Along came a spider...

14.5 (EN)

House of Lords, 12 June 1997

Further information is available at: [ Report Broken URL ]

Original language version (source reference: cf. casebook)

Judgment: LORD STEYN: ... It will be convenient first to examine the legal position regarding the implied term relied on by the applicants...

The implied term of mutual trust and confidence

The applicants do not rely on a term implied in fact. They do not therefore rely on an individualised term to be implied from the particular provisions of their employment contracts considered against their specific contextual setting. Instead they rely on a standardised term implied by law, that is, on a term which is said to be an incident of all contracts of employment: Scally v. Southern Health and Social Services Board [1992] 1 A.C. 294 , 307B. Such implied terms operate as default rules. The parties are free to exclude or modify them. But it is common ground that in the present case the particular terms of the contracts of employment of the two applicants could not affect an implied obligation of mutual trust and confidence.

The employer's primary case is based on a formulation of the implied term that has been applied at first instance and in the Court of Appeal. It imposes reciprocal duties on the employer and employee. Given that this case is concerned with alleged obligations of an employer I will concentrate on its effect on the position of employers. For convenience I will set out the term again. It is expressed to impose an obligation that the employer shall not:
'without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee:' see Woods v. W. M. Car Services (Peterborough) Ltd. [1981] I.C.R. 666 , 670 (Browne-Wilkinson J.)...

A useful anthology of the cases applying this term, or something like it, is given in Sweet & Maxwell's Encyclopedia of Employment Law (looseleaf ed.), vol. 1, para. 1.5107, pp. 1467-1470. The evolution of the term is a comparatively recent development. The obligation probably has its origin in the general duty of co-operation between contracting parties: Hepple & O'Higgins, Employment Law , 4th ed. (1981), pp. 134-135, paras. 291-292. The reason for this development is part of the history of the development of employment law in this century. The notion of a 'master and servant' *46 relationship became obsolete. Lord Slynn of Hadley recently noted 'the changes which have taken place in the employer-employee relationship, with far greater duties imposed on the employer than in the past, whether by statute or by judicial decision, to care for the physical, financial and even psychological welfare of the employee:' Spring v. Guardian Assurance Plc. [1995] 2 A.C. 296 , 335B. A striking illustration of this change is Scally's case [1992] 1 A.C. 294 , to which I have already referred, where the House of Lords implied a term that all employees in a certain category had to be notified by an employer of their entitlement to certain benefits. It was the change in legal culture which made possible the evolution of the implied term of trust and confidence.

There was some debate at the hearing about the possible interaction of the implied obligation of confidence and trust with other more specific terms implied by law. It is true that the implied term adds little to the employee's implied obligations to serve his employer loyally and not to act contrary to his employer's interests. The major importance of the implied duty of trust and confidence lies in its impact on the obligations of the employer: Douglas Brodie, 'Recent cases, Commentary, The Heart of the Matter: Mutual Trust and Confidence' (1996) 25 I.L.J. 121. and the implied obligation as formulated is apt to cover the great diversity of situations in which a balance has to be struck between an employer's interest in managing his business as he sees fit and the employee's interest in not being unfairly and improperly exploited.

The evolution of the implied term of trust and confidence is a fact. It has not yet been endorsed by your Lordships' House. It has proved a workable principle in practice. It has not been the subject of adverse criticism in any decided cases and it has been welcomed in academic writings. I regard the emergence of the implied obligation of mutual trust and confidence as a sound development.

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