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Law and common people

by Simon Longstaff

Baiting lawyers is an easy sport. Because of this, barristers and solicitors routinely attract the barbs of criticism from a cynical public that distrusts their motives, in general, and their commitment to justice, in particular.

Nowadays, some people have bigger game in their sights – the judiciary. It is increasingly fashionable to 'bag' a judge or two whenever they break cover with a decision that challenges the status quo. It's not really much of a contest.

After all, judges make for a highly visible target that usually won't fight back. But note – the most vehement attacks against the judiciary are often mounted by those with powerful interests to protect. As I hope to demonstrate, there are good reasons why we, the ordinary folk, ought to think twice before abandoning the judiciary to its fate. Put simply, our judges are required to be blind to wealth, power and prejudice. As such, they are a threat to those who hold them for their own exclusive benefit.

Local cases determined by local judges tend to inflame controversy. Bearing this in mind, it might be useful to look overseas for an example of how the courts do genuine good for the common people. The case that comes to mind is found in the judgement of the House of Lords Malik & Mahmud v Bank of Credit and Commerce International SA (BCCI).

Following the collapse of BCCI in 1991, rumours and then evidence of its corruption and dishonesty became widely known. BCCI had carefully constructed the image of being a friend to the 'Third World' and an enlightened benefactor in support of good causes.

The reality, behind this mask, was of a corporation happily engaged in the tasks of laundering drug money, facilitating illegal arms shipments and the like. Hence their Lordships' uncontroversial conclusion that the Bank itself was corrupt and dishonest – and not just one or two individuals in its employ.

This is not to suggest that everybody at BCCI was corrupt. Indeed, all parties to the dispute agreed that Mr Malik and Mr Mahmud were perfectly innocent. Despite this, they were 'tainted' by their association with BCCI and, as a consequence of this, found it impossible to gain employment in the financial services industry. Hence their decision to sue for damages.

In deciding this case, the House of Lords confirmed that in each and every contract of employment an employer has an implied obligation not to conduct a dishonest or corrupt business. So much may seem obvious. However, the decision goes on to point out that this obligation is just one aspect of a broader obligation, on both parties, not to engage in conduct:

Likely to undermine the trust and confidence required if the employment relationship is to continue in the manner the employment contract implicitly envisages.

In seeking to expand on this point, Lord Nicholls of Birkenhead points out that there is no [legal] obligation to take steps to improve an employee's future job prospects.

Most significantly, he then adds:

But failure to improve is one thing, positively to damage is another. Employment, and job prospects, are matters of vital concern to most people. Jobs of all descriptions are less secure than formally, people change jobs more frequently, and the job market is not always buoyant. Everyone knows this. An employment contract creates a close personal relationship, where there is often a disparity of power between the parties. Frequently the employee is vulnerable ... Employers must take care not to damage their employees' future employment prospects, by harsh and oppressive behaviour or by any other form of conduct which is unacceptable today as falling below the standards set by the implied trust and confidence term.

Their Lordships' chain of legal reasoning then leads them to conclude, in principle, that damages are payable as compensation for loss of income suffered by people who are stigmatised because of their association with a former employer. They find that this principle applies even in cases where the dishonest or corrupt behaviour only comes to light after an affected employee has left.

It should, of course, be noted that a decision of the British House of Lords does not directly affect the Common Law in Australia. It is; however, bound to be highly influential. Thus, a judgement of the kind outlined above is extremely important for a number of reasons.

First, it should be a clear warning to employers (in both the public and private sectors) that their obligations have been further refined. Encouraging sharp practice such as collusive tendering, or paying bribes (or even turning a blind eye to such practices) can have serious long term effects.

Insurers beware! It is also a warning to shareholders. If you invest in a company that is found to have breached its obligation, in relation to trust and confidence, then the value of your investment could be eroded by damages paid to past and present employees who sue after suffering financial detriment. Even if only motivated by self-interest, shareholders need to be concerned and informed about the underlying culture of companies in which they invest. As such they should be pushing the 'corporate governance envelope' to include such matters.

Important as all of this is, I want to conclude by returning to my opening point. The case we have been considering presents the human face of the law. In discussing the nature of modern employment, Lord Nicholls is anything but aloof. Rather, he seems to be in touch with the concerns of ordinary people and sympathetic to their plight. Moreover, the court shows that it is interested in the substance of justice and not just its legal form.

This is not a 'foreign' trait, it is the ideal in our Australian courts. Unhappily, many people are inclined to disbelieve this and, having never met a judge, remain susceptible to the shallow appeal of caricature. There will naturally be times when constructive criticism of the courts is warranted. No institution should be spared comment – let alone reasonable criticism.

However, we need to guard against the danger of accepting the views of critics who use the rhetoric of public concern to conceal private interest. Given that judges are often the only people standing between us and the powerful, we should be prepared to offer them the defence that they are precluded from providing for themselves.

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