Damages Issues II
Cases
Carey v. Independent Newspapers (Ireland) Ltd.
[2003] IEHC 67 (7 August 2003)
JUDGMENT of Mr. Justice Gilligan delivered on the 7th day of August 2003.
The plaintiff in these proceedings is a journalist by occupation and a married lady. She appears to have been a very distinguished journalist joining Ireland on Sunday in September, 1997 and rising to be the political editor correspondent earning approximately £35,000 (€44,440.00) per annum on a contractual basis in February, 1999. While with Ireland on Sunday she worked Tuesday through Saturday, commencing at 10 a.m. in the morning and concluding on Saturday with the 4 p.m. deadline for the following day’s edition and this arrangement dovetailed perfectly with the plaintiff’s domestic responsibilities in respect of her son, Eamon, who was born on the 20th November, 1998.
The Facts
The plaintiff was contacted by Paul Drury who was then the editor of the Evening Herald newspaper at some time in late September, 1999, with a view to ascertaining if she would be interested in taking up a position as political correspondent with the Evening Herald. A meeting was arranged at the Palace Bar. The plaintiff says she made it clear to Mr. Drury that it would be impossible for her to
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work in the early mornings at the offices of the Evening Herald by reason of the fact that she could not get a child minder and that she would have to work from home for the first edition. The proposed salary was also discussed. Mr. Drury indicated to her that he would have to go back to discuss the matter with Mr. Carlisle, Mr. Dunne and Mr. Roche.
From his perspective, Paul Drury gave evidence that the previous political correspondent with the Evening Herald had resigned and the paper was being relaunched and in his professional opinion it was essential to get a senior responsible journalist to fill the vacancy as political correspondent as quickly as possible. He had known the plaintiff who had worked on occasion for him on a free-lance basis and knew that she was a self-starter. He referred to the fact that she had been responsible for the breaking of some major stories such as the child organ retention scandal and he saw her as particularly suitable for the proposed new agenda for the Evening Herald. When he went to the first meeting with the plaintiff at the Palace Bar he was of the mind that the paper had a serious weakness without a political correspondent and he wanted to know if Mairead Carey, the plaintiff, was interested in the proposed position. At first she appeared to him to be a little hesitant and she referred to the fact that her job was going well with Ireland on Sunday. This appears to be an important factor because there is no suggestion whatsoever that prior to this meeting, the plaintiff had any plans to leave her existing well paid position. Mr. Drury says that he outlined the plan for the Evening Herald to the plaintiff and that they were going to aim at the mid-market as he wanted a heavyweight political correspondent with a Dublin focus. He accepts that she raised the issue of not being able to work in the early hours in the office as it was not practical for her and she would have to cover the morning session from her home.
He accepts that there was a discussion as regards salary and that it was the plaintiff who suggested a figure and when this initial meeting concluded there were two issues to be clarified, one being salary and the other being the plaintiff working from home in the early hours. He accepts that he indicated that he would have to talk to his colleagues, Mr. Dunne, Mr. Roche and possibly Mr. Carlisle but he is not sure if he ever actually discussed the situation with the latter. His concern was that he wanted a candidate found as quickly as possible and if necessary he was going to recommend that the additional money as required be forthcoming. He also wanted
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approval for the slightly unusual arrangement of the plaintiff working from home for the first edition shift.
The subsequent events appear to me to be of significant importance. Mr. Drury did go back and he discussed the matter with Mr. Michael Roche who was the Group Managing Editor of the Independent Group Newspapers. It is of particular significance that when Mr. Drury discussed the matter with Mr. Roche he had serious reservations as regards the plaintiff working from home. He was aware that the plaintiff had some difficulty but he took the view that if it suited Mr. Drury and his team and if he believed it workable, he was happy to go along with it.
However, Mr. Roche was reluctant to confirm the issue of working from home in writing as he indicated to Mr. Drury that the group may want to review this issue in the future and I am left with the distinct impression that Mr. Roche was not at all happy about the arrangement and in this regard I am satisfied that Mr. Drury never advised Ms. Carey that Mr. Roche had a serious concern about the proposed working arrangements.
Mr. Drury also had a previous conversation with Mr. Dunne in his capacity as Group News Editor for the Evening Herald and the Irish Independent and Mr. Dunne did not have any reservations about the agreed working arrangements, provided they worked out. He did become aware of Mr. Roche’s reservations and he took the view that if the system as arranged worked, it would be okay but that it was a matter for the editor and it was his responsibility to make it work.
There were apparently a number of other candidates but the plaintiff was the desired corn candidate and Mr. Drury discussed the matter with Mr. Paul Dunne and got good reports in relation to the plaintiff.
Mr. Drury also obtained approval for the plaintiff’s salary arrangements in the sum of IR£45,000 (€57,138.21) and there were then a number of telephone calls between the plaintiff and Mr. Drury in which the two central matters pertaining to the plaintiff’s salary and working from home for the first edition were agreed and, insofar as the plaintiff could not obtain confirmation in writing as regards the working arrangements, she took Mr. Drury’s word for it against the background where she was aware that he had discussed the matter with senior management.
At the second meeting between Mr. Drury, Mr. Dunne and the plaintiff, other than there having previously been a mention that Mr. Brennan, the
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News Desk Editor, may not have been that happy with the arrangement proposed, neither Mr. Drury nor Mr. Dunne put the plaintiff on notice that in the background serious reservations had been expressed by Mr. Roche group editor about the proposed working arrangements.
In my view, this amounted to a significant breakdown in communication, principally between Mr. Drury and the plaintiff. He had the unique knowledge and insight into the plaintiff’s position that she could not work for the Evening Herald if she was required to attend at their offices for the first edition. She was not interested in any private arrangements, or ad hoc agreements. From her point of view, she made it plain that she could not take the job if she had to go into work in the early mornings and Mr. Drury was fully aware of this fact. I am satisfied on the evidence that Mr. Drury never advised Mr. Roche and Mr. Dunne that the plaintiff could only take up the position she was being offered provided she did not have to work from the office in the early mornings.
Accordingly, insofar as an agreement was reached between the plaintiff and Mr. Drury, there was no room for the situation being left to see how it worked out or, impliedly, that if it did not work out, the plaintiff would then have to come into work in the early mornings to the office of the Evening Herald which, quite simply, she could not do.
In my view, on the evidence, Mr. Drury had full authority to negotiate the agreement with the plaintiff on the defendant’s behalf and by representing to the plaintiff that her requirement that she would work from home for the first edition in the mornings would be acceded to in the light of the knowledge that he possessed, this was in my view an inducement to the plaintiff to give up her contractual relationship with Ireland on Sunday so as to take up employment as Political Correspondent with the Evening Herald.
I accept Mr. Drury’s evidence that following the second meeting, the plaintiff was told she had the job and that the matters subsequent to that arrangement were formalities, namely the medical which the plaintiff passed, the application for the job and the subsequent interview. I am fortified in the view which I have arrived at in relation to the agreement having been reached at the second meeting by the evidence of Mr. Carlisle where he says that by the time of the interview which took place on the 9th November 1999, it was very clear to him that the deal was done.
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Mr. Drury entered the arrangement on behalf of the company and offered the plaintiff employment in good faith and he could not envisage the employee being told of major changes in employment and any changes during his period of control would be by agreement.
As I have previously indicated I do not believe that events which took place subsequent to the plaintiff being told she had the job are of any great relevance to the legal issue that arises in this case. Clearly with Mr. Drury’s departure from the position of editor, a number of people were concerned that the arrangement as agreed with the plaintiff would not work out. I accept Mr. Roche’s evidence that he was not aware of the fact that Mr. Drury’s position was in jeopardy until at best a few days before his employment ended. I accept the submission of counsel for the defendant that it would be unrealistic to penalise the defendant company in some way because of the fact that Senior Management may have been discussing the termination of Mr. Drury’s employment and management at a lower level were not made aware of this fact.
I fully accept that Independent Newspaper Group were well intentioned to Ms. Carey and that in a different set of circumstances, the arrangement would probably have worked very well. Because of Ms. Carey’s experience, Independent Newspapers were clearly keen to take her on as Political Correspondent and she was equally keen to take up the position and advance herself within the Group but unfortunately events conspired to overtake both the plaintiff and Mr. Drury with the inevitable conclusion that because the plaintiff could not work the 7 a.m. – 9.30 a.m. shift at the offices of the Evening Herald, her employment came to an end in April 2000.
I accept Mr. O’Regan’s evidence that if it had been his decision, he would never had taken on the plaintiff as Political Correspondent on the basis that she was not going to be able to attend in the offices for the first edition shift. He said the arrangements for the plaintiff were unworkable and the plaintiff could see no difficulties why she could not have been allowed work from home.
In this regard I am satisfied that Mr. O’Regan was bona fide in the views that he holds and he is entitled to have his professional opinion respected. In the particular circumstances, the difficulty that arises is that Mr. Drury had already put the arrangement in place against the background which I have previously outlined and the reality of the situation was that the plaintiff could not adhere to Mr. O’Regan’s
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proposed regime so that in effect, on a bona fide basis, the new editor required the plaintiff to be in attendance from 7 a.m. onwards and equally on a bona fide basis the plaintiff could not comply with this request and indeed never could have because of her domestic circumstances.
It is quite clear from the manner in which this case is presented to the Court by the Independent Newspaper Group that no aspersion is cast on the plaintiff’s capacity and integrity as a journalist and in particular as to her role as Political Correspondent.
Post Termination.
Following the termination of her employment, the plaintiff attempted to obtain alternative work of a similar nature. In this regard, I accept her evidence that jobs in the nature of a political correspondent do not come up very often and she had no alternative but to return to freelancing, working for alternative media sources and she also worked for a text messaging agency. Her accountant has given evidence as regards her actual financial loss. The plaintiff has studied for the degree of Barrister-at-Law at the King’s Inns and has recently qualified and is hoping to commence practice. Counsel for the plaintiff in opening the case submits that one year’s notice would have been reasonable in the circumstances of this case. The evidence given on behalf of the plaintiff by Seamus Dooley, the Irish Organiser of the N.U.J. was to the effect that the current N.U.J. has agreement with the Defendant provides for a one month notice period for an employee such as the plaintiff and this agreement came into place in or about May, 2001, the plaintiff’s employment having been terminated in April, 2000. He accepted that there was no particular custom or practice in place at the time of the termination of the plaintiff’s employment and he considered that the one month notice period provided for in the current N.U.J. agreement was reasonable.
Ryan Dowling, a Senior Political Correspondent, gave evidence that the current notice period applicable to his employment with the Defendant, was one month and that when he moved from the Defendant Group to the Sunday Times Newspaper he entered into a contract which provided expressly for a three months notice period in 2001. Mr. Dowling indicated that when he left The Independent Newspaper Group to take up employment with the Sunday Times, he gave them one month’s notice of termination of his employment.
Submissions of the plaintiff
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The plaintiff’s first claim is for damages for breach of contract and/ or for wrongful dismissal (paragraph 5, Statement of Claim), and her second claim is for general damages for negligent misstatement/ misrepresentation (paragraph 6, Statement of Claim). The central allegation of the plaintiff in these respects is that the defendant represented to her during the negotiations leading up to her contract of employment that she would be employed under the conditions pleaded in paragraph 4 of the Statement of Claim, the most important of which in the context of this claim is the matter set out at paragraph 4(b) in the Statement of Claim, i.e. “That the plaintiff would work from home from 7.00am until the first edition deadline and from thereafter would work from the Dail for the remainder of the working day.” The plaintiff further alleges that the defendants knew or ought to have known that this was not true. The plaintiff claims that she relied on the representations and was induced by them to enter into the contract of employment with the defendant and suffered loss as a result.
The plaintiff submits that the summary termination of her contract by the defendant on 17th April 2000 without cause was in breach of the terms and conditions of her contract with the defendant, in particular the agreed working arrangement whereby she would work from home from 7am until the first edition deadline which, it is submitted, is a fundamental term of the plaintiff’s contract and accordingly cannot be varied except by consent.
The plaintiff contends that the defendant represented to the plaintiff during the negotiations for her contract of employment that if she were to be employed by the defendant as the political correspondent of the Evening Herald that she could work from home from 7am until the first edition deadline and as such was a statement of fact. The plaintiff submits that the parties intended that the statement would constitute a binding promise on the defendant and as such was a binding collateral warranty which the defendant breached.
With regard to the question of whether the plaintiff is entitled to additional damages where the dismissal caused injury to her reputation (as is contended by the plaintiff), the plaintiff submits that the position in the United Kingdom that such an entitlement does not exist has not yet been accepted in Ireland and has been rejected by the rest of the common law world and in any event that additional damages have always been recoverable under the remoteness test laid down in Hadley v. Baxendale.
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Submissions of the defendant
The defendant contends that if the court finds that the plaintiff did have a contract of employment with the defendant in accordance with the alleged representations, then by definition there was no misrepresentation and the plaintiff can only succeed in her claim for breach of contract/ wrongful dismissal.
In the alternative, the defendant submits that if the court finds that representations were made about the nature of the contract of employment that would be entered into and that these representations did not accord with the actual contract of employment, the court will have to determine the issue of whether such representations were made negligently and what loss arose. It is submitted that the loss complained of was that the plaintiff changed job and that she would not have done this had the representation not been made.
The defendant contends that the plaintiff’s contract did not contain a term to the effect that she was entitled to work from home from 7am until the first edition deadline and thereafter to work from the Dail for the remainder of the working day. The defendant contends it was a work practice and not a term of the contract of employment and therefore subject to change by the defendant when done bona fide in pursuit of the business interests of the defendant newspaper group. Further, it is submitted that the work practice was contingent on Mr. Drury and/ or the arrangement working to the satisfaction of both parties.
Making the assumption that the contract of employment does not contain the term to the effect that the plaintiff was entitled to work from home from 7am until the first edition deadline and thereafter to work from the Dail for the remainder of the working day, the defendant concedes that if the court finds that a representation was made to the plaintiff that she would be employed on the basis of this term, the plaintiff’s contract of employment did contain such a term.
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The defendant contends that the plaintiff is not entitled to make separate claims for breach of contract/ wrongful dismissal on the one hand and misrepresentation on the other hand, given the differing purposes of damages for these differing claims. The defendant contends that the purpose of damages for breach of contract/ wrongful dismissal is to place a plaintiff in the same position as if the contract had been properly performed. In light of this, the defendant contends that in the circumstances of this case the application of this principle means that damages must be awarded on the basis that the plaintiff had been given reasonable notice that the contract would be terminated- in other words, damages for breach of contract/ wrongful dismissal should be confined to the notice period.
With regard to the claim for negligent misrepresentation/misstatement, the defendant submits that the basis for assessing damages for alleged negligent misrepresentation is placing the plaintiff back in the position he/she would have been had the alleged misrepresentation not occurred. The defendant contends that in the circumstances of this case, this would mean awarding damages to the plaintiff on the basis that had the alleged negligent misrepresentations not been made, she would have remained in her post as political correspondent with Ireland on Sunday. Accordingly, the defendant contends that the court cannot award damages both on the basis that the plaintiff should have had her contract terminated in accordance with a period of reasonable notice and on the basis that the plaintiff would have remained with Ireland on Sunday had the representations not been made
A claim for damages for injury to the plaintiff’s reputation as a journalist was made in paragraph 6 of the Statement of Claim. The defendant contends that damages for this part of the plaintiff’s claim are not recoverable given the general rule at common law that in an action for wrongful dismissal, a plaintiff is not entitled to claim damages for the injury to reputation flowing from the dismissal.
With regard to the question of reasonable notice, the defendant concedes that there was an implied term in the plaintiff’s contract that reasonable notice had to be given as there was no express agreement regarding notice periods between the parties.
Referring to the evidence of Seamus Dooley, the Irish Organiser of the NUJ, Brian Dowling and the evidence of the plaintiff (the defendant contends that the effect
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of the plaintiff’s evidence is that there is no custom or practice with regard to notice and that this contention is supported by the evidence of Mr. Dowling), the defendant submits that the evidence before the court clearly establishes that a one-month notice period is reasonable and that there is absolutely no evidential basis for the plaintiff’s contention that a reasonable notice period in the circumstances would be not less than one year.
The law of warranty
Not every statement or representation of fact made by parties in pre-contractual negotiations will form part of any concluded contract: such statements may be made in the interests of extracting the best possible bargain from the give and take nature of negotiations. Further, any potential for contractual effect such statements may have could be negated by the express intentions of the parties. However, there is a tension between such situations and situations where (for one party at least) the contractual incorporation of a matter ventilated in negotiations may be of fundamental importance: circumstances could leave a question mark hovering over whether such matters were in fact mutually understood as having contractual effect. Given the need to define the boundaries of any contractual arrangement, the common law has drawn a distinction between representations having no contractual effect and those having such contractual effect: the textbooks classify the former as “mere representations” and the latter as “warranties” (for example, see McDermott, Contract Law, p.269).
Broadly, “warranty” means a term having contractual effect: more narrowly, it denotes a contractual term any breach of which will give rise to an entitlement to damages.
The manner in which the courts will approach the question of whether a representation constitutes a warranty or a matter having no contractual effect is outlined in Scales v. Scanlan (1843) 6 ILRCL 432 by Lefroy B at p.457 of the report:
“To make a warranty it is not necessary that the word “warrant” or “warranty” should be used. There was a time in law when it was otherwise… but it has long since been well settled, that words of affirmation, affirming a matter of fact, on the faith of
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which the party contracts, are as competent to make a warranty as any strict technical term.”
It is well established that the significance of the representation to the eventual entry into the contract on the part of either or other of the parties is a relevant factor in ascertaining the existence of a warranty: see Murphy v. Hennessey (1897) 31 ILT 404 and Gill v. Cape Contracts Ltd [1985] ILR 49.
In Dick Bentley Productions Ltd v. Harold Smith [1965] 2 All ER 65 at 67, Lord Denning MR stated:
“Looking at the cases once more, as we have done so often, it seems to me that if a representation is made in the course of dealings for a contract at the very purpose of inducing the other party to act on it, and it actually induces him to act on it by entering into the contract, that is a prima facie ground for inferring that the representation was intended as a warranty. It is not necessary to speak of it as being collateral. Suffice it that the representation was intended to be acted on and was in fact acted on. But the maker of the representation can rebut this inference if he can show that it really was an innocent misrepresentation, in that he was in fact innocent of fault in making it, and that it would not be reasonable in the circumstances for him to be bound by it.”
This statement of principle was approved and applied in the employment context by the Queen’s Bench Division of Northern Ireland in Gill v. Cape Contracts Ltd. [1985] ILR 49. In that case, the defendant company required around 40 insulation engineers to complete a contract in the Shetland Islands. The defendant company contacted their representatives in Northern Ireland who passed word among the insulation engineers employed by Harland and Wolff (which included the plaintiffs). The plaintiffs, who were married men in the main, were informed that they would receive a much higher wage than they were earning at Harland and Wolff to compensate for the difficult conditions working in the Shetlands would entail. They were told that the job would last for at least six months: as a result of the assurances they received, the plaintiffs applied for employment with the defendants. When the plaintiffs were informed that they were acceptable, they gave notice to Harland and
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Wolff which, irked at losing workers in this way, told the plaintiffs that they would not be employed there again. The opportunity in the Shetlands fell through due to industrial relations problems and the plaintiffs sued for damages. O’Donnell LJ held that the plaintiffs were entitled to damages for breach of a warranty by the defendants as the defendants failed to honour a representation to the plaintiffs forming a collateral contract that if they gave up their existing employment, they would be employed by the defendant company in the Shetlands for approximately six months at wages considerably in excess of their existing earnings. The court again reaffirmed the basic principle that if a representation is made in the knowledge and intention that the representee will act on it, it constitutes a warranty. In Gill, the court characterised the representations made by the defendants as representations which the defendant intended the plaintiff to act upon and upon which the plaintiffs did act. With regard to the role of the representations in the plaintiffs’ decision to switch their employment from Harland and Wolff to the defendant, the court remarked at p.51:
“The plaintiffs were in the main married men, in steady employment. To give up such employment on the mere expectation of obtaining employment at Sullum Voe, albeit with vastly increased wages, would have been foolhardy in the extreme. Both parties were aware of this and it appears to me that negotiations never proceeded on this basis. I do not believe that the plaintiffs would have terminated their employment with Messrs Harland & Wolff, had they been offered no more than a reasonable expectation of obtaining employment.” Accordingly, the court awarded damages for loss of bargain.
Negligent misrepresentation/ misstatement
The nature of misrepresentation required- will silence constitute a representation?
In Stafford v. Mahony, Smith and Palmer [1980] ILRM 53 at 64, Doyle J laid down the criteria for the action of negligent misrepresentation as follows:
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“In order to establish the liability for negligent or non-fraudulent misrepresentation giving rise to action there must first of all be a person conveying the information or the representation relied upon; secondly, that there must be a person to whom that information is intended to be conveyed or to whom it might reasonably be expected that the information would be conveyed; thirdly, that the person must act upon such information or representation to his detriment so s to show that he is entitled to damages.”
In principle, the Irish courts have accepted that silence or non-disclosure regarding facts or changes in circumstance not known to the other party can give rise to an obligation to disclose such facts and circumstances and such failure to disclose will constitute a misrepresentation. In Pat O’Donnell and Co v. Truck and Machinery Sales Ltd. [1998] 4 I.R. 191 at 202, O’Flaherty J remarked:
“In general, mere silence will not be held to constitute a misrepresentation. Thus, a person about to enter into a contract is not, in general, under a duty to disclose facts that are known to him but not to the other party. However, in certain circumstances, such a party may be under a duty to disclose such facts. A duty of disclosure will arise, for example, where silence would negate or distort a positive representation that has been made, or where material facts come to the notice of the party which falsify a representation previously made.”
The duty of care and contractual negligent misrepresentation
The substance of the plaintiff’s claim in this respect is that she was induced to enter the contract by the representation made by Mr. Drury that she would be allowed to work from home from lam until the first edition deadline: thereafter, she would work from the Dail.
In Securities Trust Ltd. v. Hugh Moore & Alexander Ltd. [1964] I.R. 417. Davitt P. defined the context in which liability may arise as follows at p. 421:-
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“… circumstances may create a relationship between two parties in which, if one seeks information from the other and is given it, that other is under a duty to take reasonable care to ensure that the information given is correct…”
In Esso Petroleum v. Mardon [1976] QB 801, Lord Denning MR formulated the duty of care in the following manner at p. 820:-
“… if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another – be it advice, information or opinion – with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable. If he negligently gives unsound advice or misleading information or expresses an erroneous opinion, and thereby induces the other side to enter into a contract with him, he is liable in damages.”
Irish law reflects this line of thinking. In Forshall v. Walsh (unreported, High Court, Shanley J, 18th June, 1997), Shanley J stated at p.64 of the transcript:
“A party seeking damages for negligent misrepresentation must establish that the representative failed to exercise due care in making the representation as a result of which representation the person to whom it was made was induced to enter into the particular agreement and suffered damage in consequence of the inaccurate representation. Closely aligned to the claim of negligent misrepresentation is the wider tort of negligent misstatement. In relation to negligent misstatement the first matter a plaintiff must establish is that the defendant owed him a duty of care.”
The most recent affirmation of these principles in Irish law is King v. Aer Lingus plc [2002] 3 I.R. 481. So far as apposite to the present context, the facts and issues in this case were as follows. In 1989, Aer Lingus transferred its service and maintenance engineering component into a new subsidiary company, a process which involved lengthy and detailed negotiations between management and trade unions. The workforce felt that the only option was a secondment type arrangement where employees would retain their employment relationship with Aer Lingus while working in the subsidiary. As part of the negotiation process, the defendant company
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wrote similar letters to the plaintiffs, containing statements to the effect that in the event of TEAM (i.e. the subsidiary to which the service and engineering component was transferred) getting into financial difficulties, existing employees would continue to maintain the Aer Lingus fleet at a minimum. The agreement also contained a clause that the company would not cause or permit a lockout during the lifetime of the agreement. The plaintiffs transferred to TEAM, which ran into financial difficulty in 1993 and was eventually sold in 1997. 97% of the workforce transferred to the purchasing company: however, the plaintiffs were among those who instead decided to return to Aer Lingus. The plaintiffs failed to secure the fleet maintenance jobs they were assured they would retain in any circumstance in the 1989 letters and were working on clerical or operative positions on their return. They claimed that they were entitled to do the same kind of work that they had always done and claimed that insofar as Aer Lingus had failed to provide such work, the plaintiffs were entitled to damages for breach of the assurances given to them in 1990.
At p. 48 of the report, Kearns J held:
“The commitment contained in the letter… can only be seen, be it a representation or term of the agreement, as conveying that fleet maintenance work would be available ‘at a minimum’ with the defendant at the point of return for those workers who, having transferred to TEAM in 1990, opted to return to the parent company in 1998 against the backdrop of difficulties described in evidence. For the avoidance of any doubt, however, I find that the assurance contained in Mr. O’Neill’s’ letter of the 30th April, 1990, was both a representation and a term of the agreement and that, insofar as it may be regarded as a representation, the defendants, in making it, were under the duty of care alluded to in Hagen & ors. v. ICI Chemicals and Polymers Limited [2002] IRLR 31. It is proper to record that the defendants did not deny the existence of such a duty in a transfer of undertaking situation, which for all practical purposes existed in this case, but rather sought to argue that the plaintiffs had failed to plead any specific misrepresentations. The duty of care, it seems to me, it self-evident and no more than basic common sense, and a general plea of misrepresentation is sufficient in the circumstances.”
With regard to the question of damages, Kearns J held at p.489 of the report:-
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“… the plaintiffs are entitled to be treated as though they had never transferred to TEAM, that they are entitled to all appropriate increments or benefits on the basis that they earned and achieved the same seniority by 1998, as those Aer Lingus employees who did not transfer, that they were, on returning, entitled to such recognition and are now entitled to compensation in lieu thereof if they have suffered financial loss as a consequence of not getting such recognition.”
This case re-affirms two propositions. First, there is a duty of care to avoid making negligent representations or statements in pre-contractual, negotiation stages which have the effect of inducing a plaintiff to act to his/ her detriment. The case took place in a “transfer of undertaking” context, but there is nothing in the language of the judgment to suggest that the duty of care is confined to this situation. Where a new contract and terms of employment are being negotiated with prospective employees, there is a duty of care on the part of the prospective employer to avoid making negligent misrepresentations/ statements which are intended or have the effect of inducing an employee to leave his present position and which results in detriment to the employee. As regards the question of damages, Kearns J treated the employees as though the inducement to transfer to TEAM never took place: this is consistent with the basis on which damages for negligent misrepresentation are awarded in tort.
Is there any duty on the representee to ascertain the truth of the position before he acts on the representation?
The cases are uncertain in the context of claims for misrepresentation where the representation complained of induced a plaintiff to enter into a contract. In several cases, it has been suggested that when the representee is, or in the circumstances should be, informed or better informed of matters relating to the misrepresentation, any carelessness in reliance upon the misrepresentation will not deprive the misrepresentee of a remedy.
In Redgrave v. Hurd (1881) 20 Ch.D 1 at 13, it was held that it was not a “sufficient answer” to an action to rescind the contract between two solicitors for the
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purchase of a practice that the representee had the means of discovering and might, with reasonable diligence, have discovered the truth. In Nocton v. Ashburton [1914] AC 932, Lord Dunedin stated at p.962:
“No one is entitled to make a statement which on the face of it conveys a false impression and then excuse himself on the ground that the person to whom he made it had available the means of correction.”
In Strover v. Harrington [1988] Ch. 390, Sir Nicholas Browne-Wilkinson VC stated at p.410-
“… if it is once shown that a misrepresentation has been made, it is no answer for the representor to say that the representee has been negligent and could have found out the true facts if he had acted otherwise. The representee is under no duty of care to the representor to check on the accuracy of the representation. The representor is bound by his representations, however careless the representee may have been.”
At p.596 of Butterworth’s’ The Law of Contract, it is stated that “In Scotland, in contrast, Walker asserts a general rule to the contrary that there is no recission (reduction) if the error was attributable to the negligence of the plaintiff (pursuer). The true state of the law may lie between these positions. Courts engage in what has been described as ‘balancing the equities’.”
However, in the broader tort action of negligent misstatement, the court will enquire whether it was reasonable for the former to rely on the statements of the representor in the circumstances of the case: see Smith v. Eric S Bush [1990] 1 AC 831.
Degree of inducement necessary
The next question is the degree of inducement necessary to satisfy the requirement of inducement. There are four possible scenarios. In the first situation, the significance of the truth to the plaintiff of what turns out to be a misrepresentation may be such that, if the plaintiff representee appreciated the true position, they would not have entered the contract at all (see Horry v. Tate and Lyle Refineries Ltd [1982] 2
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Lloyd’s Rep 416 at 422, per Peter Pain J). This obviously meets the standard required for a legally effective inducement. The second situation is where, depending on the circumstances, a representation may be material to the decision of the plaintiff representee to enter into the contract without being decisive: if the representee had known the truth, the representee would still have been willing to conclude the contract, but perhaps on different terms. This will also suffice to meet the requirement of inducement: the best example of this in Irish law is Donnellan v. Dungoyne Ltd. [199511 ILRM 388.
The third situation is where, despite the relevance of the misrepresentation to the eventual contract, if the plaintiff representee had known the truth, the plaintiff would still have concluded the contract. This will not meet the standard of an operative inducement. The fourth possibility lies somewhere between the second and third possibilities: it cannot be said for certain whether the misrepresentation induced the plaintiff to enter the contract or not, but it might be said that the misrepresentation might have been material, if not decisive, to the decision to enter the contract.
In an action for negligent misstatement, the law requires that any loss be caused by the misstatement or misrepresentation. In other words, the effect of the misrepresentation (which constituted the inducement) must be causal in the sense of decisive (see Edgington v. Fitzmaurice (1885) 29 Ch.D 459 at 483, per Bowen LJ). The plaintiff who has been misled by the representation must have relied upon the representation in the sense that but for the misrepresentation, the plaintiff would not have made the contract at all, or at least not in the same terms: in short, the first and second situations of inducement outlined above.
Quantum of damages for negligent misrepresentation
The measure of damages applicable in the tort of deceit (i.e. where a fraudulent misrepresentation has been made) is also applicable to negligent misrepresentation. In Forshall v. Walsh (unreported, High Court, Shanley J, 18th June, 1997), Shanley J adopted the following passage from the judgment of Henchy J in Northern Bank Finance v. Charlton [1979] IR 149 at 199 (which occurred in the context of an action for fraudulent misrepresentation) and held that it was an accurate statement of the measure of damages in actions for negligent misrepresentation also:
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“As far as the tort of fraud or deceit is concerned, it is well settled that the measure of damages is based on the actual damage directly flowing from the fraudulent inducement, and that the award may include, in an appropriate case… consequential damages representing what was reasonably and necessarily expended as a result of acting on the inducement.”
Basis of Assessing Damages
An action for wrongful dismissal is an action for breach of contract: in essence, the breach complained of in such an action is that the plaintiff’s employment has not been terminated in accordance with his/ her contract or, where no such procedures exist, that the contract has not been terminated in accordance with fair procedures and the common law. The normal measure of damages in a wrongful dismissal action is the amount of salary the employee would have earned had he/ she been allowed to remain working for the balance of his contract, or for the period for which notice of termination should have been given in accordance with the contract. The same principle applies where no notice period as such has been incorporated into the contract: in such cases the common law implies a term into the contract that the employee may only be dismissed on giving reasonable notice and damages will be confined to the measure of the salary the plaintiff would have earned for the period of notice found reasonable in all the circumstances by the court. This has been the rule since Addis v. Gramophone Co. Ltd. [1909] AC 488.
However, the plaintiff has also made separate claims for breach of warranty and/ or negligent misrepresentation/ misstatement. The basis of awarding damages in these two contexts differs considerably from the attenuated scope for awarding damages in wrongful dismissal claims per se and is potentially far more remunerative: accordingly, it is necessary to outline the basis upon which the court will award damages in these contexts in some detail.
The common law courts have drawn a firm distinction between contract and tort in terms of awarding damages upon a finding of liability.
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In tort, the plaintiff is entitled to be put in the same position, as far as money can do so, as he would have been in had the tort not been committed. This has been established since Livingstone v. Rawyards Coal Co. (1880) 5 App. Cas. 25 at 39, per Lord Blackburn. This principle is the basis of awarding damages in tort in Irish law: subject to the application of the test of remoteness of damages laid down in Hadley v. Baxendale, the general purpose of an award of damages in a tort claim is to place the plaintiff in the same position as they had been before the commission of the tort in question: damages cannot be awarded for loss of bargain. In Foley v. Thermocement Products Ltd. (1954) 90 ILTR 92 at 98, the Supreme Court referred to restitutio in integrum as “the underlying principle by which courts are guided in awarding damages.”
In contract, however, the compensatable wrong consists not in the making but in the breach of the contract and accordingly the plaintiff is entitled to be placed in the position he would have been had the contract been performed. In other words, the plaintiff is entitled to recover damages for loss of bargain.
Experience has shown that the distinction between the principles upon which contract damages and tort damages are awarded outlined above tends to blur in cases involving misrepresentations of fact inducing entrance into contractual relations, which is the type of case at issue in the present proceedings: in such cases there is inevitable scope for pleading that the representation was a term of the contract entered into and that the misrepresentation leading to the non-observance of contractual obligations is an actionable tort. Where a plaintiff has been induced to enter into a contract by a misrepresentation of fact on the part of a defendant or his agent, if the representation forms part of the concluded contract (whether the representation constitutes a condition or a warranty is immaterial in this context), the plaintiff may sue for breach of contract and loss of bargain, which entitles the plaintiff to be placed in the same position as he/ she would have been had the representation of fact been true and obligations consequent upon the representation been performed by the defendant. However, if the representation is not a term of the contract, there is by definition no breach of contract and the plaintiff’s only remedy will lie in tort: the plaintiff will have a remedy in deceit where the misrepresentation is fraudulently made, and there will be a remedy in negligent misrepresentation where the
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misrepresentation was made negligently in the context of a duty of care owed by the representor to the plaintiff.
This vital distinction is established in Irish law. O’Hanlon J contrasted the basis upon which damages for misrepresentation in tort are awarded and the basis upon which damages for breach of warranty are awarded in McAnarney v. Hanrahan [1993] 3 I.R. 492 at 498 as follows-
“What now falls for consideration is the correct way in which damages should be assessed in a case of negligent misrepresentation. Damages in such cases are assessed by analogy with claims for damages for deceit. Where damages are claimed for fraudulent misrepresentation then they are assessed so as to put the plaintiff in the position he would have been in if the representation had not been made to him. This is different to the case where damages are being assessed in the case of a claim based on breach of warranty – then damages are assessed on the basis that the warranty was true. So, in the case of a sale of shares induced by fraudulent misrepresentation the normal measure of damages is the purchase price of the shares less their actual value at the time of acquisition (see McGregor, Damages, 15th Ed., paras. 17.18, 17.24 and 19.39) and in a case like the present one, where a plaintiff has been induced to enter into a contract for the purchase of land by a misrepresentation negligently made, the normal measure of damages is the price paid for the land less its actual value at the time of sale.”
O’Hanlon J followed his approach in McAnarney v. Hanrahan in Donnellan v. Dungoyne Ltd. [1995] 1 ILRM 388.
In this case, the plaintiff has made claims for breach of contract (at paragraph 5 of her Statement of Claim) and negligent misrepresentation (at paragraph 6 of her Statement of Claim). Applying the analysis above, if the plaintiff is entitled to succeed in her claim for negligent misrepresentation, the damages she is entitled to will be assessed on the assumption that she would not have left her position as political correspondent with Ireland on Sunday but for the misrepresentation that she would be permitted to work from home from lam until the first edition deadline and thereafter would work from the Dail for the remainder of the working day. In short,
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the plaintiff will not be entitled to damages based on the remuneration she would have earned had her contractual obligations with the Evening Herald been met.
If it is found that the representation with which the plaintiff takes most significant issue, i.e. that she would be allowed to work from home until the first edition deadline, is a term of the contract entered into by her and the defendant and that such term has been breached, the plaintiff will be entitled to damages awarded on the basis that the defendant would have observed the contract: in other words, the plaintiff will be entitled to damages based on the net pay she would have earned had the defendant allowed her to remain in her position at the Evening Herald.
The factual scenario in this case is but one illustration of the obvious possibility of the existence of a set of facts which conceivably give rise to concurrent liability in contract and tort. Given the differing principles upon which damages for contract and tort are awarded, should the defendant newspaper group be found liable for negligent misrepresentation and breach of warranty, the defendant will in effect be required to pay damages on the basis that the plaintiff both would have stayed in her position at Ireland on Sunday but for the misrepresentation and would still be with the Evening Herald had the defendant honoured its contractual obligation to allow the plaintiff to work from home until the first edition deadline every morning. In view of the possibility of concurrent liability (which in principle amounts to double compensation for the plaintiff), and the fact that the defendant has submitted that it is not open to the plaintiff to maintain an action in both contract and tort, the following appears to be the position in Irish law regarding concurrent liability in contract and tort.
Approaching the matter from first principles, the boundaries of contract and tort actions suggest that there is no conceptual objection to imposing liability in both contract and tort provided the facts as found meet the criteria of liability of the type of tort and contract action taken. Going back to first principles, the obvious condition precedent to an action for breach of contract is the existence of a contractual obligation: an action in tort has never required a contractual relationship between the parties, although the circumstances of a contractual obligation may give rise to a duty of care in tort over and above the normal “duty of care” (so to speak) to observe the
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terms of the agreement in the contractual context. To take the causes of action in tort and contract at issue in the present proceedings, it is not a requirement of an action for negligent misrepresentation that the parties enter into the contract, even if this is the effect of the representation. Secondly- again going back to first principles- in order to bring an action for negligent misrepresentation, it must be proved that the party making the representation owed a duty of care to the representee (Hedley Byrne v. Heller [1964] AC 465: see the first instance decision of O’Donnell v. Truck and Machinery Sales [1997] 1 ILRM 466 at 473, per Moriarty J. His decision was overturned on the facts by the Supreme Court but the Court did not question Moriarty J’s interpretation of the law). For an action for breach of warranty, the existence of the warranty as a contractual obligation is the only condition precedent to the finding of a compensatable breach: no duty of care of the standard required in tort is required.
The Irish courts have accepted that a defendant may be liable in both contract and tort: the law does not require a plaintiff to elect between the remedies and he may plead either or both. In Kennedy v. Allied Irish Banks plc [1998] 2 IR 48- at p.56 Hamilton CJ stated:
“…where a duty of care exists, whether such duty is tortious or created by contract, the claimant is entitled to take advantage of the remedy which is most advantageous to him subject only to ascertaining whether the tortious duty is so inconsistent with the applicable contract that, in accordance with ordinary principle the parties must be taken to have agreed that the tortious remedy is to be limited or excluded.”
In O’Donnell & Co. Ltd. v. Truck and Machinery Sales Ltd. [1998] 4 I.R. 191 at 198-99, O’Flaherty J remarked of the effect of the decision in Kennedy as follows:
“In the light of the decision of this Court in Kennedy v. Allied Irish Banks plc. [1998] 2 IR 48, it is clear that the law in this jurisdiction permits concurrent remedies. Indeed, the common law world would appear to be united in this regard: see, e.g., Henderson v. Merrett Syndicates Ltd. [1995] 2 AC 145 (The House of Lords); Central Trust Co. v. Rafuse (1986) 31 D.L.R. (4th) 481 (The Supreme Court of Canada); Bryan v. Maloney (1995) 182 C.L.R. 609 (The High Court of Australia); Aluminium Products (Qld.) Pty Ltd v. Hill [1981] Qd.R. 33 (a decision of the full
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Court of the Supreme Court of Queensland) and Macpherson & Kelley v. Kevin J. Prunty & Associates [1983] 1 V.R. 573 (a decision of the full Court of the Supreme Court of Victoria); Rowlands v. Collow [1992] 1 N.Z.L.R. 178 (The High Court of New Zealand). In relation to the American position, see Fleming, The Law of Torts, 8th ed. (1992) p.187; Prosser and Keeton on the Law of Torts, W. Keeton. Gen. Ed., (1984) page 444.
Thus, where under the general law a person owes a duty to another to exercise reasonable care and skill in some activity, a breach of that duty can give rise to a claim in tort notwithstanding the fact that the activity is the subject matter of a contract between them. There is no general duty of non-cumul des obligations such as is found in civil law systems.”
O’Hanlon J saw no obstacle to awarding damages for breach of warranty and negligent misrepresentation in Donnellan v. Dungoyne [1995] 1 ILRM 385. In that case, a plaintiff was interested in setting up his son in a shoe retailing business in Laois Shopping Centre, Portlaoise and engaged in negotiations from February 1991 with the letting agents of the defendant company, which owned the shopping centre in question, to lease a unit in the centre. In November 1991, the letting agents represented to the plaintiff that virtually all the units of the centre had been leased to tenants and would be occupied and trading by Christmas 1991. The defendant company executed a 35 year lease of a unit in the shopping centre to the plaintiff’s son. In January 1992, the plaintiffs realised that the centre had not been fully let and along with other tenants sought further rent-free periods from the defendants as compensation for the poor performance of the plaintiff’s son’s shoe retailing business: they argued that the centre attracted insufficient numbers of customers and that this caused the failure of the plaintiff’s son’s shoe business. Inter alia, on the facts of the case, O’Hanlon J found that the representation that the units in the shopping centre had been fully let was a contributing factor in the decision of the plaintiff and his son to embark upon the lease, but not decisive. However, the importance of the case in the present context is the tacit suggestion of O’Hanlon J that the remedies of breach of warranty and negligent misrepresentation are not mutually exclusive: at p.397 of the report, he remarked:
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“… I am of opinion that a case has not been made out for recission of the lease, as sought in the civil bill, but merely for damages for breach of warranty and negligent misrepresentation, as happened in the case of Esso Petroleum v. Mardon [1976] QB 801, and McAnarney v. Hanrahan [1993] 3 IR 492 to which I have been referred by counsel, and which I propose to follow.”
Reasonable notice
Where a termination procedure has been agreed and incorporated into the contract of employment, the courts are disinclined to substitute their own view of what is otherwise required to lawfully terminate the contract for the agreed termination procedure: accordingly, even where such a termination procedure does not specify that the employee in question may be dismissed on reasonable notice, the courts will not imply a term to this effect into the contract on the basis that the express agreement regarding termination is inconsistent with the implication of any other terms: see Grehan v. North Eastern Health Board [1989] IR 422.
However, in the converse situation- i.e. that where no termination procedure or notice period has been agreed between the parties- the law implies a term into every contract of employment where a notice period has not been expressly stipulated that reasonable notice must be given to terminate the contract. What constitutes “reasonable notice” is a matter of fact for the court to determine in light of all the circumstances. How the court will approach the question of what constitutes “reasonable notice” in any given context was set out by Tucker J in Warren v. Super Drug Markets Ltd. (1965) 54 DLR (2d) 183 as follows:
“The rules for determining what is a reasonable notice were set out by the full court in Speakman v. Calgary (City) (1908) 9 WLR 264, at 265, 1 Alta LIZ 454, by Beck, J. … viz.:
`… the question, what is a reasonable notice, depends upon the capacity in which the employee is engaged, the general standing in the community of the class of persons, having regard to their profession, to which the employee belongs, the probable facility or difficulty the employee would have in procuring other employment in case of
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dismissal, having regard to the demand for persons of that profession, and the general character of the services which the engagement contemplates.”
The plaintiff and defendant have cited a significant number of cases in Irish and English law concerning newspaper employees. However (leaving aside those employees whose terms and conditions of employment are dealt with under statute or where a termination procedure and notice period have been agreed and incorporated into a contract) no profession, job or category of employee is treated differently or favourably in the context of the rules used in determining what a reasonable notice period is: the cases are merely specific illustrations of generally applicable rules.
One common thread running through the cases is that “persons in well paid and prestigious jobs are entitled to relatively lengthy notices.” (Forde, Employment Law (2nd edition, p.166). In Lyons v. M.F. Kent & Co. (International) Ltd [1996] ELR 103, an accountant employed by a large construction company who spent much of his time on foreign assignment was held entitled to one year’s notice. In McDonald v. Minister for Education [1940] IR 316, a teacher was held entitled to six months’ notice. It seems the status and position of the employee in question has been the most significant factor in deciding notice entitlements in recent Irish case law. Among the most significant examples of such are: Carvill v. Irish Industrial Bank [1968] IR 325 (where a managing director of a small bank was held entitled to one years’ notice); Tierney v. Irish Meat Packers (1989) ILT 5 (where a group credit controller of a meat company was held entitled to six months notice); Robinson v. Corneil (unreported, High Court, Keane J, 10th April 1992) (where the responsibilities attached to a managerial position were held to justify six months’ notice).
Of interest in the context of the plaintiff’s situation in this case is Lowe v. Walter (1892) 8 TLR 358, which offers the nearest analogy to the plaintiff’s own situation in terms of the position of the person whose notice entitlements were being decided. The foreign correspondent to the Times was held to be entitled to six months’ notice.
A typical example of the length of period the courts are inclined to stipulate for positions of responsibility in the print media is Bowman v. Holten Press Ltd. [1952] 2 All ER 1121. A journalist and photographer were held entitled to six
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months. Much of the report of the case was taken up with the question of whether the plaintiff was employed under a contract of service or a contract for services and there is no guidance on the issue of reasonable notice: the report briefly recounts how, after finding that the plaintiff was employed under a contract of service the court determined that a reasonable notice period was six months and held that giving the plaintiff two week’s notice to leave was a breach of contract. However, it seems that this decision was based upon the status of the employee more than any other factor.
A good illustration of the relevance of the responsibilities of a position to the question of entitlement to reasonable notice is O’Reilly v. Irish Press (1937) 71 ILTR 194. The plaintiff was the chief subeditor of the Irish Press. He failed to prove a wage custom entitling him to six months’ notice, but the court gave him six months based on the responsibilities attaching to his role: the Court noted that on the evidence before it the success or failure of a newspaper depends to a great extent upon the competence, judgment and the taste of the chief subeditor. The plaintiff had 15 subeditors below him and in addition to being chief subeditor, the plaintiff was the night editor.
It seems proof of a custom regarding notice periods in a particular industry or sector is a significant factor for the court to weigh in deciding the matter and will appreciably influence the court’s thought processes: a reading of some of the cases on reasonable notice suggests that customs prevalent in the industry were of central significance to the court’s decision. However, the customs of a particular industry, if such are proved to exist upon the evidence, will not be decisive of the question of what amounts to reasonable notice: it is but one of the factors identified in Warren v. Superdrug Markets Ltd. to be taken into account in assessing the circumstances of the plaintiff’s employment and the notice period that such circumstances warrant.
One case where a custom of the particular industry proved significant in the court’s decision as to reasonable notice is O’Connell v. The Gaelic Echo Ltd. (1958) 92 ILTR 156. A member of the editorial staff of a monthly magazine was held to be entitled to at least one month’s notice and evidence was given on behalf of the plaintiff by a representative of the NUJ that the customary period for notice in the absence of express agreement in the Dublin area was one month for reporters, three months for sub-editors and six months for chief sub-editor. Another case emphasising the importance of custom is George Edwardes (Daly’s Theatre) Ltd. v. Comber (1926) 42 TLR 247. In that case, an actor had an option agreement with Daly’s
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Theatre whereby the theatre could require the actor to play the part of the Ambassador in the play Katja the Dancer in a West End theatre by giving the actor two weeks’ notice before the end of the season. The option was duly exercised, and the concluded agreement contained a clause that the actor would not perform for any other company or production for the run of the play. The actor subsequently tried to take up an acting engagement with another company before the end of the play’s run. An application by the plaintiff theatre company to restrain the defendant actor from taking this offer up was successful: the court rejected a submission that the agreement was terminable by fourteen days’ notice. Had the agreement been indefinite, this submission would have been accepted: however, the court accepted evidence that “so well known and established is the custom in the profession that a mere engagement of a person to play a part in a certain play in London or the provinces constitutes a contract for such engagement for the run of the play in London or the provinces constitutes a contract for such engagement for the run of the play in London or for the tour, as the case may be, and there is no power on either side to determine the contract during the said run.” Another such case is Grundy v. Sun Printing and Publishing Association (1916) 33 TLR 77, where the court accepted that the custom for a newspaper editor was a twelve-month notice period and that a sub-editor was entitled to a six-month notice period and determined the period of reasonable notice these persons were entitled to accordingly. Yet another example is Fox-Bourne v. Vernon and Co. (1894) 10 TLR 647 where a six-month notice period for an editor was found to be reasonable by reference to the established custom for editors: in the same vein, see also Chamberlain v. Bennett (1892) 8 TLR 234 (where a subeditor of newspaper was held to be entitled to six months based on evidence of a custom).
Claim for damages for injury to reputation
At paragraph 6 of her Statement of Claim, the plaintiff claims that she “… has suffered and continues to suffer loss, damage, expense and distress and in particular, has suffered injury to her reputation as a journalist. Further, the plaintiff has been damaged by reason of the misrepresentation and/ or negligent misstatement of the defendant company, its servants or agents.”
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At common law, the general rule for many years was that damages for the manner or unfortunate circumstances of the dismissal were not recoverable in a common law action for wrongful dismissal. This was laid down in Addis v. Gramophone Company Ltd. [1909] AC 488, where a plaintiff was awarded a sum of money in excess of the outstanding salary due to him for the notice period: the implication of this award was that the extra sum was compensation for the humiliating manner in which he had been dismissed. The House of Lords held that the plaintiff was only entitled to the salary he would have earned during the notice period, but the stressful and humiliating nature of the circumstances surrounding his dismissal could not be permitted to influence the court’s jurisdiction to award damages. Lord Loreburn LC commented:
“If there be a dismissal without notice the employer must pay an indemnity, but that indemnity cannot include compensation either for the injured feelings of the servant or for the loss that he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment.”
It was held that the employee may have a separate action in tort for defamation or nervous shock, but damages in the wrongful dismissal context remained limited to the notice period. Early Irish authority suggested that Irish law would develop along the lines of the position in Addis: in Kinlen v. Ulster Bank Ltd. [1928] IR 171 at 184, Kennedy CJ stated:
“The plaintiff has relied on two matters for the purpose of aggravating the damages to which he is entitled. In the first place, he said that the bank manager not only refused him the money to which he was entitled, but refused it contemptuously, and with contumely. Indeed, I have no doubt that the plaintiff was very badly treated indeed by the bank. In the second place, he urged that by reason of the first refusal he was subjected to great humiliation in raising money to pay his workmen. He had to pawn some of his personal belongings to raise part of the money, and he had to borrow part of it from a friend. These matters were greatly pressed upon us, and they evoke much sympathy with the plaintiff, but they are not matters which can be considered as elements of damages. It is very clearly settled, both in this country and in England, and affirmed in many cases, that in actions for breach of contract damages may not be given for such matters as disappointment of mind, humiliation, vexation, or the like, nor may exemplary or vindictive damages be awarded. See Breen v. Cooper IR 3 CL 621;
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Hamlin v. Great Northern Railway 1 H & N 8; Addis v. Gramophone Co., Ltd. [1909] AC 488”
In Malik v. BCCI [1998] AC 20 (HL), the plaintiffs successfully claimed what are colloquially known as “stigma damages”, their dismissal occurring in the wake of their employer’s involvement in fraudulent banking practices. The plaintiffs issued proceedings on the basis of their difficulty in finding alternative employment stemming from their association with BCCI. The House of Lords held that, as a result of the bank’s fraudulent activities, the bank had breached the implied term of trust and confidence in the employment relationship and this breach was sufficient to make the employer liable for the financial loss suffered by the plaintiffs: such losses were not limited to any notice period. However, Malik does not seem to have altered the Addis principle: the award of damages in Malik was based upon the breach of the implied term of trust and confidence and in any event the basis upon which the award of damages was made was purely financial. Nevertheless, the case is authority for a limited right of recovery where an employee’s future job prospects have been damaged by the employer.
The High Court in England departed from the Addis position in Cox v. Phillips Industries Ltd. [1976] 1 WLR 638, but in 1985 the Court of Appeal reaffirmed the position in Addis in Bliss v. South East Thames Regional Health Authority [1987] 1 ICR 700. In Johnson v. Unisys Ltd. [2001] 2 All ER 801, the House of Lords endorsed its decision in Addis. In Johnson, the plaintiff had been summarily dismissed and had already been awarded damages for unfair dismissal by an industrial tribunal. He sought further damages to compensate him for the losses he suffered due to the manner in which he was treated and dismissed. The plaintiff tried to invoke the decision in Malik by claiming that he was entitled to such damages on the basis of breach of the implied term of trust and confidence in that the employer failed to afford him a proper opportunity to defend himself in disciplinary proceedings and failure to abide by the company’s disciplinary code. The lower courts struck out his proceedings and the House of Lords dismissed the appeal, holding that where an employee was wrongfully dismissed, any damages awarded could not take account of the manner of the dismissal or any adverse consequences thereof for the plaintiff. The decision appears to have been based upon policy considerations: Lord Hoffmann considered that the plaintiff’s claim was tantamount to an invitation to the court to
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create a right to unfair dismissal at common law parallel to the statutory regime. He held at p.821 of the report that “…for the judiciary to construct a general common law remedy for unfair circumstances attending dismissal would be to go contrary to the evident intention of parliament that there should be such a remedy but that it should be limited in its application and extent.”
Lord Hoffmann also considered whether the implied term as to trust and confidence could have any application or relevance at the dismissal stage. He concluded that the term had always been concerned with the preservation of the employment relationship and not its termination and to extend its scope to dismissal contexts would have been “inappropriate and unnatural.” He held that at common law there was no obligation on an employer who had decided to end the employment relationship only for good cause: this was a matter for unfair dismissals legislation. This analysis regarding the scope of the implied term as to trust and confidence was subsequently applied by the Court of Appeal in Boardman v. Copeland County Council (unreported, Court of Appeal, 13th June 2002).
It is of interest to note that other common law jurisdictions have rejected Addis. In Stuart v. Armourguard Security [1996] 1 NZLR 484, the New Zealand High Court held that it was an implied term of the employment contract that an employee should not be dismissed in a manner likely to cause distress or loss of reputation, without proper cause. In that case, a regional manager who was peremptorily dismissed after he declined to tender his “non-negotiable resignation” was awarded general damages not limited by the Addis principle.
Conclusions:
I am satisfied that the plaintiff made it perfectly plain to Mr. Drury that she could not work the morning shift for the first edition from the offices of the Evening Herald: accordingly, Mr. Drury knew that if such an arrangement was not in place, the plaintiff could not undertake the job. I am satisfied that Mr. Drury did not express the serious reservations that were held by Senior Management as regards the proposed working arrangements and equally that he did not advise Senior Management that the plaintiff could not take up the position if the proposed morning working arrangements were not agreed or proved unworkable. In my view, this is the crucial point in the
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case. I am satisfied that Mr. Drury was anxious to retain the services of the plaintiff and never foresaw that there would be any difficulty in the matter.
I take the view that the agreement as regards the morning working conditions was a fundamental term of the agreement reached between Mr. Drury and the plaintiff and that it constituted a warranty and an inducement to the plaintiff to give up her contractual arrangement with Ireland on Sunday. Furthermore, I am satisfied that the plaintiff left her job with Ireland on Sunday to join the Evening Herald as a result of the representation made by Mr. Drury that the plaintiff could work from home for the first edition of the Evening Herald. I am also satisfied on the evidence as a matter of probability that without the assurance on the morning working arrangements, the plaintiff would not have taken up employment with the defendants.
I fully accept that due to unforeseen circumstances, namely the departure of Mr. Drury as editor of the Evening Herald the agreed working conditions were immediately in jeopardy, leading to the termination of the plaintiff’s employment on 17th April, 2000.
I take the view that no blame attaches in this regard to the plaintiff and in any event there does not appear to me to have been any way open to the plaintiff to check on the accuracy of the representation which was made to her by Mr. Drury and she simply trusted him and relied on what he said. Accordingly, I come to the conclusion that the plaintiff is entitled to damages for breach of warranty as against the defendants.
I am satisfied that Mr. Drury owed the plaintiff a duty of care to avoid making a negligent representation in the precontractual negotiation stages which had the effect of inducing the plaintiff to act to her detriment in the circumstances that arose.
I accept that Mr. Drury may not have anticipated a problem and that he may have mentioned the fact of Mr. Brennan not being particularly happy with the proposed arrangements: in my view, however, Mr. Drury’s silence about the serious reservations expressed to him by senior management should have been communicated by him to the plaintiff, in compliance with the duty of care which he owed to her to enable her to fully assess the position, especially since Mr. Doyle was not prepared to reduce the terms of the plaintiff’s morning working arrangements to writing.
I take the view that Mr. Drury failed in the duty of care he owed to the plaintiff and made a negligent representation to her by positively affirming the morning working arrangements and failing to advise the plaintiff by his silence of the
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fact that senior management had serious reservations about the position regarding the early morning working arrangements.
Following on the decision of Doyle J. in Stafford v Mahony, Smith and Palmer [1980] I.L.R.M. 53, at 64, I am satisfied that there was, in the particular circumstances of this case, a person (Mr. Drury) conveying the information and representation relied upon and further that the relevant information was conveyed to the plaintiff and that she acted to her detriment upon the information and representation made to her.
Insofar as the misrepresentation in the particular circumstances of this case relates to a failure to disclose a material fact, it is quite clear to me that a duty of disclosure did arise because Mr. Drury’s silence in effect negated and distorted the positive representation that he made that the working arrangements were agreed to, he having discussed the matter with senior management. I accept that there is an argument to be made on the defendants’ behalf that the serious reservations on the part of senior management may not have falsified the representation previously made, but the reality of the situation is that Mr. Drury knew that the plaintiff could not take up the position if the morning working arrangements were not agreed to and he also knew that senior management were expressing serious reservations about the morning working arrangements, so that in effect, in my view, he was conveying to the plaintiff an inaccurate representation as to the true background position.
In my view, Mr. Drury owed the plaintiff a duty of care: he failed in this regard and accordingly I am satisfied that the defendants are guilty of a negligent misrepresentation in these circumstances and that the plaintiff is entitled to damages arising there from.
On the issue of reasonable termination of the plaintiff’s contract of employment, I take the view that both the N.U.J. current agreement and the situation that pertained to Mr. Dowling when he left the defendant company to join the Sunday Times are different from the situation that faced the plaintiff when she was approached by the defendant company because she had in place a contractual arrangement and if a termination period had been discussed, undoubtedly it would have been an important factor for her consideration. In any event, it was never discussed or indeed touched on in any way and there was no provision in place as to an agreed period of notice of termination.
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In all the circumstances of this case, including the factual background as to how the plaintiff came to be employed by the Defendant, the importance which Mr. Paul Drury attached to the plaintiff’s employment, her esteemed professional ability, the fact that she was moving from a job to take up this position and most importantly the difficulty that she would undoubtedly face as a Political Correspondent in achieving a similar position in the greater Dublin area lead me to the conclusion that a reasonable period of notice of termination of the plaintiff’s employment with the Defendant Group would be six months or alternatively six months’ net loss of earnings in lieu of notice.
Insofar as the plaintiff has advanced a claim for damages for injury to reputation, I do not consider that in the particular circumstances of this case the plaintiff has made out such a case for loss of reputation against a background where no aspersion was cast on the plaintiff’s capacity and integrity as a journalist and, in particular, as to her role as political correspondent. The reality of the situation, I believe, is that the defendants were well intentioned to the plaintiff and, as I have already stated, in a different set of circumstances the arrangement would probably have worked very well. Furthermore, if it were possible for the plaintiff to have worked for the first edition from the offices of the Evening Herald, it is quite clear that the arrangement would have continued. Accordingly, I conclude that there is no basis for any claim for injury to the plaintiff’s reputation and, in these circumstances, it is not necessary for me to consider the legal issue as to whether or not there is a remedy in Irish law in respect of a valid claim for damages for loss of reputation arising from a termination of a contract of employment.
My findings bring about a situation where I have to assess damages both for breach of warranty and for negligent misrepresentation. I am satisfied following the judgment of Hamilton C.J. in Kennedy v Allied Irish Banks PLC [1998] 2 IR 48 at p. 56, that the claimant in these proceedings is entitled to take advantage of the remedy which is most advantageous to her, subject only to ascertaining whether the tortious duty is so inconsistent with the applicable contract that in accordance with ordinary principles the parties must be taken to have agreed that the tortious remedy is to be limited or excluded. In the particular circumstances of this case I am satisfied that the plaintiff is entitled to seek damages for concurrent remedies both in respect of breach of warranty and negligent misrepresentation.
-35-
I am further satisfied following the decision of O’Hanlon J. in McAnarney v Hanrahan [1993] 3 I.R. at 498 that damages to which the plaintiff is entitled for negligent misrepresentation are to be assessed on the basis that the plaintiff would not have left her position as political correspondent with Ireland on Sunday but for the misrepresentation and these damages will be based on the plaintiff’s net loss of earnings and dependent on the remuneration she would have earned if she had remained on with Ireland on Sunday.
Insofar as the plaintiff is entitled to damages for breach of warranty, she is entitled to damages based on net loss of earnings and dependent on the remuneration she would have earned had she remained on in her position at the Evening Herald.
In assessing the appropriate level of damages for negligent misrepresentation, and breach of warranty I conclude that the appropriate measure is two years’ net loss of earnings less the net remuneration as earned by the plaintiff from alternative sources during this period.
Insofar as there is an element of dispute as regards the appropriate taxation levels relating to the plaintiffs earnings I propose to reply on the figures as produced by Mr. Russell because from the taxation perspective he has been for a number of years the plaintiffs accountant and has been responsible for her tax returns and I consider it probable that he is more familiar with the taxation situation than the person who produced the figures on behalf of the defendants.
Furthermore while I accept that on or about the 24th day of March, 2000 the plaintiffs salary was reduced by the exclusion of the fifth day due to the intervention of the Trade Union the plaintiffs contract with the defendants was for a salary of IR£45,000 and having regard to the unusual circumstances that brought about the change I propose for the purpose of assessing damages herein to disregard that change of circumstances and to rely on the original contract.
The plaintiff is entitled to six months’ notice of termination of her employment with the Evening Herald or, alternatively, six months’ net pay in lieu thereof, which I calculate to be a sum of €18,637.06.
In respect of the plaintiff’s claim for negligent misrepresentation, I assess damages in the sum of €33,227.61 being two years’ net loss of earnings from the plaintiff’s position with Ireland on Sunday less remuneration derived from alternative sources.
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In respect of the plaintiff’s claim for damages for breach of warranty, I assess damages in the sum of €52,266.00, being two years’ net loss of earnings from the plaintiff’s position with the Evening Herald less remuneration derived from alternative sources.
Accordingly, while the plaintiff is entitled to succeed in her claim as against the defendants under a number of headings, she is not entitled to recover damages under all of the headings because the claim arises out of the same set of circumstances and cause of action. The plaintiff is only entitled to recover damages under one heading of claim but she is entitled to recover damages from her optimum position which in the particular circumstances is in respect of her claim for breach of warranty and accordingly I award the plaintiff €52,266.00 damages.
Dooley v. Great Southern Hotels Ltd.
JUDGMENT of Mr. Justice McCracken delivered the 27th day of July, 2001.
1. The Plaintiff is the holder of a Diploma in Hotel Management and has been employed in the hotel industry for most of his working life. In February 1990 he was offered the position of General Manager of Shannon International Hotel, which at the time was owned by Aer Rianta and he was then employed by them under the terms of a written contract dated 8th February, 1990. I will deal with the specific terms of the contract below.
2. Not long afterwards, the hotel changed hands and became part of the Great Southern Group owned by the Defendant, and its name was changed to “Great Southern”. It became one of a group of hotels owned by the Defendant, and the Plaintiff’s position became part of the Defendant’s management structure.
3. While the Plaintiff’s appointment was to the Shannon Hotel, he was in fact asked to and agreed to move to the position of General Manager of the Great Southern Torc Hotel in Killarney where he remained for several years. In 1997 he resumed his position as General Manager of the Great Southern Shannon, again under the terms of his original contract.
4. The administrative structure of the Defendant at the relevant time was that Mr. Eamon McKeon was Chief Executive with overall responsibility for all the hotels with several managers reporting to him, each of whom was responsible for their particular aspect of management for all hotels in the group. In particular, Mary McKeon was Group Operations Manager and Catherine Cronin was Sales Manager. As General Manager of the Shannon Hotel, the Plaintiffs immediate superior in relation to the operation of the hotel was Mary McKeon.
5. These proceedings arise out of the purported dismissal of the Plaintiff by the Defendant as General Manager of the Hotel, which took place by letter dated 24th February, 2001.
THE PLAINTIFF’S CONTRACT .
6. The contract was contained in a letter dated 8th February, 1990 from the Assistant Chief Executive of Aer Rianta, the Plaintiff’s employment to commence on 19th March, 1990. It contained most of the normal provisions of such a contract, including a specific provision in relation to a bonus. The relevant clause for the purpose of these proceedings is headed “Notice of Termination of Employment”, which reads:-
“It is intended that this employment should extend up to normal retiring date i.e., age 65 in present circumstances. If however, either party should wish, for good and sufficient reason, to terminate the employment, then the applicable period of notice would be six months”
7. This clause is notable for several reasons. Firstly, the contract was not for any fixed period, and the notice provision refers to an intention to extend the employment up to 65 years of age, but does not state in so many words that it is an appointment for that length of time. Secondly, it permits termination of the contract by six months notice for good and sufficient reason, without in any way indicating what is meant by that phrase. Thirdly, nowhere in either the agreement in general nor in the termination provision in particular does it contain any disciplinary provisions or any reference to misconduct.
EMPLOYMENT OF DENISE HICKEY .
8. It is quite clear that commercially the hotel had not prospered since the Plaintiffs return in 1997. There is no doubt that at least part of the reason for this was the lack of any efficient sales personnel attached specifically to this hotel. There had been several appointments to that position, but the appointments had proved short lived, and there had been several periods in which there was no Sales Assistant. Ultimately in March 2000 Ms. Denise Hickey was appointed by the Plaintiff, with the approval of his superiors, to this position at an annual salary of £15,000. In the second half of the year 2000, probably due to a considerable extent to Ms. Hickey’s efforts, the business of the hotel increased considerably. Unfortunately, and I am quite satisfied on this point on the evidence of Ms. Hickey herself, she was working under some considerable difficulties. She was not allocated an office of her own, which was the matter of a number of complaints by her, and she was asked to undertake some secretarial and administrative duties which not only were not part of her job, but also took away from the time available to her for sales. I am also satisfied that, while the Plaintiff may not have fully realised it, Ms. Hickey was not comfortable working with the Plaintiff and felt intimidated by him. The outcome of all of this was on 12th January, 2001 she submitted her resignation in writing.
EVENTS 12TH JANUARY TO 15TH JANUARY, 2001.
9. The events of this weekend are of vital importance to the case, and there has been some conflict of evidence as to what exactly took place. I have listened carefully to all the witnesses concerned, and I think that on the balance of probabilities the following is an account of the events of those days.
10. On the afternoon of 12th January, Ms. Hickey told the Plaintiff that she was resigning and handed him her letter of resignation. He made very little comment except to say he was sorry to hear it, and did not ask for the reason for her resignation. Later that evening Mary McKeon called to the hotel and was told by the Plaintiff that Ms Hickey had given her notice. By this time, her resignation was common knowledge in the hotel, and it appears to have been generally rumoured that she had left for a job which was paying double her then salary. A discussion then took place about the value of Ms. Hickey to the hotel and Mary McKeon’s evidence is that she gave the Plaintiff an instruction to talk to Ms. Hickey and to try and persuade her to stay. The Plaintiff’s account is that he suggested that he should contact Ms. Hickey, and that no instruction as such was given to him. Indeed, his evidence was that the hotel did not operate by a regime of formal instructions, but rather by consensus. I am satisfied that, whoever may have initiated the suggestion, there was not only an agreement between the Plaintiff and Ms. McKeon that he would approach Ms. Hickey personally, but that this was the strategy to try to get her to stay which was agreed between the Plaintiff and his superior and which he undertook to his superior to put in place.
11. It is common case that the Plaintiff did not in fact talk to Ms. Hickey personally. Instead, he spoke to another employee, a Ms. Denise Glendenning, who he believed was a friend of Ms. Hickeys, and asked Ms. Glendenning to speak to Ms. Hickey to find out why she was leaving. This conversation probably took place on the Friday evening. On the following Monday, 15th January, Ms. Glendenning’s evidence is that she met Ms. Hickey during the coffee break and had a cup of coffee with her and Ms. Hickey told her she had a new position with a better package of £30,000 a year and certain other benefits. Ms. Glendenning did not make any effort to persuade her to stay, nor had she been asked to, and reported back later on the Monday to the Plaintiff. Ms. Hickey says she does not recollect such a conversation ever taking place, but on balance I think it probably did in a very informal way. I certainly accept that Ms. Hickey was not told that any enquiries were being made of her on behalf of the Plaintiff.
12. Later on the Monday Mary McKeon telephoned the Plaintiff to find out what had happened. I am quite satisfied on the evidence that the Plaintiff told her that he had talked to Ms. Hickey and further told her that Ms. Hickey was not going to stay.
MEMORANDUM OF 26TH JANUARY, 2001 .
13. On 26th January Mary McKeon sent a four page memorandum to the Plaintiff concerning a number of issues which she said were causing her and Eamon McKeon concern and needed to be discussed with the Plaintiff. The issues referred to can briefly be summarised as follows:-
There had been several meetings during the previous year in which had been discussed the Plaintiff’s poor performance and the failure of the Plaintiff to take responsibility for the results.
The importance of Ms. Hickey in improving the results of the hotel.
The events of 12th to 15th January.
The discovery by Mary McKeon that the Plaintiff had not spoken to Ms. Hickey.
An earlier complaint in relation to a customer, namely Mr. McDonald, where it was alleged that the Plaintiff had not apologised as instructed.
The hygiene audit for December 2000 which gave a very low rating.
14. The Plaintiff was requested to attend a meeting at the Great Southern Hotel in Dublin Airport on 5th February to discuss these matters. In the course of the letter it was stated that following a meeting of 29th June, 2000 in relation to Ms. Hickey, “You left us in no doubt that you fully understood the consequences for the hotel and for yourself if her appointment did not work out”. It was also stated that “Eamon and I had made it very clear to you what the consequences were for you of not maintaining sales continuity”. The memorandum ended as follows:-
“The purpose of the meeting will be to discuss with you the events set out in this letter and to get your version of events and response to our concerns. If you do not have a satisfactory and acceptable explanation and response, your future as General Manager of Shannon will be reviewed. This is a very serious matter. You may seek advice prior to meeting us and if you wish you can have a representative or advisor at the meeting with you. If you intend to have anybody present please let me know in advance who it is.”
MEETING OF 5TH FEBRUARY, 2001.
15. On the morning of 5th February the Plaintiff indicated that he intended to bring his solicitor to the meeting, and accordingly the Defendants also arranged to have its solicitor present. At the meeting, therefore, were the Plaintiff, his solicitor, Mary McKeon, Eamon McKeon and the Defendant’s solicitor. As well hearing evidence from the people concerned in relation to the meeting, I have been furnished with the attendances taken by both solicitors. Before the meeting the Plaintiff had been advised by his solicitor to say as little as possible.
16. At the outset of the meeting the Plaintiff’s solicitor asked what was the purpose of the meeting, and was told that it was to discuss the issues raised in the memorandum of 26th January. She then complained that the memorandum lacked coherency and that she was not clear what issues were to be discussed . After some short time Eamon McKeon stated that the meeting was a disciplinary meeting but that if satisfactory answers were given by the Plaintiff the matter would not go any further. He conceded that he had not given written warnings to the Plaintiff in the past, but emphasised that he had raised concerns about the Plaintiff’s performance at meetings. Eamon McKeon then sought to question the Plaintiff in relation to the events of 12th to 15th January. Initially the Plaintiff objected to being questioned and then said that he did not get any instruction because it was his suggestion that he would meet Ms. Hickey and that although he did not meet her, he spoke to a friend of hers. He then said he was not prepared to discuss it any further. The atmosphere at the meeting appears to have been very fraught and it broke up with no conclusion having been reached, although the Plaintiff was offered a further meeting should he request it. At the meeting the Plaintiff had also asked that the matter should be adjudicated upon by the chairman of the company, who was not an executive, and that Ms. Hickey and Mr. McDonald should be present to give their account of what was alleged to have taken place.
FURTHER CORRESPONDENCE.
17. Over the next two weeks a number of letters were exchanged. Unfortunately, as is frequently the case, they only served to harden attitudes, and ultimately by a letter dated 24th February, 2001 from Eamon McKeon to the Plaintiff the Plaintiff’s employment was terminated with effect three months from the date of the letter. The Plaintiff was also told:-
“As you know you have a right to appeal my decision. If you wish to appeal you should do so within seven days and either you or your solicitor should write to Sean Dempsey, Company Secretary at Head Office notifying him of the appeal and he will make the necessary arrangements for the appeal to take place.”
18. Nothing was done by the Plaintiff in relation to an appeal, and in a letter dated 14th March, the Defendant’s solicitors stated that they assumed that he was not lodging an appeal. The Plaintiff never appealed nor sought to do so.
THE PLAINTIFF’S CASE.
19. The Plaintiff acknowledges, although his letter of appointment does not so state, that there could be circumstances which would justify his instant dismissal or his dismissal other than under the termination clause in the contract. However, he maintains that nothing took place in the present case could possibly justify such dismissal.
20. In relation to any purported dismissal under the terms of his contract, the Plaintiff argues that prima facie he was entitled to employment until retiring age, and that if the termination provision in his contract was to be relied upon, natural justice must apply to the procedures which would precede such termination. He contends that natural justice was not complied with by the Defendant in that he was not told that the meeting of 5th February was to be a disciplinary meeting, he was not given any documentation in relation to the complaints against him, he was not given any warning and, very importantly, the person making the decision, namely Eamon McKeon, was in fact one of the complainants against him and had had an admitted input into the drafting the memorandum of 26th January. The Plaintiff maintains that under those circumstances he could not and did not get a fair hearing.
21. Finally, while the Plaintiff contends that his contract cannot be terminated other than under the specific termination clause, and that he is entitled to employment until the age of 65, he puts forward an alternative argument if that should not be the proper construction of his contract. While he accepts that twelve months notice is normally the maximum implied where employment may be terminated on reasonable notice, he makes the case that the terms of his specific contract are such that, if reasonable notice applies, that notice must be quite lengthy. If he is entitled to as long as six months notice where there is good and sufficient reason to terminate his contract, then, if there is no good and sufficient reason, but an implied right to terminate on reasonable notice, that notice must be construed as being considerable in excess of the six month period, and it is suggested it should be a minimum of two years.
THE DEFENDANT’S CASE.
22. The Defendant’s primary case is that on the facts the Plaintiff disobeyed a direct instruction from a superior, and this in itself merits instant dismissal. In this regard reference is made to Pepper -v- Webb (1969) 2 ALL E.R. 216 where a gardener refused to obey his employers instructions in relation to certain plants, and it was held that this, coupled with insolent remarks by the Plaintiff justified instant dismissal. This case was approved of by Hamilton J. as he then was in an unreported judgment of 8th February, 1978 in the case of Brewster -v- Burke & Anor . The Defendant further argues that even if instant dismissal was not justified, there clearly was good and sufficient reason in the circumstances of the present case to give notice to the Plaintiff, taking into account the poor performance of the hotel under his management, the specific incident with Ms. Hickey and the Plaintiff’s subsequent attitude. They point out that, by the time the Plaintiff was actually dismissed, all trust and confidence between the Plaintiff and the Defendant had disappeared and it would be impossible to continue the Plaintiff’s employment under those circumstances. They contend that this in itself constitutes good and sufficient reason to terminate the employment.
THE LAW.
23. I have already referred to Pepper -v- Webb and Brewster -v- Burke. I would point out that both those cases were decided over twenty years ago, and it could certainly be argued that they do not represent the law as of today. Employment law has developed very considerably over those years.
24. There is no doubt that some at least of the principles of natural justice must apply to a situation where an employee is being dismissed for misconduct. In Glover -v- BLN Limited [1973] I.R. 388 Walsh J. said at p. 425:-
“The Plaintiff was neither told of the charges against him nor was he given any opportunity of dealing with them before the Board of Directors arrived at its decision to dismiss him. In my view this procedure was a breach of the implied term of the contract that the procedure should be fair, as it cannot be disputed, in the light of so much authority on the point, that failure to allow a person to meet the charges against him and to afford him an adequate opportunity of answering them is a violation of an obligation to proceed fairly.”
25. In the present case there was no procedure laid down for the conduct of any disciplinary procedures against the Plaintiff, although there were quite detailed procedures in relation to more junior members of the staff. That situation was addressed by the Supreme Court in Mooney -v- An Post [1998] ELR 238, where Barrington J. giving the Judgment of the Court said at p. 247:-
“If the contract or the statute governing a person’s employment contains a procedure whereby the employment may be terminated it usually will be sufficient for the employer to show that he has complied with this procedure. If the contract or the statute contains a provision whereby an employee is entitled to a hearing before an independent board or arbitrator before he can be dismissed then clearly that independent board or arbitrator must conduct the relevant proceedings with due respect to the principles of natural and constitutional justice. If however the contract (or the statute) provides that the employee may be dismissed for misconduct without specifying any procedure to be followed the position may be more difficult. Certainly the employee is entitled to the benefit of fair procedures but what these demand will depend upon the terms of his employment and the circumstances surrounding his proposed dismissal. Certainly the minimum he is entitled to is to be informed of the charge against him and to be given an opportunity to answer it and to make submissions.”
26. Finally, there is authority that a claim that employment is permanent in the sense of being continuous for life or until a pensionable age is not sustainable at common law and that in those circumstances the Plaintiff’s employment is permanent only in the sense of being for an indefinite period terminable by reasonable notice. Walsh -v- Dublin Health Board 98 ILTR 82.
CONCLUSIONS.
27. While the Plaintiff’s contract is a somewhat unusual one in relation to its termination, I have very little doubt as to its true construction. I do not think that this was ever intended to be a contractually binding contract of employment until the Plaintiff reached the age of 65, particularly in the light of the commencement of the relevant clause with the words “it is intended that”. In my view this was a contract which could be terminated on reasonable notice by either party at any time. The contract then provides that it may be determined on six months notice “for good and sufficient reason”. I think this phrase is of considerable importance, as it does not in my view either expressly or impliedly limit the right to give notice to cases where there has been some form of misconduct. I think, had that been intended, it would have been very clearly stated. Accordingly, in my view this contract may be determined by six months notice for any good and sufficient reason, whether it be related to the Plaintiff’s misconduct or to the general relationship between the parties. I also am quite satisfied that, like most contracts of employment, there is an implied condition that the contract may be determined without notice for serious misconduct.
28. The question then arises as to whether there was serious misconduct in the present case. I am satisfied on the evidence that the Plaintiff was either given a specific order or at least there was an agreement between himself and his superior officer, namely Mary McKeon, that he would personally approach Ms. Hickey, would seek to find out from her the reasons for her letter of resignation and would seek to persuade her to remain in the Defendant’s employment. I am further satisfied he did not do this, and that he told Mary McKeon he had done so. I think it matters little whether this was an express instruction or a course of action which he undertook to his superior to carry out. He certainly lied to her about it and this is a very serious matter. It should be noted that the Defendant does not rely solely on this episode as grounds for dismissal, in that it also points to the Plaintiff’s attitude in the days following the incident, in which he showed little or no co-operation with the Defendant, and were it not for the fact that this was clearly done on his solicitors advice, I would treat it as a most serious matter. I do not think any of the other matters which were ultimately taken into account by the Defendant could conceivably justify immediate dismissal, and I therefore would propose only to consider the Plaintiff’s behaviour in the relevant incident in this regard. I have considered the statements set forth in Pepper -v- Webb but on balance I do not think that they apply to the present case. The Plaintiff here was a senior employee, and, as is shown by the fact that the disciplinary procedures agreed by the company with the trade unions did not apply to him, I think he deserved to be treated slightly differently from the average employee. While what took place between the 12th and 15th January undoubtedly was misconduct on his part, I do not think in the circumstances of the present case that it was sufficient misconduct to justify instant dismissal. I think I should also say in fairness to the Plaintiff that I think the Defendant’s handling of the subsequent disciplinary proceedings was unnecessarily heavy handed, and both parties were to blame for the subsequent deterioration of relations.
29. Having said all of that, however, I am quite satisfied that the totality of matters complained of against the Plaintiff did constitute good and sufficient reason to terminate his employment. The results of the hotel had been bad for several years, I am satisfied that the Plaintiff had been made aware of the disquiet of the Defendant as to his management of the hotel, and I am also satisfied that he was well aware of the importance of the employment of Ms. Hickey in turning around the results. I do not know why he pursued the course he did on 12th January, but it was clearly a serious breach of his obligations to the Defendant, which was compounded by his telling lies afterwards. In addition, all normal relations between the Plaintiff and his superiors in the Defendant had disappeared to the extent that it would have been virtually impossible for them to have worked together. I am satisfied that the Defendant was perfectly entitled to serve notice on the Plaintiff pursuant to the relevant clause in his contract of employment on the basis there was good and sufficient reason to terminate it.
30. The only other matter to be considered is whether fair procedures were observed in the Defendant’s dealing with the Plaintiff. Apart from earlier discussions about his management and about Ms. Hickey, the Plaintiff was given a four page document setting out a number of complaints against him. He had that document for ten days and obtained legal advice on it. He was invited to, and did, attend a meeting with his legal advisor present. He was asked to explain the matters complained of in the memorandum and was given ample opportunity to do so, which he declined. He was offered a further meeting should he wish it, and was informed that he could appeal any decision made.
31. He complains that at the meeting he had asked for certain financial records to be produced, but in my view this could not be a valid complaint as he must have been well aware of the financial records of the hotel himself. He complains that he asked that Ms. Hickey and Mr. McDonald be present to give their account of what had happened in relation to the two incidents complained of. However, he had had the letter of complaint for ten days before the meeting and did not make this request until he was actually present at the meeting. He complains that Eamon McKeon was effectively the decision maker, and was also one of the complainants. There might be some merit in this complaint were it not for the fact that he was offered an appeal, and did not even respond, and indeed gave evidence that immediately after the meeting on 5th February he had decided to issue these proceedings.
32. For these reasons I am quite satisfied that there was good and sufficient reason to terminate his employment, but he was not given the requisite six months notice. This was undoubtedly a breach of his contract, but one which in my view only entitles him to damages amounting to six months gross salary. As he was entitled to notice under the express contractual provision, in my view the six months gross salary must include all benefits, which I understand amounts to the sum of £29,752.00. The Plaintiff has also claimed general damages and has produced evidence of medical treatment for an episode of depression after the termination of his agreement. Somewhat reluctantly, I would accept that the Defendant did not follow the proper procedures in terminating the contract, as they did not purport to use the contractual provision that they were terminating for good and sufficient reason, but rather purported to terminate his employment on the basis there had been serious or gross misconduct. I would accept that this did cause some distress to the Plaintiff and that it probably was the cause of some short term depression, but in view of the fact that the Defendant was entitled to determine on six months notice I think this can have caused very little specific damage to the Plaintiff. I would be prepared to award him a further £2,000.00 in general damages. Accordingly, there will be a decree for £31,752.00, but of course credit must then be given for all monies which have been paid to the Plaintiff since the termination of his contract.
Murray -v- Budds & ors
[2017] IESC 4 (02 February 2017)
Judgment delivered the 2nd day of February, 2017 by Denham C.J.
1. This is an appeal, upon which leave was granted by the Court, brought by Martin Murray, plaintiff/appellant, who is referred to as “the plaintiff”.
2. Conan P. Budds and Anthony T. Hanahoe, Terence Hanahoe and Michael E. Hanahoe, trading as Michael E. Hanahoe Solicitors, the defendants/respondents, are referred to as “the defendants”.
3. The Court determined that the plaintiff had raised an issue of general public importance, being as to whether a claim framed as a professional negligence action seeking damages for negligence and breach of contract, in which the particulars of loss and damage claimed are worry and stress short of a recognised physical injury, should be treated as a personal injury action, subject to the statutory limitation period applicable to personal injury actions. The Court granted leave to the plaintiff to appeal to this Court on that issue.
Background
4. The plaintiff retained the services of the defendants to represent him in criminal proceedings.
5. I gratefully adopt the background facts as described by Peart J., in the Court of Appeal judgment of the 19th November, 2015.
6. The plaintiff was charged with possession, with intent to supply, of a significant quantity of heroin. He was convicted of that offence on the 11th February, 1999, and received a seven year sentence of imprisonment, from which he was released in September, 2004. The plaintiff was unsuccessful in two separate appeals against his conviction to the Court of Criminal Appeal. In 2000 his first appeal was based on a number of alleged errors on the part of the trial judge. In 2005, his second appeal heard after his release from prison, was based on an alleged failure of his solicitor to adequately and properly prepare for his trial, and the alleged failure of both solicitor and counsel to pay heed to his instructions during the course of his trial. However, neither of his appeals succeeded.
7. The plaintiff issued a plenary summons in February, 2005, claiming damages for negligence and breach of contract by the defendants in their provision of legal services prior to and during his criminal trial.
8. The defendants entered a full defence.
Two Motions
9. The defendants issued a motion seeking to dismiss the plaintiff’s claim as (i) statute barred; (ii) an abuse of process; and (iii) frivolous or vexatious.
10. After a part hearing of the defendants’ motion, the plaintiff issued a motion seeking to amend his statement of claim.
Two appeals to Court of Appeal
11. There were two appeals before the Court of Appeal. The plaintiff appealed to the Court of Appeal against an order of Charleton J. dated the 20th April, 2009 where it was ordered:-
(a) that the proceedings be struck out as an abuse of process because, being an action alleging professional negligence, it was launched without first ascertaining that there were reasonable grounds for so doing by obtaining appropriate expert evidence to support it; and
(b) that the plaintiff pay the defendants’ costs of the motion when taxed and ascertained.
12. The defendants appealed to the Court of Appeal against an order of Clark J. dated the 23rd November, 2010, where she:-
(a) permitted the plaintiff to amend his pleadings in order to introduce a new claim for “loss and damage in the week of the 3rd to 10th February 1999”, the particulars of which loss were that “the plaintiff was exposed to the worry and stress from the uncertain position where he found himself in the criminal justice system facing an imminent trial without knowing who his counsel would be”;
(b) declined the defendants’ application to strike out the proceedings in their entirety on the basis of s. 3(1) of the Statute of Limitations (Amendment) Act, 1991, and
(c) directed that the issue of the application of the Statute of Limitations be determined by the trial judge.
13. The plaintiff had claimed in the statement of claim 4(b) that:-
“They failed to instruct Counsel properly or adequately, and indeed retained Counsel only on the night before the Trial…”
Thus, the plaintiff complained that, despite knowing for approximately a week that counsel would be unavailable, no new counsel was engaged to defend him until the day before the trial was due to take place. The defendants, in their defence, denied that counsel was retained only on the night before the trial.
14. The plaintiff’s claim, pursuant to the order of the High Court (Clark J.), was therefore a claim for loss and damage in the week of the 3rd to the 10th February, 1999, arising from the fact that the plaintiff was exposed to the worry and stress from the uncertain position where he found himself in the criminal justice system facing an imminent trial without knowing who his counsel would be.
15. In the Court of Appeal the defendants submitted that while Clark J. struck out the claims of the plaintiff as originally constituted as an abuse of process, she erred by allowing the plaintiff to amend his proceedings and by not simply striking out the entire proceedings.
16. The Court of Appeal held that the permitted claim was a claim in tort only, and that it could only therefore be a personal injury claim. The fact that contract was pleaded, as part of the claims which were originally made, was not relevant as all those claims had been struck out.
17. The Court of Appeal (Peart J.) concluded:-
“29. There is no doubt in my view that the claim permitted is statute-barred. I appreciate that no amended Statement of Claim has been delivered by the plaintiff, presumably because the order of Clark J. is under appeal, but it can be noted and had regard to that in its Defence to the Statement of Claim originally delivered, the defendants pleaded the statute. There have been cases where a defendant has attempted to have a plaintiff’s claim struck out ahead of the delivery of its defence, and that application has been considered to be premature, since a plea on the statute is a plea by way of defence. But here the position is clear. The plaintiff’s claim has been permitted by way of amendment where the cause of action accrued at latest on the 10th February 1999. That is not in dispute. It is now a new personal injury claim in tort. A two year, or at best from the plaintiff’s point of view a three year, limitation period applies. In my view, Clark J. ought not to have permitted an amendment of the claim in order to introduce a personal injury claim that was clearly statute-barred. She was already in possession of all the facts and circumstances said to give rise to that claim, as is clear from the very precise nature of the amendment permitted by her. On that ground alone I would allow this appeal and vacate that part of the order of Clark J. which permitted an amendment to the plaintiff’s claim.
30. There is, however, another important aspect to the appeal which should be addressed by reference to the judgment of Hogan J. in Walter and another v. Crossan and others [2014] IEHC 377. It is the entirely separate question whether, even if this claim was not statute-barred, damages for the alleged worry and stress during the week of 3rd February 1999 is recoverable at all, given the absence of any pleaded recognizable psychiatric injury. In Walter, Hogan J. examined the relevant case-law in this area both from this and the neighbouring jurisdiction with typical care and exhaustion, and concluded on the facts of that case that even though there was a duty of care owed to the plaintiff purchasers by the firm of solicitors acting for the builder of the house, the only damages claimed were for “mental distress, upset and inconvenience falling short of nervous shock or psychiatric injury” and as such were not recoverable. I appreciate that in Walter there was no contractual relationship between the plaintiffs and the solicitor firm and that the only remedy, if any, was in negligence predicated on a duty of care being owed. But in the present case, the claims based upon a breach of contract have been expressly struck out by Clark J., and cannot subtend the claim that was permitted by way of amendment. It is now solely a claim in negligence, and it seems to me in such circumstances that the damage being claimed are, as in Walter, in respect of a category of claim for which damages are not recoverable, namely mental distress, stress generally and worry, but short of any recognised psychiatric illness.
31. That being my conclusion, I am satisfied that having struck out all the plaintiff’s existing claims in the proceedings, Clark J. erred in permitting the plaintiff to amend his Statement of Claim by inserting the new claim for damages in negligence and breach of duty which are provided for in her order under appeal by the defendants.”
The Court of Appeal then allowed the appeal of the defendants against that part of the order of Clark J.
18. As to the plaintiff’s appeal against the order of the High Court (Charleton J.) of the 20th April, 2009, when the learned trial judge acceded to a motion by the defendants to strike out the plaintiff’s proceedings as an abuse of process on the ground that being an action alleging professional negligence, it was launched without first ascertaining that there were reasonable grounds for so doing by obtaining appropriate expert evidence to support it, the Court of Appeal held, Peart J. stating:-
“In my view it is unnecessary now to dispose of that appeal, save to say that if I was required to reach a determination I would have allowed that appeal because, while there is certainly authority to the effect that in cases alleging medical negligence against a doctor or other professional person, it would be an abuse of process or irresponsible to launch such proceedings in the absence of the plaintiff’s solicitor satisfying himself or herself that there were reasonable grounds for the allegations of negligence being made, I would not exclude the possibility that where the action is being contemplated against a solicitor for professional negligence, the plaintiff’s solicitor may not in every case require to obtain an independent expert opinion from another solicitor or counsel in order to form the relevant opinion that the facts of the case disclose a prima facie case, and that it is not irresponsible to commence the proceedings.
34. Every case will depend on its own facts, and a plaintiff’s solicitor ought to exercise caution in every such case. In any case where he or she has a doubt, prudence suggests that an opinion from another expert be sought in advance of commencement. I believe that such a view is consistent with what was stated by Denham J. (as she then was) when, having considered the views expressed by Barr J. in Reidy v. National Maternity Hospital [1997] IEHC 143, and those of Kelly J. in Connolly v. Casey & Fitzgibbon [2000] 1 IR 345, she expressed agreement as follows:
‘While bearing in mind the important right of access to the Courts I am satisfied that these statements of law are correct. To issue proceedings alleging professional negligence puts an individual in a situation where for professional or practice reasons to have the case proceed in open Court may be perceived and feared by that professional as being unprofessional conduct’.”
19. The Court of Appeal stated that it was unnecessary to reach a concluded view on the appeal from Charleton J., given that the appeal against the order of Clark J. was allowed.
Submissions
20. The parties filed written submissions in this appeal. The Court also heard oral argument by counsel on behalf of each party.
Single appeal
21. As the Court of Appeal made no determination on the appeal from Charleton J., the issue before the Court arises from the decision of the Court of Appeal on the appeal from the decision of Clark J.
Determination
22. In its determination [2016] IESCDET 20, the Court was of the view that the plaintiff had raised an issue of general public importance, whether a claim framed as a professional negligence action seeking damages for negligence and breach of contract in which the particulars of loss and damage claimed are worry and stress short of a recognised physical injury should be treated as a personal injury action subject to the statutory limitation period applicable to personal injury actions.
Issues
23. The plaintiff submitted that two questions arise on the determination of the Court, being:-
1. Whether the plaintiff’s claim, as amended by Clark J., constitutes a claim for personal injuries.
2. If the claim should not be treated as a personal injuries action, is the loss and/or damage claimed by the plaintiff for “worry and stress” recoverable in an action for breach of contract and/or professional negligence.
Personal Injury
24. If this claim were treated as a personal injury claim, it would be statute barred, as the plaintiff’s claim issued over three years after the event, being the statutory limitation period applicable.
25. If this claim were treated as a personal injury claim, the loss and damage claimed, being for worry and stress, does not amount to a recognised psychiatric injury, and thus, is not recoverable in a personal injury claim.
Tort
26. I would affirm the decision of the Court of Appeal (Peart J.) that the claim as amended by Clark J. in the High Court is solely a claim in negligence and so is statute barred. Further, as it is a claim for “worry and stress” without any psychiatric illness, no damages would, at any rate, be recoverable. Consequently, I would dismiss this aspect of the appeal of the plaintiff, on tort.
27. I agree with the decision of Hogan J. in Walter v Crossan [2014] IEHC 377, as he then was a judge of the High Court, where he held that damages for worry and stress not giving rise to psychiatric injury is not recoverable in tort.
28. I note also the decision in Larkin v Dublin City Council [2008] 1 IR 391. There the plaintiff suffered upset and emotional upheaval, but no psychiatric illness, because of a mistaken communication that he had been promoted. Clarke J. accepted that there had been a duty of care, which had been breached, but held that it did not give rise to any injury which entitled the plaintiff to recover damages.
29. Thus, I would dismiss this aspect of the plaintiff’s claim. I am satisfied that the claim as framed in the amendment made by Clark J., seeking damages for negligence, in which the particulars of loss and damage claimed are for worry and stress short of psychiatric illness, should be treated as a personal injury action, and so subject to the statutory limitation period applicable to personal injury actions. Consequently, I would affirm the finding of the Court of Appeal that the claim was statute barred. I would affirm also the decision of the Court of Appeal that damages would not lie for worry and stress in the absence of a psychiatric illness. Consequently, I would dismiss the aspect of the appeal relating to the tort of negligence for personal injuries.
Professional Negligence and Breach of Contract
30. The plaintiff moved the claim, against the solicitor defendants, as a claim for damages for professional negligence and breach of contract.
31. There is rather an unusual matrix of facts in this case. The issue of the claim in professional negligence has been struck out by Charleton J. in the High Court. Given the run of events in the Court of Appeal, the appeal against Charleton J. was not addressed. Thus, the decision of the High Court stands, striking out the claim for professional negligence.
32. However, an issue may be inferred from the determination, and an issue argued by the plaintiff was as to whether the loss and damage claimed by the plaintiff for “worry and stress” may be recoverable in an action for breach of contract and/or professional negligence.
33. In such a situation a question would arise as to whether he would be entitled to recover for loss and damage as sought, short of a psychiatric illness.
Addis v Gramaphone Co. Ltd [1909] AC 488
34. It was established in Addis v Gramaphone Co. Ltd [1909] AC 488, that Courts would not in general permit damages for worry or upset as a consequence of a breach of contract. In Addis a servant was wrongfully dismissed from his employment. The issue of damages arose. In the House of Lords Lord Loreburn L.C. stated:-
“To my mind it signifies nothing in the present case whether the claim is to be treated as for wrongful dismissal or not. In any case there was a breach of contract in not allowing the plaintiff to discharge his duties as manager, and the damages are exactly the same in either view. They are, in my opinion, the salary to which the plaintiff was entitled for the six months between October, 1905, and April, 1906, together with the commission which the jury think he would have earned had he been allowed to manage the business himself. I cannot agree that the manner of dismissal affects these damages. Such considerations have never been allowed to influence damages in this kind of case.
…
If there be a dismissal without notice the employer must pay an indemnity; but that indemnity cannot include compensation either for the injured feelings of the servant, or for the loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment.”
Lord Atkinson stated:-
“I have always understood that damages for breach of contract were in the nature of compensation, not punishment,
…
In Sikes v Wild (1861) 1 B. & S. 587, at p. 594, Lord Blackburn says:
“I do not see how the existence of misconduct can alter the rule of law by which damages for breach of contract are to be assessed. It may render the contract voidable on the ground of fraud or give a cause of action for deceit, but surely it cannot alter the effect of the contract itself.”
There are three well-known exceptions to the general rule applicable to the measure of damages for breach of contract, namely, actions against a banker for refusing to pay a customer’s cheque when he has in his hands funds of the customer’s to meet it, actions for breach of promise of marriage, and actions like that in Flureau v Thornhill (1776) 2 W. BI. 1078, where the vendor of real estate, without any fault on his part, fails to make title. I know of none other.
…
In many other cases of breach of contract there may be circumstances of malice, fraud, defamation, or violence, which would sustain an action of tort as an alternative remedy to an action for breach of contract. If one should select the former mode of redress, he may, no doubt, recover exemplary damages, or what is sometimes styled vindictive damages; but if he should choose to seek redress in the form of an action for breach of contract, he lets in all the consequences of that form of action; Thorpe v Thorpe, (1832) 3 B. & Ad. 580. One of these consequences is, I think, this: that he is to be paid adequate compensation in money for the loss of that which he would have received had his contract been kept, and no more.”
[Emphasis added]
33. This has remained for many years the foundation case setting out the law on such damages in a contract action, with the few exceptions to the general principles as identified by Lord Atkinson.
34. There have been some additional exceptions added in specific cases.
35. In McDermott, Contract Law (Butterworths, 2001) paras 22.57 and 22.58 the theory behind the exclusionary rule was provided:-
“Many factors explain the courts restrictive approach to non-pecuniary losses. The Addis decision reflects the individualist orientation of traditional contract law under which contracts are impersonal relationships, concerned primarily with economic exchange, and do not typically involve other elements of the parties personalities. It also reflects an historical desire not to restrict unduly the ability of employers to dismiss employees and a mistrust of exemplary damages (which appeared to be what the plaintiff was seeking in Addis). In Baltic Shipping v Dixon [1993] 176 CLR 344, Mason C.J. observed that:-
‘The conceptual policy foundations of the general rule are by no means clear. It seems to rest on the view that damages for breach of contract are in essence compensatory and that they are confined to the award of that sum of money which will put the injured party in the financial position the party would have been had the breach of contract not taken place.’”
Mason C.J. held that the policy is based on an apprehension that the recovery of compensation for injured feelings will lead to inflated awards of damages in contract cases. Other reasons put forward include:-
(i) It is too harsh on the defendant to have to pay damages for mental distress.
(ii) Mental distress is incapable of exact proof.
(iii) The risk of mental distress is voluntarily assumed by the plaintiff upon entering into the contract.”
36. The law was further described in Watts v Morrow [1991] 1 WLR 1421 by Bingham LJ:-
“A contract-breaker is not in general liable for any distress, frustration, anxiety, displeasure, vexation, tension or aggravation which his breach of contract may cause to the innocent party. This rule is not, I think, founded on the assumption that such reactions are not foreseeable, which they surely are or may be, but on considerations of policy. But the rule is not absolute. Where the very object of a contract is to provide pleasure, relaxation, peace of mind, or freedom from molestation, damages will be awarded if the fruit of the contract is not provided or if the contrary result is procured instead.”
[Emphasis added]
37. I agree with that statement of Bingham LJ.
38. The key is that one looks to the very object of a contract. Also, I agree with Lord Neuberger in Hamilton Jones v David & Snape [2004] 1 WLR 924. In Hamilton Neuberger J. held that the facts of the case took the solicitor-client relationship into a special categorisation, as the solicitor had been retained in particular to address the anxiety of the wife that her husband would abduct their children. This did happen, her solicitors having taken insufficient measures to prevent such abduction. Lord Neuberger stated:-
“52. Where a claim is founded in contract, the general rule is that the contract breaker cannot be liable for damages for injured feelings or distress: see Addis v Gramaphone Co Ltd [1909] AC 488, which still remains the law, although it is subject to exceptions (as mentioned by Lord Bingham of Cornhill in Johnson v Gore Wood & Co [2002] 2 AC 1, 37 – 38; I would also refer to the discussion in the speech of Lord Cooke of Thorndon in the same case at p 49f – 50h). The question, therefore must be whether a case such as the present falls into one of the established exceptions to the rule in Addis v Gramaphone Co Ltd or whether, indeed, it should represent a new exception to the rule.”
The Court was satisfied in that case that a significant aspect of the instructions was that the wife would retain custody of her children for her own pleasure and peace of mind.
39. Other types of contracts where an exception to the rule in Addis arises include a contract in relation to a holiday, where such a contract is to provide for pleasure and relaxation.
40. Also, it has arisen where there was a failure to secure an injunction to prevent a plaintiff being molested Heywood v Wellers [1976] 2 WLR 101
41. In addition, it has arisen where there was a wrongful adjudication as a bankrupt: Hussey v Dillon [1995] 1 IR 111.
42. The plaintiff relied on McLeish v Amoo-Gottfried & Co. (1993) The Times, 13th October, 1993, (1993) 10 PN 102. This was a solicitor’s negligence action in which liability was admitted and it came before the Queen’s Bench Division for assessment of damage. In McLeish Scott Baker J. stated:-
“Mr. Goodman for the plaintiff contends that, subject to the normal rules of remoteness and mitigation, damages for distress may form part of an award in cases of professional negligence, irrespective of whether the plaintiff chooses to frame his case in contract or tort. Whilst mental distress is not in itself sufficient damages to ground an action in tort, Mr. Doggett for the Defendants accepts that the plaintiff is entitled to damages in contract under this head and refers me to the judgment of Lord Justice Bingham in Watts v. Morrow [1991] 4 All ER 937, 54 Build LR 86 at 959, of the former report where he says…”
Here Scott Baker J. quotes from Bingham L.J., as set out above.
42. I would distinguish McLeish. In that case liability was admitted, it has not been in this case. Further, indeed it was pointed out by Scott Baker J. that, mental distress is not in itself sufficient damages to ground an action in tort, such as claimed in this case. Scott Baker J. relied on Watts v. Morrow where Bingham L.J. stated that a contract breaker is not in general liable for distress etc., but he indicated exceptions based on the object of the contract. The circumstances in McLeish are entirely different to that of the plaintiff. Consequently, I find no persuasive value in McLeish
43. The issue of such damages in contract cases has arisen as an ancillary ground in cases in Ireland. In Kelly v Crowley [ 1985] 1 IR 212, Murphy J. held that a solicitor was professionally negligent. However, a claim for mental distress was not permitted as an additional claim for damages.
44. In Doran v Delaney (No. 2) 1999 1 IR 303, Geoghegan J. did award damages for a high degree of anxiety suffered by the plaintiff arising from the defendants’ negligence. He held that the plaintiffs suffered a high degree of anxiety and that their health had been undermined because of the negligence of their solicitor’s advice in purchasing a site in order to construct a dwelling house. The court held that the plaintiffs would never have engaged in the transaction, which resulted in a lengthy dispute and forced them to resell the property at a loss and left them in considerable debt, if they had been adequately informed by the defendants. However, in Doran v. Delaney (No 2.) the plaintiffs’ action was not only against their own solicitor, but also against the vendor and against the vendor’s solicitors, and they were successful against all the defendants. The award of €10,000 general damages was against all of the defendants.
45. In analysing whether a contract may be an exception to the rule in Addis it is useful to consider the analysis by Brennan J. in Baltic Shipping Co. v Dillon (1993) 111 ALR 289, where he stated:-
“To ascertain whether the obtaining of peace of mind is the object of a contract or, more accurately, an object of a contract, reference is made to its terms, express or implied, construed in the context of facts which the parties know or are taken to have known. Thus, if peaceful and comfortable accommodation is promised to holidaymakers and the accommodation tendered does not answer the description, there is a breach which directly causes the loss of the promised peacefulness and comfort and damages are recoverable accordingly. In cases of this kind, a statement of the promisor commending a service or facility to be provided under the contract is frequently a term of the contract, not a mere representation.”
46. The law in Northern Ireland is similar to that in Australia. Smyth v Huey & Co [1993] NI 236, was a case of solicitor’s negligence in relation to a conveyance. The Court held that the plaintiffs were not entitled to damages for distress. The test as to exceptions to the Addis rule was stated as:-
“a plaintiff is not entitled to general damages for ‘distress and inconvenience’ unless he can bring himself within one of the two exceptions to the general rule: namely (1) mental distress caused by physical discomfort or inconvenience resulting from breach of duty in contract or in tort. (2) A contract whose very object is to provide pleasure, relaxation, peace of mind or freedom from molestation.”
Conclusion
47. In this appeal the plaintiff asked the Court to create new law, that Addis should not be followed. Or, if the Court would not take that step, that the Court would hold that the plaintiff’s claim came within one of the recognised exceptions to Addis. Or, it was suggested, the Court could find a new exception to Addis.
48. In this case the plaintiff had been represented by solicitor and counsel and there was no breach of professional standards as he was competently represented. The plaintiff was, in effect, trying to establish a separate cause of action and seeking damages for worry and stress. This case is further complicated by the fact that there was not a direct contract with the solicitor, the plaintiff had the benefit of the statutory legal aid scheme with a solicitor assigned by the Court. However, the fundamental situation is that the plaintiff had competent legal advisors. The only injury alleged is worry and stress arising because he did not know who his counsel would be the day before his trial.
49. Addis v. Gramaphone Co. Ltd [1909] AC 488, remains the law in Ireland.
50. I am satisfied that the plaintiff’s claim does not come within one of the recognised exceptions to Addis. If one presumed there was a contract, it was for professional services, and there was no breach as he was competently legally represented. This case does not establish a stand alone claim. There is no stand alone right of claim for being upset. Insofar as it is a personal injury, it is statute barred.
51. The nature of the contract was not such that damages for distress would be available.
52. There is no reason, in all the circumstances of the case, to consider any additional exceptions to the law as set out in Addis and subsequent judgments.
53. The appeal before this Court is confined to the determination made on the application for leave. There are many issues in the proceedings which are not before this Court. On the issue before the Court, I would dismiss the appeal.
Collier and Wife v Dublin, Wicklow, and Wexford Railway Company
Court of Common Pleas.
24 November 1873
[1874] 8 I.L.T.R 24
Monahan C.J., Keogh, Lawson J.J.
Nov. 24th, 1873
Breach of contract to carry within reasonable time—Conveyance of plaintiff’s wife—Nominal damages.
Where a railway company contracted to carry the wife of the plaintiff, but neglected to perform their contract, and the wife of the plaintiff was in consequence detained for a night at the station of the defendants, it was held that the plaintiff could not recover more than nominal damages, he not having been at home, and, in consequence, not having been deprived of his wife’s society and companionship on that occasion, and there being no evidence of an injury to his wife depriving him of her services afterwards.
The plaintiffs in this action, William H. Collier, and Mary Collier, his wife, complained, in the first count of the summons and plaint, that the defendants, the Dublin, Wicklow, and Wexford Railway Company, being carriers of passengers, contracted with the plaintiff, William Collier, to carry his wife, the plaintiff, Mary Collier, from Booterstown to Lansdowne Road Station, within a reasonable time, but that they did not do so, whereby the plaintiff, Mary Collier, was obliged to remain during a whole night in a certain station of the defendants, without proper accommodation, and that by reason thereof she became seriously ill, and the plaintiff, William Collier, was deprived of her services. There were four other counts for assaulting and imprisoning the plaintiff, Mary Collier. The defendants pleaded, in addition to ordinary traverses, a special plea that the female plaintiff would not enter the carriage, whereby the defendants were unable to perform their part of the contract. The case came on for trial before Monahan, C.J., and a special jury, on the 19th of July. The facts appearing on his lordship’s report were as follows:—The plaintiff, Mary Collier, took a second-class return-ticket from Dublin to Booterstown; she spent the day at her father’s house at Booterstown; she returned to the station, at Booterstown, with her daughter, about 11.30, p.m, in time to catch the last train. She and her daughter got into a carriage, but when they had done so they found it was a smoking compartment, and got out in order to enter another compartment. The porter opened the door for them to get in; the daughter got in, but the train went off before Mrs. Collier could get in. After the departure of the train she entered the station-house, and complained to Mahony, the deputy station-master, and asked to have a cab sent for. This was refused. She then sat down in the station. When Mahony was about to lock up the place for the night and go home, he informed her of it. She, nevertheless, remained sitting. He turned out the lights, locked the door, and went away, leaving Mrs. Collier inside, where she was found next morning, when the station was again opened for the day. It was not alleged that she contracted any illness, or sustained any personal injury from what had happened beyond the fact that she had to lie in bed for a time, in consequence of having sat so long upon a hard seat. No medical advice was applied for. The plaintiff, William Collier, was absent from home on the night in question, on his business as a commercial traveller, and did not know of what had happened till afterwards. The defendants contended that they were not liable for the acts of Mahony. In this view his lordship concurred, and directed the jury to find for the defendants on all the counts, except the first. In charging the jury his lordship said that it appeared to him that the guard should not have signalled for starting the train till the lady was provided with a seat, and that, therefore, some damages for a breach of contract should be given. His lordship declined to direct nominal damages, but directed the jury only to give such damages as were sustained by the husband in his own capacity. The jury found for the plaintiff on the first count £50 damages. A conditional order for a new trial having been obtained on the ground of misdirection, and also that the verdict was against the weight of evidence, and that the damages were excessive,
Purcell, Q.C., for the plaintiff, showed cause.—The defendants are liable for the natural results which flow from their breach of contract, Smeed v. Foord, 1 El. & El 602. “Each case of this description must be decided with reference to the circumstances peculiar to each,” per Pollock, C.B., Hamlin v. Great Northern Railway Company, 1 H. & N. 408. The natural consequence resulting from her being left behind by the train was, that she had to pass the night in the station in the cold, and she so sustained injury. The damages were not excessive.
Pierce White, Q.C. (with him Gibson, Q.C., and Seeds ), for the defendants, contra.—The jury were mainly led, in giving damages, by a consideration of what had taken place at the station-house. There was not a sufficient separation in their minds of the damages which they might have given under the other counts, and damages which it was lawful for them to give on the first count. There is here no question of the damages not being the consequence of the breach, as in Hadley v. Baxendale, 9 Exch. 341, but here there is no damage done at all. No evidence was given of the plaintiff, William Collier, having incurred any expense in medical attendance on his wife. He was not deprived of his wife’s services at the time of the breach of contract, as he was absent from home at the time. If the plaintiff had incurred expense in hiring a conveyance to perform the journey, she might have recovered damages to that extent; but nothing of the sort took place. The contract was to carry, within a reasonable time, and no damages can be recovered which do not flow from that breach. “Generally, in actions upon contracts no damages can be given which cannot be stated specifically. A contract to marry has always been considered an exceptional case, in which the injury to the feelings of the party may be taken into consideration. In actions for breaches of contract the damages must be such as are capable of being appreciated and estimated,”Hamlin v. Great Northern Railway Company, 1 H. & N. 408. Supposing nominal damages had been directed, could a verdict returned in accordance with such damages have been set aside? If this were a contract to carry a servant of the plaintiff, would the plaintiff be listened to if he claimed more than his pecuniary loss? What specific pecuniary loss has been sustained by the plaintiff?
Keogh, J.
This is a case for nominal damages. The plaintiff did not take a cab, or get a doctor; and no injury has been sustained by the plaintiff upon the first count. We think that the jury should have given nominal damages.
Lawson, J.
When I look at the only allegation of damage to the plaintiff, William, I cannot see that a deprivation of services has taken place. When the plaintiff was not at home that night, he cannot get damages for his wife being kept out of her house.
Monahan, C.J.
I am of opinion that the damages were excessive, but I think that the jury could have considered *24 the circumstances attending the whole case. I think that, if the plaintiff was kept out of the train she was entitled to more than nominal damages.
Mackenzie v Corballis
King’s Bench Division.
22 November 1905
[1906] 40 I.L.T.R 28
Andrews, Gibson, Boyd JJ.
Andrews, J.
This case has been argued on a motion by the defendant to reduce the damages to nominal damages, and the argument proceeded on the question whether the plaintiff was entitled to nominal or substantial damages. In my opinion this case is not governed by the settled general rule of law—that in the case of non-payment of money the measure of damages is merely the amount of the debt with interest. The foundation of the rule, that nothing beyond this can be recovered, is that the uncertain consequences that may happen by reason of the non-payment of the sum of money cannot be regarded as flowing naturally from the breach of the contract or within the contemplation of the parties at the time they entered into the contract. But this rule of law does not apply to the case of a special contract in which there are terms showing that injurious consequences of a particular character may result from the non-payment of the money, and which consequences may, therefore, be taken to have been in the contemplation of the parties at the time. What was laid down by the Court in Fletcher v. Tayleur, 17 C. B. 21, 29, had reference only to a common money demand. [Refers to the judgment of Wills, J.] In Wallis v. Smith, 21 Ch. D. 257, Jessel, J., in his judgment was referring to the general rule as to non-payment of a simple money demand where there was no special contract. He says—“It has always appeared to me that the doctrine of the English Law as to non-payment of money—the general rule being that you cannot recover damages because it is not paid by a certain day—is not quite consistent with reason.” If the money was to be paid with no reference to any particular purpose the damages sustained have been held to be too remote. Here, however, the defendant agreed to pay the plaintiff money for the specific purpose of meeting the expenses of her return to South Africa. This special agreement may reasonably be supposed to have brought it within the defendant’s contemplation that the plaintiff might *29 suffer damage through being detained by reason of not having any funds to return to South Africa. Consequently, I am of opinion that the damage here comes within the principle of Hadley v. Baxendale, 9 Exch. 341, as laid down by Pigot, L.C.B., in Boyd v. Fitt, 14 Ir. C. L. R. 43. The principle on which special damage has been held recoverable has also been laid down in cases dealing with the liability of carriers. The case of Millen v. Brash & Co., 8 Q. B. D. 35, went very far in the direction of imposing liability. In Prehn and another v. Royal Bank of Liverpool, L. R. 5 Ex. 92, the Court held that the general rule of law was not applicable, the plaintiffs having suffered special damage. I am, therefore, of opinion that the plaintiff in the present case was not limited to merely nominal damages. The defendant’s motion must be refused, but without costs.
Gibson, J.
The question is whether, under the contract existing in this case, the plaintiff can recover more than nominal damages over and above the actual sum due for plaintiff’s travelling expenses for the defendant’s neglect to pay the plaintiff such travelling expenses. The general rule is that all damages reasonably in the contemplation of the parties can be recovered: Grebert-Borgnis v. J. & W. Nugent, 15 Q. B. D. 85 (judgment of Bowen, L.J., at p. 92). The cases mentioned by Andrews, J., are applicable to the present case. The South African Territories, Ltd., v. Wallington is also worth notice. Prehn v. Royal Bank of Liverpool, Adams and Midland Ry. Co., 31 L. J. Ex. 35, and Wood v. Bell, 5 Ellis and Blackburne 772, are authorities which decide that though for breach of a mere contract to pay a sum of money nothing can be recovered beyond the amount and costs, special circumstances may entitle the plaintiff to recover further damages. Take the case I mentioned during the argument as illustrating the lengths to which the defendant’s arguments can be pushed. A penniless servant girl is brought up to town from a remote country district under a contract that if she is not found suitable her fare will be paid back. She is not found suitable, but her fare is refused, and in consequence she has to walk back to her home a hundred miles away begging her way. Could it be contended that she was not entitled to any damages? I think not; and cannot, therefore, accept Mr. Jefferson’s proposition that the plaintiff’s claim was necessarily restricted to nominal damages If she was in fact unable to return back through not being paid her passage money the jury could give substantial damages. If she had means to return otherwise, and was merely staying here for the purpose of giving evidence as a witness in her action, the case might be different. [Gibson, J., here referred to Adams v. Midland Ry. Co.] Here there was evidence from which a jury might infer that she was unable to return if she did not receive her passage money from the defendant. I may here state that in my opinion a legal question such as this is not properly triable before a Master. It would have been better to have raised the point by a defence paying 6d. into Court.
Boyd, J., concurred.