Concut Pty Ltd v Worrell and Another
[2000] HCA 64(2000) 176 ALR 693
(Judgment by: Gleeson CJ, Gaudron J, Gummow J)
Concut Pty Ltd
vWorrell and Another
Judges:
Gleeson CJ
Gaudron J
McHugh J
Gummow J
Kirby J
Subject References:
Employment
Contract
Oral contract of employment and subsequent written contract
Whether second contract terminated and replaced first contract
Whether second contract removed or compromised employer's right to dismiss employee
Whether duty on employee to disclose past faults.
Employment
Unfair dismissal
Employer not aware of misconduct at time of summary dismissal
Whether misconduct available to employer to resist action for damages for wrongful dismissal.
Contract
Agreement
Oral contract of employment and subsequent written contract
Whether second contract terminated and replaced first contract.
Legislative References:
Trade Practices Act 1974 (Cth) - 52
Industrial Relations Act 1971 (UK) - The Act
Case References:
Coulton v Holcombe (1986) - 162 CLR 1; 65 ALR 656
Griffin v London Bank of Australia Ltd - (1919) 19 SR (NSW) 154
Gordon & Gotch (Australasia) Ltd v Cox (1923) - 31 CLR 370
Byrne v Australian Airlines Ltd (1995) - 185 CLR 410; 131 ALR 422
Stratton v Illawarra County Council - [1979] 2 NSWLR 701
Meek v Port of London Authority - [1918] 2 Ch 96
Stocznia Gdanska SA v Latvian Shipping Co - 1 WLR 574; [1998] 1 AllER 883
Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd - [1974] AC 689
Holland v Wiltshire (1954) - 90 CLR 409
Taylor v Raglan Developments Pty Ltd - [1981] 2 NSWLR 117
Sterling Engineering Co Ltd v Patchett - [1955] AC 534
Scally v Southern Health and Social Services Board - [1992] 1 AC 294
Malik v Bank of Credit and Commerce International SA (in liq ) - [1998] AC 20
Lever Brothers Ltd v Bell - [1931] 1 KB 557
Demagogue Pty Ltd v Ramensky (1992) - 39 FCR 31
Blyth Chemicals Ltd v Bushnell (1933) - 49 CLR 66
Adami v Maison de Luxe Ltd (1924) - 35 CLR 143
Shepherd v Felt and Textiles of Australia Ltd (1931) - 45 CLR 359
Official Trustee in Bankruptcy v Concut Pty Ltd - [1999] QCA 3
Employment Secretary v Associated Society of Locomotive Engineers and Firemen (No 2) - [1972] 2 QB 455
Vine v National Dock Labour Board - [1957] AC 488
Hill v C A Parsons Ltd - [1972] Ch 305
Automatic Fire Sprinklers Pty Ltd v Watson (1946) - 72 CLR 435
Qantas Airways Ltd v Christie (1998) - 193 CLR 280; 152 ALR 365
Ryder v Foley (1906) - 4 CLR 422
Fletcher v Nott (1938) - 60 CLR 55
Kaye v Attorney-General (Tas ) (1956) - 94 CLR 193
Reedman v Hoare (1959) - 102 CLR 177
Coutts v Commonwealth (1985) - 157 CLR 91; 59 ALR 699
English and Australian Copper Co Ltd v Johnson (1911) - 13 CLR 490
Independent Management Resources Pty Ltd v Brown - [1987] VR 605
Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) - 132 CLR 373
Timber Engineering Co Pty Ltd v Anderson - [1980] 2 NSWLR 488
Printing Industry Employees Union of Australia v Jackson & O'Sullivan Pty Ltd (1957) - 1 FLR 175
Boston Deep Sea Fishing and Ice Co v Ansell - (1888) 39 Ch D 339
Clouston & Co Ltd v Corry - [1906] AC 122
Re Rubel Bronze and Metal Co Ltd and Vos - [1918] 1 KB 315
Orr v University of Tasmania (1957) - 100 CLR 526
Lucy v Commonwealth (1923) - 33 CLR 229
Automatic Fire Sprinklers Pty Ltd v Watson (1946) - 72 CLR 435
Pan Foods Co Importers & Distributors Pty Ltd v Australian and New Zealand Banking Group Ltd (2000) - 170 ALR 579; 74 ALJR 791
Colquhoun v Brooks - (1888) 21 QBD 52
Gill v Colonial Mutual Life Assurance Society Ltd - [1912] VLR 146
Bell v Lever Brothers Ltd - [1932] AC 161
Sybron Corp v Rochem Ltd - [1984] Ch 112
Suggested reading:
Hearing date: 20 June 2000
Judgment date: 14 December 2000
Canberra
Judgment by:
Gleeson CJ
Gaudron J
Gummow J
[1] This appeal raises issues respecting the application of general principles of the law of contract to the termination of an employment relationship.
[2] At the relevant times, the appellant (Concut) carried on in several states and the Australian Capital Territory the business of concrete sawing, concrete drilling, grooving of concrete and other surfaces, and the texturing of concrete and other surfaces. The respondents succeeded the Official Trustee in Bankruptcy in the administration of the bankruptcy of Geoffrey John Wells, a former employee of Concut. The affairs of Mr Wells had been administered by the official trustee from on or about 2 July 1997, after the commencement of the present litigation. The respondents were appointed joint and several trustees in place of the official trustee by resolution passed at a meeting of the creditors of Mr Wells' estate held on 28 April 1999.
[3] In the period before 1980, Mr Wells was employed by a related corporation of Concut as a sales representative. He moved to Brisbane in November 1980 and became Queensland Branch Manager for Concut. At this stage, the terms of the employment relationship between the parties were not reduced to writing. However, on 1 December 1986, Concut and Mr Wells executed a document headed "SERVICE AGREEMENT" (the service agreement). Recital B thereof stated that Mr Wells "is an employee of and shareholder in [Concut]" and recital C stated that they "have entered into this Agreement to record the terms and conditions of the employees [sic] employment with [Concut]". At the same time, Mr Wells purchased part of the shareholding in Concut of another company. These further arrangements were recorded in a document styled "Shareholders Agreement" and dated 2 December 1986.
[4] Clause 1.1 of the service agreement stipulated that Mr Wells was to serve as "Branch Manager Queensland" from 1 December 1986 until 30 November 1991 and, thereafter, for further consecutive periods of 12 months each. There was a proviso that either party might give at any time after 30 November 1991 at least three months notice in writing of the intention to terminate "this Agreement" at the end of that period of three months. Clause 1.1 was designed to give Mr Wells some security of tenure, given his investment in the shares in Concut.
[5] On 1 February 1988, Concut terminated the employment of Mr Wells as its Queensland Branch Manager. It did so without notice. The period stipulated in cl 1.1 then still had a substantial time to run.
[6] In 1991, Mr Wells brought an action in the Supreme Court of Queensland for damages for wrongful termination of his employment. The action appears to have been transferred to the District Court, where it was heard by Trafford-Walker DCJ. His Honour dismissed Mr Wells' claim.
[7] Concut resisted the claim on the footing that Mr Wells had breached his conditions of employment in a manner which gave Concut the right to dismiss him without notice and without the payment of any penalties. What the trial judge described as the most substantial ground put forward to justify Mr Wells' dismissal was his alleged misconduct by the use of Concut's employees and property in the construction of his house at Beaudesert. The trial judge found that, in a period which most probably occurred prior to 1 December 1986, Mr Wells had used Concut's staff and materials for his private purposes without Concut's permission, knowing that he was not entitled to do so, and that this constituted significant misconduct on his part. His Honour also found that Concut had not been aware of Mr Wells' misconduct when it terminated his employment, and that it only became aware of this later. There was a counter-claim by Concut for the cost of the improper use of its staff and property. The trial judge entered judgment for Concut on the counter-claim in the sum of $2816.
[8] The Court of Appeal confirmed the order made by the District Court on the counter-claim. However, by majority (McMurdo P and Thomas JA; Shepherdson J dissenting), it allowed an appeal by the official trustee and entered judgment against Concut in the sum of $383,333. The Court of Appeal held that the service agreement was "a new and discrete contract of employment, terminating and replacing the oral agreement"; that Bell v Lever Brothers Ltd [1] was "strong authority for the proposition that there is no duty on an employee to disclose his or her own past faults"; that, while the oral contract had contained a term implied by law that the employee refrain from conduct destructive of the necessary confidence between the parties, this contract "had been concluded" at the time of the employee's dismissal; that there had been no obligation under the service agreement for the employee to disclose his prior misconduct; and that there had been no breach of any term of the service agreement.
[9] In this court, Concut seeks an order setting aside the entry of judgment against it and the restoration of the order made by the trial judge dismissing the action against it for wrongful termination.
[10] The relevant findings of fact in the District Court have not been challenged. The area of debate between the parties concerns the identification of the legal consequences of those findings, the construction of the service agreement and its place in the employment relationship between the parties. In particular, in this court, as was done successfully in the Court of Appeal, the respondents place great weight upon the circumstance that the misuse by Mr Wells of his position occurred before the date of the service agreement and upon what they say is the prospective and exclusive operation of a provision in the service agreement for the dismissal of Mr Wells.
[11] For its part, Concut stresses the anterior existence of the employment relationship whereunder, since 1980, Mr Wells had been its Queensland Branch Manager. It is common ground that Mr Wells remained Queensland Branch Manager before and after the date of the service agreement. Concut submits that the legal effect of what happened was that there was a contractual variation brought about by the execution of the service agreement so that thereafter the terms of the employment relationship were found partly, but not exclusively, in the written instrument.
[12] The respondents complain that these submissions involve some departure from the legal characterisation previously attached by Concut to the state of affairs surrounding Mr Wells' employment as Queensland Branch Manager. It is by no means clear that this fairly describes the earlier conduct by Concut of the litigation. In any event, this is a case in the class identified by Mason J in O'Brien v Komesaroff [2] where it is expedient in the interests of justice that a question of law turning upon the construction of a document or upon facts either admitted or found beyond controversy should be argued and decided in this court. It was not suggested by the respondents that the legal issues advanced in this court were such that evidence could have been given at the trial which could have prevented the success of the appellant on those issues.
[13] Clause 6 of the service agreement stated:
DISMISSAL FOR MISCONDUCT
If at any time during his employment by [Concut] the Employee
- (a)
- Shall be guilty of any serious misconduct which shall include failure by the Employee to devote his whole time and attention to the business of [Concut] during normal business hours, absenting himself without leave (except in the case of illness or accident) disobedience or neglect to fulfil any of the orders or directions of the Board of Directors of [Concut].
- (b)
- Shall commit either in the course of his employment or otherwise any act which causes the Employee to be publicly disgraced or held in public contempt.
- (c)
- Commits any material breach of any provision of this Agreement which is incapable of being remedied or fails after notice in writing given by [Concut] to remedy any other breach by the Employee of any provision of this Agreement within 7 days of such notice.
- (d)
- Shall draw endorse, accept or otherwise render the company liable under any Bill of Exchange, Promissory Note or Guarantee other than as authorised from time to time by the Board.
- (e)
- Shall render [Concut] liable for any borrowings without the prior written consent of [Concut].
- (f)
- Shall dispose of or purport to dispose of any of [Concut's] property other than in the ordinary course of the business of [Concut] without the written consent of [Concut]
and in any such event [Concut] may terminate the Employee's employment forthwith without any notice or payment in lieu of notice or liability for damages or otherwise.
[14] In his dissenting judgment, Shepherdson J concluded that (a) the service agreement "was not a new and discrete contract between the parties with its operation, including its `DISMISSAL FOR MISCONDUCT' provisions ... being limited to [Mr Wells'] misconduct only on and from 1 December 1986" and (b) Concut had been entitled to rely upon that provision in cl 6 in respect of conduct before 1 December 1986.
[15] The contrary result reached by the majority depended upon their Honours' conclusion that the service agreement was a new and discrete agreement and, it would seem, that it was a new contract of employment which terminated and replaced the pre-existing oral agreement between Concut and Mr Wells.
[16] The issues which arise in this court include the following:
- (i)
- whether Mr Wells' misconduct in the period before 1 December 1986 was in serious breach of his duties forming part of his employment relationship as Queensland Branch Manager under his then unwritten contract with Concut;
- (ii)
- whether, at any time before it dismissed Mr Wells, Concut had released or compromised its rights against Mr Wells arising from that serious breach, so that at no time thereafter was Concut at liberty to justify his dismissal by reliance upon those rights;
- (iii)
- the relationship between the service agreement and the antecedent employment relationship; and
- (iv)
- the significance for this case of certain remarks by Lord Atkin in Bell v Lever Brothers Ltd . [3]
In the end, it will not be necessary to consider certain further questions which emerged in the course of argument in this court. One is the scope of the principle that there may be conduct "quite outside the discharge of duties in the immediate service" which justifies immediate dismissal. [4] Another is the proposition that present unfitness to discharge the duties of the employee may be demonstrated, at least in an evidentiary sense, by previous misconduct. [5]
[17] The issues which must be determined are to be understood in the context of the law respecting employment relationships. It would be unusual for this to be purely contractual. Statute may impose obligations to observe industrial awards and agreements, [6] and in some instances the relevant terms of the employment relationship may be found in the industrial award which binds the parties at the relevant time. [7] Further, as Mason J pointed out in Hospital Products Ltd v United States Surgical Corp , [8] the relationship between employee and employer is one of the accepted fiduciary relationships; their critical feature is that the fiduciary undertakes or agrees to act for or on behalf of, or in the interests of, another person in the exercise of a power or discretion that will affect the interests of that other person in a legal or practical sense. An illustration respecting employer and employee is provided by the decision of Kearney J in Timber Engineering Co Pty Ltd v Anderson . [9] In that case, the defendant employees, in breach of their fiduciary duties, diverted the business and profits of their employer to themselves and to their companies; the equitable remedies awarded included an account of profits and a constructive trust as to the business of the employees' companies.
[18] In the present case, the dispute centres not upon these other aspects of the employment relationship, but upon the identification of the contractual source of the relationship over a fairly lengthy period. In our view, the majority of the Court of Appeal erred in treating the service agreement as a new and discrete contract of employment which had the effect of terminating and replacing the anterior oral agreement between Concut and Mr Wells, and this error dictated an incorrect outcome to the appeal.
[19] The relevant principles are well settled. In FCT v Sara Lee Household & Body Care (Aust) Pty Ltd , [10] Gleeson CJ, Gaudron, McHugh and Hayne JJ said:
When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration. For example, something may turn upon the place, or the time, or the form, of the contract, and it may therefore be necessary to decide whether the original contract subsists.
Their Honours went on [11] to refer to the judgment of Taylor J in TALL ERman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd . [12] Taylor J had rejected submissions that (a) "it is impossible by a subsequent agreement, merely, to vary or modify an existing contract" and (b) "[an] agreement which purports to vary an existing contract operates ... first of all to abrogate entirely the existing contractual relationship and, then, to reinstate the terms of the old contract as varied or modified by the new agreement". [13] His Honour, to the contrary, accepted the propositions that (a) the earlier contract might be rescinded altogether, the determining factor being the intention of the parties disclosed by the later agreement; (b) partial rescission is a variation, not the destruction, of the contractual relationship between the parties; and (c) the earlier contract may be varied by way of (i) partial rescission with or without the substitution of new terms for those rescinded and (ii) the addition of new terms with or without any partial rescission at all. [14] In TALL ERman , Kitto J [15] spoke in terms which involved acceptance of propositions (a) and (b) as identified above, adding that while "in strict logic" a variation may be a new contract, "the discharge of an old contract is a matter of intention".
[20] The decision of the majority in the Court of Appeal in the present case appears to involve the holding that there was a discharge of the prior contractual relationship between Concut and Mr Wells, that the service agreement became the exclusive charter of the contractual rights and duties of the parties, and that subsisting rights and liabilities under the prior contract, including those arising by reason of breach thereof, were compromised or released. However, the text of the service agreement itself, as well as the surrounding circumstances, indicate that such a conclusion would not be in accord with the manifest intention of the parties.
[21] The service agreement recited that Mr Wells was an employee of Concut and manifested no intention to displace rights and liabilities which had accrued between the parties since Mr Wells had become the Queensland Branch Manager in 1980 by releasing or compromising those rights and liabilities. Rather the employment relationship continued but was supplemented by the terms of the service agreement. Clause 1 thereof specified a term of employment to continue until 30 November 1991 and for periods thereafter as provided in the clause; cl 2 fixed Mr Wells' remuneration and provided for regular salary reviews; cl 8 contained various provisions protective of the interest of Concut in what was defined as "confidential information". Clause 11 stipulated an entitlement to four weeks annual leave on full salary, but this had to be read with cl 13. This was headed "PRIOR SERVICE" and stated:
Nothing contained in this agreement shall in anyway [sic] limit or restrict the accrued rights of [Mr Wells] in respect of prior service with [Concut] to long service leave, superannuation, holiday pay and other like emoluments.
[22] The conclusion that the employment relationship continued but was supplemented by the terms of the service agreement has several relevant consequences. One concerns the argument that the express provision made in cl 6(a) of the service agreement for dismissal without notice if at any time Mr Wells was guilty of serious misconduct had a prospective and exclusive operation. The corollary is said to be that Concut was precluded from dismissing Mr Wells during the currency of the service agreement for misconduct anterior to the date of the service agreement. However, cl 6(a) operated concurrently with terms implied by law and did not displace the consequences of anterior breach of such terms.
[23] In Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd , [16] Hope JA identified contracts between master and servant as a typical class of contract in which terms will be implied by law. Such terms apply in the absence of an expression of contrary intention by the parties. [17] In discerning that intention, regard should be had to "the familiar principle of construction that clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of the contract arising by operation of law". [18] Thus, an express provision for termination for breach in certain circumstances may be regarded as designed to augment rather than to restrict or remove the rights at common law which a party otherwise would have had on breach. [19]
[24] Paragraph (a) of cl 6 of the service agreement is a provision of this character. It specifies that certain acts or omissions are to be treated as included in the notion of "serious misconduct" for which Mr Wells might be dismissed without notice. The activities so identified are a failure to devote the whole of Mr Wells' time and attention to the business of Concut during normal business hours, absence without leave (except in the case of illness or accident), disobedience, and neglect to fulfil any of the orders or directions of the board of Concut. Paragraph (a) was expressed prospectively and augmented rather than restricted or removed rights which Concut otherwise would have in respect of a breach of any term implied by law; nor did it release or compromise such rights as Concut may have had at the time of the execution of the service agreement by reason of past misconduct of Mr Wells.
[25] In Pearce v Foster , [20] Lord Esher MR stated it to be a "rule of law" that "where a person has entered into the position of servant, if he does anything incompatible with the due or faithful discharge of his duty to his master, the latter has a right to dismiss him". In Blyth Chemicals Ltd v Bushnell , [21] in the course of considering the position of the respondent, who was the manager of the appellant's business, Starke and Evatt JJ said: [22]
As manager for the appellant, the respondent was in a confidential position. And it is clear that he might be dismissed without notice or compensation if he acted in a manner incompatible with the due and faithful performance of his duty, or inconsistent with the confidential relation between himself and the appellant.
In the same case, Dixon and McTiernan JJ said: [23]
Conduct which in respect of important matters is incompatible with the fulfilment of an employee's duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal.
[26] Contractual obligations and fiduciary duties have different conceptual origins, "the former", in the words of McLelland J, [24] "representing express or implied common intentions manifested by the mutual assents of contracting parties, and the latter being descriptive of circumstances in which equity will regard conduct of a particular kind as unconscionable and consequently attracting equitable remedies". Formulations of the obligations of an employee in terms such as those in Pearce and Blyth Chemicals may be understood, Professor Finn has pointed out, as the re-expression of equitable obligations in terms of implied contracts. [25] If so, the importation is well established and beneficial, and nothing turns upon it for present purposes.
[27] The trial judge had held that Mr Wells' activities in relation to the building operations at Beaudesert had amounted to significant misconduct which was sufficient to terminate his employment. His Honour also held, with reference to Shepherd v Felt and Textiles of Australia Ltd [26] that it did not matter that at the time of the dismissal Concut had not been aware of that misconduct. That misconduct nevertheless was available to Concut to resist the action for damages for wrongful dismissal instituted by Mr Wells.
[28] The majority in the Court of Appeal did not controvert those grounds upon which the case had been decided at trial. Plainly, the trial judge was correct in deciding the case in this way. However, the Court of Appeal directed its attention to the submissions for the appellant, which sought to outflank the decision of the trial judge by maintaining that Concut had not been entitled to terminate the employment of Mr Wells because breach of the earlier oral contract did not entitle Concut to terminate without compensation what was said to be the later fixed term contract.
[29] In this court, no attempt was made, and none would have succeeded, to deny the proposition of law expressed in Shepherd . The proposition that the dismissal of an employee may be justified upon grounds on which the employer did not act and of which the employer was unaware when the employee was discharged is but an application of what, in Shepherd , Dixon J identified as a rule of general application with respect to the discharge of contract by breach. [27]
[30] The submissions, accepted by the majority in the Court of Appeal, depended upon acceptance of a view of the contractual relationship between Mr Wells and Concut before and during the currency of the service agreement which, as indicated above, should not be accepted. There may conceivably have been a question whether, by reason of any release or compromise of Concut's rights arising at general law by reason of the serious breach by Mr Wells of the term implied by law into his contractual relationship, Concut had been disabled from later justifying its dismissal of Mr Wells by reliance upon the breach. However, no such release or compromise was stipulated in the service agreement and no other source for it has been suggested.
[31] The majority in the Court of Appeal fixed their attention upon the state of affairs at the time of execution of the service agreement and emphasised that there was nothing to show that Mr Wells had deliberately withheld his prior misconduct in order to induce Concut to enter into "the new written contract of employment". The majority further stressed that the speech of Lord Atkin in Bell v Lever Brothers Ltd [28] was "strong authority for the proposition that there is no duty on an employee to disclose his or her own past faults".
[32] Neither proposition is determinative of the present appeal once there is an appreciation of the duration and content of the employment relationship between the parties. In any event, Bell v Lever Brothers Ltd was concerned not with an answer to a claim for damages for breach of contract, but with a situation where payments had been made under contracts stated to be entered into "in full satisfaction and discharge of all claims and demands" between the parties [29] and the party which had then made the payments sought to recover them as moneys paid under total failure of consideration. [30] The jury had held that the contracts had not been induced by fraud. [31]
[33] In the present matter, the majority of the Court of Appeal, as did counsel for the respondent in this court, placed particular reliance upon the statement by Lord Atkin in Bell v Lever Brothers Ltd : [32]
If a man agrees to raise his butler's wages, must the butler disclose that two years ago he received a secret commission from the wine merchant; and if the master discovers it, can he , without dismissal or after the servant has left, avoid the agreement for the increase in salary and recover back the extra wages paid ? If he gives his cook a month's wages in lieu of notice can he, on discovering that the cook has been pilfering the tea and sugar, claim the return of the month's wages ? I think not. He takes the risk; if he wishes to protect himself he can question his servant, and will then be protected by the truth or otherwise of the answers. [emphasis added]
However, as these remarks show, Lord Atkin was concerned with avoidance of agreements for failure to disclose past misconduct and the recovery of moneys paid thereunder.
[34] In his speech, Lord Atkin (who, with Lord Blanesburgh and Lord Thankerton, comprised the majority) had isolated "[t]wo points ... for decision". [33] The first was whether the agreement with Bell negotiated by Mr Cooper was void by reason of a "mutual mistake" of Bell and Cooper, as to the "quality of the thing contracted for", [34] so that, if the agreement be executed (as was the case), one party "can recover back money paid on the ground of failure of the consideration". [35] His Lordship decided that "the party paying for release [had gotten] exactly what [it had] bargain[ed] for", and it was not to the point that, had it known the true facts, it would not have entered into the bargain. [36] So, on this ground, Bell was able successfully to resist the claim for repayment.
[35] With this branch of Lord Atkin's speech, which for 70 years has attracted varied academic analysis, the Court of Appeal was not concerned. The passage set out above comes from that part of Lord Atkin's speech answering favourably to Bell the second point for decision. This was whether Bell had "owed a duty to Levers to disclose his misconduct, and that in default of disclosure the contract was voidable". [37]
[36] In Bank of Credit and Commerce International SA v Ali , [38] Lightman J dealt with this section of Lord Atkin's speech and said that Bell v Lever Brothers Ltd was authority for the following propositions:
The current law as generally understood may be stated as follows: that (1) (subject to one exception) neither party to a contract is obliged to disclose facts material to the decision of the other party whether to enter into that contract; (2) the exception is limited to contracts which are uberrimae fidei; (3) neither contracts of employment nor contracts of compromise (unless by way of family arrangement) fall within this exceptional category; and (4) neither the employer nor the employee, once in contractual relations, are under a duty as such to disclose to each other their own breaches of contract.
[37] Proposition (4) may require qualification to allow for obligations of disclosure which attend a fiduciary duty, if informed consent is to be obtained to what otherwise would be a breach of that duty. [39] Further, particular problems arise respecting the contracts of compromise identified in proposition (3) by his Lordship where there is a question respecting the actual or apparent authority of counsel to enter into such a compromise. In Harvey v Phillips , [40] Dixon CJ, McTiernan, Williams, Webb and Fullagar JJ said that a court did not appear to possess a discretion to rescind or set aside such a compromise and continued: [41]
The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like.
Questions respecting non-disclosure of a material fact where disclosure is required may also arise where the complaint is one of contravention of s 52 of the Trade Practices Act 1974 (Cth). [42] None of these questions arises here.
[38] The fundamental point is that the present appeal is not concerned with any claim by Concut to avoid Mr Wells' contract for alleged failure by Mr Wells to disclose alleged misconduct during a period anterior to his appointment in 1980 as Queensland Branch Manager. Rather, the outcome of the case turns upon the breach of an obligation implied by law in the employment contract and the right of the employer to rely upon that breach, when subsequently discovered, in answer to a claim for damages for wrongful dismissal, although the dismissal was not based on that ground. The applicable principles are well settled and their application to the undisputed facts produces a result favourable to the employer.
[39] The appeal should be allowed with costs. Orders 1 and 2 of the orders of the Court of Appeal should be set aside. In place thereof, it should be ordered that the appeal to that court be dismissed with costs.