Implied Terms
Case Law
Mears v Safecar Security Ltd (Pay)
[1981] IRLR 99
Slynn P
‘In our judgment the proper approach is to look at all the facts and the circumstances to see whether a term is to be implied that wages shall or shall not be paid during periods of absence through sickness. Such a term as the cases show may be implied from the custom or practice in the industry. It may be implied from the knowledge of the parties at the time the contract is made. The implication may depend upon whether the contract is one whether payment is due if the servant is ready, willing and able to work. It may depend not so much as to whether the employee is willing and ready or willing and able to work but on whether payment for the wages of the consideration for faithful service at other times during the contract and during the period of absence rather than for a particular week’s work actually performed. These are all matters which will have to be taken into account; so will the nature of the contract itself.’
Benjamin v Interlacing Ribbon Ltd (Pay)
[2005] UKEAT 363
Richardson J.
“Contract of Employment and Unfair Dismissal
We begin with the question of pay during sickness absence. It does not appear that the Tribunal had cited to it any authority on the question of pay during sickness absence. The leading modern case is Mears v Safecar Security Ltd [1981] IRLR 99 (in the Employment Appeal Tribunal) and 183 (in the Court of Appeal). The authorities prior to the decision in Mears are summarised in the judgment of Slynn P. Some of the authorities had said that a workman remained entitled to his wages throughout sickness and incapacity. Thus, for example, in Marrison v Bell [1939] 1ALL ER 745 Scott LJ had said:
“Those cases say in my opinion quite clearly that under a contract of service irrespective of the question of length of notice provided by that contract, wages continue through sickness and incapacity from sickness to do the work contracted for until the contract is terminated by a notice by the employer in accordance with the terms of the contract.”
However subsequent authorities had made it clear that the general principle laid down by Scott LJ had to be read subject to any term to be implied in a particular contract to the contrary effect. In the Appeal Tribunal Slynn P said:
“In our judgment the proper approach is to look at all the facts and the circumstances to see whether a term is to be implied that wages shall or shall not be paid during periods of absence through sickness. Such a term as the cases show may be implied from the custom or practice in the industry. It may be implied from the knowledge of the parties at the time the contract is made. The implication may depend upon whether the contract is one whether payment is due if the servant is ready, willing and able to work. It may depend not so much as to whether the employee is willing and ready or willing and able to work but on whether payment for the wages of the consideration for faithful service at other times during the contract and during the period of absence rather than for a particular week’s work actually performed. These are all matters which will have to be taken into account; so will the nature of the contract itself.”
He said also:
“The right approach is to ask on all the facts and circumstances of the case to which it is proper to have regard what term is to be implied. One does not begin by assuming the term as to payment is to be implied unless the employer displaces it.”
Finally, he said this in paragraph 32:
“It may be at the end of the day if there are no factors either way which can be properly relied upon that the correct inference is that if a man is employed for a period on a wage then if nothing else can be found the presumption will be that the wage is to be paid during the period of employment but if there are other factors it seems to us that they come in at the beginning of the exercise and not after certain presumptions have been made.”
The judgment of Slynn P was approved in the Court of Appeal: see the judgment of Stevenson LJ at paragraph 34. Stevenson LJ said that the correct approach was:
“An approach to the facts and evidence in each case with an open mind unprejudiced by any pre-conception, presumption or assumption.”
We think it very unlikely that the Tribunal if it had had in mind the guidance set out in Mears v Safecar Security Ltd would have expressed itself in the way it did in paragraph 16 of its Reasons.
The Tribunal’s task, in our judgment, was to look at all the facts and having looked at all the facts draw an inference one way or the other. It might have drawn the inference that no sick pay was to be payable. It might have drawn the inference that sick pay was to be payable. It might, in modern conditions, have drawn an inference that sick pay was to be payable but with statutory sick pay taken into account in some way.
We do not think that it is appropriate in the light of the guidance in Mears v Safecar Security Ltd to decide a case of this kind simply by saying that the Tribunal finds insufficient evidence to satisfy it that it was a term of the contract of employment. It would be hard on a claimant in a case of this kind in particular to decide the case on the burden of proof when contrary to law the employer had not provided the claimant with any statutory statement of terms and conditions.
in mind.
Devonald v Rosser & Sons (Providing Work)
[1906] 2 KB 728
Lord Alverston CJ
“ No distinction in principle can be drawn between wages by time and wages by piece. Piece work is only a method of ascertaining the amount of the wages which is to be paid to the workman… On the one hand we must consider the matter from the point of view of the employers who I agree will under ordinary circumstance desire to carry their works at a profit… On the other hand, we have to consider the position of the workman. The workman has to live; and the effect of the defendants’ contention is that if the master at any time found that his works were being carried on at a loss, he might at once close down his works and cease to employ his men, who, even if they gave notice to quit the employment, would be bound to the master for a period of at least twenty-eight days during which time they would be unable to earn any wages at all. I agree with Jelf J that that is an unreasonable contention from the workman’s point of view. In my opinion the necessary implication to be drawn from this contract is at least that the master will find a reasonable amount of work up to the expiration of a notice given in accordance with the contract.
…it seems that there is nothing unreasonable in the implication that the master shall look at least twenty-eight days ahead, or, to take the extreme case, as the notice has to be given on the first Monday in the month, fifty-seven days ahead, so as to place himself in a position to provide the workman with work during the period covered by the notice. ”
Elaney v Staples (Providing Work)
[1992] 2 WLR 451, [1992] 1 AC 687, [1992] ICR 483
Lord Browne-Wilkinson
The four ‘principal categories’ of payment in lieu of notice are as follows
‘ I agree with the Court of Appeal that the essential characteristic of wages is that they are consideration for work done or to be done under a contract of employment. If a payment is not referable to an obligation on the employee under a subsisting contract of employment to render his services it does not in my judgment fall within the ordinary meaning of the word ‘wages’. It follows that if an employer terminates the employment (whether lawfully or not) any payment of wages in respect of the period after the date of such termination is not a payment of wages (in the ordinary meaning of that word) since the employee is not under obligation to render services during that period.’
Miles v Wakefield Metropolitan District Council (Providing Work)
[1987] UKHL 15
Lord Bridge
“If an employee refuses to perform the full duties which can be required of him under his contract of service, the employer is entitled to refuse to accept any partial performance. The position then resulting, during any relevant period while these conditions obtain, is exactly as if the employee were refusing to work at all.”
Lord Brightman
“If an employee offers partial performance, as he does in some types of industrial conflict falling short of a strike, the employer has a choice. He may decline to accept the partial performance that is offered, in which case the employee is entitled to no remuneration for his unwanted services, even if they are performed.”
Lord Templeman
“For the past two years teachers have been engaged in sporadic strike action, usually on one day in a week. If Mr Sedley is right, educational authorities must pay for strike days unless after each day’s strike they issue dismissal notices. To show that the educational authorities have no intention of ruining the educational system by insisting on dismissal, the dismissal notice must presumably be accompanied by a reinstatement notice. This would finally submerge the teaching profession in paper.
The consequences of Mr. Sedley’s submissions demonstrate that his analysis of a contract of employment is deficient. It cannot be right that an employer should be compelled to pay something for nothing whether he dismisses or retains a worker. In a contract of employment wages and work go together. The employer pays for work and the worker works for his wages. If the employer declines to pay, the worker need not work. If the worker declines to work, the employer need not pay….
[…] ‘In those circumstances [of “go slow” action], the worker cannot claim that he is entitled to his wages under the contract because he is deliberately working in a manner designed to harm the employer. But the worker will be entitled to be paid on a quantum meruit basis for the amount and value of the reduced work performed and accepted.”
Wiluszynski v London Borough of Tower Hamlets (Providing Work)
[1989] ICR 439
Nicholls LJ
“The contrary conclusion would mean that the defendant would be obliged to continue to employ and pay the plaintiff even though part of the work required of him and others in his position would not be done. That cannot be right.
In my view, however, termination of the contract is not the only remedy available to an employer in such circumstances. A buyer of goods is entitled to decline to accept goods tendered to him which do not conform to a condition in the contract, without necessarily terminating the contract altogether. So with services… He can hold himself out as continuing to be ready and willing to carry out the contract of employment, and to accept from the employee work as agreed and to pay him for that work as agreed, while declining to accept or pay for part only of the agreed work…
The council did not wish to take any steps, and it did not take any steps, physically to prevent the plaintiff and the other estate officers concerned from remaining at their desks… But a person is not treated by the law as having chosen to accept that which is forced down his throat despite his objections.”
Collier v Sunday Referee Publishing (Providing Work)
[1940] KB 647
Asquith J
‘It is true that a contract of employment does not necessarily, or perhaps normally, oblige the master to provide the servant with work. Provided I pay my cook her wages regularly she cannot complain if I choose to take any or all of my meals out. In some exceptional cases there is an obligation to provide work. For instance, where the servant is remunerated by commission, or where (as in the case of an actor or singer) the servant bargains, among other things, for publicity, and the master, by withholding work, also withholds the stipulated publicity: see, for instance, Marbe v. George Edwardes (Daly’s Theatre), Ld.; but such cases are anomalous, and the normal rule is illustrated by authorities such as Lagerwall v. Wilkinson, Henderson & Clarke, Ld. (2) and Turner v. Sawdon & Co., where the plaintiffs (a commercial traveller and a salesman respectively, retained for a fixed period and remunerated by salary) were held to have no legal complaint so long as the salary continued to be paid……”
Langston v Amalgamated Union of Engineering Workers (Providing Work)
[1973] EWCA Civ 7 Denning MR
“ It is true that a contract of employment does not necessarily, or perhaps normally, oblige the master to provide the servant with work. Provided I pay my cook her wages regularly, she cannot complain if I choose to take any or all of my meals out”….
Mr. Justice Asquith went on to refer to two cases where a commercial traveller and a salesman
“were held to have no legal complaint so long as their salary continued to be paid, notwithstanding that owing to their employer’s action they were left with nothing to do. The employers were not bound to supply work to enable their employee as the phrase goes to ‘keep his hand in’, or to avoid the reproach of idleness, or even to make a profit out of a travelling allowance.”
That was said 33 years ago. Things have altered much since then. We have repeatedly said in this Court that a man has a right to work, which the Courts will protect, see Nagle v. Feilden (1966) 2 Q.B. 33; Hill v. Parsons (1972) 2 Ch. 305. I would not wish to express any decided view, but simply state the argument which could be put forward for Mr. Langston:- In these days an employer, when employing a skilled man, is bound to provide him with work. By which I mean that the man should be given the opportunity of doing his work when it is available and he is ready and willing to do it. A skilled man takes a pride in his work. He does not do it merely to earn money. He does it so as to make his contribution to the well-being of all. He does it so as to keep himself busy, and not idle. To use his skill, and to improve it. To have the satisfaction which comes of a task well done. Such as Longfellow attributed to the village blacksmith:-
“Something attempted, something done
Has earned a night’s repose.”
The Code of Practice contains the same thought. It says, at paragraph 8, that “management should recognise the employee’s need to achieve a sense of satisfaction in his job and snould provide for it so far as practicable.”
A parallel can be drawn in regard to women’s work. Many a married woman seeks work.. She does so when the children grow up and leave the home. She does it, not solely to earn money, helpful as it is: but to fill her time with useful occupation, rather than sit idly at home waiting for her husband to return. The devil tempts those who have nothing to do.
To my mind, therefore, it is arguable that in these days a man has, by reason of an implication in the contract, a right to work. That is, he has a right to have the opportunity of doing his work when it is there to be done. If this be correct, then if any person knowingly induces the employer to turn the man away – and thus deprive him of the opportunity of doing his work – then that person induces the employer to break his contract. It is none the less a breach, even though the employer pays the man his full wages. So also when fellow workers threaten to walk out unless a man is turned off the job, they threaten to induce a breach of contract. At any rate, the man who is suspended has a case for saying that they have induced or threatened to induce the employer to break the contract of employment.”
William Hill Organisation Ltd v Tucker (Providing Work)
[1998] EWCA Civ 615
LORD JUSTICE MORRITT
“3. We were referred to many more authorities than were drawn to the judge’s attention and have had greater opportunity than he did to consider the implications and effect of these rival submissions. I mention that because neither party appears to support the broad proposition, which I have quoted, on which the judge founded his decision. Neither side suggests that there is “a right to work” having any source other than the contract of employment. Moreover the submissions for each side are inconsistent with the existence of rights and obligations arising from the status of employer and employee as explained by Lord Steyn in Malik v Bank of Credit and Commerce International SA [l997] 3 WLR 95 at page 109. Thus it is common ground that the solution to the problem must be found from the terms of the contract between the Employer and Mr Tucker. I agree. One proposition which is clearly demonstrated by all the cases to which we were referred is that the question whether there is a “right to work” is one of construction of the particular contract in the light of its surrounding circumstances.
4. The issue is most clearly expressed in the judgment of Stirling LJ in Turner v Sawdon & Co . [1901] 2 KB 653 at page 659 in a passage expressly approved by the House of Lords in Herbert Clayton and Jack Waller Ltd v Oliver [l930] AC 209. He said
“It is an agreement by which the defendants agreed to engage and employ the plaintiff, and the plaintiff agreed to devote the whole of his time to their service. The question is, What is the meaning of the word “employ” as used in this agreement? It seems to me clear, and if authority be required we find it in the case of Emmens v Elderton , that the word “employ” is capable of two meanings – to retain in service, or to give actual work to be done by the person employed. There are many cases in which the nature of the work to be done shews which of these meanings should be adopted. Take the case of a medical man engaged for a term at a fixed payment. No one would say that employment must be found for him. On the other hand, in the case of an actor who accepts an engagement, it may be an important consideration with him to have an opportunity of displaying his abilities before the public, and it may be that there is an implied obligation on the part of the master to afford such an opportunity: Fechter v Montgomery . So in the case of a commission agent, to which reference has been made. The term “employ” being one with a flexible meaning, I feel the force of the argument that the plaintiff was to be employed in the capacity of salesman to serve and solicit orders, and so there should be a correlative duty on the employers to give him the opportunity of doing this.”
5. In more recent times the same point was made by Sir John Donaldson in Langston v AUEW (No.2) [l974] ICR 5l0 at page 52l. He said
“In our judgment, the crucial question to be asked is “What is the consideration moving from the employers under the contract of employment?” In the case of theatrical performers it is a salary plus the opportunity of becoming better known. Thus a failure to pay the salary produces a partial failure of the consideration and thus a breach of contract. But so does the cancellation of the performance, even if the salary is paid: see Herbert Clayton and Jack Waller v Oliver [l930] A.C. 209. Similarly the consideration in a commission or piece work contract of employment is the express obligation to pay an agreed rate for work done plus the implied obligation to provide a reasonable amount of work: see Devonald v Rosser & Sons [l906] 2 K.B. 728. In a contract for the employment of one who needs practice to maintain or develop his skills, the consideration will include an obligation to pay the salary or wage, but it may also extend to an obligation to provide a reasonable amount of work. The complainant’s work as a spot welder may have been in the “skilled” category, but we do not think that he needs practice in order to maintain his skills. There are, however, other cases in which the sole consideration moving from the employer is the obligation to pay a wage. An example is provided by Turner v Sawdon & Co. [l90l] 2 K.B. 653.”
6. Given that the question must be resolved by construing the particular contract of employment in the light of its surrounding circumstances previous cases decided on their own wording and circumstances are of limited value. But in this field the cases do illustrate certain categories and trends which are of assistance. Thus in the case of theatrical engagements the courts have been ready to find an obligation on the part of the employer to afford the opportunity to the employee to perform the part for which he was engaged. cf Fechter v Montgomery (l863) 33 Beav. 22; Marbe v George Edwardes (Daly’s Theatre) Ltd [l928] l KB 269 and Herbert Clayton and Jack Waller Ltd v Oliver [l930] AC 209. Similarly engagement for a specific project such as employment on a specific voyage ( Driscoll v Australian RMSN Co . (l859) l F & F 458) or in a specific and unique post such as the chief sub-editor of a newspaper ( Collier v Sunday Referee Publishing Co. Ltd [l940] 2 KB 647) or as the manager of an overseas business ( Addis v Gramophone Co Ltd [l909] AC 488) have been treated by the courts as giving rise to an obligation on the part of the employer not to do anything which puts the promised employment out of his power. And where the promised remuneration depends on the employer providing the opportunity to earn it then an obligation to afford the employee an opportunity so to do is readily implied. cf Devonald v Rosser [l906] 2 KB 728 and Addis v Gramophone Co Ltd [l909] AC 488.
7. In the case of employees engaged for an indefinite term and at a fixed wage or salary the courts have been much more reluctant so to construe the contract as to cast on the employer an obligation over and above the payment of the promised remuneration. Thus the claim for such an obligation was rejected in the cases of a representative salesman ( Turner v Sawdon & Co . [l90l] 2 KB 653) and, by implication, of domestic servants ( Collier v Sunday Referee Publishing Co. Ltd [l940] 2 KB 647).
8. But as social conditions have changed the courts have increasingly recognised the importance to the employee of the work, not just the pay. Thus in Langston v AUEW [l974] Lord Denning MR considered that it was open to a welder to argue that
“..a man has by reason of an implication in the contract a right to work. That is he has a right to have the opportunity of doing his work when it is there to be done.”
Cairns LJ thought it arguable that the contract of employment gave the employee “a right to attend normally at his place of work”. Stephenson LJ likewise recognised that the employee might be able to show that
“he has a right to work out any notice which he may be given, that it is his employer’s duty to allow him to exercise that right by providing him with the work, and that by continuing to suspend him on full pay, as they are doing, they are in breach of their contract of employment with him.”
9. In Provident Financial Group v Hayward [l989] ICR l60 there was a specific term absolving the employer from providing any work so that the question of construction did not arise. But in the context of the exercise of the discretion of the court as to how long to impose the restraint Dillon LJ observed
“The employee has a concern to work and a concern to exercise his skills. That has been recognised in some circumstances concerned with artists and singers who depend on publicity, but it applies equally, I apprehend, to skilled workmen and even to chartered accountants.”
Though it did not arise in that case Taylor LJ recognised that the employee would be concerned if in the period of restraint his skill was likely to atrophy. …………………….
20. It is important to appreciate the limits to the obligation for which Mr Tucker contends. It is not suggested that there is an obligation to find work if there is none to be done or none which can be done with profit to the employer. Nor does he contend that the employer is bound to allocate work to him in preference to another employee if there is not enough for both of them. He submits that if the job is there to be done and the employee was appointed to do it and is ready and willing to do so then the employer must permit him to do so. He submits, by reference to the analogy of the cook given by Asquith J in Collier v Sunday Referee Publishing Co. Ltd [l940] 2 KB 647, that though that judge was not bound to eat the food his cook provided he was not entitled to put another cook in her kitchen. So, likewise in this case, he submits, the Employer is not entitled to exclude Mr Tucker from the post to which they appointed him; the work is there to be done and it is the obligation of the Employer to permit Mr Tucker to do it unless, which there is not, there is a provision in the contract absolving the Employer from that obligation.
21. For my part I accept that the contract of employment in this case can and should be construed as giving rise to such an obligation on the part of the Employer. First, the post of Senior Dealer was a specific and unique post. It is not in dispute that Mr Tucker was asked by the Employer in August l994 to investigate what was involved in setting up a spread betting business. After considering the product of his researches the Employer decided to extend its operations into that field. Mr Tucker was the only senior dealer. There were juniors below him and a manager above him but he was the person appointed to conduct this new and specialised business. No doubt every employment nowadays has a title and job description which make it sound specific and unique but I have no doubt that the post to which Mr Tucker was appointed merited that description both in substance as well as form. Secondly, the skills necessary to the proper discharge of such duties did require their frequent exercise. Though it is not a case comparable to a skilled musician who requires regular practice to stay at concert pitch I have little doubt that frequent and continuing experience of the spread betting market, what it will bear and the subtle changes it goes through, is necessary to the enhancement and preservation of the skills of those who work in it.
22. Both those considerations arise from the surrounding circumstances in which the contract falls to be construed. But, thirdly, when one turns to the terms of the contract there are further considerations pointing to the same conclusion. Not only does the contract provide for the hours and days of work so as to fill the normal working week, it specifically imposes on the employee the obligation to work those hours necessary to carry out his duties in a full and professional manner. If the work is available it is inconsistent with that provision if the employee is entitled or bound to draw the remuneration without doing the work. To my mind that consideration is unaffected by the provision that the duties of members of staff are as assigned by the Employer or by individual managers. Not only is it followed immediately by a further stipulation requiring all staff to work such hours as are necessary for the proper performance of their duties but, in this case, the post of senior dealer in the spread betting business itself involved a broad assignment of duties. But the absence of an obligation on the Employer, as contended for by Mr Tucker, would be contrary to two express terms. The first is that appearing under the heading “Training and Development”. In that part of the Staff Handbook the Employer declares that
“The most important asset in any business is its employees and the [Employer] is prepared to invest in its staff to ensure that they have every opportunity to develop their skills.”
The second is the express power of suspension, to which I have already referred, which is limited to cases where more time is required to investigate serious allegations of breach of discipline or security. If the Employer were to be entitled to keep its employee in idleness the investment in its staff might be as illusory as the limited power of suspension would be unnecessary.
23. For these reasons I conclude that on the proper construction of this contract of employment the Employer was under an obligation to permit Mr Tucker to perform the duties of the post to which it had appointed him in accordance with his contract as well during the period of his notice as before it was given. In reaching this conclusion it is not necessary to accept or reject the propositions advanced on either side; a consideration of each plays its part in the construction of the contract but cannot be conclusive. I agree with the judge’s conclusion and refusal to grant the injunction sought. In those circumstances it is unnecessary to consider the basis on which, if he had one, he exercised his discretion. “
Lister v Romford Ice and Cold Storage Co Ltd (Employee’s Duties)
[1956] UKHL 6
Lord Tucker
“(1) the duty to give reasonable notice in the absence of custom or express agreement; (2) the duty to obey lawful orders of the master; (3) the duty to be honest and diligent in the master’s service (4) the duty to take reasonable care of his master’s property entrusted to him and generally in the performance of his duties; (5) to account to his master for any secret commission or remuneration received by him; (6) not to abuse his master’s confidence in matters pertaining to his services.
Walker v Northumberland County Council (Psychological Damage)
[1994] EWHC QB 2
Mr Justice Caiman
“There has been little judicial authority on the extent to which an employer owes to his employees a duty not to cause them psychiatric damage by the volume or character of the work which the employees are required to perform. It is clear law that an employer has a duty to provide his employee with a reasonably safe system of work and to take reasonable steps to protect him from risks which are reasonably foreseeable. Whereas the law on the extent of this duty has developed almost exclusively in cases involving physical injury to the employer as distinct from injury to his mental health, there is no logical reason why risk of psychiatric damage should be excluded from the scope of an employer’s duty of care or from the co-extensive implied term in the contract of employment. That said, there can be no doubt that the circumstances in which claims based on such damage are likely to arise will often give rise to extremely difficult evidential problems of foreseeability and causation. This is particularly so in the environment of the professions where the plaintiff may be ambitious and dedicated, determined to succeed in his career in which he knows the work to be demanding, and may have a measure of discretion as to how and when and for how long he works, but where the character or volume of the work given to him eventually drives him to breaking point. Given that the professional work is intrinsically demanding and stressful, at what point is the employer’s duty to take protective steps engaged? What assumption is he entitled to make about the employee’s resilience, mental toughness and stability of character given that people of clinically normal personality may have a widely differing ability to absorb stress attributable to their work?
Mr Brian Langstaff QC, on behalf of the plaintiff, in the course of his conspicuously well-presented submissions, argues that the increasing pressure of work on Mr Walker and generally on his area, as well as the frustrations and discouragement resulting from the lack of action by his superiors foreseeably exposed him, as a personality of ordinary robustness, to increasing stress and that because excessive stress causes mental illness, a “real risk” of psychiatric injury must at all material times from 1984 have been reasonably foreseeable to the Council. He argues that, by analogy with the relatively small magnitude of risk of injury envisaged as sufficient to give rise to a duty in such cases as Bolton v Stone [1961] AC 850, the foreseeable risk of psychiatric injury to Mr Walker was sufficiently great for the Council to be under a duty to take steps to alleviate his position. Mr Langstaff has drawn attention to the fact that, although in Bolton v Stone the evidence was that the cricket ball had been hit into the highway only six times in over thirty years and that nobody had previously suffered injury, a majority of the House of Lords, while concluding that the risk of injury was properly held by the trial judge to be too small to make it reasonable for the defendants to act to prevent it, nonetheless expressed the view that the case was on its facts near the borderline: see Lord Normond at page 861, Lord Oaksey at page 863 and Lord Reid at page 86 7.
It is reasonably clear from the authorities that once a duty of care has been established the standard of care required for the performance of that duty must be measured against the yardstick of reasonable conduct on the part of a person in the position of that person who owes the duty. The law does not impose upon him the duty of an insurer against all injury or damage caused by him, however unlikely or unexpected and whatever the practical difficulties of guarding against it. It calls for no more than a reasonable response, what is reasonable being measured by the nature of the neighbourhood relationship, the magnitude of the risk of injury which was reasonably foreseeable, the seriousness of the consequence for the person to whom the duty is owed of the risk eventuating and the cost and practicability of preventing the risk. That these are the individual constituents of the yardstick of reasonable conduct is firmly supported by the observations of Lord Thankerton in Glasgow Corporation v Muir [1943] AC 448 at page 454:
“In my opinion, it has long been held in Scotland that all that a person can be bound to foresee are the reasonable and probable consequences of the failure to take care, judged by the standard of the ordinary reasonable man……. The court must be careful to place itself in the position of the person charged with the duty and to consider what he or she should have reasonably anticipated as a natural and probable consequence of neglect, and not to give undue weight to the fact that a distressing accident has happened…..”
To the same effect is the speech of Lord Porter in Bolton v Stone, supra, at page 858:
“It is not enough that the event should be such as can reasonably be foreseen. The further result that injury is likely to follow must also be such as a reasonable man would contemplate before he can be convicted of actionable negligence. Nor is the remote possibility of injury occurring enough. There must be sufficient probability to lead a reasonable man to anticipate it. The existence of some risk is an ordinary incident of life, even when all due care has been, as it must be, taken.”
And in Paris v Stepney Borough Council [1951] AC 367 at page 375 Lord Simonds expressly recognised the potential seriousness of injury as a relevant factor in assessing the standard of care to be expected of the reasonable employer. In Latimer v AEC Ltd [1952] 2 QB 701, Lord Denning observed:
“…in every case of foreseeable risk it is a matter of balancing the risk against the measures necessary to eliminate it.”
and in Overseas Tankship (UK) Ltd v The Miller Steamship Co Ltd [1967] AC 617 at page 542, Lord Reid said:
“It does not follow that, no matter what the circumstances may be, it is justifiable to neglect a risk of such a small magnitude. A reasonable man would only neglect such a risk if he had some valid reason for doing so, eg that it would involve considerable expense to eliminate the risk. He would weigh the risk against the difficulty of eliminating it.”
The practicability of remedial measures must clearly take into account the resources and facilities at the disposal of the person or body owing the duty of care: see Lord Reid in British Railways Board v Herrington [1972] AC 877 at page 899, and the purpose of the activity which has given rise to the risk of injury: the risk must be balanced “against the end to be achieved”: see Denning LJ in Watt v Hertfordshire CC [1954] 1 WLR 835 at page 838.
The approach to reasonable foreseeability of the risk of work-engendered psychiatric injury is helpfully illustrated by the judgment of Miles CJ in Gillespie v Commonwealth of Australia (1991) ACTR l. That case involved a claim by a former Australian diplomat against the Australian Foreign Affairs and Trade Department in respect of a mental breakdown which he suffered in consequence of stresses created by the living conditions in Caracas, Venezuela, to where he had been posted. The plaintiff contended that such stress and therefore his injury would have been avoided or reduced if the defendants had, before sending him to Caracas, prepared him by a course of training for the severely stressful conditions likely to be encountered. Miles CJ observed at page 15
“In the present case it is not necessary to consider foreseeability with respect to the existence of a duty of care, because the relationship of employer and employee itself gives rise to that duty of care. Foreseeability for present proposes is to be considered only in so far as the degree of remoteness of the harm sustained by the plaintiff set the parameters of the steps that a reasonable person in the position of the defendant would have taken to reduce the risk to the extent that any “unnecessary” risk was eliminated. In practical terms this means that the plaintiff must show that the defendant unreasonably failed to take such steps as would reduce the risk to what was a reasonable, that is a sociably acceptable, level. It may be that this takes the court into an area of value judgment for which the inscrutability of a jury verdict may provide a more appropriate means of expression.”
He held that the magnitude of the harm was considerable but that there was not a high degree of probability that harm of that kind would eventuate. At pages 17-18 of his judgment Miles CJ addresses himself first to the question whether the factors involved in moving to such an environment as Caracas would have involved a reasonably foreseeable risk of breakdown to any ordinary person and secondly to the question whether it was foreseeable that the plaintiff was more susceptible to psychological harm than an ordinary member of the diplomatic staff in Caracas. Having held that some risk of psychiatric harm was reasonably foreseeable, but that the plaintiff’s particular vulnerability was not foreseeable, he concluded that even if the defendant had taken steps to warn the plaintiff it was not established that he would not have gone to Caracas or, had he done so, avoided his mental breakdown. Consequently the plaintiff’s claim failed.
In Petch v Customs and Excise Commissioners [1993] ICR 789 the plaintiff claimed damages for negligence against the defendants for causing him to have a mental breakdown by the volume and stressful character of the work he was required to do. Dillon LJ approached the issue of breach of duty in these words
“. . .I take the view, in the light of the general circumstances of this case and the other findings of the judge which I have set out, that, unless senior management in the defendants’ department were aware or ought to have been aware that the plaintiff was showing signs of impending breakdown, or were aware or ought to have been aware that his workload carried a real risk that he would have a breakdown, then the defendants were not negligent in failing to avert the breakdown of October 1974.”
In the present case, the mental illness and the lasting impairment of his personality which Mr Walker sustained in consequence of the 1987 breakdown was so substantial and damaging that the magnitude of the risk to which he was exposed must be regarded as relatively large.
Moreover, there can, in my judgment, be no doubt on the evidence that by 1985 at the latest, it was reasonably foreseeable to Mr Davison, given the information which I have held that he then had, that by reason of stress of work there was in general some risk that Mr Walker might sustain a mental breakdown of some sort in consequence of his work. That said, how great was the reasonably-foreseeable risk? Was the risk of incidence of illness so slight as to be in all the circumstances negligible or was it a materially substantial risk? There is no evidence that the Council had hitherto encountered mental illness in any other of its area officers or that area officers with heavy work loads, or others in middle management in the Social Services, as distinct from field workers, were particularly vulnerable to stress-induced mental illness. Accordingly the question is whether it ought to have been foreseen that Mr Walker was exposed to a risk of mental illness materially higher than that which would ordinarily affect a social services middle manager in his position with a really heavy work load. For if the foreseeable risk were not materially greater than that, there would not, as a matter of reasonable conduct, be any basis upon which the Council’s duty to act arose.”
Malik v Bank of Credit and Commerce International SA (Trust and Confidence)
[1997] UKHL 23; [1998] AC 20;
Lord Nicholls
“An implied obligation
Two points can be noted here. First, as a matter of legal analysis, the innocent employee’s entitlement to leave at once must derive from the bank being in breach of a term of the contract of employment which the employee is entitled to treat as a repudiation by the bank of its contractual obligations. That is the source of his right to step away from the contract forthwith.
In other words, and this is the necessary corollary of the employee’s right to leave at once, the bank was under an implied obligation to its employees not to conduct a dishonest or corrupt business. This implied obligation is no more than one particular aspect of the portmanteau, general obligation not to engage in conduct likely to undermine the trust and confidence required if the employment relationship is to continue in the manner the employment contract implicitly envisages.
Second, I do not accept the liquidators’ submission that the conduct of which complaint is made must be targeted in some way at the employee or a group of employees. No doubt that will often be the position, perhaps usually so. But there is no reason in principle why this must always be so. The trust and confidence required in the employment relationship can be undermined by an employer, or indeed an employee, in many different ways. I can see no justification for the law giving the employee a remedy if the unjustified trust-destroying conduct occurs in some ways but refusing a remedy if it occurs in others. The conduct must, of course, impinge on the relationship in the sense that, looked at objectively, it is likely to destroy or seriously damage the degree of trust and confidence the employee is reasonably entitled to have in his employer. That requires one to look at all the circumstances.
Breach
The objective standard just mentioned provides the answer to the liquidators’ submission that unless the employee’s confidence is actually undermined there is no breach. A breach occurs when the proscribed conduct takes place: here, operating a dishonest and corrupt business. Proof of a subjective loss of confidence in the employer is not an essential element of the breach, although the time when the employee learns of the misconduct and his response to it may affect his remedy.
The contrary argument of principle is that since the purpose of the trust and confidence term is to preserve the employment relationship and to enable that relationship to prosper and continue, the losses recoverable for breach should be confined to those flowing from the premature termination of the relationship. Thus, a breach of the term should not be regarded as giving rise to recoverable losses beyond those I have described as premature termination losses. In this way, the measure of damages would be commensurate with, and not go beyond, the scope of the protection the trust and confidence term is intended to provide for the employee.
This is an unacceptably narrow evaluation of the trust and confidence term. Employers may be under no common law obligation, through the medium of an implied contractual term of general application, to take steps to improve their employees’ future job prospects. But failure to improve is one thing, positively to damage is another. Employment, and job prospects, are matters of vital concern to most people. Jobs of all descriptions are less secure than formerly, people change jobs more frequently, and the job market is not always buoyant. Everyone knows this. An employment contract creates a close personal relationship, where there is often a disparity of power between the parties. Frequently the employee is vulnerable. Although the underlying purpose of the trust and confidence term is to protect the employment relationship, there can be nothing unfairly onerous or unreasonable in requiring an employer who breaches the trust and confidence term to be liable if he thereby causes continuing financial loss of a nature that was reasonably foreseeable. Employers must take care not to damage their employees’ future employment prospects, by harsh and oppressive behaviour or by any other form of conduct which is unacceptable today as falling below the standards set by the implied trust and confidence term.
This approach brings one face to face with the decision in the wrongful dismissal case of Addis v. Gramophone Co. Ltd. [1909] AC 488. It does so, because the measure of damages recoverable for breach of the trust and confidence term cannot be decided without having some regard to a comparable question which arises regarding the measure of damages recoverable for wrongful dismissal. An employee may elect to treat a sufficiently serious breach of the trust and confidence term as discharging him from the contract and, hence, as a constructive dismissal. The damages in such a case ought, in principle, to be the same as they would be if the employer had expressly dismissed the employee. The employee should be no better off, or worse off, in the two situations. In principle, so far as the recoverability of continuing financial losses are concerned, there is no basis for distinguishing (a) wrongful dismissal following a breach of the trust and confidence term, (b) constructive dismissal following a breach of the trust and confidence term, and (c) a breach of the trust and confidence term which only becomes known after the contract has ended for other reasons. The present case is in the last category, but a principled answer cannot be given for cases in this category without considering the other two categories from which it is indistinguishable.
Addis v. Gramophone Co.
Against this background I turn to the much discussed case of Addis v. Gramophone Co. Ltd. [1909] AC 488. Mr. Addis, it will be recalled, was wrongfully and contumeliously dismissed from his post as the defendant’s manager in Calcutta. At trial he was awarded damages exceeding the amount of his salary for the period of notice to which he was entitled. The case is generally regarded as having decided, echoing the words of Lord Loreburn L.C., at p. 491, that an employee cannot recover damages for the manner in which the wrongful dismissal took place, for injured feelings or for any loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment. In particular, Addis is generally understood to have decided that any loss suffered by the adverse impact on the employee’s chances of obtaining alternative employment is to be excluded from an assessment of damages for wrongful dismissal: see, for instance, O’Laoire v. Jackel International Ltd. (No. 2) [1991] I.C.R. 718, 730-731, following earlier authorities; in Canada, the decision of the Supreme Court in Vorvis v. Insurance Corporation of British Columbia (1989) 58 D.L.R. (4th) 193, 205; and, in New Zealand, Vivian v. Coca-Cola Export Corporation [1984] 2 N.Z.L.R. 289, 292; Whelan v. Waitaki Meats Ltd. [1991] 2 N.Z.L.R. 74, where Gallen J. disagreed with the decision in Addis, and Brandt v. Nixdorf Computer Ltd. [1991] 3 N.Z.L.R. 750.
For present purposes I am not concerned with the exclusion of damages for injured feelings. The present case is concerned only with financial loss. The report of the facts in Addis is sketchy. Whether Mr. Addis sought to prove that the manner of his dismissal caused him financial loss over and above his premature termination losses is not clear beyond a peradventure. If he did, it is surprising that their Lordships did not address this important feature more specifically. Instead there are references to injured feelings, the fact of dismissal of itself, aggravated damages, exemplary damages amounting to damages for defamation, damages being compensatory and not punitive, and the irrelevance of motive. The dissenting speech of Lord Collins was based on competence to award exemplary or vindictive damages.
However, Lord Loreburn’s observations were framed in quite general terms, and he expressly disagreed with the suggestion of Lord Coleridge C.J. in Maw v. Jones 25 Q.B.D. 107, 108, to the effect that an assessment of damages might take into account the greater difficulty which an apprentice dismissed with a slur on his character might have in obtaining other employment. Similarly general observations were made by Lord James of Hereford, Lord Atkinson, Lord Gorell and Lord Shaw of Dunfermline.
In my view these observations cannot be read as precluding the recovery of damages where the manner of dismissal involved a breach of the trust and confidence term and this caused financial loss. Addis v. Gramophone Co. Ltd. was decided in the days before this implied term was adumbrated. Now that this term exists and is normally implied in every contract of employment, damages for its breach should be assessed in accordance with ordinary contractual principles. This is as much true if the breach occurs before or in connection with dismissal as at any other time.
This approach would accord, in its result, with the approach adopted by courts and tribunals in unfair dismissal cases when exercising the statutory jurisdiction, currently limited to a maximum of £11,300, to award an amount of compensation which the court or tribunal considers “just and reasonable” in all the circumstances. Writing on a clean slate, the courts have interpreted this as enabling awards to include compensation in respect of the manner and circumstances of dismissal if these would give rise to a risk of financial loss by, for instance, making the employee less acceptable to potential employers: see sections 123 and 124 of the Employment Rights Act 1996 and Norton Tool Co. Ltd. v. Tewson [1973] 1 WLR 45.
I do not believe this approach gives rise to artificiality. On the contrary, the trust and confidence term is a useful tool, well established now in employment law. At common law damages are awarded to compensate for wrongful dismissal. Thus, loss which an employee would have suffered even if the dismissal had been after due notice is irrecoverable, because such loss does not derive from the wrongful element in the dismissal. Further, it is difficult to see how the mere fact of wrongful dismissal, rather than dismissal after due notice, could of itself handicap an employee in the labour market. All this is in line with Addis. But the manner and circumstances of the dismissal, as measured by the standards of conduct now identified in the implied trust and confidence term, may give rise to such a handicap. The law would be blemished if this were not recognised today. There now exists the separate cause of action whose absence Lord Shaw of Dunfermline noted with “a certain regret”: see Addis v. Gramphone Co. Ltd. [1909] AC 488, 504. The trust and confidence term has removed the cause for his regret.
Breach of contract and reputation
I must now turn to two submissions made concerning injury to reputation. The liquidators submitted that injury to reputation is protected by the law of defamation. The boundaries set by the tort of defamation are not to be side-stepped by allowing a claim in contract that would not succeed in defamation: see Lonrho Plc v. Fayed (No. 5) [1993] 1 W.L.R. 1489, 1496, per Dillon L.J. Here, it was submitted, a claim in defamation would not succeed: the bank made no defamatory statements, either referring to the appellants or at all. This submission is misconceived.
I agree that the cause of action known to the law in respect of injury to reputation is the tort of defamation. With certain exceptions this tort provides a remedy, where the necessary ingredients are present, whether or not the injury to a person’s reputation causes financial loss. No proof of actual damage is necessary, and damages are at large. If, as a result of the injury to his reputation the plaintiff does in fact suffer financial loss, this may be recoverable in a defamation action as “special damage”.
All this is commonplace. It by no means follows, however, that financial loss which may be recoverable as special damage in a defamation action is irrecoverable as damages for breach of contract. If a breach of contract gives rise to financial loss which on ordinary principles would be recoverable as damages for breach of contract, those damages do not cease to be recoverable because they might also be recoverable in a defamation action. There can be no justification for artificially excising from the damages recoverable for breach of contract that part of the financial loss which might or might not be the subject of a successful claim in defamation. Hallett J. summarised the position in Foaminol Laboratories Ltd. v. British Artid Plastics Ltd. [1941] 2 All E.R. 393, 399-400:
“. . . a claim for mere loss of reputation is the proper subject of an action for defamation, and cannot ordinarily be sustained by means of any other form of action . . . However . . . if pecuniary loss can be established, the mere fact that the pecuniary loss is brought about by the loss of reputation caused by a breach of contract is not sufficient to preclude the plaintiffs from recovering in respect of that pecuniary loss.”
Furthermore, the fact that the breach of contract injures the plaintiff’s
reputation in circumstances where no claim for defamation would lie is not, by itself, a reason for excluding from the damages recoverable for breach of contract compensation for financial loss which on ordinary principles would be recoverable. An award of damages for breach of contract has a different objective: compensation for financial loss suffered by a breach of contract, not compensation for injury to reputation.
Sometimes, in practice, the distinction between damage to reputation and financial loss can become blurred. Damage to the reputation of professional persons, or persons carrying on a business, frequently causes financial loss. Nonetheless, the distinction is fundamentally sound, and when awarding damages for breach of contract courts take care to confine the damages to their proper ambit: making good financial loss. In Herbert Clayton and Jack Waller Ltd. v. Oliver [1930] A.C. 209, 220, when considering an award of damages to an actor who should have been billed to appear at the London Hippodrome, Lord Buckmaster regarded loss of publicity rather than loss of reputation as the preferable expression. In Aerial Advertising Co. v. Batchelors Peas Ltd. (Manchester) [1938] 2 All E.R. 788, 796-797, where aerial advertising (“Eat Bachelors Peas”) took place during Armistice Day services, Atkinson J. was careful to confine damages to the financial loss flowing from public boycotting of the defendant’s goods and to exclude damages for loss of reputation. Lord Denning M.R. drew the same distinction in GKN Centrax Gears Ltd. v. Matbro Ltd. [1976] 2 Lloyd’s Rep. 555, 573.
Breach of contract and existing reputation
The second submission concerning reputation was that the appellants’ claims for damages to their existing reputations is barred by the decision of the Court of Appeal in Withers v. General Theatre Corporation Ltd. [1933] 2 K.B. 536.
There is an acute conflict between this decision and the earlier decision, also of the Court of Appeal, in Marbe v. George Edwardes (Daly’s Theatre) Ltd. [1928] 1 K.B. 269. In Marbe clear views were expressed that when assessing damages for loss flowing from a failure to provide promised publicity, the loss may include loss to existing reputation: see Bankes L.J., at p. 281, and Atkin L.J., at p. 288. In Withers equally clear views were firmly stated to the contrary by all three members of the court: see Scrutton L.J., at p. 547, Greer L.J., at p. 554, and Romer L.J., at p. 556. I have to say that, faced with the embarrassing necessity to choose, I prefer the views expressed in Marbe. They accord better with principle. Loss of promised publicity might cause an actor financial loss, for two reasons: first, through loss of opportunity to enhance his professional reputation and, secondly, his absence from the theatre scene might actually damage his existing professional reputation. If as a matter of fact an actor does suffer financial loss under both heads, and that is a question of evidence, I can see no reason why the law should deny recovery of damages in respect of the second head of loss.
Conclusion
For these reasons I would allow these appeals. The agreed set of assumed facts discloses a good cause of action. Unlike the courts below, this House is not bound by the observations in Addis v. Gramophone Co. Ltd. [1909] AC 488 regarding irrecoverability of loss flowing from the manner of dismissal, or by the decision in Withers v. General Theatre Corporation Ltd. [1933] 2 K.B. 536.”
Cresswell v Board of Inland Revenue (Training)
[1984] ICR 508
Walton J
“Of course, in a proper case the employer must provide any necessary training…
One of the main functions of a computer is to store records and so it is well within the scope of the clerical assistant’s job to help in keeping the necessary records by entering the information upon a computer. This does not, pace some of the wilder suggestions that have been made in this case, make him a computer operator any more than a customer who draws cash from a service till facility afforded by his bank is a computer operator because he is required to feed certain information into the service till as a pre-requisite to drawing the cash he requires. Of course, the transaction here is one way, but it is no more outside the scope of the duties of a clerical assistant than filing the details desired to be recorded upon a card; the essential step is the same in both cases. And when one comes to consider the tax officer and tax officer higher grade, the matter is, if anything, even clearer. Here, although I think also the words “computer operator,” or, more picturesquely, “slave to the machine” were bandied about during the course of the trial, it is extremely difficult to think that, if an entirely unprejudiced observer were to sit in the offices of any of the 14 districts for any length of time, observing intelligently all that went on, and was then asked, what job have these people got, he would not in all conscience be able to say that they were anything other than tax officers; that is to say, officers working the P.A.Y.E. tax system in all its manifold aspects.
Of course the changes in working methods and practices which COP brings in its train are great — although I think that the evidence has tended to exaggerate them. But that, as it seems to me, is not the point. COP merely introduces up to date modern methods for dealing with bulk problems: it leaves the jobs done by those who operate the new methodology precisely the same as before, although the content of some of the jobs, most notably that of the grade of clerical assistant, will have been considerably altered, but in no case altered anything like sufficiently to fall outside the original description of the proper functions of the grade concerned. Moreover, the contrary conclusion would fly in the face of common sense. Although doubtless, all of us, being conservative (with a small “c”) by nature desire nothing better than to be left to deepen our accustomed ruts, and hate change, a tax officer has no right to remain in perpetuity doing one defined type of tax work in one particular way.
Reading v Attorney-General
[1951] UKHL 1
Lord Porter House of Lords
“ In these circumstances Denning J, held that the Crown was entitled to the money in question. It was, in his view, immaterial to consider whether the method of seizure was justified or not. Even if it was not, the Crown had a valid counterclaim and. avoiding a circuity of action, could thus defeat the Appellant’s claim. ” It is”, he says, ” a claim for restitution of moneys ” which, in justice, ought to be paid over.” It was suggested in argument that the learned judge founded his decision solely upon the doctrine of unjust enrichment and that that doctrine was not recognised by the law of England. My Lords, the exact status of the law of unjust enrichment is not yet assured. It holds a predominant place in the law of Scotland and, I think, of the United States, but I am content for the purposes of this case to accept the view that it forms no part of the law of England and that a right to restitution so described would be too widely stated. But. indeed, this doctrine is not of the essence of Denning, J.’s, judgment. His reasoning is to be found in the passage which succeeds that quoted. He says:
“In my judgment, it is a principle of law that if a servant takes advantage of his service by violating his duty of honesty and good faith, to make a prom for himself, in this sense, that the assets of which he has control, or the facilities which he enjoys, or the position which he occupies, are the real cause of his obtaining the money, as distinct from being the mere opportunity for getting it, that is to say, if they play the predominant part in his obtaining the money, then he is accountable for it to the master. It matters not that the master has not lost any profit, nor suffered any damage. Nor does it matter that the master could not have done the act himself. It is a case where the servant has unjustly enriched himself by virtue of his service without his master’s sanction. It is money which the servant ought not to be allowed to keep, and the law says it shall be taken from him and given to his master, because he got it solely by reason of the position which he occupied as a servant of his master.”
And again,
“The uniform of the Crown, and the position of the man as a servant of the Crown were the sole reasons why he was able to get this money, and that is sufficient to make him liable to hand it over to the Crown.”
The learned judge however also says:
“There was not, in this case, a fiduciary relationship; and this man Reading was not acting in the course of his employment.”
If this means, as I think it does, that the Appellant was neither a trustee nor in possession of some profit-earning chattel and that it was contrary to his duty to escort unwarranted traffic or possibly any traffic through the streets of Cairo, it is true, but, in my view, irrelevant. He nevertheless was using his position as a Sergeant in His Majesty’s Army and the uniform to which his rank entitled him to obtain the money which he received. In my opinion any official position, whether marked by a uniform or not, which enables the holder to earn money by its use gives his master a right to receive the money so earned even though it was earned by a criminal act.”
Secretary of State v ASLEF (No 2) (Work to Rule)
[1972] 2 QB 455
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.’
As to the the words ‘if it appears to the Secretary of State’ used in the statute there in question: ‘If the Minister did not act in good faith or he acts on extraneous considerations which ought not to influence him or if he plainly misdirects himself in fact or in law it may well be that a court would interfere.’
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.’
Scally v Southern Health and Social Services Board
[1992] 1 AC 294
Lord Bridge
“A clear distinction is drawn in the speeches of Viscount Simonds in Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555 and Lord Wilberforce in Liverpool City Council v Irwin [1977] AC 239 between the search for an implied term necessary to give business efficacy to a particular contract and the search, based on wider considerations, for a term which the law will imply as a necessary incident of a definable category of contractual relationship. If any implication is appropriate here, it is, I think, of this latter type. Carswell J. accepted the submission that any formulation of an implied term of this kind which would be effective to sustain the plaintiffs’ claims in this case must necessarily be too wide in its ambit to be acceptable as of general application. I believe however that this difficulty is surmounted if the category of contractual relationship in which the implication will arise is defined with sufficient precision. I would define it as the relationship of employer and employee where the following circumstances obtain: (1) the terms of the contract of employment have not been negotiated with the individual employee but result from negotiation with a representative body or are otherwise incorporated by reference; (2) a particular term of the contract makes available to the employee a valuable right contingent upon action being taken by him to avail himself of its benefit; (3) the employee cannot, in all the circumstances, reasonably be expected to be aware of the term unless it is drawn to his attention. I fully appreciate that the criterion to justify an implication of this kind is necessity, not reasonableness. But I take the view that it is not merely reasonable, but necessary, in the circumstances postulated, to imply an obligation on the employer to take reasonable steps to bring the term of the contract in question to the employee’s attention, so that he may be in a position to enjoy its benefit. Accordingly I would hold that there was an implied term in each of the plaintiffs’ contracts of employment of which the boards were in each case in breach. ”
Glover v. B.L.N. Ltd. (Irish Case)
[1973] I.R. 388
Walsh J. Supreme Court
“ Mr. Justice Kenny held that, as the plaintiff did not get notice of the charges against him and as the directors of the holding company did not give him an opportunity to make his defence, the termination of the plaintiff’s contract by the resolution 59 of the 5th July and the letter of the 8th July, 1966, was invalid; the judge held that the plaintiff was entitled to damages against the defendants. Mr. Justice Kenny reviewed the various cases he mentioned in his judgment, in particular the decision of the House of Lords in Ridge v. Baldwin 60; the speech of Lord Reid in that decision led him to the conclusion that the plaintiff’s position should be equated to that of the holder of an office, and not that of an employee only, and that the principles of natural justice applied to a termination under clause 12(c) of the plaintiff’s agreement.
In my opinion, this case hinges entirely upon clause 12(c) of the service agreement. The defendants have relied upon this particular clause to justify their summary dismissal of the plaintiff. I agree with Mr. Justice Kenny when he states that, because of the express provisions of this clause, no implied term is to be read into the contract that the plaintiff might be summarily dismissed for misconduct. On the contrary, the clause expressly provides that the plaintiff could not be validly dismissed for misconduct unless it was serious misconduct and was of a kind which, in the unanimous opinion of the board of directors of the holding company present and voting at the meeting, injuriously affected the reputation, business or property of either that company or of the subsidiary companies. The question of whether or not such a contract could be terminated summarily for breach of fundamental condition on the part of the plaintiff was not raised in this case and was not relied upon by the defendants so I do not feel any need to offer any view upon that point. It appears to me quite clear that the operation of clause 12 (c) would necessarily involve (a) the ascertainment of the facts alleged to constitute serious misconduct, (b) the determination that they did in fact constitute serious misconduct, and (c) that the members of the board present and voting should be unanimously of opinion that the serious misconduct injuriously affected the reputation, business or property of the holding company or of the subsidiary companies. The parties by their conduct explicitly set up the machinery for dismissal specified in clause 12(c); that machinery designated the board of directors as the tribunal, and required unanimity of opinion upon the effect of such serious misconduct if it should be proved.
In my view, it was necessarily an implied term of the contract that this inquiry and determination should be fairly conducted. The arguments and submissions in this Court ranged over a very wide field particularly in the field of constitutional justice: see the judgments of this Court in McDonald v. Bord na gCon 61 and East Donegal Co-operative v. The Attorney General. 62 The Constitution was relied upon; in particular Article 40, s. 3, of the Constitution. This Court in In re Haughey 63 held that that provision of the Constitution was a guarantee of fair procedures. It is not, in my opinion, necessary to discuss the full effect of this Article in the realm of private law or indeed of public law. It is sufficient to say that public policy and the dictates of constitutional justice require that statutes, regulations or agreements setting up machinery for taking decisions which may affect rights or impose liabilities should be construed as providing for fair procedures. It is unnecessary to decide to what extent the contrary can be provided for by agreement between the parties. In the present case the provisions of clause 12(c) do not seek expressly or by implication to exclude the right of any of the parties to a fair procedure.
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.
Having regard to the evidence which was given at the trial, one could not say with any degree of certainty that the members of the board of directors would have come to the same conclusion on the facts as Mr. Justice Kenny did, or that they would have arrived at a unanimity of opinion on the effects of such misconduct as they might have found proved, particularly when one has regard to the close personal relationships which existed between some members of the board and the plaintiff and their knowledge of his activities in the firm since he joined it. But even if one could say with certainty that, if he had been given a fair hearing, the result would still have been the same, in my view that does not offer any ground for validating retroactively a procedure which was clearly invalid. It is to be noted that the board acted with great haste in dismissing the plaintiff, and on a report which did not contain complaints or allegations of misconduct set out with the particularity with which they were set out subsequently in the reply to the plaintiff’s notice for particulars. Furthermore, as was settled by this Court in Carvill v.Irish Industrial Bank Ltd. 64, an employer, in defending an action by an employee for wrongful summary dismissal, cannot rely upon misconduct which was not known by the employer at the time of the dismissal. I would add that the misconduct, if known but not in fact used as a ground for dismissal at the time, cannot be relied upon afterwards in an effort to justify the dismissal.
For the reasons I have already stated, I am of opinion that the plaintiff was wrongfully dismissed in that the dismissal was a violation of the provisions of clause 12(c) of the service agreement because of the failure to inform him of the charges against him and the failure to give him an adequate opportunity of answering them.
I am conscious of the fact that Mr. Justice Kenny’s conclusion that the defendants had acted in breach of the contract is based on somewhat different grounds and, therefore, I should deal with Mr. Justice Kenny’s reasons. He placed great reliance upon the speech of Lord Reid in Ridge v. Baldwin 65 and quoted with apparent approval the
passage at p. 65 of the report in which Lord Reid said:””The law regarding master and servant is not in doubt. There cannot be specific performance of a contract of service, and the master can terminate the contract with his servant at any time and for any reason or for none. But if he does so in a manner not warranted by the contract he must pay damages for breach of contract.” This particular point does not arise for decision in this case but I wish to expressly reserve my opinion on the correctness of this statement if it is intended to convey that a court cannot make a declaration which would have the effect of reinstating a person wrongfully dismissed. I do not think that the decision in Ridge v. Baldwin 66 is directly applicable to the present case. In that case the appellant was a Chief Constable and by a statutory provision the watch committee had power to suspend or dismiss him when they thought him negligent in the discharge of his duty or otherwise unfit for the same. The Chief Constable was not the servant of the watch committee, or of any one else, and he was the holder of an office from which he could be only dismissed in accordance with statutory provisions. It was held that the power of dismissal of this officer, contained in the Municipal Corporations Act, 1882, could not have been exercised until the watch committee had informed the officer of the grounds on which they proposed to proceed and had given him a proper opportunity to present his case in defence. It was a prerequisite that the question of neglect of duty should be considered in a judicial spirit and that could not be done without giving the officer in question the opportunity to defend himself against such a charge, and he would therefore have to be told what was the alleged neglect of duty. As that had not been done the decision was a nullity.
Unlike the present case, Ridge v. Baldwin 66 was not governed by the terms of a contract. In my view, once the matter is governed by the terms of a contract between the parties, it is immaterial whether the employee concerned is deemed to be a servant or an officer in so far as the distinction may be of relevance depending on whether the contract is a contract for services or a contract of service. In the present case it is immaterial whether the
plaintiff is an officer or a servant of his employers and, in my view, the case does not fall to be decided upon that distinction but rather upon the actual terms of the contract for the reasons I have already given.
Mr. Justice Kenny attached importance to the fact that the plaintiff’s position with any of the four companies involved could be terminated by the directors of one of them (namely, the holding company) and that this was a characteristic which equated his position to that of an officer. This particular position was the result of a contract between the parties, including the plaintiff, and clause 12(c) of the service agreement gave the directors of the holding company the final decision in whether or not he should be dismissed. I agree with Mr. Justice Kenny in so far as he says that this situation strengthened the plaintiff’s position in his claim to have a fair hearing, but it leads me to the conclusion that this right was an implied term of the contract by reason of the particular machinery set up by clause 12(c) and, therefore, it is not necessary to examine what might have been the plaintiff’s position if such a machinery had not been provided. The relationship between the plaintiff and the defendants was a contractual one in so far as this particular matter is concerned.
Even if there had not been a pre-existing contractual relationship and the plaintiff had been invited to attend such an inquiry, it is probably correct to say, as Harman J. held in Byrne v. Kinematograph Renters Society 67, that a contract between the plaintiff and the defendants that the inquiry would be fairly conducted could be implied. It never appears to have been doubted in cases decided in England that, if the basis of the jurisdiction to conduct such an inquiry was based on statute or on the agreement of the parties, public policy prevents the exclusion of the rules of what in England is called natural justice where they ought to be observed. It is unnecessary in this case to enter into an examination of the other aspects of this problem which have engaged English courts, namely, whether the obligation to observe the rules of natural justice can be relied upon in a case where the relationship between the parties is not founded either on statute or on contract.
Lastly, I come to deal with the defendants’ contention that, if a hearing had been given to the plaintiff, there was nothing he could usefully have said and the result would have been the same. I think this proposition only has to be stated to be rejected. The obligation to give a fair hearing to the guilty is just as great as the obligation to give a fair hearing to the innocent. Furthermore, in this case, by reason of the provisions of clause 12(c), it would not be simply a case of establishing guilt or innocence, because the most important and effective power of the board of the holding company was one which was mainly a discretionary power, namely, to form the opinion or not that the plaintiff’s misconduct injured any of the four companies.
Cronin v Eircom Limited
[2006] IEHC 380
Laffoy J.
“The issues identified in relation to the commission to which the plaintiff claims she was entitled under her secondment contract are as follows:
(1) Whether, as a matter of construction of the plaintiff’s employment contract and her secondment contract, she was entitled to payment of any commission in her capacity of accounts manager, having regard to the downsizing of the defendant’s business and the termination of the defendant’s business in the U.K. and of the plaintiff’s secondment thereto.
(2) Whether, as a matter of construction of the plaintiff’s secondment contract, the optional third year of the secondment was at the option of the plaintiff or of the defendant.
(3) If the plaintiff was contractually entitled to payment of commission for the second and/or third year of her secondment, the amount of commission that she would have earned.
Although the plaintiff is still an employee of the defendant, I consider that a commentary in McGregor on Damages (17th Edition, Sweeet and Maxwell, 2003) on the measure of damages for wrongful dismissal is a useful starting point in setting out the legal principles in relation to entitlement to damages for breach by an employer of a contractual obligation to pay commission. The same principles should apply whether a breach of such a contractual obligation arises during the currency of the employment or as a consequence of wrongful dismissal.
In the context of the normal measure of damages for wrongful dismissal (prima facie the amount that the claimant would have earned had the employment continued according to the contract, subject to a deduction in respect of any amount accruing from any other employment which the claimant, in minimising damages, either had obtained or should reasonably have obtained), in dealing with the amount which the employee would have earned under the contract, the position in relation to commission is summarised as follows at para. 28-004:
“Where the claimant has been entitled to be paid commission on work done or sales effected by him, or in relation to profits made by the defendant in his business, or on orders received from customers introduced by him, this must also be taken into account, provided always that the defendant’s failure to provide the claimant with an opportunity to earn the commission constitutes a breach of contract. This proviso is important, and on the facts of a particular case it is often difficult to ascertain whether there has been such a breach, especially where the wrongful dismissal is occasioned by the defendant closing down the business. The failure to pay the wages or salary constitutes a breach, but the failure to give an opportunity to earn the commission may not. If, however, there is a breach as to commission, and this is more likely to be so where the commission depends on the claimant’s own work and efforts than on the defendant’s profits, the claimant will be entitled to recover damages in respect thereof, and not only commission proper but also money paid on piece work, and tips.”
It seems to me to be implicit in the first issue that the defendant recognises that, had her secondment not been terminated, the plaintiff would have been entitled to be paid commission. Even if that is not the case, in my view, she would have been entitled to commission if she had earned it. On its proper construction, the letter of 21st November, 2000 meant that the bonus scheme, as it applied to the plaintiff, would be replaced by a commission scheme from April, 2001. This construction is consistent with the understanding of the plaintiff and of her line manager, Mr. O’Sullivan, at the time.
The essence of the first issue is whether the termination of the plaintiff’s secondment and the consequent deprivation of the opportunity to earn commission constitute a breach of contract on the part of the defendant. What happened in fact is that the defendant closed down part of its business in the United Kingdom. While reiterating that the passage from McGregor which I have quoted above is concerned with the normal measure of damages for wrongful dismissal, which does not arise here, the principles set out there are apposite to a situation in which an employer terminates a special contract with an employee, but not the underlying contract of employment. There is a footnote in McGregor to the effect that the question whether there has been a breach in a context where the defendant’s business has closed down is often put in the form whether the case falls within Turner v. Goldsmith [1891] 1 Q.B. 544, CA, on the one hand, or within Rhodes v. Forwood (1876) 1 App. CAS. 256, on the other. Turner v. Goldsmith was one of the two cases on which counsel for the plaintiff relied in support of the plaintiff’s claim for commission, the other being Devonald v. Rosser & Sons [1906] 2 K.B. 728.
In Turner v. Goldsmith the plaintiff had been employed under a contract in writing by the defendant, a shirt manufacturer, as an agent, in reality as a travelling salesman, for a term of five years on the basis that he would be remunerated by commission. After about two years the defendant’s manufactory was burned down. The defendant did not resume business and did not employ the plaintiff thereafter. The plaintiff brought an action for damages. The Court of Appeal held that the action was maintainable, and that the plaintiff was entitled to substantial damages because the defendant, having agreed to employ the plaintiff for five years, did not fulfil that agreement unless he sent him a reasonable amount of samples to enable him to earn his commission, and that the defendant was not excused from fulfilling his agreement by destruction of his manufactory by fire. Linley L.J. distinguished Rhodes v. Forwood (at p. 549) on the basis that there had not been any express contract to employ the agent in that case and such contract could not be implied. In the case under consideration there was an express contract to employ the plaintiff. Linley L.J. went on at p. 550 to consider the circumstances in which a positive contract would be subject to an implied condition that the parties should be excused in case, before breach, performance becomes impossible without default of the contractor and he stated:
“… the contract will be treated as subject to an implied condition that it is to be in force only so long as a certain state of things continues, in those cases only where the parties must have contemplated the continuing of that state of things as the foundation of what was to be done.”
Counsel for the defendant, albeit in a different context, referred to the following passage from the concurring judgment of Kay L.J. in Turner v. Goldsmith (at p. 550):
“If it had been shewn that not only the manufactory but the business of the defendant had been destroyed by vis major, without any default of the defendant, I think the plaintiff could not recover. But there is no proof that it is impossible for the defendant to carry on business in articles of the nature mentioned in the agreement.”
That passage was clearly obiter.
As a matter of construction of the secondment contract, in my view, it was not in contemplation of the parties, and the contract was not subject to an implied term, that the plaintiff’s secondment would only continue as long as the defendant considered that the operations of its subsidiary in the United Kingdom were financially and commercially advantageous, which, in my view, is as far as the evidence goes in establishing a reason for the almost total withdrawal from the United Kingdom market. Accordingly, in my view, the defendant was in breach of contract in terminating the secondment contract of the plaintiff.
Rafferty v. Bus Eireann
[1997] 2 I.R.442
Kelly J.
“Conditions of service/work practices
I turn now to consider a topic which promoted a good deal of debate during the course of the hearing and in respect of which there does not appear to be any Irish decision to date. Is there a difference in law between conditions of service and work practices?
In O’’Cearbhaill v. Bord Telecom Eireann [1994] E.L.R. 54 Blayney J. said this at p. 61:
“Neither of the parties was able to refer the Court to any case in which the question of what constitute conditions of service was considered. Kenny v. An Post [1988] I.R. 285 and O’Rourke v. Talbot (Ireland) Ltd. [1984] I.L.R.M. 587 were cited but neither of these cases really throws any light on the question so the matter must be approached on first principles. It seems to me that conditions of service are conditions which one would expect to find in a contract of employment between an employer and an employee. Any terms which it would be normal to include in such a contract would be entitled to be so described. And in considering what these terms might be, what has to be borne in mind is the nature of a contract of employment it is a contract between an employer and a single employee. Each employee has an individual contract, so the conditions of service would have to be appropriate to such a contract.
Would a term dealing with an employee’s prospects of promotion come into this category? In my opinion it would not. It does not concern the immediate relationship between the employer and employee as would, for example, the rate of pay, hours of work, length of holidays, sick leave, pension rights etc. It relates rather to the general manner in which the employer’s business is structured and managed. If an employer were to make it the subject of the contract of employment of individual employees he would be unable to change it without the consent of each of them. No employer would be prepared to restrict his freedom in this way. For this reason it seems to me that it would be wholly inappropriate to include a prospect of promotion in a contract of employment and so it could not be considered as being a condition of service. It is simply an incident of a person’s employment depending entirely on how the employer’s business is structured and subject to change since the employer is under no obligation not to alter the structure of his business.”
That quotation appears to me to make it quite clear that in the totality of the relationship between employer and employee, certain aspects of it may truly be described as conditions of service whereas other aspects are not. Even though these other aspects may have important implications for both employer and employee, they are nonetheless not to be regarded as conditions of service and in the present case would not fall to be protected under s. 14, sub-s. 5 of the Act of 1986. Accordingly there is a difference in law between conditions of service and work practices.
It is also clear from the quotation that when Blayney J. describes what are conditions of employment by reference to the rate of pay, hours of work, length of holidays, sick leave and pension rights, he is not setting forth an exhaustive list of what may be regarded as conditions of service. I would not wish to do so in the course of this judgment either. But I do think that there may be added to that list one other item which can be regarded as a condition of service. It is the basic job description applicable to a post. At common law an employee is not required to do a fundamentally different job from that contracted for.
An English decision is of assistance in illustrating the difference between conditions of service and work practices. It is Cresswell v. Board of Inland Revenue [1984] 2 All E.R. 713. In that case the Inland Revenue in England wished to introduce a system of computer operation of the PAYE Scheme. This meant that calculations formerly done manually by tax officers would henceforth be done by computer. The effect for certain grades of revenue staff, namely, clerical assistants and tax officers, was that they would be required to enter relevant information into a computer via a visual display unit rather than onto individual cards. The plaintiffs objected to the introduction of a computerisation scheme on the ground that it would be a breach of their terms of service to introduce it without their consent. The Revenue told the plaintiffs that it was not prepared to continue with the old manual methods formerly used and that it would not pay the plaintiffs while they refused to operate the computerised system. The employer also made it clear that it was not putting an end to the plaintiffs’ contracts of employment or seeking to take disciplinary action against them and that they would be paid if they returned to full time work using the computerised system. The plaintiffs sought from the High Court a declaration that the Revenue was in breach of its contracts of employment in requiring them to operate or use the system and in suspending them without pay while they refused to operate it. They said that the introduction of the computerised system would be such a change in the method of performing the tasks for which they had been recruited as to amount to a change in the nature of their jobs and that they were therefore being asked to perform work under wholly different contracts without their consent.
In the High Court, Walton J. dismissed the plaintiffs’ claim. He took the view that an employee does not have a vested right to preserve his working obligations completely unchanged as from the moment he first began work. Rather an employee is expected to adapt himself to new methods and techniques introduced in the course of his employment. I agree. The effect of the Board’s computerised system was not that the plaintiffs would be doing a different job but merely that they would be doing recognisably the same job in a different way. That judge was of the view that the content of some of the jobs might be considerably affected but nonetheless it would not be altered enough to fall outside the original description of the plaintiffs’ proper functions since it could not be said that staff using the computerised system would be anything other than tax officers working for the P.A.Y.E. scheme.
I have already decided that the basic job description constitutes a condition of service. In order to decide whether that condition of service has or is likely to be altered in an unlawful fashion by the respondent I formulate the same test as was applied by Walton J. in Cresswell v. Board of Inland Revenue [1984] 2 All E.R. 713 and so I ask myself this question:”Is the effect of the changes promulgated by the respondent such as to result in the bus driver doing a different job or is it merely to bring about a situation where they will be doing recognisably the same job in a different way”? If it is the former and is less beneficial to the employee it is unlawful without the consent of the trade unions pursuant to s. 14, sub-s. 5 of the Act of 1986. If the latter, it is merely a change in work practice, does not attract the statutory protection and is lawful.
Reynolds v Altomoravia Holdings Ltd Good Faith
[2017] IECA 157
Mr. Justice Gerard Hogan
JUDGMENT
1. In November 2012 the plaintiff, Ms. Helen Earley, was appointed to her current position as Area Director of Nursing, Mental Health Services for the Galway/Roscommon area pursuant to a written contract of employment. It is clear from the terms of the job description for this position that this was a senior post within the Health Service Executive (“HSE”) which entailed both clinical and management responsibilities. The evidence, indeed, was that the plaintiff had responsibility for some 60 facilities in these two counties. The plaintiff is now aged 57 and has been employed with the HSE since 1998. It is important to state that she has an unblemished employment history.
2. On 1st July 2015 the plaintiff received a letter from Mr. Bernard Gloster, Chief Officer of the HSE Mid-West and interim chief officer of the HSE West, to the effect that she was to be temporarily reassigned from her position as an Area Director of Nursing for Galway/Roscommon Mental Health Services as Area Director of Nursing in a specialised capacity to the Programme Management Office of the National Mental Health Division of the HSE. Ms. Earley’ reporting obligations were also changed, as she was now required to report to the Head of Planning, Performance and Programme Management. This re-assignment took effect from the 6th July 2015. On that date a Mr. Brian O’Malley was appointed as Acting Area Director of Nursing. In that letter Mr. Gloster had explained that her “substantive post will be filled on a specific purpose contract pending further decision making.”
3. It was this re-assignment which gave rise to the present proceedings. On 30th July 2015 Kennedy J. granted the plaintiff an interlocutory injunction which prevented the HSE giving effect to this re-assignment pending the trial of the action: see Earley v. Health Service Executive [2015] IEHC 520. The full hearing of the action in the High Court was heard by O’Connor J. in November 2015. In his reserved judgment delivered on 27th November 2015 O’Connor J. found that the re-assignment of the plaintiff was lawful and he refused to grant her any of the injunctive or declaratory relief which she had sought: see Earley v. Health Service Executive [2015] IEHC 841.
4. The plaintiff has now appealed against that decision, contending that the HSE breached the terms of her employment contract in re-assigning her in the way which it did. It is agreed that this re-assignment was not a disciplinary process. The only issue which this Court is now required to consider is whether the plaintiff’ contract of employment permitted such a re-assignment.
5. As will presently become clear, for the purposes of this judgment I have only found it necessary to address the terms of the plaintiff’ contract of employment and the relevant statutory provisions. I have not found it necessary to consider any of the other arguments relied on by the plaintiff. Before, however, considering the issue of the plaintiff’ employment contract issue it is first necessary to set out the relevant background facts.
The background facts
6. In April and May 2015 the HSE received a series of anonymous complaints to the effect, first, that a number of incidents had occurred at HSE facilities in the Galway/Roscommon area and, second, that these had not been dealt with appropriately by senior staff. A protected disclosure detailing certain complaints was also made by an identified member of the HSE staff.
7. It was decided that an investigation would be conducted in relation to these alleged incidents and the manner in which they were handled. The plaintiff was originally asked by her direct line manager, Ms. Catherine Cunningham, on 21st May, 2015 as to whether she would be prepared to be re-assigned, but she declined to take this step. In view, however, of these allegations and the difficulties presented in the Roscommon area for mental health services, the HSE concluded that it was necessary that certain interim measures should be put in place so that it could be assured that the day to day care and management arrangements were also appropriate. Furthermore, such was the concern regarding the state of the Roscommon Mental Health services that the HSE decided to commission a review of all aspects of the service in that county, including workplace culture and governance.
8. The plaintiff ultimately received an email from Mr. Gloster on 29th June 2015 which sought to explain the reasons for the re-assignment. In that e-mail Mr. Gloster referred to the five incidents, the HSE decision to conduct a full review of the Roscommon Mental Health Service and an unspecified “protected disclosure”. On the 1st July 2015, the plaintiff received a formal letter from Mr. Gloster informing her of the HSE’ decision to reassign her temporarily without prejudice. It was stressed that this was not a disciplinary process or investigation.
9. A review body was also established consisting of three independent experts to review the provision of services in Roscommon.
10. It was also accepted that the re-assignment was made without the plaintiff’ agreement, but it was nonetheless described as being in the nature of a protective and temporary measure, which was made on a without prejudice basis. What is not in doubt, however, is that the plaintiff was reassigned from a clinical role to a non-clinical role, albeit that her pay and other conditions were not otherwise affected. While Mr. Gloster was at pains to stress that this re-assignment did not reflect on the professional ability of the plaintiff, the plaintiff herself maintained that, as I have already indicated, given the nature and provenance of the allegations, the re-assignment did in fact reflect on her reputation and good name.
11. It was originally envisaged that the re-assignment would simply last for a matter of months pending the national review of the Roscommon mental health services which had been commissioned at the same time. As of the date of the hearing of this appeal (April 2017) the review body still had not, however, reported, albeit that counsel for the HSE, Mr. Ward S.C., informed us that a report was understood to be imminent and that the time frame for the delivery of the report had itself been extended. All of this meant that the plaintiff continued to be re-assigned to these other duties and this re-assignment has now lasted since July 2015, with the exception of the period from 30th July 2015 to 27th November 2015 when the plaintiff had obtained an interlocutory injunction from the High Court keeping her in her original post.
The plaintiff’ employment terms
12. The plaintiff’ contract of employment contained the following terms:
“1. Title: You are employed as Area Director of Nursing, Mental Health Service, Galway and Roscommon Mental Health Services….
4. Location: You will be employed in Galway and Roscommon Mental Health Services. Your initial assignment will be to Galway and Roscommon Mental Health Services. You may be required to work in any service area within the vicinity as the need arises.
5. Reporting Relationship: You will report to the area manager or other nominated manager.
6. Duties: The main duties of your position are set out in the job specification already supplied. In addition to your normal duties, you may be required to undertake other duties appropriate to your position as may be assigned to you, including deputising as appropriate….
16. Grievance Procedure: You have the right to seek redress in respect of any aspect of your terms and conditions of employment under the HSE Western Area’ Grievance Procedure, copy of which is attached. Should you have a grievance you should follow this procedure…..
25. Agreement: Your terms and conditions may be revised in accordance with agreements reached between the union representing your grade and the HSE Western Area.”
13. The elaborate job specification in respect of this post referred to in clause 6 of the contract of employment identified the plaintiff as a member of the multi-disciplinary management team preparing a local “vision for change implementation” for the area and included a particular section concerning “quality assurance”. This specification also stated:
“…..the above job description is not intended to be a comprehensive list of all duties involved and consequently, the post holder may be required to perform other duties as appropriate to the post which may be assigned to him/her from time to time and contribute to the development of the post while in office.”
14. The purpose of the post was also described by the job specification in the following terms:
“The Area Director of Mental Health Nursing will be Head of Nursing and the budget holder for nursing and associated services within the Mental Health Services.”
The judgment of the High Court
15. In his judgment O’Connor J. noted that counsel for the plaintiff had urged the Court to follow the views which had been expressed by Kelly J. in Rafferty v. Bus Éireann [1997] 2 I.R. 424, 442 where he said that “at common law an employee is not required to do a fundamentally different job from that contracted for”. But O’Connor J. did not accept that this is what had occurred in the present case:
“The Court has already mentioned that the re-assignment of the plaintiff did not constitute a fundamentally different job. By way of explanation for that finding, the Court observes that the plaintiff was temporarily moved to a position of clinical lead in the programme management office which is the office that is driving reform of mental health services in this country. As counsel for the defendant mentioned, the plaintiff was not assigned to administering the catering in a hospital or to carrying out some duties that were unrelated to the plaintiff’ qualifications, experience or status. In fact, none of the witnesses expressed a view that the temporary re-assignment was in any way inferior and Mr. Gloster expressed the belief that it offered some degree of prestige.
There is no need to give an excursus of what is or is not a condition of service as the effect of clauses 4 and 6 in particular of the plaintiff’ contract obliges the plaintiff to work “in any service area”. Furthermore she is required to “undertake duties appropriate to [her] position”. Clause 1 of the contract refers to a title which could be changed in any re-organisation if she was promoted or moved as indeed the plaintiff acknowledged could be the case and will probably be the case with a reorganisation due next year.”
16. O’Connor J. went on to state that he could not construe the terms of the contract “such that the plaintiff has a contractual right to preserve some right to remain as Area Director of Nursing until she otherwise agrees”. He continued thus:
“The reference to revising terms and conditions in clause 25 of her contract in accordance with trade unions representing her grade and “the HSE Western Area” copper-fastens the Court’ view that the plaintiff had a contractual right to a grade which could only be altered by agreement. Neither the plaintiff nor a union representing her grade could veto a temporary re-assignment as a result of the written contract between the parties.”
17. O’Connor J. further stressed that “the plaintiff has not been accused of wrongdoing and is not the subject of a disciplinary process” and nor had she established any “loss of reputation or status due to the re-assignment decision”. O’Connor J. finally rejected the plaintiff’ argument that the re-assignment was in breach of her conditions of employment:
“In summary, despite the rigorous cross examination of both Mr. Gloster and Ms. O’Connor, no bad faith, conspiracy or failure to recognise the rights of the plaintiff has been established. The particular union officer who threatened the plaintiff’ position and prospects has been told in no uncertain terms by the defendant that the defendant will not tolerate any such activity. Moreover, the Court accepts that the appeasement of that union or its members did not motivate Mr. Gloster’ decision of 1st July 2015. The decision communicated to the plaintiff on 1st July 2015, was not made with a view to investigating the plaintiff’ conduct or to starting disciplinary proceedings against the plaintiff personally. The decisions to initiate a national review and screening of the anonymous complaints were made by the defendant, and it was considered prudent to reassign the plaintiff while those processes were ongoing. There was and is no obligation on Mr. Gloster to justify his decision other than in the way that he did.”
18. In essence, therefore, O’Connor J. appears to have proceeded on the basis that the HSE had at least an implied entitlement to re-assign the plaintiff in circumstances where there were serious concerns about the functioning of the service and that such decision could only be challenged where something akin to bad faith had been established.
19. Against that background I now turn to the legal issues which now arise.
Whether there was any legal basis for the re-assignment of the plaintiff?
20. At the core of the plaintiff’ case is her contention that the re-assignment amounted to a clear breach of her contract of employment, irrespective of whether the re-assignment was regarded as permanent or temporary. The HSE argued that there was an express power to re-assign the plaintiff having regard to the provisions of clauses 4, 6 and 25 of the contact. It was alternatively claimed that there was an implied power to effect such a re-assignment.
21. Contrary to the views expressed by O’Connor J. on this issue of construction, I find myself obliged to hold that when this particular contract of employment is viewed in conjunction with the job specification (in the manner required by clause 6 of the contract document itself), there is simply no basis by which the plaintiff could lawfully have been re-assigned from her position. I reach this conclusion for the following reasons.
22. It is clear, first, that the plaintiff was appointed to the particular post of Area Director of Nursing in the Galway and Roscommon Mental Health Service. It is also clear from the job description that this was a post with clinical as well as managerial responsibility. The post also included being “Head of Nursing” for the mental health services in the area.
23. Second, clause 4 of the contract envisages that the plaintiff would be employed in the Galway and Roscommon Mental Health Services. It is true that this clause also expressly required the plaintiff “to work in any service area within the vicinity as the need arises”, but when viewed in its proper context all that this provision really means is that the plaintiff could be required to work in adjoining service areas in a similar capacity. In other words, while the geographical location of her post might be changed, this did not enable the HSE to change the nature of the post.
24. Third, this conclusion is re-inforced by a consideration of clause 6 which stipulates that the plaintiff would undertake the duties set out in the job specification. This further specifies that the plaintiff might be assigned further duties “appropriate to your position”, including “deputising as appropriate”. But clause 6 did not entitle the HSE to re-assign the plaintiff from her existing post to a quite different position.
25. It is accordingly clear that this was a very particular contractual position which entailed a mix of clinical and managerial responsibilities in the Galway and Roscommon Mental Health Service area. While the plaintiff could be assigned further duties (including performing duties outside of that area as occasion might require), these additional duties were required to be “appropriate” to her position. It followed that any additional responsibilities which the plaintiff might have to perform would have to be consistent with her position as Area Director of Nursing.
26. It followed, therefore, that in these circumstances, save for the provisions of clause 25, the plaintiff’ contract of employment did not permit her to be re-assigned from her existing contractual position with clinical and management responsibility in a designated service area to the Programme Management Office of the National Mental Health Service of the HSE, even if this did not entail any loss of remuneration or status and prestige. She was, in effect, changed from a clinical and operational role to a non-operational role, so that in substance the nature of her job specification had been changed in a material fashion. In these circumstances, it is hard to see how the plaintiff could not properly invoke the test articulated by Kelly J. in Rafferty inasmuch she was now required to perform a fundamentally different job from that contracted for.
27. In expressing this conclusion I have not overlooked Mr. Ward S.C.’ forceful argument to the effect that the contract of employment contained an implied term permitting the HSE to re-assign the plaintiff to other non-operation and non-clinical duties where the exigencies of the situation – such as the nature of the complaints and the general crisis in the provision of mental health services in Roscommon – so required. The most straightforward answer to this contention is that contained in Sweeney v. Duggan [1997] 2 I.L.R.M. 211, 217, a case where the Supreme Court outlined the tests for the importation of implied terms into a contract. Delivering the judgment of the Court, Murphy J. emphasised the requirement of necessity before a Court would imply a term in a contract:
“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.”
28. Applying that principle in the present case, it is sufficient to state that an implied term of the kind now claimed by the HSE would be inconsistent with the express wording of the contract of employment. It would be tantamount to saying that even though the post entailed operational and clinical responsibility, combined with a guarantee that any further assigned responsibilities would be “appropriate” to that position, the HSE was nonetheless free by reason of an implied term to act in a manner which contradicted these contractual commitments and thereby assign the plaintiff to non-operational duties. There is, accordingly, no basis for the contention that there was an implied term of the kind relied on by the HSE.
29. It follows, therefore, that the assignment of the plaintiff to these non-operational duties amounted to a plain breach of her contract of employment. I would further reject the argument that the HSE was nonetheless free to take this course of action by reason of some supposed implied term.
Clause 25 of the Contract of Employment
30. Clause 25 of the contract of employment provides that the plaintiff’ terms and conditions “may be revised in accordance with agreements reached between the union representing your grade and the HSE Western Area”. For my part, however, I do not think that this clause is any direct relevance to the present case because there was no suggestion that there had in fact been an agreement between the union and the HSE pertinent to the present case such as might have triggered a revision of these terms and conditions.
31. It follows, therefore, that clause 25 could not be invoked to justify the re-assignment of the plaintiff from a position with clinical and operational responsibilities to a posting with no such duties.
Section 22 of the Health Act 2004
32. The HSE also seeks to rely on s. 22 of the Health Act 2004 (“the 2004 Act”), which it is contended provides an express statutory power to determine the duties of employees. The defendant also seeks to rely on an implied statutory power to manage its affairs in an appropriate manner.
33. Section 22(1) of the 2004 Act provides:x
“The Executive may, subject to subsections (2) to (5), appoint persons to be its employees and may determine their duties.”
34. Section 22(4) provides:
“The Executive shall, with the approval of the Minister given with the consent of the Minister for Finance, determine:
(a) the terms and conditions of employment (including terms and conditions relating to remuneration and allowances) of employees appointed under this section, and
(b) the grades of the employees of the Executive and the numbers of employees in each grade.”
35. I cannot think that these statutory provisions are of any assistance to the respondent. They are simply standard provisions which enable the HSE to appoint persons to be employees and to determine their duties. So far as the plaintiff is concerned, the HSE has, in fact, appointed her to this post and has determined her duties in her written contract of employment which also identifies in clause 25 how the terms and conditions of that contract may be revised. The present proceedings are simply the means whereby the plaintiff seeks to give effect to these agreed conditions of employment. It would, of course, have been open to the HSE to have stipulated different terms and conditions in that contract of employment prior to the appointment of Ms. Earley to her position in November 2012.
36. Nor can I agree that the HSE enjoys an implied power of the kind claimed. The Supreme Court has made it clear that the courts will imply such a power where this is “incidental or consequential” in the context of the statutory provision at issue: see, e.g., Keane v. An Bord Pleanála [1997] 1 I.R. 184; McCarron v. Kearney [2010] IESC 28, [2010] 3 I.R. 302. But a power to re-assign employees in this fashion could not be regarded as “incidental” or “consequential” in this sense. If the HSE’ argument were correct, it would mean that it could depart almost at will from the terms of any contract of employment, so that, for example, a clinician might be assigned to purely non-clinical duties remote from her field of expertise or a nurse might find herself assigned to purely administrative duties.
37. The existence of such a power would, moreover, be inconsistent with the structure of s. 22 of the 2004 Act itself. It would mean, in effect, that the HSE’ express power found in s.22(1) to appoint employees and to determine their duties in the context of a contract of employment could be overridden by an implied power which enabled the HSE unilaterally to vary these duties, perhaps in far-reaching fashion. If the Oireachtas had ever intended that the HSE should enjoy such a power, one would have expected this to have been stated in clear and express terms and that it was not one which arose simply by implication.
Conclusions
38. It follows, therefore, that, for the reasons stated, I must conclude that the trial judge fell into error in concluding that the HSE had not breached the plaintiff’ contract of employment by re-assigning her from the operational and clinical duties specified in that contract (and which are also specified in the accompanying job description for that post) to non-operational duties. This conclusion is unaffected by the fact that the plaintiff’ remuneration was unaffected by this change or that the re-assignment was expressed to be a temporary one or even that it was expressed to be on a without prejudice basis.
39. I would accordingly allow the plaintiff’ appeal and grant a declaration to the effect that the re-assignment of the plaintiff in July 2015 constituted a breach of her contract of employment. In the light of this finding and the granting of such relief, I would invite the parties to make such further submissions on the question of whether the grant of any further relief by this Court is necessary or appropriate.
Kearney v Byrne Wallace Good Faith
[2019] IECA 206 (23 July 2019)
Composition of Court:
Peart J., Whelan J., McGovern J.
Judgment by:
Peart J.
Status:
Approved
Result:
Dismiss
THE COURT OF APPEAL
Neutral Citation Number: [2019] IECA 206
Record Number: 2018 16
Peart J.
Whelan J.
McGovern J.
JUDGMENT OF MR. JUSTICE MICHAEL PEART DELIVERED ON THE 23RD DAY OF JULY 2019
1. By his notice of motion dated 10th October 2017 the plaintiff/appellant sought certain interlocutory injunctions, including restraining the defendant firm from dismissing and/or implementing his purported dismissal from his position as a solicitor in the firm, and requiring the firm to continue to pay his salary, pending the determination of the substantive issues in the proceedings. His application was refused by order of the High Court dated 21st December 2017 (Baker J.) for the reasons explained in a written judgment delivered on 28th November 2017 ([2017] IEHC 713). The appellant now appeals to this Court by way of notice of expedited appeal filed on 15th January 2018.
2. Before setting out the trial judge’s reasons for refusing the appellant’s application, it would be helpful to provide some factual background.
3. The appellant qualified as a solicitor in 1996, and took up employment with the defendant in August 2006 as an associate solicitor at a salary of €90,000 per annum, which was increased in 2008 to €100,000 per annum.
4. Unfortunately, the appellant has had to endure certain health difficulties. In 1996 he was diagnosed with bipolar mood disorder. He informed the firm about this prior to his taking up employment there in 2006. His illness has forced him to be absent from work for various periods since his employment commenced. For example, he was absent from 27th July 2010 until his return on the 5th September 2011 – some 13 months. Upon his return he was informed that his salary was reduced to €60,000 per annum. The firm maintain that this reduction was in line with reductions made to salaries of other employees caused by the downturn in the economy since 2008. The appellant on the other hand maintains that the cuts made to others were not as great as the reduction of €40,000 made to his salary. He also referred to the fact that other employees’ salaries have been restored in more recent times, whereas his remained essentially unchanged, save for a modest increase of €5,000 in April 2013.
5. In July 2013 the appellant was again absent from work until November 2015 – an absence of some 27 months. He continued to be paid during this period in accordance with the firm’s sick pay policy, and his salary was not further reduced.
6. Following his return to work in November 2015 the appellant had an unpleasant disagreement with a superior staff member in relation to the apportionment of a fee for the presentation of a paper that he had prepared, and he accepts that he was rude to that person on that occasion.
7. The appellant took annual leave on 5th May 2016, and was given an additional period of unpaid leave until the 27th May 2016. It appears that during that period the firm requested that the appellant attend an independent medical practitioner for an assessment of his fitness for work. That assessment concluded that he was fit for work, and the appellant’s own psychiatrist also agreed that he was fit for work.
8. The appellant requested on several occasions to be allowed to return to work, but he says that these requests were ignored. He engaged a firm of solicitors to write to the firm in relation to his request to return to their employment, and eventually the appellant instituted plenary proceedings (not the present proceedings) in which he sought, inter alia, a declaration that he is and continues to be a solicitor employed by the firm, and that the firm was required to provide them with work to do. Those proceedings also sought an order directing the firm to pay him at the same rate of remuneration as an appropriate comparator who, unlike him, does not suffer from a disability. Those earlier proceedings have proceeded to the extent that a statement of claim and defence have been delivered, but they have not been heard and determined.
9. The appellant experienced certain difficulties in obtaining certain payslips and a P60 for 2016 as averred by him in his affidavit sworn on the 29th September 2017. He engaged the assistance of the Workplace Relations Commission and also of his solicitors in relation to that difficulty, and in due course these documents were furnished by the firm on the 31st July 2017. There was also a difficulty about which he complained because his practising certificate was not renewed by the firm for the year 2017. Those difficulties are dealt with in the affidavits.
10. The present proceedings were commenced on 2nd October 2017 some weeks after the appellant had received a letter from his employer dated 28th August 2017. This letter set out in some detail a history of relevant events, and concluded with the following paragraph:
“Having conducted a review in relation to your position, it is clear that your previous role is not available and in fact it no longer exists. We have examined other possibilities but unfortunately we are unable to identify another suitable role for you within the firm having regard to your expertise and experience. We therefore, and with regret, have no option but to regard your role as redundant with immediate effect. We will arrange to pay your statutory contractual entitlements together with a payment in lieu of two months’ notice as per your contract of employment and will arrange for a member of our HR team to contact you to progress this.”
11. The appellant disputes that a genuine redundancy situation existed, and considers that the work he was previously doing continues to be done at the firm, and has asserted in addition that the firm is actively recruiting as of the date of swearing of his said affidavit.
12. In his proceedings the appellant seeks a number of declarations, including that the termination of his employment is null and void; that he continues to be employed by the firm; and that they are obliged to provide him with work to carry out. He also seeks a declaration that his position as an associate solicitor is not redundant, and in addition, various injunctive reliefs, as well as damages under various headings including aggravated and/or exemplary damages for breach of contract, negligence, breach of duty and so forth.
13. As already stated, this application for interlocutory injunctive relief was directed towards obtaining an interlocutory injunction to restrain his purported dismissal pending the determination of the substantive proceedings and an order directing the firm to pay his salary, expenses, and bonuses as they fall due and pending the determination of the substantive issues.
The judgment appealed against
14. In her judgment the trial judge set forth an uncontroversial summary of the background facts, which reflect in large measure the summary which I have set forth above. She also referred to the contents of the statement of claim delivered by the appellant. In that regard she stated the following at paras. 9 and 10 of her judgment regarding the appellant’s claims:
“9. The present proceedings relate to the letter of the 28th August 2017, by which the defendant firm purported to terminate the employment of the plaintiff on account of redundancy. The statement of claim (at para. 21) pleads that the letter wrongly and in repudiatory breach of contract purported to declare the plaintiff’s position to be redundant. It is pleaded that the actions of the defendant firm are “carefully contrived” and that the circumstances do not exist to justify his dismissal on the grounds of redundancy. Paragraph 25 of the statement of claim contains a plea that the functions and responsibilities with which he was formerly engaged continue to be performed in the firm in a manner similar to that performed by him and that the defendant firm continues to recruit solicitors, who hold similar or less impressive qualifications and experience than those of the plaintiff, to carry out that work.
10. The claim is pleaded broadly that the termination is null and void and a declaration is sought that the position of the plaintiff in the defendant firm as an associate solicitor “is not redundant”. Damages are sought for breach of contract, breach of warranty and/or breach of statutory duty.”
15. The trial judge went on to state that the parties were in agreement that the relevant threshold test for the granting of an employment injunction, such as the plaintiff seeks is that stated by the Supreme Court (per Fennelly J.) in Maha Lingam v. HSE [2005] IESC 89 – i.e. that a party seeking injunctive relief that is mandatory in substance and form should make out a “strong and clear case”.
16. At para. 15 of her judgment, the trial judge stated that she did not accept the appellant’s argument that the factual basis for his submission that the redundancy is a sham had not been materially contradicted on affidavit. She stated that “the replying affidavits taken together do point to a factual dispute which cannot be resolved at the present stage, but the existence of which makes it more difficult for the plaintiff to establish a strong arguable case”.
17. The trial judge went on to state that “the primary issue in the hearing was one of jurisdiction”. In that regard she referred to the firm’s argument that “no right of action exists at common law arising from an alleged unfair selection for redundancy and that the cause of action derives from the statutory redress scheme established by the Redundancy Payments Act 1967 (as amended) and the Unfair Dismissal Act 1977”. She stated that “the defendant argues therefore that the claim is properly one to be determined in the forum designated by legislature, by reference to the legislative criteria and in the context of the legislative test”.
18. The trial judge went on at para. 18 to describe the appellant’s counter-argument as follows:
“18. The plaintiff denies that the claim is properly characterised as a claim for unfair dismissal or a claim for damages or reinstatement under the Unfair Dismissal Act or the Redundancy Payments Act and that the pleaded claims invoke the original jurisdiction of the High Court because it seeks declarative and mandatory relief and that the claim is not a claim that the plaintiff was unfairly selected for redundancy, but rather that the defendant was obliged to observe fairness of procedures before terminating the employment of the plaintiff, such that the failure to do so constitutes a breach of contract.”
19. The trial judge then stated at paras. 19-20:
“19. It is not my function at the present point in time to make a determination as to how the proceedings will evolve but, in order for the plaintiff to succeed in defeating the argument of the defendant that the injunction may not be granted because that plaintiff does not have a “strong” case, the plaintiff must establish to my satisfaction that he has a strong argument that the claim he seeks to bring is one recognised by the common law.
20. The plaintiff essentially argues that a form of injunctive relief in support of his claim exists as a matter of law outside the statutory scheme operating in the employment context, under which proceedings are to be commenced in the more informal setting of the Workplace Relations Commission (WRC).”
20. The trial Judge then proceeded to consider a number of authorities to which she had been referred. She considered that the case that had the most similarity to the present case was Nolan v. Emo Oil Services Ltd [2009] IEHC 15 which, as the trial judge had noted, was “an application for an interlocutory injunction restraining the defendant from giving effect to his purported dismissal by reason of redundancy and requiring the defendant to continue to pay the salary and associated emoluments and benefits as they fell due”. She distinguished other cases to which she was referred by the appellant such as Shortt v. Data Packaging Ltd [1994] E.L.R 251; Phelan v. BIC (Irl) Ltd & ors [1997] 5 E.L.R. 208; Burke v. Independent Colleges Ltd [2010] IEHC 412; Wallace v. Irish Aviation Authority [2012] IEHC 178; Brennan v. Irish Pride Bakeries [2017] IECA 1207; and Quigley v. HSE [2017] IEHC 654, largely on the basis that, unlike Nolan, these cases relied upon a breach of a contractual term of the contract of employment, and that the argument in the present case is, as she refers at para. 36 of her judgment, that there is “an alleged unfair dismissal by reason of unfair selection for redundancy, either because no genuine circumstances exist within the firm to justify his dismissal or because he was selected for redundancy on account of his absence from work due to ill health”.
21. With regard to Nolan, the trial judge stated as follows at paras. 24-26 of her judgment:
“24. In [ Nolan ] Laffoy J. was hearing an application for an interlocutory injunction restraining the defendant from giving effect to his purported dismissal by reason of redundancy and requiring the defendant to continue to pay the salary and associated emoluments and benefits as they fell due.
25. The plaintiff had argued that a judgment of Keane J. (as he then was), sitting in the High Court, in Shortt v. Data Packaging Ltd … was authority for the proposition that a mandatory injunction could be granted to restrain an employer from acting on a redundancy. Laffoy J. rejected the argument that Shortt v. Data Packaging Ltd was authority for that proposition and relied on, inter alia, the judgment of Fennelly J. in Maha Lingam v. HSE and the discussion therein of the English case of Eastwood v. Magnox Electric plc [2004] 3 All ER 991. She held, to borrow the language of Lord Nicholls at para. 14 of his judgment, that it was not for the “courts now to expand a common law principle into the same field” and produce an outcome inconsistent with that created by the statutory code.
26. Laffoy J. considered that Mr Nolan’s remedy arose under statute, and that he had not otherwise acquired a cause of action for breach of contract. Accordingly, she held that there was no remedy he could pursue in the courts and she rejected the argument that the court could “develop its common law jurisdiction by reference to the statutory concepts of redundancy and unfair dismissal” (p. 11). Having regard to the fact that the Oireachtas provided specific remedies for unfair dismissal and specific procedures for obtaining such remedies, the common law had no role to play, as it might “end up supplanting part of the code”.
22. Considering that the circumstances of the present case where an analogous to those identified in Nolan , and having considered the reasoning of Laffoy J. therein and the case law already referred to, the trial judge was satisfied that the appellant had not made out “a strong case that would justify the granting of an injunction”. In circumstances therefore where the first limb of the test for interlocutory relief had failed, the trial judge stated that there was no need for her to consider the balance of convenience, or whether damages would be an adequate remedy.
Appellant’s legal submissions
23. The question at the heart of this appeal is whether, as found by the trial judge, the High Court has no jurisdiction to grant an injunction such as is sought in these proceedings where the appellant has been dismissed on the basis of an asserted redundancy, and where the he asserts that the redundancy relied upon by the firm is a “sham”. In so far as Nolan is relied upon by the trial judge for her conclusion that absent some contractual basis for the employee’s claim the Court has no jurisdiction, and that the claim being advanced must be pursued through the statutory scheme provided for by the Oireachtas, the appellant submits firstly that what has occurred in the present case is a breach of an implied term of his contract of employment – that implied term being one of mutual trust and good faith – and therefore that Nolan ought to be distinguished; and secondly, if necessary, that Nolan was wrongly decided. It is submitted that the mere fact that the claim being advanced is on the basis of “several flagrant breaches by [the firm] of their contractual obligations to [the appellant” as opposed to breaches of one or more express terms should not deprive him of his right at common law to obtain injunctive relief in the form which he seeks.
24. Specifically, the appellant relies on his contention that the respondent firm has breached three fundamental and implied terms of his contract of employment:
(i) the firm has failed to act towards him with all good faith and fidelity;
(ii) the firm has disregarded its obligation to provide him with work to do; and
(iii) the decision by the firm to dismiss him was capricious and arbitrary, since his position is, demonstrably, not redundant.
25. The appellant has submitted that simply because the respondent firm has described the dismissal as one based on a redundancy does not mean that this is correct, and that the Court should not be influenced by the label attached to the dismissal by the firm. It is submitted that the appellant’s rights and entitlements, including his constitutional right of access to the courts should not be curtailed or interfered with because the firm has labelled the dismissal as a redundancy, and that this Court should look at the substance of the dismissal and not the label attached to it.
26. It has been submitted that the judgment of Laffoy J. in Nolan has had a radical impact in terms of depriving an employee of his/her common law and equitable remedies, and that this should not be countenanced in the absence of specific and express statutory provision. This Court is urged to not follow Nolan and to find that it was wrongly decided.
Respondent’s legal submissions
27. Counsel for the respondent resists any invitation to this Court to revisit and/or not follow the decision of Laffoy J, in Nolan , and submits that not only has it been accepted as correct and followed in subsequent cases, but that it is correct in principle.
28. Counsel has referred to the position that pertained at common law prior to the enactment of the Unfair Dismissals Act, 1977 when the basis for any claim for wrongful dismissal was confined to where the employer had failed to give proper notice of dismissal. Counsel has referred in the present case to the undoubted fact which is not in controversy between the parties that the firm terminated the appellant’s employment by its letter dated 28th August 2017 and gave the notice that it was required to give under the terms of the contract of employment.
29. It has been submitted that in so far as the appellant seeks to claim an entitlement to injunctive relief on the basis of a claim in the substantive proceedings that the redundancy is a ‘sham’ and therefore that his dismissal is null and void, this is an issue that he must under the statutory scheme introduced by the Oireachtas for that very purpose pursue such claims before the Workplace Relations Commission, and not through the courts. He refers also to the fact that there is a clear conflict on the affidavit evidence adduced on the interlocutory application in relation to the allegations behind the assertion by the appellant that the alleged redundancy is a sham, contrived to avoid compliance by the firm of its obligations to the appellant. Counsel has referred to the relevant provisions of the Unfair Dismissals Act, 1977 which at s.1 provides a definition of “dismissal” for the purposes of the Act as including “(a) the termination by his employer of the employee’s contract of employment with the employer, whether prior notice of the termination was or was not given to the employee”. The Court was referred also to s.6(4) of the Act which provides:
“(4) Without prejudice to the generality of subsection (1) of this section, the dismissal of an employee shall be deemed, for the purposes of this Act, not to be an unfair dismissal, if it results wholly or mainly from one or more of the following:
(a) the capability, competence or qualifications of the employee for performing work of the kind which she was employed by the employer to do;
(b) the conduct of the employee;
(c) the redundancy of the employee ; and
(d) the employee being unable to work or continue to work in the position which he held without contravention (by him or by his employer) of a duty or restriction imposed by or under any statutory instrument made under statute.” [Emphasis provided]
30. It is accepted on behalf of the firm that by virtue of the provisions of s. 6(6) of the Act, the onus is upon the employer to show that the dismissal resulted wholly or mainly from one or more of the matters set forth in subs. (4) above.
31. It is accepted also that by virtue of s. 6(3) of the Act, a selection for redundancy that is found to be unfair, a dismissal on the basis of such a redundancy is deemed for the purposes of the Act to be an unfair dismissal.
32. Counsel is referred also to the Redundancy Payments Act 1967 and submits that the statutory regimes in relation to both redundancy and unfair dismissals are stand-alone regimes set up by the Oireachtas for the purpose of dealing with all disputes relating to redundancy, including a challenge such as brought by the appellant herein on the basis that his purported redundancy is a sham.
33. It is submitted that claims for wrongful dismissal under common law must now be seen as being confined to those cases where a dismissal is claimed to be wrongful because of a breach of some express contractual obligation in the employee’s contract of employment, such as the failure to give the required notice, or perhaps where an agreed disciplinary procedure has not been adhered to, and the dismissal has been found to be void ab initio . None of these features exist in the present case.
34. It is submitted that the attempt by the appellant to contend that there is some contractual breach based upon some implied term of trust and good faith is contrived, and ought not to be considered sufficient to bring the present came within the now restricted ambit of the common law in employment matters. It is submitted that if such an argument was to be accepted, it would open the floodgates to many applications for injunctions of the kind being sought herein, and that it would be to ignore the express and clear intention of the Oireachtas that such disputes should be dealt under the unfair dismissals statutory code, and specifically at the Workplace Relations Commission, and not in the courts.
35. In so far as the appellant has urged that the effect of the decision in Nolan is to deprive the appellant and persons in his position of his constitutional right of access to the courts, the respondent argues that this is not the case, and points out that the appellant is not deprived by the Act of his right of access to the courts in the case of a wrongful dismissal, and that by s. 15 of the Act it is simply the case that where a person seeks to recover damages for wrongful dismissal at common law, he is precluded from also seeking redress under the Act in respect of the dismissal to which the court proceedings relate.
36. It is submitted that in the present case, the appellant was dismissed by letter dated 28th August 2017; that this dismissal complied with the terms of the contract of employment as to the period of notice required to be given, and that the reason was explained namely that it was on the grounds of redundancy.
Conclusions
37. Firstly, I would not decline to follow the decision in Nolan and that line of authority, as invited, still less find that it was wrongly decided. Quite apart from being entirely satisfied that it is correct in the light of the statutory code that has been provided by the Oireachtas for dealing with the type of issues that the appellant seeks to raise, it would be entirely inappropriate to do so on an interlocutory application, notwithstanding that Nolan itself was an application for an interlocutory injunction of the kind now being sought by the appellant. In my view Nolan is by now firmly embedded in the jurisprudence in this area, notwithstanding that it is a decision by Laffoy J. given when she was a judge of the High Court.
38. The decision in Nolan presents as an insuperable obstacle to the appellant obtaining an interlocutory injunction to restrain his dismissal, and to have his salary paid, pending the determination of these proceedings. For the same reasons that are clearly stated by the trial judge I cannot be satisfied that the appellant has demonstrated that he has a “strong case” to be tried. Overlooking altogether the unresolved dispute on the facts, as a matter of law the appellant’s case cannot be seen as being a “strong one”, and therefore the trial judge was in my view perfectly correct to conclude as she did.
39. I would not reject out of hand the general idea that a term of mutual trust and good faith might be implied into the contract of employment, such that an asserted breach of that term might be considered a breach of the contractual terms for the purpose of bringing the case outside the decision in Nolan and that jurisprudence. But facts must be established in order to determine the basis on which it sought to invoke the implied term of mutual trust and good faith. The implied term could not in my view be such as would deprive the employer of the right to terminate the contract of employment with proper notice and for example where it is based on a redundancy as in the present case.
40. The legal principles which guide the courts in determining whether a particular term ought to be implied into a contract in order to give it business efficacy ( e.g. The Moorcock [1889] 14 P.D. 64) have not been addressed on the present appeal. But in the area of employment law I would say there are undoubtedly terms that may readily be implied into a contract of employment. An obvious such term, overlooking any statutory regulation that might so require, would be that the employer would provide a safe place of work. In the absence of a specific clause regarding the period of notice to be given before termination of the employment, it is clear that a term requiring reasonable notice will be implied in order to give it business efficacy (see e.g. per Barron J. in Royal Trust Company of Canada (Ireland) Ltd v. Kelly & ors, Unreported, High Court, 27 February, 1989). Similarly, there has been found to be an implied term obliging the employee to serve his employer faithfully, so that if he “moonlights” by taking on work for a rival business he will be found to be in breach of his contract of employment. One can think of other terms that might be reasonably or necessarily implied. It is not clear at all what the appellant in the present case considers is encapsulated by the implied term of mutual trust and good faith which he seeks to rely upon in order to escape the clutches of the decision in Nolan and that line of authority. It cannot in my view include an obligation that he would not be dismissed on the grounds of a redundancy. It has not been established that the firm acted in bad faith in reaching a decision to terminate his employment on the basis of a redundancy. I would reject the arguments advanced on the basis of the unspecific term sought to be implied of mutual trust and good faith. No facts are established that could bring such an implied term into play, even if it is to be accepted (and I reach no definitive conclusion in that regard in this case) that there is an implied term of mutual trust and good faith in all contracts of employment.
41. In Maha Lingam , Fennelly J. referred to the development in recent times of the notion of an implied term of mutual trust and good faith in contracts of employment. In that regard he stated:
“The argument developed by Mr O’Reilly in particular on behalf of the plaintiff/appellant is that there has developed in parallel with the statutory scheme of things the tendency of the courts to imply a term of good faith and mutual trust into contracts of employment. That implies, as far as the employee is concerned, that he will work faithfully and respect the employment obligations that he has towards his employer but by purity of reasoning, therefore, the employer is equally bound not to act so as to undermine the contract of employment but to act also in good faith on the basis that there is a relationship of mutual trust between the parties.
This is a development which is perhaps at its early stages and it is not contested, in the present case, by Mr O’Reilly that he needs to develop that law further in order to bring it to bear in the present case and to secure the injunction that he seeks. There has been a discussion of course in the English case of Eastwood v. Magnox Electric Plc [2004] 2 All ER 991 decided this year and referred to in the judgment of Carroll J. and in particular the majority speech in the House of Lords in that case were Lord Nicholls, as cited by Carroll J., took the view that because of the statutory code relating to unfair dismissal, in effect that it was not for the courts to extend further into the common law the implied term regarding mutual trust in such a way as to upset the balance set by the legislature. In other words that the principle that there is an implied term of mutual trust and good faith in contract of employment does not extend so as to prevent the employer terminating a contract of employment by giving proper notice and, having already said that it is not contested that proper period of notice was given in this case, the question is whether the plaintiff has made out the sort of case that would be necessary to show that the contract of employment has been undermined to such an extent by the employer in this case that the employer was deprived of the right to give a proper period of notice of termination.”
42. I am not satisfied that the appellant has made out a strong case upon which he might succeed at trial, and such that the Court is required to proceed to a consideration of the other factors that the Court would have to consider in order to grant the kind of injunction that the appellant seeks, such as the adequacy of damages and the balance of convenience. The more arguable case is, as submitted by the respondent, that the appellant’s remedy on the facts of this case lies within the statutory framework provided by the Unfair Dismissals Act, 1977 and the Redundancy Payments Act, 1967.
43. I agree with the reasoning and conclusions of the trial judge, and I would dismiss this appeal.
B-Lex Ltd -v- Fields Good Faith
[2007] IEHC 437 (03 December 2007)
Judgment by: Laffoy J.
Status of Judgment: Approved
Neutral Citation Number: [2007] IEHC 437
THE HIGH COURT
[
Judgment of Miss Justice Laffoy delivered on 3rd December, 2007.
This is an appeal by the plaintiff, which was the defendant’s employer, from a determination of the Employment Appeals Tribunal (the Tribunal) dated 1st September, 2006 on a claim by the defendant against the plaintiff pursuant to the Payment of Wages Act, 1991 (the Act of 1991).
In outline, the circumstances which give rise to the appeal are as follows:
· Following determination of the defendant’s employment with the plaintiff the defendant brought a complaint under the Act of 1991 against the defendant claiming the sum of €13,115 on the basis that the plaintiff, as his employer, had wrongfully deducted sums aggregating that amount from his final wage, which he contended was due on 31st July, 2005, contrary to s. 5 of the Act of 1991. The defendant’s claim was made up of three components: €1,730.76 in respect of minimum notice of termination; €1,385.00 in respect of holiday pay; and the balance representing a bonus payment which the defendant contended was payable to him.
· The decision of the Rights Commissioner on the claim was dated 16th February, 2006. The Rights Commissioner found as follows:
§ That because of his service the defendant would have had a statutory entitlement to a minimum of two weeks’ notice and, accordingly, he was entitled to compensation in the sum of €1,486 (net).
§ That the defendant was entitled to the sum of €595 (net) in lieu of leave untaken at the termination of his employment.
§ That the defendant was entitled to payment of the bonus as provided in his contract in the sum of €7,800 (net).
Accordingly, the Rights Commissioner ordered the plaintiff to pay total compensation in the sum of €9,881 (net) to the defendant within six weeks of the date of the decision.
· The plaintiff appealed against the decision of the Rights Commissioner to the Tribunal. The appeal was against the entirety of that decision. The Tribunal gave its determination on the appeal on 1st September, 2006. In relation to the holiday pay and bonus components, the Tribunal affirmed the recommendation of the Rights Commissioner and the amounts awarded. In relation to the minimum notice component, the Tribunal varied the recommendation of the Rights Commissioner. It did so on the basis that it was a contractual term of the defendant’s employment that he had the right to a payment of three months where his employment was terminated by the plaintiff. On that basis Tribunal found that the defendant was entitled to the sum of €11,250 in respect of the minimum notice component.
· The plaintiff appealed against the entirety of the determination of the Tribunal. However, at the hearing of the appeal, counsel for the plaintiff indicated that the appeal was being pursued in respect of the minimum notice component only and that the plaintiff will pay to the defendant the sums of €595 and €7,800 to which the Rights Commissioner and the Tribunal found the plaintiff to be entitled in respect of the holiday pay and the bonus components respectively.
The defendant appeared in person on the hearing of the appeal.
Section 7(3)(b) of the Act of 1991 provides that a party to proceedings before the Tribunal may apply to the High Court from a determination of the Tribunal on a point of law and the determination of the High Court shall be final and conclusive. Counsel for the plaintiff referred the court to the decision of the Supreme Court on a similar type of appeal from the Tribunal to the High Court on a question of law in Bates v. Model Bakery Limited [1993] 1 I.R. 359. In that case, the Supreme Court (per Finlay C.J. at p. 365) held that on such an appeal there does not appear to be any room for repeating and, in particular, for adding to or supplementing evidence which was given before the Tribunal concerning the circumstances of the dispute which had been referred to the Tribunal. The position, accordingly, is that this appeal must be determined in accordance with the evidence which was before the Tribunal.
The facts relevant to the minimum notice component of the defendant’s claim are that the defendant was employed as director of business development by the plaintiff from February, 2003 to July, 2005. The terms of his employment were set out in a letter dated 14th December, 2002 from the plaintiff to the defendant. That letter was before both the Rights Commissioner and the Tribunal. In relation to termination, the letter provided:
“Payment of three months salary in the event of B-Lex wishing to terminate the contract/offer”
As the Rights Commissioner pointed out, the letter was silent on the length of notice of termination which the defendant was obliged to give. It was the defendant who initiated the termination of the contract of employment. He did so on Monday, 11th July, 2005, when he told Mr. Seamus Boland, the Managing Director of the plaintiff, that he was leaving his employment with the plaintiff but that he would work until the end of July, 2005. On the following day, 12th July, 2005, Mr. Boland directed him to leave forthwith.
The plaintiff’s case before the Rights Commissioner, before the Tribunal and in this Court was that the defendant had repudiated his contract of employment and the plaintiff was entitled to treat it as having terminated forthwith having regard to the following facts. During the previous week and for some time prior to that, the plaintiff, through Mr. Boland, was negotiating for the acquisition of a holding of shares in a company, which was a customer of the plaintiff and which I will refer to as “the Company”. The defendant was aware of this, although he denied that Mr. Boland had instructed him to look after the acquisition on behalf of the plaintiff. On 7th July, 2005 the defendant had discussions with one of the shareholders of the Company in relation to the acquisition of the shares which the plaintiff intended purchasing and on the following day the defendant was given financial information in relation to the Company. On 11th July, 2005 the defendant told the plaintiff that he had decided to buy the shares in question himself when giving notice of the termination of his employment.
The Tribunal rejected the plaintiff’s contention that the defendant had repudiated his contract of employment for a number of reasons. First, the Tribunal attached weight to the fact that the share purchase involved the Company, which was a customer rather than a competitor of the plaintiff. Secondly, there was no “documented agreement” for the acquisition of the shares by the plaintiff. Thirdly, as of 12th July, 2005, the defendant had merely expressed an intent to purchase the shares, rather than having actually purchased them. For those reasons the Tribunal held that the defendant had not by his actions repudiated the contract of employment, but rather it was terminated by the plaintiff, thus giving rise to the defendant’s entitlement to payment of three months’ salary under the terms of his contract.
In this Court, counsel for the plaintiff submitted that the Tribunal should have concluded that the defendant had breached his contract of employment and that the breach was sufficiently serious to justify the plaintiff in treating the contract as having terminated forthwith so that the defendant’s wages to the end of July, 2005 were not “properly payable” within the meaning of s. 5 of the Act of 1991. It was submitted that it is an established principle that a person employed under a contract of employment is subject to an implied obligation to act with good faith and fidelity in the course of his employment. As an example of that principle, the court was referred to the decision of the Court of Appeal of England and Wales in Wessex Dairies Limited v. Smith [1935] 2 K.B. 80. In that case, which concerned a milk roundsman employed by a dairy who canvassed the dairy’s customers while in the employ of the dairy but to take effect after his employment had terminated, Maughan L.J. stated the question to be determined as essentially depending upon the term to be implied in the ordinary case of a contract of employment in the absence of express agreement. He identified the term to be implied by adopting (at p. 86) what he described as the “general implication” stated by A.L. Smith L.J. in Robb v. Green [1895] 2 Q.B. 320 as follows:
“I think that it is a necessary implication which must be engrafted on such a contract that the servant undertakes to serve his master with good faith and fidelity …”
Counsel for the plaintiff submitted that, on the issue of repudiation, the question for the Tribunal was whether the defendant breached his duty of good faith and fidelity to the plaintiff in his dealing with the Company and that it should have found on the facts that he did. Further, it was submitted that the Tribunal should have recognised that it is well established law that an employee can be instantly dismissed when his conduct is such that it not only amounts to a wrongful act inconsistent with his duty towards his employer but is also inconsistent with the continuance of confidence between them (per Sachs L.J. in Sinclair v. Neighbour [1967] 2 Q.B. 279 at p. 289).
In my view, the submissions made on behalf of the plaintiff are correct. The factors which the Tribunal considered distinguished this case from the authorities to which it had been referred, in my view, are immaterial. It is immaterial that the Company in which the plaintiff was interested in acquiring a shareholding was a customer rather than a competitor of the plaintiff, that the plaintiff had not concluded a “documented agreement” in relation to the shareholding, and that the defendant had not a concluded agreement for the acquisition of the shareholding by 11th July, 2005. On that day, the defendant evinced an intention to frustrate the plaintiff’s acquisition of the shareholding, thus breaching his duty of good faith and fidelity to the plaintiff and shattering the plaintiff’s trust and confidence in him. The Tribunal erred in not finding that the defendant was not entitled as a matter of law to be paid his wages until the end of July, 2005, whether by way of minimum notice or otherwise.
An alternative argument was advanced on behalf of the plaintiff. It was submitted that, even if the defendant’s conduct was not repudiatory, the Tribunal erred in law in varying the decision of the Rights Commissioner. What the defendant claimed in his application to the Rights Commissioner represented his quantification of the salary which he claimed was due in respect of the period of notice he gave, that is to say, to the end of July, 2005. The decision of the Rights Commissioner was to award a sum representing the equivalent of the two weeks’ notice to which the defendant would have been entitled under the Minimum Notice and Terms of Employment Act, 1973, which was less than the amount he claimed. The defendant did not appeal against that decision and in this Court he intimated that he would have accepted the amount awarded by the Rights Commissioner. So the position is that the Tribunal, in awarding the plaintiff a sum equivalent to three months’ salary, gave him something which he had not claimed.
In support of its submission that the Tribunal erred in law in adopting that course, counsel for the plaintiff relied on the following statement by Charlton J. in Galway-Mayo Institute of Technology v. Employment Appeals Tribunal [2007] IEHC 210, at para. 24:
“… a judicial or quasi-judicial tribunal is not entitled to invoke a statutory remedy which no-one has sought and in respect of which no-one is on notice.”
The fact that the basis on which the Tribunal decided the minimum notice component of the defendant’s claim was a complete departure from what was claimed by him and from the claim of which the plaintiff was on notice violated the principles of natural and constitutional justice. Apart from that, it was patently erroneous in law in that it ignored the fact that it was the defendant who initiated the termination of his contract of employment.
There will be an order that the Tribunal erred in law in failing to set aside so much of the decision of the Rights Commissioner as found that the defendant had an entitlement to a minimum of two weeks’ notice and as awarded the defendant compensation in the sum of €1,486 (net).
Daniel Sweeney v Dennis Duggan (Insurability)
1991 No. 276
Supreme Court
14 February 1997
[1997] 2 I.L.R.M. 211
(Nem. Diss.) (Hamilton CJ, Barrington and Murphy JJ)
MURPHY J
(Hamilton CJ and Barrington J concurring) delivered his judgment on 14 February 1997 saying: To explain the nature of the dispute between the parties to these proceedings it is necessary first to identify Kenmare Lime Works Ltd (the company) and analyse to some extent its structure and business operations.
The company was incorporated in or about the year 1976 and had an issued share capital of £19,000 of which 18,999 shares were held at all relevant times by the above named defendant/respondent Dennis Duggan (Mr Duggan) and the remaining one issued ordinary share was held by his wife Mrs Eileen Duggan. It appears that Mr Duggan was the managing director of the company and Mrs *214 Duggan the secretary thereof.
The company was the owner of a lime stone quarry at Kilpadder, County Kerry, which it operated, subject to some disruptions, until it was wound-up in a creditors’ voluntary winding up pursuant to resolution in that behalf passed in the month of August 1987 and by which Mr Eoin Clayton was appointed liquidator thereof.
The liquidator gave evidence to the effect that the accounts of the company showed a loss of approximately £10,000 for the year 1982 and a loss of £30,000 for the year 1983. The liquidator was satisfied that proper books and accounts were kept for the years up to 1984 but thereafter the books and records of the company were destroyed by a fire which occurred in that year. The losses incurred by the company were explained in part or in whole by the withdrawal of subsidies on lime with the consequent decrease in user of lime by farmers. As a result of the losses it was established, by the accounts for the year 1983, that the net assets of the company were less than half of the company’s issued share capital.
The Mines and Quarries Act 1965 imposes numerous and detailed provisions on the owner of a quarry to ensure the safety, health and physical welfare of persons employed in quarrying operations. Any breach of those provisions constitutes a criminal offence and is punishable accordingly. A statutory system is set up for the inspection of quarries by officers appointed for that purpose by the relevant minister. A particular provision — s. 23 — requires that an individual be appointed to the statutory position of quarry manager. That manager has the statutory duty of supervising the operations in the quarry and ensuring the compliance with the provisions of the Act. The post of quarry manager of the company was at all material times held by Mr Duggan.
The above named Daniel Sweeney (the plaintiff) is about 65 years of age. He commenced working with the company as a labourer or unskilled operative in the mid seventies. On 18 February 1984 whilst operating a drill in the company’s quarry he met with an accident as a result of which he suffered a significant injury to his leg. On 24 September 1984 he instituted proceedings against the company claiming damages for those personal injuries which he alleged were caused by the negligence and breach of statutory duty of the company. Those proceedings came on for hearing on 15 October 1987 when the plaintiff was awarded a sum of £20,866 damages against the company. In the meantime the plaintiff had returned to work with the company in or about March 1985 and had continued working with the company until it ultimately ceased operations in 1986. Whilst an employee of the company had informed the plaintiff immediately after the accident that the company was insured against liability for accidents the plaintiff was advised about the time he returned to work in March 1985 that no such insurance existed.
It was clear from the evidence given by the liquidator that the company will *215 not be able to pay its creditors — even its preferential creditors — in full. It is anticipated that the plaintiff may receive a dividend amounting to approximately £4,500 on his preferential claim of £20,866. In addition the plaintiff has recovered or will recover a small but unspecified sum on foot of a policy of insurance which he himself had taken out at his own expense in respect of the injuries suffered by him.
The present proceedings were commenced by the plaintiff against Mr Duggan by plenary summons issued on 1 March 1989. On behalf of the plaintiff it was contended: first that the company as the employer of the plaintiff had a duty — in all of the relevant circumstances — to procure employer’s liability insurance to meet any claim which the plaintiff might have for damages for personal injuries or, failing that, to warn the plaintiff that no such policy was in existence. And, secondly, that Mr Duggan had a duty to ensure that the company obtained and maintained such a policy of insurance or the alternative obligation to warn the plaintiff that this course had not been adopted.
It was asserted on behalf of the plaintiff that the obligations aforesaid in so far as they fell upon the company derived primarily (and perhaps exclusively) from the contractual relationship between the employer and the employee. It was contended that the particular obligation to insure the company against liability (or in default to warn the plaintiff) was an implied term of the employment contract.
In the amended written submissions to this Court the plaintiff contended that such a term should be implied having regard to a variety of matters which included the following:
(I) The company’s business, quarrying, was said to be exceptionally dangerous.
(II) At the time of the accident, the company’s finances were precarious.
(III) The plaintiff had insured himself to a ‘small extent’ against loss covered by injuries sustained in the course of his employment.
Whilst there may be room for argument as to the degree of danger involved in the business carried on by the company or the extent of its financial difficulties in or around the time of the accident there is no doubt that evidence was adduced before the learned trial judge to the effect that the accident rate in quarries is approximately eight times the rate on building sites generally and furthermore there was evidence of substantial losses incurred by the company in the years immediately prior to the accident albeit due to no fault of the company or its management. Moreover it was asserted that the plaintiff was a man of modest means and education who was not represented by a trade union in any negotiations he had with the company or Mr Duggan. The question is whether in these *216 circumstances, and accepting that each of the factors aforesaid existed and assuming that they existed to the highest degree for which the plaintiff might contend, a term such as that for which the plaintiff argues would be implied in the contract of employment.
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 Moorcock case (1889) 14 PD 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 LJ in Shirlaw v. Southern Foundries (1926) Ltd [1939] 2 KB 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 City Council v. Irwin [1977] AC 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 the Irwin case. 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 LJ speculated as to what the reaction of the Liverpool City Council would have been if one of the tenants had said: ‘I suppose that the council will be under a legal liability to us to keep the chutes and lifts in working order and the staircases properly lighted’ and he concluded that the answer in all probability would have been — ‘Certainly not’. Whilst Lord Roskill’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 Lord Salmon said at p. 262: *217
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 MR 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 AC 454 at p. 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 is 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 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 have well 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 & Dockers Society [1956] 1 WLR 585 the defendant trade union sought to expel the plaintiff from its membership and in doing so relied upon what they alleged was implied in the contract between the plaintiff and them. The term which it was said should be implied arose from an agreement which had been reached at Bridlington in 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 the Vice Chancellor Sir Leonard Stone postulated the Moorcock test in the following terms (at p. 599):
If that test were to be applied to the facts of the present case and the bystander *218 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 employer’s 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 doctrine.
Both parties referred to the decision of the Court of Appeal in England in two cases, namely, Reid v. Rush & Tompkins Group plc [1990] 1 WLR 212 and Van Oppen & Clarke v. Bedford Charity Trustees [1990] 1 WLR 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 the Reid case the plaintiff was employed by the defendant 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 employer — the defendant — 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. Alterna *219 tively, the plaintiff argued, that the defendant was negligent in failing to discharge its duty of care as an employer to protect the plaintiff’s economic welfare by providing the appropriate insurance cover. Ralph Gibson LJ 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 pp. 227–8) 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 plaintiff’s claim.
Again having referred to the judgment of Lord Scarman in Tai Hing Cotton Mill Ltd v. Liu Chong Hing Bank Ltd [1986] AC 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 Charity Trustees (above) 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 LJ in delivering the main judgment of the court endorsed substantially the judgment of Ralph Gibson LJ *220 in Reid v. Rush & Tompkins Group plc. It is, however, notable that the insurance in the Van Oppen case and the Reid case 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 and Social Services Board [1992] 1 AC 294 and in particular the speech of Lord Bridge of Harwich 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 the Scally case 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.
Lord Bridge 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 Lord Scarman in Tai Hing Cotton Mill Ltd v. Liu Chong Hing Bank Ltd [1986] AC 80 (at p. 107) as Ralph Gibson LJ had relied upon in the Reid case. 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 *221 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 flow 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 and Romford Ice & Cold Storage Co. Ltd [1957] AC 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 time the relationship between master and servant, between employer and the employed 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, Lord Bridge 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:
… Here 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 *222 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 Mr Duggan. The piercing of the corporate veil bestowed upon the company by law, or even its complete removal, cannot impose on Mr Duggan or the other shareholder in the company an obligation in contract to which the company itself was not subject.
That Mr Duggan may have had a variety of duties to the plaintiff in tort is hardly open to dispute. In so far as Mr Duggan was a fellow workman of the plaintiff he was of course bound to exercise reasonable care in the exercise of his duties as an employee not to cause injury to Mr Sweeney. Again in his capacity as quarry manager Mr Duggan had wide ranging statutory obligations the breach of which might well have given rise to a liability on his part to the plaintiff. However the neglect of such duties has not been alleged nor would the breach of any of them provide the remedy which the plaintiff seeks to assert in these proceedings.
I find it difficult to accept that a director or shareholder as such has the necessary relationship with an employee of his company to give rise to any duty on the part of the director/shareholder for the economic welfare of the employee. I find it inconceivable that any such duty on the part of a corporator, if it did exist, could be more extensive than that of the corporation itself.
I would of course recognise that the case put forward on behalf of the plaintiff was that the company did have the particular obligations in contract so that the argument for liability on the part of Mr Duggan was essentially his failure to ensure that ‘his’ company failed to fulfil its obligations. To find a duty in Mr Duggan to protect the economic welfare of the plaintiff in a manner which is *223 not sustained by the terms of employment of the plaintiff express or implied is in my view unstateable.
In the circumstances I would dismiss the plaintiff’s appeal herein.