Duty of trust and confidence

Starting in the late 1970s, courts and tribunals in the United Kingdom began to recognise the existence of an implied term in contracts of employment to the effect that the employer must not act in such a way as to damage or destroy trust and confidence as between the parties to the contract.

A number of Australian courts had proceeded on the assumption that such a term automatically formed part of employment contracts in Australia as well, until the High Court held otherwise in Commonwealth Bank of Australia v Barker.

The High Court in that case clarified that a term of mutual trust and confidence is not implied as a matter of law into contracts of employment in Australia. This does not prevent the parties from explicitly adding a duty of mutual trust and confidence as a term of their employment contracts. There may also be circumstances where the duty is implied by fact (rather than law) into a particular contract.