied term in the contract of employment which reproduced cl 11(a). That question involved distinct sub-issues. Keely, Beaumont and Heerey JJ (Gray J dissenting) held that the terms of cl 11(a) were not implied in the terms of employment as a matter of business efficacy. Black CJ would have returned the matters to the trial judge to make findings of fact relevant to the determination of whether such an implication ad hoc should be found. Black CJ, Keely, Beaumont and Heerey JJ (Gray J dissenting) also held that the terms of the clause were not imported into the contracts as a matter of law and independently of the intentions of the parties.

In reaching that latter conclusion, the majority did not follow the decision of the Full Court in Gregory v Philip Morris Ltd [49] . In that case, the appellant contended that there was imported into the terms of his employment contract a provision inserted in 1985 into the Metal Industry Award 1984. This provision was in the same terms as cl 11(a) and (b) of the Award which applies in this case. In their joint judgment, Wilcox and Ryan JJ [50] said that, whilst there was no evidence of any express agreement for the incorporation of the terms of the award, there were two bases upon which it might be said that the contract of employment included the terms of the relevant award, as in force from time to time. One such basis was that an agreement to that effect ought to be implied as necessary to give business efficacy to the contract. Their Honours also said:

It has long been recognised that an employee is entitled to sue at law to recover the moneys payable to him or her under an award, notwithstanding that no independent express agreement has been made about those moneys: see Mallinson v Scottish Australian Investment Co Ltd [51] . As we understand it, that is because the award provision imports a term into the contract of employment independently of the intention of the parties: see Amalgamated Collieries of WA Ltd v True [52] . Similarly, Windeyer J in R v Gough; Ex parte Meat and Allied Trades Federation of Australia [53] described the award provision as operating to "create new rights as between master and servant superimposed on the common law incidents of their relationship". 1. (1988) 80 ALR 455. 2. Gregory (1988) 80 ALR 455 at 478-479. Jenkinson J dissented on these issues. 3. (1920) 28 CLR 66. 4. (1938) 59 CLR 417 at 431, per Dixon J. 5. (1969) 122 CLR 237 at 246.

In their joint judgment in the present case, Beaumont and Heerey JJ [54] made a detailed analysis of the three authorities referred to in this passage. Their Honours concluded that, properly understood in the relevant statutory contexts, those authorities did not support any such general proposition. The authorities also were discussed by Black CJ, who reached the same conclusion [55] . In this Court, the appellants did not seriously dispute the accuracy of these analyses. It is sufficient to say here that what Black CJ, Beaumont and Heerey JJ said upon the matter was correct. However, before this Court the appellants still pressed the general proposition as to implication as a matter of law independently of the intentions of the parties.

1. Byrne (1994) 47 FCR 300 at 334-337. 2. Byrne (1994) 47 FCR 300 at 306-307.

Two further holdings of the Full Court are important for present purposes. The first of these (Keely, Beaumont and Heerey JJ, Black CJ and Gray J dissenting) was that, on its proper construction, the Award did not make the contract of employment legally "infrangible", or unbreakable. Their Honours accordingly rejected the appellants' submission that the purported termination by the respondent was void, thereby entitling the appellants to accept the repudiation and sue for damages. This issue involved consideration of Automatic Fire Sprinklers Pty Ltd v Watson [56] .

Finally, Keely, Beaumont and Heerey JJ dealt with the statutory duties issue. They rejected the submission that, upon its proper construction, the 1988 Act conferred a right to damages for breach of the terms of an award. The other members of the Full Court did not consider this issue.

The result in the Full Court was that, whilst the appellants succeeded in their claim that the termination of their employment had been in breach of the Award, they failed in their claims in the accrued jurisdiction for damages.

It should be noted that the majority in the Full Court decided that the termination of the employment had been in contravention of the Award on the footing that the dismissal procedure followed by the respondent had been unreasonable. The employees also had submitted that the employer had acted unreasonably in what their Honours described as "a substantive sense" [57] . However, they expressed no opinion on that aspect of the matter. In particular, their Honours did not enter upon the challenge to the findings of fact made by the primary judge which had been adverse to the appellants. Hill J had considered himself bound by Gregory v Philip Morris Ltd to hold that cl 11(a) was a term of the contract of employment but had held, on the facts, that the termination had been neither in breach of the Award nor in breach of contract.

In argument before this Court the issue arose whether, on the hypothesis that cl 11(a) was not a contractual term and none of the other claims in the accrued jurisdiction were made out, the remaining issues in the litigation concerning the liability of the respondent to penalties under the 1988 Act could satisfactorily be resolved in this Court in the absence of consideration by the Full Court of the findings of fact by the primary judge.

We should refer briefly to those findings of fact by the primary judge.

On 11 October 1988, Mr Byrne, Mr Frew and Mr Brosnan had been members of a team allocated to handle luggage to be loaded for a flight from Sydney to Adelaide and then Perth. The evidence included a video-tape of the loading operation. After viewing the video-tape and hearing the evidence of the appellants and of Mr Brosnan, the primary judge found that Mr Brosnan had been searching through customer baggage with the purpose of stealing items from it, that Mr Byrne was involved in those activities in the sense that he had full knowledge of what Mr Brosnan was doing and had aided him in carrying out that activity, and that Mr Frew also was involved in Mr Brosnan's activities, in the sense that he knew of them and assisted in them being carried out.

Hill J held that each appellant had been given the opportunity to put his side of the story and that their failure to provide an innocent explanation resulted in there being reasonable grounds for the respondent to conclude that each appellant had been participating in criminal acts. A belief, reasonably held, that the appellants were involved in the pilfering of baggage justified their peremptory dismissal. His Honour added:

Length of service with the Airline, a matter treated by the award itself as relevant in calculating the period of notice required in the event of a dismissal on notice (not being a summary dismissal), could not, once involvement in pilfering was established, have acted as a justification to prevent dismissal.

In this Court, the contentions of the appellants before the Full Court were reagitated, in some instances, with embellishments and additions.

The respondent contests the holding by the Full Court that the dismissal procedure had been unreasonable. It seeks special leave, in each proceeding, to cross-appeal. That leave should be granted. The respondent also submits that the Full Court erred in not considering whether, in all the circumstances of the case, including the findings by Hill J as to the complicity of the appellants in pilfering, the termination was in breach of the Award. The submission is that the Full Court did not deal adequately with the question of breach of the Award because it had dealt only with the "procedural" aspects of the dismissal of the appellants and had not given weight to the "substantive" aspect of the matter, the dismissal for involvement in the pilfering of luggage.

Since the institution of this litigation the 1988 Act has been relevantly amended on several occasions. However, the issues in the present dispute may remain of some general importance.

Sections 170DC and 170DE were inserted by s 21 of the Industrial Relations Reform Act 1993 Cth. They state:

170dc An employer must not terminate an employee's employment for reasons related to the employee's conduct or performance unless:

(a) the employee has been given the opportunity to defend himself or herself against the allegations made; or

(b) the employer could not reasonably be expected to give the employee that opportunity.

170de(1) An employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on the operational requirements of the undertaking, establishment or service.

(2) A reason is not valid if, having regard to the employee's capacity and conduct and those operational requirements, the termination is harsh, unjust or unreasonable. This subsection does not limit the cases where a reason may be taken not to be valid.

The remedies which the Industrial Relations Court of Australia might grant under s 170EE in respect of such wrongful termination of employment included "an order that the employer pay compensation to the employee" (s 170EE(2)). However, s 170EE was repealed by s 8 of the Industrial Relations Amendment Act (No 2) 1994 Cth, with effect from 30 June 1994, and a new s 170EE was inserted. This contains detailed provisions by which the amount of compensation is to be assessed, including the specification of upper limits (s 170EE(3), (4)). Thus, in some cases, there would remain the possibility of a higher award of damages for breach of contract of the nature contended for by the present appellants.

The evolution in the common law as to the relationship of employment has been seen as a classic illustration of the shift from status (that of master and servant) to that of contract (between employer and employee) [58] . Dixon J referred to fluctuations in the extent to which terms and conditions of employment were "left to free contract" and to the changes in the social and economic purposes to which the employment relationship has been put [59] . This case concerns the impact of what, to some extent, is the status conferred upon workers by awards under the 1904 Act and the 1988 Act, upon the particular contracts of employment under which individual workers may be engaged.

1. Attorney-General (NSW) v Perpetual Trustee Co Ltd (1955) 92 CLR 113 at 122-123; [1955] AC 457 at 482-483. 2. Attorney-General (NSW) v Perpetual Trustee Co Ltd (1952) 85 CLR 237 at 248.

The issues in this Court, in addition to those agitated in the Federal Court, included what was said to be the effect of "custom" arising from the operation of the industrial relations system in Australia, particularly at federal level. This is indicative of the general thrust of the submissions for the appellants. This is to give to the provisions of the Award, in particular cl 11(a), a "normative effect" upon the relationship between employer and employee beyond that which is given to it by the federal statute in conjunction with s 109 of the Constitution. The result sought to be achieved is recognition and enforcement of a right to damages to supplement the penalty for breach of the Award. The means relied upon involves the ingestion of cl 11(a) by the law of contract. The appellants also rely upon the principles governing the recovery of damages for breach of statutory obligation.

The appellants sought support for their submissions as to Australian law from developments in labour law in the United Kingdom. But these reflect the particular industrial relations system of that country. It hardly needs to be stated that social conditions, the history of labour relations, and the relevant legislative schemes differ significantly. The differences between the Australian system [60] and the changing face of labour law in Britain are exemplified in the writings of Professor Sir Otto Kahn-Freund. He identified a process by which labour conflict leads to collective bargaining, which in turn leads to collective agreements. Out of these agreements, whatever be their legal status [61] , grow norms of conduct codifying existing and laying down new industrial customs. The collective standards thus evolved are of two broad types. There are standards which govern the behaviour of groups and there are those designed to regulate the conduct of individual employers and individual employees. Kahn-Freund emphasised that [62] :

[t]his "rule-making" character is inherent in the collective bargaining process, quite irrespective of the degree of legal effect which the state attaches to the rules made in the autonomous sphere. It is true that, since these words were written, there have been legislative changes in Britain and Australia. However, the Australian system of state supported and legislatively-based dispute prevention and resolution, not merely by contractual bargaining but by conciliation, arbitration and an award structure, remains significantly different. 1. The origins and objectives of the Australian system were explained by Higgins J in his article, "A New Province for Law and Order - Industrial Peace Through Minimum Wage and Arbitration", Harvard Law Review, vol 29 (1915) 13. 2. It is now provided by s 179 of the Trade Union and Labour Relations (Consolidation) Act 1992 UK that, as between the collective parties, a collective agreement is conclusively presumed not to have been intended to be "a legally enforceable contract" unless it be in writing and contain a provision to that effect, in which case it is conclusively presumed to have been intended by the parties to be a legally enforceable contract. 3. Selected Writings (1978), p 46. See also his articles "Legislation Through Adjudication. The Legal Aspect of Fair Wages Clauses and Recognised Conditions", Modern Law Review, vol 11 (1948) 269, at p 429; "Blackstone's Neglected Child: The Contract of Employment", Law Quarterly Review, vol 93 (1977) 508.

Consistently with the views expressed by Kahn-Freund, the tenor of the submissions for the appellants may reflect the trend of common law decisions in England. But many of the recent English cases concern the powers of tribunals under the Employment Protection (Consolidation) Act 1978 UK [63] . This required the employer to give the employee a written statement containing specified particulars of the terms of employment (s 1), and provided that in default thereof the employee might obtain from a tribunal a determination of what particulars "ought" to have been given (s 11). In Mears v Safecar Security Ltd [64] , the Court of Appeal held that the tribunal was required to approach the search for the missing term or terms by considering "all the facts and circumstances, including the subsequent conduct of the parties". The relevant facts and circumstances might include the provisions of collective agreements made by trade unions and employers' associations.

1. This legislation has been frequently amended, more recently by the Trade Union and Labour Relations (Consolidation) Act 1992 UK and the Trade Union Reform and Employment Rights Act 1993 UK. 2. [1983] QB 54 at 80.

The conceptual difficulties which have arisen in England are highlighted in remarks of Hobhouse J in Alexander v Standard Telephones & Cables Ltd [65] :

The so-called "normative effect" by which it can be inferred that provisions of collective agreements have become part of individual contracts of employment is now well recognised in employment law (see, eg, Harvey on Industrial Relations and Employment Law [66] ). However, serious difficulties still arise because the principle still has to be one of incorporation into the individual contracts of employment and the extraction of a recognisable contractual intent as between the individual employee and his employer. The mere existence of collective agreements which are relevant to the employee and his employment does not include a contractual intent (see, eg, per Ackner LJ, Robertson v British Gas Corporation [67] ). The contractual intent has to be found in the individual contract of employment and very often the evidence will not be sufficient to establish such an intent in a manner which satisfies accepted contractual criteria and satisfies ordinary criteria of certainty. 1. [1991] IRLR 286 at 292. 2. vol 2 (1971) [p 35]. 3. [1983] IRLR 302.

It also is to be borne in mind that provisions such as cl 11(a) of the Award have antecedents in State legislation. In particular, s 26(2) of the Industrial Code 1967 SA provided:

If a question arises as to whether the dismissal of an employee was harsh, unjust and unreasonable, the President [of the Industrial Commission of South Australia] may, except where the employee has a right of appeal or review under any other Act or law in relation to the dismissal, determine the matter, and may, if he thinks fit, direct the employer to re-employ such employee. (Emphasis added.)

This provision was replaced by s 15(1)(e) of the Industrial Conciliation and Arbitration Act 1972 SA (the 1972 South Australian Act). Jurisdiction was conferred on the South Australian Industrial Court to hear and determine any question as to whether "the dismissal" from his or her employment of an employee was "harsh, unjust or unreasonable" and empowered the Court to direct the employer to re-employ the employee. Later in these reasons it will be appropriate to refer to some of the decisions construing the South Australian statute. It will be noted that the earlier phrase, "harsh, unjust and unreasonable", became "harsh, unjust or unreasonable", which is also the language of cl 11(a) of the Award [68] .

1. Sections 8 and 21 of the Industrial Conciliation and Arbitration Act Amendment Act 1984 SA removed s 15(1)(e) and inserted s 31 which referred not to "the dismissal" but to the "decision to dismiss". The Industrial Relations Act 1972 SA was repealed by the Industrial and Employee Relations Act 1994 SA. Part 6 (ss 105-111) of the 1994 statute is headed "Unfair Dismissal" and provides for applications to the Industrial Relations Commission of South Australia which must determine whether on the balance of probabilities "the dismissal was harsh, unjust or unreasonable"; in deciding that question, the Commission is obliged to have regard to rules and procedures for termination prescribed by or under Sch 8 of the Act and to the Convention concerning Termination of Employment at the Initiative of the Employer, set out in Sch 7. See also s 34(5) of the Industrial Relations Act 1979 Vict, inserted by s 4 of the Industrial Relations (Further Amendment) Act 1983 Vict.

The statement in the majority judgment in Gregory v Philip Morris Ltd [69] , that what was before the Court was a "novel award prescription" whose application had not then been considered by the courts, thus requires qualification.

In this Court, the appellants submitted that their contracts of employment contained terms to the effect of cl 11(a) of the Award. The submission was put on three bases:

(a) the contracts were "employment contracts", a class of contract whose inherent nature required, as a matter of law, inclusion of an obligation upon the employer in the terms of cl 11(a); (b) the contracts included an implied term to the effect of cl 11(a) as a matter of business efficacy and the presumed intention of the parties in the circumstances of the case; and (c) there was a "crystallised custom" in the industry in which the appellants were employed that the employer would terminate employment only in accordance with cl 11(a) or such a custom of the "labour market" to adhere to award restrictions on the power of employers to terminate employment.

We consider first the foundation for an implied term in custom. The phrase "crystallised custom" appears to have its origin in the writings of Professor Sir Otto Kahn-Freund [70] . The term "crystallised" adds nothing to the principles which determine when the existence of a custom or usage will justify the implication of a term into a contract. The phrase "custom or usage" includes terms implied by established mercantile usage or professional practice.

1. In his essay "Legal Framework", Flanders and Clegg (eds), The System of Industrial Relations in Great Britain (1954), p 58. See also Hepple and Fredman, Labour Law and Industrial Relations in Great Britain, (1986), s151-152.

The matter was considered in the joint judgment of five members of this Court in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [71] . The question is always whether the general notoriety of the custom makes it reasonable to assume that the parties contracted with reference to the custom so that it is therefore reasonable to import such a term into the contract. Where there is such an established usage, "the courts are spelling out what both parties know and would, if asked, unhesitatingly agree to be part of the bargain" [72] . Because the importation of the term rests on the presumed intention of the parties, it must yield to the actual intention embodied in express terms of the contract, whether the contract be written or oral.

1. (1986) 160 CLR 226 at 236-238. 2. Liverpool City Council v Irwin [1977] AC 239 at 253.

Further, whilst it is not essential that the custom be universally accepted, it must be so well known and acquiesced in that persons making a contract in that situation reasonably can be presumed to have imported it into their contract. It is here that there arises an immediate difficulty for the appellants in this case.

The difficulty is that, apart from the inferences that may be drawn from the existence of the Award and the apparent common ground that the Award bound the respondent and the employment of the appellants was subject to the Award, there is lacking evidence of a custom whereby, as between persons in the position of the respondent and the appellants, the provisions of cl 11(a) of the Award were carried into their contracts of employment. Still less is there evidence that such a custom was, at any relevant time, so well known and acquiesced in that all parties of the relevant description can reasonably be presumed thereafter to contract on the footing that cl 11(a) became a term, and to modify existing contracts so as to include it.

No doubt the existence of the award structure provided for in the 1904 Act and the 1988 Act may be treated as common knowledge, at all relevant times, of the parties to this litigation. But it would be another matter to assume on the evidence in this case that the terms of awards which dealt with termination of employment were to be given contractual force. The submission as to "crystallised custom" fails at the threshold.

We turn now to consider the submission that cl 11(a) was implied as a term from the particular circumstances of the case and to give effect to some apparent underlying intention of the parties about providing business efficacy. Reliance here was placed upon the well-known statement of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [73] . This has been approved and applied in numerous decisions in this Court [74] . The Privy Council specified five conditions which, whilst they might overlap, must be satisfied before a court may imply a term in a contract which the parties had not thought fit to express. First, the term must be "reasonable and equitable"; secondly, it must be necessary to give "business efficacy to the contract" so that no term will be implied if the contract is effective without it; thirdly, the term must be so obvious that "it goes without saying"; fourthly, it must be "capable of clear expression"; and, finally, it must not contradict any express term.

1. (1977) 180 CLR 266 at 283. 2. These include Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 605-606; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 351-352, 404; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 65-66, 95, 117-118, 121; Moorgate Tobacco Co Ltd v Philip Morris Ltd [No 2] (1984) 156 CLR 414 at 435; Adelaide City Corporation v Jennings Industries Ltd (1985) 156 CLR 274 at 281-282; Hawkins v Clayton (1988) 164 CLR 539 at 571-573.

In BP itself and in other cases such as Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [75] , Codelfa Construction Pty Ltd v State Rail Authority (NSW) [76] and Adelaide City Corporation v Jennings Industries Ltd [77] , the question was whether a term should be implied in a formal written contract which was complete upon its face.

1. (1979) 144 CLR 596. 2. (1982) 149 CLR 337. 3. (1985) 156 CLR 274.

That is not the present case. We have referred to the exiguous nature of the evidence as to the form taken by, and the express terms of, the contract of employment between the respondent and the appellants. There are two consequences.

First, this species of implication is concerned with the circumstances of the particular case. The primary judge and Black CJ and Gray J in the Full Court referred to the need to prove facts leading to the implication of a term of this nature. Gray J said [78] :

[T]his Full Court does not know what all of the express terms of the contracts were. It does not know whether they were adequate to make the contracts of employment efficacious or whether any of them would contradict the proposed implied term. An examination of the facts surrounding the creation of each contract of employment might lead to a different result for one appellant from the other. 1. Byrne (1994) 47 FCR 300 at 361.

Secondly, where the contract is not in writing and is oral or partly oral or it appears that the parties themselves did not reduce their agreement to a complete written form, caution is required against an automatic or rigid application of the cumulative criteria identified in BP. We should proceed on the footing that the present case is to be approached in this way.

In such situations, the first task is to consider the evidence and find the relevant express terms. Some terms may be inferred from the evidence of a course of dealing between the parties. It may be apparent that the parties have not spelled out all the terms of their contract, but have left some or most of them to be inferred or implied. Some terms may be implied by established custom or usage, as described above. Other terms may satisfy the criterion of being so obvious that they go without saying, in the sense that if the subject had been raised the parties to the contract would have replied "of course" [79] . If the contract has not been reduced to complete written form, the question is whether the implication of the particular term is necessary for the reasonable or effective operation of the contract in the circumstances of the case; only where this can be seen to be true will the term be implied [80] .

1. Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 121. 2. Hawkins v Clayton (1988) 164 CLR 539 at 573.

The contractual term propounded by the appellants would operate in a partisan fashion. It would favour the interests of the employee at the expense of those of the employer. Further, in the operation sought to be given the term by the appellants, so as to require procedural regularity or fairness, the term also would qualify what otherwise has been understood to be the general law of the employment contract.

In Pillai v Singapore City Council [81] , their Lordships of the Judicial Committee said that the relationship of master and servant "gives rise to no application of the principle of audi alteram partem on dismissal". They referred [82] to what had been said by Lord Reid in Ridge v Baldwin [83] . There, after pointing out that dismissal of an employee might not be warranted by the terms of the particular contract, Lord Reid continued:

[T]he question in a pure case of master and servant does not at all depend on whether the master has heard the servant in his own defence: it depends on whether the facts emerging at the trial prove breach of contract. Ridge v Baldwin is, of course, a classic authority on the subject of procedural fairness in administrative law. But the decision was that the chief constable was an office-holder under s 191 of the Municipal Corporations Act 1882 Eng and the statutory power of dismissal carried with it an obligation of procedural fairness [84] . Likewise, Marlborough Harbour Board v Goulden [85] , a decision relied upon by the appellants, was a case concerning the exercise of a statutory power of dismissal of an office-holder. The expression of opinion by the New Zealand Court of Appeal [86] , that in private contracts of employment not subject to the Industrial Relations Act 1973 NZ, the common law "may come to recognise" a duty on the employer to act "in a fair and reasonable manner" before dismissal on the ground of possible dishonesty, does not take matters very far. 1. [1968] 1 WLR 1278 at 1284. See also Heatley v Tasmanian Racing and Gaming Commission (1977) 137 CLR 487 at 511. 2. Pillai [1968] 1 WLR 1278 at 1282. 3. [1964] AC 40 at 65. 4. Ridge v Baldwin [1964] AC 40 at 79, 122-123, 132. 5. [1985] 2 NZLR 378. 6. Marlborough Harbour Board [1985] 2 NZLR 378 at 383.

It is true that, in this country, what one might call the overall relationship between employer and employee includes the effect which by statute must be given to a relevant award made under the federal or a State system. In the case of the present Award, s 149 specifies the persons bound by an award and s 152 engages s 109 of the Constitution to resolve inconsistencies between federal and State laws, including awards made by a State industrial authority [87] .

1. Clyde Engineering Co Ltd v Cowburn (1926) 37 CLR 466 at 497; Ex parte McLean (1930) 43 CLR 472 at 483-485.

There is no reason why an employee might not be engaged upon terms and conditions including some or all of the terms of an award under the legislation. True v Amalgamated Collieries of WA Ltd [88] was such a case. The worker sued for wages to which he was entitled in the same amount both under the State award and under the express terms of his contract. There was no issue as to whether the terms of the award had become an implied term of the contract.

Again, in Kilminster v Sun Newspapers Ltd [89] , it was held that the provisions of an award under the 1904 Act that employment should not be terminated unless a prescribed period of notice be given did not interfere with the contractual rights of the parties with respect to longer notice. In this way, the Award may be said to assume that relations between those bound by it are ordinarily governed by the common law [90] .

1. (1931) 46 CLR 284. 2. Metal Trades Industry Association of Australia v Amalgamated Metal Workers' and Shipwrights' Union (1983) 152 CLR 632 at 642.

But these considerations do not, as a matter of imputed intention of the parties to a particular employment contract, render it any more likely that the importation into the contract of a provision such as cl 11(a) of the Award was so obvious that it went without saying, or that it was necessary for the reasonable or effective operation of the contract.

That, if anything, the contrary is the case is illustrated by remarks of Gibbs J in Australian Broadcasting Commission v Industrial Court (SA) [91] . The question there was whether, if s 15(1)(e) of the 1972 South Australian Act empowered the Industrial Court to order re-employment of employees or temporary employees of the Australian Broadcasting Commission, it was inconsistent with certain provisions of the Broadcasting and Television Act 1942 Cth. In the course of his analysis of s 15(1)(e), Gibbs J said [92] :

[The South Australian Full Court] held that s 15(1)(e) is part of the general law regulating the terms and conditions of employment of employees, either because the provisions of that paragraph can be interpreted "as superadding a statutory adjunct to a contract of employment within its terms" or because it creates a quasi-contractual right which, as part of the ordinary civil law of the State, is enforceable against the Commission until federal legislation excludes it. With all respect, this is to give to the provisions of s 15(1)(e) a character which in truth they do not bear. Those provisions do not require a new term to be implied in every contract of employment. They do not give a quasi-contractual right to every employee. They confer jurisdiction and power upon the Industrial Court to make orders of the kind therein described. The jurisdiction is not limited to cases in which the dismissal has been in breach of contract or otherwise wrongful In other words s 15(1)(e) is not a part of the State law regarding contracts of employment. (Emphasis added.) 1. (1977) 138 CLR 399. 2. Australian Broadcasting Commission (1977) 138 CLR 399 at 403.

Before answering the question whether cl 11(a) is to be implied in the contracts of employment between the respondent and the appellants as being so obvious that it goes without saying, it is first necessary to consider the part played by cl 11(a) in the scheme established by the Award.

Clause 11(f) provides that, subject to s 5 of the 1904 Act (creating certain offences in relation to dismissal and threatened dismissal and related matters) and ss 119, 122 and 123 (dealing with the enforcement of awards) any dispute or claim arising under cl 11 shall be dealt with in accordance with cl 41. Clause 41 is headed " Settlement of Disputes or Claims ". It requires any dispute or claim to be discussed first by the aggrieved employee with his or her supervisor, then between the accredited union representative and an appropriate officer of the employer, then by the Branch Secretary or other appropriate official of the union and the appropriate representative of the employer, and then between a representative of the employer and the federal body of the union. If the matter is still not settled, it is submitted to a member of the Australian Conciliation and Arbitration Commission whose decision shall, subject to any appeal in accordance with the 1904 Act, be final and be accepted by the parties. Clause 41 further provides that, until the matter is determined, work shall continue as instructed by the employer.

Upon their face, cll 11 and 41 of the Award do not require a new term to be implied in every relevant contract of employment, any more than did s 15(1)(e) of the 1972 South Australian Act.

Clause 11(a) is not a free-standing provision in the Award. It is an integral part of a regime which, at the same time, establishes a norm by which an unfair dismissal is to be assessed, and provides for the resolution of disputes as to such dismissals and for the enforcement of the Award by the recovery of penalties. Why should cl 11(a) be severed from that context and given a further and distinct operation as a contractual term?

Further, there is force in the following remarks of Jenkinson J in Gregory v Philip Morris Ltd [93] :

It could not in my opinion be predicated in respect of the implication proposed that, if the parties had been asked at the time the contract was made whether the provisions of the award as they should from time to time exist were to be terms of their contract, each would have unhesitatingly responded in the affirmative. The evidence, no less than what one may be permitted judicially to know, is consistent with each party's believing that some of the matters with respect to which the award made provision, or might in the future make provision, could be regulated by agreement between employer and union representatives of the employer's workers to the greater advantage of that party than that party might expect to gain from the contractual adoption of whatever provision an award applying indifferently to many kinds of industrial enterprises might from time to time contain. Since the provisions of the award as from time to time varied would bind the parties without their agreement, and since the parties would remain free to agree that the appellant should have more than the award prescribed [94] , why should it be thought likely that the appellant would have responded affirmatively, when he entered into the contract of employment, to a question whether his freedom should be fettered by a term of the kind suggested? 1. (1988) 80 ALR 455 at 459. See also Australian Agricultural Co Ltd v Federated Engine-Drivers' and Firemen's Association of Australasia (1913) 17 CLR 261 at 273. 2. Kilminster v Sun Newspapers Ltd (1931) 46 CLR 284.

In the present case, Beaumont and Heerey JJ [95] dealt with this particular question of implication by saying that, whilst the employee might have agreed that the terms of cl 11(a) be expressly included in the contract of employment, the employer in all probability would be of the contrary view. There is much to be said for their Honours' hypothesis that the employer would indicate that, whilst bound by the terms of the Award and so subject to the penalties prescribed by the legislation for breach, it would not accept cl 11(a) as a term of the contract. In the event of breach, the employer would be liable not only to the penalty but also to pay damages in contract.

In contracts of this nature, apparently lacking written formality and detailed specificity, it still is necessary to show that the term in question would have been accepted by the contracting parties as a matter so obvious that it would go without saying. That cannot be postulated here.

Nor could it be said that the implication into the contract of employment of a term to the effect of cl 11(a) of the Award would be necessary for their reasonable or effective operation. In the absence of such a contractual provision, there would remain unaffected the entitlement of the employer at general law to terminate at will on giving reasonable notice and to dismiss summarily for misconduct. That this would be the case was accepted in the submissions of both sides to this Court. Thus, there would be no "gap" which it was necessary to fill by a provision such as cl 11(a).

Accordingly, we accept the submissions for the respondent that the term for which the appellants contend is not to be implied as a matter of business efficacy in its contracts of employment with the appellants.

The two species of term considered above, if indeed they be distinct, are concerned with giving effect to what is taken to have been the intentions of the parties. The expression "implied term" suggests imposition in the way in which statutes such as the Trade Practices Act 1974 Cth [96] imply conditions or warranties in contracts of a particular description, which may not be excluded or modified. The sense of the matter would have been better served by general adoption of the expression - apparently coined by Sir John Salmond [97] and used by Dixon J [98] - "tacit term" to identify the latent unexpressed intentions of the parties.

1. eg, ss 66-74. 2. Salmond and Winfield, Principles of the Law of Contracts (1927), p 47. 3. Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 378.

The third type of term upon which the appellants rely is of a different nature. In the Full Federal Court Gray J alone accepted the submission, in turn based upon Gregory , that cl 11(a) was a term of the contract of employment imported independently of the intention of the parties. His Honour referred to a number of incidents of the employment relationship which are imposed not by implication in the sense discussed above, but by law and as a matter of policy [99] . His Honour concluded [100] :

This Court should hold that cl 11(a) became a term of the contract of employment of each of the appellants, independently of the intention of the parties to that contract. The term cannot be excluded by express agreement, because the law regards it as a proper incident of an employment contract and because its origin is in the Act. Such a decision would not carry with it any principle that all terms of all awards are to be imported into the contracts of employment of those whose conditions of employment are prescribed by the relevant awards. The importation of some award terms will be inappropriate. 1. Byrne (1994) 47 FCR 300 at 361-364. 2. Byrne (1994) 47 FCR 300 at 365.

On the other hand, Beaumont and Heerey JJ approached the matter on the footing that, if cl 11(a) was to be imported into the employment contracts independently of the intention of the parties, this result could flow only from the terms of the Award itself, and the relevant legislation. Their Honours concluded [101] :

The award creates rights and obligations, and the Act confers remedies in the case of breach, both independently of the agreement of the parties and the common law of contract. 1. Byrne (1994) 47 FCR 300 at 342.

What, then, is involved in the proposition that a contractual term is implied as a matter of law rather than as the assumed intention of the parties?

There is at least one basic distinction. It is that, as indicated above, terms implied by the application of what one might call the business efficacy test are terms unique to the particular contract in question, depending upon the form of the contract, the express terms and the surrounding circumstances. By contrast, terms implied by law are, in general, implied in all contracts of a particular class or which answer a given description [102] .

1. Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 30.

Further, as Hope JA pointed out in Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd [103] :

Although the distinction between the two classes of implication has not been and perhaps is still not universally appreciated, classes of contract in respect of which terms will be implied by law, and the terms which will be implied, have in many cases been long established. Typical classes are contracts between master and servant, for the sale of goods, for the provision of work and materials and between landlord and tenant [104] . However, the classes of contracts in which the law will imply terms are not closed; the difficult question is to determine what test should be applied before the courts imply such a term for the first time. 1. (1987) 10 NSWLR 468 at 487. 2. A more detailed description was given by Professor Glanville Williams in his article "Language and the Law", which was published in four parts: Law Quarterly Review, vol 61 (1945) 71, 179, 283, 384, at p 403: "Examples of such terms "implied" into contracts by rules of law are the implied conditions of reasonable fitness and merchantable quality on a contract of sale of goods, the rule that payment and delivery of goods are concurrent conditions, the implied warranty of seaworthiness, the implied condition on the letting of a furnished house that it is reasonably fit for habitation, the implied promise by one who agrees to build a house that the house will be reasonably fit for habitation, the implied promise by a servant not to disclose secret processes, not to hand over to a rival written work completed for the master, and not, while still in his master's employment, to solicit the master's customers to transfer their custom to himself, the implied promise by an employer (in some cases) to furnish work, the implied duty of care in the carriage of passengers and in looking after bailed goods, and the implied promise by a banker not to disclose the state of his customer's account."

Some implied terms are perhaps more usefully identified as rules of construction applied to the express terms of the contract, particularly to the written terms thereof. Thus, in Secured Income Real Estate [105] , Mason J described as a "rule of construction" the proposition of Lord Blackburn in Mackay v Dick [106] :

I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on circumstances. In the same case (which was an appeal from Scotland), Lord Watson [107] identified the principle as a legal doctrine borrowed from the civil law and recognised as such in Scotland. Further, in Southern Foundries (1926) Ltd v Shirlaw [108] , Lord Atkin said: Personally I should not so much base the law on an implied term, as on a positive rule of the law of contract that conduct of either promiser or promisee which can be said to amount to himself "of his own motion" bringing about the impossibility of performance is in itself a breach. 1. (1979) 144 CLR 596 at 607-608. 2. (1881) 6 App Cas 251 at 263. 3. Mackay v Dick (1881) 6 App Cas 251 at 270. 4. [1940] AC 701 at 717.

However, the more modern and better view is that these rules of construction are not rules of law so much as terms implied, in the sense of attributed to the contractual intent of the parties, unless the contrary appears on a proper construction of their bargain [109] . There is force in the suggestion that what now would be classified as terms implied by law in particular classes of case had their origin as implications based on the intention of the parties, but thereafter became so much a part of the common understanding as to be imported into all transactions of the particular description. The matter is put as follows in Halsbury [110] :

Perhaps the truth is that the ambiguous terminology enables the courts in the first instance to imply terms on the basis of the intention of the parties but later there comes a time when the particular implied term has become so much a part of common practice that the courts begin to import it into all transactions of that type as a matter of course; and the result is a rule of law of the type considered in this paragraph. This understanding of the matter is consistent with the proposition that terms of this kind, although treated as implied by law, may be excluded by express provision made by the parties and also as a result of inconsistency with terms of the contract [111] . The result is that, even if treated as rules of law, they only apply in the absence of an expression of contrary intent. 1. Cheall v Association of Professional Executive Clerical and Computer Staff [1983] 2 AC 180 at 188-189; Thompson v ASDA-MFI Group Plc [1988] Ch 241 at 266. 2. Halsbury's Laws of England, 4th ed, (1974) vol 9, par 354, fn 27. 3. Castlemaine Tooheys (1987) 10 NSWLR 468 at 490-493; Devefi Pty Ltd v Mateffy Pearl Nagy Pty Ltd (1993) 113 ALR 225 at 240-241; Glanville Williams, "Language and the Law", Law Quarterly Review, vol 61 (1945) 71, 179, 283, 384, at p 404. The common law as to the engagement of Crown servants has been treated as apparently in a special position. Not only is any appointment as a Crown servant, however subordinate, terminable at will unless otherwise provided by legislation (Ryder v Foley (1906) 4 CLR 422 at 433-434, 449; Fletcher v Nott (1938) 60 CLR 55 at 67, 77; Kaye v Attorney-General (Tas) (1956) 94 CLR 193 at 198, 203; Marks v The Commonwealth (1964) 111 CLR 549 at 587; Director-General of Education v Suttling (1987) 162 CLR 427 at 437; Kodeeswaran v Attorney-General (Ceylon) [1970] AC 1111 at 1118), but it seems that the Crown cannot deprive itself of that right, even though it has purported to fetter it in the particular terms of engagement of the servant: Sir Douglas Logan, "A Civil Servant and his Pay", Law Quarterly Review, vol 61 (1945) 240, at pp 255, 262; cf Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth (1977) 139 CLR 54 at 74-76.

The reference by Gray J in the passage set out above to the implied condition he favoured being insusceptible of exclusion by express agreement is at odds with the weight of authority. It may reflect what a writer with a civilian and common law training has identified as the distinction familiar in continental Europe between "imperative" norms of the law of contract, applicable to all contracts, and "optional" norms, where the intention of the parties is determinative [112] . His Honour gave as a reason against exclusion the "origin" of cl 11(a) in the Act, but that poses the somewhat different issue, to be considered next, of the impact of the statute upon general law rights and obligations.

1. Kahn-Freund, "A Note On Status and Contract In British Labour Law", Modern Law Review, vol 30 (1967) 635, at pp 641-642.

Many of the terms now said to be implied by law in various categories of case reflect the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined [113] . Hence, the reference in the decisions to "necessity".

1. Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635 at 647-648, 659.

For example, it is established that the mere relationship of landlord and tenant implies a covenant for quiet enjoyment. The reason for this appears to be that, originally, the common law courts would not recognise the tenant as having any estate in the demised land and would not reinstate the tenant if ejected by the landlord; the remedy in covenant remedied the position of the tenant who otherwise, if ejected, would have been without recourse [114] .

1. Norton, Treatise on Deeds, 2nd ed (1928), p 547, where the authorities are collected.

This notion of "necessity" has been crucial in the modern cases in which the courts have implied for the first time a new term as a matter of law.

Codelfa establishes that the doctrine of frustration is concerned with the termination of the contract by operation of law in particular circumstances, rather than by the operation of an implied condition. In the course of dealing with implied terms, Mason J stated [115] :

Of course, I am speaking of an implied term necessary to give business efficacy to a particular contract, not of the implied term which is a legal incident of a particular class of contract, of which Liverpool City Council v Irwin [116] is an example. The difference between the two categories of implied term was mentioned by Viscount Simonds in Lister v Romford Ice & Cold Storage Co Ltd [117] , where he referred to the search for the second category of implied term as being based "upon more general considerations", a comment endorsed by Lord Wilberforce in Irwin [118] . 1. Codelfa (1982) 149 CLR 337 at 345. 2. [1977] AC 239. 3. [1957] AC 555 at 576. 4. [1977] AC 239 at 255.

In Liverpool City Council v Irwin, the House of Lords considered the obligations to its tenants of the lessor of a fifteen storey tower block. The lessor was a public body charged by statute with the duty of providing housing for members of the public, selected because of their need, at rents subsidised by the general body of ratepayers. The matter was approached by identifying the rights conferred upon the tenants and then considering that activity by the lessor which would be necessary to avoid the impairment of the essentials of the grant to the tenant. Lord Wilberforce said [119] :

In my opinion such obligation should be read into the contract as the nature of the contract itself implicitly requires, no more, no less: a test, in other words, of necessity. The relationship accepted by the corporation is that of landlord and tenant: the tenant accepts obligations accordingly, in relation inter alia to the stairs, the lifts and the chutes. All these are not just facilities, or conveniences provided at discretion: they are essentials of the tenancy without which life in the dwellings, as a tenant, is not possible. To leave the landlord free of contractual obligation as regards these matters, and subject only to administrative or political pressure, is, in my opinion, inconsistent totally with the nature of this relationship. The subject matter of the lease (high rise blocks) and the relationship created by the tenancy demand, of their nature, some contractual obligation on the landlord. 1. Irwin [1977] AC 239 at 254.

A similar approach subsequently was taken by the House of Lords in Scally v Southern Health and Social Services Board [120] . In this case, the appellants were medical practitioners whose terms of employment with Northern Ireland health boards had been negotiated by representatives of their professional bodies. They brought actions against their employers alleging, among other things, breach of contract in respect of failure of their employers to inform them of certain rights which they had enjoyed but which had been exercisable only within a particular period. Lord Bridge of Harwich [121] identified the issue as follows:

The problem is a novel one which could not arise in the classical contractual situation in which all the contractual terms, having been agreed between the parties, must, ex hypothesi, have been known to both parties. But in the modern world it is increasingly common for individuals to enter into contracts, particularly contracts of employment, on complex terms which have been settled in the course of negotiations between representative bodies or organisations and many details of which the individual employee cannot be expected to know unless they are drawn to his attention. The instant case presents an example of this phenomenon arising in the context of the statutory provisions which regulate the operation of the health services in Northern Ireland. 1. [1992] 1 AC 294. See also the Privy Council decision in Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank [1986] AC 80 at 104-107, dealing with the contract between banker and customer. 2. Scally [1992] 1 AC 294 at 304.

The question was whether the law would imply into the contract of employment an obligation on the employer to notify the employees of the rights in question. Was the term a "necessary incident of a definable category of contractual relationship"? The House posed this question and answered it in the affirmative [122] . Their Lordships held that, where a contract of employment, negotiated between employers and a representative body, contained a particular term conferring upon the employee a valuable right contingent upon his or her acting as required to obtain the benefit, of which the employee could not be expected to be aware unless the term was brought to the attention of the employee, there was an implied obligation on the employer to take reasonable steps to publicise the term.

In the present appeal, the appellants relied upon this concept of necessity. Their submission was that employment contracts were a well-recognised "class" of contract. That was conceded by the respondent. So also was the proposition that the law imported various incidents into the relationship of employment, one of them being the entitlement of the employer to terminate the employment at will on giving reasonable notice and to dismiss summarily for misconduct. It was then submitted that the existence of the Award, and in particular cl 11(a), "required" reformulation of that incident of the relationship by importing, in terms, the provisions of cl 11(a).

However, there is no "necessity" for such a step in the sense in which that term was applied in cases such as Irwin and Scally. The contract of employment is not, from the viewpoint of the employee, rendered nugatory if the existing provisions thereof remain, as a matter of contract, to operate concurrently with the regime established by the Award and deriving its authority from statute.

There is nothing to suggest that the contracts of employment were not workable and effective before the introduction into awards of provisions such as cl 11(a). This is not a case where a provision such as cl 11(a) is necessary lest the contract be deprived of its substance, seriously undermined or drastically devalued in an important respect.

As we have indicated, it is a distinct question whether the regime established by the Award has, by force of its statutory authority, a particular impact upon the terms of the contract of employment. To this we now turn.

The appellants relied upon the reasoning in Automatic Fire Sprinklers Pty Ltd v Watson as support for the proposition that cl 11(a) operated to render ineffective the termination by the respondent of the contract of employment of the appellants with the result that there was a repudiation thereof by the respondent. The submission is that this entitled the appellants either to accept the repudiation and sue for damages or else to treat the contract as continuing and to sue for unpaid remuneration. The proposition based upon Automatic Fire Sprinklers was accepted by the Chief Justice and Gray J. It was rejected by Keely J and by Beaumont and Heerey JJ in their joint judgment. The appellants rely upon what was said by Black CJ and Gray J.

Given the nature and importance of the subject matter [in cl 11(a)], the words "termination shall not be" should not be read as leaving untouched the employer's power to dismiss an employee. It can hardly have been intended that in such an important matter, in respect of which the award provisions were making fundamental changes, an employer should retain its previous power to bring the employment relationship to an end in circumstances that were harsh, unjust or unreasonable, and that the employee's position was to be protected only by the liability of the employer to a penalty of not more than $1,000. Gray J said of cl 11(a) [125] : Its effect is to prohibit a termination of employment which would be in breach of it [A]n employer bound by a clause such as cl 11(a) cannot validly terminate a contract of employment by an act which would be illegal, in the sense of being prohibited by that clause. The purported dismissal of each of the appellants was therefore ineffective. 1. Byrne (1994) 47 FCR 300 at 310. 2. Byrne (1994) 47 FCR 300 at 365.

In these judgments, reference was made to Automatic Fire Sprinklers. That case (in which an appeal from the New South Wales Full Court was dismissed) turned upon the construction of regulations made under the National Security Act 1939 Cth (the Security Act). Section 5 thereof conferred upon the Governor-General wide powers to make regulations for securing the public safety and defence of the Commonwealth and s 10 made it an offence against the statute to contravene or fail to comply with any provision of any such regulation. The National Security (Man Power) Regulations (the Regulations) forbade, in a protected undertaking, the termination by the employer of the employment of an employee, and the termination or change by the employee of employment, in either case without the permission of the Director-General of Man Power.

The precise issue, identified by Dixon J [126] , was whether the Regulations made it impossible that the de facto discharge of the respondent from his employment by the appellant should operate to disentitle him to salary for the period during which he continued to proffer his services after that de facto discharge. The conclusion was that the respondent was entitled to his salary or remuneration for the period in question. This was because, on their proper construction, the Regulations made ineffectual any attempt by an employer, contrary to their provisions, to discharge an employee who remained ready and willing to serve. The result was that the relationship continued with consequent liability on the part of the employer for wages for any period for which the employee offered his services.

1. Automatic Fire Sprinklers (1946) 72 CLR 435 at 469.

This made it unnecessary to determine the other principal issues, although there was some discussion of it by four members of the Bench. These were the legal effect of the respondent's refusal to accept his dismissal, discharge of the contract of employment by unilateral breach by the employer and the distinction (if any) between the contract of employment and the employment relationship or status. The outcome of the present appeal will be such as not to call for further consideration here of these matters [127] .

1. The recent decisions are collected in Siagian v Sanel Pty Ltd (1994) 122 ALR 333 at 342-345. What the author identifies as the "elective" and "automatic" theories of termination of contracts of employment are analysed, with some reference to Automatic Fire Sprinklers and to the important question of the availability of equitable relief in such cases by McMullen, "A Synthesis of the Mode of Termination of Contracts of Employment", Cambridge Law Journal, vol 41 (1982) 110, at pp 111-133.

It will be apparent that there is nothing in Automatic Fire Sprinklers which is of any immediate assistance for these appeals, other than by the presentation of an analogy by reference to which the present issues of construction may be resolved.

However, the analogy is far from close. First, reg 14 stated that an employer carrying on a protected occupation "shall not", save with the specified permission, "terminate the employment in the undertaking of any person employed therein", whereas cl 11(a) of the Award operates upon the fact or circumstance of termination, stating that the termination of employment by an employer shall not be harsh, unjust or unreasonable. Secondly, the presence of the offence provision in s 10 of the Security Act, the offence being constituted by the act of termination of employment without permission, made more readily applicable the common law principle that a transaction made illegal by statute is void. This matter was adverted to by McTiernan J [128] and Williams J [129] in the High Court and by Jordan CJ in the Full Court [130] . With reference to authority, Jordan CJ had said:

It is well established that if the doing of an act is prohibited by statute (and the same applies to a valid statutory regulation), in the absence of some indication of intention to the contrary, the act, if purported to be done, is illegal and void. The third point is suggested by the second. It is that Automatic Fire Sprinklers was concerned with the impact upon common law rights and obligations of statute and delegated legislation. The present case is concerned with the operation and effect of the Award, which draws its legal efficacy from the rather special provisions of the 1904 Act and now the 1988 Act. Of itself, the Award could not answer the description of a law of the Commonwealth [131] . It is well established that the Award is made part of the law, not by its own force but by force of its adoption by the statute, which makes the directions contained in it "binding and enforceable in law" [132] . 1. Automatic Fire Sprinklers (1946) 72 CLR 435 at 472. 2. Automatic Fire Sprinklers (1946) 72 CLR 435 at 478. 3. Watson v Automatic Fire Sprinklers Pty Ltd (1946) 46 SR (NSW) 336 at 343. 4. T A Robinson & Sons Pty Ltd v Haylor (1957) 97 CLR 177 at 182-183. 5. Proprietors of the Daily News Ltd v Australian Journalists' Association (1920) 27 CLR 532 at 537.

The intention of Parliament as expressed in the relevant provisions of the legislation is directed to awards at large, without distinguishing between them, and the issue becomes one of determining what is involved in the use of the term "binding" in those provisions.

Section 61 of the 1904 Act and s 149 of the 1988 Act specify those parties, successors and members of organisations upon whom an award is "binding"; this includes organisations and persons on whom the award is binding as a common rule. Also, the legislative provisions to which we have referred as attracting the operation of s 109 of the Constitution, together with the provisions dealing with compliance (Pt VIII of the 1988 Act and Pt VI of the 1904 Act), provide for penalties and other remedies for contraventions of awards.

Counsel for the respondent referred to the long line of authority propounding the general rule that, where a statute creates an obligation and enforces performance in the specified manner, performance is not to be enforced in any other manner [133] . In Josephson v Walker [134] , this Court applied that reasoning to the construction of the Industrial Arbitration Act 1912 NSW. Section 49 of that statute created procedures for enforcement of obligations imposed on employers by an award. The Court held an action did not otherwise lie at general law for recovery by the employee of the difference between wages paid under the contract of employment and those payable under an award. This was because the legislation did not make the statutory rate of wages part of the contract of employment; rather, a new right was created with an inseparable new remedy. Their Honours pointed out [135] that, upon an examination of the particular statute, it might be found that the legislative intention was different. Thus the intention, as one would expect, was that of the Parliament not of the body making the award, in that case the New South Wales Court of Industrial Arbitration.

1. Doe d Murray v Bridges (1831) 1 B & Ad 847 at 859 [109 ER 1001 at 1005-1006]; Deputy Federal Commissioner of Taxation v Brown (1958) 100 CLR 32 at 42; Houston v Dewi Thomas Pty Ltd [1967] VR 300 at 305-306; Lonrho Ltd v Shell Petroleum Co Ltd [No 2] [1982] AC 173 at 185-186. 2. (1914) 18 CLR 691. 3. Josephson (1914) 18 CLR 691 at 697, 701-702.

An award made under the present statute or its predecessor by the relevant arbitral body is given binding effect pursuant to the provisions we have mentioned, in respect of matters which, whilst they arise out of or are connected with the relationship of employer and employee, include much that is outside the contract of service, its incidents and the work done under it [136] . The concept of "industrial dispute", central to the system established by the legislation, is concerned not with the relationship of individual employer and individual employee or former employee, so much as with a more general relationship inhering in the subject matter of the dispute, such that it can be identified as involving the collective relationship between employers and employees as such [137] .

1. Re Cram; Ex parte NSW Colliery Proprietors' Association Ltd (1987) 163 CLR 117 at 133-134. 2. Re Boyne Smelters Ltd; Ex parte Federation of Industrial Manufacturing and Engineering Employees of Australia (1993) 177 CLR 446 at 454-455.

Section 2(d) of the 1904 Act stated that one of the "chief objects" of the statute was to provide for "the observance and enforcement of agreements and awards made for the prevention or settlement of industrial disputes". At the time of the events giving rise to the present proceedings, s 3(e) of the 1988 Act was to like effect. Section 178(1) provided for the imposition of a pecuniary penalty for breach of an award, subs (6) thereof made provision for an order for payment to an employee of the amount of any underpayment of an amount to which an employee was entitled under an award, and s 179 empowered an employee to sue for any amount unpaid pursuant to an award. Further, as was done in the present litigation, the employee might seek an order under s 356 that the penalty imposed under s 178 be paid to the employee. Contravention by an organisation of an award could lead to cancellation or suspension of an award by the Australian Industrial Relations Commission and, as the statute then stood, s 311 prescribed penalties for wilful contravention of an award.

These matters are consistent with the proposition that, in making an award "binding", the legislature was concerned to oblige those subjected to the award to observe its terms under the sanctions for which the statute itself provided rather than to leave it to the arbitral body dealing with the industrial dispute to make an award, breach of a term of which would render legally ineffective that which otherwise would have been an exercise of contractual power held by a party bound by the award.

The submission that the present case is one in which the exercise of the contractual power of dismissal was controlled by the Award so as to render the steps taken by the respondent a repudiation of contract meets the same fate if primary significance be attached to the terms of the Award itself. We have referred to the internal dispute resolution procedures established by cll 11(f) and 41 of the Award. As Beaumont and Heerey JJ pointed out in the present case [138] , it would be an impractical intention to impute to the award-maker that the validity, as distinct from the lawfulness, of a termination of employment would have to await the outcome of proceedings for breach of an award. Their Honours said that it did not seem a sensible intention that, in the meantime, the employee and employer should have to organise their affairs without knowing whether the termination was valid or totally without legal effect.

The submissions by the appellants under this head should fail.

The submission here is not that liability arises from contract but in damages for breach of a duty imposed upon the respondent to observe cl 11(a) of the Award. Nevertheless, the two submissions are closely connected.

The appellants submitted that it would be but a small step to attribute to the Parliament an intention that those provisions of the Award which are clearly inserted for the benefit of employees as a class of persons are to be enforceable by action for damages at the instance of any member of that class.

The result would have to be that there was "arising under" a law "made by the Parliament", in the sense of s 76(ii) of the Constitution, a new species of "matter" [139] . However, where a question arises as to the creation of new rights and liabilities which will engage Ch III of the Constitution, it is to be expected that the Parliament will clearly state its will [140] . That consideration is significant in a case such as this. Further, in this regard, it is to be remembered that the Award itself is not a law of the Commonwealth [141] .

1. cf R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141. 2. cf Willocks v Anderson (1971) 124 CLR 293 at 297-298. 3. Collins v Charles Marshall Pty Ltd (1955) 92 CLR 529 at 540.

These considerations make it difficult in Australia to accept the suggestion [142] , made with reference to the judgment of Isaacs J in Cofield v Waterloo Case Co Ltd [143] , that the action upon the statute may be an example of the doctrine of the "equity of the statute" whereby, in allowing a civil remedy, the common law courts render more effective the legislative will. In any event, modern authority does not proceed on this basis.

1. Fricke, "The Juridical Nature of the Action upon the Statute", Law Quarterly Review, vol 76 (1960) 240, at pp 254-255. 2. (1924) 34 CLR 363 at 371-372.

In cases arising in the United Kingdom and under the laws of the States, the issue often is presented as whether the legislature "intended" that a breach of the statute in question - and here the significance of the particular status of an award will be apparent - gives rise to a civil remedy for damages in addition to those remedies conferred by the statute. We were referred to R v Deputy Governor of Parkhurst Prison; Ex parte Hague [144] . There, the House of Lords rejected the submission that, if the plaintiff belonged to a class which the statutory provision was intended to protect and the breach had caused the plaintiff damage of a kind against which the provision was intended to give protection, any breach of statutory duty causing injury and unaccompanied by a statutory remedy or penalty would afford the injured person a cause of action. Rather, their Lordships affirmed that "the fundamental question" was whether the legislature intended to confer on the plaintiff a cause of action for beach of statutory duty.

1. [1992] 1 AC 58 at 159, 168-171. See also Scally v Southern Health and Social Services Board [1992] 1 AC 294 at 297 and X (Minors) v Bedfordshire County Council [1995] 2 AC 633 at 731-732; but cf Lonhro Ltd v Shell Petroleum Co Ltd [No 2] [1982] AC 173 at 185, where Lord Diplock asked whether "upon the true construction of the Act [the Southern Rhodesia Act 1965 UK] it is apparent that the obligation or prohibition was imposed for the benefit or protection of a particular class of individuals, as in the case of the Factories Acts and similar legislation".

However, in O'Connor v S P Bray Ltd [145] , Dixon J said:

The difficulty is that in such a case the legislature has in fact expressed no intention upon the subject, and an interpretation of the statute, according to ordinary canons of construction, will rarely yield a necessary implication positively giving a civil remedy. As an examination of the decided cases will show, an intention to give, or not to give, a private right has more often than not been ascribed to the legislature as a result of presumptions or by reference to matters governing the policy of the provision rather than the meaning of the instrument. Sometimes it almost appears that a complexion is given to the statute upon very general considerations without either the authority of any general rule of law or the application of any definite rule of construction. In Australia, the proposition that the courts give effect to "the intention of the legislature" tends to disguise the compromises between contradictory positions which may be involved in obtaining the passage of legislation, particularly through a bicameral and federal legislature. To plumb the intent of the particular body which enacted the law in question may be an illusory quest [146] . Moreover, even a collective intention may fail to be translated into the statutory text. The task of the court, aided by such provisions as s 15AB of the Acts Interpretation Act 1901 Cth, is to give effect to the will of the legislature but as it has been expressed in the law and by ascertaining the meaning of the terms of the law [147] . 1. (1937) 56 CLR 464 at 477-478. 2. cf Pennsylvania v Union Gas Co (1989) 491 US 1 at 29-30. 3. Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518. See also Brennan v Comcare (1994) 50 FCR 555 at 572-575.

References which are still made in modern decisions to the intention of the legislature as to the conferring of private rights of action for breach of statutory duty are better understood in the light of the course of decision in the last century. Many of the statutes which fell for construction by the courts were private Acts for the laying down of railways, water and gas supplies and other elements of modern infrastructure. A private Act partook of the nature of a compact, as a contract between the promoters, or the portion of the public directly interested in it, and the legislature [148] . That brought with it notions of intention and also the operation of the principle described by Maxwell [149] . After stating that statutes which invested private persons or bodies, for their own benefit or profit, with privileges and powers interfering with the rights of others, were to be construed more strictly than other enactments, Maxwell continued:

The Courts take notice that they are obtained on the petitions framed by their promoters, and are in effect contracts between those persons and the Legislature, or the public. Their language is therefore treated as the language of their promoters, who asked the Legislature to confer exceptional powers on them; and when doubt arises as to the construction of the language [t]he benefit of the doubt is to be given to those who might be prejudiced by the exercise of the powers which the enactment grants, and against those who claim to exercise them. These notions were relied upon by Lord Macnaghten, delivering the advice of the Privy Council, in deciding that no individual customer of the Consumers' Gas Co of Toronto had a right of action against the company for non-compliance with provisions of its statute [150] . Earlier, in Atkinson v Newcastle Waterworks Co [151] , Lord Cairns LC emphasised the limited purview of the legislature in enacting a private legislative bargain with "a body of undertakers" as to the manner in which it would keep up public works. Learned writers [152] have shown how the Lord Chancellor's remarks later were translated, in leading cases such as Groves v Wimborne [153] , into the broader proposition as to legislative intention which is repeated in some modern authorities. 1. Bennion, Statutory Interpretation, 2nd ed (1992), p 631. The modern Australian counterpart is legislation which adopts or otherwise gives effect to agreements between governments or public authorities and trading or financial corporations, often in connection with asset sales or resource development; see, eg, the agreements analysed in Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth (1977) 139 CLR 54; Cliffs International Inc v Federal Commissioner of Taxation (1979) 142 CLR 140 at 170-171; and Westpac Banking Corporation v Commissioner of Stamp Duties (Q) [1994] 2 Qd R 212. 2. The Interpretation of Statutes, 1st ed (1875), pp 268-269. 3. Johnston v Consumers' Gas Co of Toronto [1898] AC 447 at 454-455. See also Martin v Western District of the Australasian Coal and Shale Employees' Federation Workers' Industrial Union of Australia (Mining Department) (1934) 34 SR (NSW) 593 at 597; Barton v Moorhouse [1935] AC 300 at 306-307. 4. (1877) 2 Ex D 441 at 448. 5. Fricke, "The Juridical Nature of the Action upon the Statute", Law Quarterly Review, vol 76 (1960) 240 at pp 259-260; Finn, "A Road Not Taken: The Boyce Plaintiff and Lord Cairns' Act", Australian Law Journal, vol 57 (1983) 493, at p 497. 6. [1898] 2 QB 402 at 407.

In this Court, an effort was made in Sovar v Henry Lane Pty Ltd [154] to restore the subject to a principled basis. Kitto J referred with approval to the judgment of Jordan CJ in Martin v Western District of the Australasian Coal and Shale Employees' Federation Workers' Industrial Union of Australia (Mining Department) [155] and said [156] :

The intention that such a private right shall exist is not, as some observations made in the Supreme Court in this case may be thought to suggest, conjured up by judges to give effect to their own ideas of policy and then "imputed" to the legislature. The legitimate endeavour of the courts is to determine what inference really arises, on a balance of considerations, from the nature, scope and terms of the statute, including the nature of the evil against which it is directed, the nature of the conduct prescribed, the pre-existing state of the law, and, generally, the whole range of circumstances relevant upon a question of statutory interpretation. 1. (1967) 116 CLR 397. 2. (1934) 34 SR (NSW) 593 at 596. 3. Sovar (1967) 116 CLR 397 at 405.

How then does the present case stand? We have referred to the provisions in s 2 of the 1904 Act and s 3 of the 1988 Act which specify that one of the chief objects of the legislation is to provide for observance and enforcement of agreements and awards made for the prevention or settlement of industrial disputes. Those sections also manifest a concern with the prevention and settlement of industrial disputes by processes of conciliation and arbitration with the minimum of legal form and technicality. Detailed provisions, which we have described, were made to promote compliance with awards and orders and these included what one might describe as personal remedies for the recovery of money.

The modern legislation is in a different form to the 1904 Act as it stood at the time of Mallinson v Scottish Australian Investment Co Ltd [157] . Then there was no express provision giving the employee a means of enforcing payment of wages which the statute, operating on the award, entitled the employee to receive from the employer. Section 49A which first conferred such a right upon the employee was added by s 40 of the Commonwealth Conciliation and Arbitration Act 1928 [158] . The Act in its earlier form, as Jordan CJ pointed out in Martin [159] , thus had displayed characteristics pointing to the existence of a private right of action to recover benefits imperfectly bestowed by it.

1. (1920) 28 CLR 66. 2. Section 49A was renumbered as s 63 by the Commonwealth Conciliation and Arbitration Act 1947 and as s 123 by the Conciliation and Arbitration Act 1956 Cth. The comparable provision in the 1988 Act is s 179. 3. (1934) 34 SR (NSW) 593 at 597.

The existence of rights conferred by the legislation to recover payments due under awards and the power of the court to order payment of penalties tend against the proposition that, from the nature, scope and terms of the legislation, there arises the further inference that damages are recoverable.

We have referred to the rather special juristic nature of the Award. Even where the duty in question is created by delegated legislation in the form of regulations made under power conferred on the Executive by statute, there is an added difficulty in discerning the existence of a civil sanction for breach. The question then, as Fullagar J pointed out in Darling Island Stevedoring & Lighterage Co Ltd v Long [160] is whether the statute gives power to create by regulation duties enforceable by action at the suit of a person injured by breach thereof. If the statute does not expressly confer on the Executive a power by regulation to create an action for damages at the suit of any person injured by breach of the substantive provisions of the regulations, it must be difficult to construe the statute and the delegated legislation as impliedly bringing about that result. This must be so, perhaps a fortiori, where the silent statute operates upon an award made by an arbitral body established by the statute.

These considerations provide further support for the conclusion on this issue which was reached by the majority in the Full Federal Court. After referring to Mallinson, Keely J [161] stated that, in any event, in his opinion, the legislation disclosed no intention to benefit employees as a class as distinct from employers as a class. Beaumont and Heerey JJ concluded their examination of the point as follows [162] :

[S]ince awards will always operate alongside employment contracts, or in a contractual milieu, there is logic in imputing to the legislature the assumption that it is a matter for employer and employee to agree whether award provisions are to be expressly incorporated into the contract - as for example occurred in True - and thus create contractual remedies in case of breach. Absent such agreement, the statute provides the remedy.

The very fact that the statute provides for awards which (for the reasons already advanced) do not become part of employment contracts, is a ground for thinking that one cannot impute to the legislature an intention to confer (irrespective of the intention of the parties) a right which is, practically speaking, equivalent to the right which would exist if the award were part of such contracts.

1. Byrne (1994) 47 FCR 300 at 317. 2. Byrne (1994) 47 FCR 300 at 347.

The submissions for the appellants on this branch of the appeals fail.

It remains to consider the issues concerned with the actions brought to recover not damages but penalties.

The issue here is whether the terminations of employment of the appellants were in breach of the Award. Hill J found there had been no breach. In the Full Federal Court, on this issue, Keely J agreed with the reasons of Beaumont and Heerey JJ [163] . Their Honours commenced their treatment of the matter [164] by noting three main arguments advanced on behalf of the appellants.

1. Byrne (1994) 47 FCR 300 at 313. 2. Byrne (1994) 47 FCR 300 at 328-329.

One was that the dismissal procedure was unfair. Earlier in these reasons we have summarised the findings by Hill J of the facts which led up to the dismissals of the appellants. These took place at a meeting on 28 March 1989, with Miss Foisy, the Employee Relations Manager of the respondent at Sydney Airport. Miss Foisy called in the appellants, together with a representative of their union, the Transport Workers Union. Hill J found that, at the outset, she outlined to them that the respondent was considering termination of the services of the appellants for breach of trust. There was some, limited, reference to the video. Reference was made to the involvement of the appellants in passenger baggage theft and the men were invited to give an explanation. Miss Foisy then sent the appellants out of the room with the union representative to confer. His Honour found that it was probable that Miss Foisy did not see the men together at any time. When the men returned again individually, Miss Foisy asked whether there was any reason why their services should be retained. At some stage, one of the appellants, Mr Frew, referred to his twenty-six years of employment. No explanation on the substantive matter of baggage pilfering was forthcoming and Miss Foisy then told each man that his service was to be terminated. Some reference was made to lack of trust and probably the word "mistrust" was used.

In their joint judgment, Beaumont and Heerey JJ went on [165] to refer to two further arguments advanced on behalf of the appellants. One was that the conduct of the appellants as revealed on the video should have been perceived as equivocal and inconclusive as an indication of dishonesty. The other was that, in allowing for his observations with respect to the credit of the appellants and of Mr Brosnan (whose role in the alleged pilfering is mentioned earlier in these reasons), Hill J had addressed the wrong issue. The question to be decided was not whether, on an opinion formed by evidence given at the trial, the appellants were guilty of misconduct but whether, on the material available on 28 March, the respondent had terminated their employment harshly, unjustly or unreasonably.

Their Honours held that the way in which the respondent went about terminating the employment of the appellants should have led the primary judge to conclude that, in each case, the termination was at least "unreasonable". They said it may also have been "harsh" or "unjust" but expressed no opinion on that point. Their Honours referred to the time taken to bring the video to the attention of the appellants (more than five months) and to the failure of the respondent to indicate to the appellants in a way that would be clear to them the misconduct on their part of which complaint was made. Further it had been unreasonable on the part of the respondent not to interview the remaining member of the loading team, Mr Harvey.

Beaumont and Heerey JJ concluded that, for those reasons, a breach of cl 11 had been established. This is because "in a procedural sense" the respondent had acted unreasonably [166] . Their Honours continued:

As has been noted, the appellants further submitted that the respondent also acted unreasonably in a substantive sense, that is to say, they contended that on the evidence before his Honour there should have been a finding that in fact the appellants had not been guilty of any wrongdoing in relation to the loading of the aircraft; or, at any rate, that the employer had not established this to be the case. It is not necessary that we deal with this alternative argument and we express no opinion on this aspect of the matter. 1. Byrne (1994) 47 FCR 300 at 332.

The hearing of the appeals in the Full Federal Court occupied three days. In this Court, we were told that a significant part of this time was taken up with an analysis of the evidence before the primary judge, in support of the submission that Hill J should have found that in fact the appellants had not been guilty of any wrongdoing. But, as will be apparent, the Full Court did not enter into that matter when allowing the appeal on this branch of the case. The appellants sought, before this Court, to support the holding in the Full Court as to breach of the Award on the footing that all aspects of the matter had been dealt with at the intermediate appellate level. Plainly that is not the case.

It is also apparent that the majority had proceeded on the footing that termination of employment might be unreasonable, within the meaning of cl 11(a), by reason of "procedural" deficiencies without the need to go further into "substantive" aspects of the matter.

Unless that construction of the Award is to be upheld, there is substance in the cross-appeals by the respondent that the Full Court reversed the finding in its favour that there had been no breach of the Award without determining the necessary question whether the primary judge had erred in finding that there had been dishonest conduct in the handling of luggage.

If the cross-appeals succeed, it will be necessary to return the matter to the Full Court, not necessarily constituted with the same membership, for determination of the challenge to the factual findings by the primary judge.

Against this background, it is necessary first to consider questions of construction of the Award.

On the one hand there are indications in the Award of the desire to provide a measure of security from arbitrary dismissal and, on the other, an acknowledgment that protection is confined within provisions which are predicated on the possibility of fair dismissal. The Award does not proceed on any evident footing that there is a right to a hearing or other procedural fairness required in all cases before there is a termination of employment. This is apparent from cl 11(d) which is headed "Notice of termination by employer". Subclause (i) specifies the giving of particular periods of notice, varying with the period of continuous service. Subclause (v) states:

The period of notice in this clause shall not apply in the case of dismissal for conduct that justifies instant dismissal, including malingering, inefficiency or neglect of duty, or in the case of casual employees or employees engaged for a specific period of time or for a specific task or tasks.

[T]ermination of employment shall include terminations with or without notice.

Clause 39 contains certain protections in cases of redundancy including requirements as to period of notice. Notwithstanding the periods prescribed by cl 11(d)(i), to which we have referred, an employee with at least one year's completed service must be given the longer periods of notice (specified in cl 39(f)) before termination for redundancy. However, these provisions are stated by cl 39(v)(i) not to apply "where employment is terminated as a consequence of misconduct on the part of the employee".

Clause 11(b) is aimed at the situation where the termination of employment brought about by the dismissal, rather than the steps leading up to the dismissal, or lack of them, is harsh, unjust or unreasonable. A dismissal with notice may be harsh, unjust or unreasonable because it is based on a ground defined as such by cl 11(b). This refers to such matters as termination "on the ground of" race, colour, sex and marital status. It may be that the termination is harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap. Thus, the one termination of employment may be unjust because the employee was not guilty of the misconduct on which the employer acted, may be unreasonable because it was decided upon inferences which could not reasonably have been drawn from the material before the employer, and may be harsh in its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct in respect of which the employer acted.

The distinction between procedure and substance is elusive. This is so even in those fields of private international law, the statute law dealing with limitations of actions and the effect of repeal upon accrued rights, and the Statute of Frauds, where it has an entrenched operation [167] . In our view, it is unhelpful and contrary to the tenor of the Award to introduce it into cl 11(a).

1. Maxwell v Murphy (1957) 96 CLR 261 at 285-287; McKain v R W Miller & Co (SA) Pty Ltd (1991) 174 CLR 1 at 19-20, 40, 48-50.

That is not to say that the steps taken, or not taken, before termination may not in a given case be relevant to consideration of whether the state of affairs that was produced was harsh, unjust or unreasonable. Thus, it has been said that a decision which is the product of unfair procedures may be arbitrary, irrational or unreasonable [168] . But the question under cl 11(a) is whether, in all the circumstances, the termination of employment disobeyed the injunction that it not be harsh, unjust or unreasonable. That is not answered by imposing a disjunction between procedure and substance. It is important that matters not be decided simply by looking to the first issue before there is seen to be any need to enter upon the second.

1. Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 367.

Some assistance and support for the conclusions we have reached is provided by decisions of the South Australian courts upon the legislation of that State, and also of the Federal Court in proceedings upon Awards with like provisions to cl 11(a). The decisions are as follows:

(i) The Supreme Court of South Australia held that the State legislation did more than provide an extra remedy for a dismissal that was wrongful at common law. In R v Industrial Court of South Australia; Ex parte General Motors-Holdens Pty Ltd [169] , Bray CJ said [170] : I think that the subsection [15(1)(e) of the Industrial Conciliation and Arbitration Act 1972 SA] is designed to apply to all dismissals, whether wrongful or lawful at common law. A lawful dismissal, in appropriate circumstances, can, I think, be legitimately categorised as harsh and unreasonable, and probably it could even be called unjust. Conversely, some wrongful dismissals, as when by excusable mistake a notice is given slightly short of the necessary week, might deserve none of these adjectives. The criterion is not lawful or wrongful dismissal, but harsh, unjust or unreasonable dismissal.

(ii) Hocking v Public Service Association of South Australia Inc [171] indicates that the task of the Industrial Court under the South Australian legislation was to determine whether, in all the circumstances of the case, the employee had demonstrated that the dismissal was harsh, unjust or unreasonable so that, whilst the method adopted in carrying out the dismissal, as distinct from the dismissal itself, might be said to be unjust or unreasonable, that would not be the end of the matter. An example was given [172] of a dismissal on the strength of a rumour without there first having been an investigation but where, after the dismissal, the employer ascertained facts which proved that the rumour relied upon was correct; the dismissal would not have been harsh, unjust or unreasonable.

(iii) In Lane v Arrowcrest Group Pty Ltd [173] , von Doussa J considered the example of the dismissal of an accountant who held a position of trust where it was discovered after the dismissal that the accountant had been systematically embezzling money from the employer. His Honour said it would be astonishing if the employer could not resist an allegation that the dismissal was harsh, unjust or unreasonable, within the meaning of the relevant award, by pointing to those facts discovered after the dismissal, so long as they concerned circumstances in existence when the decision was made. His Honour concluded: Whether the decision can be so justified will depend on all the circumstances. A circumstance, likely to favour the decision to dismiss, would be that fraud or dishonesty of the employee had caused or contributed to the employer's state of ignorance. A circumstance likely to weigh against the decision would be that the employer had failed to make reasonable inquiries which would have brought existing facts to its knowledge before the dismissal occurred.

(iv) In Bostik (Australia) Pty Ltd v Gorgevski [No 1] [174] , a decision of the Full Federal Court, Sheppard and Heerey JJ said of the phrase "harsh, unjust or unreasonable" as it appeared in the Manufacturing Grocers Award 1985: These are ordinary non-technical words which are intended to apply to an infinite variety of situations where employment is terminated. We do not think any redefinition or paraphrase of the expression is desirable. We agree with the learned trial judge's view that a court must decide whether the decision of the employer to dismiss was, viewed objectively, harsh, unjust or unreasonable. Relevant to this are the circumstances which led to the decision to dismiss and also the effect of that decision on the employer. Any harsh effect on the individual employee is clearly relevant but of course not conclusive. Other matters have to be considered such as the gravity of the employee's misconduct.

1. (1975) 10 SASR 582. 2. R v Industrial Court (SA) (1975) 10 SASR 582 at 586, applied in R v Industrial Court of South Australia; Ex parte Mount Gunson Mines Pty Ltd (1982) 30 SASR 504 at 505. 3. (1978) 45 SAIR 637. 4. Hocking (1978) 45 SAIR 637 at 658. 5. (1990) 27 FCR 427 at 456. 6. (1992) 36 FCR 20 at 28.

The above propositions should be accepted as applicable to the present appeals. However, it should be emphasised that the present task is to construe the Award and that nothing now said necessarily determines the meaning of the phrase "harsh, unjust or unreasonable" in any other setting.

The propositions we have set out support the submissions for the respondent that it was necessary for the Full Court to look at the whole of the relevant circumstances which were taken into account by the primary judge in determining that there had been no breach of the Award; and, in particular, that it was an error to reverse that ultimate holding purely for reasons associated with what are identified as procedural defects in the steps taken by the respondent to dismiss the appellants.

Procedures adopted in carrying out the termination might properly be taken into account in determining whether the termination thus produced was harsh, unjust or unreasonable. The submissions for the respondent in the present appeals appeared to concede this. But the burden of the respondent's submissions is that there was error in determining the issue without regard to the very material circumstance of the finding of the primary judge as to the complicity of the appellants in pilfering.

Those submissions should be accepted. This means that the primary judge was bound to consider whether, on the evidence given at the trial, the respondent could resist the allegation of breach of cl 11(a), provided that the evidence concerned circumstances in existence when the decision to terminate employment was made. A further consequence is that it remains for the Full Court to determine whether Hill J erred in his findings of fact as to complicity in pilfering. If those findings were upheld it would be very difficult to see how the dismissal of the appellants could be regarded as harsh, unjust or unreasonable.

Each appeal should be dismissed. Special leave should be granted in respect of each cross-appeal. On each cross-appeal, orders 1-4 of the Full Court of the Federal Court made 7 February 1994 should be set aside, and the matter remitted to the Federal Court for determination, conformably with the reasons of this Court, of the remaining issues on the appeal to that Court.