PREVIOUS SPEAKERS:
The Honourable Mr Justice Elias
ILS, December 2003
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to list of speakers Title: "The duty of trust and confidence."
There are four features to note:
(1) The duty is predicated on the duty of trust and confidence underpinning the relationship between the parties. Two observations about this. First, is it in fact accurate to describe the connection as one of trust and confidence? Or would a duty of minimum respect achieve the same objective? Could the term even be defined merely as the duty not to undermine the relationship, without any mention of trust and confidence at all?
Second, the concept of trust and confidence is used to impose more stringent obligations in other areas e.g. the duty imposed on fiduciaries. Is it helpful to use the same concept here, when their effect is different?
(2) The term is infringed only if there is a repudiatory breach. This is a very curious term. It cannot mean that if there is a breach then it must be repudiatory. (cf Morrow v Safeway’s Stores [2002]IRLR 9 in which the EAT held that if there was a breach of the term it was ipso facto a repudiatory breach.) It plainly is intended only to render unlawful an interference with trust and confidence which is sufficiently significant to warrant the contract being brought to an end. Is this sustainable in all cases? I think not, for the reasons I have set out below.
(3) What is the significance of the concept "good and proper cause"? The question whether the duty of trust and confidence has been undermined is to be determined objectively: see BCCI. Is the cause or reason one of the factors to be taken into account in making that objective determination? If so, does the concept of good and proper cause have any independent role to play? Or is it necessary to ask, independently of the cause of the conduct, whether the trust and confidence has been undermined, so that the question of good and proper cause then comes in by way of a justification? See the observations in Gogay v Hertfordshire Health Authority [2000] IRLR703 and Marshall Specialist Vehicle v Osborne [2003]IRLR 673.
(4) Is the term an aspect of the duty of cooperation, as Lord Steyn said in BCCI? Or is this too narrow a formulation?
Basic thesis.
The term has played a vitally important role in developing protections for the employee. But it purports to be an overarching term which is the source of many distinct contractual duties. I do not think that it does in truth properly constitute a source of these disparate duties and I think that it obscures what the law is really doing to try to explain the development of implied terms within the umbrella of this general portmanteau term.
I would make the following points.
- the specific traditional formulation is really only appropriate for describing the term applicable in those cases where the conduct or behaviour is directed at conduct which justifies the employee saying " I cannot be expected to put up with this conduct any more. I’ve had enough." These are not the sort of cases where the employer infringes a term which goes to the root of the contract such that the employee is entitled to treat the contract as at an end: rather they are the sort of cases where the employer treats the employer with a basic lack of decency or respect. They include some of the early cases such as Isle of White Tourist Board v Coombes [1976]IRLR 413 and Courtaulds Northern Textiles v Andrew [1979]IRLR84.
- In these cases the term is properly characterised as a term whose origin lies in the duty of cooperation. Just as the employer has a duty not to make it physically impossible for the employee to perform the contract- the well known principle in Mackay v Dick- so he also has a duty not to make it psychologically impossible for the employee to do so.
- The need not to render performance psychologically
impossible also justifies the requirement that the breach should be
repudiatory; by definition it renders further performance impossible.
- But in other cases where the duty has been used, and especially where it has imposed limits on the exercise of contractual or prerogative powers, it is misleading to see the principle operating either as undermining the relationship itself or requiring a fundamental undermining of the relationship.
The role of trust and confidence.
This requires some consideration of the range of circumstances where the duty has been held to apply. They include the following cases;
- where the employer demeans the employee or fails to show elementary respect, as in the cases referred to above.
-where the employer fails to provide some basic support for the employee, or fails to deal with grievances relatively speedily: see e.g. Goold v O’Connell [1995] IRLR516; Associated Tyre Specialists v Waterhouse [1977] ICR218.
-where the employer exercises powers in various ways deemed to be unacceptable: these include a multitude of sins;
acting in an arbitrary or capricious manner e.g. Gardner v Beresford[1978]IRLR 63; BG plc v O’Brien [2002] ICR731.
-defeating a legitimate expectation e.g. French v Barclays Bank [1998]IRLR 646
-failing to exercise a power for the purpose for which it has been given: Imperial Tobacco [1991]ICR524.; Macari v Celtic FC [1999]IRLR 787. This may also include refusing to exercise a power where the contract plainly presupposes that it should be exercised at least to some extent in favour of the employee: see e.g. Clark v Nomura [2000] IRLR766 and the Cantor Fitzgerald case.
The cases involving the regulation of powers demonstrate a move towards accepting that powers under the contract are in various ways subject to principles similar to those which regulate the exercise of public law powers. One must not, however, take the analogy too far. The nature of the purpose of the contract of employment is of course different to that of public powers. In general each party to a contract is entitled to look after his or her own interests; but even within that fundamental framework the courts have worked out certain limitations on the power of the employer.
Many of the cases I have referred to above have been explained by the concept of trust and confidence. But is this a helpful description of what the courts are really doing? Take Imperial;
Was the action of the employer in withholding consent to certain changes in the pension scheme conduct undermining trust and confidence in the employment relationship? Could each employee have left and claimed constructive dismissal? I am not sure they could. In any event, would they have wanted to have done so? It was not a case where they were saying "we can’t stand this anymore." On the contrary, they wanted to remain in employment but retain more satisfactory terms.
It is surely wholly artificial in this context to say that the employer has undermined trust and confidence in the relationship. At least, to the extent he has done so, it is the same as where he infringes some other term, such as the failure to pay wages. That may –and generally will- be a repudiatory breach; but it does not assist to say that, by failing to pay, the employer has undermined the trust and confidence in the relationship. He has not made it psychologically impossible for the employee to stay. On the contrary, the employees want to stay; they just want their contract honoured. Similarly in the Gogay case the employee wanted damages for unlawful suspension, but not to bring the contract to an end. And it would surely have been preferable to obtain an injunction to prevent the unlawful act rather than for the employee to bring the contract to an end.
Furthermore, it is not the case that the term, when applied in this way, can properly be seen as part of the duty of cooperation. It is really in cases of this kind simply the application of a duty to act fairly in dealing with the employees; see the observations of Lord Steyn in the Johnson v Unisys case. But if that is what really underpins the term why try to bring it under the trust and confidence umbrella?
Furthermore, there are attempts to explain principles which can readily be seen as the application of orthodox contract doctrines by trying to bring them under this doctrine; e.g. the House of Lords decision in Scally and the recent decision of the Court of Appeal in Glendale Management Services v Graham [ 2002] IRLR465
Limits to the doctrine.
The doctrine is limited in two ways.
First, it does not apply where the alleged breach occurs in the context of dismissal: see Johnson v Unisys and subsequent cases. There were two reasons for this; the first was that the alleged term conflicted with an express term. The second was that it was inconsistent with the fact that dismissals were now regulated by statute.
There is considerable force in the first ground if the duty of trust and confidence is seen as involving the continuation of the relationship. Not, however, if it is simply an aspect of a duty to act fairly.
Second, the doctrine does not apply where there is a contrary express term. But when is that? See the Johnson case and Reda v Flag [2002] IRLR 747 for a discussion of when an express term conflicts with the implied term. Also the older case of Johnson v Bloomsbury Health Authority.
Mutuality.
The doctrine is said to be mutual. Yet it is not thought in most cases at least to add anything, or at least not anything much, to the protection afforded to employers by the traditional implied terms resulting from the duty of good faith, cooperation and obedience. it has not been thought helpful or appropriate to try to bring all these terms under some overarching principle such as the duty on the employee not to undermine trust and confidence, and this supports the view that the duties cast on the employer cannot be helpfully cast in this way.
There are moreover possible developments of the doctrine which could affect the employee. Might it, for example, require the performance of voluntary overtime? Or render overtime bans a breach of contract? Or require the employee to disclose even his own wrongdoing?