Case: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165
Outcome: applied
determining whether a commercial document imposes contractual obligations regard is had to the intention of the parties: would a reasonable person conclude that the person making the alleged binding promise intend to be contractually bound by that promise. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at 179 the High Court summarised the position as follows: "It is not the subjective beliefs or understanding of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe ... That, normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." Clause 2.10 is, as it says, designed to deal with "concerns" which CMA may, from time to time have about the behaviour of its employees. Those concerns may arise from some innocent act of the employee which leads CMA mistakenly to believe that some misconduct has occurred. At the other end of the spectrum concern may be raised by blatant misconduct which occurs in the presence of a supervisor. Between these extremes fall many forms of conduct which have the potential to give rise to concern on the part of the employer. They include matters such as unapproved absences from duty, the failure to meet production targets, the performance of work in a manner which might compromise the health and safety of other employees, failure to contribute as part of a team and many more possibilities. Clause 2.10 is intended to deal with all such situations. Step 1 would, for example, be of use where CMA suspected that an employee had engaged in some misconduct but was not sure. The discussion between the manager and the employee may set the manager's mind at rest. Step 1 might also be useful where an employee is thought not to be working productively. If the issue is raised with the employee the employee may be able to offer a satisfactory explanation to CMA such as that his work is being impeded by some work-related injury. Serious misconduct such as abuse of a supervisor or actions which jeopardise the health and safety of other employees can be dealt with by immediate counselling under Step 2. The subsequent steps ensure that the employee knows that he or she is on notice that any repetition will place his or her continued employment in jeopardy. Extreme misconduct may lead to summary dismissal. Clause 2.10 can be engaged even when CMA has not determined that disciplinary action against the employee is warranted. The prefatory words of the clause make no mention of disciplinary action and do not condition its application on a decision by CMA that disciplinary action is warranted. The adoption of the term "grievance procedure" suggests that the clause was intended to have application to a wider range of "concerns" than those which have disciplinary implications. This is made plain by a reading of the clause as a whole. Its language confirms that it has application if CMA has a concern about an employee's behaviour and wishes to ascertain whether the employee has, in fact, done anything wrong. CMA may also harbour concerns about behaviour which it is satisfied amounts to misconduct but, in respect of which, it considers it appropriate to do no more than draw the matter to the employee's attention and request or direct that the conduct not be repeated. The word "grievance" is, of course, apt also to embrace CMA's reaction to conduct by an employee which CMA considers does or may warrant disciplinary action. The terms in which industrial instruments are drafted often require a distinction to be drawn between aspirational and promissory statements. In accordance with the objective theory of contract expounded in Toll , a provision in a document proffered by an employer, will be treated as promissory in nature if the hypothetical, reasonable, potential employee to whom the document is presented would have concluded that CMA intended to be contractually bound to follow the procedures, outlined in it if CMA developed any concerns about the behaviour of the employee. Whether or not he or she would have so concluded will depend on a consideration of the terms of the clause, the surrounding circumstances known to the parties and the nature of the arrangement which is being entered into. In my view clause 2.10 does impose an obligation on CMA to proceed at least as far as step 1 in a case such as the present. The clause appears in a particular type of contract which is recognised and regulated by statute. It is an agreement which is intended to govern the employment relationship of an employer and an employee. It provides a form of protection to an employee whose conduct has, for any reason, given the employer cause for concern. It is designed to ensure that the employee is informed of the nature of those concerns and has the opportunity to disabuse the employer or to have the opportunity (in most instances) of rectifying any shortcomings which have given rise to the employer's misgivings.