Implication of Terms
Cases
National Coal Board v Galley
[1958] 1 WLR 16, [1958] 1 All ER 91
Mr. Gardiner contends that the judge was wrong inholding that the defendant was personally bound by the Nacods agreement. If that point fell to be decided it might well be a matter of some difficulty.But, as the judge said, it is clear that the defendant’s personal contract of service is regulated by the Nacods agreement, and the defendant by working on the terms of the Nacods agreement has entered into an agreement which contains the term now indispute.The defendant next contends that, even though the Nacods agreement was applicable to the defendant’s employment, yet it had no contractual force, because it was too vague. It is an industrial agreement, he argues, covering a wide area, with no intention that it shall have a specific or enforceable effect.
Collieries differ, and what is reasonablein one will be unreasonable in another. The court has no yardstick to measure what are reasonable requirements. For instance, the stringency of those requirements depends on the number of deputies employed. It is a case within the principle of May and Butcher v. The King rather than Foley v.Classique Coaches Ltd. But it seems to us, on a consideration of the Nacods agreement, that it was meant to have a binding effect. Realising the difficulties inherent in the situation, it provided for discussions, if it appeared to be working out unfairly for the deputies. To define with exactitude what are the duties of a servant is no easy task. The court will supply an implied condition as to reasonableness in many contracts where duties are not fully defined, as in Hillas & Co. Ltd.v. Arcos Ltd.10 and Foley v. Classique CoachesLtd.
Gardiner also relies on the provision in clause15 for discussion in the event of complaints. He contends that this is typical of an industrial agreement not intended to be enforceable in the courts.We do not, however, see how in principle such a provision differs from that in Foley v. Classique Coaches Ltd. , which provided for the price to be agreed between the parties. It may be that discussion is a condition precedent to action, but once discussion is repudiated or fails the matter falls to be determined by the courts. Moreover, the defend-ant is in this further difficulty. He is asserting that the agreement as a whole exists, while seeking to deny the enforceability of clause 12. If clause 12 is too vague to be enforceable the whole agreement isnot legally binding on either side: see Bishop &Baxter Ltd. v. Anglo-Eastern Trading Co. Ltd.13In this contract the parties have expressly provided that reasonableness shall be the test. The fact that itis difficult to decide in a given case, should not deter the court from deciding what is a reasonable requirement by a master in the light of the surrounding circumstances. In our view, therefore, the judge was right in deciding that the term as to working was legally binding. ………………..
. Ultimately the question must be whether the defendant himself was being required to work reasonable hours. If, of course, he was being required to work longer hours than other deputies, that, in the absence of some exceptional circum-stances, would be evidence that the requirement made on him was unreasonable. There is, however, no suggestion of that in this case.[His Lordship reviewed the evidence and said that the court had come to the conclusion that there was no evidence to justify the contentions that the defendant was being required to work in breach of the1952 agreement.
Robertson v British Gas Corp
[1983] ICR 351
A bonus scheme for British Gas employees was fixed by collective agreement. The employer said it was terminating bonuses and withdrawing from the collective agreement. Employees claimed for arrears in the lost bonus entitlements.
Kerr LJ upheld the claim for three reasons. First, the bonus scheme was part of the individual contracts of employment because it was an important part of wages. Second, if the collective agreement was varied it had no effect on individual contracts. ‘This was another way of saying that the terms of the individual contracts are in part to be found in the agreed collective agreements as exist from time to time…’ Third, the approach to treating an employer’s statement as merely evidence of the contract’s terms, seen in System Floors (U.K.) Ltd v Daniel[1] was approved.
Jones v Associated Tunnelling Co Ltd:
[1981] UKEAT 523
Mr. Justice Browne-Wilkinson (P)
“The starting point must ,be, that a contract of employment cannot simply be silent on the place of work: if there is no express term, there must be either some rule of law that in all contracts of employment the employer is (or alternatively is not) entitled to transfer the employee from his original place of work or some term regulating the matter must be implied into each contract. We know of no rule of law laying down the position in relation to all contracts of employment, nor do we think it either desirable or possible to lay down a single rule. It is impossible to conceive of any fixed rule which will be equally appropriate to the case of, say, an employee of a touring repertory theatre and the librarian of the British Museum. Therefore, the position must be regulated by the express or implied agreement of the parties in each case. In order to give the contract business efficacy, it is necessary to imply some term into each contract of employment.
The term to be implied must depend on the circumstances of each case. The authorities show that it may be relevant to consider the nature of the employer’s business, whether or not the employee has in fact been moved during the employment, what the employee was told when he was employed, and whether there is any provision made to cover the employee’s expenses when working away from daily reach of his home. These are only examples; all the circumstances of each case have to be considered: see O’Brien v. Associated Fire Alarms [1969] 1 All ER 93; Stevenson v. Teesside Bridge and Engineering Ltd. [1971] 1 All ER 296; Times Newspapers v. Bartlett [1976] 11 ITR 106.
Looking at the circumstances of this case, what would the parties have said had an officious bystander asked them “At what sites can Mr. Jones be asked to work?” The employers might have replied “Anywhere in the United Kingdom.” But the industrial tribunal’s findings indicate that Mr. Jones, as one-would expect, would have objected to being transferred anywhere outside daily reach of his home. The employers were in business as contractors working at different sites; so the parties must have envisaged a degree of mobility. In 1969, Mr. Jones himself was moved from his original place of work to Hem Heath Colliery without objection. All the statements of terms and conditions subsequently issued contain mobility clauses, albeit in varying terms. From these factors we think that the plain inference is that the employers were to have some power to move Mr. Jones’s place of work and that the reasonable term to imply (as the lowest common denominator of what the parties would have agreed if asked) is a power to direct Mr. Jones to work at any place within reasonable daily reach of Mr. Jones’s home. Such a term would permit Mr. Jones to be required to work at Florence Colliery.
This approach, however, is challenged by Mr. Hughes on behalf of Mr. Jones. He submits that in order to imply a term, it is not enough to say that some term has to be implied and for the court then to imply a reasonable term. He submits that before any term can be implied it is necessary to show precisely what term the parties (if asked) would have said was obvious. In this case, as in all contracts of employment, it is impossible to state with certainty what the term as to mobility would have been. It might have been the term that the industrial tribunal suggested: but it might also have been mobility within a defined area or within a given radius of Mr. Jones’s home. Therefore, says Mr. Hughes, it is not possible to imply any term since one cannot be certain what that term should be.
The foundation for this submission is the decision of the House of Lords in Trollope and Colls Ltd. v. North Western Metropolitan Regional Hospital Board [1973] 2 All ER 260. In that case, a building contract provided for the work to be done in three phases. There was a fixed date for completion of Phase 1 but the architect was given power to extend that date and in fact did so. Phase 3 was to commence six months after practical completion of Phase 1. The contract provided that Phase 3 was to be completed by a date specified in the contract, there being no express power to extend the date for completion of Phase 3- It was argued that there ought to be implied into the contract a term extending the date for completion of Phase 3 if, as happened, the date for completion of Phase 1 was extended by the architect. The House of Lords held that no term could be implied, reversing the Court of Appeal decision that a reasonable term could be implied. The majority of the House of Lords gave two reasons for their decision: the first, that as the contract dealt unambiguously with the date for completion there was no room for any implication; the second (being the one directly in point in this case) that as any one of a number of possible terms might have been agreed by the parties to cover the position if they had directed their mind to the problem, it was not possible to imply any term: see Lord Pearson at pages 268-9; Lord Cross at page 272.
In our judgment, that decision is distinguishable from the present case. In that case, there was no need to imply any term: the express terms of the contract were unambiguous and covered the event which had happened, albeit in a way which was surprising in its result. Therefore any term which was to be implied would be varying the unambiguous express terms of the contract. In the case of contracts of employment containing no mobility clause, the position is quite different. As we have sought to show, it is essential to imply some term into the contract- in order to give the contract business efficacy: there must be some term laying down the place of work. In such a case, it seems to us that there is no alternative but for the tribunal or court to imply a term which the parties, if reasonable, would probably have agreed if they had directed their minds to the problem. Such a term will not vary the express contractual terms. This view is supported by the very many cases in which the courts have decided what term as to mobility ought to be included in a contract of employment: .see for example the cases cited above. If Mr. Hughes’s submission were correct, all those cases would have been wrongly decided since it is never possible to state with certainty exactly what the parties would have agreed as to mobility if they had directed their minds to the question.
We therefore reach the conclusion that we are entitled to hold, and do hold, that the right term to imply into Mr. Jones’s contract from the outset was that he could be required to work at any place within reasonable daily commuting distance from his home. If we are right on this, none of the later documents (with the possible exception of A2/A6) can have affected the position, since A3 is silent on the point and A4 and A5 both contain terms as to mobility wider than that implied term. It was submitted that if A2/A6 was the last contractual document, the mobility clause in A2/A6 is void for uncertainty and therefore the employers would not be able to show that they had any power to move Mr. Jones’s place of work. There are many possible answers to this submission, but in our view the decisive one is that adopted by the industrial tribunal, namely that it was unable to find that A2/A6 had been issued to Mr. Jones at all. Unless and until it is proved that A2/A6 had been issued, its terms cannot affect the position between the parties.
It is therefore not necessary for us to reach any concluded view as to whether the industrial tribunal was right in holding that, even if under the original contract Mr. Jones’s place of work could not be changed, by continuing to work without objection Mr. Jones must be taken to have assented to a variation in his terms of employment including the introduction of the mobility clause. However, since the case may go further and the Court of Appeal may take a different view on the implied term, we must state our reservations about the industrial tribunal’s view on such variations. The statutory “statement of terms and conditions of employment” is not itself a contract but merely contains the employer’s statement of what has previously been agreed. As such, the first of such statements to be issued is often compelling evidence of what terms have in fact been agreed. But where there are two or more statements which are not in identical terms, the later statement can only be evidence of an agreed variation of the original terms. Such variation may be either express or implied. If, as in the present case, there is no evidence of any oral discussion varying the original terms, the fact that a statement of terms and conditions containing different terms has been issued cannot be compelling evidence of an express oral variation. The most that can be said is that by continuing to work without objection after receiving such further statement, the employee may have impliedly agreed to the variation recorded in the second statement or is estopped from denying it.
In our view, to imply an agreement to vary or to raise an estoppel against the employee on the grounds that he has not objected to a false record by the employers of the terms actually agreed is a course which should be adopted with great caution. If the variation relates to a matter which has immediate practical application (e.g., the rate of pay) and the employee continues to work without objection after effect has been given to the variation (e.g., his pay packet has been reduced) then obviously he may well be taken to have impliedly agreed. But where, as in the present case, the variation has no immediate practical effect the position is not the same. It is the view of both members of this Tribunal with experience in industrial relations (with which the Chairman, without such experience, agrees) that it is asking too much of the ordinary employee to require him either to object to an erroneous statement of his terms of employment having no immediate practical impact on him or be taken to have assented to the variation. So to hold would involve an unrealistic view of the inclination and ability of the ordinary employee to read and fully understand such statements. Even if he does read the statement and can understand it, it would be unrealistic of the law to require him to risk a confrontation with his employer on a matter which has no immediate practical impact on the employee. For those reasons, as at present advised, we would not be inclined to imply any assent to a variation from mere failure by the employee to object to the unilateral alteration by the employer of the terms of employment contained in a statutory statement.
Sec of State v ASLEF (No 2)
[1972] 2 QB 455
Railway employees had been instructed by their unions to ‘work to rule’ and more specifically to ban overtime, Sunday and rest day working. ‘Working to rule’ meant giving an unreasonably literal construction to certain requirements of the railway rule book (such as satisfying oneself that the engine is in order) and ignoring others, such as the rule that one should make every effort to facilitate the working of the trains and prevent avoidable delay. And this course of conduct was pursued with the intention of bringing the system to a halt. The question was whether the conduct of the union amounted to industrial action.
Lord Denning MR
‘If [the employee], with the others, takes steps wilfully to disrupt the undertaking, to produce chaos so that it will not run as it should, then each one who is a party to those steps is guilty of a breach of his contract. It is no answer for any one of them to say ‘I am only obeying the rule book,’ or ‘I am not bound to do more than a 40-hour week.’ That would be all very well if done in good faith without any wilful disruption of services; but what makes it wrong is the object with which it is done. There are many branches of our law when an act which would otherwise be lawful is rendered unlawful by the motive or object with which it is done. So here it is the wilful disruption which is the breach.’
Roskill LJ
‘In legal theory, performance or non-performance of a contract does not depend upon goodwill or lack of goodwill; a contractual obligation can be properly performed albeit without goodwill, it can equally be broken notwithstanding honest if unavailing and well intentioned attempts at performance. But I venture to doubt whether the dichotomy between mere withdrawal of goodwill and the non-performance of a contract is in practice as complete as Mr Pain eloquently urged upon us. Purported performance accompanied by lack of goodwill may all too easily cross the borderline between lawful performance without breach and purported performance in breach either of some express or some implied term in the contract.’
Buckley LJ
‘work to rule’ involved ‘breaches of an implied term to serve the employer faithfully within the requirements of the contract. It does not mean that the employer could require a man to do anything which lay outside his obligations under the contract, such as to work excess hours of work or to work an unsafe system of work or anything of that kind, but it does mean that within the terms of the contract the employee must serve the employer faithfully with a view to promoting those commercial interests for which he is employed.’
Sagar v Ridehalgh & Sons Ltd
[1931] 1 Ch 310
Lord Hanworth MR
“Farwell J., who tried the case, held that the deduction was not justified; that the practice above stated was not universal, nor reasonable or certain, and that the deduction was illegal under s. 3 of the Truck Act, 1831. From this judgment the defendants appeal.
[…]
There is abundant evidence to justify the finding of Farwell J. that the plaintiff was guilty of carelessness in his work, that he failed to comply with the standard of proper skill which he agreed it was his duty to exercise – indeed, he admitted his carelessness. Further, he agreed that the prices in the list and on the card issued to him were prices for work carefully done. It seems that there was on one occasion a strike or lock-out at a mill at Nelson arising out of a deduction made from wages. The plaintiff admitted he knew of it, that the strike came to an end, and that the system of deductions remained and was assented to. There was cogent evidence that the system of deductions in the estimation of the work to be paid for had been in operation at the defendants’ mill for a long stretch of time and had been exercised from time to time at the discretion of the defendants, and their manager. Farwell J. found a difficulty in believing that the plaintiff did not become aware that there was such a system in vogue at the defendants’ mill, and I share it. The Uniform List of Prices provides a scale of increased payment where special care has to be taken by the weaver, as in the case of what is known as “pickfinding,” and provision is also made for an allowance in favour of the workman where inferior materials are provided for his weaving by the employer.
Gunn v National College of Art and Design
[1990] 2 I.R. 168
There is one other matter I wish to refer to, to clear up what appears to be misapprehension concerning the application of the rules of natural justice or of constitutional justice. The application of these rules does not depend upon whether the person concerned is an office-holder as distinct from being an employee of some other kind. I mention this because it is a subject which is referred to in the course of the judgment of the learned judge of the High Court in his reference to Glover v. B.L.N. Ltd. [1973] I.R. 388. The quality of justice does not depend on such distinctions. It appears to me that the misunderstanding has arisen by reason of the great reliance which Kenny J. in the High Court appeared to have placed upon the speech of Lord Reid in the English House of Lords decision of Ridge v. Baldwin [1964] A.C. 40. In that case the person who had been dismissed was a Chief Constable and was the holder of a statutory office. He could only have been dismissed from it in accordance with particular statutory provisions. The persons who had the power to dismiss him were not his employers in the strict sense. Because of that fact and that he was by statutory instrument designated as an “officer” as distinct from another type of employee, it was held that the particular statutory provisions referable to the dismissal of an officer had not been complied with. As was pointed out in the majority judgment of this Court in Glover v. B.L.N. Ltd. [1973] I.R. 388, the question of whether the plaintiff in that case was an officer or a servant was irrelevant, as the case fell to be decided not upon that distinction but upon the actual terms of the contract between Mr. Glover and his employers. In the present case, the agreed procedures are those set out in the agreement with the Federated Workers Union of Ireland, and they did not in anyway depend upon whether the employee in question was an officer or not. In any case where there is no particular procedure prescribed either by agreement between the parties or by statute, and where the case falls to be determined by the application of the principles of constitutional justice, or the principles of natural justice, they are applicable without regard to the status of the person entitled to benefit from them.”
Sweeney v. Duggan
[1997] 2 I.R.531
“There are at least two situations where the courts will, independently of statutory requirement, imply a term which has not been expressly agreed by the parties to a contract. The first of these situations was identified in the well-known case, The Moorcock (1889) 14 P.D. 64 where a term not expressly agreed upon by the parties was inferred on the basis of the presumed intention of the parties. The basis for such a presumption was explained by MacKinnon L.J. in Shirlaw v. Southern Foundries (1926) Ltd. [1939] 2 K.B. 206 at p. 227 in an expression, equally memorable, in the following terms:
“Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common ‘Oh, of course’.”
In addition there are a variety of cases in which a contractual term has been implied on the basis, not of the intention of the parties to the contract but deriving from the nature of the contract itself. Indeed in analysing the different types of case in which a term will be implied Lord Wilberforce in Liverpool C.C. v. Irwin [1977] A.C. 239 preferred to describe the different categories which he identified as no more than shades on a continuous spectrum.
The relevance of the presumed intention of the parties differs in different cases. This is dramatically illustrated in Liverpool C.C. v. Irwin [1977] A.C. 239. In that case the court was asked to infer a term in a contract between the Liverpool City Council and its tenants to the effect that the Council would maintain and repair the lifts and chutes in an apartment block. Roskill L.J. speculated as to what the reaction of the Liverpool City Council would have been if one of the tenants has said: “I suppose that the council will be under a legal liability to us to keep the chutes and the lifts in working order and the staircases properly lighted”and he concluded that the answer in all probability would have been”Certainly not”. Whilst Roskill L.J.’s assumption aforesaid was accepted in the House of Lords, they concluded that irrespective of the presumed intention of the parties a term must be implied from the very nature of the fact that the tenants had to gain access to their apartments by and through the common areas of a fifteen storey tower block that some party would have to keep them in repair. The question then was whether this obligation would fall on the tenants collectively or individually or else on the Council. As Salmon L.J. said at p. 262:
“Unless the law, in circumstances such as these, imposes an obligation upon the council at least to use reasonable care to keep the lifts working properly and the staircase lit, the whole transaction becomes inefficacious, futile and absurd. I cannot go so far as Lord Denning M.R. and hold that the courts have any power to imply a term into a contract merely because it seems reasonable to do so. Indeed, I think that such a proposition is contrary to all authority. To say, as Lord Reid said in Young & Marten Ltd. v. McManus Childs Ltd. [1969] 1 A.C. 454, 465 that ‘. . . no warranty ought to be implied in a contract unless it is in all of the circumstances reasonable’ is, in my view, quite different from saying that any warranty or term which is, in all of the circumstances, reasonable ought to be implied in a contract. I am confident that Lord Reid meant no more than that unless a warranty or term is in all the circumstances reasonable there can be no question of implying it into a contract, but before it is implied much else besides is necessary, for example that without it the contract would be inefficacious, futile and absurd.”
Whether a term is implied pursuant to the presumed intention of the parties or as a legal incident of a definable category of contract it must be not merely reasonable but also necessary. Clearly it cannot be implied if it is inconsistent with the express wording of the contract and furthermore it may be difficult to infer a term where it cannot be formulated with reasonable precision.
It seems to me clear that the contention that a term as to insurance by the company of its risk for liability to the plaintiff as its employee or an obligation to warn him of the absence of such insurance could not be implied in pursuance of The Moorcock (1889) 14 P.D. 64 doctrine. The contract of employment would and did operate effectively without any such term and if one postulated an inquiry by the ubiquitous and officious bystander as to whether such a term should be included I anticipate that it might well have been rejected and certainly would not have been accepted without considerable negotiation and discussion a result which would negative the existence of an implied term. In Spring v. National Amalgamated Stevedores and Dockers Society [1956] 1 W.L.R. 585, the defendant trade union sought to expel the plaintiff from membership and in doing so relied upon what it alleged was implied in the contract between the plaintiff and it. The term which it was said should be implied arose from an agreement which had been reached at Bridlington in the year 1939, and regulated the transfer of members from one union to another. That agreement was, in trade union circles, referred to as “the Bridlington Agreement”. What, therefore, the defendants sought to incorporate by implication in their agreement with the plaintiff was a provision that the plaintiff should comply with the “the Bridlington Agreement”. In his judgment, Stone V.C. postulated The Moorcock test, at p. 599, in the following terms:
“If that test were to be applied to the facts of the present case and the bystander had asked the plaintiff at the time he paid his five shillings and signed the acceptance form, ‘Won’t you put into it some reference to the Bridlington Agreement?’ I think (indeed, I have no doubt) the plaintiff would have answered ‘What’s that?’ In my judgment, that is sufficient to dispose of this case, . . .”
Clearly the plaintiff in the present case would have little difficulty in appreciating the general concept of employers’ liability insurance but so far from an immediate acquiescence to any proposals in relation to such insurance I think it is reasonable to anticipate that a debate would have arisen as to the value of such insurance to the employee seeing that such insurance is primarily for the benefit of the employer and, if it were explained how it might also benefit the employee, further and useful discussion might well follow as to whether the interests of the plaintiff would not be better secured by some other arrangement which would be of immediate and direct benefit to the plaintiff. The parties to the negotiations might recognise, (as did their counsel) that a contractual obligation by the company to insure would add little protection to the plaintiff as default by the company would merely duplicate the plaintiff’s right to recover a judgment against the company with no greater prospect of recovering thereon. I would reject the contention that the term for which the plaintiff contends could be implied on the basis of The Moorcock (1889) 14 P.D. 64 doctrine.
Both parties referred to the decision of the Court of Appeal in England in two cases, namely, Reid v. Rush & Tompkins Plc [1990] 1 W.L.R. 212 and Van Oppen v. Bedford Trustees [1990] 1 W.L.R. 235, on the issue as to whether the disputed provision with regard to insurance should be implied as a legal incident to the plaintiff’s contract of employment. Each of these cases has a similarity to the other and a relevance to the existing matter in as much as it was alleged (unsuccessfully) that the defendants in each case were under an obligation or duty to take out and maintain some form of insurance for the benefit of the plaintiff or at any rate to advise him in relation to such insurance.
In Reid v. Rush & Tompkins Plc [1990] 1 W.L.R. 212, the plaintiff was employed by the defendants to travel to Ethiopia as a quarry foreman. While in that country the plaintiff was injured in a motor car accident caused by the negligence of a third party whose identity was never discovered. In Ethiopia there was not, at the time, any compulsory third party motor insurance nor any scheme for compensating persons injured in accidents caused by the negligence of uninsured or untraced drivers. In those circumstances the plaintiff brought an action against his employers, the defendants, for damages in respect of the economic loss which he had suffered in being unable to recover such compensation. He alleged that the defendant was in breach of an implied term of his contract of employment to the effect that it would take out appropriate indemnity insurance cover for the plaintiff or, alternatively, that it would, prior to his departure for Ethiopia, advise him of any special risks so that he could obtain such insurance cover for himself. Alternatively, the plaintiff argued, that the defendant was negligent in failing to discharge its duty of care as an employer to protect the plaintiffs economic welfare by providing the appropriate insurance cover. Ralph Gibson L.J. delivering the main judgment of the Court of Appeal declined to imply the term for which the plaintiff contended. He analysed the facts of the case and went on, at p. 227 to state as follows:
“It is, however, impossible in my judgment, to imply in this case a term as a matter of law in the form contended for, namely, a specific duty to advise the plaintiff to obtain specific insurance cover. Such a duty seems to me inappropriate for incorporation by law into all contracts of employment in the circumstances alleged. The length of time during which the servant will work abroad and the nature of his work may vary greatly between one job and another and hence the extent to which the servant would be exposed to the special risk. Further, having regard to the many different ways in which a servant working abroad may run the risk of uncompensated injury caused by the wrong doing of a third party, apart from a traffic accident, it seems to me impossible to formulate the detailed terms in which the law could incorporate into the general relationship of master and servant a contractual obligation to the effect necessary to cover the plaintiffs claim.”
Again having referred to the judgment of Scarman L.J. in Tai Hing Ltd v. Liu Chong Hing Bank [1986] A.C. 80 (to which I will refer again) he expressed his conclusion with regard to the allegation based on tort, at p. 232 in the following terms:
“It therefore seems to me that, on the facts alleged, it is not open to this court to extend the duty of care owed by this defendant to the plaintiff by imposing a duty in tort which, if I am right, is not contained in any express or implied term of the contract.”
The judgment of the Court of Appeal in Van Oppen v. Bedford Trustees [1990] 1 W.L.R. 235 does not significantly advance the matter either way. It was a case in which the defendant trustees, who owned and managed a school, were advised by a competent association of the desirability of taking out accident insurance for all of their pupils who played rugby. The school informed the parents of the advice which they had received in this regard but before any action was taken on the proposals the plaintiff suffered serious injuries to his cervical spine while playing rugby. In those circumstances the pupil claimed damages against the defendants for negligence alleging that they had failed to take reasonable care for his safety on the rugby field and failed to advise his father of the risk of serious injury and the consequent need for personal accident insurance. It may be sufficient to say that Balcombe L.J. in delivering the main judgment of the court endorsed substantially the judgment of Ralph Gibson L.J. in Reid v. Rush & Tompkins Plc [1990] 1 W.L.R. 212. It is, however, notable that the insurance in Van Oppen v. Bedford Trustees and Reid v. Rush & Tompkins Plc. would have had the effect of providing the plaintiff with a positive economic benefit and not merely security for the discharge by the employer of a pre-existing liability.
It seems to me that the decision of the House of Lords in Scally v. Southern Health Board [1992] 1 A.C. 294 and in particular the speech of Bridge L.J. provides even more persuasive authority for the proposition that a term such as that for which the plaintiff contends cannot in circumstances such as the present be found by reference to the law of tort. It is helpful also as to the circumstances in which a term will be implied as a matter of law independently of the intention of the parties. In Scally v. Southern Health Board the plaintiffs were employees of the Northern Ireland Health Board whose contracts of employment had been negotiated by representatives of their professional bodies. The terms of their employment provided for certain pension benefits. By virtue of certain legislative provisions, the plaintiffs were given the right to purchase particular “additional years” on advantageous terms but that right was required to be exercised within a specified time from the date on which the legislative regulations came into operation.
Bridge L.J. dealing with the claim based in contract expressed his views, at p. 302, in the following terms:
“. . . it seems to me that the plaintiffs’ common law claims can only succeed if the duty allegedly owed to them by their employers arose out of the contract of employment. If a duty of the kind in question was not inherent in the contractual relationship, I do not see how it could possibly be derived from the tort of negligence.”
He then went on to cite with approval the same passage from the judgment of Scarman L.J. in Tai Hing Ltd v. Liu Chong Hing Bank [1986] A.C. 80 at p. 107 as Ralph Gibson L.J. had relied upon in Reid v. Rush & Tompkins Plc [1990] 1 W.L.R. 212. That passage is in the following terms:
“Their Lordships do not believe that there is anything to the advantage of the law’s development in searching for a liability in tort where the parties are in a contractual relationship. This is particularly so in a commercial relationship. Though it is possible as a matter of legal semantics to conduct an analysis of the rights and duties inherent in some contractual relationships including that of banker and customer either as a matter of contract law when the question will be what, if any, terms are to be implied or as a matter of tort law when the task will be to identify a duty arising from the proximity and character of the relationship between the parties, their Lordships believe it to be correct in principle and necessary for the avoidance of confusion in the law to adhere to the contractual analysis: on principle because it is a relationship in which the parties have, subject to a few exceptions, the right to determine their obligations to each other, and for the avoidance of confusion because different consequences do follow according to whether liability arises from contract or tort, e.g. in the limitation of action. Their Lordships respectfully agree with some wise words of Lord Radcliffe in his dissenting speech in Lister v. Romford Ice & Cold Storage Co. Ltd. [1957] A.C. 555. After indicating that there are cases in which a duty arising out of the relationship between employer and employee could be analysed as contractual or tortious Lord Radcliffe said, at p. 587: ‘Since, in any event, the duty in question is one which exists by imputation or implication of law and not by virtue of any express negotiation between the parties, I should be inclined to say that there is no real distinction between the two possible sources of obligation. But it is certainly, I think, as much contractual as tortious. Since in modern times the relationship between master and servant, between employer and employee, is inherently one of contract, it seems to me entirely correct to attribute the duties which arise from that relationship to implied contract’.
Their Lordships do not, therefore, embark on an investigation as to whether in the relationship of banker and customer it is possible to identify tort as well as contract as a source of the obligations owed by the one to the other. Their Lordships do not, however, accept that the parties’ mutual obligations in tort can be any greater than those to be found expressly or by necessary implication in their contract.”
In his judgment with which all of their Lordships were in agreement, Bridge L.J. in fact concluded that the term for which the plaintiffs contended should be implied in the contract between them and their employers. His analysis of the circumstances in which the term was implied is to be found, at p. 306, in the following terms:
“. . . there is no doubt whatever that the terms of the superannuation scheme as laid down in the regulations in force from time to time were embodied in the terms of the contract of employment of each plaintiff. Since the relevant board was in each case the employer upon whom, although acting as agent for the Department, all liabilities were imposed by paragraph 2 of Schedule 1 to the Order of 1972, it seems to me beyond question that the legal obligation, if there was one, to notify the plaintiffs of their rights in relation to the purchase of added years rested in each case on the board not on the department.
Will the law then imply a term in the contract of employment imposing such an obligation on the employer? The implication cannot, of course, be justified as necessary to give business efficacy to the contract of employment as a whole. I think there is force in the submission that, since the employee’s entitlement to enhance his pension rights by the purchase of added years is of no effect unless he is aware of it and since he cannot be expected to become aware of it unless it is drawn to his attention, it is necessary to imply an obligation on the employer to bring it to his attention to render efficacious the very benefit which the contractual right to purchase added years was intended to confer.”
I agree that a term may be implied independently of the intention of the parties where it is necessary as a matter of law and logic to enable the provisions of the agreement to have operative effect. No such necessity exists in the present case. The decision is also relevant in setting out the principles, with which I fully agree, which establish that the obligation as between the employer and employee in a case such as the present are to be found in contract and not in tort.
Accordingly, as to the first and crucial argument submitted on behalf of the plaintiff, I am satisfied that there is no basis for the implication in the contract of employment between the company and the plaintiff of a term that the employer should in any circumstances extract risk insurance cover or otherwise make special provision to ensure the payment of compensation to the plaintiff in the event of injury or to warn the plaintiff of the absence of such policy or such arrangement. Likewise I am satisfied that no such obligation or duty can be identified by reference to the law of tort. If the company has no liability in contract to the plaintiff then neither has the defendant. The piercing of the corporate veil bestowed upon the company by law, or even its complete removal, cannot impose on the defendant or the other shareholder in the company an obligation in contract to which the company itself was not subject.
Patrick Sullivan v. The Southern Health Board (Stress)
[S.C. No. 334 of 1993]
Supreme Court 30th July 1997
[1997]3 I.R. 124
Murphy J.
30th July 1997
This is an appeal by the Southern Health Board (the Board) from the judgment of Keane J. given on the 29th July, 1993 and the order made thereon by which the learned judge awarded to the plaintiff the sum of £92,966 as damages for breach of contract.
The plaintiff was appointed to the post of consultant in medicine at Mallow Hospital in Co. Cork from the 1st April, 1981, on the terms of what is called the “common contract” entered into by the plaintiff and the Board on the 17th July, 1981. The plaintiff had qualified in medicine in University College Cork in 1968. In 1985, he obtained a doctorate in medicine and became a fellow of the Royal College of Physicians of Ireland in 1987. He is and clearly was at the date of his appointment a highly qualified and distinguished medical practitioner. Furthermore, it is readily and fully accepted by the Board that he has carried out his duties with efficiency and dedication.
Mallow Hospital is one of the institutions maintained by the Board in which health services are provided by them pursuant to the provisions of the Health Acts, 1947 to 1991. The hospital was opened initially as an army hospital in 1939. It was subsequently a tuberculosis hospital and eventually became an acute medical facility in 1960. At the time the plaintiff was appointed, Dr. Joyce was already and had been for some 19 years, consultant physician in Mallow Hospital. The plaintiff filled an additional post and he and Dr Joyce shared responsibility for providing consultant medical services until the latter developed poor health in 1988 and died in September of that year. Mallow Hospital, at the time of the plaintiff’s appointment, comprised 103 acute medical beds which were divided roughly between the physicians and the surgeons. The catchment area of the hospital is the north Cork region with a population of approximately 72,000.
In the statement of claim it was pleaded that the agreement contained the express terms following, namely, that:”
(A) The plaintiff would be required to work for a period of 33 hoursper week subject to being available and, when necessary, for an additional period of up to 2 hours after the end of each day’s scheduled commitment.
(B) The plaintiff would be entitled as of right to have available to him from the Board reasonable facilities and resources for the proper discharge of his duties.
(C) The plaintiff would be entitled to 30 days annual leave.
(D) The Board would at all times employ a second consultant physician in addition to the plaintiff at the said hospital.
It was then pleaded that in breach of the express terms aforesaid:”
(A) The plaintiff had been consistently required over a period of years to work hours far in excess of those contracted for.
(B) The Board had failed, refused and neglected notwithstanding repeated demands made by the plaintiff to make available to him reasonable facilities or resources for the proper discharge of his duties.
(C) The plaintiff had not been afforded his annual entitlement to 30 days leave.
(D) The Board had failed refused and neglected since 1988 to appoint and engage a second consultant physician at the said hospital.
The plaintiff claimed damages for the alleged breaches of the express terms of the contract aforesaid and also claimed injunctive relief to restrain the continued breach thereof. At the hearing of the trial the claim for injunctive relief was abandoned and the matter proceeded solely as a claim for damages. Furthermore, it was recognised that the contract did not contain any express term in relation to the appointment of a second consultant: it was argued that there was an implied term to that effect.
As appears specifically from the order made herein on the 29th July, 1993, the Court assessed damages under the following headings:”
1. Losses sustained by the plaintiff as a result of the failure of the Board to appoint a second physician
£35,654
2. Loss of fees from private practice
£42,312
3. Damages for stress and anxiety caused to the plaintiff, in his professional and domestic life
£15,000
Total: £92,966
These figures reflect precisely those contained in a document (to which I will refer as “the revised claim”) referred to in the course of the plaintiff’s evidence. Counsel on behalf of the Board understandably complained that the figures and information contained in the revised claim had not been furnished to the Board prior to the hearing. There was, and there still is, some difficulty in fully comprehending those figures and the assumptions on which they are based. The learned trial judge explained (at p. 27, vol. 1 of the transcript) his difficulty in reconciling the claim made by the plaintiff with a letter dated the 24th July, 1992, on which his counsel relied, which had made a claim in broad terms for loss due to “locum cover” on the basis that the plaintiff was at the time operating a one-on-one-off rota.
In his judgment the learned trial judge set out the history of the relationship between the plaintiff and the management of the Board and in particular, dealt with the deterioration of the conditions in the hospital and the facilities available there. The learned judge found, and indeed it was not seriously disputed, that in the year 1987, serious problems began to arise at the hospital as a result of policy decisions made at government level to cut back the budget available for health services. The learned judge referred to specific deficiencies which existed in the period between 1987 and 1991, including defective x-ray screening equipment, obsolete laboratory equipment, faulty lifts and damaged building structures. Perhaps even more obvious was the dramatic reduction in the number of beds available in the hospital. In 1987, there were 103, in 1988, 52 and in 1989, 40. Again, there was staffing shortages. No permanent matron was appointed after 1988. There was a shortfall in the number of nurses, radiographers and physiotherapists. In 1989, a question arose as to whether Mallow Hospital would be continued or the services provided there relocated in Cork city. Undoubtedly a change took place in mid 1989. It is not clear whether that was due in whole or in part to the decision of Gannon J. in O’Callaghan v. Southern Health Board (Unreported, High Court, 8th May, 1989). Political changes had resulted in further funds being made available to the Board. In any event from mid 1989, steps were taken to remedy most of the specific deficiencies identified in the judgment of the learned trial judge. However, it would seem that unsatisfactory conditions prevailed up to the 16th January, 1991, when a delegation from the Irish Hospitals Consultants Association visited the hospital and reported that:”
“The state of Mallow hospital at present is both disgraceful and dangerous. There is a disgraceful waste of resources with a well qualified consultant, medical, non-consultant medical, nursing and paramedical staff working at half capacity because of lack of beds, lack of equipment and lack of administrative support. The service which is offered by the hospital is, despite the best efforts of the staff, both inadequate and sometimes dangerous because of the lack of basic investigatory facilities and insufficient support staff. This risk is compounded by the completely inadequate number of beds available.”
The reversal of the original trend was exemplified by the fact that before the action came on for hearing the number of beds had been increased from the low of 40 to its then level of 64. There was, however, the difficulty that there was no separate male medical ward and had been none since 1989.
The agreement in clause 7.6 acknowledged that the plaintiff had certain rights specified in that clause and in particular:”
“Your [the plaintiff’s] right to have available to you from the Southern Health Board reasonable facilities and resources for the proper discharge of your duties.”
Whilst the learned trial judge dealt with the deterioration of the conditions in the hospital in conjunction with other issues, I have no doubt whatever that the deficiencies and inadequacies in the facilities available in the hospital in the period between 1987 and 1991, constituted a breach of clause 7.6 of the contract. The fact that the management of the hospital was dedicated to their work and that the Board itself was powerless to finance the appropriate improvements and maintenance does not alter the position. The Board had entered into a specific contract and had failed to perform it. On that basis I take the view that the Board were clearly liable to the plaintiff in damages.
The failure to replace Dr Joyce in September, 1988, was presumably due to the financial stringency affecting the Board at the time. The failure to do so was one of the plaintiff’s major grievances and the question whether the Board owed him a contractual duty in that behalf was a crucial issue in both the High Court and this Court. It must be emphasised that the issue was whether the Board was bound to appoint a secondpermanent medical consultant. In fact, medical consultants were appointed to replace Dr. Joyce. The first appears to have been appointed some time after Dr. Joyce’s retirement and to have continued until September, 1991, when he was replaced by the present incumbent, Dr English. These two appointments were medical consultants who were appointed to act independently of the plaintiff and not as a subordinate to him or a locum for him. This is made clear in the transcript of the evidence of the plaintiff (vol. 1, p. 39). He was asked:”
Question 291:”
“Q. A temporary position who is also called a locum sometimes but he is not a locum really and he is not your locum.
Question 293:”
“Q. He or she is in no way responsible to you, they have their own clinical responsibilities as you have yours?
A. Yes indeed my lord that is quite correct.”
Question 277:”
“Q. You have your patients and Ms English has her patients?
A. That is correct my lord.”
Question 278:”
“Q. And you cover for one another?
A. We cover for one another.”
The problem arising from the failure to appoint a permanent consultant was identified in the next following question:”
Question 279:”
“Q. She is totally responsible for her own patients?
A. She is indeed my lord but there is more to the running of hospitals than treating patients my lord.”
Question 280:”
“Q. Well I am putting to you that there is nothing in your work outside the clinical aspects of the work which prevented you at any time from taking whatever holidays were due to you.
A. I disagree my lord.”
In fact the way the plaintiff put it (at p. 37):”
“. . . I am, if I may call myself, the anchor physician since 1987, so the responsibility of the day to day running of the hospital rests with me almost exclusively.”
The particular problem was then explored further in cross examination between questions 298 and 300 where the plaintiff was asked whether the provision of temporary consultants was as effective as permanent ones and he disagreed. However, he went on to accept that his criticism was directed to the consultant holding office in the years 1989 to 1991. He felt bound to make known his concerns in that regard to management and they were promptly dealt with. Apart from the quality of the support which could be or was provided by temporary appointments, attention was directed to the legal issue as to whether or not the Board was contractually bound by an implied term to provide a second permanent medical consultant at Mallow Hospital. The learned trial judge answered that question in the affirmative. In my view he was mistaken in that conclusion.
There is no doubt but that from the date of the plaintiff’s contract in 1979/80 Mallow Hospital was intended to be, and seen as being, a two consultant physician hospital. Various reports in relation to the hospital envisaged such a situation and the appointment of the plaintiff confirmed it. In his evidence Mr. Sean Hurley, the Chief Executive Officer of the Board, accepted unequivocally that it was a two consultant physician hospital though he would not accept that it was expressly or implicitly required that both consultants should be permanent though it was his expressed preference that they should be.
It seems to me that a distinction must be made between a situation which exists and which parties expected to continue on the one hand and a contractual obligation on one or other of them positively to ensure that it does so on the other.
As I understand it, the argument for implying the term in addition to those numerous provisions contained in the written contract of July 1981 was the presumed intention of the parties as that concept was identified in Moorcock [1889] 14 PD 64 and applied by Mackinnon L.J. in Shirlaw v. Southern Foundries [1939] 2 KB 206 at 227 where he explained:”
“Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common ‘Oh, of course!’.”
Clearly that condition is not met where the question posed by the ubiquitous bystander is answered in the negative or even where it is the subject matter of further discussion between the parties. On that basis the implication of a term was rejected in Spring v. National Amalgamated Stevedores and Dockers Society [1956] 1 W.L.R. 585 and more recently and authoritatively in two decisions of this Court, namely, Sweeney v. Duggan [1997] 2 I.R. 532 and Carna Foods Ltd. v. Eagle Star Insurance Co. (Ireland) Ltd. [1997] 2 I.R. 193. In Spring v. National Amalgamated Stevedores and Dockers Society [1956] 1 W.L.R. 585 the question to be posed would have been “Won’t you put into it some reference to the Bridlington Agreement?” and Stone V.C. anticipated the answer “What’s that?”. As he said, that answer disposed of the argument in support of the implied term. In Sweeney v. Duggan [1997] 2 I.R. 532, the issue was whether a term was to be implied in a contract of employment to the effect that the employer would maintain insurance cover to protect him, the employer, for any liability which he might incur in respect of an accident to his employee. In delivering the judgment of the Court, I concluded that the hypothetical question of the officious bystander would promote a debate as to the value of the proposed insurance rather than a confident affirmation of the proposed term. In these circumstances, I rejected the claim for an implied term.
In the present case we know from the evidence what the plaintiff and the Chief Executive of the Board believed to be the rights and duties of a health board in making a permanent medical appointment. The plaintiff dealt with it in cross examination (vol. 2, questions 90-93):”
“Q. Now you are aware Doctor with regard to the filling of posts of a permanent nature in the Health Board?
A. In broad terms I am yes.
Q. Is it not fair to say that no permanent post can since early 1980 be filled without the specific approval of the Department of Health?
A. Yes.
Q. No doubt about that?
A. No my lord.
Q. Are you aware that superimposed on top of that in the case of consultants that there is an approval required from Comhairle na nOspidéal.
A. I am aware of that my lord.”
Mr. Hurley explained the position as he saw it (vol. 4, answer 246):”
“. . . At the end of the day it is Comhairle’s function to decide the nature and structure of the post. They could have decided to fill that post permanently and attach any conditions that they thought fit to that post. They could have written back to us and said we will agree to filling the second post and it is to be based at Mallow. Or they could have said that he is for the Cork area or whatever, it is for Comhairle to decide on the conditions, it is not to accept any suggestions that we would make or whatever that is their function.”
Whilst argument was directed in this Court as to the actual powers of the Minister for Health and Comhairle na nOspidéal, the correctness or otherwise of those submissions is not relevant. What is clear is that both parties to the contract believed, whether right or wrong in principle or in detail, that the filling of a post as a permanent medical consultant was not within the gift of the Board and that they required the sanction of an outside authority, whichever agency that may have been. That being the belief of the parties to the contract, it is clear that if one came to write the script for the scene in which the officious bystander moves centre stage to intervene in the negotiations for the contract that a simple affirmative would not suffice. The script writer would have to anticipate a lengthy debate as to what could or might happen on the death or retirement of either of the two permanent consultants. It well might be that the representative of the Board would offer reassurance to the doctor as to the likelihood of the outgoing permanent consultant being replaced by another holding similar tenure but having regard to the state of his knowledge or belief, nobody could anticipate that he would have unhesitatingly entered into a binding legal commitment to do something which he believed was outside his capacity to perform. In the circumstances, I am forced to conclude that this was not a case in which the term on which the plaintiff relies should have been implied.
It does not follow, however, that the plaintiff was never entitled to any part of the sum of £35,654. It is true that that sum was awarded by the trial judge to the plaintiff under the heading of damages for losses which the plaintiff “sustained as the result of the failure of the defendant to appoint a second physician”. However there was some confusion as to the loss in respect of which the sum of £35,654 was claimed as compensation. The plaintiff did not contend that the temporary medical consultants were as such or by virtue of their lack of permanence incompetent to perform their medical duties. He was critical of one consultant and fulsome in his praise of the other but neither criticism nor praise related to the duration of their appointment. His concern was that the absence of a second permanent consultant reduced the status of the hospital and imposed upon him an additional burden in relation to the administration of the hospital. It is true that he felt unable to take his full quota of holidays (54 days per annum) between 1988 and 1992, but it seems to me to have been demonstrated clearly that this was not due to the absence of a permanent medical consultant. In 1987 and 1988, that is to say, before the retirement of Dr Joyce he took 30 days and 36 days respectively. In 1989, 1990 and 1991, he took 22 days, 27 days and 21 days respectively. That very much
reduced leave coincided largely with the appointment of a medical consultant who did not enjoy his confidence. The figures for leave in those years contrasted dramatically with the 55 days leave he took in 1992, after the present temporary medical consultant had been appointed. Furthermore, the concept of heavier workloads would be difficult to reconcile with the greatly reduced number of patients. Indeed the consultants’ report referred to complained that the medical staff were being under worked.
As I see it the figure for £35,654 is not related to a claim for damages for the non-appointment of a medical consultant permanent or temporary. Whilst the plaintiff did give evidence about problems which he said arose as a result of the non-appointment of a permanent consultant at the end of the day he explained the computation in the revised claim under the heading “estimated damages – locum cover” in the following way (vol. 2, answer 461):”
“Well I am not saying I lost the sum, my lord, I am saying that based on clause 513 of the contract that I would be entitled to that sum because of the absence of a colleague and the fact that I would have been working for a week at least on my own. It says “If, for valid and true reasons, a locum cannot be obtained and a consultant colleague has to undertake all or part of the absent consultant’s work, other than that of cross cover as defined, then that part of the consultant’s work shall be regarded as that of a locum and remunerated accordingly”.”
Question 462:”
“Q. So what you are saying is that during a period when you would have been there on your own without Dr. Joyce being there and without a locum . . . is that correct?
A. That is correct my lord.”
Question 463:”
“Q. You say you are entitled to be paid additional to your normal salary, is that the point?
A. Well that is what the contract seems to say my lord.”
Question 466:”
“Q You are paid your own consultant’s salary but you say that you should be paid the locum’s salary on top of that because you are covering for your colleague?
A. That is what my interpretation of the contract says my lord.”
Question 472:”
“Q. What you are saying is that as a matter of conscience that where you have any two physicians in a hospital under that contract that they are all entitled to be paid double salary when their colleagues are off?
A. That is my interpretation of the contract my lord.”
That cross examination and the intervention of the judge made it crystal clear that the claim for £35,000 was not based on the failure of the Board to appoint a second permanent physician. Indeed it could not have been because the first two figures in the claim amounting to £15,087 related to the period up to the 6th June, 1988, which was a time at which there were two permanent medical physicians working in the hospital. The particular claim adumbrated by the plaintiff himself (but perhaps not clearly identified in the particulars) was not a claim for breach of contract; it was a claim for monies payable on foot of the contract. It was argued that whether or not the consultants were permanent or temporary if one or other of them was absent then a locum, properly so called, should have been retained to cover for him and if that was not done his colleague, whether permanent or temporary, was, or so the plaintiff contends, entitled under the terms of the contract to payment at the same rate as alocum in addition to his ordinary remuneration. This question which turns on the proper construction of the contract was never addressed in argument nor determined in express terms by the learned trial judge. The case before Keane J., was an action for breach of contract. The claim for payment as a locum is a claim under the contract which was not made in the pleadings or indeed formally presented at any time before the commencement of the proceedings. In my view the award of £35,654 cannot be sustained as damages for breach of the contract.
In awarding the sum of £42,312 the learned trial judge allowed in full the claim made by the plaintiff under a heading described in the revised claim as “estimated in patient loss of earnings”. The plaintiff estimated that in the years prior to 1988, he had an average of six private patientsper day and this fell steadily from 4.5 patients per day in 1989, to 1.5 in 1993. The loss in financial terms is then computed by reference to the amount paid by the Voluntary Health Insurance Board to the plaintiff in respect of in-patients in the years 1989 to 1993, and that is contrasted with the sum which would have been received if the full compliment of six inpatient medical cases had been treated per day. The explanation for the downturn as given by the plaintiff (at question 228, vol. 1) was:”
“The reason for the fall off in my Voluntary Health Insurance Board income was a direct consequence of inadequate bed space and the lack of good perception of the hospital in the community not only in relation to public patients but also in relation to private patients.”
That there was a dramatic fall off in both medical and surgical patients is beyond debate. The figures for admissions from 1980 to 1992, put in evidence by the Board confirmed this. The Board’s figures show medical admissions from 1980 to 1986, averaging approximately 12,000per year and thereafter falling in 1987, to 9,000 and reducing steadily in the subsequent years until there was a recovery in 1992. The validity of the claim made on behalf of the plaintiff was challenged in the cross-examination of him. In particular it was pointed out that the plaintiff could not assert that there was an enormous or colossal demand for beds in the hospital and at the same time contend that the facilities at the hospital were so bad that there was no demand for beds. In addition the plaintiff did concede (vol. 1, question 315) that his failure to obtain the requisite number of beds was due in part to a personality clash between himself and the surgeons who insisted upon taking or managed to take any available beds. The calculation of losses made by or on behalf of the plaintiff certainly was not a precise and inevitable relationship between the breach of contract by the Board and the estimated loss to the plaintiff. It was an attempt to demonstrate and quantify the loss which the plaintiff suffered.
The remainder of the award amounted to £15,000 and was identified by the learned trial judge in the penultimate paragraph of his judgment as being “for the stress and anxiety caused to him in both his professional and domestic life by the persistent failure of the Board to remedy his legitimate complaints”.
The plaintiff is entitled to be compensated for the general and any special damage caused to him by the failure of the Board to provide him with the resources for proper discharge of his duties as they had agreed to do. Unfortunately, the plaintiff’s claim in this regard was inextricably bound up with his unsustainable claims to damages for the alleged breach of contract in failing to appoint a permanent medical consultant. That factor impinges more strongly on the claim to general damages. It affects to a lesser extent the claim for special damage or the exercise on which that claim is based. However, the quantification of the special damage and the assumptions on which the evidence in that behalf was based are open to criticism. In particular, it was regrettable that the figures contained in the revised claim were not submitted to the Board in advance of the hearing so as to enable the same to be investigated in advance of the hearing and to be explored fully in the course thereof. I am very far from saying that a total sum of £57,312 would be an excessive award as damages for breach of contract. I merely conclude that the particular award and the manner in which it was segregated between special and general damages is unsatisfactory and may be unfair to either the plaintiff or the Board. I would allow the appeal and direct a retrial on the issue as to the damages, be they special or general, flowing from the Board’s breach of contract. Furthermore I would direct the plaintiff within eight weeks of today’s date to give full and precise particulars of all damages claimed by him.
The plaintiff must particularise:”
(a) Each and every of the facilities and resources for the proper discharge of the plaintiff’s duties which it is alleged the Board in breach of contract failed to make available to the plaintiff (excluding of course the provision of a second permanent medical consultant, the right to which has been rejected by this Court) and
(b) The damages which it is alleged flow from each and every such failure and breach of contract.
I feel that it might be helpful to comment on the remaining question which concerns the incidence of taxation on damages.
How tax may affect an award of damages was dealt with in a judgment delivered by me in Allen v. Ó Súilleabháin (Unreported, Supreme Court, 11th March, 1997) at p. 11 in the following terms:”
“As I understand it, the principle enunciated by Kenny J. in Glover v. B.L.N. Ltd. (No. 2) [1973] I.R. 432 and accepted by Finlay P. in Hickey v. Roches Stores [1980] I.L.R.M. 107, is that where damages (or the actual or notional income to be derived from the investment thereof) are exempt from tax that an appropriate adjustment or reduction in those damages must be made if the plaintiff is being compensated for a loss of income or profits which would have been liable to tax in his hands. The logic of this proposition is clear. The failure to make such an adjustment would result in the plaintiff receiving compensation which might very much exceed the loss which he suffered.”
In Allen v. Ó Súilleabháin (Unreported, High Court, Murphy J., 11th March, 1996) the actual or notional income to be derived from the investment of the damages awarded was expressly exempt from tax by virtue of s. 5 of the Finance Act, 1990, subject only to the compliance with the terms and provisions of that section. In Glover v. B.L.N. Ltd (No. 2) [1973] I.R. 432, the “silver handshake” provisions of s. 8 of the Finance Act, 1964, imposed tax on damages awarded as compensation for wrongful dismissal subject to an exemption in respect of the first £3,000 of such damages. Those particular statutory exemptions brought into play the principle which required the deduction of the tax element from all or part of the award. In Hickey v. Roches Stores [1980] I.L.R.M. 107, Finlay P., having found as a matter of law that the damages payable by the defendants would be subject to tax in the same way as the profits which they would have earned but for the breach of contract, understandably refused to countenance any reduction in respect of tax. These principles seem to me to be clear. The problem in the present case is that the liability to tax in respect of the damages awarded or any part thereof was not explored in argument before the learned trial judge or this Court. Certainly, it has not been suggested that any part of the damages which were awarded as compensation for a taxable income was exempt from tax. Whilst it is inescapable that some doubt may exist as to the incidence of taxation or the facts on which such liability depends, I do not believe that it would be proper for any court to compute the defendant’s liability to damages on the basis of the plaintiff’s liability to tax without a convincing case having been made for the adoption of that course. I am not satisfied that such a case was made here. I would reject this ground of appeal.
I would allow the appeal and direct a retrial on the issue as to damages for the breach of the defendant’s contract to provide proper resources for the plaintiff at Mallow Hospital.
Lynch J.
I agree.
Barron J.
I agree with the judgment of Murphy J.